Transcript QAV #502

QAV 502 Club

Cameron  00:07

Wel­come back to QAV, TK.

Tony  00:09

Hey Cam.

Cameron  00:09

Con­grat­u­la­tions.

Tony  00:11

Thank you.

Cameron  00:11

Let me start with that.

Tony  00:12

Yeah, Mag­ic Mil­lions. It’s been a big week.

Cameron  00:15

What’s bet­ter, like, a horse win­ning a race or sell­ing a horse?

Tony  00:19

Oh, good ques­tion. Prob­a­bly a horse win­ning a race, but it’s still good to have some cash flow to fund it. So, Mag­ic Mil­lions was busy last week. Big sale on the Gold Coast for horse peo­ple. We had a colt out of a mare called Caesura and it went to sale late Fri­day after­noon, and before the sale we thought we’d be lucky to get $200,000 for it, we thought about 150, which was still a good result because it was, we bought it in foal to a horse called Har­ry Angel, a sire. And the sire does­n’t charge very much in this case. Some­times they charge 150 grand, this one charges 16 grand for a ser­vice. So, it was­n’t an expen­sive buy for us. Dur­ing the week, the new records were set with the hors­es that were sell­ing so we could sort of ride on the back of that. We own half — I touched base with the oth­er own­er who was up there and said, you know, “what do you think we should do for a reserve?” He said, “well, I think it’s going to go for 200.” And I said “you want to make that the reserve?” And he said that “I don’t think we should make a reserve at all, it could go north of that.” So, he said “okay, we’ll put it on reserve.” He’d done a good job — he’s in the indus­try — he’d done a good job of lin­ing up some train­ers to make sure we had some bid­ders, some price action. I’d spo­ken to a cou­ple of train­ers I knew that we’re going to have a look. One of them was going to bid, asked us to retain a share in the horse, we said we would as long as it’s sold for more than 200, oth­er­wise we’d take the cash. So, a lot of toing and fro­ing going on behind the scenes. Any­ways, long sto­ry short, went to auc­tion, blew past 200, blew past 250, blew past 300, and sold for 400 grand.

Cameron  01:55

Wow. That’s great.

Tony  01:59

Yeah, real­ly excit­ing.

Cameron  02:00

And yet you’re sober enough to do the show today okay.

Tony  02:05

Well, I was home here by myself. I took Jen­ny up to the air­port on Fri­day just before the sale. So, no one to cel­e­brate with except vir­tu­al­ly.

Cameron  02:16

Oh, well. That’s a shame. Con­grat­u­la­tions.

Tony  02:19

Thank you.

Cameron  02:19

It’s nice to have a win.

Tony  02:20

Yeah, it was. Real­ly good. So, that’s, that’s good cash flow for our busi­ness going for­ward for a while.

Cameron  02:26

Nice to have a win as opposed to those of us that own Myer — final­ly had to sell Myer today. Thanks for noth­ing, Jeff Wil­son.

Tony  02:34

I don’t think it’s Jeff Wil­son, I think it’s Dominic Per­rot­tet and the oth­er state pre­miers. I mean, there’s a lot of infor­ma­tion out there say­ing that retail’s had a dip because of Omi­cron. No one’s pre­pared to go out. Still lots of online sales, but who wants to go and stand in a Myer store when there’s a vir­u­lent flu going around?

Cameron  02:53

Pret­ty much every­one from what I can gath­er, because, you know, when the gov­ern­ment, I don’t know about down there, but up here the gov­ern­men­t’s stopped report­ing con­tact sites.

Tony  03:02

Yep.

Cameron  03:03

They just gave up on con­tact trac­ing. Like “uh, why the hell did we both­er?” Or, “why are we both­er­ing to check in?” But there’s a cou­ple of Face­book groups that set up where peo­ple are doing their own con­tact trac­ing, which I’m part of, and I was look­ing at, you know, peo­ple if they get a pos­i­tive test, they post their own con­tact trac­ing his­to­ry. And every one of them seems to have been every­where. Like they’ve just been going to a mil­lion places, and con­stant­ly, I’m like, “well, no won­der you got it. What, what did you think was going to hap­pen?”

Tony  03:34

Yeah.

Cameron  03:34

Any­way, so I just assume that I’m the only one who’s stay­ing home and play­ing it safe. Every­one else is just going about life like it’s nor­mal.

Tony  03:43

I’m the same, and I even had a cou­ple of friends who were going to come down and vis­it on the week­end, and then last minute they said they both had fam­i­ly mem­bers with COVID. And I said “well, maybe not a good idea to come down.” I was talk­ing with Jen­ny today, so she’s back up in Syd­ney at the apart­ment set­tled in because she had some work com­mit­ments, and I said, “how is it?” and she said, “well, you know,” like, went out, she went out today. No one’s wear­ing a mask. Well, lots of peo­ple aren’t wear­ing masks. There’s sev­en apart­ments with COVID in our apart­ment build­ing. So, it’s just you know, it’s every­where.

Cameron  04:15

You know, I got my boost­er on Fri­day after­noon and the first jab did­n’t, had no side effects. Sec­ond jab, no side effects. I thought this one, this will be fine. Chris­sy got hers the day before and she was quite sick on Fri­day. She got hers Thurs­day, was quite sick on Fri­day. I got mine on Fri­day, and I thought it’ll be fine. Fri­day night, I’m fine. Sat­ur­day morn­ing, I woke up I was fine. And then all of a sud­den, I was like, oh shit, I don’t feel well and then I got real­ly — I still cleaned the garage because I bought my Wing Chung wood­en dum­my that week and I had to clear space in the garage to set it up and I was­n’t going to let a lit­tle bit of COVID Boost­er symp­toms stop me. But I’d like, I’d get up for a minute and move some stuff and then I’d have to sit down for like five min­utes and rest and get up. And by the end of the day it was fevers, chills, pains in my kid­neys, rough night. Woke up Sun­day morn­ing, fine. Then start­ed get­ting weird headaches Sun­day night again, but by Mon­day, I was fine. But just that one day of those symp­toms, I was like, “holy crap, I would­n’t want this for a week or to be any worse than this,” you know, it was ter­ri­ble.

Tony  05:24

Yeah. Well that’s your immune sys­tem fight­ing it, so it’s not even COVID. It’s your immune sys­tems’ response to it. So, yeah, I had a sim­i­lar sort of thing, the first shot I had of AZ. So, it must just be that your body when it gets an over­load and gen­er­ates lots of immune response once one of the jabs goes through that process, yeah.

Cameron  05:42

Any­way, enough of my tra­vails. Howard Marks’ lat­est memo, Tony, did you have a read?

Tony  05:48

I did. I read it this morn­ing. Thanks for send­ing it through, and with the notes. What a load of horse­shit. Biggest wank on paper I’ve read for all week, it’s just ridicu­lous.

Cameron  06:03

Yeah, well, look, there was some of it, I thought, was on mes­sage for us. Like, you know, he starts off; “the basic idea every­one is famil­iar with the old school that’s sup­posed to cap­ture invest­ing’s basic propo­si­tion, buy low, sell high. It’s a hack­neyed car­i­ca­ture of the way most peo­ple view invest­ing. But few things that are impor­tant can be dis­tilled into just four words. Thus, buy low sell high, is noth­ing but a start­ing point for dis­cus­sion of a very com­plex process.” And he goes on to say what I’ve heard you say a lot of times, you don’t sell high, you ride it out. Like, he talks about Ama­zon, “every­one wish­es they bought Ama­zon at $5 on the first day of 1998, since it’s now up 660 times at $3,304, but who would have con­tin­ued to hold when the stock hit $85 in 1999? Up 17 times in less than two years, who among those who held on would have been able to avoid pan­ick­ing in 2001, as the price fell 93% to $6? And who would­n’t have sold by late 2015, when it hits $600, up 100 times from the 2001 low? Yet any­one who sold at $600 cap­tured only the first 18% of the over­all rise from the low.” And I thought okay, well, that’s exact­ly what Tony would say; you don’t sell, you ride your win­ners. And you know, then it went down­hill from there.

Tony  07:35

No, he makes a good point. And I sus­pect if I did own Ama­zon, I prob­a­bly would have sold it along the way, because I’m sure it’s had its ups and downs and three-point trend­line sells and rebuys and all the rest of it if it had ever come on the QAV buylist. Which it nev­er did, because you know, it took a long time for it to make mon­ey. And it’s not on the buylist now, or even if we’re doing over­seas stocks it would­n’t be on the buy lists now, because it’s got a high PE ratio. So, or ratio of Pr/OpCaf. So, the rea­son why I think Howard Marks was jerk­ing us all off is because he went through a lot of the old saws and a lot of the things that we’ve talked about in the mar­ket — adages like buy low, sell high — and he talked about “so when do you sell?” And he said, “well, here are all the things you should­n’t do, you should­n’t sell just because you’ve made a prof­it. You should­n’t sell just because the stock went down,” etc., etc. All those sorts of obvi­ous things. But he nev­er told you when you do sell. He basi­cal­ly said it’s a judge­ment call. Well, fuck that. It’s either you’re the Eye of Sauron who can make per­fect judge­ment every time. He did­n’t tell you how he makes judge­ment, he did­n’t say “here are the rules I live by when I have to make a judge­ment on a sell.” He just said it’s a judge­ment call. Shove that.

Cameron  08:40

You need to sell hors­es more often. A whole oth­er side of your per­son­al­i­ties com­ing out today.

Tony  08:48

Well, I just thought it would have been a more use­ful arti­cle if he said, “here’s how I sell” and there was some rules around it or a frame­work around it, oth­er than “I make a judge­ment call”. “I stick a fin­ger in the air, a wet fin­ger in the air and see which way the wind blows.”

Cameron  09:02

“When should investors sell” on page four, and he recounts his fic­tion­al con­ver­sa­tion with his son that we talked about a while back. Then he goes into apho­risms like “no one ever went broke tak­ing a prof­it maybe rel­e­vant to peo­ple who invest part time for them­selves, but they should have no place in pro­fes­sion­al invest­ing.” And I think you’d agree with that, you know, and we have plen­ty of new, or some­times quite expe­ri­enced, QAV sub­scribers who say “come on, it’s up 50%,” “it’s up 100% Sure­ly we should sell.” Tay­lor and I have this con­ver­sa­tion all the time. He’s like furi­ous now that he did­n’t sell Myer when it was up 70% four months ago. We did sell, and I think we made 20% on it in six months. I’m not com­plain­ing I’m mak­ing a 20% prof­it on six months. But if we’d sold it four months ago, we would have made 70% on it.

Tony  09:56

You can’t think that way, that’s, that’s hind­sight bias, right? You can’t pick the top.

Cameron  10:00

Exact­ly.

Tony  10:01

If we could­n’t pick the top, that’d be a rule. But it’s not, because you can’t do it.

Cameron  10:04

He said there cer­tain­ly, this is back to Howard, “there cer­tain­ly are good rea­sons for sell­ing but they have noth­ing to do with the fear of mak­ing mis­takes, expe­ri­enc­ing regret and look­ing bad. Rather, these rea­sons should be based on the out­look for the invest­ment, not the psy­che of the investor, and they have to be iden­ti­fied through hard-head­ed finan­cial analy­sis, rigour and dis­ci­pline.” I was like, “Oh, good. Let’s get to that bit.” It did­n’t real­ly get to that bit.

Tony  10:31

He did­n’t did he, did­n’t tell us what these rules were? Yeah.

Cameron  10:33

Well, maybe he’s not giv­ing away the secret, the mag­ic like you do.

Tony  10:38

If you just take that state­ment, even if you don’t know what his rules are, there’s been plen­ty of times when the num­bers tell us one thing — like the hard facts tell us one thing — but the share price is still going south because the infor­ma­tion isn’t out in the mar­ket yet. There’s a select group of peo­ple who know that the MD’s about to retire or resign, or a com­peti­tor is about to take one of their key cus­tomers or what­ev­er, and so the price starts going south. That’s why we use sen­ti­ment as our frame­work, one of the rea­sons why we sell, prob­a­bly the prime rea­son why we sell. And you can see that from the buy list; our watch list is twice as big as our buy list because there are just as many com­pa­nies who have good fig­ures who, but the share price is going south that we don’t want to buy. So, it’s the same sort of thing. So, Howard’s fine to say “do some hard-head­ed finan­cial analy­sis,” if he does­n’t tell us how, then it’s not the full pic­ture.

Cameron  11:28

He’s also com­ing from the view, I think read­ing through it, that he’s a long-term investor. So, like your clas­sic val­ue investor, he, if he believes in the busi­ness, he’s will­ing to ride through the ups and downs. He says, “as men­tioned ear­li­er, investors often engage in sell­ing because they believe a decline is immi­nent, and they have the abil­i­ty to avoid it. The truth, how­ev­er, is that buy­ing or hold­ing, even at ele­vat­ed prices, and expe­ri­enc­ing that decline is in itself far from fatal. Usu­al­ly every mar­ket high is fol­lowed by a high­er one, and after all, only the long-term return mat­ters. Reduc­ing mar­ket expo­sure through ill-con­ceived sell­ing, and thus fail­ing to par­tic­i­pate ful­ly in the mar­ket pos­i­tive long-term trend, is a car­di­nal sin in invest­ing. That’s even more true of sell­ing with­out rea­son things that have fall­en, turn­ing neg­a­tive fluc­tu­a­tions into per­ma­nent loss­es, and miss­ing out on the mir­a­cle of long-term com­pound­ing.” But of course, just because you sell it does­n’t mean it’s per­ma­nent loss, because you can buy it again when it comes back up, right?

Tony  12:36

Or you can buy the next thing on the buy list, which might be going up much stronger. So, again, I don’t dis­agree with what he’s say­ing, he just does­n’t tell us what he does and what his rules are.

Cameron  12:45

Well, I think he’s say­ing that, you know, if he likes a busi­ness, he’ll hold it until he does­n’t like the busi­ness any­more. Where­as, the mag­ic, I’ve come to believe that part of the mag­ic of QAV is how you’ve mod­er­at­ed that hard­core val­ue invest­ing view, which is buy and hold for­ev­er, to well, look even if you think it’s real­ly good, if every­one else does­n’t, the price is gonna go down and could go down fur­ther and could stay down. So, get your ego out of the equa­tion and just go okay,

Tony  13:18

Yeah, exact­ly.

Cameron  13:19

Just bow out for a lit­tle bit and see what hap­pens. Buy some­thing else.

Tony  13:23

Well put, Cam, that’s exact­ly right. And the oth­er dimen­sion to that is that the way that I invest is not to get that immersed in try­ing to under­stand the com­pa­ny I’m invest­ing in. I do a cur­so­ry analy­sis of it, but some­one like Howard Marks, I imag­ine, would have a hot­line to the chair­man or the CEO and would be able to ring them up and say, “hey, what’s hap­pen­ing?” You know, “how you’re feel­ing today? What’s going on?” etc., etc. We don’t have a hope in hell of invest­ing that way. And so, he’s say­ing that he’ll invest until he does­n’t like some­thing in the com­pa­ny,

Cameron  13:51

Yet.

Tony  13:52

Yeah, that’s right. Yeah. He’ll keep invest­ing until he does­n’t like some­thing in the com­pa­ny. He’s prob­a­bly more informed than what, than what we could be as retail investors.

Cameron  14:01

Okay, good to get your feed­back on that. I thought, I thought that would be fun. Want to give a shout out to Jere­my and Brett, who pub­lished some of the returns they’re get­ting on their QAV port­fo­lios on Face­book in the last week or so. Get­ting incred­i­ble returns, well done.

Tony  14:17

Well done, guys.

Cameron  14:17

Well done to every­one out there who is using QAV and get­ting bet­ter returns than I do. Con­grat­u­la­tions. And I’m not com­plain­ing about mine, but you know, some peo­ple have just… tim­ing thing when you buy and all that kind of stuff. But they’re doing very, very well. Well done, guys.

Tony  14:34

And thanks for shar­ing too.

Cameron  14:35

Yeah, it’s always good for me to hear those sto­ries, to know that peo­ple out there actu­al­ly putting it into prac­tice and doing very well. That’s great. I want to point out to peo­ple, I did post this on Face­book today, but there’s a new ver­sion of the AF sheet I put up today. Thank you, as always to Andrew Flit­man for doing the work on that. As you know, when we com­pare our check­lists every week, I’ve noticed that the scor­ing has been a lit­tle bit out; you’ll get a 0.9 for some­thing and I’ll get a 0.1 and I was nev­er quite sure why. I’ve worked it out, there was a for­mu­la — I don’t remem­ber when we did this, but in the Bible it says if the, when we’re doing yield minus PE in the Bible, it says, if the PE is blank, the score should be blank, which is what your sheet was doing. The AF sheet was­n’t doing that, I don’t know if we changed that at some point and I did­n’t tell Andrew or we missed it in the first mod­el. I don’t think it would be that because Andrew is very, very good, but, at trans­lat­ing your mod­el over but any­way, so that’s changed now. So, it should fix the scor­ing. I don’t think it’s, it’s not going to be a big deal for any­body, but it just changed the final score by 0.03 or some­thing in some cas­es. But, if that’s enough with the round­ing to get some­thing that’s point… you had 0.093 and round­ed it down 0.09, mine was get­ting 0.096 and round­ing it up to 0.10, you know. It was just annoy­ing me and tak­ing a lot of my time to work it out. VUK, Tony, you said VUK is get­ting close to it’s buy price.

Tony  16:04

VUK, Vir­gin UK it’s been on the buy list in the past. We sold it about 12 months ago, I think from mem­o­ry, and it’s now get­ting close so I put an alert into Stock Doc­tor. But, if it keeps going in the next week or so it’ll prob­a­bly come back on the buy list. It’s a large ADT stock. If peo­ple need that, keep an eye out for VUK.

Cameron  16:22

Very good. Well, the stocks of the week this week were MFD, good old MFD. They come and they go on a reg­u­lar basis, May­field Child­care. And I did post on my blog post about it, they’re our small-cap stock of the week. The last time they were a stock of the week was Feb­ru­ary 2020, like a week before the COVID crash. But, they’re well above where they were price wise when we had them as our stock of the week, so if they, if any­one did a Howard Marks and bought and held they’ve done quite well out of it. But yeah, it’s obvi­ous­ly not May­field­’s fault that the mar­ket crashed and they crashed along with it. But they’re back on and our large cap stock of the week this week was Beach ener­gy, BPT, anoth­er one that we’ve seen come and go on a reg­u­lar basis.

Tony  17:15

So, I’m going to make that my pulled pork, if I can do that now. So, as you allud­ed to, it’s been on the buy list in the past, and it’s back on now. The cou­ple of things, I guess, as back­ground for it. The oil price has been increas­ing recent­ly, and that’s not unusu­al this time of year because it’s the north­ern win­ter, so they’re kind of a flip side of what we are in sum­mer. So, in sum­mer, our pow­er sta­tions work around the clock because every­one’s turn­ing on their air­con units, but in win­ter, we don’t need much heat­ing. But in Europe, it’s the reverse. So, in win­ter, the pow­er sta­tions crank up because every­one’s try­ing to heat their homes, and get­ting less and less these days but cer­tain­ly over the last cou­ple of decades, a lot of the homes were being heat­ed by burn­ing fuel oil, a type of oil, like a low-grade oil. And so, the oil prices in the north­ern win­ter gen­er­al­ly go up. So, it could be short term, but it’s also being sup­port­ed by anoth­er thing that’s going on, a macro trend, which is the fact that because oil is on the nose in terms of the ESG investors, and even to the point where they pres­sure the banks these days not to lend to oil com­pa­nies to try and reduce the car­bon foot­print of the world — and I’m not say­ing it’s a good thing or a bad thing — but there’s been less much less explo­ration in new oil dis­cov­er­ies in the last cou­ple of years than is nor­mal. And so, it’s one of the rea­sons why the oil price is going up because the exist­ing pro­duc­ers have less com­pe­ti­tion. A cou­ple of oth­er fac­tors too, like in the north­ern hemi­sphere win­ter, because oil is, when it’s being drilled, it often goes through reserves of water and pulls out water as well, it freezes, and the water if it freezes on the drilling rigs it can shut them down for long peri­ods of time. And so that’s hap­pen­ing. There was appar­ent­ly some kind of cold spell in Texas, which is unusu­al, but the oil rigs froze there, so they’ve been out of the mar­ket for a while. So, lots of things are going on to sort of keep the oil price ele­vat­ed, which all plays into a good sto­ry for stocks like Beach Ener­gy. They’re also a nat­ur­al gas explor­er and pro­duc­er. Nat­ur­al gas is a fun­ny one because it’s actu­al­ly bet­ter to pow­er a pow­er plant using nat­ur­al gas than it is to use coal but the ESG peo­ple still say they’re both bad. But there has been a, there still is an ongo­ing con­ver­sion of coal pow­er plants to nat­ur­al gas, so that’s also sup­port­ing the price and, and often­times con­tracts for a gas are tied to the oil price, so they tend to go in lock­step. But both of those com­mod­i­ty graphs are going up. So, that’s the back­ground to Beach. A cou­ple of things about Beach Ener­gy. One of the rea­sons why it came off the buy list last time was because they had a sur­prise down­grade, they even­tu­al­ly got around to telling the mar­ket that they did­n’t have as much oil reserves under the ground and they’re oil fields as they’d stat­ed in the past, so that caused the price to crash. I guess that’s now baked into the share price, so the fact that it’s turn­ing up again is tak­ing that into account. A cou­ple of oth­er things, though. The MD resigned unex­pect­ed­ly at the end of last year, so we need to be cog­nisant of that. I don’t think they’ve appoint­ed any­one yet as an act­ing CFO, as an act­ing MD. So, that’s anoth­er risk, I guess, to the stock. The last sort of back­ground sto­ry to the stock is that the Stokes fam­i­ly through their Sev­en Group com­pa­ny own about 30% of the stock. That can be a good thing and a bad thing. If you look at what they did with Boral, I guess in the short term, it’s good. I don’t know how it’ll play out in the long term, but what they have a track record of doing with oth­er com­pa­nies as well is buy­ing a stake that gets them a seat on the board, and then using what’s called the Creek Pro­vi­sion to be able to buy more stock with­out launch­ing a takeover — a for­mal takeover. So, one of the prob­lems with a com­pa­ny like Beach, if it has a large share­hold­er on the base is that it makes it less attrac­tive for some­one to launch a takeover bid. So, even though the price crashed and the fun­da­men­tals were still strong, and the oil price is ris­ing, and there has been merg­er and acqui­si­tion activ­i­ty going on in the Aus­tralian oil and gas scene, it makes it hard for some­one to launch a takeover bid for some­thing like Beach Ener­gy. So, that takes that kind of upswing in the share price poten­tial out of the stock. So, that’s an issue. And then if, if the Sev­en Group keeps creep­ing up on the reg­is­ter with­out launch­ing a takeover then they’ll get to a stage where they’ll effec­tive­ly con­trol the com­pa­ny. That can be good and bad. There’s a case in the past where it’s been bad, where the Sev­en Group then use their con­trol to buy oth­er assets they owned at prices that were prob­a­bly unre­al­is­tic com­pared to what you get in the mar­ket and so the, the com­pa­ny became stuffed with assets, and even­tu­al­ly, I think it even­tu­al­ly went broke. I won’t talk about which com­pa­ny that was because I don’t want to be lit­i­gat­ed against, but that’s essen­tial­ly what hap­pened. And, but in the oth­er case of Boral, it seems to have worked out for share­hold­ers because they did exert enough pres­sure to turn around the com­pa­ny, and so that’s work­ing out there. So, it can be good or bad. So, I know I’m sit­ting on the fence with the Stokes own­ing 30% of Beach Ener­gy, but it is some­thing to watch and just be, be aware that it can have pos­i­tive and neg­a­tive impli­ca­tions for the com­pa­ny. That all aside, I guess we just go straight to num­bers, that’s pret­ty much it, I was going to talk about the oil price a bit fur­ther and say that as the oil price ris­es, there’s been some sto­ries in the press say­ing that, some ana­lysts are say­ing or can reach $200 a bar­rel, it’s now sit­ting around 80 odd, in the 80s a bar­rel. So, along with a lot of upside. And they’re bas­ing that analy­sis around the fact that, like I said before, less explo­ration going on, ESG squeez­ing on pro­duc­ers being able to explore and there­fore the exist­ing peo­ple should be able to com­mand a big­ger mar­gin for what’s left. And that’s, there’s some cer­tain truth about that. How­ev­er, in the last decade or so, both Rus­sia and the US have act­ed as kind of valves against the oil price going too high, because there are shale oil pro­duc­ers in the US who lie dor­mant until the oil price gets up around $100 a bar­rel, and then they come back on because they can make mon­ey at $100 a bar­rel. And so, they almost become like a pres­sure valve for the oil price get­ting too high. And Rus­sia is a bit the same. So, they’ve done a deal now with OPEC to throw in with the car­tel in terms of try­ing to reg­u­late the price and keep the mar­gin up, but they also have a his­to­ry of going rogue and when they need to sell­ing lots of oil, which brings mon­ey to them but drops the price in the mar­ket. So, they’re the two, I guess, issues around the oil price. To me, all that summed up says that I think $100 is about the nat­ur­al lim­it in this mar­ket to the oil price, but it’s a pre­dic­tion that could be wrong. Any­way, QAV by the num­bers are quite good for this com­pa­ny. I’m using a share price of $1.40, which is less than the con­sen­sus tar­get for Beach Ener­gy, so that’s a score of 1 for us. It is a low yield com­pa­ny, and I guess I ques­tion why even has a yield — I think it’s about 1.5%. I expect the answer is so that they can release some of the frank­ing cred­its on the bal­ance sheet. They’ve been pay­ing tax on their earn­ings and like they can release some of that back as a cred­it to their share­hold­ers. They don’t want to pay a whole heap­ing yield because they do want to put mon­ey back into explor­ing for oil and devel­op­ing their own oil and gas fields. So, that’s prob­a­bly why it’s about 1.5%. Finan­cial health is strong and steady, Pr/OpCaf on this one cur­rent­ly is 4.2 times, so makes a good val­ue stock for us. The price is slight­ly high­er than IV1, less than IV2 and less than two times IV2, so it gets a cou­ple of points on the check­list for those things. Net equi­ty per share is around $1.35, and as I said before the share price is $1.40, so it’s trad­ing around its book price and cer­tain­ly less than book plus 30%, which is a good test for us in terms of val­ue, so it gets a point for that. The inter­est­ing thing is that the ana­lysts are fore­cast­ing earn­ings per share growth of 60% on this com­pa­ny, so they’re cer­tain­ly see­ing, I guess the ana­lysts are bull­ish on the oil price and they’re cer­tain­ly prob­a­bly also bull­ish on Beach Ener­gy get­ting it’s shit togeth­er. So, that’s prob­a­bly why it’s fore­cast growth’s so high. But it means it’s got the growth over PE met­ric that we look at, is quite strong, it’s greater than five times, which is very strong. Stock Doc­tor is stat­ing that direc­tors’ hold­ings are only 1.79%, which is a bit mis­lead­ing because the Stokes fam­i­ly have, as I said before, 30% via their Sev­en Group com­pa­ny. And the Sev­en Group com­pa­ny has at least one direc­tor on the board and maybe even two. So, that’s a bit mis­lead­ing. But if I over­ride the spread­sheet and give that 1 it does­n’t change the QAV score very much. So, I haven’t, I’ve left it, left it down. But peo­ple may want to do that. It gets a zero for the low­est PE of the last six halves. It’s, it’s almost that but it’s not. Gets a 1 for a new upturn, because as I said before, it was crash­ing last year, it’s just been turn­ing around since its last results were out. Gets a 1 for con­sis­tent­ly increas­ing equi­ty. So total score is 12 out of 14 for qual­i­ty, which is 86%, which is good. And if you add the Stokes share­hold­ing back, it’s 13 out of 14, which is even bet­ter. QAV score of 0.2, and 0.22 if you add the Stokes’ score back in. So yeah, for a large cap stock it’s cer­tain­ly scor­ing well for us.

Cameron  26:28

Very good. Thank you for that. Let me ask you a ques­tion though while we’re talk­ing about OPEC, why does­n’t the World Trade Organ­i­sa­tion slap them around for col­lu­sion?

Tony  26:40

Well, I don’t know if they can. It’s a good ques­tion. I’m not sure of the his­to­ry of it. But how would you do that? There’s no sort of… some­one could­n’t take them to court, I guess. But again, the WTO rules on dis­putes, I don’t know if it actu­al­ly has the legal abil­i­ty to break up a car­tel in Sau­di Ara­bia and its friends,

Cameron  26:56

Could just, the rest of the world could just say, “well, we’re not buy­ing your oil any­more unless you cut it out.”

Tony  27:00

Well, that’s what kind of hap­pened when, I mean, OPEC came under a lot of pres­sure in the Oba­ma years when shale oil became big in the US. This is an inter­est­ing thing about the US econ­o­my, is that, like when I was vis­it­ing there from Cana­da, you can buy fuel for equiv­a­lent I’d say about 25 cents a litre. I mean, they sold it in dol­lars per gal­lon and you had to con­vert it and all the rest of it, but it was very, very cheap. That’s now changed.

Cameron  27:24

25 cents Aussie?

Tony  27:26

Oh, I think so, some­thing like that, yeah.

Cameron  27:28

A litre? Wow.

Tony  27:29

I think I did the cal­cu­la­tion once and it was very cheap. So yeah, much, much cheap­er than what we pay for it. That’s now risen, so that’s a drag on the US econ­o­my, because the shale oil, a lot of the shale oil providers as I said before can’t make mon­ey when the oil price is low — and it got down to, I think it was about $35 a bar­rel dur­ing the COVID cough. That put all of the shale oper­a­tors into care and main­te­nance mode. They’ll come, come back. And so, it is a drag on the US econ­o­my the oil prices ris­ing, but I don’t think it’ll go too high, because as I said before the shale oil com­pa­nies will open up again, price will go down. But that shale oil buffer, I guess, for world oil pro­duc­tion put OPEC under all the pres­sure. Then Rus­sia came in and said “well stuff you guys, we’re gonna go our own way because you guys are under pres­sure because of the shale oil in the US.” And they had to do a lot of singing and danc­ing to get the car­tel to hold togeth­er in the last 10 years or so. It’s now back on track. Rus­sia has joined up with them again and the shale oil pro­duc­ers in the US have been moth­balled for a while, but that might just be a hold­ing pat­tern.

Tony  27:31

Plus, the Saud­is know they could do any­thing they want and get away with it. They, they fund­ed 9/11 attacks, got away with it. Killed Khashog­gi, chopped him up in a bath­tub with an axe, got away with it. They can do what­ev­er they want. They basi­cal­ly can get away with any­thing. Alleged­ly. No, there’s no alleged­ly. It’s not alleged­ly.

Tony  28:57

I’m not say­ing any­thing, because I think you’re right. They can do what­ev­er they want. I don’t need to be on the wrong end of that state­ment.

Cameron  29:05

Hey, I love the Saud­is. But they can get away with what­ev­er they want. Well, let’s, let’s… any­thing else? Shall we get into Q&A?

Cameron  29:13

Let’s go into Q&A, thanks.

Cameron  29:15

Mark. This ques­tion is also about oil and it’s a cou­ple of weeks old, so I apol­o­gise, Mark, for miss­ing this the first time. He remind­ed me that we did­n’t get to it. “West Texas Inter­me­di­ate crude is a three-point trend­line sell,” he said, “but Brent crude is well above its sell line.” I think they’re both above their lines now, he emailed me this morn­ing. “Which one does Tony use to gauge if a stock is an under­ly­ing com­mod­i­ty sell and why?”

Tony  29:42

Yeah, so I’m using Brent, and Brent is pret­ty much the glob­al bench­mark now. For a long time they were neck and neck and, well, going back ten-twen­ty years West Texas Inter­me­di­ate was the glob­al bench­mark. Brent became the glob­al bench­mark. Basi­cal­ly, West Texas Inter­me­di­ate is US oil pro­duc­ers, Brent tra­di­tion­al­ly has been a north­ern, the North Sea, UK oil pro­duc­ers, and I guess, North Sea would include Nor­way and Den­mark and places like that, too. So, a pret­ty big mar­ket. And then, when Africa became an oil force and Asia start­ed to do more as well, they fell into line with Brent, part­ly because they were using that mar­ket as opposed to the US mar­ket. It’s got a lot to do with the var­i­ous lev­els of “sweet­ness” as they call it, and spe­cif­ic grav­i­ty or crude­ness of the oil. And so Amer­i­can oil is, I think from mem­o­ry, is the lighter one and Brent is the heav­ier one, and that Bren­t’s more like most of the oil or more oil in the world than the Amer­i­can one is. So, oil can be priced specif­i­cal­ly based on the char­ac­ter­is­tics of the crude com­ing out of that par­tic­u­lar area. There had to be a glob­al bench­mark, and it has default­ed to Brent in the last sort of five, maybe ten years, and it’s the one that the Aus­tralian pro­duc­ers will often use as well. So, Bren­t’s the one I pay atten­tion to, less so West Texas Inter­me­di­ate.

Cameron  31:04

And Brent is the one that we’d find in the com­mod­i­ty sec­tion of Stock Doc­tor? In advanced chart­ing?

Tony  31:11

That’s right, yeah.

Cameron  31:13

Brent Crude North Amer­i­ca.

Tony  31:15

Yeah, that’s the one I’m using. It’s fun­ny that Stock Doc­tor only gives us North Amer­i­ca. But that’s the one that we use, it’s the only option we’ve got in Stock Doc­tor. There is prob­a­bly some Brent glob­al ones if we go to some of the oth­er providers, but it’s BTR‑N in Stock Doc­tor.

Cameron  31:29

BRT‑N, actu­al­ly.

Tony  31:31

Sor­ry, BRT‑N. Yep.

Cameron  31:33

Well, it looks like it’s doing quite well.

Tony  31:36

Yeah, strong buy. $86 a bar­rel.

Cameron  31:39

Which is a five-year high, at least five years.

Tony  31:43

So, accord­ing to this, at the bot­tom of the COVID cough it got below $30 a bar­rel. Looks like it’s about actu­al­ly $22.71 in March. That’s very low.

Cameron  31:53

It peaked in, on the 30th of June 2008 at $138. Wow. Just before the GFC when it came down to $36.16 by the end of 2008.

Tony  32:11

It does move around a lot, does­n’t it? I mean there’s peo­ple who trade oil futures all the time, and it’s a big liq­uid mar­ket. So, they’ll be look­ing at things like is Omi­cron gonna shut down the world econ­o­my? What’s hap­pen­ing in Chi­na? All those things also play into the, the oil price mix as well as who’s pro­duc­ing what and what deals are they doing?

Cameron  32:30

Well, good luck to them. Thanks for that ques­tion, Mark. Ali asks, she says, “I’m torn. Should I buy indis­crim­i­nate­ly from the top of the list down putting, aside that I may favour or need high cap­i­tal top 300 stocks, or should I over­lay Mar­tin Roth’s cur­rent top stock selec­tion, and choose stocks that also appear in his lat­est edi­tion. For exam­ple, CCP has just made it on the QAV list, but a fair way down. How­ev­er, it is includ­ed in Roth’s lat­est list.” I per­son­al­ly align the QAV stocks with David Lee Roth’s list, which usu­al­ly just includes jump­ing and Pana­ma, things like that. Nev­er heard of Mar­tin Roth before, but I did look into him when she post­ed this on Face­book. I gath­er he’s a finance jour­nal­ist who’s, writes books on top stocks. Are you famil­iar with Mar­tin Roth?

Tony  33:26

I’m not. I have a vague mem­o­ry of look­ing at his book a long time ago, and because I’m not using it now, I guess I’ll prob­a­bly put it aside. But I was­n’t famil­iar with it. I did, when I saw your, the ques­tion from Ali, I did go and do some research and it’s very inter­est­ing. So, I actu­al­ly went and bought the eBook for last year, because I thought I’m going to do some analy­sis onto this and see how it com­pares to the mar­ket and com­pares to us. So, I bought his 2021 edi­tion, and looks like what he does is he’s a val­ue investor and he has a set of fig­ures around debt and debt to equi­ty and size of the com­pa­ny and has to have been mak­ing a prof­it for the last five years and pay­ing a div­i­dend etc., etc. He comes up with a list of nine­ty stocks, he pub­lish­es it at the start of the year and he sug­gests you buy and hold them for 12 months. So, until the next list comes out, and then adjust your list when his next book comes out. So, not a bad sys­tem. I don’t real­ly have any quar­rels with it. I thought I’d see then whether it worked bet­ter than QAV or not. So, it was too dif­fi­cult for me, too time con­sum­ing to go and do all nine­ty stocks and put their price in from the first, well I actu­al­ly used the 15th of Jan­u­ary last year, which is 12 months before my analy­sis this time. And I took all the stocks that start­ed with “a” which is an old data ana­lyst hack, but it’s a good way of get­ting a ran­dom sam­ple. You just pick a let­ter and take all the things, all the names that start with that let­ter, and that was four­teen stocks. So, it was like a port­fo­lio size, so I thought it was a good sam­ple to take. And they did well, so those four­teen stocks — so the stocks that began with the let­ter “a” from his 2021 book from the same time last year ’til now — were up 29%. So, hap­py days. Bet­ter than the mar­ket, and it was a set and for­get, buy and hold like a Howard Marks type strat­e­gy. So, I then went back to the buy list at the same time, 15th of Jan­u­ary 2021 for QAV, took the top four­teen stocks — and full dis­clo­sure, I think there were three, a cou­ple of ETFs and an LIC, so I binned those because, part­ly because we don’t use those any­more, but also, he does­n’t use them as well in his stock selec­tion process, pret­ty much for the same rea­sons we don’t. And there was one com­pa­ny in that top 14 list that was sold, was tak­en over soon after, so I binned that one too, because it was basi­cal­ly in the last week that some takeover play. Took the top four­teen stocks oth­er­wise, though, and they were up 36% for the same peri­od. So, that’s as far as I’ve gone in analysing it, but then I’ve sort of, that’s opened up a whole can of worms: are we bet­ter off using the buy list once a year and, and buy­ing and hold­ing and tak­ing 36% — which was bet­ter than I got­ten in the mar­ket last cal­en­dar yea -, or not? So, I need to do fur­ther research on that and prop­er analy­sis would be to see whether four­teen stocks ver­sus twen­ty stocks, how that per­forms, whether it’s you know, a small­er port­fo­lio, does that per­form bet­ter? And we basi­cal­ly have to, you know, go along the axis on each, along with dimen­sions on each vari­able there. Is, is the first or the start of Jan­u­ary and hold­ing for a cal­en­dar year impor­tant or do we, you know, does March work bet­ter than Jan­u­ary? Do we hold it for three months or twelve months? Or two years or six months? What’s the time­line that’s best opti­mised? All those things have to be looked at. Is it small-caps ver­sus large stocks? So, I’m going to flick that one to a data ana­lyst like Dylan to do some research for me, but cer­tain­ly a good thought starter for the process. But in answer­ing, to answer Ali’s ques­tion, even though it was a small self-analy­sis, it did sort of sug­gest to me that QAV still per­formed bet­ter than a more tra­di­tion­al val­ue approach to invest­ing, like top stocks use.

Cameron  37:07

And you said he puts out, was it nine­ty stocks?

Tony  37:11

Yeah. So, he puts out all the stocks that meet his cri­te­ria and from what I read recent­ly, in last year’s book, he said nine­ty stocks was down on some of his past years because… and there was also a whole heap of stocks which con­tin­ued to be on his list. So, I think he said there was some­thing like fif­teen new stocks, fif­teen had dropped-thir­ty had dropped off so his list was small­er than last year. So, it sounds like, he said that banks have always been on his lists, so they’ve been there for­ev­er, and so it sounds like so had a lot of the oth­er stocks on the list. He’s more a buy and hold, he’s not turn­ing over a whole heap. From what I’ve read so far, he does­n’t tell you when to sell, he does­n’t tell you whether you should have all 90 stocks in the port­fo­lio, whether you should have a small­er port­fo­lio. All those kinds of ques­tions from what I’ve read so far haven’t been answered. But, inter­est­ing con­cept.

Cameron  37:57

We should get him on the show.

Tony  37:58

Yeah, that’d be good.

Cameron  38:00

I was won­der­ing like if he’s rec­om­mend­ing you buy all nine­ty, and if you bought, like if you threw all nine­ty in and see how that did, if they would sort of get clos­er to mar­ket sized returns. You’ve always told me that the big­ger the port­fo­lio is, the more chance you’ve got of get­ting clos­er to the ASX 100 or the 200 or the index or what­ev­er, you know.

Tony  38:20

Cor­rect.

Cameron  38:21

Inter­est­ing well good, good stuff. Thank you, Ali. Thank you for throw­ing that our way. Let Tony think about that. Ger­ry asks, “cur­rent­ly, we keep an eye out for announce­ments from com­pa­nies in our port­fo­lios, espe­cial­ly around con­fes­sion sea­son. But what about com­pa­nies on the buy list that we don’t own yet? We’re at a point in the cycle where most of the QAV scores are off data that was released five months ago, we’re a month away from half year results. A prof­it down­grade or oth­er neg­a­tive announce­ment could be a sig­nal and many of the met­rics used to cal­cu­late the QAV score are going to fall in the next results release. So, my ques­tion is, should we be check­ing price sen­si­tive announce­ments since the last results announce­ment for red flags before buy­ing? Thanks, Ger­ry.”

Tony  39:06

Good ques­tion. Broad answer is yes. So, we are in con­fes­sion sea­son, and in fact I meant to men­tion before that EFG in our Navexa port­fo­lio con­fessed, or they came out with their unau­dit­ed results and told the mar­ket that they thought they’d make I think it was $44 mil­lion prof­it. And the share price has dropped about 8–10% since that came out. So, that’s our first casu­al­ty from the con­fes­sion sea­son. It’s still well and tru­ly a buy for us, but it has come down in the last week. To answer Ger­ry’s ques­tions, yes, you should be check­ing announce­ments before you buy any­thing, cer­tain­ly dur­ing con­fes­sion sea­son. So, you don’t need to watch announce­ments for all stocks on the buy list because you’re not both­ered by the ones you don’t own. But, if you’re about to buy a new one, then yes, I always would check the announce­ments and make sure that there’s some­thing in there which I’m com­fort­able with — there’s noth­ing in there I’m not com­fort­able with I guess I should say. Hav­ing said that, as soon as the announce­ment is made, the share price will adjust to the news. So, as long as it obeys our oth­er rules — it’s a good QAV score, the sen­ti­ments still okay, it’s still a buy, it’s not a Josephine — then I’d still buy. Which is pret­ty much the case with Beach Ener­gy. I mean, I out­lined all the risks around Beach Ener­gy at the moment, but it’s going up, and it has a great QAV score, so that’s enough to, I guess, bal­ance the risks that are there with a stock like that. So yes, I think at this stage, and we are wait­ing for new results… but I’m still buy­ing things you know, I sold Chal­lenger and bought ANZ recent­ly, which I flagged in the Face­book group, so I’m still buy­ing things. ANZ’s a bit dif­fer­ent because I think its results are in March rather than com­ing up, but any­way, Chal­lenger may come out with good results soon and come back onto the buy list. But any­way, it’s impor­tant before you buy to real­ly check the sen­ti­ment and real­ly check for Josephine’s at this time, because as you saw with Myer, what can hap­pen, what often hap­pens is that the last thing you want to do is to buy a retail stock com­ing into a report­ing sea­son when the share price is going down. I mean, they gen­er­al­ly put out lots of sales announce­ments along the way, and it’s enough to tell the ana­lysts that it’s not going to be a good announce­ment, and you can see that in the sen­ti­ment of the com­pa­ny.

Cameron  41:15

Yeah, I said to Jer­ry, I replied to his email and said, “look, my guess is that any announce­ment that did­n’t sound good, the share price would be down and it would be a Josephine if I went to buy it, and gen­er­al rule is we don’t buy Josephine’s.” That’d be the first indi­ca­tor that some­thing’s going on, I would sus­pect. And if there was an announce­ment and the share price has­n’t gone down enough to make it a Josephine, then it’s prob­a­bly not that bad of a price announce­ment.

Tony  41:43

Yeah, exact­ly.

Cameron  41:44

But good one, Jer­ry, thanks for think­ing about that, and thanks for remind­ing me that it’s that time of the year. Sue asks, “hi, Cam, Hap­py New Year to both of you.” Thank you, back to you, Sue. “A ques­tion for you guys. With the like­li­hood of inter­est rates ris­ing with some pre­dic­tions of sev­en ris­es over the next two years in the US, what impact is this like­ly to have on the econ­o­my, the share mar­ket and QAV stocks in par­tic­u­lar and in a broad sense? I know Tony can’t pre­dict the future,” as evi­denced by how much he thought his horse was going to sell for, “but what has Tony’s expe­ri­ence been when inter­est rates are ris­ing? What impact or pat­tern has occurred on QAV port­fo­lios so we can be some­what pre­pared to look for?”

Tony  42:36

Sue, this is prob­a­bly the ques­tion most vex­ing peo­ple’s minds in the mar­ket at the moment; what’s going to hap­pen with inter­est rates ris­ing. In terms of my expe­ri­ence of it, which is, I guess at the heart of your ques­tions, inter­est rates ris­ings gen­er­al­ly hurt the mar­ket and hurt busi­ness­es for a cou­ple of rea­sons. They, it par­tic­u­lar­ly hurts growth stocks, the high PE stocks like your After­pay ‘s of the world and the tech stocks, because it makes the dis­count­ed cash flow mod­el that the ana­lysts use to base their price val­u­a­tions a lit­tle bit hard­er to stack up, because the inter­est rate is a part of the cal­cu­la­tion for the hur­dle rate. And the hur­dle rate if inter­est rates go up goes down, which means that the mul­ti­ples for those tech stocks go down. So, expect to see tech stocks retreat dur­ing a ris­ing inter­est rate mar­ket. But, it also hurts your gen­er­al busi­ness­es because the bor­row­ing costs go up for their debt. And that’s going to affect high­ly indebt­ed com­pa­nies more than it’s going to affect the com­pa­nies in the QAV port­fo­lio, because one of our tests is for ris­ing equi­ty, which is gen­er­al­ly — and finan­cial health — which, all things being con­sid­ered gen­er­al­ly points to low debt and low indebt­ed com­pa­nies rather than high ones. So, those two things alone will prob­a­bly put a bit of a hand­brake on the mar­ket. How­ev­er, the mar­ket will even­tu­al­ly set­tle, and, you know, for most of my invest­ing life this, this, the last sort of four or five years has been the anom­aly rather than the norm. Inter­est rates, like our mort­gage rates for the last twen­ty or so years have aver­aged much high­er than what they are now. And I gen­er­al­ly think of about 7% as the aver­age mort­gage rate that I would have paid over the last twen­ty-twen­ty-five years. But the mar­kets were still going up when inter­est rates were that high, and that’s more than dou­ble what they are now. So, I’m not wor­ried that the ris­ing inter­est rates is going to close the share mar­ket or be an insur­mount­able obsta­cle for it. But there will be a peri­od of adjust­ments, there will be a peri­od of dif­fer­ent sec­tors doing poor­ly or doing well while that sort of set­tling hap­pens. I guess what else hap­pens, they’ll hurt things like col­lectibles, which is not part of what we invest in, although it’ll hurt race­hors­es I think even­tu­al­ly as well because they’re kind of thrown in with col­lectibles, any­thing where peo­ple are buy­ing things because the cost of debt is vir­tu­al­ly zero will get hurt. So, art, wine, cars, race hors­es, all those kinds of things which have been fun to buy when it’s not cost­ing you much each month to pay the debt will sud­den­ly become much hard­er to buy when the debt becomes seri­ous. So, there’s that. It could have an impact on the hous­ing mar­ket, prob­a­bly will have an impact on the hous­ing mar­ket, although with the recent price ris­es you’ve got to think that peo­ple have lots of equi­ty as a buffer at the moment so who knows. But, cer­tain­ly you prob­a­bly won’t get the growth in the hous­ing mar­ket from here if inter­est rates are ris­ing, and that’s one of the back­bones of the econ­o­my. So, that’s going to be an issue. One of the things which I, which I prob­a­bly weight even more high­ly than inter­est rates ris­ing is what does that mean to infla­tion? And so, we’re see­ing high infla­tion in the US, they haven’t had infla­tion this high, which I think is run­ning about 6% for the last quar­ter, in a long time. And that becomes a vicious cycle, because if the price of food goes up, if the price of fuel goes up, if inter­est rates, your mort­gage price goes up, sud­den­ly you have less spend­ing to put into dis­cre­tionary things or to upgrade your house or your car, and that is a real hand­brake on the econ­o­my. So, it tends to be infla­tion and wage ris­es, and wage ris­es become the dou­ble wham­my for busi­ness because they’re pay­ing more for their debt and they’re pay­ing more for their wages, they’re kind of like two of the biggest costs for a busi­ness. So, that’s what real­ly slows down the econ­o­my. So, it real­ly comes down to what the cen­tral bank does to try and nip infla­tion in the bud. So, it’s entire­ly pos­si­ble that we don’t see inter­est rates ris­ing too much high­er than where they are now, if infla­tion gets out of con­trol, because the only lever that cen­tral banks have to deal with infla­tion is to low­er inter­est rates to try and take some steam out of the econ­o­my which is what they kind of doing now in the US in par­tic­u­lar. So, if they can’t bal­ance that tightrope walk, and there’s been a his­to­ry of, of them get­ting it right for a while and then get­ting it wrong, the economies crash into reces­sion. And that’s what real­ly hurts the stock mar­ket. So, you’ve always got to fac­tor into account that there’s going to be anoth­er GFC, there’s going to be anoth­er reces­sion that we had to have all, those kinds of things that have hap­pened in the past will hap­pen again in the future. And my expe­ri­ence is a sys­tem like QAV is the best way to deal with those. We’re invest­ing in qual­i­ty stocks, we’re invest­ing in stocks we’re not pay­ing high prices for, they don’t car­ry much debt. So yes, they will go down and we may have to sell them and go to cash and then wait for them to turn up again, but they’re prob­a­bly the best way of invest­ing giv­en the risks in the econ­o­my.

Cameron  47:24

And QAV tells us when to get in and when to get out.

Tony  47:27

Absolute­ly.

Cameron  47:28

Min­imise our risk and max­imise our upside. So, what you’re say­ing, Tony, is all of this has hap­pened before and all of this will hap­pen again.

Tony  47:37

Cor­rect. All Things must pass.

Cameron  47:39

“Dun, dun, dun, dun, dun, dun dun…” Did you watch Bat­tlestar Galac­ti­ca?

Tony  47:43

No.

Cameron  47:44

Oh! Real­ly?

Tony  47:47

Which ver­sion? i used to watch the Lorne Green one.

Cameron  47:50

No the reboot, the 2005 reboot or what­ev­er it was. That was their sort of mantra: “all of this has hap­pened before, and all of this will hap­pen again.”

Tony  48:03

It’s a good mantra.

Cameron  48:04

Basi­cal­ly, humans build robots to go to war with the humans. And then, the robots sort of become the humans, and then they build new robots to replace the robots, you know, well, they end up becom­ing indis­tin­guish­able from humans, because they get more and more advanced, then they get lazy. And so they build robots to do all the man­u­al labour and then the robots become sen­tient and wipe them out, and the cycle just keeps repeat­ing.

Tony  48:35

Oh, cool. I have to have looked at it.

Cameron  48:37

It was good.

Tony  48:38

I remem­ber those ter­ri­ble red-eyed Cylon things in the orig­i­nal and the ter­ri­ble act­ing.

Cameron  48:44

Well, I mean, yeah, this one has got Edward James Olmos at the head of it, man. And he’s, he’s great as the com­man­der of the fleet, this grav­el­ly voice, and he’s like “grr”. Any­way, lat­er, all right, well, that’s that. After hours. What have you been enter­tain­ing your­self with out­side of sell­ing hors­es?

Tony  49:09

Yeah, watch­ing, watch­ing a lot down here. Noth­ing much else to do except play golf and go for walks. So, a new sea­son of After­life dropped on Net­flix, have you been watch­ing that? Sea­son Three?

Cameron  49:20

No, I haven’t start­ed the new sea­son yet. I’ve been mean­ing to get around to it. Love that show. Real­ly great.

Tony  49:27

Yeah, enjoy­ing it. Watched a cop movie? I don’t know if you’re into detec­tive-ser­i­al killer movies, called The Lit­tle Things which was real­ly good. Den­zel Wash­ing­ton and Rami Malik both did real­ly well.

Cameron  49:38

Haven’t seen Rami Malik do any­thing good since Mr. Robot, like he had the Queen thing I did­n’t like, the James Bond thins — you saw No Time to Die.

Tony  49:49

It was ter­ri­ble. What a hot mess.

Cameron  49:54

What, like, after his start with Casi­no Royale, which I still think is one of the best if not the best Bond movie they ever did, to start like that and end with… I thought, like the last few have been very aver­age, I thought, but they’ll, they’ll do it right on the way out. No, just shod­dy.

Tony  50:15

And, I mean I don’t want to give away spoil­ers, but haven’t they killed off the fran­chise?

Cameron  50:22

And it made no sense. I’m going to skip spoil­ers, if peo­ple haven’t watched No Time to Die, turn off the episode now, you have been warned. But they’re like, he’s, he’s in the bunker, and they’ve gone “oh James, we’ve set off the mis­siles, the mis­siles are going, go back inside the bunker James.” You just said the bunker had, he had to open the mis­sile doors so they could be destroyed, just close the mis­sile doors again and then go “alright, well lis­ten, I’ll just close the doors and then after these mis­siles have gone I’ll open them again in 15 min­utes, and then you can send anoth­er bunch of mis­siles to destroy the secret Tox­in Lab.” Like, what, like, why did the just, like what? That made no sense.

Tony  51:13

The whole movie made no sense. They killed off Felix, they killed every­one in Spec­tre, they killed off Blofeld, and they killed off Bond. What’s the next one gonna be? What’s the next instal­ment gonna be?

Cameron  51:26

They regrow Bond from DNA of a mar­ti­ni glass that they found.

Tony  51:35

Who’s gonna say Bond, James Bond in the next day instal­ment.

Cameron  51:39

Well, Idris Elba.

Tony  51:40

If there is one.

Cameron  51:41

Oh, there will be. Bond will out­live, out­live the human race — they’ll be mak­ing Bond movies when the Cylons takeover.

Tony  51:51

Jen­ny and I both thought the, there was a girl he meets when he goes to the Spec­tre par­ty and she said “I’ve only been train­ing for two weeks.” And she, she does real­ly well. We both thought “that’s the next James Bond.”

Cameron  52:03

Well, she’s the Cuban chick?

Tony  52:05

Yeah.

Cameron  52:06

So she was in Knives Out with Daniel Craig, and — did you see that?

Tony  52:13

Yeah.

Cameron  52:13

It was good, right, Knives Out? It was, I thought it was good. Good sort of Agatha Christie type thing. And then she was all — I just rewatched when I was sick, I rewatched Blade Run­ner 2049 because I hat­ed it when I first saw it, and a lot of peo­ple told me to give it anoth­er shot, so I final­ly did. And she’s Ryan Gosling’s vir­tu­al girl­friend in that and she’s gor­geous. She does a good job in that. And I still, like, it’s a, it’s a beau­ti­ful film, like in terms of the, the sets and the cin­e­matog­ra­phy and the sound­track and it’s an inter­est­ing enough sto­ry. I still think it miss­es — like I’m a big fan of Philip K Dick­’s short sto­ries and his nov­els, always have been. And the whole thing behind Philip K Dick­’s writ­ing is usu­al­ly this ques­tion about what does it mean to be sen­tient? What does it mean to be con­scious? What kind of auto­mat­ic rights do you get if you can demon­strate sen­tience or con­scious­ness in var­i­ous forms? And, you know, why does a robot not have the same rights as a human if it is sen­tient, and these real­ly deep moral, philo­soph­i­cal ques­tions, and the Denis Vil­leneuve film just did­n’t real­ly go there. It was just an action film. And I was like, “you’re miss­ing the whole point of Blade Run­ner for my mon­ey.” Any­way.

Tony  53:44

I agree. I did­n’t like it either. I did­n’t like bonds, that’s for sure.

Cameron  53:49

Such a dis­ap­point­ment.

Tony  53:50

And just the, the sight of, Daniel Craig must be push­ing six­ty now, like hook­ing up with a thir­ty-year-old, and it was urgh.

Cameron  53:59

If I looked like that, I could hook up with a 30-year-old too, I mean, he’s a good look­ing dude.

Tony  54:04

Well, do you notice he did­n’t take his shirt off the whole time? Jen­ny and I were look­ing at it like, she’s going, “oh, there’s crepe skin.”

Cameron  54:15

Wow, harsh.

Tony  54:17

And then she goes, “look, he’s, he’s in bed. He’s got no clothes on, but the girls lying on him so you can’t see his chest.” Any­way, we were being harsh. We got to the stage where we were sort of like com­ment­ing on the movie rather than get­ting into it and being tak­en away by it.

Cameron  54:30

Yeah. Ear­ly on when the cars chas­ing him over some stone bridge in Italy some­where, and he hides behind some big stu­pid rock that’s just sit­ting in the mid­dle of the bridge. Like why is that rock not been removed for the last 500 years? It’s obvi­ous­ly not a good place to have a rock on a bridge. It’s going to be caus­ing all sorts of prob­lems.

Tony  54:53

Yeah. It did­n’t have the action of the oth­er ones too, even if like the last cou­ple have been weak, but they’ve had great action set pieces. The, was it last time the plane lost its wings when it crashed land­ed but kept going on relent­less­ly and all that. I mean, there’s great action scenes and all that but this time it was just Bond doing donuts in his Aston Mar­tin shoot­ing up the bad guys. Or they were fir­ing paint­balls at the bul­let­proof glass. It was just, it was weak as.

Cameron  55:22

I want to give a plug for a book that Steven Mabb rec­om­mend­ed to me that you would like if you haven’t read it already: Lifes­pan by David Sin­clair.

Tony  55:32

Does­n’t ring a bell, no. Okay, I’ll look at it.

Cameron  55:34

Sin­clair is an Aussie, but he’s a pro­fes­sor of genet­ics or some­thing at Har­vard, and his whole, you know, he’s got a team here and a team over there, and he’s ded­i­cat­ed decades to defeat­ing age­ing so we can live much longer, health­i­er lives. Bit like, you know, the old inter­views I did with Aubrey de Grey back in the G’Day World days, or Ray Kurtzweil. Sort of an update on that from, Aubrey de Grey was at Cam­bridge, I think, at the time I inter­viewed him, but this guy is at Har­vard, very cred­i­ble, and has writ­ten a whole book on the fact that yeah, like those guys always said back in those old episodes, age­ing is a dis­ease. It’s the biggest killer and we should think of it as a dis­ease and we can cure it like a dis­ease. And he said, we actu­al­ly under­stand the basic cause of age­ing now, and we can fix it and we’re going to fix it. And he said, peo­ple don’t believe it, that we’re going to fix it, but, what’s the anal­o­gy that he uses in one of the ear­ly chap­ters? I don’t know, some­thing like peo­ple did­n’t believe that we could fix, you know, virus­es a hun­dred years ago until we did and then we just took care of it and saved bil­lions of peo­ple’s lives. He also talks about can­cer, and all the progress that’s been made on can­cer since 2016. Oba­ma made big invest­ments in can­cer research and they fig­ured out some stuff and he said there’s like sev­en­teen mil­lion peo­ple alive in the US today that would­n’t have been alive as a result of these new approach­es to cur­ing can­cer. Any­way, it’s a good book.

Tony  57:11

Okay, I’ll check it out. Telom­eres by Eliz­a­beth Black­burn, I think, the oth­er Aus­tralian researcher, is very good in that sort of vein as well. Came out about four or five years ago

Cameron  57:21

Black­burn’s the woman I inter­viewed about con­scious­ness.

Tony  57:24

Oh, okay. I’m pret­ty sure she got a, she may have even got a Nobel Prize, but got some, some big award for the research into telom­eres, those caps at the end of the shoelaces of the DNA.

Cameron  57:36

Oh, not, I don’t think that’s Black­burn, but I know who you’re talk­ing about. Yeah.

Tony  57:42

Okay. I could have that wrong.

Cameron  57:43

I’ve read that book as well, about telom­erase and that kind of stuff.

Tony  57:48

Is that how you pro­nounce it? Telom­erase.

Cameron  57:50

Telom­erase, yeah.

Tony  57:52

Telom­eres, okay.

Cameron  57:53

No, no, the telom­eres are the things at the end of the DNA, but the solu­tion that they can put in to stop them from dete­ri­o­rat­ing is called telom­erase, the pro­tein or what­ev­er that goes into it.

Tony  58:07

Ah, okay.

Cameron  58:07

I actu­al­ly start­ed writ­ing again, when I was sick in bed, I start­ed writ­ing a, either a TV series, a script for a TV series or a com­ic book, I’m not sure what it is. It’s called The Tel­lows. It’s about peo­ple that are born with a muta­tion where their telom­eres don’t short­en and they effec­tive­ly stay young. It kicks in epi­ge­net­ics when they’re in their ear­ly 20s, they basi­cal­ly don’t age. They can still die if they get mur­dered or have an acci­dent or catch a dis­ease, but they just basi­cal­ly stay young. And you know, how they expe­ri­ence, a bit, a lit­tle bit like High­lander, but, you know, with an actu­al sci­en­tif­ic basis for it like a muta­tion that caus­es their telom­eres to… any­way.

Tony  58:48

Good.

Cameron  58:48

After read­ing this book I got think­ing about that when I had a fever dream. I was just gonna fin­ish with some­thing not to watch, is Guy Ritchie’s last film with Jason Statham Wrath of Man. You think the Bond movie was bad? It makes Wrath of Man, it’s a mas­ter­piece com­pared to Wrath of Man, man. What a piece of shit.

Tony  59:10

Oh no.

Cameron  59:11

Oh, after The Gen­tle­men, which was great, he’s just, he must be mar­ried to Madon­na again, because it was just hor­ri­ble. Shock­en’.

Tony  59:22

Did you ever see that Jason Statham movie, Jolt?

Cameron  59:25

No.

Tony  59:25

I think there’s two of them. Great B‑movie where some­thing hap­pens to his heart and he has to keep elec­tro­cut­ing him­self every hour or some­thing to keep the heart going. It’s fan­tas­tic. It’s a real B‑movie, so don’t think much of it, but it’s just a great premise and a great fast pace movie. Anoth­er B‑movie I watched recent­ly, which you might want to check out, Boss Zone. Have you seen that?

Cameron  59:46

No.

Tony  59:47

On Net­flix, Mel Gib­son plays the bad­dy, Nao­mi Watts plays the good­ie. There’s a guy whose face I recog­nise but he’s been around lots of B‑movies. Great B‑movie. It’s a, it’s a riff on that same Ground­hog Day premise where Nao­mi Watts, believe it or not, plays a quan­tum physi­cist to invents a machine that can, like, keep revers­ing time. So, every time her ex-hus­band, who just hap­pens to be a Navy SEAL, dies he can wake up again and relive the day.

Cameron  1:00:15

Oh, I saw the trail­er for that. I think the twins watched it and said it was hor­ri­ble.

Tony  1:00:19

Oh, I liked it. Again, clas­sic B‑movie, right? You know, full of sword fights, gun­fights. It’s real­ly good. I enjoyed it.

Cameron  1:00:27

Mel Gib­son play­ing a bad guy’s not that much of a stretch for him real­ly these days, is it?

Tony  1:00:31

No, he’s the quin­tes­sen­tial Hol­ly­wood bad guy these days, isn’t he?

Cameron  1:00:36

He’s the quin­tes­sen­tial human bad guy, just lost his, lost his… I saw a YouTube that he did for some Amer­i­can Bish­ops Con­fer­ence recent­ly where he was just like, a cou­ple of months ago, where he was talk­ing about how “they’re out to get us, the Catholics” you know “every­one’s out to get the Catholics,” and you know the pre-Vat­i­can two Catholics and “we’re the only ones that real­ly know what’s going on” and “got­ta fight the good fight because the Lord’s expect­ing us to do it.” And he’s “grr” and I was like, “oh my god.”

Tony  1:01:05

Yeah.

Cameron  1:01:06

Mel, Mel, Mel.

Tony  1:01:09

But he goes home to his young super­mod­el after he ditched his wife and kids and all the rest of it. Yeah, great Catholic val­ues.

Cameron  1:01:16

And he says “you want to get out of here, you talk to me.” Any­way, that’s it for the show. Thank you, Tony. Enjoy your week, and good luck every­one. Stay safe, wear a mask, don’t be sil­ly.

Cameron  1:01:38

The QAV Pod­cast is a pro­duc­tion of Space­craft Pub­lish­ing Pro­pri­etary Lim­it­ed autho­rised rep­re­sen­ta­tive of AFSL 520442 AFS rep­re­sen­ta­tive num­ber 001292718. Please don’t make any invest­ment deci­sions based sole­ly on lis­ten­ing to this pod­cast. This is pre­sent­ed as gen­er­al advice only not per­son­al finan­cial advice. We don’t know your per­son­al finan­cial cir­cum­stances. Please see a finan­cial plan­ner before mak­ing any invest­ing deci­sions.