Drilling for Dollars: BRK, the Strait of Hormuz, and America’s $41 Trillion Hole — QAV AU 913

QAV AU 913

[00:00:00] Cameron Reil­ly: QAV Aus­tralia, 9 1 3. It’s the 31st of March, 2026, which means some­body has a birth­day com­ing up. Tony.

[00:00:10] TK: Oh, that’s why you sent me a present. I thought you were just spon­sor­ing me for the episode. It’s not, it’s, it’s a, it’s a, a low spend mar­ket­ing effort for a pod­cast to make me wear a QAV v cap, but I’ve got a, Cameron sent me a QAV v cap, which I appre­ci­ate.

[00:00:26] Cameron Reil­ly: I

[00:00:27] TK: Thank you.

[00:00:28] Cameron Reil­ly: much time and effort try­ing to find a present for you and end­ed up just going, ah, the hell with it. I’m gonna send him a QAV cap. Uh, I looked at War­ren Buf­fet relat­ed things and golf relat­ed things and, and shell relat­ed thing. I near­ly got you A‑A-A-A‑A, a old Shell Oil can from like

[00:00:53] TK: Oh, real­ly?

[00:00:54] Cameron Reil­ly: but I could­n’t get it to you on time. These things. This is like a few

[00:00:58] TK: Yeah.

[00:00:58] Cameron Reil­ly: and I was like, every­thing’s gonna take [00:01:00] weeks to get to you.

[00:01:01] Cameron Reil­ly: And I was like, you know what? He needs a hat. He plays golf when his back­’s good.

[00:01:07] TK: Yeah. Thank you.

[00:01:09] Cameron Reil­ly: I just wan­na see if any­one asks you what it is. ’cause

[00:01:12] TK: Hmm,

[00:01:12] Cameron Reil­ly: you know, I still haven’t had any­one ask me what

[00:01:14] TK: hmm. Same.

[00:01:15] Cameron Reil­ly: I ordered myself one too. I’m gonna wear it around and see if

[00:01:18] TK: Okay.

[00:01:19] Cameron Reil­ly: Well, hap­py

[00:01:21] TK: Very good.

[00:01:22] Cameron Reil­ly: uh, 4th of April.

[00:01:23] Cameron Reil­ly: Tony,

[00:01:23] TK: Mm-hmm.

[00:01:24] Cameron Reil­ly: this year? 62,

[00:01:26] TK: Three. Yes.

[00:01:29] Cameron Reil­ly: Wow. Has it been three years since the Angels?

[00:01:32] TK: Yes, it has been.

[00:01:34] Cameron Reil­ly: Wow.

[00:01:35] TK: here for over a year, so yeah, it’s been a while. Mm

[00:01:38] Cameron Reil­ly: Time flies

[00:01:39] TK: mm

[00:01:40] Cameron Reil­ly: Well, uh, tell you what else has flown by, uh, or gone down is con­sumer con­fi­dence. I was just

[00:01:46] TK: Yes.

[00:01:47] Cameron Reil­ly: A, b, C, that con­sumer con­fi­dence in Aus­tralia has hit a 53 year low. The low­est result since track­ing began in 1973, worse than [00:02:00] COVID.

[00:02:00] TK: It is pret­ty bad, isn’t it? I, there’s a, there’s a loose cor­re­la­tion between con­sumer con­fi­dence and the stock mar­ket, which I’ve observed in the past, which I think is just basi­cal­ly, if peo­ple have spared mon­ey, they’ve put it to the stock mar­kets and their con­fi­dence is up. But, uh, and the cor­re­la­tion still holds worse than a long time and the mar­ket’s off, so, yeah.

[00:02:21] TK: But, um, are peo­ple just throw­ing their hands up? It’s, it’s just like, you know, no one can con­trol Trump. It’s, we’re just gonna keep get­ting hit with things that have noth­ing to do with our con­trol or efforts or, you know, are they say­ing we’ll nev­er be able to have our kids buy a house? Um, I’m doing every­thing right and I’m going back­wards.

[00:02:42] TK: I’m being taxed too much, et cetera, et cetera. That’s, I think the econ­o­my or the peo­ple are get­ting close to that kind of feel­ing.

[00:02:50] Cameron Reil­ly: I don’t know. And you know, I,

[00:02:52] TK: Is pes­simistic.

[00:02:53] Cameron Reil­ly: I don’t have a lot of sym­pa­thy for, uh, elbow and his team of nuff enoughs, but, [00:03:00] um, you know. It’s got­ta be hard for any leader of any coun­try right now to try and man­age your econ­o­my when Trump’s just throw­ing span­ners into the works on a reg­u­lar basis. Tar­iffs this wars that, you know, it’s just how the, how the hell do you pre­pare?

[00:03:19] Cameron Reil­ly: But, you know, I was talk­ing to some­body the oth­er day about, um, you know, the just in time econ­o­my that we have and how that’s impact­ing our abil­i­ty to get fuel. And it seems like, well, we come out­ta COVID going, wow, just in time economies are real­ly frag­ile. Um, maybe we should do some­thing about that in case we get hit with anoth­er major dis­rup­tion to the glob­al sup­ply chain infra­struc­ture. Appar­ent­ly not. No one, no one real­ly fact has done any­thing about that in the last years.

[00:03:57] TK: I think it’s been gov­ern­ment pol­i­cy for [00:04:00] the suc­cess of gov­ern­ments for at least a decade to have three months worth of fuel sup­ply. And it’s nev­er hap­pened. They’ve sort of set­tled on one month, um, which I guess is a trade off. It’s the oth­er, the oth­er dif­fi­cult thing at the moment is we’re com­ing out of the, one of the longest decreas­ing inter­est rate envi­ron­ments.

[00:04:19] TK: Well, cer­tain­ly in my life­time, but per­haps ever. They’ve basi­cal­ly been on a gen­tle slope down­ward since the Clin­ton era in the us. Um, and now we’re start­ing to go up, which could. End of next year, but it could be the start of a new upcy­cle. And it’s very hard to man­age an econ­o­my when that’s hap­pen­ing.

[00:04:34] TK: You’ve got no spare capac­i­ty. Growth is often out­paced by infla­tion and cer­tain­ly by inter­est rates. And you know, it’s kind of be hard to fix all these struc­tur­al prob­lems that need fix­ing, but as always have sim­ple solu­tions to com­plex prob­lems. But they are very com­plex and if you throw in the added dimen­sion of the gov­ern­ment can’t do [00:05:00] any­thing if it wants to stay in gov­ern­ment because every­thing it needs to do affects the vot­ers.

[00:05:04] TK: You know, like chang­ing tax­es on hous­ing or, um, uh, tak­ing fuel, rebates off, what­ev­er, what­ev­er they need to do is gonna have

[00:05:15] Cameron Reil­ly: rid of sur­charge rates.

[00:05:17] TK: Yeah. Which is gonna affect the bud­get, which means that it’s gonna have to get paid for some­where. Um. I, I guess I’m segue­ing into as well, the US arti­cle, which we’re gonna talk about, about the, the par state of the econ­o­my over there.

[00:05:31] TK: Aus­trali­a’s not as bad, but it’s, it’s on the same sort of slope, but it’s, it’s much bet­ter place than the us But, but yeah, I mean. Ever since gov­ern­ments real­ize that they can print mon­ey to solve prob­lems, they’ve just issued debt. Like there’s no tomor­row. They keep pay­ing for hand­outs to peo­ple. And I guess the biggest issue at the moment in Aus­tralia in terms of hand­outs is the NDIS.

[00:05:51] TK: And, and you know, again, um, it needs a dose of salts to go into it and clean, clean it up. But there are so many peo­ple now ben­e­fit­ing from the NDIS so the [00:06:00] gov­ern­ment can’t do it and stay in pow­er ’cause it’ll just attract so many neg­a­tive votes. Um, there’s only a, a small num­ber of eco­nom­ic ratio­nal­ists in the vot­ing pop­u­la­tion and a large num­ber of peo­ple with their hands out in pock­ets open.

[00:06:14] TK: So, um, it’s a dif­fi­cult sit­u­a­tion again. But yeah, all these, all these things mount up every day, every week, every month. It’s not just have we enough oil reserves or do we have the right sup­ply chains? It’s do we have the right inter­est rate set­tings? Do we have the right tax set­tings? Do we have the right hous­ing set­tings, et cetera, et cetera, et cetera.

[00:06:32] TK: And until it’s almost like you need to, to vote in a sui­cide squad. You know, but you and I talked about the don’t vote for me par­ty many years ago. The idea is you’ll let some­one in for one term and they just, they just clean the place out. ’cause they’ve got, and they’ve got no ambi­tion to be reelect­ed and they just fix it up.

[00:06:51] Cameron Reil­ly: Amer­i­cans vot­ed for Trump the

[00:06:53] TK: That’s right. Yeah. No, exact­ly. Which is why he is pop­u­lar. So it is a, there is a, there is an appetite [00:07:00] for it. It’s just got­ta be imple­ment­ed by some­one with half a brain.

[00:07:02] Cameron Reil­ly: now he wants anoth­er $200 bil­lion to fin­ish the war that he said was won a month ago.

[00:07:08] TK: Well, all he has to do is, as we know, is to, is to get into the, your mar­ket 15 min­utes before he posts on true social. And he’s got that, that inflow to do what­ev­er he wants. Yeah.

[00:07:18] Cameron Reil­ly: I am not sure he is gonna spend that prof­it on, uh, financ­ing the war. Um. So, yeah, we, you men­tioned this arti­cle, so I saw this in For­tune the oth­er day, the, this is by Steve Han­ky, who’s a pro­fes­sor of Applied Eco­nom­ics at the Johns Hop­kins Uni­ver­si­ty, and a mem­ber of the board of Direc­tors at the Fed­er­al Fis­cal Sus­tain­abil­i­ty Foun­da­tion. He says The trea­sury just declared the US insol­vent. The media missed it. The US gov­ern­ment is insol­vent. That’s not hyper­bole. It’s the con­clu­sion drawn direct­ly from the trea­sury depart­men­t’s own con­sol­i­dat­ed finan­cial state­ments for fis­cal year 2025, released last week to near total media silence. The num­bers 6.06 [00:08:00] tril­lion in total assets against 47.78 tril­lion in total lia­bil­i­ties as of Sep­tem­ber 30th, 2025. Impor­tant­ly, the 47.78 tril­lion in report­ed lia­bil­i­ties does not include the unfund­ed oblig­a­tions of social insur­ance pro­grams like Social Secu­ri­ty and Medicare. Those are the close sep­a­rate­ly in the off bal­ance sheet.

[00:08:24] Cameron Reil­ly: State­ment of social infra­struc­ture, con­sol­i­dat­ed bal­ance sheet posi­tion, exclud­ing the SOSI. Dete­ri­o­rat­ed near­ly 2.07 tril­lion between FY 24 and FY 25, reach­ing a stag­ger­ing neg­a­tive 41.72 tril­lion. lia­bil­i­ties are now near­ly eight times the val­ue of report­ed assets. The largest dri­vers were a $2 tril­lion increase in fed­er­al debt and inter­est payable.

[00:08:54] Cameron Reil­ly: Now 30.33 tril­lion and a 438.8 bil­lion [00:09:00] increase in fed­er­al employ­ee and vet­er­an ben­e­fits payable. Now 15.47 tril­lion goes on and on and on. But, um, the, sort of the, they break it down into more relat­able num­bers lat­er on. said most peo­ple can­not relate to tril­lion dol­lar fig­ures on a gov­ern­ment ledger.

[00:09:18] Cameron Reil­ly: So con­sid­er this, this is their, uh, cof­fee shop anal­o­gy. Divide every num­ber by a hun­dred mil­lion. Drop eight zeros in fed­er­al finances look like a house­hold bud­get and free fall. That house­hold earns $52,456 and spends 73,378 run­ning a 20,932 annu­al deficit. total lia­bil­i­ties in unfund­ed promis­es amount to 1.361 mil­lion against just $60,554 in assets leav­ing at 1.3 mil­lion in the whole Uncle Sam by any account­ing stan­dard is insol­vent. Con­gress has clear­ly lost [00:10:00] con­trol of the nation’s finances. Amer­i­ca is fac­ing a fis­cal cat­a­stro­phe. The reck­on­ing, long deferred is becom­ing impos­si­ble to ignore.

[00:10:09] TK: The cof­fee shop anal­o­gy is the right one to use. Uh, except that miss­es one impor­tant fac­tor, and that is that in the cof­fee shop that the US gov­ern­ment runs, they have a mag­ic print­ing press in the base­ment. And uh, they can keep. Fund­ing their lia­bil­i­ties by either print­ing more mon­ey or issu­ing more debt.

[00:10:29] TK: Um, I, I did a bit of research into this arti­cle ’cause it, it’s, it’s always both­ered me. Um, and this isn’t the first year the US gov­ern­men­t’s been insol­vent on any sort of bal­ance sheet reck­on­ing. It’s the 29th year that the, um, the, uh, what’s it called? The GOA, the gov­ern­ment, what­ev­er the gov­ern­ment agency is, that signs off on these accounts has refused to sign off on the account.

[00:10:54] Cameron Reil­ly: Gov­ern­ment account­ing office or

[00:10:56] TK: Yeah, that’s it. GAO. So they haven’t signed off on the accounts for [00:11:00] 29 years for the rea­son that it’s tech­ni­cal­ly insol­vent. And again, it, it gets back to this. Cycle of low­er­ing inter­est rates that, that gov­ern­ments could just keep issu­ing debt, which became cheap­er and cheap­er and kicked the can down the road for the day when debt starts to increase.

[00:11:15] TK: And then they can’t ser­vice that debt. And so they have to print mon­ey, um, to, to help do that. So it’s, it’s not a good sit­u­a­tion and it does­n’t mean it’s not gonna go on for anoth­er 29 years, but what’s gonna hap­pen at some stages is either gonna be a reck­on­ing, uh, you know, a seri­ous reces­sion or depres­sion when infla­tion gets real­ly high, when the US cur­ren­cy gets the val­ue.

[00:11:40] TK: Uh, ’cause you can’t keep. Print­ing mon­ey for­ev­er with­out the cur­ren­cy going down in val­ue, or, which is prob­a­bly the most like­ly option. There’s anoth­er default cur­ren­cy and a bet­ter gov­ern­ment, um, issu­ing or a bet­ter gov­ern­ment, uh, risk in terms of being able to issue bonds, which is prob­a­bly gonna be Chi­na, I would’ve thought, um, down the [00:12:00] track.

[00:12:00] TK: And then the US has some real trou­ble then because it’s trad­ed on the fact that you can always issue bonds at a cheap or cheap­er rate than any­body else, any oth­er gov­ern­ment, and its cur­ren­cy is the default world cur­ren­cy that helps prop up this house of cards. Um, and it may con­tin­ue to for anoth­er 10, 29 years, but it, it won’t do it for­ev­er.

[00:12:21] TK: Um, so.

[00:12:21] Cameron Reil­ly: priv­i­lege as called it, I think it was the, uh, British For­eign Min­is­ter back in the fifties or some­thing, the exor­bi­tant priv­i­lege.

[00:12:33] TK: Yeah, and I mean, you com­pare, I, I com­pared it to Aus­tralia just to see if we were on the same sort of, um, dimen­sion as the US and we’re not. We we’re all along the way, but we’re not as bad. So, uh, in the Aus­tralian case, we have total assets of 9 25 0.8 bil­lion total lia­bil­i­ties at approx­i­mate­ly 1.570 billion.[00:13:00]

[00:13:00] TK: Um, so neg­a­tive 644 bil­lion and net debt esti­mat­ed to be about the same at 587 bil­lion, which is still rea­son­ably high. 20% of GDP. And we are run­ning a deficit, but it’s, it’s the kind of deficit that the gov­ern­ment can get back into sur­plus if it needs to. So it’s not a run­away deficit like the US is. And hence, Aus­tralia is one of a small num­ber of coun­tries.

[00:13:23] TK: I think there’s 11 in the world, which still have AAA rat­ing with all three agen­cies. Um. Around the world. So, you know, stan­dard and pause, uh, Fitch and I’ve for­got­ten the third one. Uh, but, so that’s coun­tries like Aus­tralia, Cana­da, Den­mark, Ger­many, et cetera, et cetera, Sin­ga­pore, Swe­den. Um, so we’re kind of man­ag­ing this much bet­ter than the US is, but we don’t have the, we don’t have the assets.

[00:13:51] TK: The US has no one’s, you know, our gov­ern­ment bonds are more expen­sive. In terms of what you need to pay as a yield to attract peo­ple. Our cur­ren­cy isn’t the reserve cur­ren­cy, [00:14:00] so we’ve got­ta be more respon­si­ble. Um, when the US kind of starts to lose those priv­i­leges as it will one day, then they’re gonna have to be more respon­si­ble, but they’re fur­ther down the track, and it’s gonna be a real prob­lem for who­ev­er who inher­its that.

[00:14:12] TK: Uh, and I remem­ber War­ren Buf­fet going on about this for a long, long, long time, and he, he talked about, uh, the US max­ing out its cred­it card back in the nineties and liv­ing beyond its mean. And he had a, he had a, what he called his five minute solu­tion to the prob­lem. He pro­posed that if the fed­er­al deficit exceeds 3% of GDP, all sit­ting of mem­bers of Con­gress should be inel­i­gi­ble for reelec­tion, which is not a bad solu­tion.

[00:14:39] TK: Um, so yeah, so it’s not a, it’s not an imme­di­ate prob­lem, but it’s not a great frame­work to go for­ward with.

[00:14:45] Cameron Reil­ly: that’s like my lie detec­tor for politi­cians that I’ve been push­ing for 20 years.

[00:14:51] TK: Lie detec­tor test?

[00:14:53] Cameron Reil­ly: You remem­ber that one?

[00:14:54] TK: No. What’s the ques­tion gonna be?

[00:14:56] Cameron Reil­ly: No. It’s always, well, if, um, uh, well, I, I have. [00:15:00] Two, two tests. But one is if you make a cam­paign promise

[00:15:05] TK: Mm-hmm.

[00:15:05] Cameron Reil­ly: and then you get elect­ed and you break that promise, you imme­di­ate­ly get five years

[00:15:10] TK: You don’t know you. You don’t remem­ber why the politi­cian’s strength is it’s word sal­ad. Right? So you put them on,

[00:15:19] Cameron Reil­ly: Does­n’t

[00:15:19] TK: did you break this cam­paign promise? Well, the econ­o­my changed. The boils stopped.

[00:15:24] Cameron Reil­ly: And there’s no excus­es. That’s the thing. Did you promise some­thing? Did you deliv­er on it? No. Five years hard time.

[00:15:31] TK: So then you get elec­tion cam­paigns like we’ve had in the past where the oppo­si­tion just says no, and that does­n’t devel­op any poli­cies. A small tar­get cam­paign.

[00:15:39] Cameron Reil­ly: That’s okay. Just don’t promise stuff and don’t deliv­er it. That’s okay. I don’t mind if you don’t promise stuff. Just don’t promise stuff that you can’t deliv­er on.

[00:15:46] TK: Yeah. Okay. That’s, that’s

[00:15:49] Cameron Reil­ly: is

[00:15:50] TK: of an issue. But,

[00:15:51] Cameron Reil­ly: Politi­cians need to set a lie detec­tor test, once a year they fail five years.

[00:15:57] TK: but the fun­da­men­tal prob­lem with [00:16:00] democ­ra­cy is that we, the peo­ple don’t set the agen­da, right? We should, we should be a board which says, um, we’re gonna have an elec­tion. Every­one’s gonna vote. Who can best sort out these prob­lems? And here is a list of the prob­lems they have to sort out. We decid­ed, so we have a ref­er­en­dum first, and we say, you know, there’s only, we are only allowed to vote on 10 issues, top 10 because, and you’ve got four years to fix them.

[00:16:23] TK: And we all agree on the top 10. And then we say, okay, we’re gonna vote for A, B, and C to do that. And in four years time we’re gonna say, here’s a score­board, here’s a score­card. You in all, you’re out.

[00:16:33] Cameron Reil­ly: Love it. Love it. By the way, it was, uh, the guy who came up with exor­bi­tant priv­i­lege was­n’t British, he was French. His, uh, name was, uh, re he was the French for­eign Min­is­ter in 1965. He, uh, um. Oh, he’s the one who put the spe­cif­ic phrase into the pub­lic record. The intel­lec­tu­al archi­tec­ture behind, behind the [00:17:00] cri­tique came from Mabb, Jacque Ruth, a French econ­o­mist, an influ­en­tial advi­sor to Charles Dega, famous­ly described the Amer­i­can sit­u­a­tion as a deficit with­out tears that the US was the only nation that could run mas­sive trade deficits and pay for them by sim­ply print­ing its own cur­ren­cy, which oth­er nations were then forced to hold as reserves.

[00:17:20] Cameron Reil­ly: And that was in 1965.

[00:17:22] TK: Wow. And of course, that’s the oth­er rea­son why the gold price has been going up is because cen­tral banks are buy­ing gold, know­ing that at some stage the US is gonna have to print a lot of mon­ey to pay its debt or deval­ue its cur­ren­cy and they don’t want to be hold­ing US dol­lars, uh, with­out a. Hedge when that hap­pens.

[00:17:40] Cameron Reil­ly: Well, and you know, uh, apart from the extra $200 bil­lion that the Trump admin­is­tra­tion wants to fin­ish the war, he’s already won with Iran. Is, uh, in add that’s in addi­tion to a mas­sive $1.5 tril­lion base [00:18:00] defense bud­get or war bud­get. Now that it’s the Depart­ment of War, I guess, for fis­cal year 2027, which is a 66% increase over pre­vi­ous lev­els.

[00:18:10] TK: Well, that was the oth­er thing I noticed in that arti­cle when you sent it through about the US deficit, the GAO said the num­bers they were using were approx­i­mate because they can’t get mon, they can’t get num­bers out of them. Min­istry of Defense or Min­istry of War, what­ev­er it’s called now.

[00:18:24] Cameron Reil­ly: Yeah.

[00:18:26] TK: So it’s prob­a­bly a.

[00:18:28] Cameron Reil­ly: Talk­ing about US issues. Um, this isn’t in my notes, but I, ’cause I just saw it a lit­tle while ago. This is in Reuters today. Uh, Iran blows hole in US alu­minum sup­ply chain with smelter strikes, with attacks on the two biggest alu­minum smelters in the Mid­dle East. Over the week­end, Iran struck at major sup­plies to the Unit­ed States of a strate­gic met­al.

[00:18:51] Cameron Reil­ly: The world’s biggest econ­o­my does not pro­duce near­ly enough of domes­ti­cal­ly. Ana­lysts said the week­end dis­rup­tion from the Iran War cen­tered around the [00:19:00] dif­fi­cul­ty of ship­ping alu­minum and raw mate­ri­als through the strait of mush, which has been effec­tive­ly closed by Ter­an. But on Sat­ur­day, Emi­rates Glob­al Alu­minum said it’s rough­ly 1.5 mil­lion met­ric ton per year. Al we last site in Abu Dhabi had sus­tained sig­nif­i­cant dam­age from Iran­ian attacks. Alu­minum. Bahrain said it’s 1.6 mil­lion ton per year plant was tar­get­ed on the same day. the US um, only pro­duces about 40% of the, uh, alu­minum that it needs every year. And alu­minum prices lept 6% to $3,492 a ton, close to a four year high. So we may see, um, alu­minum stocks back

[00:19:48] TK: Yeah.

[00:19:49] Cameron Reil­ly: buy list very soon.

[00:19:51] TK: Capra comes to mind,

[00:19:52] Cameron Reil­ly: Uh

[00:19:54] TK: but um, like it’s again, just a, anoth­er one of these short­sight­ed issues and it’s Trump’s [00:20:00] been, you know, walk­ing around like a roost­er say­ing, well, we don’t need oil from the Mid­dle East. Haha, you can fix it Europe, but it’s, but there, oil isn’t the only thing that comes out­ta the Mid­dle East.

[00:20:11] TK: And I remem­ber going to Dubai for a, a hol­i­day and see­ing the huge alu­minum smelter on the side of the coast there. Um, yeah, I can’t remem­ber the exact details, but there was like a desal plant, which of course they need, and a huge elec elec­tric­i­ty, uh, gen­er­a­tor, um, which both an alu­minum smelter and a desal plant knee.

[00:20:33] TK: So they put them side by side and stuck a gen­er­a­tor next to them. Um, and uh, yeah, it was big. Let me tell you, it was like a big refin­ery.

[00:20:42] Cameron Reil­ly: I am, uh, alu­minum’s already a buy on our buy list. I’m just look­ing at who their Aus­tralian stocks are. That would prob­a­bly show up Capal. Uh, Rio has, but I don’t think it’s a major­i­ty of their rev­enue. S 32. Are they [00:21:00] still around even

[00:21:01] TK: Uh, they’re under takeover. Yeah. Um, but they’re steel. I think there might be a bit of alu­minum there, but they’re main­ly steel.

[00:21:07] Cameron Reil­ly: I’ve got 50% alu­minum

[00:21:10] TK: Real­ly? Okay.

[00:21:11] Cameron Reil­ly: I haven’t checked that for, you know, a while.

[00:21:14] TK: I haven’t either, so I trust your num­ber.

[00:21:16] Cameron Reil­ly: I’m look­ing at c’s, uh, cabals. Uh, yeah, they’ve been going up, they’re in a, they’re a Josephine at the moment. Um, but they had their five year char­ters look­ing real­ly good, but I, uh, haven’t seen them turn up on the buy list for a while, but there you go. So, yeah, I, I did see a cou­ple of sto­ries in the news this morn­ing that Trump’s num­ber one strate­gic objec­tive in Iran now is to open the Strait of ous. So the thing that the war cre­at­ed is now the num­ber one strate­gic objec­tive of the war. His war blocked it. Now he needs to open [00:22:00] it.

[00:22:00] TK: Well it’s, that was, I was gonna make that point, but when moved on, when you were read­ing the arti­cle out, it said, when Iran, since Iran closed the Straits F on war, I’m think­ing they did­n’t close it. It was the US and the Israel that closed it.

[00:22:13] Cameron Reil­ly: Yeah. Oh dear me.

[00:22:17] TK: There’s also been, there’s also a debate around CAA about whether Bo site was the rel­e­vant com­mod­i­ty or alu­minum.

[00:22:23] Cameron Reil­ly: Right

[00:22:24] TK: ’ cause alu­minum itself isn’t real­ly a com­mod­i­ty, it’s the out­put of refin­ing bulk site. Yeah.

[00:22:29] Cameron Reil­ly: Yeah. Right. August last year looks like it was the last time it was on our buy list. Well, fun and games. Uh, the oth­er sto­ry, of course is uh, traders bet $500 mil­lion on oil price just before Trump’s post on delay to Iran attack traders bet heav­i­ly on crude 15 min­utes before Trump announced delay to attack oil prices plunged 15% after Trump’s post on Iran talks. Yes. [00:23:00] I won­der who that could have been that had 15 min­utes warn­ing

[00:23:08] TK: I won­der. But um, the inter­est­ing thing is it’s, that hap­pened, it’s almost a week ago now. Not quite. Per­haps it was a week ago. I think it was this, this time last week we were talk­ing about it. Um, and no one knows who ben­e­fit­ed, like.

[00:23:23] Cameron Reil­ly: Yeah.

[00:23:24] TK: It’s on, it’s on a pub­licly trad­ed plat­form, prob­a­bly nymex, which is where the US WTI, um, works.

[00:23:33] TK: West Texas. Inter­me­di­ate oil gets trad­ed. Uh, so open plat­form, it’s, it’s not like some­one ducked into a alley­way and saw a guy in a fedo­ra and sun­glass­es and the rain­coat who said, you wan­na buy some oil. It’s like, it’s on a pub­lic plat­form. Buy­er and sell­er. Some­one needs to know who’s on both sides of those trades.

[00:23:53] TK: Now there’s prob­a­bly, there’s prob­a­bly pri­va­cy issues. Like I get that, but [00:24:00] ha has report­ing sunk to such a low debt that no one can work out who actu­al­ly ben­e­fit­ed from that trade.

[00:24:06] Cameron Reil­ly: Don’t wor­ry Tony to Don­ald Trump has his best peo­ple look­ing into it right now.

[00:24:11] TK: That’s why we don’t know after a week.

[00:24:13] Cameron Reil­ly: It’s like try­ing to get infor­ma­tion out of, uh, the Pen­ta­gon where all the mon­ey’s going. Don’t wor­ry about it. We’ll get

[00:24:20] TK: Yeah.

[00:24:20] Cameron Reil­ly: that. Yeah, we’ve got our best peo­ple. Our best peo­ple are work­ing on it.

[00:24:24] TK: Hey, by the way, going back to those, um, US accounts, has­n’t Doge made a big dif­fer­ence to the cost base?

[00:24:30] Cameron Reil­ly: Yeah. Fan­tas­tic. Doge. Such a win.

[00:24:33] TK: Mm. Win­ning.

[00:24:34] Cameron Reil­ly: the oil price, Dr. Was at $97. It dropped down to 88. It’s now $102 50. This is, uh, WTI.

[00:24:43] TK: Yeah. Right.

[00:24:45] Cameron Reil­ly: who­ev­er short­ed it got out pret­ty quick­ly because it did­n’t stay down for very

[00:24:50] TK: It did­n’t, did it? No, that’s right. Well, I think they were sell­ing, so they did­n’t, I don’t, I think the sto­ry is they sold their, their hold­ings of oil. So [00:25:00] that’s the oth­er thing too, like, again, it should­n’t be too hard for some­one to dig into the paper­work and find out who holds that much oil to sell.

[00:25:08] TK: Nar­row it down, dig around and find out who ben­e­fit­ed, where’s, where’s wood and Bern­stein these days.

[00:25:14] Cameron Reil­ly: They sold futures. LSEG data shows that between 10 49 and 10 50 GMT traders placed bets on 5,100 lots of Brent and WTI crude futures worth well over 500 mil­lion based on a Reuters cal­cu­la­tion.

[00:25:30] TK: Okay, so maybe they did­n’t have o Often­times a pro­fes­sion­al unit trad­ing a com­mod­i­ty like that in the futures will have some kind of real asset back­ing in case it goes south. Um, but they can do it what’s called a naked trade and do the futures with­out that com­mod­i­ty back­ing. But either way, there’s a paper trail.

[00:25:47] Cameron Reil­ly: yeah.

[00:25:48] TK: How, how do you know you’re gonna get paid if you don’t know who the coun­ter­par­ty is

[00:25:51] Cameron Reil­ly: Yeah. Yeah, yeah, yeah, yeah, yeah, yeah,

[00:25:56] TK: or some­body does­n’t know who the coun­ter­par­ty is?

[00:25:58] Cameron Reil­ly: Well, the [00:26:00] Unit­ed States Secu­ri­ties and Exchange Com­mis­sion when asked about this, declined to com­ment, and the Com­mod­i­ty Futures Trad­ing Com­mis­sion was not imme­di­ate­ly avail­able for com­ment. So it’s just No com­ment. Tony

[00:26:14] TK: Every­one knows which side of the bread their but­ters on in the US, don’t they?

[00:26:18] Cameron Reil­ly: No idea what’s going on. Uh,

[00:26:21] TK: We’re look­ing into it so we can do it our­selves next time. So bug­ger off.

[00:26:25] Cameron Reil­ly: We’re gonna have a, we’re gonna have a com­plete inves­ti­ga­tion

[00:26:28] TK: Yeah,

[00:26:28] Cameron Reil­ly: this. Uh,

[00:26:30] TK: time.

[00:26:32] Cameron Reil­ly: the, uh, chair­man of the, uh, SEC is a chap by the name of Paul Atkins. Paul Atkins, uh, was appoint­ed or nom­i­nat­ed by Pres­i­dent-Elect Trump Decem­ber, 2024. And, uh, yeah, so, you know, I’m sure he is. I’m sure he is doing a great job. Great job.

[00:26:58] TK: Well, I’m [00:27:00] sure he is too de, depend­ing on your per­spec­tive.

[00:27:04] Cameron Reil­ly: PPM says, no, Tony. 25th of March. This is dat­ed, uh, update on non-bind­ing offer for pep­per. Mon­ey. Chal­lenger Lim­it­ed has been informed by Pep­per Mon­ey Lim­it­ed’s inde­pen­dent board com­mit­tee. The chal­lenges con­fi­den­tial, non-bind­ing and con­di­tion­al pro­pos­al to acquire PEPPER mon­ey joint­ly with PEPPER Group A NZ Hold­Co Lim­it­ed not rea­son­ably capa­ble of exe­cu­tion.

[00:27:31] Cameron Reil­ly: And accord­ing­ly, PEPPER mon­ey has decid­ed not to pro­ceed with the revised pro­pos­al. Man­ag­ing Direc­tor and chief exec­u­tive. Nick Hamil­ton said I would like to thank Pep­per mon­ey. Mabb Mabb pet. I would like to thank the Pep­per mon­ey man­age­ment team. Peter Papa picked a peck of Pick a Pep­pers, a Pep­per mon­ey man­age­ment team for their engage­ment through­out the process. And I’d like to tell Chal­lenger to go take a hike. You did­n’t say that. I just made that bit

[00:27:58] TK: No.

[00:27:59] Cameron Reil­ly: Um, [00:28:00] so, uh, there you go.

[00:28:04] TK: Yeah, I think it’s.

[00:28:05] Cameron Reil­ly: to see and PPP M as a result?

[00:28:08] TK: Inter­est­ing choice of words there. They did­n’t, the, the tar­get did­n’t think the acquir­er could exe­cute the, the, um, takeover. So there’s a num­ber of things that spring to mind that I’ve been think­ing about my, since I saw that. Num­ber one is it’s pret­ty hard to do an m and a deal at the moment. Um, all the, like, you know, our, our buy list is full of oil com­pa­nies and that’s about it.

[00:28:31] TK: So every­thing’s drop­ping. Um, uh, you know, fund­ing’s gonna be a bit skit­tish as well if they need­ed to bor­row any funds to, to do the deal. But I think the biggest issue was that, uh, and you could see this when the announce­ment came out, the chal­lenge of share price went up. So the chal­lenge chal­lenger share­hold­ers did­n’t real­ly wan­na do the deal, even though man­age­ment did, and the board did.

[00:28:51] TK: Um, so I think that is pos­si­bly what was behind that com­ment. We did­n’t think you could exe­cute, ’cause you’re share­hold­ers, we gonna, we’re gonna lynch you. So, [00:29:00] um, yeah, it, and I think Chal­lenger pos­si­bly said thank you and, um, with­drew the bid.

[00:29:05] Cameron Reil­ly: Mm.

[00:29:07] TK: But dif­fi­cult time for any m and a takeovers at the moment. It’s a, it’s such a, every­thing’s so volatile.

[00:29:12] TK: How do you fix on a price?

[00:29:14] Cameron Reil­ly: Mm

[00:29:15] TK: an inter­est­ing dimen­sion to valu­ing com­pa­nies that like every day at the moment, they’re just oscil­lat­ing so wild­ly based that on all sorts of emo­tion, all sorts of peo­ple read­ing tea leaves about when the straits of are gonna open again and who’s gonna win and da da, what, what it means for infla­tion and what the gov­ern­ment will do on response and all this kind of stuff.

[00:29:39] TK: And then feed­ing ’em into five year pro­jec­tions for, um, MPV cal­cu­la­tion for a com­pa­ny. It kind of makes a bit of a laugh­ing stock out of being able to accu­rate­ly val­ue any­thing, does­n’t it?

[00:29:50] Cameron Reil­ly: Yeah. in my, uh, week­ly QAV Light newslet­ter this week, I men­tioned the fact that, uh, you always say mar­kets like [00:30:00] pre­dictabil­i­ty

[00:30:00] TK: Yeah.

[00:30:01] Cameron Reil­ly: and so far away from pre­dictabil­i­ty

[00:30:05] TK: Yeah.

[00:30:05] Cameron Reil­ly: insan­i­ty. Right.

[00:30:07] TK: Yeah. But

[00:30:08] Cameron Reil­ly: gonna hap­pen today, let alone five years from now.

[00:30:11] TK: it is fun­ny like that, isn’t it? It’s like I, you know, nor­mal­ly when I get up, I check what the US mar­ket did overnight, but I’m also look­ing at the oil price these days, and it’s just like, Ooh, that’s a sur­prise. Oh, that’s a sur­prise. It’s, it’s usu­al­ly, it’s, it’s, you know, it’s, it’s a quick glance and get on with your day, but now it’s a, wow, what, what drove that?

[00:30:31] TK: What’s hap­pened in the morn­ings?

[00:30:35] Cameron Reil­ly: Dar­ryl sent me an email. Hi Cam and Tony in this week’s pod­cast and Paul Pork of KAR. Tony men­tioned scor­ing them for hav­ing a buy­back in place. I know this was in the con­text of increas­ing equi­ty and there has been dis­cus­sion pre­vi­ous­ly about quan­ti­fy­ing the lev­el of actu­al buy­backs under­way, but there’s no men­tion of this in the Bible, so I’m not clear what weight we should be giv­ing this in terms of actu­al QAV scor­ing. Can [00:31:00] you or Tony elab­o­rate in the next episode? So thank you for, uh, that reminder, Dar­ryl, that I had­n’t, uh, inte­grat­ed those things into the Bible or the check­list. I have now done that. the check­list tem­plates now have the new buy­back log­ic. I’ve also inte­grat­ed it into the Bible. If you’re using the updat­ed ver­sion of the AFR tem­plate, you’ll see the man­u­al data sheet has a new col­umn t does it have a buy­back, gets a one or a blank.