Transcript QAV 411

Episode name: QAV 411

Audio Length: 1:03:23

 

[Intro] Cameron Reil­ly [00:05]: Wel­come back to QAV, Kyno!

Tony Kynas­ton [0:12]: Hi Cam, how are you?

Cameron Reil­ly [00:15]: I’m good. This is episode 411 record­ed on Wednes­day, the 17th of March, 2021. How was your golf tour­na­ment?

Tony Kynas­ton [00:28]: Good. We had three days of golf actu­al­ly. We played on Fri­day and a char­i­ty golf tour­na­ment and had a lot of fun and came 6 out at about 40 groups and that was good, not enough to win a prize, but still have lots of fun and then we had a cou­ple of rounds, one round, on Mon­day, and one round on Tues­day; one at Liv­er­pool and one River­side Oaks, so had lots of real­ly good rounds. We were lucky we dodged the rain; it’s been rain­ing down here for a long time. Golf was good.

Cameron Reil­ly [01:00]: Oh, you avoid­ed the rain, that’s good. It’s been rain­ing here non­stop for the last few days, which is good for pod­cast­ing because the tem­per­a­tures down at 25 in my office, not the 32 it was I think last week when we record­ed. So that’s nice.

Tony Kynas­ton [01:12]: Good. Yes.

Cameron Reil­ly [01:14]: I don’t have to sneak­i­ly turn the fan on every time you start talk­ing. Mute my micro­phone and turn the fan on.

Tony Kynas­ton [01:26]: To avoid [cross-talk­ing 01:26]

Cameron Reil­ly [01:27]: So Golf went okay. You got some hors­es run­ning this week?

Tony Kynas­ton [01:32]: Yes. Well, peo­ple won’t get to see Ring of Hon­or, but she’s rac­ing at six o’clock tonight, Wednes­day night, but Darnie Pati­na races in Syd­ney on Sat­ur­day race one on gold­en slip­per day, big race day at Rose Hill.

Cameron Reil­ly [01:47]: I’ve put five bucks on it to place. So, I think I win 1378 if it places, so that’ll recoup some­thing. Good, Yes.

Tony Kynas­ton [01:57]: Well, I hope it does place.

Cameron Reil­ly [02:00]: Good.

Tony Kynas­ton [02:00]: It’s got a very good place record so she should do okay.

Cameron Reil­ly [02:04]: Right. And Damien Oliv­er [cross-talk­ing 02:06].

Tony Kynas­ton [02:06]: And she was rid­ing. Yes, he’s an amaz­ing jock­ey, he’s get­ting pret­ty old now, too.

 

Cameron Reil­ly [02:10]: Yes. He’s been around for a long time. Yes. I was going to say, Yes.

Tony Kynas­ton [02:14]: Yes. Mel­bourne Cup-win­ning jock­ey. He’s very good. And Darnie Pati­na loves the wet, which is why she’s com­ing to Syd­ney because it’s so frick­ing wet here.

Cameron Reil­ly [02:24]: And I’m com­ing to Syd­ney on the week­end.

Tony Kynas­ton [02:26]: You are? Bring your umbrel­la.

Cameron Reil­ly [02:31]: I will

Tony Kynas­ton [02:31]: Yes, good. We’re going to the Whiskey Awards.

Cameron Reil­ly [02:35]: Whiskey Awards on Sun­day, QAV din­ner on Mon­day night, hard to get Syd­ney peo­ple to come to a din­ner. We do a din­ner in Bris­bane ton of peo­ple turn up, we do a din­ner in Mel­bourne ton of peo­ple turn up, we do a din­ner in your home­town every­one’s like, ah real­ly? We have to go out? No don’t think so. Very hard to sell tick­ets din­ners with you in Syd­ney for some rea­son, I think word must have got­ten around or some­thing in Syd­ney.

Tony Kynas­ton [03:05]: Yes. Well, I mean come on peo­ple in Syd­ney come along, it’s good fun. We’ve got the restau­rant to our­selves; you can ask ques­tions; you can take pho­tos with cam.

Cameron Reil­ly [03:20]: I’ve got a pho­tog­ra­ph­er com­ing in to take some pho­tos of you and I on Mon­day, you’re going to have a hair­cut before then? Or you’re just going to, ugh which does­n’t mat­ter.

Tony Kynas­ton [03:29]: Yes, I’ll try and have one of mine.

Cameron Reil­ly [03:32]: I can do it for you if you’d like. I’ll bring my scis­sors, my razor, give you a buzz cut.

Tony Kynas­ton [03:39]: Num­ber three, bald. It’s okay, I’ll try that one.

Cameron Reil­ly [03:46]: It’s okay. I’ll put some gel or some­thing in it’ll fudge, slick it back, put you in a good suit and tie. That’s what all the oth­er Invest­ment gurus do on the inter­net man they’re all like.

Tony Kynas­ton [03:58]: Yes man, okay.

Cameron Reil­ly [03:58]: Slicked back, get the suit, pos­ing in front of the rent­ed Lam­bo.

Tony Kynas­ton [04:03]: Yes, and I got the side part with an ear­ring     kind of over the one side,

Cameron Reil­ly [04:08]:  The French cuffs?

Tony Kynas­ton [04:11]: [cross-talk­ing 04:12] Yes, French cuffs, yep. oh my God!

Cameron Reil­ly [04:14]: Turn up hazeled, tus­sled, wrin­kled, bloody shirt, you’re like, eh,

Tony Kynas­ton [04:21]: What’s hap­pen­ing? What are these?

Cameron Reil­ly [04:29]: That’s the new cof­fee mug of get­ting made up QAV, what’s up wannabes? I’m look­ing for­ward to com­ing down and hang­ing out. It’s going to be good fun.

Tony Kynas­ton [04:40]: Yes.

Cameron Reil­ly [04:40]:  All right. let’s get into show stuff. We’ve got a mil­lion ques­tions again this week, prob­a­bly not going to get to all of them I apol­o­gize to every­body, but we’ll work our way through them. Obvi­ous­ly the big­ger the audi­ence gets, the more the ques­tions are, the tougher it is to get through all of your ques­tions, but keep them com­ing because it’s great.

Tony Kynas­ton [04:59]: Please do. Yes, they’re real­ly good ques­tions.

Cameron Reil­ly [05:02]: Now one of our new sub­scribers Jeff, sug­gest­ed that we do some work­shops. He said, Yes, what about one day work­shops? And I said, Oh, I’ll run it past Tony, but I’m pret­ty sure he’ll say it sounds like too much hard work, and that’s in fact exact­ly what you said oh the whole day, oh God.

Tony Kynas­ton [05:26]: Well, I can prob­a­bly train the intern maybe in for half a day and then he can go on the one-day work­shops.

Cameron Reil­ly [05:32]: I’m going to have to get like a body dou­ble for you like cus­to­di­an.

Tony Kynas­ton [05:36]: Yes. Phillip Sey­mour Hoff­man is the decease though, so I can’t get him. Well, I mean, peo­ple won’t come along to a Syd­ney din­ner, who’s going to come along to a Syd­ney work­shop.

Cameron Reil­ly [05:47]: Yes. Good point, well.

Tony Kynas­ton [05:47]: We can fig­ure some­thing online, but zoom calls are pret­ty much work­shops, aren’t they? Or zoom videos are pret­ty much work­shops.

Cameron Reil­ly [05:56]: They are, or I was think­ing I could do it by myself, like I answer some of the emails by myself, you just play golf and I’ll just Face­Time you if there’s one, I’m not con­fi­dent in answer­ing. Just every­one take a break, eat one of those lit­tle mints on the table, I’m going to Face­Time Tony. Sor­ry Jeff, it’s a no for the work­shops. I want to talk about a cou­ple of things that hit my radar this week, Tony, I was watch­ing a video by a guy called Aswath Damodaran, you ever come across him as Aswath Damodaran?

Tony Kynas­ton [06:36]: No, I haven’t. No.

Cameron Reil­ly [06:37]: It’s also a Har­ry Pot­ter mag­ic spell if I say as Aswath Damodaran, can make all your mon­ey dis­ap­pear and go to my bank account.

Tony Kynas­ton [06:48]: You’re big­ger than me, I was try­ing to rip off his name but I could­n’t make it hap­pen.

 

Cameron Reil­ly [06:52]: Well, I was actu­al­ly think­ing about say­ing that over Bel­la Nipoti­na on Sat­ur­day, just before the race as with Damodaran. Now Damodaran is a pro­fes­sor of finance at the Stern School of Busi­ness at New York Uni­ver­si­ty and.

Tony Kynas­ton [07:06]: I nev­er smile there.

Cameron Reil­ly [07:08]: No, you don’t want an easy-going school of busi­ness or school of finance, you want them to be stern where they take it very seri­ous­ly. He is a val­ue guy and been around a long time appar­ent­ly, very pop­u­lar I gath­er. But I watched some videos that he did and he starts off one of them by using a lemming’s anal­o­gy. He said, all investors are lem­mings, try­ing to remem­ber the rest of it but he said, you look at lem­mings and you go, okay well the first one that goes over the edge of the cliff you go okay, well you can under­stand that maybe the first one did­n’t see the edge of the cliff and was just excit­ed and was run­ning and fell over and then the next cou­ple that go over well, maybe they were just too close to the first one and it was too late by the time the first one went over and they could­n’t put the brakes on fast enough, so momen­tum car­ries them over. Yes, but what do you do about the last one? It’s like 50 lem­mings how do you explain the last one? He’s seen 50 of his friends go over Yes and he’s obvi­ous­ly think­ing wow, it must be some­thing good at the bot­tom of this cliff, I’m not going to miss out I’m going over as well.

Tony Kynas­ton [08:19]: Exact­ly. Yes, he goes “Yolo!” on the way over. You Only Live Once.

Cameron Reil­ly [08:24]: Yes, that’s right. So, he said, they’re all investors are lem­mings the ones at the front are the momen­tum investors, like they’re just excit­ed, they can’t believe how great this is, they’re going along with it they go over the cliff. Then he said, you got the peo­ple in the mid­dle of the bunch that are sort of a lit­tle bit more skep­ti­cal, but then they look at what the momen­tum investors are doing and they’re like, well they must know some­thing I don’t and so they go over the edge. Then he at the bot­tom, you’ve got the val­ue investors right at the back, they’re like, oh no I’m going to at least try and apply some log­ic and rea­son­ing to why I’m run­ning up this cliff and whether or not I should jump off the end. He said, it does­n’t mean that they won’t jump off cliffs from time to time, but he was basi­cal­ly talk­ing about hav­ing some rules, hav­ing some attempts not to be a momen­tum lem­ming not to be one of the worst lem­mings, he was talk­ing about the hard­est thing, and we’ve talked about this a lot before  but the hard­est thing in invest­ing is dis­ci­pline and not get­ting car­ried away and not get­ting involved in FOMO and all those sorts of things and so he said look, for me I just try and I under­stand that I’m prob­a­bly going to make mis­takes and I’m prob­a­bly going to fall into traps and I’m prob­a­bly going to do things that I make deci­sions that I regret lat­er, but I’m try­ing to use as much data and log­ic and rea­son­ing as I can to avoid those things, to avoid those aspects of human nature, which we all have. It’s nat­ur­al, apart from you ice man, but for the rest of us, it’s hard not to get swept up in the.

Tony Kynas­ton [10:15]: Yes [cross-talking10:16]

Cameron Reil­ly [10:15]: The big excite­ment. Yes, exact­ly. [cross-talk­ing 10:20] Well you and Tay­lor are going to have some good con­ver­sa­tions about Bit­coin when we’re in Syd­ney,

Tony Kynas­ton [10:26]: What’s worse than that that Cam, it’s like there are peo­ple who are paid to ush­er the lem­mings up the cliff, and then they pay the road run­ner to go out in front and then just stop just short of the cliff and watch every­one go over and there are peo­ple who sell tick­ets to the cliff, it’s like Yes.

Cameron Reil­ly [10:45]: Yes!

Tony Kynas­ton [10:45]: You don’t want to go on there and nah you’re not good enough for the cliff mate, no. Okay, I’ll give you a tick­et, sure.

Cameron Reil­ly [10:53]: Shh, don’t tell any­one.

Tony Kynas­ton [10:58]: The mag­ic tick­et. Yes great. [cross-talk­ing 10:58] He’s right. We’re prob­a­bly all, some type of lem­ming, but you can just spot where the lem­mings are going at the moment can’t you? Into the SAS stocks, the after-pay stocks, all those kinds of things.

Cameron Reil­ly [11:16]: Yes. But of course, they don’t think they’re lem­mings, they think they’re the smart ones and we’re the dumb ones, val­ue investors are the dumb ones. Well, any­way, this is all a lead up to sto­ry that some­body post­ed on, I think on a Face­book group today, CBA launch­ing BNPL ser­vice. Well, we always knew it was a mat­ter of time, I guess this is from their finan­cial review Com­mon­wealth Bank unveiled its after pay pin­cer move­ment, announc­ing a new prod­uct; Comm­Bank BNPL, not exact­ly the catchi­est name, some­body in Com­mon­wealth Bank’s mar­ket­ing depart­ment is prob­a­bly putting a rope around their neck this morn­ing, they prob­a­bly had a bunch of real­ly cool names and then the senior execs went nah, let’s call it Comm­Bank BNPL and the mar­ket­ing per­son is like no.

Tony Kynas­ton [12:12]: No, they would have gone. Lis­ten, what do you know about, what’s wrong with the Comm­Bank brand? Come on.

Cameron Reil­ly [12:18]:  It’s one of the most beloved brands in the coun­try. It’s your mon­ey, Ralph, no was that Comm­Bank?

Tony Kynas­ton [12:27]: [cross-talk­ing 12:27] Vic­to­ria.

Cameron Reil­ly [12:27]: Who was Comm­Bank? It was Jan not hap­py Jan? [cross-talk­ing 12:3I] I’m sure they had a catchy mar­ket­ing slo­gan at some point.

Tony Kynas­ton [12:41]: Or prob­a­bly not.

Cameron Reil­ly [12:41]: We’ll allow up to 4 mil­lion of its retail cus­tomers to pay in four install­ments and the biggest com­pet­i­tive response by a major bank to the buy now pay lat­er phe­nom­e­non. Now Tony, I asked you this being an invest­ing guru, when an announce­ment like that comes out what would have hap­pened today to the Com­mon­wealth Bank shares and what hap­pened to the After-pay shares?

Tony Kynas­ton [13:09]: I don’t think it would have affect­ed the Comm­Bank shares much at all and after pay, I think I know the answer, they went down a lit­tle bit, but then they came back up to about where they were before­hand. So, investors have pret­ty much brushed off the news.

Cameron Reil­ly [13:23]: Last time I checked after pay was up. I think after the mar­ket goes, well this is val­i­da­tion of after pay, that they’re on a good thing.

Tony Kynas­ton [13:32]: Copy­cats, Yes.

Cameron Reil­ly [13:33]: Copy­cats, Yes. And Com­mon­wealth Bank nah, what do they know about the kids of today? And they’re prob­a­bly right.

Tony Kynas­ton [13:40]: I read in the arti­cle that Comm­Bank weren’t going to charge their mer­chants, any­thing for the sales. So, if you’re a retail­er and you’re pay­ing 6%, at least to after pay to book their sales, you’re going to put the After pay pro­mo­tion­al gear at the back of the counter or under the counter and put lots of CBA stuff on the counter or [inaudi­ble 14:03].

Cameron Reil­ly [14:05]: Is that a cause for any com­pet­i­tive law­suit at some point?

Tony Kynas­ton [14:15]: No, I don’t think so. pos­si­bly, who knows?

Cameron Reil­ly [14:19]:  Yes. Do we have any com­pe­ti­tion laws in this coun­try like they do in the US? I don’t even know how it stands here.

Tony Kynas­ton [14:27]: Yes, we do have anti-com­pet­i­tive laws, I don’t think they apply in that case. We have third line forc­ing, so it would be ille­gal if the mer­chant said you can only buy these goods with a com­bat card, but.

Cameron Reil­ly [14:38]: Right.

Tony Kynas­ton [14:40]: Yes. And that would­n’t apply in this case either.

Cameron Reil­ly [14:42]: We are going to treat it like it is cred­it CBA group exec­u­tive for retail bank­ing ser­vices Angus Sul­li­van said CBA would mon­i­tor cus­tomers expo­sure to oth­er buy now pay lat­er ser­vices and would not allow the new prod­uct to be used when cus­tomers are late repay­ing oth­er providers, this goes beyond the com­mit­ments made by the buy now pay lat­er fin­tech in the new BNPL code of con­duct which has been attacked by con­sumer groups as lack­ing the pro­tec­tions of the Cred­it Act.

Tony Kynas­ton [15:10]: Yes, I heard that today, they made a pow­er­ful case. I for­get the lady’s name, but she was the chair of one of the finan­cial coun­sel­ing char­i­ties and she was say­ing, we get heaps and heaps of peo­ple in who are in finan­cial prob­lems because it’d be BNPL.

Cameron Reil­ly [15:24]: Real­ly? Wow!

Tony Kynas­ton [15:29]:  Because there’s no cred­it check done before you buy some­thing and you can spend quite a bit of mon­ey on it, so you can get into lots of trou­ble.

Cameron Reil­ly [15:35]: Right.

Tony Kynas­ton [15:36]: Because it’s cred­it! As we’ve said before, it walks like a duck, it quacks like a duck, its cred­it and there’s no cred­it check before you use the prod­uct and sign up.

Cameron Reil­ly [15:46]: Any­way, there you go. CBA shares are down, after­pay shares are up.

Tony Kynas­ton [15:54]: Yep

Cameron Reil­ly [15:54]: Oh, com­plete­ly ratio­nal in the mar­kets today.

Tony Kynas­ton [15:57]: We’re through the look­ing glass. But there’s a few oth­er devel­op­ments, you see what hap­pened with after pay, they issued 10-year bonds, zero coupon so no inter­est pay­ments. So, if you give your mon­ey to after pay for 10 years, I think from mem­o­ry the deal was some­thing like the bond is basi­cal­ly [inaudi­ble 16:16] after pay share price of it around a hun­dred bucks, but in 10 years’ time, they’ll give you I think $130 a share or some­thing like that. So, you’re basi­cal­ly gam­bling with after pay. A] it’s still going to be around in 10 years’ time and B] It’s going to be worth some­where way north of $130 a share and peo­ple are just lin­ing up like lem­mings to take out the zero-coupon bowl.

Cameron Reil­ly [16:39]: Well, there you go. Good luck to them all. I hope they do well.

Tony Kynas­ton [16:42]: Yes.

Cameron Reil­ly [16:42]: Mov­ing right along.

Tony Kynas­ton [16:46]: [cross-talk­ing 16:46] with Bit­coin.

Cameron Reil­ly [16:49]: Mov­ing right along. CVL that we recent­ly added to our port­fo­lio is cur­rent­ly slight­ly under the price we paid for it. What do we do?

Tony Kynas­ton [17:00]: Oh, let me have a look. I haven’t looked at it for a while.

Cameron Reil­ly [17:02]: Civmec, we bought it for 60 cents on the 1st of March, it’s cur­rent­ly trad­ing at 59 cents.

Tony Kynas­ton [17:09] Let’s have a look at this graph. So, 1.7% today, by the way.

Cameron Reil­ly [17:21]: Yes, it was down low­er than this yes­ter­day. Yes.

Tony Kynas­ton [17:25]: I think [cross-talk­ing 17:26] look­ing at that share graph, it’s well above its sell line.

Cameron Reil­ly [17:32]: Right. But recent­ly we sold some­thing because it dropped below the share price.

Tony Kynas­ton [17:38]: I think that was Ramelius, was­n’t it? And if you look at the Ramelius graph, I think gen­er­al­ly it was trend­ing down which is why we sold it and it was, but I did­n’t sell it because its graph was trend­ing down in the short term because it’s still above its sell price, but I was sell­ing it because its graph was trend­ing down in the short term and it was below its sell price. I’m just call­ing up Ramelius now and Yes, well it’s actu­al­ly kicked up since we sold it so that was a dumb mis­take, was­n’t it? Okay, capit­u­la­tion.

Cameron Reil­ly [18:15]: Yes.

Tony Kynas­ton [18:17]: [cross-talk­ing 18:18] dis­ci­plined?

 

Cameron Reil­ly [18:22]: Yes, well some­times.

Tony Kynas­ton [18:23]: When I write my annu­al let­ter to share­hold­ers, I have to do what Buf­fett does and say I made a fool­ish mis­take.

Cameron Reil­ly [18:31]: Yes. Well, it’s not the first one you’ve made. I can just rat­tle off all of the things that you’ve got involved with me on over the years. You need to get­ting involved in with Cam Projects. Check­list. First thing is, is cam involved? Yes, [inaudi­ble 18:51] no I’m not get­ting involved in it, it’s a big mis­take. All right, so just because it’s.

Tony Kynas­ton [19:00]: You sound like my wife.

Cameron Reil­ly [19:03]: Oh right, Yes. Okay. Well, I’ll remem­ber to bring that up at din­ner on Mon­day night. Let’s say Tay­lor explain to all of us, why you think invest­ing in Bit­coin is a good idea. Now Jen­ny explains to all of us why Tony should­n’t get involved with me in any more projects.

Tony Kynas­ton [19:22]: She would­n’t say that, she just says, how much have you spent?

Cameron Reil­ly [19:27]: Fair enough. Well, one of these days.

Tony Kynas­ton [19:31]: Exact­ly.

Cameron Reil­ly [19:31]:  It’ll all come good.

Tony Kynas­ton [19:33]: Yes. I say just treat it like anoth­er race horse, Jen.

Cameron Reil­ly [19:38]: Oh, I’m a race­horse, I like that, Yes.

Tony Kynas­ton [19:40]: Yes. A thor­ough­bred., even­tu­al­ly some­thing will come good.

Cameron Reil­ly [19:45]: A Fox is going to be where it all comes good.

Tony Kynas­ton: [19:48]: Right. Okay.

Cameron Reil­ly [19:49]: Yes. Okay, well that was uncom­fort­able, but let’s move on. Okay, so CBL is down a bit, but because the chart looks like a Hal­loween pump­kin it’s good.

Tony Kynas­ton [20:01]: It looks bet­ter than that. Yes. It’s climb­ing over­all.

Cameron Reil­ly [20:06]: Yes, but you got Five-year child and It looks like a Hal­loween pump­kin, but it’s up on the right-hand side. Okay, good to know. Stock of the week Tony, you’ve been a lit­tle bit qui­et on the whole jour­nal [cross-talk­ing 20:21] this week.

Tony Kynas­ton [20:21]: [cross-talk­ing 20:21] and golf.

Cameron Reil­ly [20:22]: I know, Yes. So, I actu­al­ly did the down­load today and it’s tak­ing me all day to try and get some­thing out to you, but I haven’t fin­ished yet, but because there’s lots of stuff com­ing to Stock Doc­tor in the last week.

Cameron Reil­ly [20:36]: So, report­ing sea­son is not over?

Tony Kynas­ton [20:39]: Report­ing sea­son is over but two things hap­pen most com­pa­nies by num­ber report in the last week. So, lots of lots of late reporters and it can take a week to get, or maybe even a lit­tle bit longer to get the num­bers in the Stock Doc­tor from their data providers.

Cameron Reil­ly [20:59]: Right

Tony Kynas­ton [20:59]: Yes. So, I’m still going through it. I’ve got a cou­ple of stocks of the week, actu­al­ly got, two or three to talk about. I was going to make GCY stock of the week and that’s

 

Cameron Reil­ly [21:12]: GCY?

Tony Kynas­ton [21:12]: The rea­son is because they had a qual­i­fied audit six months ago and that’s been removed now. So, I guess going resources and the share prices with the rock­et. So, they actu­al­ly, I think were sus­pend­ed for a while, they did a cap­i­tal rais­ing to keep the com­pa­ny alive, which went off suc­cess­ful­ly and now that they’ve come back into trad­ing, they’re on the up so.

Cameron Reil­ly [21:40]: Oh my God.

Tony Kynas­ton [21:41]:  We might want to have a look at guests going resources.

Cameron Reil­ly [21:44]: Shut up, from 2.89 cents to 56 cents?

Tony Kynas­ton [21:49]: Yes. So, it was like I said, it was dropped right down to that to that 3 cents a share and then it was sus­pend­ed and then they do the cap­i­tal rais­ing of some, 150 odd mil­lion dol­lars, which was sup­port­ed and now they’re back and list­ed again and the shares are on the up from 3 cents to 56 cents.

Cameron Reil­ly [22:09]: Okay. So that’s the stock of the week. What’s their QAV score?

Tony Kynas­ton [22:14]: Hang on, GCY has a 0.53 QAV score.

Cameron Reil­ly [22:19]: Wow! What?!

Tony Kynas­ton [22:23]: Yes.

Cameron Reil­ly [22:23]: This must be a new thing right? Because they’re not in the most recent buy list that you sent through.

Tony Kynas­ton [22:30]: Cor­rect. Because they had a qual­i­fied audit up until recent­ly and I’ve just put their lat­est num­bers into my spread­sheet.

Cameron Reil­ly [22:38]: Right, okay. Well, that GCY it’s a good one. What do they do? Gas going resources? What do they dig up?

Tony Kynas­ton [22:46]: Gold min­er.

Cameron Reil­ly [22:48]: Gold.

Tony Kynas­ton [22:48]: Gold, Yes.

Cameron Reil­ly [22:49]: Okay. And I noticed in your jour­nal last week, you men­tioned that the qual­i­fied audit for Zim­plats has gone away.

Tony Kynas­ton [22:59]: Yes. That’s right. Yep. So, I think from mem­o­ry, just read­ing through their annu­al report last week, the qual­i­fied audit is gone away, but they still actu­al­ly are, I think even in the courts with the South African gov­ern­ment about, or whichev­er gov­ern­ment, there was Zim­bab­we I sup­pose I’m not sure, with an African gov­ern­ment about the tax issue so that the tax issue that was high­light­ed in the qual­i­fied audit has­n’t gone away, but the audit is hap­py enough to sign off on the accounts. So that’s improved for them.

Cameron Reil­ly [23:34]: Okay. Zim has [cross-talk­ing 23:39]

Tony Kynas­ton [23:40]: If you’re call the qual­i­fied audit for Zim­plats was about there’s, I think it’s a Zim­bab­we com­pa­ny rather than, sor­ry South African and I think from mem­o­ry, the prob­lem was they weren’t account­ing for their pur­chas­es of equip­ment in Zim­bab­wean dol­lars, they were some­times putting them into us dol­lars, which appar­ent­ly was ille­gal, so they would try to unpick that and it was caus­ing them headaches.

Cameron Reil­ly [24:05]: Right. Okay, so it can go back on the.

Tony Kynas­ton [24:12]: Yep.

Cameron Reil­ly [24:12]: Is it on the list? So back on the buy­er list?

Tony Kynas­ton [24:14]: Yes.

Cameron Reil­ly [24:15]: Like you said, it is right? Yup.

Tony Kynas­ton [24:17]: Yup.

Cameron Reil­ly [24:19]: What did you say in your jour­nal just pulling up, added to the buy­er list with the QAV score of 0.19.

Tony Kynas­ton [24:25]: Yes. So not very high.

Cameron Reil­ly [24:27]: Yes. Okay, not a guess going there.

 

Tony Kynas­ton [24:30]: Yes. Cor­rect.

Cameron Reil­ly [24:32]: Okay, all right. Well, that’s it for my news of the week. Do you want to get into Q&A?

Tony Kynas­ton [24:38]: Yes, sure. Just a cou­ple of oth­er points about the buy­er list. I’ll put one out in a day or so prob­a­bly tomor­row. There’s a fair bit of work to be done and sec­ond­ly, there’s lots of our cur­rent buy­ers’ com­pa­nies have new fig­ures and I think most of them are remain­ing on the buy­er list, even though.

Cameron Reil­ly [24:56]: Okay

Tony Kynas­ton [24:56]: These have come in. So, I think just to point out a cou­ple of high­lights CAA Capral Alu­minum has got a QAV score of 0.46 still. Myer’s new fig­ures came out recent­ly and they’ve got a QAV score of 0.68. So, MML Medusa Min­ing have a QAV score of 0.54.  So, there’s a cou­ple of peo­ple might want to have a look at, but they remain on the buy list, which is good.

 

Cameron Reil­ly [25:20]: Good and while I think of it one more news item, FMG it’s tak­en a huge hit in its price in the last few weeks; Iron-ore prices are down, et cetera, et cetera. You want to just talk through your thoughts on some­thing like this? I’d say we’ve obvi­ous­ly done very well out of FMG in the port­fo­lio. It was trad­ing at 2423 since the 26th of Feb­ru­ary, it’s down to 2028 so that’s a big drop, what are your thoughts?

Tony Kynas­ton [25:59]: I’ll Sit and watch. We’ve also paid a big div­i­dend in that time peri­od of at least 10% I think from mem­o­ry so that’s anoth­er rea­son why the share price has gone down, but Yes, cer­tain­ly in all prices had got­ten to record highs of around $170 a ton and they’re back into, I think about the 150’s now so that would also be weigh­ing on the share price. Again, I’m guid­ed by the sen­ti­ment if it keeps drop­ping from here, I might look at sell­ing it, and look at the more recent trend lines, our pay [inaudi­ble 26:34] talks about because I don’t want it to go all the way back to say $60 a ton of iron ore and we’ve giv­en up all our upside, but I don’t think it will do that. It’s like­ly, I think to still stay behind our price mar­ket lit­tle bit from here but there’s still lots of when the world comes out of, COVID lots of demand for infra­struc­ture spend­ing, which is large­ly dri­ven by Iron-ore so I think most peo­ple are say­ing the iron ore prices are going stay up for longer, but it’s hard. I don’t want to pre­dict what the iron ore price will do because I’m dri­ven by some of the vagaries about which com­pa­nies min­ing well, which one isn’t whether what’s Chi­na doing all those kinds of things. And there’s also talk about Chi­na try­ing to buy up Iron-ore mines in Africa and devel­op them there to try and off­set depen­dence on Aus­tralia. So Yes, I’m not an Iron-ore expert I’m going to sit and watch and make a call when I need to. Well, the sum­ma­ry is I’m going to have to wait and watch for the [inaudi­ble 27:38].

Cameron Reil­ly [27:39]: Okay. Do you think the world’s ever going to come out of COVID the way it goes?

Tony Kynas­ton [27:43]: [cross-talk­ing 27:43].

Cameron Reil­ly [27:46]: I can’t believe it’s been a year and the US had 47,000 new cas­es yes­ter­day, like a year. I’m in shock real­ly that it’s still going on like this it’s real­ly kind of crazy.

 

Tony Kynas­ton [28:02]: 47,000 new cas­es, well. One of the guys I played golf with he is an Amer­i­can and he was say­ing that some of the states are doing well with the vac­ci­na­tions, some of the states are doing poor­ly with the vac­ci­na­tion and it real­ly comes down to the weak­est link in this stuff that he does­n’t think that the US will get com­plete cov­er­age from vac­ci­na­tion any­time soon, so there’ll be out­breaks.

Cameron Reil­ly [28:25]: Yes. And it’s not going well in Europe, but I saw the oth­er day too. I think Italy’s got its third wave going on. They’re all stop­ping the AstraZeneca Vac­cine because of this blood clot­ting issue, it’s kind of crazy. Sor­ry. I was wrong on that US num­ber; they did­n’t have 47,000 new cas­es yes­ter­day That was the day before they had 53,231 new cas­es yes­ter­day. Brazil at 84,124 new cas­es, India,28,000, France 29,000, Italy 20,000, Ger­many 9,000.

Tony Kynas­ton [29:06]: A day.

Cameron Reil­ly [29:07]:  Poland 14,000, a day!

Tony Kynas­ton [29:10]: So clear­ly all of these coun­tries just aren’t lock­ing down, are they? just going about busi­ness as usu­al.

Cameron Reil­ly [29:16]: Yes. Some­thing like that. Any­who! Let’s get into Q&A.

Tony Kynas­ton [29:23]: Yes. Good for gold stocks app.

Cameron Reil­ly [29:25]: Hi Cam. This is from Brett, “Hi Cam”. Hi, Brett, “Can you please ask TK how he decid­ed to sell a stock before he dis­cov­ered the three-point trend­line? ”

Tony Kynas­ton [29:34]: Yes. Good ques­tion. I think I’d prob­a­bly clas­si­fy myself as a buy and hold investor large­ly before that so, as I’ve said before on the show, held most of my stocks through the GFC and that was painful and that’s when I start­ed to inves­ti­gate ways of try­ing to improve that process, which is when I came across the sim­ple idea of the three-point trend line. Although there were plen­ty of peo­ple out there talk­ing about oth­er kinds of momen­tum invest­ing about short-term, three-month trend lines going below 12-month trend lines are above that kind of thing so it’s not a new con­cept. I think I would prob­a­bly say that I would have sold things in the past based on some of the ways we’re talk­ing about now. If you ignore the sen­ti­ment, so if there was a res­ig­na­tion of a direc­tor or a CEO or a CFO, if there were red flags like that, if they were qual­i­fied audits, if they were a bad result announce­ment, that kind of thing. I guess in my ear­ly days, I prob­a­bly put a lot of stock in what peo­ple like Roger Mont­gomery would say, there was anoth­er guy who I used to sub­scribe to called Ian Hunt­ley who’s not around any­more, he sold his newslet­ter to Morn­ingstar, which I think is still going, but I did­n’t find their analy­sis to be as good as the Ian Hunt­ley’s and Yes, peo­ple like that, so no real sci­ence behind or method­ol­o­gy behind it.

Cameron Reil­ly [31:08]: And after the GFC, you imple­ment­ed the three PTL to try and.

Tony Kynas­ton [31:15]: Cor­rect.

Cameron Reil­ly [31:15]: Lim­it the loss­es because, buy and hold is sort of a clas­sic val­ue investor strat­e­gy, right? That’s what a lot of val­ue investors do.

Tony Kynas­ton [31:22]: Yes, cor­rect. So, I was try­ing to find good com­pa­nies and look to hold them for the rest of my life if I could. So, lots of empha­sis on the qual­i­ty side of the check­list and the val­ue side I sup­pose lots of analy­sis, which even­tu­al­ly dis­tilled itself into the check­list but Yes on the sell side, event-dri­ven is prob­a­bly how I describe it.

Cameron Reil­ly [31:45]: Okay, there you go Brett, I hope that helps. Matt, “Hi Cameron, real­ly enjoy­ing the QAV pod­cast, I nev­er thought I’d be eager­ly await­ing a show about invest­ing each week so thanks very much to you and Tony for all your work.” I nev­er thought I’d be mak­ing a pod­cast about invest­ing each week, Matt and so wel­come to the club. “. Got a ques­tion for TK about fudg­ing a sell price in sit­u­a­tions where we have fudged the buy­er price take ECX as an exam­ple. That’s the sec­ond well, we’ve got anoth­er ques­tion about ECX I think in the show.

Tony Kynas­ton [32:15]: Yes, we do [inaudi­ble 32:15]

Cameron Reil­ly [32:17]: “If we strict­ly fol­low the rules, the sell price is cur­rent­ly about 72 cents, but TK fudge the sen­ti­ment for ECX on the way in and end­ed up with a buy price of around a $1.22 rather than wait­ing until some­where around $4.00” Do you remem­ber this? I don’t remem­ber this.

Tony Kynas­ton [32:34]: Yes. ECX was def­i­nite­ly a fudge.

Cameron Reil­ly [32:36]: Right?

Tony Kynas­ton [32:38]: It had two peaks from mem­o­ry or three peaks around the same price or in that $4.00 Mark.

Cameron Reil­ly [32:42]: You took the last one, Yes, I remem­ber now.

Tony Kynas­ton [32:43]: Cor­rect, yep.

Cameron Reil­ly [32:45]: “In this sit­u­a­tion, should we sim­i­lar­ly fudge the sell price and the way out to more accu­rate­ly reflect the more recent sen­ti­ment? For exam­ple, use the low points in Feb­ru­ary and March, 2020 to get a sell price around a $1.20 or to aligned to the scale of fudg­ing on the buy side, use March, 2020 in Decem­ber, 2020 to get a sell price around a $1.90. My think­ing is that by doing so, we’d be bas­ing any sell deci­sion on changes to sen­ti­ment that are more close­ly aligned to the events that caused us to, by inter­est­ed in your thoughts on bal­anc­ing our fudge”. Well, that’s the title of the episode, Matt, well done.

Tony Kynas­ton [33:22]: Bal­anc­ing the fudge.

Cameron Reil­ly [33:22]: Bal­anc­ing the fudge.

Tony Kynas­ton [33:24]: I don’t think you have to bal­ance the fudge, that’s the first point to make real­ly. Yes, it was a fudge buy, all jokes aside I knew the busi­ness quite well and the rea­son why it went down was because they had some prob­lems, they made lots of acqui­si­tions to try and grow the com­pa­ny. One was a dri­ving instruc­tor com­pa­ny and one was I think a Grey’s Online; an auc­tion com­pa­ny and the sort of diver­si­fi­ca­tion had dis­tract­ed man­age­ment. And so, the share price start­ed to drop then there was a takeover offer ini­ti­at­ed and that was with­drawn and that caused a share price to col­lapse and new man­age­ment came in and even­tu­al­ly sold off Grey’s Online and the dri­ving instruc­tor busi­ness and that’s why I was hap­py to fudge it because I could see some fun­da­men­tal shifts hap­pen­ing in the com­pa­ny which allowed me to think it would recov­er, which it has. In terms of fudg­ing things, I’m hap­py to fudge on the sell-side as well. I tend to take the first line that Matt spoke about there, which was the sell price of around $1.20 so he’s ignor­ing the low point, but using March, 2020 is the low point and that’s fine. I think if I drew the line for my own use, I’d be draw­ing it with a sell price in the sev­en­ties, around 70 cents, some­thing like that using the two low points. I’ll just call up the share so I can talk about what those low points are, ECX.

Cameron Reil­ly [35:07]: Yes. So, you’d be using the first one back in March 2019, 64 cents and the sec­ond one, March, 2020 at, 68 cents.

Tony Kynas­ton [35:19]: Yes. Which gives us a sell price around 70 cents. I think what Matt was say­ing was to use March and then April, which would give him a sell price of North of a dol­lar; $1.20 he’s say­ing, and that’s fine. I don’t have a prob­lem with that either. So, it’s all these ques­tions about three trend lines in sell­ing, et cetera I think we’ve still got to use com­mon sense. At the moment, the share price is going up prob­a­bly the slight­ly slow­er rate than it has in the past. If peo­ple want to lock in prof­its and fine, but I won’t be sell­ing until it gets down into the 70-cent range. Do you own ECX? [Cross-talk­ing 35:58].

 

Tony Kynas­ton [35:58]: Yes, I do own ECX

 

Cameron Reil­ly [35:58]: [Cross-talk­ing 35:58] QAV port­fo­lio? You held it for a long time or is it a more recent thing?

Tony Kynas­ton [36:05]: When did I buy it? I think I bought it, that’s a good ques­tion Cam, I bought it when it turned up around, the time we added that, so prob­a­bly July last year?

Cameron Reil­ly [36:20]: Sep­tem­ber last year we added it at $1.50. We bought it before it was in our port­fo­lio going back to June 19, but then we got out, we bought it again at $1.50. And it’s now what? 1.90? Yes. So, 26, 27% up since we bought it in Sep­tem­ber so it’s a good one for us, but we’re going to keep hold­ing it. You’re not wor­ried about fudg­ing a sell line for this one?

Tony Kynas­ton [36:52]: No, I’m not.

Cameron Reil­ly [36:54]: Okay.

Tony Kynas­ton [36:54]: But look I can see the sense in doing that first one that you spoke about, that Matt spoke about a $1.20 in terms of ignor­ing the first sell line and just using the two more recent ones I don’t have a prob­lem with that in terms of a fudge, but I don’t think we need to bal­ance the fudge, there’s no sort of sci­ence now.

Cameron Reil­ly [37:15]: It sounds good though. So, I’m just look­ing at the last buy list you sent me, which is on the 4th of March. It’s in the buy list with a QAV score of 0.48. This is with the buy sen­ti­ment fudge though but well the share price was $1.93 then, so it’s come down a lit­tle bit, but it’s got a good QAV score, stocks good, it’s a good buy, it’d be in our top 10 buys if we did­n’t already own it so it’s not like the busi­ness is tank­ing.

Tony Kynas­ton [37:53]: No, cor­rect. No, I agree. I think it’s still quite cheap.

Cameron Reil­ly [37:57]: Right and just to explain for us again, Tony, your thoughts on stick­ing to the sell line, even when it looks pret­ty dras­tic like that, as I under­stand it, it’s because you believe that a busi­ness that’s per­form­ing well and is under­val­ued accord­ing to our cal­cu­la­tions, the mar­ket will even­tu­al­ly wake up to that and it’ll revert to the main.

Tony Kynas­ton [38:26]: Yes, or we’ll see some rea­son for it drop­ping off and we’ll make a deci­sion based on that, you know like if the MD resigns unex­pect­ed­ly or some­thing like that, the share price will drop and we have to decide whether we want to buy or sell, even though it’s above the sell line. But Yes, that’s the whole point with the sell lines, the steep­er you draw the sell line, the clos­er you draw it to the cur­rent uptrend, the more volatile you’re going to be. So, you can see with the uptrend with ECX, it does­n’t just go off in a straight line, it goes up, it comes back, it goes up, it comes back. So, it’s gen­er­al­ly falling in uptrend, but if you sort of draw a line along the bot­toms of all that sort of retreats on the way up, even­tu­al­ly it might drop below that and your sell, but then it might revert quite quick­ly and go above the buy line again. So, I pre­fer to have quite a bit of room on the way up so that I can hold, some­times you might want to hold for six months to see what the new fig­ures come out as that might vin­di­cate your idea of it being a qual­i­ty stock, that’s still cheap­ly priced. So, I think there are excep­tions to that, like we said, last week, I’m think­ing very hard about gold stocks, and poten­tial­ly then by the same sort of idea on all stocks or any sort of com­mod­i­ty stock where the volatil­i­ty of the under­ly­ing com­mod­i­ty might cause us some con­cern, but I haven’t real­ly come to a con­clu­sion with that at the moment yet and, I think if it might be worth­while just going through a chart, there’s a com­pa­ny called North­ern Star which was one of my big­ger hold­ings not if you want to call that one out, we can talk about it. I bought it three or four years ago when the gold price first start­ed trend­ing up it says.

Cameron Reil­ly [40:12]: NST?

Tony Kynas­ton [40:15]: NST that’s, right. Peo­ple might want to have a look at NST. And I still scratch my head with some of these gold min­ing com­pa­nies. So NST was a very good buy for me four or five years ago and it’s gone up four or five times for me over that peri­od but recent­ly it dropped off and you can see from the graph it’s dropped off from some­thing like 15, $16 back to $9, but if you drew a three-point trend line on the graph, as it cur­rent­ly stands, the sell line’s going to be around sort of $7 or even maybe even low­er than that, maybe sort of 4.50.

Cameron Reil­ly [40:56]: Yes. So that’s where I think.

Tony Kynas­ton [40:59]: Yes, we would­n’t be sell­ing it. So, I was in two minds, but the rea­son why I did sell North­ern star recent­ly, and I did­n’t declare it because it’s not on our buy list or any­where near it because its prices weren’t so much. The rea­son I sold it is because of the clients start­ed to hap­pen with the retreat in the gold price the CEO who real­ly was instru­ment, Oh, sor­ry, I think he’s now chair­man real­ly instru­men­tal in dri­ving this com­pa­ny through acqui­si­tion has just recent­ly left the com­pa­ny and that sort of split the mar­ket a bit so I decid­ed to sell. So, you can see that it’s above its sell line by this pret­ty clear using com­mon sense so that’s gone below the trend for the last four years and you have the addi­tion­al com­pli­ca­tion of the Bill Beau­mont the guy who drove the com­pa­ny has left the com­pa­ny.

So, I made a deci­sion to sell, I’m sort of betwixt in between with gold because it’s only the gold price has only dropped, sort of 15, 20% tops from $2,000 US and the answer back to you, some­thing in the sev­en­teen hun­dred. So that still means these com­pa­nies are mak­ing lots of mon­ey so I just can’t real­ly under­stand why they’ve pulled back so dra­mat­i­cal­ly. I think the bond sell off has had a bit to do with it, peo­ple are sort of expect­ing that the world’s going to come out of COVID reces­sion quick­ly and there­fore gold won’t be as valu­able as if the world was in tur­moil and we’re head­ing into reces­sion as you said before, cam, I don’t know if we’re that clear­ly out of the woods yet that gold won’t revis­it some of its highs but I just don’t know. So, you know, I think it’s worth­while using a bit of com­mon sense in these cas­es. And so

Cameron Reil­ly [42:50]: Peo­ple are buy­ing Bit­coin instead of gold it’s the view, it’s the new dig­i­tal gold Tony.

Tony Kynas­ton [42:55]: That’s what I find strange is that peo­ple are say­ing Bit­coin’s a new dig­i­tal gold, but gold is being sold off, but Bit­coin isn’t, so there’s a lot of oth­er sort of con­trary posi­tions or con­tra log­ic going on at the moment. I can’t make heads or tails of it. So, yes when I see a retreat, I got the oth­er North­ern star around 10 bucks, it’s now nine but this may be how some­thing like Fortes­cue Met­als plays out for us or any of the oth­er com­mod­i­ty stocks that we have. We might make a com­mon-sense deci­sion rather than apply a hard sell line to it.

Cameron Reil­ly [43:28]:  So just [cross-talk­ing 43:30] of peo­ple, Yes. So, the three-point trend line is a guide, not a rule.

Tony Kynas­ton [43:35]: Cor­rect, Yes.

Cameron Reil­ly [43:36]: What would Bill Mur­ray say? It’s more of a guide­line than a rule or some­thing like that, can’t remem­ber what film that was from, but I’m not a God, I’m not the God, I’m just a God. Yes, so you can make some com­mon-sense deci­sions look­ing at the three-point trend line. Not a hard and fast rule.

Tony Kynas­ton [44:00]: We’re get­ting back to ECX. I think that ECX is well above its sell price, but things might change that caus­es me to sell it before it gets to its sell price but at the moment it’s look­ing good.

Cameron Reil­ly [44:13]: Can you smell that?

Tony Kynas­ton [44:14]: No, I’m going to Syd­ney.

Cameron Reil­ly [44:17]: Well, I’m pret­ty sure Chris­sy just opened the door and opened the jar of kim­chi and I was won­der­ing if it came through the micro­phone because it’s pret­ty stinky here. Where’s the kim­chi, take the kim­chi out­side. Yes, stop lis­ten­ing to me. Okay. Thanks Matt, good and thanks for giv­ing us the title of the episode.  Eric is next. “Hi Cameron. I’ve just been read­ing TK’s lat­est jour­nal entry. I raise a ques­tion on EVZ, this is prob­a­bly a week or so old EVZ removed for a qual­i­fied audit, where is this qual­i­fied audit? There is the audit entry, this is the audit entry from the lat­est half year results. It says that they have not become aware of any mat­ter, blah, blah. I thought this was what we were look­ing for to see if there were any issues. If there was an issue, they would­n’t be say­ing this right? Cheers, Eric.” Thanks Eric.

Tony Kynas­ton [45:13]: You know, I think Eric had to just drop down a lit­tle bit fur­ther in the audit report, I’ll just call it up, EVZ going to their annu­al report. Yes, so Eric sent us the basis for oth­er con­clu­sion and if he scrolls down the next para­graph has head­ed basis for con­clu­sion and then the para­graph under that says “Mate­r­i­al Uncer­tain­ty Relat­ed to Going Con­cern” and that’s the qual­i­fied audit I’m talk­ing about.

Cameron Reil­ly [45:47]: So, this is in which report? The half-year report from the 18th of Feb­ru­ary or is it the ear­li­er one from Novem­ber?

Tony Kynas­ton [45:57]: 18th of Feb­ru­ary.

Cameron Reil­ly [45:58]: Okay. I’m just down­load­ing it. So, it’s right down the bot­tom?

Tony Kynas­ton [46:04]: Yep, right down the bot­tom of the report.

Cameron Reil­ly [46:07]: Grant Thorn­ton audi­tor’s respon­si­bil­i­ty?

Tony Kynas­ton [46:11]: I’ve got to say nor­mal­ly in this sort of sit­u­a­tion, they would have said some­thing. I’m sur­prised they did­n’t say in the con­clu­sion sec­tion there based on our review; we have not become aware of any mat­ter that makes us believe that the accom­pa­ny half year results does not com­ply. They usu­al­ly put in their qual­i­fi­ca­tion some­thing like except for our note below, but if you do scroll down anoth­er half a page, it says “Mate­r­i­al Uncer­tain­ty Relat­ed to Going Con­cern. We draw atten­tion to note 1D in the finan­cial report, which notes that the groups bank fund­ing matures on the 31st of Octo­ber, 2021, the group’s abil­i­ty to con­tin­ue as a going con­cern is depen­dent on their bank facil­i­ties being extend­ed.

These con­di­tions are set out, set forth in note 1D indi­cate the exis­tence of a mate­r­i­al uncer­tain­ty which may make us doubt sig­nif­i­cant doubt about the group’s abil­i­ty to con­tin­ue as a going con­cern.

Cameron Reil­ly [47:09]: They say our report has not been mod­i­fied in rela­tion to this mat­ter and then below, right at the end, they say a court accord­ing­ly, we do not express an audit opin­ion, but your clas­si­fy­ing, this is a qual­i­fied audit.

Tony Kynas­ton [47:27]: Well, Yes, if there’s mate­r­i­al uncer­tain­ty that the com­pa­ny is not going to be con­tin­ued past 31st of Octo­ber, I don’t want to buy it.

Cameron Reil­ly [47:33]: Right.

Tony Kynas­ton [47:35]: [cross-talk­ing 47:35]

Cameron Reil­ly [47:38]: So even though they don’t specif­i­cal­ly say there’s a qual­i­fied audit, but read­ing between the lines, well, it says mate­r­i­al uncer­tain­ty so that’s your red flag, right?

Tony Kynas­ton [47:49]: Right. exact­ly. Yes, okay. So, I am sur­prised that they con­clud­ed the way they did because there are oth­er exam­ples where they say the same ver­biage, but they have a quote qual­i­fi­ca­tion, then they’re say­ing see below and below is mate­r­i­al uncer­tain­ty or the going con­cern.

Cameron Reil­ly [48:06]: Okay, good. Thanks for clar­i­fy­ing.

Tony Kynas­ton [48:11]:  Was it James from Mel­bourne who is the audi­tor with Deloitte? We should still get him on the show to go through all this stuff with us and just tell us, are there grades of uncer­tain­ty, or what do all these dif­fer­ent word­ings mean?

Cameron Reil­ly [48:24]: I think from mem­o­ry he was ask­ing for per­mis­sion.

Tony Kynas­ton [48:27]: Oh, okay. All right, Yes.

Cameron Reil­ly [48:29]: Yes. Thank you, Eric hope that helps. Daniel. “Hey mate ques­tion for TK or your­self, if you could answer it off the cuff, if not, I’ll wait, not sure if I’ve used all my ques­tions, I’m inter­est­ed in what met­rics make up for SD IV; Stock Doc­tor Intrin­sic Val­ue for new lis­ten­ers. For exam­ple, is it a DCF mod­el don’t come Fri­day and FCF mod­el?

Tony Kynas­ton [48:51]: Free close Fri­day.

Cameron Reil­ly [48:53]:  No, that’s fine. Well, there’s some­thing else, I just want to repli­cate the check­list the best I can with my guru focus check­list. Cheers” I use one called Guru Focus Val­ue. This is how it’s described on the web­site both for­ward and back­ward-look­ing guru focus adjust­ment fac­tor based on the com­pa­ny’s past returns and growth future esti­mates of the busi­ness per­for­mance. Now cal­cu­lat­ing the SDIV, I know that we’ve talked before about how to sort of fudge the SD star stock rat­ing.

Tony Kynas­ton [49:30]: Yes.

Cameron Reil­ly [49:31]: But if we have a bro­ken down the SD IV do you know how they cal­cu­late that?

Tony Kynas­ton [49:37]: They won’t tell.

Cameron Reil­ly [49:38]: Right.

Tony Kynas­ton [49:40]: I haven’t asked them recent­ly, but in the past when I’ve asked them, they won’t say, they say its pro­pri­etary to them.

Cameron Reil­ly [49:47]: They don’t tell they don’t smell and they’re as grate­ful as hell.

Tony Kynas­ton [49:52]: Don’t ask, don’t tell, they won’t say. So, I guess my rec­om­men­da­tion to Daniel is use the con­sen­sus fore­cast which is avail­able in Yahoo finance and I think prob­a­bly Google finance as well, which we use and if he wants to, I’d sus­pect that Stock Doc­tor use some kind of dis­count­ed cash­flow, but they won’t con­firm that or not and I don’t know the details, I don’t know what their DCF rate is, for exam­ple. So, it’s not the end of the world if you don’t have it. I just use a con­sen­sus fore­cast instead. And if Guru Focus has one and he thinks it looks real­is­tic, use theirs.

Cameron Reil­ly [50:31]: Unlike us, where we teach peo­ple how to cal­cu­late it, keep­ing it close to their vest.

Tony Kynas­ton [50:38]: Yes.

Cameron Reil­ly [50:39]: Fair enough. Thank you, Daniel, hope that helps. How are we going for time? One more, cou­ple more 52 min­utes. Okay. Jamie, hi, Jamie, when are you com­ing on the show, Jamie? “Hi Cam. I seem to recall TK men­tion­ing a book he once read where he learned how to draw three PTL., per­haps you could ask him the name of the book I’d like to read it. Jamie.” Can you remem­ber?

Tony Kynas­ton [51:04]: Well, it was­n’t a book, it was like an eBook and I’ll be hon­est to say it was some kind of finan­cial Click Bank that I clicked on 20 years ago or I’ll lis­ten to, I sup­pose it was 13, 14 years ago after the GFC.

Cameron Reil­ly [51:21]: You still got those porn pop­ups on your Mac at the time?

Tony Kynas­ton [51:25]: Well, it was on my old, XT com­put­er or some­thing so it’s prob­a­bly on a hard dri­ve some­where there, but I haven’t been able to find it. I’m sor­ry and I’ve searched the inter­net can’t even find the com­pa­ny that sold it to me, I can’t remem­ber the com­pa­ny’s name. So, the guy just took my twen­ty-five bucks and prob­a­bly shut up shop, and now he’s sell­ing the porn.

Cameron Reil­ly [51:45]: Sor­ry. I was just think­ing the oth­er title for this episode is just what’s up wannabes, decide which one to go. Sor­ry about there, Jamie, but if we ever remem­ber, we’ll let you know I would offer when I’m down in Syd­ney to go through all of Tony’s old hard dri­ves, but that could be a scary prospect, god knows what I’d find. John, “Hi Cam, how are you?” I’m good. Thanks, John. “Could you ask Tony if the gold price chart on index mun­di sig­nals a buy yet?

Tony Kynas­ton [52:16]: It’s been a buy for years, it’s been a buy since well, last four or five years. Let me just call it up.

Cameron Reil­ly [52:22]: Month­ly gold price indexmundi.com. Yes, look at so we do a five year. Yes. It’s been just on a tear for the last cou­ple of years?

Tony Kynas­ton [52:36]: Yes. So, I don’t know if he’s sort of, I’m sug­gest­ing because of the pull­back, is it time to buy gold or not? But it’s cer­tain­ly mean­ing a five-year uptrend.

 

Cameron Reil­ly [52:47]: Yes.

 

Tony Kynas­ton [52:48]: And in fact, if you look at the gold price, what month is that read­ing up until the end of Feb­ru­ary it’s pulled back? So that’s the ques­tion I’m hav­ing about gold. Do we take the three-point trend line back from Novem­ber 16 and August 18, which gives a sell price of around $1,200, U S announce maybe $1,300? Or do we say some peo­ple have sug­gest­ed take a more recent trend line approach in which case it’s prob­a­bly breached now and I’m still think­ing about that because if you click on the longer time peri­od, say 10 years on the gold price chart, you can see how it does go through cycles. It goes up and down but if you look back into 2011, there was a peak 2012, there was a peak almost into 2013 is kind of like a num­ber of dif­fer­ent peaks so are we going to see it turn up again and give us mul­ti­ple peaks or are we going to see it revert back to that sort of trough around $1,200? Like it did in 2016? And the short answer is, I don’t know.

Cameron Reil­ly [53:58]: What was going on in 2011 and 2012 was that Oba­ma’s going to take away all of our guns. So, buy gold Fox news, Bill O’Reil­ly spruk­ing it, or Alex Jones or some­one.

 

Tony Kynas­ton [54:11]: I would say in broad terms, that was the end of the get­ting out of the GFC so there were lots of fits and starts up until about 2012 when peo­ple final­ly said, okay we’re over it and then the gold price dropped right back down again, and got going again in about 2017–2018. About 2018 I think it was when I start­ed buy­ing gold min­er shares Yes. I’m look­ing at the trend I think If it does slide back a bit more from here, I prob­a­bly would be a sell­er. but as I said before, I think we’ll prob­a­bly see that reflect­ed in the gold min­er shares first of all. Well, I think that’s, what’s prob­a­bly going on now with com­pa­nies like RMS is that, peo­ple are pre­dict­ing the gold price to be past its peak but again that’s a pre­dic­tion we’ll nev­er know.

Cameron Reil­ly [55:06]: Yes. So, the gold price and index mun­di only real­ly affect us as much as it affects the gold stocks in our port­fo­lio. You’ll be look­ing at their charts indi­vid­u­al­ly, but then fac­tor­ing in the index mun­di price as sort of an over­ar­ch­ing issue about whether or not we should con­tin­ue to hold or we should bail.

Tony Kynas­ton [55:28]: Well, Yes, I think it’s a good point. You could almost ignore the com­mod­i­ty price except that I think peo­ple who are buy­ing and sell­ing com­modi­ties stocks, min­ing stocks, try­ing to pre­dict what’s going to hap­pen with the com­mod­i­ty-based on the index mun­di type chart, which I think is what’s hap­pen­ing now with the gold price, peo­ple are say­ing well there was com­ing out of COVID, there was no big depres­sion or the depres­sion was short-lived and every­thing’s going to be rosy so sell gold but there’s a lot of ifs and buts in that kind of pre­dic­tion game.

Cameron Reil­ly [56:02]: Biden got a $1.9 tril­lion relief bill passed it’s get­ting it up to one 5 tril­lion now I think they’ve passed.

Tony Kynas­ton [56:11]: Yes, but look the thing that does that I am mind­ful of is that we don’t want to wait for the gold price to go all the way back to $1,200 before we sell because then we’ve lost all the upside that we had over the last four years. I don’t think that will hap­pen because as we’re see­ing now with, we just went through North­ern star even though it’s not below its five-year sell lines below it’s sort of four years so it’s not a bad time to sell.

Cameron Reil­ly [56:36]: Okay, good thanks. Good time for one more?

Tony Kynas­ton [56:41]: Yes, sure.

Cameron Reil­ly [56:42]: This is Gary. Hi Gary, ” I was won­der­ing how Chi‑X works with or along­side the ASX ” Chi‑X, remind me what Chi‑X is Tony.

Tony Kynas­ton [56:58]: It’s anoth­er stock exchange a com­peti­tor to the ASX. So, there’s the Aus­tralian stock exchange and then there’s the Chi‑X. Not sure what chi stands for you think Chi­nese, but I think it is.

Cameron Reil­ly [57:09]: Chica­go I would have guessed.

Tony Kynas­ton [57:11]: Yes, it could be. So Yes, it’s a com­peti­tor to the ASX, it’s anoth­er stock exchange that exists in Aus­tralia and a lot of big insti­tu­tion­al traders will use it and they will, although I will arbi­trage between one and the oth­er or they’ll try and get the best price, but on both exchanges, there’s a bit of work going on at the moment I think dri­ven by the gov­ern­ment depart­ments either APRO or ASIC prob­a­bly ASIC, I’m not sure which one who reg­u­late the stock exchange, so it’ll be ASIC be a sick Yes. And they were upset when the ASX had an out­age a month or two ago, and peo­ple could­n’t trade for half a day. And so they’re think­ing about mak­ing some kind of plat­form that strad­dles both Chi‑X and the ASX so one can back up the oth­er and I think there’ll be some ben­e­fit if ASIC came out and said to a stock­bro­ker that if you’re using a bro­ker, that you have to get the best price across either of the exchanges so it becomes more agnos­tic and we’re not talk­ing about big dif­fer­ences, obvi­ous­ly BHP is prob­a­bly on both and prob­a­bly there’s only a few cents dif­fer­ence in the price across both from time to time, depend­ing on the trades going through. So, it prob­a­bly for us sort of retail investors will have no dif­fer­ence, but if it does back up the ASX, if there’s an out­age, that’s good for all investors. I don’t know if there are any retail bro­kers who use Chi‑X exclu­sive­ly or if there are any retail bro­kers, I’ll give you the option of buy­ing on one or the oth­er, most of them are focused on the ASX which is the much big­ger, the Chi‑X is small com­pared to the ASX. That’s about all I know about it.

Cameron Reil­ly [59:01]: So, I was going to say, BHP is trad­ing at 46.07 On the ASX at the moment and on Chi‑X it’s 46.16. So, as you say few sen­tences in between them Chi‑X by the way the “Chi” is derived from the Greek let­ter chi writ­ten as X sym­bol­iz­ing the cross­ing of the two sides of a trade along with the X, from the Eng­lish alpha­bet names sig­ni­fies a com­bi­na­tion of the old world and the mod­ern world or tra­di­tion­al secu­ri­ties trad­ing tech­niques mar­ried with cut­ting edge tech­nol­o­gy. See the peo­ple who came up with this should have been hired by come­back, they would have come up with some­thing a lot sex­i­er than Comm­Bank BNPL, Chi‑X, there you go.

Tony Kynas­ton [59:46]: Yes, and there’s also the New­cas­tle Stock Exchange, which has been around for a while and that tends to just deal with small com­pa­nies and lots of them run list­ed on the ASX so they go to a sec­ondary exchange like New­cas­tle and get list­ed there so there are oth­er plat­forms out there for peo­ple to trade on if they’re inter­est­ed. I’ve nev­er tried it on Chi‑X, or New­cas­tle and it’s nev­er impact­ed me but I think it would be good if we have a bit more com­pe­ti­tion and a back­up to the ASX. The oth­er inter­est­ing point is the com­pa­ny ISX, so ISX.AX Is also the oper­a­tor of the ASX so some­one’s like a reg­u­lar, it’s going to have to stand above the ISX if it ever wants to give promi­nence to Chi‑X in terms of hav­ing anoth­er plat­form as a com­peti­tor or as a back­up to the ASX because the ISX.AX won’t ever do it.

 

Cameron Reil­ly [1:00:41]: No, it’s not in their best inter­est to do it right?

Tony Kynas­ton [1:00:44]: No.

Cameron Reil­ly [1:00:45]: It’s like try­ing to get Tel­stra to give us broad­band back in the 2000s. Why would we do that?

Tony Kynas­ton [1:00:51]: Yes, exact­ly.

Cameron Reil­ly [1:00:53]: All right. Well, I think that’s prob­a­bly it for today. Tony. Let’s we’re a lit­tle over an hour. Thank you to every­body who sub­mit­ted ques­tions, apolo­gies to those we did­n’t get to we’ll have to do those next week when I’m in Syd­ney.

Tony Kynas­ton [1:01:10]: Yes, that’s right.

Cameron Reil­ly [1:01:12]: Straight after the whiskey event, we will sit down and do a show when we’re tanked.

Tony Kynas­ton [1:01:18]: On Sun­day night.

Cameron Reil­ly [1:01:19]: From whiskey.

Tony Kynas­ton [1:01:20]: Real­ly?

Cameron Reil­ly [1:01:20]: Hell Yes! Let’s get ham­mered and do a show, see what that’s like, I can’t even talk now what that’s like.

Tony Kynas­ton [1:01:27]: You’re sali­vat­ing, have you spo­ken to Nico? Is he going to bribe us and tell us who to vote for?

Cameron Reil­ly [1:01:33]: No.

Tony Kynas­ton [1:01:36]: These are the whiskey awards, aren’t they?

Cameron Reil­ly [1:01:38]: I think the vot­ing’s already like done.

Tony Kynas­ton [1:01:40]: Okay.

Cameron Reil­ly [1:01:41]: You had to go online and do the vot­ing. He said, you go and vote and I was like, I don’t know what any of these whiskeys are, I would­n’t know what to vote for. I drink like once a year this is my one night of drink­ing a year that I’m going to do so I don’t know. But Yes, I’m look­ing for­ward to, it should be fun, it should be an inter­est­ing group of peo­ple there.

Tony Kynas­ton [1:02:02]: Yes, it should be good. I’m look­ing for­ward to hav­ing you down.

Cameron Reil­ly [1:02:08]:  All right, well I’ll see you on Sun­day.

Tony Kynas­ton [1:02:08]: Yes!

Cameron Reil­ly [1:02:09]: Thanks mate!

Tony Kynas­ton [1:02:10]: Yes.

Cameron Reil­ly [1:02:11]: Okay. Well see you then. Thanks mate, bye every­one!

Tony Kynas­ton [1:02:14]: All right, bye. Thanks Cam.

[Out­ro]