The Tuck In: QAV AU #951

QAV AU 951

[00:00:00]

Tony Kynas­ton: Your birth­day present. Spe­cial leave pass to go to the physio on your birth­day

Cameron: Wel­come back to Qual­i­tatis ad Val­orem Prin­cip­ia Math­e­mat­i­ca, Tony Uh, yes, thank you. I did have a birth­day. Thank you for your, uh, very sweet birth­day gift, and thank you to every­body out there who sent me birth­day gifts. It was very gen­er­ous, uh, of all of you who sent me birth­day gifts. Um, which was just you real­ly, but, you know, I think if I guilt them into it, they might, you know, send me some­thing next year.

Tony Kynas­ton: on board

Cameron: Of course it’s a thing. Um, uh, yes, I went to the physio last week, and seri­ous­ly, best birth­day gift ever. I saw her again today, and I’ve got­ta see her again on Thurs­day. But, uh, fixed me up, put my shoul­der back in, put my hips back in, my pelvis, what­ev­er. Um, felt like a new man. I said to Chris­sy, she says, “Yeah, best birth­day present ever.”

Get­ting my body put back into place. Still hurts, but, um, train­ing.

Tony Kynas­ton: Mm-hmm

Cameron: You know, I did five hours at kung fu on my birth­day, on [00:01:00] Sat­ur­day, and, uh, did­n’t hurt any­where near as much as it would’ve oth­er­wise, so

Tony Kynas­ton: they go easy on you?

Cameron: At kung fu?

Tony Kynas­ton: hap­py

Cameron: No. No, it’s a.

Tony Kynas­ton: hap­py birth­day.

Cameron: No, it goes the oppo­site way. We have a tra­di­tion. There’s a tra­di­tion at our school that if some­body has a birth­day, every­one needs to do, um, 10 pushups for every year.

So we were lined up to do 560 pushups. I think we got about 160 done in the fit­ness class, and then we ran out of time. But, um, yeah.

Tony Kynas­ton: Wow. Well, that’s an achieve­ment any­way, 160 pushups.

Cameron: Oh, that’s noth­ing. Uh, seri­ous­ly, you know, um, begin­ning of last year, Chris­sy and I decid­ed it was gonna be the year, well, I decid­ed, Chris­sy went along with it, the year of pushups. So on Jan­u­ary 1st, we did one pushup, and Jan­u­ary 2nd we did two, and Jan­u­ary 3 we did three at night, and Fox joined in as well.

So by March, end of March, we were doing 100 pushups a night. We sort of got to 100 and stopped ’cause I read [00:02:00] some­where that doing more than 100 pushups is sort of, you know, um, dimin­ish­ing returns after that.

Tony Kynas­ton: Okay.

Cameron: So we would do 100 pushups a night, um, every night just for, you know, to get good at pushups. Well, it was to get good at pushups.

Pushups is a thing, right? You have to train your body to be able to do them. We all strug­gled to do them. Um, so yeah, now we can, you know, chuck out 100 with­out blink­ing.

Tony Kynas­ton: Can you do one-armed hand claps in the air?

Cameron: Mm, no. No. Or on my three fin­gers, like some of the guys do them on three fin­gers at kung fu. Can’t do that, ’cause I got a bro­ken knuck­le here too, and my knuck­les are sore. But I’m try­ing to train up my fore­arm so I can do more. Any­way, peo­ple don’t wan­na lis­ten to this. Tony,

Tony Kynas­ton: I do. It’s hilar­i­ous.

Cameron: Qual­i­tas Ad Val­orem Prin­cip­ia Math­e­mat­i­ca, which is what I decid­ed, uh, we’re gonna change the name of this to because sounds fanci­er.

Um, but it leads me into my first thing. Math­e­mati­cians are out of a job. [00:03:00] You been fol­low­ing this?

Tony Kynas­ton: yeah. it 1,000 the­o­rems solved in a day or some­thing?

Cameron: 722, I think.

Tony Kynas­ton: con­vert it to Aussie.

Cameron: Nice. Very, very good. Uh, yeah, like just the shock and out­rage, um, com­ing from math­e­mati­cians is fas­ci­nat­ing. I saw a guy a cou­ple of days ago whose s- it was­n’t a Nobel Prize win­ner, but it was some top, you know, uh, prize in math­e­mat­ics, old­er guy, who said he expect­ed that some of the prob­lems that he’d been work­ing on would even­tu­al­ly get solved by AI one at a time.

But he said 10 of the prob­lems that he spent decades work­ing on were solved in one day, um, imme­di­ate­ly. And he was like, “I d- I don’t know what to do. I have no words.” I mean

Tony Kynas­ton: I don’t know what to do.

Cameron: [00:04:00] Seri­ous­ly. I mean, if you’re a, if you’re a the­o­ret­i­cal math­e­mati­cian and this is what you do for a liv­ing is solve math prob­lems, and now they’re just get­ting solved in a day, uh, by AI, what d- what do you do tomor­row? He said his gradu- He, he said, “I feel for my grad­u­ate stu­dents.” Like, what do they do? Their careers have just been, not ter­mi­nat­ed, but, um, made redun­dant maybe.

I don’t know. He said, “We’ll work it out. We will fig­ure it out. We’ll work it out, but right now I, I feel like I, I don’t know what to do today.”

Tony Kynas­ton: they jump on and use the tool and advance math­e­mat­ics even more, right? Than just solv­ing the cur­rent prob­lems

Cameron: But what val­ue does a human add if the tool solves the math­e­mat­i­cal prob­lems? If your job is solv­ing math­e­mat­i­cal prob­lems and the tool can do it bet­ter, faster than you can, how do you use the tool

Tony Kynas­ton: point­ed at math­e­mat­i­cal prob­lems, at new math­e­mat­i­cal prob­lems. I mean, the, it begs the [00:05:00] ques­tion, if you can solve all these math­e­mat­i­cal prob­lems in a day, why, why haven’t they solved cold fusion? Why has­n’t AI solved can­cer? Like all

Cameron: That’s, that’s, that’s com­ing.

Tony Kynas­ton: Good.

Cameron: So cod­ing, you know, cod­ing was first. You use the cod­ing

Tony Kynas­ton: maths is a flex. Let’s get some real stuff

Cameron: Well, no, I mean, I think the, the view­point of, from the view­point of Anthrop­ic and Ope­nAI, cod­ing and math­e­mat­ics is behind every­thing else. So once you can do those, once you’ve solved those, then you can start solv­ing every­thing else. ‘Cause at the end of the day, all sci­ence is math­e­mat­ics, you know.

Tony Kynas­ton: of sci­ence

Cameron: and cod­ing is how you, you know, uh, artic­u­late the prob­lems that you need to solve with the math­e­mat­ics, so.

Any­way,

Tony Kynas­ton: Yeah. Inter­est­ing

Cameron: keep say­ing jobs are. I haven’t seen any jobs. I have this debate with Sam­marti­no on Futur­is­tic all the time. He goes, “Jobs are being tak­en by AI.” Well, go talk to, go talk to the math­e­mati­cians. [00:06:00] It just took their job

Tony Kynas­ton: Well, has it? That’s, I mean, with­out labor­ing the point, it, AI solves some prob­lems. There’ll be new prob­lems. The, I’m sure if the, sure if the maths guy said, “If I had­n’t spent deca- two decades work­ing on this prob­lem, I would’ve thought about the next one.” So think about the next one and get AI to solve that

Cameron: I’ll pass on your pithy response to the world’s math­e­mati­cians

Tony Kynas­ton: pass it on to the vice chan­cel­lors of the uni­ver­si­ties that employ the math­e­mati­cians before they sack them.

Cameron: T- Tony, Tony says, “Stop bitch­ing. Do some­thing else.” Tay­lor said, “Just go and get anoth­er job.” I’m like, “Right, you’ve been a the­o­ret­i­cal math­e­mati­cian for 30 years. Just go out and get a job as a barista.”

Tony Kynas­ton: A pod­cast­er.

Cameron: Yeah, pod- that’s what the world needs, more mid­dle-class white men doing pod­casts. I keep say­ing that.

There’s not enough of us. There was five when I start­ed. Um,

Tony Kynas­ton: a trend.

Cameron: yeah

Tony Kynas­ton: you had’ve been female and Asian, we’d all [00:07:00] be f- female Asian pod­cast­ers, ’cause you

Cameron: I start­ed a trend that start­ed the whole world cry­ing. Glob­al Con­se­quences Brief­ing, Tony, are you ready?

Tony Kynas­ton: Hit me.

Cameron: By the way, this is QAV Aus­tralia episode 951. We’re record­ing this on the 13th of Octo­ber, 2026. Um, well, uh, you know, uh, Don­ald Trump said the Strait of Hor­muz was open, it’s about 75 times. Um,

Tony Kynas­ton: Got to be right once.

Cameron: yeah.

Tony Kynas­ton: Hmm

Cameron: and tanker attacks pushed Brent back above 100. Well, pushed Brent back above $106 US. Um, there is some relief in diesel prices because he’s done a, Trump’s done a deal with Rus­sia to release their diesel and buy their diesel.

Tony Kynas­ton: Yeah

Cameron: But then Ukraine start­ed bomb­ing their [00:08:00] diesel again, so,

Tony Kynas­ton: Yep.

Cameron: yeah

Tony Kynas­ton: he also declared a, a truce between Rus­sia and Ukraine with­out telling Ukraine. Yeah.

Cameron: Not a truce, an ener­gy cease­fire. Right. But Rus­sia con­tin­ued attack­ing Ukraine’s pow­er infra­struc­ture

Tony Kynas­ton: And Ukraine knocked out the Russ­ian bot fac­to­ry, which is why Trump got upset, not diesel prices.

Cameron: Uh, you’ve prob­a­bly seen that meme, but, uh, hun­dreds of thou­sands of Trump sup­port­ers mys­te­ri­ous­ly dis­ap­peared when Ukraine bombed the Russ­ian bot fac­to­ry. Yeah

Tony Kynas­ton: Yeah. Trump’s got midterms with­out bots. He’s, he’s wor­ried

Cameron: Yeah. Um, I know you’re gonna be talk­ing about bonds, so I’ll leave that, but, uh, I’ve got a Roger Mont­gomery thing on bonds as well. Microsoft have said they plan to deploy more than one mil­lion pro­pri­etary AI chips in their own data cen­ters. They’ve built their [00:09:00] own chip, the Maia chip. So they’re tak­ing aim at NVIDIA, and I don’t think they’ll be alone in doing that, but, um, Chi­na will be tr- uh, are build­ing and releas­ing their own.

But, uh, you know, NVIDIA just can’t man­u­fac­ture enough any­way to meet the glob­al demand, so some­body needs to step in, even if it’s not, uh, from a com­pe­ti­tion per­spec­tive, just a sup­ply per­spec­tive. And the oth­er thing on, the oth­er sto­ry in my glob­al con­se­quences brief­ing. It needs, needs music. Dun, dun, dun.

North Kore­a’s lat­est mis­sile launch­es fol­low South Kore­a’s first pub­lic hyper­son­ic test, fur­ther com­press­ing warn­ing times in a nuclear flash­point. So they’ve both, they’re both test­ing hyper­son­ic mis­siles, so that’s all good. It’s all going well, basi­cal­ly, Tony. Uh, the world is going well. Every­thing’s going to plan.

Tony Kynas­ton: Every­thing

Cameron: all. [00:10:00] Yeah. Every­thing’s run­ning per­fect­ly smooth­ly

Tony Kynas­ton: I think you should turn glob­al con­se­quences off, Cam. Every­thing’s going so fine.

Cameron: so, so great. There are no glob­al con­se­quences of any of this. Hey, have you heard of a guy called Bill Ben­ter?

Tony Kynas­ton: Nope

Cameron: Bet you have.

Tony Kynas­ton: guess, I’m a guy too

Cameron: Yeah. Came across this some­where today. Bill Ben­ter did the impos­si­ble. He wrote an algo­rithm that could­n’t, could­n’t lose at the track.

Tony Kynas­ton: Ooh. No, I

Cameron: close to a bil­lion dol­lars lat­er, he tells his sto­ry for the first time. This is in Bloomberg, May 3rd, 2018. The gam­bler who cracked the horse rac­ing code.

Now, I know this is prob­a­bly an after-hour sto­ry, but it’s about a, a QAV-like approach to horse rac­ing, so I thought every­one would be inter­est­ed. Um, I’ll just read the first bit of it. Horse rac­ing is some­thing like a reli­gion in Hong Kong, whose cit­i­zens bet more than any­one else on earth. [00:11:00] Their cathe­dral is Hap­py Val­ley Race­course, whose grassy oval track and flood­lit stands are ringed at night by one of the sport’s grand­est views, neon sky­scrap­ers, and neat stacks of high-ris­es.

Blah, blah, blah, blah, blah. Um, let’s get to the, let’s get to the meat of this.

Tony Kynas­ton: guy.

Cameron: Yeah, I thought you would have. Bill, um, so this guy was win­ning, um, in casi­nos in Vegas, and I think he got kicked out of Vegas. So he basi­cal­ly went to Hong Kong and tried to fig­ure out how to use prob­a­bil­i­ty the­o­ry to win at horse rac­ing, and I think he took $250,000, him and his.

He had a part­ner that went over there, and a guy called Alan Woods, and they turned that into near­ly a bil­lion dol­lars in horse rac­ing. [00:12:00] He basi­cal­ly came up with an algo­rithm that would score hors­es’, uh, chances of win­ning, would only bet on the ones that got a high score, and, uh, and it worked. So, uh, appar­ent­ly there was a book, a 1962 book by math pro­fes­sor Edward Thorp

Tony Kynas­ton: Mm-hmm.

Cameron: called Beat the Deal­er.

Tony Kynas­ton: Yep.

Cameron: know that book?

Tony Kynas­ton: read it, yeah. Famous book.

Cameron: There you go.

Tony Kynas­ton: Hmm. That was

Cameron: S-

Tony Kynas­ton: and, um, count­ing cards. It’s the basis of the movie 21, if any­one’s seen that too.

Cameron: Oh, I’ve seen that. Yeah, good movie. Edward Nor­ton? Is that the Edward Nor­ton one?

Tony Kynas­ton: No, it’s the Kevin Spacey one.

Cameron: Oh, okay. Uh, app- so appar­ent­ly he read this, g- went to Las Vegas, worked at a 7‑Eleven for $3 an hour, took his wages to bud­get casi­nos and, uh, you know, fig­ured out how to clean up on that. [00:13:00] And then, um, yeah, as I said, took that to Hong Kong and, uh, made a bil­lion dol­lars

Tony Kynas­ton: Yeah, big fan of Thorp. Um, of the prog­en­i­tors of maths in the field of bet­ting and, and also stock mar­kets, ’cause he made some mon­ey out of tak­ing his from black­jack and apply­ing them to options mis­pric­ing of options ver­sus the under­ly­ing stock or com­mod­i­ty or what­ev­er they were deal­ing in. Made a lot of mon­ey there. But in both cas­es, mar­kets closed over him. So when you count cards at black­jack, you’re basi­cal­ly at how many cards you’ve been dealt and there­fore deduc­ing how many good cards are left in the deck. And a good card in black­jack is a ten usu­al­ly or a pic­ture card. Um, ’cause if you get two of those, you get twen­ty rather than twen­ty-one, and if you get more than twen­ty-one, you bust. So you’re look­ing for tens. Um, [00:14:00] once he went to b, he went to Vegas and made a lot of mon­ey. was even bankrolled by some Tex­ans, I think, from mem­o­ry, um, to make a lot of mon­ey. And then casi­nos worked it out, banned him, changed the way they deal black­jack.

So now instead of hav­ing one deck cards, they deal up to six­teen, they have machines that shuf­fle the cards, so can’t keep track of, um, how many tens are yet to be dealt

Cameron: Right

Tony Kynas­ton: bet-bet­ting strat­e­gy. Was, i‑in a nut­shell, what Thorp was doing. And the same with the, with the options mar­ket.

Once, once it became known that you could apply the kind of math he put behind count­ing cards to the options mar­ket, oth­er, oth­er peo­ple worked it out too, and the, and the mis­pric­ing sort of closed up as well. Closed the gap. So yeah. then you go from Thorp, you go to Sharp, you go to Kel­ly. It’s, it’s a great line of read­ing if.

I’d real­ly thor­ough­ly rec­om­mend it to peo­ple to look up those three names [00:15:00] and read all you can about them. very inter­est­ing approach to not just bet­ting, but also valu­ing stocks in the stock mar­ket.

Cameron: So, um, I want­ed to ask you about your, um, horse gam­bling,

Tony Kynas­ton: Mm-hmm.

Cameron: You’ve got a check­list, I think you’ve talked about it before

Tony Kynas­ton: Yeah, I guess you’d call it that. Yep.

Cameron: Have you applied, have you applied AI to it to, uh, improve it? Do you? Is it help­ing?

Tony Kynas­ton: Uh, not real­ly. Um, well, AI, uh, uh, I’m not gonna, you know, den­i­grate the AI involve­ment because it’s a dif­fi­cult thing to do. But, um, AI gives you con­ven­tion­al wis­dom basi­cal­ly. I’ll, I’ll. I’ve got a core strat­e­gy, um, which kind of gets me to break even, which is a bit of an achieve­ment in horse rac­ing because you’re always hand­ing over 15% to the, the oper­a­tor, the

Cameron: Real­ly?

Tony Kynas­ton: track.

Cameron: Wow

Tony Kynas­ton: That’s what they take out. Book­ies [00:16:00] take out and the TAB takes out. You can get less than that if you bet on Bet­fair. Um, be as low as 4% or 5%, but you still, you still have to win more than that to make mon­ey. So that’s. It’s more dif­fi­cult to do it than to, um, use the stock mar­ket where things go up, the index goes up any­way with­out you hav­ing to do any­thing.

So you’ve got, got a bit of a tail­wind there. Yeah. Um, but yeah, AI, I use it. Um, helps me to manip­u­late the data and I ask it for sug­ges­tions. Like we’ve just, if we’ve just done a project, I’ll say, “What do you think?” And it’ll come back, but it’s gen­er­al­ly con­ven­tion­al wis­dom. Um, or it’s got a short­hand way.

It might have a short­hand way of doing some­thing I was doing labo­ri­ous­ly, for exam­ple. But, um, yeah, has­n’t, has­n’t mean­ing­ful­ly improved my returns.

Cameron: Okay

Tony Kynas­ton: I do it for fun. I do it. That’s my maths, that’s my learn­ing. Um, yeah, one day if I’m not here, I will have cracked it and I’ll be, I’ll be gone. Hmm

Cameron: Well, [00:17:00] mov­ing right along. Roger Mont­gomery, old friend of the show, uh, had an arti­cle this week. “Why stocks can­not beat rates grav­i­ty for­ev­er. Have you noticed inter­est rates on long bonds are ris­ing with appar­ent impuni­ty? Bond rates fall, stocks go up. Bond rates rise, stocks still go up. Maybe by a bit less, but they still go up.

Noth­ing, it seems, can stymie the stock mar­ket’s advance. This dynam­ic calls for a clos­er look under the bon­net. In the past, cycli­cal eco­nom­ic fac­tors were the pri­ma­ry dri­ver of bond rates, which ulti­mate­ly self-cor­rect­ed as cen­tral banks fought infla­tion or mori­bund eco­nom­ic growth at the short end of the yield curve.

But that was when nations coop­er­at­ed, when free glob­al trade pro­vid­ed sta­bil­i­ty, when sup­ply chains weren’t tar­gets in mil­i­tary con­flict, and before nation­al secu­ri­ty and strate­gic auton­o­my dic­tat­ed eco­nom­ic pol­i­cy. Today, cen­tral banks oper­ate in an altered [00:18:00] regime. They can’t print ener­gy, unblock trade routes, or sub­si­dize domes­tic man­u­fac­tur­ing plants.

And when fis­cal deficits expand per­sis­tent­ly, as they are under Don­ald Trump in the US and Antho­ny Albanese here at home, infla­tion remains struc­tural­ly stub­born. Con­se­quent­ly, cen­tral bankers aren’t the pri­ma­ry dri­vers of the eco­nom­ic cycle. They’ve become down­stream price tak­ers forced to main­tain high­er bench­mark inter­est rates just to keep infla­tion expec­ta­tions checked.”

What do you think about all of that, Tony?

Tony Kynas­ton: Yeah. Well, it’s a good segue into what I was gonna talk about, which is bonds. Um, I’m no expert on the macro sphere. I’ve nev­er bought a bond, nev­er trad­ed a bond. So, uh, I’m gonna do this as kind of con­text or back­ground. It’s, what’s real­ly inter­est­ing to me is that in the last week in par­tic­u­lar, I think every pod­cast, every research piece I’ve read and lis­tened to has [00:19:00] made bonds the top­ic of con­ver­sa­tion.

And I actu­al­ly start­ed writ­ing notes about the show mid­dle of last week. I, I think some­thing from Ray Dalio came up on one of my feeds about bonds and how, um, we’re get­ting close to a death spi­ral, um, which is when talks about the gov­ern­ment need­ing to. A death spi­ral occurs when the gov­ern­ment needs to bor­row mon­ey to repay the debt, if that makes sense.

And so he’s call­ing it out in Europe and call­ing it out in the US at the moment that we’re, if not in a death spi­ral, we’re, we’re very close.

Cameron: Sor­ry, are you say­ing a death spi­ral, D‑E-A-T‑H, or debt, D‑E-B‑T?

Tony Kynas­ton: I’m say­ing death, but you could inter­change either word.

Cameron: Right. Okay.

Tony Kynas­ton: So

Cameron: same thing?

Tony Kynas­ton: Yeah, the anal­o­gy is that like you’ve maxed out your cred­it card, but you can’t afford to repay the debt, you can’t afford to make the inter­est pay­ment, so you take out anoth­er cred­it card. And once you’ve got five or six cred­it cards maxed out, [00:20:00] then you go to the bank and say, “Hey, refi­nance this for me.” Then when you can’t meet the repay­ments on that, they take away your car. That’s, that’s where we’re kind of at, or Ray Dalio thinks we’re at. I think, um, you know, the inter­est­ing thing, like we talked about cri­sis before, that like prob­a­bly every two years of my invest­ment life has been some kind of mar­ket cri­sis. You know, um, whether it’s COVID, whether it’s Ukraine wars, whether it’s, um, GFCs, what­ev­er. And I think this is pos­si­bly the only thing that I would apply this time is dif­fer­ent to, and that’s because it seems like every cri­sis is dif­fer­ent. And the reg­u­la­tors are a bit, are a bit like gen­er­als fight­ing the last war.

They’re pro­tect­ing us from the GFC again, but they’re not real­ly look­ing over the hori­zon at what could be com­ing next. I think we’re get­ting close to call­ing a cri­sis in the bond mar­ket. And, you know, macro isn’t my thing [00:21:00] and, and so I can’t speak with any sort of author­i­ty on the bond mar­ket. Um, but if I use a kind of heat map approach of, of gath­er­ing in all the infor­ma­tion that’s out there, of all the opin­ions that are out there and, and use that to say, “Where we are,” that might be use­ful. Um, the US. So, so the Ray Dalio death spi­ral is usu­al­ly trig­gered when debt of a gov­ern­ment reach­es about a hun­dred per­cent of GDP. And at the moment, France is now at a hun­dred and nine­teen per­cent and the US is a hun­dred and twen­ty-six per­cent. So I think France is gonna be a good exam­ple for us to watch Ray Dalio’s death spi­ral in action. And there was an arti­cle in The Wall Street Jour­nal, um, week, Octo­ber 8th, and it says, “Default may be the tail risk haunt­ing French bonds.”

That’s the, um, that’s the title. Uh, “The [00:22:00] spike in French bond yields is most­ly dri­ven by the coun­try’s crush­ing debt and politi­cians’ inabil­i­ty to agree on a solu­tion, and per­haps the remote prospect of a tru­ly extreme solu­tion: default. August, far-left leader Jean-Luc Mélen­chon, a can­di­date in next year’s pres­i­den­tial elec­tion, sug­gest­ed can­cel­ing all the gov­ern­ment debt held by the Bank of France, of the nation­al arms of the Euro­pean Cen­tral Bank. ‘Throw it in the fire,’ he said.” So the. You know, France is start­ing to sound like Greece all over again. And, uh, you know, Greece went through a peri­od of hav­ing to rene­go­ti­ate its debt. Euro or the EU bailed out some of that debt on agree­ment by the Greek gov­ern­ment to rein in spend­ing, often called aus­ter­i­ty. Um, even­tu­al­ly Greece trad­ed its way through. But you know, it was­n’t an easy time for the Greek econ­o­my or for Greeks. And there were var­i­ous peo­ple on the left in Greece who [00:23:00] said, “Well, we could just, um, not. can­cel the debt and not pay the loans back.” That was a seri­ous, uh, a thing seri­ous­ly con­sid­ered. Of course, if, if gov­ern­ments start to do that, then gov­ern­ment bonds lose their cachet and, they beca- uh, but they become hard­er to issue, and to ensure they can issue them, the yields rise. So it gets hard­er and hard­er for gov­ern­ments to raise mon­ey. And they do need to raise mon­ey, espe­cial­ly when you’re in a 100% GDP type pic­ture you’ve got to raise new bonds to replace the old bonds which are retir­ing and which need to be refi­nanced.

Um, and you’ve got to repay the debt and that often­times mean, means issu­ing new bonds to help repay the debt as well. So

Cameron: Yeah, but, uh, hold on. If you, if you refuse to pay your old debt, what, what kind of yields are gonna make peo­ple think you’re gonna pay the future debt? Like, you just-

Tony Kynas­ton: World yields, um, Mex­i­can yields, [00:24:00] um, Asian yields. They’ve all, we’ve been through this dra­ma any num­ber of times, and gen­er­al­ly they, they. I’m gonna use a rule of thumb here and say they dou­ble. You know, I don’t know what a Greek bond is yield­ing now, but it, it would still be trad­able. It’d be on

Cameron: But if,

Tony Kynas­ton: than a French bond.

But

Cameron: if I lo- if I loan you mon­ey and you refuse to pay it back and then say, “But loan me more mon­ey and I’ll pay a high­er inter­est rate,” why would I do that?

Tony Kynas­ton: Well, you

Cameron: So that’s what I’m say­ing

Tony Kynas­ton: does­n’t usu­al­ly work that way. What nor­mal­ly hap­pens is the. is there’s a nego­ti­a­tion, um, like hap­pened with Greece. If, you can rein your gov­ern­ment spend­ing in and there­fore devote more mon­ey to pay­ing off the debt,

Cameron: Hmm

Tony Kynas­ton: we’ll for­give some of it, and in five years’ time you’ll be able to issue more debt into the bond mar­ket.

Cameron: So they did­n’t, yeah, they did­n’t default com­plete­ly. They nego­ti­at­ed a deal.

Tony Kynas­ton: Yeah.

Cameron: But if they default­ed com­plete­ly, you’re not gonna raise any more mon­ey, right? If you just walk away. [00:25:00] Yeah

Tony Kynas­ton: Until the gov­ern­ment changes and you have, you’ve got a track record of

Cameron: Yeah, I guess. Yeah, yeah.

Tony Kynas­ton: Yeah.

Cameron: Yeah

Tony Kynas­ton: So any­way, but that’s the, that’s the specter over France at the moment. The oth­er dimen­sion to euro coun­tries is that they can’t con­trol their debt. No, sor­ry, their, um, their cur­ren­cy. So they’re all part of the EU, and there’s one cur­ren­cy.

So the US, they can and have and will print more mon­ey, um, when they get into debt prob­lems a way of devalu­ing cur­ren­cy, as a way of, um, get­ting e- more exports away, which, which GDP, which low­ers the jet- debt to GDP ratio, which helps them issue more debt at a low­er yield, all that kind of thing.

So. And we saw that all over the world dur­ing COVID, where gov­ern­ments need­ed mon­ey, so they print­ed it. And, um, some of that’s com­ing home to roost now. The Aus­tralian gov­ern­men­t’s hav­ing to refi­nance that were issued dur­ing COVID, and five years [00:26:00] lat­er, uh, they’re rolling them over and they’re going from like a one per­cent yield to, uh, five or six or sev­en per­cent yield.

So it’s, it’s hurt­ing. So it is an issue. The dif­fer­ence in France is that they can’t deval­ue their cur­ren­cy. They can’t print more cur­ren­cy to help them get out of this. They’ve got to actu­al­ly go to the EU, either default, I guess, or nego­ti­ate an out­come. And EU is gonna say, “Well, we need you to con­trol your spend­ing.” And that’s why we’re start­ing to see riots on the streets in, um, in France. Stu­dents are say­ing the schools aren’t, uh, up to scratch. Uh, renters are say­ing they can’t find apart­ments in Spain, um, and, and in France. And it’s, it’s, you know, going. It’s, it’s a. The economies are a mess. So that’s, that’s some­thing to watch what hap­pens.

It’ll. I, I sus­pect it’ll work its way out like Greece. Um, Ger­many’s already pos­tur­ing say­ing, “Well, if you give France some relief, we’re not gonna be part of the EU [00:27:00] any­more. It’s not work­ing. We’re the only coun­try that’s fis­cal­ly respon­si­ble, and every time some­one spends too much on wel­fare or what­ev­er and does­n’t, um, raise tax­es enough to cov­er it, then, uh, they just go into the sit­u­a­tion of default and the EU works out what to do with them.” So it’s putting a lot of strain on the EU. That’s some­thing to watch, and that’s a, a local­ized prob­lem to Europe, I guess. How­ev­er, there’s a lot of oth­er things hap­pen­ing in the, in the bond heat map going, going on and around the world. Chi­na and Japan are cut­ting back on how many US Trea­suries they’re buy­ing. Uh, so Chi­na and Japan have been tra­di­tion­al buy­ers of US debt. Japan is sell­ing its US debt now to fund, um, to fund cur­ren­cy inter­ven­tions, I guess, in the yen, but also to, um, like, uh, in response to ris­ing domes­tic inter­est rates, so local investors are keep­ing their mon­ey in [00:28:00] Japan rather than buy­ing US Trea­suries. So we talked about a, a month or so ago about the, um, trade, which is not, uh, which is being unwound in Japan and how Scott Bessent stepped in and tried to influ­ence the mar­ket. So in the past when Japan had inter­est rates around zero, you could bor­row mon­ey in Japan and then go buy a US bond and make a mar­gin of four or five per­cent for doing noth­ing and with very lit­tle risk oth­er than maybe cur­ren­cy in that.

So that’s being unwound. Chi­na is also low­er­ing its hold­ings, so they’re now at, uh, an eigh­teen-year low in terms of their expo­sure, to the US, uh, debt mar­ket. And they’ve done that, um, they. Ana­lysts say they did that because, um, they saw what hap­pened to Rus­sia when, uh, the war broke out with Ukraine, and there were a lot of sanc­tions on, um, Russ­ian-held assets, and Chi­na did­n’t wan­na take that risk by hold­ing US debt, so they’re low­er­ing that. Um, the US is now [00:29:00] at forty tril­lion dol­lars worth of debt, which means a lot of debt is being issued in the US, and it’s not being bought by oth­er coun­tries so much like Japan and Chi­na now, but it is being bought by hedge funds. So they’re step­ping into the mar­ket. They have almost ten per­cent of the US Trea­sury mar­ket now, and that comes with its own risk because of, you know, I guess the volatil­i­ty in hav­ing, um, hedge funds own US debt.

It’s trad­ed more fre­quent­ly than if Chi­na was sit­ting on a pile and doing noth­ing with it. Um, it’s. There’s no coun­try to nego­ti­ate with if there, if there becomes a, um, any sort of late pay­ment or default sit­u­a­tion or a prob­lem, um, in the econ­o­my. Uh, the hedge fund traders will not go into a work­out sit­u­a­tion as you might with anoth­er coun­try.

They’ll just cut and run, which will, which will, um, cause prob­lems in the econ­o­my as well. Uh, so the hedge funds now hold more US debt than Japan. [00:30:00] Um, the, the only pos­i­tive of the equa­tion for the US is it’s a very robust econ­o­my and not just because as, um, the Roger Mont­gomery arti­cle allud­ed to the AI, super scalers are, are, um, dri­ving, uh, growth in the stock mar­ket, dri­ving cor­po­rate returns, and poten­tial­ly dri­ving pro­duc­tiv­i­ty, um, in busi­ness­es in the US. But even all those things aside, the US is a pret­ty robust econ­o­my with strong exports. So it’s not like a France or a Greece, um, which, you know, relies a lot on tourism, for exam­ple, and, and are pret­ty much wel­fare states. The US is not that. But it is very indebt­ed. And so, um, once, uh, if it’s not hap­pen­ing now, I think it might be, but debt repay­ments are actu­al­ly the biggest part of the US bud­get. If it’s not the biggest, it’s the sec­ond biggest to the mil­i­tary. But, um, when the gov­ern­ment starts to have to put more mon­ey from tax rev­enues into [00:31:00] pay­ing off debt as opposed to pro­vid­ing wel­fare or, or for defense, um, then it, it’s got­ta either. It’s got­ta do one of two things. It’s got­ta raise tax­es, which Don­ald Trump said he won’t do, uh, or it’s got­ta start mak­ing cuts.

And of course, they tried with DOGE, but you know, you, you could expect some oth­er cuts. And both of those things are to the US econ­o­my. They, um, I guess they hurt the US’s. If it’s, if it’s defense spend­ing, it’ll hurt. If it’s cut, it’ll hurt the US’s abil­i­ty to be the glob­al cop, um, there’s no EU to bail them out.

Um, they can print more mon­ey, but, uh, you’d expect there to be a cur­ren­cy deval­u­a­tion, which will again hurt the US’s role as the d‑default cur­ren­cy in the world, which will again send the cur­ren­cy down. Cur­ren­cy is held up in the US because if peo­ple want to trade in com­modi­ties, for exam­ple, or in almost any trade, they do it in US dol­lars, so they got­ta buy US dol­lars, which keeps the cur­ren­cy inflat­ed.

But if that starts to [00:32:00] erode, then, um, that, that will start to erode the US pow­er base as well. I guess my, my point here is that coun­tries are a bit like busi­ness­es, that qual­i­ty mat­ters and debt mat­ters. And as we see indebt­ed­ness rise, um, it’s becom­ing a prob­lem. Uh, what hap­pens in Aus­tralia? Well, we won’t escape a US shock. Um, if, if US, uh, Trea­sury bond yields rise, um, which they’re like­ly, which Dalio says will hap­pen with­in three years, they’re already at, um, highs at the moment. So that will flow through to our mar­ket. We’re see­ing our, um, in- we’re see­ing infla­tion go up. We’re see­ing RBA fol­low suit and raise rates as well. Um, what hap­pens then? Well, the pro. There already is a prop­er­ty down­turn, but it prob­a­bly gets worse. There’s high­er bor­row­ing costs for busi­ness­es. All of the prob­lems that we see or that we talk about for growth stocks, which are often [00:33:00] fund­ed by peo­ple who bor­row to, um, to bet on the, the next great­est thing, start m- they start to crater.

So you’ll see in growth stocks and high­ly indebt­ed stocks, um, espe­cial­ly those bor­row­ing now on the promise of future income. That’s, um, gonna be a tough ask to s- to s- to, sell if y- if your inter­est rates are get­ting up towards ten per­cent or more. So gonna hap­pen. A slow­down in Chi­na, uh, means less export income from iron ore and coal for Aus­tralia. expect to see gold surg­ing, um, as it often does when these kinds of desta­bi­liz­ing, um, events hap­pen around the world and inter­est rates rise. Um, and we’ll start to see qual­i­ty assets become cheap. So that’s the upside, I guess, is as val­ue investors, we’ll start to see, um, lots more things on the buy list. And I should also add, hold­ing cash won’t help in an infla­tion­ary envi­ron­ment because a dol­lar today buys cents in the future when, um, uh, cur­ren­cies are deval­ued and when [00:34:00] infla­tion, um, is worse than it is today. Um, and I guess the last part of the heat map is what’s hap­pen­ing on the cor­po­rate front, and the AI hyper­scalers are issu­ing bonds in, in pro­por­tions which now look like coun­try issuances.

So they’re, they’re issu­ing a lot. And so the law of sup­ply and demand says that with so much debt flood­ing the, the world mar­ket, i.e., bond issuances, the price, the price must go down and there­fore the yield goes up. So there’s a lot of rea­sons to be watch­ing the bond mar­ket at the moment. what does it mean for us?

It– I’m not gonna change the way I invest, but I, I would cau­tion peo­ple on i‑if they have any sort of, um, they can reduce to do it at least to lock in long-term rates. Um, but you know, we’ve got a, a process which han­dles mar­kets going up and mar­kets com­ing down. So I, I’m still gonna stay the course and I can’t pre­dict the future.

And of course there’s so many things that could hap­pen which may see inter­est rates decrease as [00:35:00] well as increase. But you got­ta say, if you look at the heat map, they’re prob­a­bly going up. and I also put that into the, into the con­text of say­ing that going up and they’re at a high point, um, in say twen­ty years, but they’re still in the sort of five to six per­cent range, which is prob­a­bly more like about what the aver­age I’ve seen over my life­time of invest­ing is.

So it’s when they start to get to nine, ten per­cent that I think is gonna cause a real prob­lem. But the trend is cer­tain­ly going that way and, and, and the trend is our friend and there are cer­tain­ly a lot of things point­ing to it, um, to the bonds to con­tin­ue increas­ing. And it’s, it’s what Buf­fett has said.

It’s said that, you know, debt caus­es busi­ness­es to strug­gle or it caus­es investors to capit­u­late. But either way, Buf­fett says assets flow to the patient. So, you know, if we keep invest­ing in qual­i­ty com­pa­nies, if we stay in debt. un-unin­debt­ed our­selves, even though there’ll be down times in the econ­o­my, they present buy­ing oppor­tu­ni­ties for us.

So [00:36:00] I’m, I’m putting that out there I guess for con­text and hap­py to invite and ques­tions on it. And it’s not my field of exper­tise, but it is a sto­ry that I’m see­ing unfold at the moment

Cameron: The trend is our friend. That’s the title for this week.

Tony Kynas­ton: Yeah,

Cameron: Good-

Tony Kynas­ton: if bonds keep going up, but any­way. Yeah

Cameron: Thank you, Tony. Yeah, that’s fas­ci­nat­ing. It’s, um, above my pay grade, but I’m glad you’re pay­ing atten­tion to it

Tony Kynas­ton: Well, we nor- we don’t talk about bonds because they just roll on, don’t they? They just ha- hap­pi­ly get issued and tak­en by peo­ple who need guar­an­teed income and pen­sion funds and super funds and all that kind of stuff. But that’s the oth­er dimen­sion to this, is that, you know, I won­der how many gov­ern­ment bonds are in super funds around Aus­tralia and if they’re. The yield­’s going up, but the val­ue of those under­ly­ing bonds is going down. So is that actu­al­ly com­ing out in the, in the returns for super funds at the moment? I don’t think so.

Cameron: Well, you men­tioned gold in there. I just want­ed to point out that gold was actu­al­ly a buy again this week [00:37:00] in our buy list. So that, uh, usu­al­ly means there’s a cou­ple of stocks on the buy list that’ll come on that, uh, we can actu­al­ly buy. There was one this week, West African Resources. That sounds famil­iar.

may have spo­ken about those recent­ly. Yeah. I did add them to, uh, I think the light list this week. Well, um, I’ve got the, the longest ques­tion, um, ever sub­mit­ted to QAV from Ed. Tony, should I get into that?

Tony Kynas­ton: Actu­al­ly, I don’t think I’ve got an answer for Ed. Sor­ry.

Cameron: Oh, okay. Well, that’s okay

Tony Kynas­ton: I’ll, I’ll take that one on notice if you like. Sor­ry, Ed

Cameron: Do you want me to read it any­way?

Tony Kynas­ton: Yeah, go ahead

Cameron: Ed says, “Hi, Cam and Tony. I’ve been rumi­nat­ing over a ques­tion for the show for a few months now, but I’ve been strug­gling to get it out of my head and into some­thing that makes sense. So after feed­ing my word sal­ad into Nora, as in [00:38:00] Bloody Nora, she’s my go-to AI know-it-all, here’s where I’ve land­ed.

Should sus­tained upward price momen­tum fol­low­ing a pro­longed decline car­ry more weight in the QAV check­list? Because I run a new buy list near­ly every week, I reg­u­lar­ly notice stocks that have spent months, some­times years, in decline with neg­a­tive sen­ti­ment and QAV scores below 0.1. What I’ve noticed, pure­ly anec­do­tal­ly, is that when some of these stocks final­ly break above their 3PTL buy line and estab­lish pos­i­tive sen­ti­ment, then con­tin­ue to rise for two or three con­sec­u­tive months, they often seem to main­tain that upward momen­tum for an extend­ed peri­od.

Inter­est­ing­ly, this some­times hap­pens even when their QAV score remains well below 0.1, mean­ing they still would­n’t qual­i­fy for our buy list.” NHC is one exam­ple. I bought it in Jan­u­ary this year, part­ly because of this obser­va­tion, [00:39:00] despite its QAV score being only zero point zero six at the time. If you put fif­teenth of Jan­u­ary twen­ty twen­ty-six into the bread lat­er, you’ll see what caught my atten­tion.

From mem­o­ry, BOQ is anoth­er exam­ple. I recall TK com­ment­ing on its sen­ti­ment dur­ing a pod­cast some time back. I believe it remained off the buy list fol­low­ing that dis­cus­sion, yet its share price con­tin­ued to rise. Of course, I’m well aware that two exam­ples hard­ly con­sti­tute a sig– sta­tis­ti­cal­ly sig­nif­i­cant ex– uh, sam­ple.

I appre­ci­ate that QAV already rec­og­nizes the impor­tance of sen­ti­ment, award­ing two points for pos­i­tive sen­ti­ment and an addi­tion­al point for a recent pos­i­tive upturn. How­ev­er, the check­list does­n’t dis­tin­guish between a stock that’s only just crossed its buy line and one that sub­se­quent­ly record­ed two or three con­sec­u­tive months of ris­ing share prices.

So here’s my ques­tion: Has there been any back test­ing to deter­mine whether sus­tained upward price momen­tum, par­tic­u­lar­ly fol­low­ing a pro­longed [00:40:00] peri­od of neg­a­tive sen­ti­ment, has addi­tion­al pre­dic­tive val­ue beyond the ini­tial three-point trend line buy sig­nal? More specif­i­cal­ly, do stocks with low­er QAV scores, say point zero five to point zero nine, that have record­ed two or three con­sec­u­tive months of ris­ing share prices fol­low­ing a sen­ti­ment rever­sal, out­per­form on aver­age high­er scor­ing QAV stocks above zero point one that haven’t demon­strat­ed the same momen­tum?

It would be inter­est­ing to com­pare their sub­se­quent six and twelve-month returns mea­sured from the point when that sus­tained momen­tum has been estab­lished. And if the evi­dence sup­ports that, could there be an argu­ment for award­ing addi­tion­al check­list points for sus­tained upward momen­tum rather than treat­ing all stocks with pos­i­tive sen­ti­ment equal­ly?

I’m cer­tain­ly not sug­gest­ing we aban­don the zero point one cut­off, but I won­der whether we are poten­tial­ly over­look­ing some worth­while [00:41:00] oppor­tu­ni­ties by not dis­tin­guish­ing between a fresh buy sig­nal and one that’s been rein­forced by sev­er­al months of ris­ing prices. Inter­est­ed to hear your thoughts.

Cheers, Ed. And I do wan­na point out that Ed sent me anoth­er email this week where he gave me his year-to-date per­for­mance, and it was dou­ble my year-to-date per­for­mance. So, um, con­grat­u­la­tions, Ed, ’cause I know for sev­er­al years Ed, Ed was under­per­form­ing, and I kept say­ing, “What are you doing wrong, Ed?”

What­ev­er, what­ev­er it was, he’s now doing it right ’cause he’s out­per­form­ing my port­fo­lios this year. So good. Con­grat­u­la­tions, Ed

Tony Kynas­ton: Con­grat­u­la­tions, Ed. Thanks for the ques­tion, and I do know why I did­n’t pre­pare for it, ’cause I, I thought it’s, it’s got a fair­ly sim­ple answer. can I just go back? Ed was say­ing look at NHC on the fif­teenth of the first twen­ty twen­ty-six, was he? Is that what the ques­tion said?

Cameron: Do, do-do, do-do. Let me go back to that ques­tion part of it. Uh, yes, NHC 15th of the [00:42:00] first

Tony Kynas­ton: so I’ve just put that in the bread leader– bread lat­er, and that’s when NHC became a buy, when it crossed its buy line. So I’m not sure how that’s dif­fer­ent to what we would nor­mal­ly do in that exam­ple. Um, so but that’s one exam­ple, it’s buy the buy, I guess. Um, I guess what Ed’s say­ing is if a stock has two plus months of increas­ing sen­ti­ment, should it get award­ed more points?

And I’ve got no answer for that because I haven’t done the research. Um, so if Ed wants to do some, uh, that’d be great to let us know. That’s the first point. Um, the sec­ond point is then are there oppor­tu­ni­ties for QAV scores of less than one, like point five to point nine? And yeah, I’m sure there are.

The point one cut­off is fair­ly arbi­trary, and it’s just, um, expe­ri­ence dri­ven. you, you could draw the cut­off at point two [00:43:00] and you’d have less stocks on the buy list and maybe not enough to put togeth­er a port­fo­lio in a rea­son­able amount of time. Or you could draw the cut­off at point zero five or point zero nine or what­ev­er else and have more stocks on the buy list. Um, it’s, a fair­ly arbi­trary cut­off. So again, if you’re find­ing good stocks to buy with a, a QAV score that’s, you know, still pos­i­tive and not quite up to point one, then go for it. Um, all we– all I’ve tried to do with these rules is to cre­ate some­thing work­able that can be applied every day, and we’re not try­ing to man­age the exemp­tions– excep­tions all the time.

So I’ve got a decent set of stocks on the buy list and enough to put togeth­er a port­fo­lio which works. If Ed wants to vary that, please, be great to get bet­ter returns. Just give us the research

Cameron: Did­n’t we do some back test­ing at one point on whether or not stocks with a high­er QAV score out­per­form stocks at a, with a low­er QAV score?

Tony Kynas­ton: We did. Um, [00:44:00] I’m rack­ing my brains here. I think point– Stocks above 0.2 did slight­ly bet­ter than stocks below 0.2 from mem­o­ry. Um,

Cameron: It was­n’t by much from mem­o­ry, but it was slight­ly bet­ter. Mm.

Tony Kynas­ton: Yeah.

Cameron: that was my, that was my ini­tial response to read­ing Ed’s email is, you know, the QAV score exists for a rea­son. I mean, in the­o­ry, the high­er the QAV score, the bet­ter an invest­ment it is. I mean, it’s not always gonna work out that way, but that’s kind of the the­o­ry behind it.

Tony Kynas­ton: Mhm

Cameron: It’s tak­ing the, the qual­i­ty and the val­ue and bring­ing them togeth­er to tell us, you know, what the sys­tem says is a good invest­ment. So if you have a Q- a stock with a QAV score of 0.2, in the­o­ry it should be a bet­ter invest­ment than a stock with a QAV score of 0.05. Um, won’t always work that way, but that’s kind of what it’s doing, right?

Tony Kynas­ton: out [00:45:00] of 10

Cameron: Mm.

Tony Kynas­ton: exact­ly. But there’s so many oth­er things that go into it and, you know, d- if you’ve got a QAV score of 0.2 but a qual­i­ty score of forty per­cent, is that bet­ter or worse than a QAV score of 0.19 and a qual­i­ty score of sev­en­ty per­cent? which are you rat­ing there?

The cheap­ness of the stock ver­sus the qual­i­ty of the stock, for exam­ple.

Cameron: yeah, yeah

Tony Kynas­ton: Ed might only be buy­ing large ADT stocks and so you might have to drop down to 0.05 to, you know, get

Cameron: Which I know he does. I know.

Tony Kynas­ton: you go. Yeah. So

Cameron: Yeah, I know Ed’s on the big end, yeah.

Tony Kynas­ton: So

Cameron: Yeah.

Tony Kynas­ton: yeah.

Cameron: Ed, I think you should

Tony Kynas­ton: I haven’t done the research and, and I’d appre­ci­ate it if he, know, had some research he could share it with us.

Cameron: Bloody Nora, Ed. Ask bloody Nora to do the research for you. I mean, that’s– I mean, I thought, well, that’s what I’ll do is I’ll go and cre- I could go cre­ate a research project for it and, um, you know, fig­ure out how to test it. But then you could do that too, Ed, and tell me. So [00:46:00] you got time. You don’t have a job, Ed.

You’re just trav­el­ing the world with your love­ly wife, you know, dri­ving around in your Jeep, see­ing stuff, going ski­ing. You know, make your­self use­ful, Ed. Indeed. All right. Thanks, Ed. Good ques­tion. Um, any­thing else before you get into your Pulled Pork, TK?

Tony Kynas­ton: noth­ing else, thanks

Cameron: All right, well, it’s 31.2 degrees in my office, so you do that.

I’m gonna put my phone, my phone? My micro­phone back on mic and turn the fan on blast mode

Tony Kynas­ton: Yeah, sure. Uh, so Pulled Pork today is on Kel­ly Part­ners Group. Part­ners Group Hold­ings is the offi­cial title. KPG is the code. This was a request from Philip, he asked for a Pulled Pork on KPG, but also for a com­ment change of list­ing from the ASX to the Nas­daq. So I’ll cov­er both of those things for Philip.

And, and thanks for the request, Philip. [00:47:00] It’s great to, um, to get a top­i­cal stock. Uh, top­i­cal because the, uh, EGM is com­ing up soon, I think it’s about the 23rd of Octo­ber, to vote on delist­ing in the ASX and relist­ing on the Nas­daq for this stock. So a bit of back­ground, um, oh, also a bit of con­text. KPG has been on the buy list before. Cur­rent­ly, though, even though they have a QAV score of zero point one three, they’re a sell on a three PTL basis, and the, the share price has declined a lot over the last two years, and I’ll explain why in a minute. Uh, it’s also cur­rent­ly trad­ing on about hun­dred and eighty-six thou­sand dol­lars So it’s, um, size. Was a lot big­ger, and now it’s a hun­dred and eighty-six thou­sand. K‑KPG is an account­ing firm, um, but they oper­ate a, an acqui­si­tion mod­el where they work in part­ner­ship with the acquired small account­ing busi­ness­es to inte­grate them [00:48:00] into what they call their pro­pri­etary part­ner own­er dri­ver mod­el. Um, and that’s what they’ve devel­oped over the years.

They s– What they do is that they, um, have a local part­ner in a local account­ing firm. Uh, they own a direct equi­ty of stake in their spe­cif­ic of-office, and KPG takes fifty-one per­cent, uh, of the, uh, stake, and then they pay a nine per­cent fee to KPG to cov­er the over­heads. So they con­tin­ue to oper­ate the local branch account­ing, uh, office, uh, but their over­heads are tak­en care of by KPG. Uh, obvi­ous­ly, the account­ing firm, um, they get an equi­ty inject-injec­tion because KPG puts mon­ey into the, um, into the local firm. Uh, some­times that allows a retir­ing part­ner to leave. Um, often­times it just means that, uh, some­body who, uh, is work­ing their way up in their career becomes the lead part­ner for KPG and that [00:49:00] firm, and they get the required fund­ing to, uh, make things work, and they get train­ing and sys­tems, for mar­ket­ing and, and, um, doing their books, et cetera, behind the scenes, uh, which has worked over a num­ber of dif­fer­ent, a‑accounting firms over the years.

And, and they have, uh, forty-three, um, busi­ness­es over dif­fer­ent loca­tions around the world, forty-three branch­es, they employ more than sev­en hun­dred peo­ple and ser­vice over twen­ty-five thou­sand clients. And, and most of the, if not all of the clients that, uh, Kel­ly Part­ners ser­vice tend to be in the small SME busi­ness, uh, space. They oper­ate offices in Aus­tralia, Hong Kong, and the US as well. Uh, I think they also have some­thing in the UK too. Um- So the, the mod­el has been refined over the years. KPG, um, tar­get [00:50:00] accoun­tants or account­ing prac­tices, but usu­al­ly with between two to ten mil­lion dol­lars worth of rev­enue. Um, they agree a price to buy them out.

They put in fifty-one per­cent, ask the, uh, the to put in the rest, um, and then they, uh, they con­tin­ue to ser­vice small to medi­um-sized enter­pris­es and high net worth type, uh, pri­vate fam­i­lies. One of the things that they’ve done over the years is since list­ing, um, on the ASX, they’ve always had around forty-five mil­lion shares on issue. And so to avoid dilut­ing share­hold­ers, these, uh, account­ing and acqui­si­tions are fund­ed via inter­nal cash flows and some­times, um, debt, which is, uh, they have a bank­ing facil­i­ty, I think, with West­pac from mem­o­ry. Um, but what they do is they tend to, when they buy a prac­tice, uh, they, they debt fund it from their facil­i­ty and they, um I guess they, [00:51:00] they promise, I was gonna say guar­an­tee, but they promise that the debt’s repaid quick­ly, usu­al­ly with­in four to five years, and usu­al­ly with, um, uh, increased mar­gins in the account­ing busi­ness as their sys­tems, uh, and train­ing take hold. So there’s an opti­mized cash flow that they see when they take over or become a part­ner in such a busi­ness. Um, cen­tral­iza­tion is the key to KPG’s prof­itabil­i­ty. Um, so the local account­ing part­ner hands off all admin­is­tra­tion, HR, mar­ket­ing, IT, and invoic­ing to a cen­tral­ized team. As I said before, Kel­ly Part­ners charge a flat nine per­cent of rev­enue to cov­er that. Um, the mar­gins in the busi­ness, um, gen­er­al­ly enhance and they tar­get thir­ty per­cent plus mar­gins, um, for the, the prac­tices, um, when this mod­el’s adopt­ed. So the over­heads are capped at nine per­cent and, uh, the, the [00:52:00] prac­tices, uh, well, the, the busi­ness prac­tice man­ag­er is trained in the Kel­ly way of doing things, and those two things com­bined improve the mar­gins in the busi­ness. Um- A cou­ple of ways that they oper­ate. So they have two strate­gies for tak­ing over account­ing busi­ness­es or t- start­ing a part­ner­ship, I should say, for an, an account­ing busi­ness. One of them is called a tuck-in, and the oth­er one’s called a mar­quee mod­el. Uh, the tuck-in gen­er­al­ly applies to some­body who, um, is near­ing the end of their career as an accoun­tant. And so they want to sell their busi­ness, and they enter into an agree­ment with Kel­ly Part­ners, um, who instead of, um, replac­ing the part­ner who’s leav­ing, um, and keep­ing the, the cur­rent syst- uh, prac­tice the way it is, they tend, gen­er­al­ly tuck it in to a near­by, uh, prac­tice which, uh, can absorb the clients and, uh, then they can let the, the retir­ing part­ner [00:53:00] leave. Um, uh, that’s a, a tuck-in mod­el. The oth­er one’s called the mar­quee mod­el, which is, as I said before, they gen­er­al­ly will find an account­ing firm where there is, um, per­haps the senior prin­ci­pal wants to retire, but there is some younger tal­ent who want to stay, and then they train them up to become the, uh, senior part­ner and, um, uh, adopt the Kel­ly Part­ners tem­plate and, uh, become part of the, um, the, the net­work. So that’s what they do. A bit of his­to­ry and a bit of dis­cus­sion around the founder. So this is an own­er-founder com­pa­ny, and the own­er-founder still exists in the com­pa­ny. It’s a chap by the name of Brett Kel­ly, and he, along­side with his wife, Rebec­ca, um, and three oth­er co-founders, uh, start­ed Kel­ly Part­ners. Brett Kel­ly is a char­tered accoun­tant by trade. He was a for­mer Price­wa­ter­house­C­oop­ers employ­ee, he’s also, um, writ­ten a lot of books. Um, and, uh, he’s become a best-sell­ing author [00:54:00] over time, and he’s also very wide­ly known as a devo­tee of War­ren Buf­fett and, uh, War­ren Buf­fet­t’s cor­po­rate gov­er­nance philoso­phies. His books that he’s writ­ten are in an au– are in a series called The Wis­dom Series. That he wrote was called Col­lec­tive Wis­dom in 1998, it was writ­ten when he was twen­ty-two years old and unem­ployed, it became a self-pub­lished nation­al best­seller, it fea­tured, uh, face-to-face inter­views with thir­ty-four promi­nent Aus­tralian achiev­ers like Bob Hawke, Ger­ry Har­vey, Ray Mar­tin, and Mal­colm Turn­bull, and he explored their path­ways to suc­cess. And then again in two thou­sand and nine­teen, he wrote a sim­i­lar sort of book called Invest­ment Wis­dom, Brett Kel­ly inter­viewed nine of Aus­trali­a’s top fund man­agers and investors, includ­ing Anton Tagli­a­fer­ro from Investors Mutu­al, Jeff Wil­son from Wil­son Asset Man­age­ment, and David Par­adise from Par­adise Invest­ment Man­age­ment. Uh, the book [00:55:00] dis­tilled their approach to invest­ing, which could be sum­ma­rized as pro­tect the down­side first, invest in qual­i­ty and trans­paren­cy, dif­fer­en­ti­ate val­ue from price, and focus on long-term align­ment. He con­tin­ues to write these books. Um, they become a bit of a lead gen­er­a­tor for him, so he’s often on the speak­er cir­cuit, which gives him some pro­file, um, espe­cial­ly in the account­ing. And so he can be some­times the, uh, the per­son that gets tapped when, uh, an ac- a local accoun­tant is con­sid­er­ing retire­ment and sell­ing their busi­ness. But also too, he often mails out his books, um, uh, as a mar­ket­ing tool to account­ing firms. And he claims that, uh, peo­ple have con­tact­ed him over a decade after they received his book when they were ready to talk about, uh, retir­ing and mov­ing on. It’s not bad mar­ket­ing, uh, effort there by him. Um, along the way, he estab­lished Kel­ly Part­ners in two thou­sand and six with two account­ing offices, one in North Syd­ney and one on the [00:56:00] cen­tral coast of New South Wales. Uh, the com­pa­ny spent a decade, um, oper­at­ing and per­fect­ing inter­nal pro­ce­dures and then list­ed on the ASX in June twen­ty sev­en­teen, with a fair­ly tight­ly held cor­po­rate struc­ture.

So he has retained con­trol and I think prob­a­bly if not major­i­ty own­er­ship, then very close to it along the way. And as I said before, there’s been very lit­tle in the way of share issuances even though these, um, it’s oper­at­ing as a roll-up to invest in these account­ing busi­ness­es and, and bring them into the fold. Um, Kel­ly, as I said before, styles him­self, uh, after Berk­shire Hath­away and War­ren Buf­fett. He fre­quent­ly quotes Buf­fett and uses his invest­ment prin­ci­ples, um, when he’s talk­ing to stake­hold­ers. Uh, if you go to the web­site, the logo for this com­pa­ny is Kel­ly Plus Part­ners, and he lists an own­er’s man­u­al on the web­site along the same lines that Berk­shire Hath­away do. And, uh, it’s full of [00:57:00] Berk­shire Hath­away wis­dom like treat your share­hold­ers as part­ners and look for qual­i­ty share­hold­ers who are there for the long-term ride. Um- He’s adopt­ed that Buf­fett phi­los­o­phy a lot in the way that Kel­ly Part­ners oper­ates. So as I said before, they don’t issue new shares. They pre­fer to fund growth off cash flow, uh, along the way. They have pret­ty much had forty-five mil­lion shares on issue since they float­ed in twen­ty sev­en­teen, so they haven’t had to issue more shares to fund acqui­si­tions. The. he called him­self the buy­er of choice for fam­i­ly-owned busi­ness­es in the account­ing space, much the same way as Berk­shire Hath­away itself for peo­ple who want to, um, ensure the lega­cy of their busi­ness­es after they retire. Uh, and, um, what else can I say? He’s main­tained skin in the game. So, uh, Buf­fett favors busi­ness­es run by own­er-man­agers, and so the whole cor­ner­stone [00:58:00] to Kel­ly Part­ners is not just, uh, Brett Kel­ly as an own­er founder, but also that senior part­ners are stay­ing in the busi­ness, uh, in the account­ing prac­tices in the local areas that, uh, they’ve part­nered with KPG to set up. Um, he’s done a lot of writ­ing over the years. He’s, uh, his annu­al let­ters are often like War­ren Buf­fet­t’s let­ters to Berk­shire Hath­away share­hold­ers, um, et cetera, et cetera. How­ev­er, the one mis­sive that he seems to have missed was about nev­er using mar­gin loans. So, in Feb­ru­ary twen­ty twen­ty-five, the s- the stock reached a five-year high of twelve dol­lars eighty-five per share, it now trades at four dol­lars ten, which is down rough­ly two-thirds. Some of this decline was due to the mar­ket becom­ing too enam­oured with a growth sto­ry and push­ing the PE ratio to an eye-water­ing sev­en­ty-nine times earn­ings. Um, the stock was also caught up in the fear that AI would dec­i­mate small account­ing busi­ness­es, espe­cial­ly [00:59:00] giv­en that small account­ing busi­ness­es are more in the sort of year-in, year-out sim­i­lar prac­tice activ­i­ty rather than big firms which han­dle more com­plex clients. Um, but also too, a cou­ple of oth­er things hap­pened. Over­seas expan­sion ate into KPG’s mar­gins because they had to, um, set up offices in, in, um, Hong Kong and the US and, and in Europe, which cost mon­ey before the rev­enue came in. Um, all of those things helped, uh, a decline in the share price, which kind of cul­mi­nat­ed in Sep­tem­ber twen­ty twen­ty-four when KPG was dropped from the All Ords Index off its share price decline, which com­pound­ed the prob­lem. But it’s also entire­ly pos­si­ble to say that the mar­gin calls on the shares were declin­ing on the CEO’s, um, six­ty-four mil­lion dol­lars of, uh, stock has also depressed the share price. Um, so while the broad­er val­u­a­tion [01:00:00] con­trac­tions and AI fears ini­tial­ly soft­ened the stock, it was real­ly the mar­gin lend­ing that Brett had been doing against the, the shares which, uh, t‑turned the whole thing into a mar­ket cor­rec­tion and a forced sell­ing spi­ral.

So peo­ple will remem­ber if you mar­gin loan shares, it’s a bit like buy­ing into a house. The lender lend­ing you the mon­ey will check what the LVR is, the loan-to-val­ue ratio. And, uh, once the share price falls below, what­ev­er the LVR agreed is, maybe it’s thir­ty per­cent, maybe it’s fifty per­cent in the case of a stock, you get a mar­gin call, and the, uh, per­son with the mar­gin loan either has to repay the debt, so it’s back in line with the, uh, with the, the agreed LVR, um, even though the stock price has declined or they have to sell shares to, um, uh, uh, re-repay the debt that’s been, been trig­gered by the mar­gin decline. So that’s hap­pened on and o– over and over again over the last cou­ple of years. And so sev­en mil­lion shares is [01:01:00] trans­ferred from Brett Kel­ly across to the bank that was pro­vid­ing the mar­gin loan, which was about thir-thir­ty-four per­cent of his stake, um, has dropped his stake from over, uh, fifty per­cent down to about forty per­cent, still mak­ing him the largest share­hold­er in the com­pa­ny. But, uh, it has depressed the share price and, also too, I think it’s fair to say it’s cre­at­ed what’s called an over­hang in the stock. So, ana­lysts are wor­ried that the ten per­cent which is now held by the bank will even­tu­al­ly be sold into a declin­ing mar­ket, which could also add more down­ward pres­sure on the stock. Uh, so. Sor­ry, I should, I should cor­rect myself there. I’m just look­ing at my notes. The share­hold­ing is down to thir­ty-one per­cent that, uh, Brett Kel­ly still has. So he’s still, um, the prin­ci­pal share­hold­er, still an own­er founder, still in the busi­ness. But he’s now more exposed in that when he had a, uh, fifty per­cent-ish stake in the com­pa­ny, [01:02:00] he was able to deter peo­ple from, um, tak­ing stakes and poten­tial­ly launch­ing a takeover or tak­ing stakes and becom­ing an activist investor to try and change things in the busi­ness. Um, so what’s, what’s his answer to solv­ing that prob­lem? And this is where we get to the Nas­daq list­ing. So, um, he’s propos­ing to adopt a dual share struc­ture, which would give, what he calls loy­al own­ers a sep­a­rate class of own­er­ship with extra vot­ing rights. You can’t do that, um, in Aus­tralia because the ASX has a one share, one vote pol­i­cy, so the only solu­tion to do that is to list over­seas, and he’s cho­sen the Nas­daq. Um, the EGM is sched­uled for Octo­ber 23, and it con­tains four, what’s called inter­con­di­tion­al res­o­lu­tions, mean­ing none of them will take effect unless all four are suc­cess­ful­ly passed at once by share­hold­ers. And one of those is to, um, list on the Nas­daq. Uh, anoth­er one is [01:03:00] to, um, cre­ate these Class B loy­al­ty shares, which give peo­ple who own them ten votes per share for, for, um, vot­ing pur­pos­es. And they’re also going to do a one for three share con­sol­i­da­tion, and that’s because the Nas­daq have a cou­ple of rules about list­ing, one of which is that the share price should be, um, above four dol­lars USD typ­i­cal­ly, so they need to do a share con­sol­i­da­tion to achieve that. Um, it does make the, uh, cal­cu­la­tion for the issuance of the loy­al­ty shares a bit com­pli­cat­ed.

So it’s a ten for one vot­ing under the cur­rent price, but after the split it’s more like a twen­ty-one to one vot­ing because the share con­sol­i­da­tion is one for three. And what else is the. Oh, the fourth one is that, the fourth one’s been high­light­ed as being fair­ly con­tentious amongst ana­lysts. So as part of the prob­lems with the, the CEO’s debt, there is a par­cel of six point three mil­lion dol­lars of shares which Brett Kel­ly hal-um, holds [01:04:00] direct­ly. Um, and that’s been fund­ed by loans from the com­pa­ny, and the Nas­daq does­n’t like that. So one of the propo­si­tions for the EGM is that the employ­ee share scheme will pur­chase the six mil­lion, six mil­lion odd dol­lar par­cel of ordi­nary shares direct­ly from Brett Kel­ly, there­fore, um, uh, they can abide by the Nas­daq list­ing rules.

So that’s not, um. That’s usu­al­ly frowned on by ana­lysts who are see­ing that com­pa­nies are fund­ing share pur­chase own­er­ship by CEOs and then hav­ing it bought back when it, um, when it becomes incon­ve­nient. Um, to be fair to KPG, they have giv­en rea­sons for list­ing on the Nas­daq, and I think they’re, they’re rea­son­ably gen­uine. They’re say­ing that, uh, the list­ing is to facil­i­tate a US expan­sion, the US accounts for about eleven per­cent of, of the rev­enue for this busi­ness so far. So it cer­tain­ly presents a lot of run­way upside for them. The Nas­daq will have deep­er cap­i­tal pools, um, [01:05:00] and gen­er­al­ly a growth com­pa­ny is val­ued on a high­er PE ratio in the US com­pared to how it is in Aus­tralia, which is one of the rea­sons why a lot of the, um, a lot of the AI stocks will seek to list in the US rather than, um, in Aus­tralia, uh, because the growth, growth sort of sto­ry is val­ued bet­ter in the US than it is in Aus­tralia or val­ued dif­fer­ent­ly in the US than it is in Aus­tralia. But it also, to be hon­est, looks like a bit of a, um, a tac­ti­cal defense to, uh, give the CEO con­trol again from what he’s lost dur­ing the mar­gin calls. Um, s‑I guess, you know, there’s a rea­son why the ASX does­n’t like Class B loy­al­ty shares. And inde­pen­dent experts and proxy ana­lysts, et cetera, or advi­sors will argue that, um, all share­hold­ers should have an equal vote and that, uh, if man­age­ment, um, main­tains a, a, a dual struc­ture, that, uh, it can cre­ate [01:06:00] the break­age in the link between an, an own­er founder and, uh, how an own­er founder should real­ly oper­ate, which is to oper­ate along­side equal­ly the share­hold­ers and to treat them as, um, equal part­ners when it comes to vot­ing, but when it comes to every­thing, uh, dis­tri­b­u­tions, um, invest­ments, all that kind of thing.

So I don’t have a real­ly strong opin­ion about that. Um, I do pre­fer the ASX pol­i­cy of share, one vote com­pared to dual class struc­tures in the US. I think, um, the dual class struc­ture can entrench peo­ple con­trol­ling stakes in com­pa­nies for a long, long time, which can have pos­i­tive ben­e­fits at the out­set, but whether that con­tin­ues to be pos­i­tive down the track when it’s, uh, become their own sort of per­son­al, oper­a­tion, uh, is some­times, uh, in ques­tion. The real­ly iron. Be that as it may, and this is my opin­ion, the real irony of all this is that if you look at the num­bers, they’re [01:07:00] actu­al­ly real­ly good. if you take away all the share­hold­er shenani­gans and the Buf­fett mum­bo jum­bo, the under­ly­ing busi­ness is going well. And if I look at its lat­est results, the rev­enue’s up eigh­teen per­cent, earn­ings per share are up eigh­teen per­cent, and oper­at­ing cash flow is up thir­ty per­cent. So all very, very good results and gen­er­al­ly in line with, the long-term sort of results for this com­pa­ny. So what they do works um, if I look at the QAV num­bers, they’re all pret­ty good as well. So the price for my analy­sis was four dol­lars. is four dol­lars ten. Uh, there’s no con­sen­sus tar­get for this com­pa­ny, so as it shrunk, so has the bro­kers’ cov­er­age in it. IV1 is six­ty-sev­en cents, so it’s way below four dol­lars ten, the cur­rent price, and sim­i­lar­ly for book val­ue. So book plus thir­ty per­cent is two dol­lars and nine, which again is about half the cur­rent share price. And I also point out the NTA is neg­a­tive because of all of the, uh, car­ry­ing val­ues and amor­ti­za­tions for invest­ments in account­ing [01:08:00] prac­tices and expan­sion over­seas. The div­i­dend’s been sus­pend­ed, so we can’t score it for that. Stock Doc­tor give it a mar­gin­al finan­cial health and a steady trend. Stock­o­pe­dia rank it pret­ty well. They give it a qual­i­ty rank of eighty-five, but only sev­en­ty over­all, and the F score is six out of nine, which is, is good, but kind of mid­dling. the PE is still quite high in my opin­ion. It’s thir­ty-one times. But fun­ni­ly enough, that is the low­est PE in three years, so we can score it for that. Um, back­ing that up, though, is the PROPCAF is below five. It’s four point sev­en sev­en times. So they are throw­ing off a lot of cash, and we can buy this cheap­ly at the moment, even though some of the oth­er met­rics don’t sort of sup­port that state­ment. But cer­tain­ly from an oper­at­ing cash flow point of view, very cheap. no fore­cast earn­ings per share, so I can’t give it a growth over PE score. Scali is the own­er still, so, um, and he cur­rent­ly still holds thir­ty-four per­cent before the Class B [01:09:00] share change goes through. Um, and he’s, I guess that still won’t change, and he’ll remain the own­er founder, um, so we score it for that. Uh, they have con­sis­tent­ly increas­ing equi­ty, which is some­thing I like a lot in, um, in a busi­ness, so we score it for that. So over­all, the qual­i­ty score is sev­en out of eleven or six­ty-four per­cent, which is kind of in line with and Stock Doc­tor. the QAV score is point one three. The only prob­lem is it has neg­a­tive sen­ti­ment and it crossed the sell line recent­ly.

So, you know, the pos­i­tives are the num­bers are very good. Stock price is down, and when sen­ti­ment starts to return, because it’s not a long way below its sell price, um, uh, then it does rep­re­sent good buy­ing. Uh, the down­side is it’s gonna be on the Nas­daq if these motions get passed, so we’re not gonna be able to buy it as an ASX stock. And I guess it’s up to peo­ple if they want to invest in the US and deal with the cus­to­di­al issues and tax issues and cur­ren­cy issues that that brings. But it still looks like a good busi­ness on the num­bers. The US mar­ket give it a big­ger pool [01:10:00] to invest in. There’s cer­tain­ly a big­ger pool to sell the growth sto­ry to, and a big­ger pool of account­ing, account­ing busi­ness­es to part­ner with and invest in.

So there’s a lot of pos­i­tives for being in the US. Um, on the neg­a­tive side, though, it’s, it’s fair to say that, um, the CEO repr– the CEO has tar­nished his rep­u­ta­tion, that’s anoth­er thing that Buf­fett always guards against is, um, is, uh, you know, you can lose. He’s, he said some­thing like, “You can lose mon­ey for the com­pa­ny, that’s one thing, but los­ing rep­u­ta­tion is every­thing.”

So, he sort of has­n’t, um, learnt that les­son from read­ing Buf­fett. And the oth­er thing is that, um, know, per­haps we could for­give him for mar­gin lend­ing if we knew why he, why he was mar­gin lend­ing. That’s an awful big amount of mon­ey to lend, and he has­n’t real­ly pro­vid­ed a sol­id expla­na­tion as to why were mar­gin loaned.

He cer­tain­ly did­n’t have to bor­row to buy them because he grew the busi­ness and the share­hold­ing was his from the start. so he [01:11:00] has­n’t, he has­n’t. He’s, he’s made a cou­ple of stum­bling attempts, in my opin­ion, to say what he’s used the mar­gin loans for. Um, if he came out with a good rea­son, maybe we could start to for­give him for it, but he has­n’t. And so I think his rep­u­ta­tion remains, um, tar­nished, at least on that score, notwith­stand­ing the fact that he is oper­at­ing a good busi­ness with a suc­cess­ful his­to­ry and plen­ty of upside. So, um, that’s how I view Cali Part­ners.

Cameron: Well, I just made a note, reach out to Brett Kel­ly to get him on the show until you said that bit, so now I don’t know if we should

Tony Kynas­ton: Well, he can. I’m, I– Look, I, you know, I’m hap­py to debate him or, but hap­py to also lis­ten to what he has to say about Buf­fett.

Cameron: Yes.

Tony Kynas­ton: Yeah,

Cameron: Well, I reached, uh, uh, I made a note to reach out to him after this episode goes out. Um, we can put him on the Amer­i­can show if he ends up,

Tony Kynas­ton: good point.

Cameron: doing it on the Nas­daq.

Tony Kynas­ton: Hmm

Cameron: Um, I just, I was sure we’d talked about them before, but I just went through the buy list his­to­ry. I don’t have them [01:12:00] appear­ing any­where in our buy list over the last six or sev­en years or how­ev­er long my buy list his­to­ry goes back, so I don’t know what’s up with that

Tony Kynas­ton: Well, maybe I bought them pri­or. Maybe– I don’t think I’ve held them, but I’ve cer­tain­ly looked at them. Maybe it was

Cameron: Yeah. Um, I know we’ve talked about him some­where along the line before, so I don’t know why they’re not on my his­to­ry. But I did get two good episode, uh, titles out of that bit too, the Buf­fett Mum­bo Jum­bo, and before that, the, the Tuck In, which makes me think of Buf­fa­lo Bill from Silence of the Lambs, ’cause that’s what he did to turn him­self into a girl, is he did the tuck in

Tony Kynas­ton: Oh, okay. I don’t think it has the same con­no­ta­tion when it comes to

Cameron: Hmm, I don’t know. That’s the first. That’s what I’m think­ing when I think the tuck in, so

Tony Kynas­ton: he comes on the show?

Cameron: yeah, the tuck in. Is that a Buf­fa­lo Bill ref­er­ence? Yeah.

All right. Thank you, Tony. Inter­est­ing

Tony Kynas­ton: been a lot, in the papers with that mar­gin call and a lot in Rear Win­dow as well, which must be very uncom­fort­able for him

Cameron: Thank you, nice lady, who just deliv­ered me a [01:13:00] beet­root smooth­ie. Yeah. Well, I looked up his books while you were talk­ing. inter­est­ing. I saw, uh, his first book had Pop­py King. There’s a name I had­n’t heard for a long time. Pop­py King was in it.

Tony Kynas­ton: Hmm.

Cameron: She’s in New York now, I believe. Her com­pa­ny went into liq­ui­da­tion

Tony Kynas­ton: Yep, haven’t fol­lowed her at all for a long time. The

Cameron: Hmm.

Tony Kynas­ton: queen, was­n’t she?

Cameron: Yeah, the lip­stick queen. All right, TK. Well, after hours,

Tony Kynas­ton: Mm-hmm

Cameron: me?

Tony Kynas­ton: Yeah. Um, music front, not much. I’ve been actu­al­ly lis­ten­ing to some pret­ty thump­ing

Cameron: Shostakovich?

Tony Kynas­ton: No,

Cameron: Shostakovich. Yeah

Tony Kynas­ton: I’ve, uh, been let­ting my playlist lead me into direc­tions, and I start– I often start off with some­thing and it up some­where else. But, um, I start­ed off with Lust for Life, and one of my favorite tracks and, and love the Queens of the Stone Age cov­er of it and all that.

And, um, it’s just been lead­ing me down a lot of [01:14:00] good anthemic, you know, heavy thump­ing sort of rock, which has been great dur­ing the week to play. Um, and on the watch­ing front, um, Broth­ers, the Woody Har­rel­son the Matthew McConaugh­ey com­e­dy, which has come out, I think, on Apple. And, uh, it’s pret­ty light, but we’re real­ly enjoy­ing it.

It’s a lot of fun. A lot of good, a lot of good laughs in it

Cameron: Based on the real-life premise that, uh, one of them, I think Woody thinks they’re actu­al­ly prob­a­bly broth­ers

Tony Kynas­ton: is. It, and it, it, every episode starts with a title card that says, “This sto­ry is based on a true rumor.”

Cameron: It’s like a, a Far­go, uh, ref­er­ence.

Tony Kynas­ton: Yeah. No, it’s good.

Cameron: I watched the first– I did rewatch the first episode of the first sea­son of Far­go at some point in the last week, and it was real­ly good. Makes me wan­na keep watch­ing it. It was real­ly good with Bil­ly Bob and Mar­tin Free­man

Tony Kynas­ton: know, fun­ny enough, I did too a [01:15:00] cou­ple of weeks ago, but I haven’t got­ten around

Cameron: Oh.

Tony Kynas­ton: Yeah.

Cameron: No, me either, but it was like, yeah, real­ly good.

Bil­ly Bob, so great in it

Tony Kynas­ton: Yeah. he is good

Cameron: Well, I told you

Tony Kynas­ton: watch at the moment. We’re watch­ing Tul­sa King,

Cameron: Oh yeah, I still haven’t looked at that. Stal­lone thing?

Tony Kynas­ton: Robert Patrick is the. Is Robert Patrick the guy from The Ter­mi­na­tor dude? He’s the bad guy

Cameron: no. Um, God, uh, some­thing Robert Patrick

Tony Kynas­ton: Patrick, yeah. he’s the bad guys play­ing a real­ly good bad guy. Lot of fun

Cameron: Did you watch Peace­mak­er?

Tony Kynas­ton: I saw the first sea­son of it

Cameron: He comes into, I’m not sure if it was the first or the sec­ond sea­son, he’s Peace­mak­er’s father in that, and he’s this white nation­al­ist Nazi super­hero.

Tony Kynas­ton: Okay.

Cameron: Just despi­ca­ble, awful, hor­ri­ble, you know, guy. Yeah

Tony Kynas­ton: Yeah, well he’s [01:16:00] play­ing some­thing sim­i­lar in this. He’s play­ing a boy down south dis­tiller, boot­leg­ger, mafioso type. Yep.

Cameron: He, he does this well. Speak­ing of him, I saw this week the, um, some footage of The, before he was cast as the T‑1000 in Ter­mi­na­tor 2, do you know who was cast to play the T‑1000? Bil­ly Idol. And f-

Tony Kynas­ton: been, great. Bil­ly Idol would­n’t have stood up for the whole shoot, but any­way.

Cameron: Footage came out of him with the cop uni­form on, um, and look­ing fan- with the mir­rored, uh, sun­nies and the whole deal. Looked fan­tas­tic, but appar­ent­ly the prob­lem was he has to run, he has to chase John Con­nor down the street, and he’d ha- he’d stacked his Harley not long before that, or his motor­cy­cle, what­ev­er it was, and he could­n’t run.

Yeah, so yeah, James Cameron was like, [01:17:00] “I can’t do this in CG. This has to be real.” And so he could­n’t get the role.

Tony Kynas­ton: a shame

Cameron: Yeah, it would’ve been, would’ve been inter­est­ing

Tony Kynas­ton: Uh, and, and if you were, if you were send­ing machines back from the future, know, would­n’t you pick a Bil­ly Idol or would­n’t you pick a Sid Vicious or some­thing to send back? Or a John­ny

Cameron: Yeah.

Tony Kynas­ton: or do you

Cameron: Oh

Tony Kynas­ton: sort of. Not

Cameron: I nev­er,

Tony Kynas­ton: Robert Patrick, but just an ano­dyne sort of look­ing

Cameron: Robert Patrick. I nev­er under­stood why the Ter­mi­na­tor had to be built like Arnold Schwarzeneg­ger either. Like, out that much, right?

Tony Kynas­ton: Yeah.

Cameron: he be a skin­ny guy like Robert Patrick? It’s where the.

Any­who. Uh, well, I told you off-air, I watched, um, Parthenope, the, uh, most recent, I think, Pao­lo Sor­renti­no film. Not very high­ly rat­ed, but, uh, by the crit­ics, but I enjoyed it. Chris­sy enjoyed it. Beau­ti­ful. A lit­tle bit weird, but if you like his [01:18:00] aes­thet­ic, uh, worth a watch. It’s on SBS at the moment. Watched the Lanterns finale.

Did­n’t like it. Um,

Tony Kynas­ton: it

Cameron: made no sense to me at all. Um, real­ly?

Tony Kynas­ton: you watched the whole sea­son?

Cameron: Oh, I watched the whole sea­son, yeah, but with- I don’t wan­na spoil it, but I will. Like, he’s, he’s a galac­tic cop. She killed a Green Lantern. He goes, “Ah, d- don’t wor­ry about it.” Like, what? No, you’re a galac­tic cop. And, and by the way, you can’t just appoint your­self a Green Lantern.

I don’t care. And, and Guy Gard­ner just going, “Oh, uh, what­ev­er. You know.”

Tony Kynas­ton: know

Cameron: No. No. It’s ridicu­lous

Tony Kynas­ton: Green­land.

Cameron: I grew up read­ing Green Lantern comics.

Tony Kynas­ton: Okay

Cameron: Yeah, in the ’70s. I also watched, actu­al­ly I haven’t quite fin­ished it, to be hon­est, but I’ve watched most of 9 to 5. Dol­ly Par­ton, Lily [01:19:00] Tom­lin, Jane Fon­da. Nev­er seen it before.

You ever seen it?

Tony Kynas­ton: No, I refuse to

Cameron: Fan­tas­tic.

Tony Kynas­ton: Uh-huh

Cameron: Fan­tas­tic. Don’t know who’s behind it. I should have looked that up. Why do you refuse to? What, what’s up with that?

Tony Kynas­ton: Oh, it was just, mean, all those kinds of light­weight musi­cals, Grease.

Cameron: You don’t like Grease?

Tony Kynas­ton: Grease.

Cameron: What?

Tony Kynas­ton: can­not stand it. It’s crap

Cameron: What is your prob­lem, sir? Seri­ous­ly, I love Grease. Grease is the great­est

Tony Kynas­ton: Grease is the Word?

Cameron: Yeah.

Tony Kynas­ton: No, sor­ry

Cameron: oh, wow. Okay. Well, maybe don’t watch 9 to 5 then. Real­ly enjoy­ing it. The women are fan­tas­tic. They’re all f- Lily Tom­lin’s great, Jane Fon­da’s great, Dol­ly Par­ton’s great. Dab­ney Cole­man is the boss in it. He’s always great. Love Dab­ney Cole­man.

Know him?

Tony Kynas­ton: Yep.

Cameron: Yeah

Tony Kynas­ton: was the guy. Well, I’ve seen the clip. He was the guy who was tied to the chair, was­n’t he? He’s their [01:20:00] boss

Cameron: He’s their boss. He’s the, uh, yeah, the sex­ist. It’s basi­cal­ly Mad Men, but in like 1980.

Tony Kynas­ton: okay

Cameron: But Dab­ney Cole­man, you know, in the, in the ’80s, ’90s, he was always basi­cal­ly played vari­a­tions of that. Guy’s in WarGames, Toot­sie, You’ve Got Mail. He’s in Yel­low­stone appar­ent­ly, or was. Is he still alive? No, he died 2024, but he was in Yel­low­stone.

You watched that, did­n’t you?

Tony Kynas­ton: I did not. I did­n’t like it.

Cameron: Mm, okay.

Tony Kynas­ton: Yeah. I watched the first episode or so and just thought it was Dal­las.

Cameron: Right.

Tony Kynas­ton: Yeah

Cameron: Well, Dab­ney Cole­man was around for­ev­er. He was always play­ing sort of vari­a­tions on that guy. He was good. Lis­ten­ing to Shostakovich’s Eighth Sym­pho­ny this week. Uh, lov­ing that. Um, but won’t rec­om­mend it to you because I know you don’t, uh, like that kind of thing, but

Tony Kynas­ton: I’ll put it in the 9 to 5 bas­ket.

Cameron: I will sing the open­ing bars for you though. [01:21:00] Ba-dun, ba-dun, ba-dun, ba-du-dun

Tony Kynas­ton: there’s your glob­al con­se­quences thing

Cameron: It i- uh, damn, you’re, you’re spot on. You’re absolute­ly spot on. If I could get the rights to play Shostakovich, I would add that to the thing

Tony Kynas­ton: He’s dead, isn’t he?

Cameron: He’s only been dead for 50 years, though.

Tony Kynas­ton: Mm-hmm. Okay

Cameron: And it’s the orches­tra’s per­form­ing it, I think. They prob­a­bly have the rights and the labels that put it out, uh, you know. Any­way. But for any­one out there who’s lis­ten­ing to Shostakovich and you haven’t heard the Eight, lis­ten to the Eight. Both the Eight, um, uh, String Quar­tet is also great, but the Eighth Sym­pho­ny’s also great.

Um, just want­ed to point out one thing before we go. K- K‑A-U, Kaiser Reef, if any­one holds that. We were talk­ing about gold before. They’re a gold min­er, but they just became a three-point sell. We got an alert pop up a minute ago, cou­ple of min­utes ago.

Tony Kynas­ton: Right

Cameron: [01:22:00] Appar­ent­ly one of their, their Hen­ty mine is not deliv­er­ing what they want­ed it to.

They came out with a thing, uh, last week on the 9th of Octo­ber say­ing that they weren’t real­ly hit­ting their goals. They’ve had some per­son­nel changes and their share price has tanked. So it’s a lit­tle bit below their three-point trend line price today. Three-point sell is, uh, ch- ch- ch- ch, let me see. Doo, doo-doo, doo, doo-doo.

19 and a half cents, and they just hit 18 cents. So there you go

Tony Kynas­ton: Thanks for that

Cameron: That’s it. Uh, that’s it for QAV Aus­tralia this week. We’re gonna go talk QAV Amer­i­ca, where I will be talk­ing about an oil com­pa­ny just for a change, Tony

Tony Kynas­ton: I’m try­ing to look up the– There’s a Pao­lo Sor­renti­no movie, Sor­renti­no movie, sor­ry. And I can’t think what it’s called, but it starred Michael Caine and,

Cameron: Yeah, yeah. The, the two old guys in Switzer­land.

Tony Kynas­ton: That’s my favorite

Cameron: [01:23:00] Yeah

Tony Kynas­ton: What’s it called? I thought it was called Youth, but I could be wrong.

Cameron: No, I think that is Youth. I think that. I think so, yeah.

Tony Kynas­ton: movie

Cameron: Yeah. Yeah, yeah, yeah, real­ly good.

Tony Kynas­ton: Yeah.

Cameron: Um, 20

Tony Kynas­ton: it’s got a Ital­ian name, La Giovinez­za, 2015.

Cameron: Yeah, real­ly good. Jane Fon­da’s in that too.

Tony Kynas­ton: Oh, is she? Okay.

Cameron: Speak­ing of Jane Fon­da. Well, she has a pic­ture of her in it. No, sh-

Tony Kynas­ton: I don’t recall her being in it, but not with you

Cameron: Well, there’s a pho­to of her on the IMDb page, but I can’t see her in the list of, uh, cast. So I don’t know. Don’t know what’s going on there. Maybe it’s some­thing else. Any­hoo, um, Rachel Weisz was, uh, the main female lead in it. Jane Fon­da, Jane Fon­da, Jane Fon­da. Fon- Fon- Fon- Fon- Fon- Fon­da. Yeah, Jane Fon­da was in it.

There you go.

Tony Kynas­ton: Any­way,

Cameron: All right.

Tony Kynas­ton: [01:24:00] My

Cameron: Yeah, it was, was a great film. I like La Grande Bellez­za, but any­way. And the, the Young, did you watch The Young Pope and The Old Pope and those?

Tony Kynas­ton: No.

Cameron: Oh, they’re great.

Tony Kynas­ton: Okay

Cameron: Oh! Oh my God, so good. In The Young Pope,

Tony Kynas­ton: Is that

Cameron: you’ve–

Tony Kynas­ton: Law?

Cameron: In The Young Pope, Jude Law becomes pope. He’s the first Amer­i­can pope, and he’s, uh.

Yeah, well, they do have an Amer­i­can pope now, don’t they? But he was the first Amer­i­can pope. But he was young, and he’s, you know, chain-smok­ing, and he’s sexy, and, uh, you know, it’s pret­ty cool. And then in the sec­ond one, in the– I think he, at the end of that one, he has a heart attack or some­thing, or goes into a coma, and then he gets replaced by John Malkovich in the sec­ond one as the, as the old pope.

Tony Kynas­ton: Yeah

Cameron: And, uh, he’s fan­tas­tic as well. Um, yeah, just great. Beau­ti­ful, great music, like [01:25:00] dance sort of tech­no sound­track, vibe music, and it’s all set in a f- what’s sup­posed to be the Vat­i­can, but yeah, yeah, yeah. Real­ly fun­ny, dirt dry fun­ny, beau­ti­ful. High­ly rec­om­mend­ed.

Tony Kynas­ton: Okay. I’ll have a look for that one

Cameron: That’s where we got start­ed with Pao­lo Sor­renti­no is we saw those.

My moth­er rec­om­mend­ed the first series, and we watched that, and we loved it, and then that’s when we start­ed watch­ing his films. I think you told me about him at some point too, that you liked his films.

Tony Kynas­ton: what it was called. There was, there was one of his ear­ly films made about the Ital­ian prime min­is­ter was

Cameron: Lor­rel

Tony Kynas­ton: of my, Ital­ian friends put me onto that, which I real­ly liked

Cameron: Bertolu- um, not Bertoluc­ci. Bertoluc­ci. Was a sort of a take on Berlus­coni. Was it Berlus­coni who was the pres­i­dent, prime min­is­ter?

Tony Kynas­ton: Yeah, could have been. I can’t recall now. This was 20 years ago.

Cameron: Right.

Tony Kynas­ton: Hmm.

Cameron: okay, let’s go talk Amer­i­ca

Tony Kynas­ton: Bye

Cameron: Thank you. Hap­py hunt­ing every­one