Transcript #524

QAV #524 — Club Edi­tion

Cameron 0:07
Wel­come to QAV for the Phoenix edi­tion, the hot edi­tion. I’m in Phoenix, Ari­zona this week, Tony, and I swear that this place is built on the Hell­mouth. It’s insane here. Absolute­ly crazy.

Tony 0:27
I don’t know what’s cra­zier, you being in Phoenix in sum­mer or Phoenix itself? It’s a win­ter des­ti­na­tion nor­mal­ly.

Cameron 0:33
Yes, it’s their sum­mer hol­i­days. Fox is here vis­it­ing — we’re here vis­it­ing Chris­sy’s fam­i­ly, Fox’s got cousins around about his age here. He’s hav­ing a ball, hav­ing a whale of a time. Lov­ing it. Doesn’t want to talk to me, does­n’t want to see me, just wants to play with his cousins all day, which suits me fine. So, that’s why we’re here. But man, is it hot? Like yeah, 42/43/45 every day, a low of 31/32 every day. But it’s pret­ty, real­ly pret­ty. Peo­ple are nice. It’s real­ly pret­ty. We went pad­dle­board­ing. The in-laws took us pad­dle­board­ing down a white-water riv­er kind of thing in the moun­tains at sun­set the oth­er night. There were wild hors­es com­ing out and drink­ing from the riv­er as we’re pad­dle­board­ing down, the water was icy cold, cac­tus­es, Saguaro cac­tus­es. You know, it’s like being in a road­run­ner-coy­ote car­toon. It’s real­ly, real­ly pret­ty, but it’s just insane­ly hot. And every­one I talked to, I’m like how do you live here? And they’re like, “yeah, it’s not too bad. You get used to it. It’s dry heat.” I go, “yeah, so is the top of an oven or a stove. Try putting your hand on it, see how you go.” Any­way, they all think I’m a stu­pid Aussie. They’re prob­a­bly right. How’re you doing, TK?

Tony 1:53
Yeah, good. Doing well.

Cameron 1:56
How’s the port­fo­lio?

Tony 1:57
Finan­cial­ly? Not so great, but still bet­ter than if I did­n’t have a sys­tem, so, yeah. These times hap­pen. It’s tough in the mar­ket at the moment. Yeah. Down mil­lions. So, you’ve got to turn that off, I think. Read all the memes on Face­book like, you know, “from pres­sure comes dia­monds,” and all this kind of self-help crap.

Cameron 2:20
Well, you know, what I’ve been telling myself and I’ve been telling peo­ple on our socials is I just keep remind­ing myself that what’s real­ly going on out there is the mar­ket is prepar­ing bar­gains for us. There’re great com­pa­nies that have got a good track record, they’ve been around a long time, gen­er­ate a lot of cash, good busi­ness­es, sol­id busi­ness­es, good man­age­ment, that are avail­able at a dis­count. We’re not buy­ing them yet because we’re wait­ing for things to sta­bilise, but when things sta­bilise, we’re going to be snap­ping up bar­gains — great com­pa­nies that we would­n’t have been able to buy a year ago, they’ll be cheap, and we’ll ride them back up for the next year or two and that’s where we make our mon­ey, right? Isn’t that how it works?

Tony 3:02
Look at you, Padawan. You’ve learnt how the sys­tem works. That’s exact­ly how it works. And I think the bit you’ve missed out is the fact that we’re going to cash at the right time. So, even though it’s hurt­ing to sell stocks that have been prof­itable and I’m being rule one’d every oth­er day out of stocks and things like that, I’ve got a big pile of cash now which is just sit­ting there at the right time for when the mar­ket bot­toms to get back in.

Cameron 3:26
Well, I tell you, talk­ing about going to cash at the right time; I told you a few weeks ago, I had to cash out my per­son­al port­fo­lio. I’ve got my Super port­fo­lio and my per­son­al, but I had to cash out my per­son­al port­fo­lio to pay for this trip because we had used our trip mon­ey to invest for the last few years dur­ing COVID — our hol­i­day mon­ey — and I got out of it. I cashed it out like a month ago. Real­ly glad I did. I know we’re not sup­posed to time the mar­ket, and I did­n’t, but acci­den­tal­ly got out prob­a­bly at a good time.

Tony 3:58
Well, kar­ma’s get­ting to you though, you’re liv­ing in Phoenix in 45 degrees.

Cameron 4:03
Yeah, that’s true. Any­way, so look, it’s rough out there but as you’ve been telling me for the last few years, this is just busi­ness as usu­al. Mar­kets go up, mar­kets go down. It’s like a roller coast­er. We just stay on the ride, right?

Tony 4:16
Sit­u­a­tion nor­mal, yeah. And its what mar­kets do. We’re always going to have peri­ods of exu­ber­ance and peri­ods of pes­simism, we just have to switch that off; not let it affect us and just keep stick­ing to our knit­ting, doing what we do.

Cameron 4:32
Accord­ing to Karen Maley in the Finan­cial Review, this is the white-knuck­le part of the cycle. There’s a good arti­cle I read today, she said, “high­ly regard­ed mar­ket strate­gist and econ­o­mist David Rosen­berg has come up with the most suc­cinct expla­na­tion for the ter­ror that’s now stalk­ing mar­kets. ‘We’ve had 8% infla­tion before,’ he tweet­ed a week ago. ‘Been a while, but we’ve had it. What we’ve nev­er had before was the Fed hik­ing rates into an offi­cial bear mar­ket. Brand spank­ing new, more down­side com­ing. Even though the US share mar­ket bench­mark, the S&P 500, is already down more than 20% from its all-time high,’ Rosen­berg warns the pain might not be over. Rosen­berg point­ed out that in the past fifty years a mar­ket decline of 20% has pre­saged a reces­sion pre­cise­ly 100% of the time.” So, this could go on for a while yet.

Tony 5:28
Yeah, I can’t pre­dict it Cam. I could say it will go up and my gut feels is that it’s gonna go on for at least six months, but it could turn around today or tomor­row, too. Or, it could last years.

Cameron 5:38
Which is why we need to stay frosty.

Tony 5:40
Stay frosty. Yeah, exact­ly. I mean, I can make lots of com­men­tary on the cur­rent sit­u­a­tion. I agree with that com­men­ta­tor about the Fed rais­ing inter­est rates when every­thing else is already going up. This is a sup­ply side prob­lem, infla­tion­ary prob­lem. So, I don’t see how rais­ing inter­est rates is going to affect that. It’s not going to unblock all the ships at sea who are lying with car­go off ports that can’t be unloaded, and it’s not going to help restau­rants who can’t employ staff because no back­pack­ers are in Aus­tralia, and all that kind of stuff. So, I don’t see how rais­ing inter­est rates helps that. I guess, offi­cial­ly, what they’re try­ing to do is to get back to what they call the “neu­tral set­ting”. So, at the moment infla­tion’s up, asset prices, well, they have been up until recent­ly in the stock mar­ket, and they’re still ele­vat­ed com­pared to what they were a lit­tle while ago any­way. One of the things that I do pay atten­tion to is what the PE of the mar­ket is, and I think both here and, in the States, we’re get­ting back to aver­age. So, maybe we’re going to get to a neu­tral set­ting quick­er than what the RBA thinks or the Fed in the US thinks. Unem­ploy­ment is still very low. The RBA wants infla­tion to run at between 2 and 3%. It’s cur­rent­ly run­ning in Aus­tralia at five, so it’s not going to need, I would­n’t have thought, much of a tweak in inter­est rates to bring it back to 3% at least. And giv­en the fact that it’s not real­ly inter­est rates that are caus­ing the infla­tion, its fuel prices because of the Ukrain­ian war, ener­gy prices because of the tran­si­tion to car­bon neu­tral future, all those kinds of things are impact­ing it. It’s the sup­ply chain block­ages because of COVID, it’s the lack of immi­gra­tion that’s just start­ing to come back now in Aus­tralia since COVID. None of those are real­ly inter­est rate issues. So, I always look at the econ­o­my as hav­ing a stool with three legs, and we’ve kicked out petrol prices and we’ve kicked out the dol­lar — well, actu­al­ly, the dol­lars okay at the moment, so I’ll take that back. We kicked our petrol prices and we’re now going to kick out inter­est rates. The stool is going to col­lapse. So, I think the RBA will aim for a soft land­ing but, you know, if inter­est rates do rise too high too quick­ly, that’s going to impact peo­ple’s wal­lets just like fuel prices are, like ener­gy prices will, and that’s gonna hurt peo­ple so much they can’t spend in the econ­o­my. And that’s gonna be it for the econ­o­my and we will hit a reces­sion. So, this is like, you know, the RBA is try­ing to bring a 747 in when cross-eyed‘ Karen Black­’s at the wheels because Dean Mar­t­in’s had a heart attack and she’s try­ing to bring air­port 75 and being talked at down through the tow­er, and Phil Low’s on the mic. It’s just like, it’s a real­ly hard land­ing to engi­neer, so good luck to them. I don’t believe inter­est rates will solve this, but I’m not an econ­o­mist.

Tony 6:18
What we need is Leslie Nielsen in the plane.

Tony 8:38
Yeah, what a time to give up glue sniff­ing.

Cameron 8:44
And don’t call him Shirley.

Tony 8:47
The oth­er thing I’ve noticed just recent­ly, too, out on my walks every day is that I am start­ing to see retail shop fronts up for lease again, emp­ty retail shop fronts, and that’s always for me a pre­cur­sor for a bad patch in the econ­o­my. I mean, you’ll know Sil­ly Tart’s who closed in the last month or so.

Cameron 9:05
Oh, no!

Tony 9:06
Yeah, I know. Favourite lit­tle cafe and the scene for a cou­ple of QAV din­ners.

Cameron 9:11
You kept them in busi­ness all dur­ing COVID.

Tony 9:14
We did.

Cameron 9:15
That’s sad.

Tony 9:17
Lease came up, the own­er of the build­ing put the rent up, they just stayed afloat dur­ing COVID, and they were find­ing it hard to get staff. So, they were work­ing sev­en days a week them­selves and they just pulled the pin and they’ve left. I imag­ine there are oth­er retail shop fronts in that kind of sit­u­a­tion, because as I walk around, I’m see­ing more and more emp­ty spaces and spaces for lease, and that’s a bad indi­ca­tor for the econ­o­my going for­ward.

Cameron 9:42
Noth­ing we can do about it, I guess.

Tony 9:44
That’s right. We can’t con­trol it. We just man­age our way through it. We make light of all this, but it’s going to hurt peo­ple, it’s not good. There will be peo­ple out there… I mean, Steven Main and Alan Koehler on their recent dis­cus­sions were talk­ing about try­ing to get a class act up against the RBA, because the gov­er­nor has been say­ing since COVID that inter­est rates would rise until 2024. So, all the peo­ple who’ve tak­en a mort­gage out in the last twelve months have a class action against him, because he’s now rais­ing inter­est rates quick­ly.

Cameron 10:14
Yeah. Well, I was going to ask you, when do we put heads on spikes for all the peo­ple that said that MMT was­n’t going to lead to infla­tion?

Tony 10:24
Yeah, that’s right. That’s the oth­er risk. There was a real­ly inter­est­ing arti­cle in the Fin yes­ter­day from the guy from, I think it’s Extant Cap­i­tal, does a lot of data sci­ence work, and he’s point­ing out that his peo­ple expect the Reserve Bank to have neg­a­tive equi­ty at the end of this finan­cial year when they pro­duce their bal­ance sheet. And by that he means if it was a busi­ness, it would not be able to con­tin­ue to trade as a going con­cern. So, it’s like get­ting a qual­i­fied audit. And that’s because inter­est rates are now ris­ing and they have all these bonds they bought sit­ting on their bal­ance sheet, and the bonds are going down in val­ue as the yields rise. And so, the RBA if it was a com­pa­ny would have to raise more cap­i­tal, and that’s going to be the issue going for­ward. You can’t print mon­ey in a ris­ing inter­est rate envi­ron­ment, or you can’t do it as easy as you could do it in a low­er­ing inter­est rate envi­ron­ment where you just stuff anoth­er bond on the bal­ance sheet and wait for it to mature. It’s hard­er to do when you have to pay out high­er and high­er yields and the val­ue of your bal­ance sheet goes down fur­ther and fur­ther. So, MMT I think is going to one less lever the gov­ern­ment can pull. I can’t see a gov­ern­ment, if we do go into reces­sion, that’s going to be real­ly hard to do a cash splash like they did dur­ing COVID — the RBA can’t real­ly assist with that. But, on the oth­er side of the coin, the RBA, accord­ing to this arti­cle in the Fin yes­ter­day, is expect­ed to pay out $8 bil­lion as a div­i­dend to the gov­ern­ment this year because of the fact that they have made mon­ey in a falling inter­est rate envi­ron­ment, and they’re flush with cash and they’re get­ting good income. So, that’s going to the gov­ern­ment this year, but it won’t go next year, because if they’ve got neg­a­tive equi­ty, they can’t afford to pay a div­i­dend next year. So, that kind of income is going to be hard to patch up. If we go into reces­sion and the gov­ern­ment needs to sup­port the econ­o­my, and it’s not get­ting the same kind of div­i­dends from the RBA, it’s going to have to make it up through increased tax­es in some way. Or go even more seri­ous­ly into debt which will hurt us as well, because our cred­it rat­ing will go down, so the gov­ern­ment debt will cost more. So, it’s a tricky sit­u­a­tion for the RBA and the gov­ern­ment going for­ward, for sure.

Cameron 12:28
Well, look­ing at our port­fo­lio, Tony, for the finan­cial year, the QAV dum­my port­fo­lio is down 4.25% as of the date of record­ing, which is the 21st, I think, over there, right?

Tony 12:44
21st in Aus­tralia, yeah.

Cameron 12:46
So, we’re under­wa­ter by 4.25%. Cap­i­tal gain’s actu­al­ly down 9.7% for the finan­cial year but we’ve had some income, 5.46% per annum, these num­bers are, so we’re down neg­a­tive 4.25% per annum for the finan­cial year. But again, I think over the… well, that’s com­pared to the ASX 200, which is down. I don’t have my glass­es on, but it looks like 5.9%. So, we’re not down as much as them, but we’re almost neck and neck, there’s not a lot between it. But if I look at the long haul since incep­tion…

Tony 13:25
While you do that, Cam, it’s a good point to make: the dum­my port­fo­lio’s down 4.5% even though the mar­kets down, you know, 5–6%. So, it’s not like end of the world, this finan­cial year. It would be high­ly unusu­al if we did­n’t have years where we’re down 10% in the stock mar­ket, so this is just one of those years. I had the Navexa port­fo­lio all time sit­ting at about $29,000. So, it’s still up, we’re still way up from when we start­ed. I’ve got 16% as our run rate accord­ing to Navexa since we start­ed, ver­sus the All Ords of 5.58%.

Cameron 14:00
Well, if I take it from the sec­ond of Sep­tem­ber 2019, which is our incep­tion date, it says we’re up 15.64% ver­sus the ASX 200 up 3.71%. So, we’re doing four to five times bet­ter than the index over the peri­od. So, yeah, they’re per annum num­bers, too. So, ver­sus the index, we’re doing fine over the long haul. And that’s what I keep remind­ing, par­tic­u­lar­ly the new club mem­bers, peo­ple that have start­ed with QAV in the last year: it’s been a rough year. Like, I feel for you, but as I said to some­body online today, as my father would have said, “it puts hairs on your chest.” Like, in some ways I think it’s a tur­bu­lent, scary peri­od, but this is invest­ing, right? See if you’ve got the cahonies to sur­vive it.

Tony 14:57
And, I think it is the way you approach this. In my mind, okay, I’m upset we’ve lost mon­ey, but I know that’s the way this works.

Cameron 15:04
But are you real­ly, though? Are you real­ly upset? Not real­ly, no

Tony 15:08
No, because there’s coun­ters in a bank account some­where, or a port­fo­lio sys­tem some­where. What I’m focused on is what can we do bet­ter next time, and so that’s what I’m focused on. And there’s been some real­ly inter­est­ing posts in our Face­book group. Some­one post­ed overnight that they are start­ing to look at buy­ing some of the ETFs which are going up because they are focused on a reces­sion, or focused on a down­turn, so they’re neg­a­tive­ly cor­re­lat­ed to the stock mar­ket. So, I’m going to inves­ti­gate that going for­ward. I remem­ber a month or two ago, the Aus­tralian Foun­da­tion Invest­ment Com­pa­ny — which is a List­ed Invest­ment Com­pa­ny, which is a sort of qua­si-Index Fund with low fees — and Alex *hel­lo :)*, my daugh­ter, had shares in that, and it crossed into a sell sit­u­a­tion, and I con­tact­ed her and said, “I think you should sell,” and she did. So, she’s ahead on that trade. But, you know, is that a sign that we can look for­ward to in the future that is the time to go to cash com­plete­ly? I mean, there quire a lot of things that we can inves­ti­gate so the next time this hap­pens, and it’s going to hap­pen in a cou­ple of years again, we can per­haps even improve on how we do things.

Cameron 16:11
Yeah. That’s great that you’re think­ing about how to improve the sys­tem even fur­ther, but I guess for new folks out there, peo­ple that have lost mon­ey — which a lot of peo­ple will have if they start­ed in the last twelve months, their port­fo­lio is prob­a­bly down as the QAV port­fo­lio is down a lit­tle bit — I just want to reas­sure them that, yeah, you’ll make it back up, stick to the sys­tem, be con­sis­tent…

Tony 16:37
Yeah.

Cameron 16:38
And, you know, I mean, with­out refer­ring to your thir­ty year his­to­ry, you know, I can say from first­hand expe­ri­ence now just in the last three years, there’s been times like the GFC — not the GFC, the COVID cough — where we’ve had to sell a tonne of stuff and we were down and things looked dire, and even­tu­al­ly the mar­ket picked back up again and we rode it all the way back up. And, you know, it’s come back down, but I’ve seen it hap­pen at least one, I’m not sure if that was a cycle, real­ly, but it was an event any­way that I’ve rid­den through, and so this time I’m like, “Meh, yeah, you know, it goes down goes back up.” It’s like a roller coast­er, right?

Tony 17:23
Cor­rect. And the mar­kets not gonna close, and the econ­o­my is not going to shut, so the share mar­ket might drop a lot fur­ther from where it is, it might go up tomor­row, we just don’t know. The impor­tant thing is to have a frame­work. To those peo­ple who are new to QAV, I do sym­pa­thise with them, because as we’ve spo­ken about, I’m down mil­lions as well. So, I do sym­pa­thise and empathise with them, but I’m, I’m gonna just pose a cou­ple of basic ques­tions about share invest­ing: is the time to sell at the bot­tom, or is the time to sell at the top — or just after the top? It’s obvi­ous­ly, you want to sell on the top. We choose to sell just after the top on the way down, go to cash and buy back in as close to the bot­tom as we can. So, if you’re new to it and you’ve lost mon­ey, hang in there, this sys­tem will put you back on a path to long term wealth cre­ation. And you’ll look back on this and say it was a stum­ble of a start, but, you know, we sur­vived and we got through and it’s work­ing real­ly well.

Unknown Speak­er 18:17
*“Fire and Brim­stone com­ing down from the skies, rivers and seas boil­ing.” “Forty Years of earth­quakes, vol­ca­noes.” “The dead ris­ing from the great human sac­ri­fice, dogs and cats liv­ing togeth­er, mass hys­te­ria.” “Enough! I get the point.”*

.

Tony 18:32
“Dogs and cats,” that’s my favourite line.

Cameron 18:35
The clip I was look­ing for, which I don’t have appar­ent­ly is: “you know, boys, some­day this war is gonna end.” That’s what I just keep think­ing, some­day this is going to end. We don’t know when, could be six months from now, it could be next week. We don’t know, but we know it will end. It will turn around, and we need to be vig­i­lant, we need to be invest­ed. We need to be ready to, you know, fill the cof­fers when it turns, because when it turns it’ll go back up and we know from his­to­ry, that’s where the mon­ey is made, right?

Tony 19:12
Yeah. And to set the scene, this might not hap­pen for anoth­er twelve or eigh­teen months as well. So, we may well be trad­ing in and out, sit­ting on cash for a long peri­od of time going for­ward, too, because my pre­dic­tion was wrong. It does­n’t seem like the Ukrain­ian war will be short, it will be long — well, it’s already been long.

Cameron 19:29
If the Amer­i­cans have any­thing to do with it, it’ll be going for twen­ty years. $70 bil­lion I think they’ve approved now in fund­ing for Ukraine. I under­stand the mind­set that says we want the Ukraini­ans to win, we want to sup­port the Ukraini­ans, but what it means alter­na­tive­ly is it’s going to draw this thing out for a long, long, long time.

Tony 19:55
Yeah, so the oil mar­ket might stay high for a long time which is going to impact on peo­ple’s pock­ets as they fill their cars up, as they pay their gas bills. So, the econ­o­my may not right itself for a while. If we do tip into a reces­sion, that’s not going to be an easy thing to fix. That’s going to take a cou­ple of quar­ters, prob­a­bly, to get us out of that, and all kinds of issues that will be raised by gov­ern­ments to fix that which could involve more tax­es, or it could involve cut­ting to wel­fare, or all kinds of things. So, it may not be easy. On the oth­er side, it could be all over tomor­row. Who knows?

Cameron 20:30
But we got to keep a long-term view and just ride it out.

Tony 20:34
Yeah.

Cameron 20:35
Let’s talk about the charts, Tony. Iron ore chart. Iron ore’s come back a lot from its high, and I remem­ber last year you fudge a sell line for it. What are your thoughts on the iron ore chart at the moment? I think it’s down about 125 I think it’s trad­ing at the moment, down from about 217/220 at its top. So, it’s almost come down 50%.

Tony 21:04
Yeah, I had a look at it yes­ter­day and it was still fine, even on the fudge basis, but I’ll call it up and have a look.

Cameron 21:08
If you were gonna fudge it, like, how would you draw the line at this point?

Tony 21:12
Yeah, so when I fudged it last time I went back two years, which seemed to be the cycle for iron ore. So, I went back to April 2020 as L1, and then I used the COVID cough — well, actu­al­ly it was after the COVID cough, Novem­ber 2021 as L2, and I get a sell price at $99.

Cameron 21:32
We’re gonna hang in for that?

Tony 21:34
Yeah.

Cameron 21:34
Right.

Tony 21:35
By the way, iron ore looks like a Josephine at the moment, too, because it’s sec­ond buy is just below its buy price at the moment.

Cameron 21:41
Yeah, the rea­son I ask, though, is we own some iron ore stocks still in the dum­my port­fo­lio. I’m won­der­ing when we’re going to dump them based on the iron ore com­mod­i­ty chart. Like, we’ve got GRR, we’ve got FMG, we’ve got FEX, and they’re not doing well. But we’re still up 54% on GRR this finan­cial year. We’re up 54% on KOV this finan­cial year, up 20% almost for KSC, up 70% for IGl. Some of our shares are still okay. Done real­ly well out of them this year despite them com­ing back a lot.

Tony 22:17
Yeah. And that’s how it works, as well. It’s been my expe­ri­ence that we nev­er go com­plete­ly to cash, I nev­er go com­plete­ly to cash. So, there’ll always be some­thing in the port­fo­lio, but there’ll be a lot of stuff which we’ll rule 1 out of.

Cameron 22:27
So, you’re not pre­pared to give up on iron ore stocks just yet?

Tony 22:31
No, well, using the same log­ic as last year, the fudge is going to be sub $100. So, $99, I think, is the fudge sell, and the five-year sel­l­’s even low­er, it’s going to be around, sort of, sub $80. About 79 bucks.

Cameron 22:44
And then the gold chart, if you can have a quick look at that for me, too. I mean, gold is look­ing okay, but I think it’s still… it’s not a Josephine, but it has­n’t breached the sec­ond buy line for gold. So, I’m hold­ing off on gold stocks.

Tony 23:00
Yeah, you’re right, actu­al­ly. Yeah, it’s still below its sec­ond buy line. I bought a gold stock last week, I did­n’t even check that — I should have, it went down. That was West African Resources. So, I’ve got — this is the gold futures cur­rent in Stock Doc­tor, GC#. I’ve got a sell price of around $16.65, so say $16.70, and the price today is $18.53.

Cameron 23:27
Well, I’m look­ing at the AUD chart because the stock Doc­tor ones USD, isn’t it?

Tony 23:31
It is. So, on a US dol­lar basis, the gold price is well above its sell, and on an AUD basis it’s get­ting back close to its sell, actu­al­ly.

Cameron 23:41
Real­ly? How are you draw­ing the line here?

Tony 23:43
So, I just need to go back, make sure I’ve gone back five years. Because you’re right, I’m get­ting a ten-year graph for the month­ly. I’m going to use L1 as Novem­ber 2018, and then that makes L2 April 19. And if I just do a ruler on that… no, she’s well above the sell line with those. Yeah, no, it’s fine. Has been going side­ways for a while though.

Cameron 23:43
Yeah, but it’s a Joseph, right?

Tony 23:51
Yes, it’s a Josephine too.

Cameron 23:56
Because it has­n’t breached the line. Yeah. So, we’re not buy­ing stuff there. Okay.

Tony 24:15
I wish I’d seen that last week. Thanks for point­ing it out.

Cameron 24:18
I think I did point it out to you last week too, but you obvi­ous­ly for­got. All right. The oth­er thing, I talked to you a bit about this off air, I’ve just noticed, par­tic­u­lar­ly since I’ve been here… my process when I’m here in the US is when I wake up in the morn­ing, I check my emails — because you know, nine o’clock in the morn­ing is like mid­dle of the night in Aus­tralia — and I check my Stock Doc­tor alerts for sells and then I throw them into a spread­sheet so I can dou­ble check my rule 1s and my div­i­dends and my calcs, and that kind of stuff. And I’ve got sort of a track­ing sheet. It uses stock his­to­ry in Excel to give me the cur­rent price, then tells… because, some­times the alert will go off in the mid­dle of the day in Aus­tralia, but by the time I check it the price has gone back above the rule 1 line. But what I’ve noticed is that the cur­rent price accord­ing to stock his­to­ry in Excel is dif­fer­ent some­times to the cur­rent price accord­ing to Stock Doc­tor, and Stock Doc­tor will still have it as a sell, but stock his­to­ry will have it as being okay — or, some­times just bare­ly above the rule 1 price. So far, I’ve been using stock his­to­ry’s price and not Stock Doc­tor’s because we’re using stock his­to­ry now for the auto­mat­ic Josephine cal­cu­la­tor in the score­card that Gary and Dave put togeth­er for us over the last few weeks. And if I throw out stock his­to­ry as being unre­li­able, all that goes out the win­dow as well. So, I’ve been stick­ing with it, but in some cas­es, and the one that’s most promi­nent for me at the moment is BPT. Stock his­to­ry’s cur­rent price is like $1.71, which is okay in terms of our rule 1. Stock Doc­tor’s cur­rent price is $1.55, which is well below our rule 1. We need to make a cap­tain’s call here on do we go with the stock his­to­ry price, or the Stock Doc­tor price. So, I’m sell­ing when I need to sell rather than hold­ing on when I should­n’t be hold­ing on. Thoughts? And stock his­to­ry is backed by Refini­tiv, which we should be reli­able. I haven’t reached out to Refini­tiv yet, or Microsoft, about why there’s a big dif­fer­ence. What’s your gut feel­ing on this? If Stock Doc­tor says it’s below the rule 1, should I just sell it and ignore stock his­to­ry?

Cameron 24:32
Well, I’m not an expert on stock his­to­ry. I under­stand Stock Doc­tor’s on a twen­ty-minute delay. I think their data provider is Reuters, and I think Refini­tiv’s data provider might be Reuters as well. I think stock his­to­ry has a twen­ty-minute delay as well. So, I think they both should be the same. Was this a prob­lem before you went to the States, or is it just hap­pen­ing now in the States?

Tony 26:31
I did­n’t notice it before I came here, but I was­n’t doing twen­ty rule 1s a day either back then, so I don’t know.

Tony 27:00
I won­der if when you look at Stock Doc­tors, it’s the clos­ing… well, hey both should be the clos­ing price because you’re doing it overnight Aus­tralia time.

Cameron 27:13
No, I’m look­ing at the cur­rent price. Not the clos­ing price, the cur­rent price.

Tony 27:17
Yeah, but if you’re doing it at, like, mid­night in Aus­tralia, the cur­rent price would be the clos­ing price.

Cameron 27:21
Yeah, that’s right.

Tony 27:21
So, the only thing I can think of is I won­der if there’s some trades going through some­how overnight that’s chang­ing stock his­to­ry, but stock doc­tors using a clos­ing prod­uct? I don’t know. I’m not an expert, sor­ry. I haven’t seen that prob­lem before, and I don’t use stock his­to­ry that much. But look, I’m hop­ing, well, there should be some lis­ten­ers out there who do use stock his­to­ry and can give us their take on whether it’s reli­able or not.

Cameron 27:45
Yeah, alright, any­one’s got any thoughts on that, please let me know. Alright, what have you got in your list of notes to talk about today, TK?

Tony 27:53
Yeah, I’ve got a few things, actu­al­ly. Talk­ing about how to improve things in the future, I mean, hats off to one of the lis­ten­ers who asked the ques­tion about whether we should be buy­ing GMA, the Gen­worth mort­gage busi­ness, when the inter­est rates are going up. Because of course that price has crashed, and I was rule 1d out of that fair­ly ear­ly on after the RBA raised inter­est rates. So, it was pret­ty sound advice, but I just fol­lowed the sys­tem there. But again, think­ing about things that we can improve on going for­ward, maybe that’s one of them; that we pay more atten­tion to, or I pay more atten­tion to how eco­nom­ic fun­da­men­tals are going to affect com­pa­nies,

Cameron 28:31
is that effec­tive­ly the same as look­ing at the com­mod­i­ty price for an iron ore stock? Look­ing at the inter­est rates for a mort­gage busi­ness?

Tony 28:37
Could be, absolute­ly. So, I need to look at that a bit fur­ther. But yeah, hats off to the lis­ten­er who raised that, and hope­ful­ly they sold out before the share price went down. Have we spo­ken about VGI and how it was merged and now is RPL? So, VGI was on the buy list.

Cameron 28:54
We men­tioned it briefly at some point, or I did., because I spent half an hour try­ing to work it out one day because we owned VGI, and I was try­ing to work out what was going on with it. And then, yeah, I think you and I worked out that it had changed its name the day before or some­thing. Yeah.

Tony 29:11
Yeah, if peo­ple haven’t worked it out, they prob­a­bly have by now because it was a week ago.

Cameron 29:15
We end­ed up hav­ing to sell it, too, because after that merg­er and name change it crashed.

Tony 29:21
Good merg­er. At least the invest­ment bankers got their mon­ey for the merg­er.

Cameron 29:24
Yeah, as long as they’re okay, that’s all that mat­ters.

Tony 29:26
I did want to make a com­ment on the banks. Again, it’s in line with the com­ment about GMA. So, I guess the rule in the past has been as inter­est rates rise, banks do well because their mar­gin improves. So, they tend to pay more for their bor­row­ings but pass all of that on to their deposit account, so they get the use of the deposit accounts for their mort­gages, and they get a high­er mar­gin than what they get when inter­est rates are com­ing down. I think that still holds long-term, but the banks have all been sold off as soon as the RBA raised inter­est rates more than what was expect­ed. It seems like it’s because of ana­lysts expect­ing to have a rise in bad debts, so as inter­est rates rise, you’d expect some peo­ple who are bor­row­ing on the mar­gin, who are bor­row­ing with­out any sort of abil­i­ty to pay, and high­er inter­est rates will start to go bad. I’m not sure that’s the case, but cer­tain­ly, what’s called the pro­vi­sion for bad and doubt­ful debts has been a big dri­ver of bank share prices going in the last sort of five to ten years, and the write­backs of those… so dur­ing COVID, the banks added a lot of pro­vi­sion­ing for bad and doubt­ful debts to their bal­ance sheets, and that saw the share prices tank. And then after COVID, they rode it back because the world did­n’t end and peo­ple did­n’t have to sell the hous­es, or they actu­al­ly had a hol­i­day on repay­ments, too, if they want­ed it. So, the pro­vi­sions were writ­ten back, and the banks took off again, and now they’re down again because peo­ple fear that they’re going to have to rise those pro­vi­sions. And they might. So, that’s, I think, a short-term thing for the banks, and I think longer term in a ris­ing inter­est rate envi­ron­ment they will do well. So, my gut says that the banks may be the first things we start to buy back into when things turn around. But any­way, that’s a pre­dic­tion, we’ll see. About six to twelve months ago we were asked the ques­tion about whether we should focus on the small end of the mar­ket, and whether that out­per­formed the mar­ket in gen­er­al. I went back and had a look at the Small Ords index over time ver­sus the large-cap stocks over time, and they seem to go in cycles but nei­ther out­per­formed over a long peri­od of time. I know this just recent­ly — this is last week when I saw this, so it’s prob­a­bly even worse than these num­bers — but I noticed that for a rolling twelve-month peri­od, the small Ords is down 12.8% ver­sus All Ords, down 1.64%. So, you know, this is the time prob­a­bly when the cycles chang­ing out of Small Ords doing well, small com­pa­nies, small caps doing well com­pared to large ones. That’s just by the by, I guess it was rein­forc­ing the answer to the ques­tion that was raised last year about whether we should be in small-caps or not. I’m agnos­tic to it, and if we were in small caps, we’d be doing a lot worse than what we are now. I’ve post­ed on Face­book, so a lot of lis­ten­ers have already seen this, that we are doing a lot of sell­ing at the moment and it does hap­pen to be June, which is the tra­di­tion­al peri­od for cap­i­tal gains tax sell­ing. And so, two points here: the first one is that the sell­ing is being depressed by peo­ple who are tak­ing advan­tage of loss­es, and they’re crys­tallis­ing them. I think we may see that reverse com­ing out of June. So, towards the end of June and going into July the fact that peo­ple aren’t tax sell­ing any­more may actu­al­ly have a pos­i­tive impact on the mar­ket. So, we’ll watch out for that. But I also just want to raise with peo­ple that the tax office will look for peo­ple who are sell­ing out a share at a loss to claim a cap­i­tal gains tax loss to put against the cap­i­tal gains tax that they may have to pay, and if they buy the share back in a short peri­od of time, the ATO will take a dim view to that.

Cameron 33:00
Can’t we just say to the ATO, “hey, we were just fol­low­ing the sys­tem?”

Tony 33:04
I think peo­ple will have to get their own advice on that, get their own tax advice, and I would think that if you are fol­low­ing the sys­tem and can point out, “this is how I trade nor­mal­ly,” you prob­a­bly would be on rea­son­able grounds to argue the case with the ATO. But who wants to argue with the ATO, right? Because, they have the big­ger card they can play which is, “I’m going to now do a com­plete audit on you going back over five years, pro­duce your records,” and that’s just gonna tie you up in red tape for a long time, even if you are squeaky clean. So, I’m just rais­ing it as an issue.

Cameron 33:34
So, what’s the win­dow in which you should­n’t buy back some­thing?

Tony 33:39
As I under­stand it, there’s no peri­od that the ATO has spec­i­fied. I was once told by my tax advi­sor the win­dow was six months that they would feel com­fort­able if I bought some­thing back that I’d sold in June towards the end of the year, that you could say that’s enough dis­tance, but there is no rule on what the win­dow is.

Cameron 33:58
Is he out on pro­ba­tion yet?

Tony 34:02
Yeah, I’ve been spon­sor­ing his kids for the last three years.

Cameron 34:07
Tak­ing them a cooked meal, home cooked meal, to the shel­ter once a week.

Tony 34:12
Tak­ing them to school every day. Any­way, look, I’m not a tax advi­sor, but just be aware of it, and if peo­ple can talk to their own tax accoun­tants about it. But it’s an issue. What else has been hap­pen­ing? I’ve noticed that there’s been anoth­er yield curve inver­sion in the US, which is, again, a tra­di­tion­al fore­cast­er of reces­sions. So, I guess if it hap­pens often enough, we’ll get a reces­sion. So, it’s quite pos­si­ble that this case will prove to be true. But again, who knows? Some­thing more ger­mane to our pod­cast is, it’s around this sort of time in the mar­ket that peo­ple start to raise ques­tions about three-point trend­line sells. And if any­one wants to see the ben­e­fit to that, go and have a look in the mas­ter check­list on the top scores page. So, you know, our buy list page with all the oth­er stocks that have been down­loaded as well and scroll down look­ing at the QAV col­umn. So, the stocks that are on our buy list have a three-point trend line sen­ti­ment check, which is “yes” in that col­umn. So, yes, they’re above their sell lines and their buy lines. If you scroll down far enough, you’ll see com­pa­nies which have a high QAV score but they’re sen­ti­ment is below the sell line. So, they’re stocks that we would­n’t buy, but they have been on the buy list, a lot of them have been on the buy list before. Stocks like South 32, which was a big mon­ey spin­ner for me last year, my best per­form­ing stock and I sold out, is now down a lot. It was a real eye open­er for me and rein­forc­ing the ben­e­fits of the three-point trend­line sells to go and have a look at that list and look at all the com­pa­nies that are there. Just go back into the Bret­te­la­tor with some of those and look at how much they have dropped when they crossed their sell lines. It’s quite a lot. It’s quite sub­stan­tial.

Cameron 35:55
There’s actu­al­ly a ques­tion that I’ve got lat­er on from Kurt about that process. He post­ed on Face­book today and shout out to Andrew McClel­lan who weighed in with his expe­ri­ence, which I thought was fan­tas­tic. Andrew said, you know, talk­ing about the sell­ing etcetera, etcetera, because, you know, some­times they go down, some­times they go back up and all that kind of stuff. Andrew says, “I thought the same ear­li­er on and then I went and looked at all the stocks I’d sold against bet­ter advice to see where they’d be if I had­n’t rule 1d them. Over­whelm­ing­ly worse off was the answer. I think if your QAV time­frame had start­ed a year or two years ear­li­er, then you’d be in a dif­fer­ent posi­tion, also. After the first year my accoun­tant did ask why I’d sold all my losers and lost mon­ey, and I explained to him that I was keep­ing the win­ners run­ning.” And then he said, “anoth­er thing that took a lit­tle longer to get used to was not look­ing as much as I was. Always log­ging in and check­ing, com­par­ing etc., was very dis­tract­ing. Mine was a cold turkey sce­nario. Had some hol­i­days com­ing up, I was so busy at work lead­ing up to it then too dis­tract­ed while on hol­i­days to check.” So, two points there I think are worth repeat­ing. Num­ber one is that yeah, long-term, the rea­son we rule 1 things or 3PTL things is whilst some of them will turn around and go back up, we believe based on your expe­ri­ence that more often than not, six out of ten times they won’t go back up, and so we win on aver­ages there. And the sec­ond point is, when you sell some­thing don’t check it. You told me that one point and yeah, that’s been my rule. You’re dead to me. If I sell you, you’re dead to me until you turn up on the top of the buy list again. I don’t want to know about it. I’m like “la-la-la-la-la”.

Tony 37:47
Yeah, exact­ly right, and it was just by coin­ci­dence I went down the buy list to that bot­tom sec­tion, and just saw all these stocks that I had either own in the past or had been on the buy list. I went, “holy shit”, they had all cratered by a large, a large amount. It was quite eye open­ing.

Cameron 38:05
And I know it’s tough for peo­ple when you’re new, when you’re sell­ing stuff and then you check and it goes back up, and you’re like, “ah, I should have held on to it,” etc, etc. But the point is that we’re putting into place stop loss­es, because, well, in most cas­es, not in the cur­rent mar­ket, but most cas­es, we can take that mon­ey and put it some­where else that we’re a lit­tle bit more con­fi­dent about. And your expe­ri­ence over thir­ty years is that more often than not, call­ing the stop loss is the right deci­sion to make. It’ll go against you some­times, but it’ll go in your favour more often than not over a long peri­od of time.

Tony 38:46
Yeah, and the COVID cough is a great exam­ple of that as was the GFC, which I did­n’t have the 3PTL lines for. And so, like, when the mar­ket went down 15% or so at the start of the GFC, or at the start of the COVID cough, we’re all going “rats”, you know, “we’ve been doing so well late­ly and we’re giv­ing it all back,” but we’d get out and then…

Cameron 39:04
You rode it all the way down.

Tony 39:06
In the GFC I rode it all the way down, and sud­den­ly 15% looked great, wish I had of sold out at 15% — which we did dur­ing the COVID cough. And so, when the mar­ket was down 35% or what­ev­er it was in March 2020, I felt a lot bet­ter about the fact that I was down 15% at the start, and I had cash to invest back in. So, yeah, we’re flog­ging a dead horse here, or we’re repeat­ing our­selves, but it is the sys­tem, and it is some­times hard to imple­ment, but it is worth­while.

Cameron 39:36
Look, I know for peo­ple that have been lis­ten­ing for a long time it’s flog­ging a dead horse, but for all the new peo­ple this is their first cor­rec­tion, and it’s ter­ri­fy­ing. I get it. You’ve invest­ed mon­ey using a sys­tem, now the shares are gone, and you have to sell them. A lot of peo­ple have prob­a­bly, you know, I’ve seen on Face­book, they had twen­ty stocks in their port­fo­lio, and they’ve had sell three quar­ters of them in the last few weeks. And that’s like “holy hell”. But you’ve just got to chill, it’ll be okay.

Tony 40:07
I guess the last com­ment I’ll make about the mar­ket at the moment is, there’s two things which dri­ves the mar­ket either up or down, and they’re both reflect­ed in the PE ratio. So, at the moment we’re see­ing what’s called PE com­pres­sion, which is dri­ving the mar­ket down. So, you know, most of the stocks on the stock mar­ket are prof­itable, just as prof­itable as they were, if not more so, six months ago. The mar­kets try­ing to guess that they might be less prof­itable six months from here, and there­fore the price they’re pay­ing for the same earn­ings goes down. So, we’re see­ing what’s called PE com­pres­sion. So, we we’re above mar­ket aver­age PE, we’re back to mar­ket aver­age PE. I think the pen­du­lum will keep swing­ing and we’ll go below mar­ket aver­age PE. So, we’re see­ing noth­ing dif­fer­ent on the earn­ings front, at least the report­ed earn­ings front, but the peo­ple’s will­ing­ness to pay for earn­ings is drop­ping, and so we’re see­ing what’s called PE com­pres­sion. That’s always the first leg down of the stock mar­ket. The sec­ond leg down is when we see earn­ings reduce, and so we get the PE going down because the earn­ings are going down. Whether or not that hap­pens is yet to play out, but we won’t know that until the report­ing sea­son — either this next one com­ing up in August, or per­haps lat­er on. Prob­a­bly August I would think we’ll start to see either the earn­ings be affect­ed, or com­pa­nies call out that their pro­jec­tions are going to be affect­ed by it. So, that might be when we see anoth­er leg down in the share mar­ket. But there’s always two legs to this; PE ratio either goes down or goes up because peo­ple are either more pes­simistic or more exu­ber­ant, and then we see what’s hap­pen­ing with earn­ings after that.

Tony 40:07
But you’re gonna take a long-term view. I don’t want to be sex­ist about it, but this sep­a­rates the men from the boys, or the women from the girls, or what­ev­er. Just the tes­tic­u­lar for­ti­tude to be an investor, a val­ue investor, a pro­fes­sion­al investor.

Tony 42:01
Yeah.

Cameron 42:01
Right? This is where the rub­ber meets the road, you’ve got to be able to stom­ach your way through cor­rec­tions and down­turns because that’s just part of the part of the cycle.

Tony 42:14
Cor­rect. We tune the mar­ket out. I have one last com­ment to make and that’s some­thing I noticed about, again in the Fin Review, an arti­cle last week that the ALP since it’s been elect­ed are con­sid­er­ing throw­ing out the finan­cial — I don’t know what the cor­rect term is — but the rules gov­ern­ing finan­cial advice in Aus­tralia and they’re going to change them. So, at the moment if you go to a finan­cial advi­sor you have to pay for a full assess­ment to be done on your sit­u­a­tion that gen­er­al­ly costs sort of $3,000/$4,000/$5,000 depend­ing on your sit­u­a­tion, which is turn­ing a lot of peo­ple away from finan­cial advice and has also cre­at­ed a down­turn in com­pa­nies that pro­vide finan­cial advice. The rum­blings in this arti­cle are that the ALP are going to intro­duce a new rule which says that you can pro­vide some kind of basic finan­cial advice for about $500, which has always been the Nir­vana in in wealth man­age­ment cir­cles. So, I imag­ine it will be along the lines of our invest­ing lad­der. You know, if you’re the first rung on the lad­der, you go in, they’ll ask you some basic ques­tions: do you have a house? How much is it worth? What’s the mort­gage? Do you have spare cash? What’s your Super like? Okay, pay down your debt or buy an ETF or some­thing like that, and they’ll charge 500 bucks for that. If that nut’s cracked and the reg­u­la­tions changes, then I would expect com­pa­nies like AMP to have a good run. So, AMPs, I think, below its sell line for us at the moment, but oth­er­wise it will be on the buy list, so it’s one to watch going for­ward.

Cameron 43:43
I think we still have it. I bet­ter check the port­fo­lio. Maybe we got rid of it, I can’t remem­ber. Bloody ALP. Did you notice that this mar­ket down­turn hap­pened when the Labor gov­ern­ment got elect­ed, Tony? It’s all their fault.

Tony 43:55
It’s always the Labor gov­ern­ment that cleans up, isn’t it? Kevin Rudd got in and then had the GFC hap­pen, and now it’s Albane­se’s turn.

Cameron 44:04
Yes. Is Dut­ton blam­ing Albo for the reces­sion yet?

Tony 44:11
No, but he was blam­ing him for the prob­lems in the ener­gy mar­ket which I thought was a bit rich. He’s only been in for two weeks and already’s been blamed for the ener­gy mar­ket, which has been stuffed up by Angus bloody Tay­lor for the last ten years.

Cameron 44:25
All right, you’re ready for some Q&A?.

Tony 44:27
No, I want to do a pulled pork.

Cameron 44:29
Oh, the pulled pork. What have you got in your oven today, Tony?

Tony 44:34
I’ll do a quick one. Wood­side Ener­gy Group. Was called Wood­side Petro­le­um, now has merged with BHP — or the oil and gas assets from BHP — to cre­ate quite a big ener­gy pow­er­house in Aus­tralia. Cer­tain­ly, ranks up there on the glob­al stage now. Wood­side Ener­gy Group. The fig­ures I’m going to use are the ones that are in our buy list and they’re still pre-merg­er because they haven’t released their results since they merged. But I guess I’ll make a glob­al com­ment. It’s inter­est­ing, the fact that Wood­side has come onto our buy list means it’s got a low price to oper­at­ing cash flow, and I know it’s got a rea­son­able PE. Those things I would think will even improve more when new results come out, because there are more assets and more cash flow to add to that from the merg­er. So, again, I don’t want to fore­cast it, but it’s one worth look­ing at. It actu­al­ly has been about the only thing I’ve thought of buy­ing, well, I did by West African Resources when I should­n’t have last week because gold was a Josephine, and I did­n’t pick it up. But a cou­ple of days I’ve come close to buy­ing Wood­side, but they’ve been hav­ing some down days as the oil price has move down a bit, so I’ve been hes­i­tant to buy on a down day. But it is not a Josephine and it is above its buy price, and it’s prob­a­bly one of the only things on our buy list which is. So, just quick­ly, I’m using a share price of $30.36 which was the price yes­ter­day, 20th of June 2022. Price is just below con­sen­sus tar­get, it’s a bor­der­line star stock in stock doc­tor, so it gets a score of 0.05 for that. It’s got a high div­i­dend yield of 5.86% which scores a point for us. Finan­cial health is strong which is a score of one, and recov­er­ing, which we like to see as well, so it gets a score of two on that basis. Price to oper­at­ing cash flow 5.7 times, and as I said, I would think there’d be more oper­at­ing cash tipped into this com­pa­ny because of the BHP oil and gas assets being added. So, that might actu­al­ly improve going for­ward, but we’ll see. Price is less than IV2 and less than two times IV2, so it’s scores for those. Growth over PE is quite high, it’s sev­en times, and if you recall the score­cards look­ing for a growth to PE of above 1.5. But I think in this case the growth is com­ing from the merg­ers. So, we’re still look­ing at a PE based on the cur­rent fig­ures, but there’s a lot more earn­ings per share com­ing into the com­bined com­pa­ny which is, there­fore, the fore­cast is say­ing earn­ings per share will rise if growth over PE looks good. It’s the low­est PE for three years. It does­n’t have con­sis­tent increas­ing equi­ty, so it does­n’t score on that. All in all, it gets 103% for qual­i­ty which is a real­ly good score and the sign of a well-man­aged com­pa­ny, and a 0.18 for QAV, so we might look to Wood­side on a good day fair­ly soon.

Cameron 47:29
Except I sold it today. I rule 1’d it out yes­ter­day.

Tony 47:32
Oh real­ly? Oh, okay.

Cameron 47:34
You said it’s not a Josephine but I think it is still below its sec­ond buy line.

Tony 47:39
Okay, I haven’t looked at that, sor­ry.

Cameron 47:42
I had a look at it this morn­ing, because it popped up on my buy list and I was gonna buy it for my port­fo­lio, my own port­fo­lio. But yeah, I think it’s… it’s on its way up, but still a lit­tle bit below the sec­ond buy line.

Tony 47:55
Okay, thanks.

Cameron 47:56
No prob­lems. Thank you for that.

Tony 47:58
Any­way, it’s one to watch.

Cameron 48:00
Yeah, one of the very few things that’s look­ing good at the moment. AVA is the oth­er one that looks okay at the moment, but again, I don’t think it’s gone above its sec­ond buy line recov­er­ing from a Josephine. Not a lot of things out there right now. All right, Q&A. Here’s a ques­tion from Dave S: “hi Cam and Tony. This isn’t a ques­tion as such, but maybe an inter­est­ing top­ic for the next show. The say­ing ‘why bench Michael Jor­dan’ is often cit­ed in rela­tion to sell­ing a stock whose price has risen dra­mat­i­cal­ly. I think this con­fus­es price with per­for­mance. A counter anal­o­gy is ‘Why sell Fer­nan­do Tor­res.’ ” And then for peo­ple like me who have no idea what he’s talk­ing about, he help­ful­ly pro­vides the fol­low­ing expla­na­tion. “In 2011, Fer­nan­do Tor­res was one of the Eng­lish Pre­mier League’s best strik­ers hav­ing scored six­ty-five goals in his four sea­sons for Liv­er­pool. He was sold to Chelsea for the irre­sistible price of 50 mil­lion pounds. With the pro­ceeds, Liv­er­pool bought Luis Suarez for 20 mil­lion pounds who was even more pro­lif­ic, scor­ing six­ty-nine goals in his four sea­sons before being sold Barcelona for 65 mil­lion pounds. Tor­res, mean­while, scored just twen­ty goals in his sub­se­quent four sea­sons at Chelsea before even­tu­al­ly being released as a free agent. So, by sell­ing their best play­er at his peak, Liv­er­pool got two mas­sive prof­its totalling 75 mil­lion pounds plus six­ty-nine goals. Had they kept him, they would have received no prof­it and just twen­ty goals. So, why bench your best play­er, Michael Jor­dan? Well, he’s the best because he scores the most points, not because he demands the high­est trans­fer fee. And you’re not bench­ing him, you’re sell­ing him for an astro­nom­i­cal fee. With that fee you might afford five Steph Cur­ry’s, and just because he’s the best play­er does­n’t mean he isn’t also the most over­hyped and over­val­ued play­er whose val­ue could revert to mean any day. Thanks again for the show, hope this is a use­ful con­tri­bu­tion. Dave S.” What’s your take on all of that, TK?

Tony 50:10
I think a cou­ple of things. The why bench Michael Jor­dan-ism is a war­ren Buf­fett quote, and he talks about let­ting his best stocks run. I don’t know, this might be over labour­ing the anal­o­gy a lit­tle bit, because we do have our sell rules, so we will sell Michael Jor­dan at the right time, hope­ful­ly. And when regres­sion to the mean hap­pens. The ques­tion and the key is in Dav­e’s lit­tle sum­ma­ry there, he’s say­ing that in this case, Chelsea I think it was sold their play­er at their peak and then Liv­er­pool sold to Chelsea and got a good price by sell­ing their play­er at their peak. The ques­tion for Dave I’ve got is, if you have a bet­ter way of pick­ing a stock when it’s at its peak then let us know, but I’ve always found it incred­i­bly hard to know when a stock is at its peak. I know when they’re not at their peak, and it’s when we sell them, they’re on their way down. But, you know, I’ve tried over the years rebal­anc­ing port­fo­lio tri­als, you know, sell­ing from the bot­tom of the buy list and buy­ing from the top and var­i­ous rules around that, and it’s nev­er per­formed as well as hold­ing on to those good stocks even when they appear to be over­priced accord­ing to our check­list, until they turn, and we sell them for what­ev­er rea­son. So, yeah, I under­stand what you’re say­ing, Dave, I just haven’t been able to crack when a stocks at its peak, and it’s the old say­ing that no one rings a bell when the mar­kets at the top of the cycle or at the bot­tom of the cycle. Same goes for stocks. So, hap­py to accept your anal­o­gy, but I haven’t been able to put it in prac­tice on any sort of improved basis than the rules we use cur­rent­ly.

Cameron 51:49
And the exam­ple that I always go back to is FMG a few years ago. When we bought it, peo­ple said we were buy­ing it at the high­est price it had ever been, we were crazy. Then it went up 100%, peo­ple said we should sell it, we’re crazy. Then we held on to it, then it went up like anoth­er 100% over the next year. And yeah, obvi­ous­ly it does­n’t always work out that way, but again, we think that more often than not good com­pa­nies will con­tin­ue to be good com­pa­nies and they’ll con­tin­ue to gen­er­ate cash and be loved by the mar­ket until they’re not any­more.

Tony 52:28
Yeah. And that’s kind of the essence of our way of invest­ing. As you say, they have to be a good com­pa­ny to be on our buy list. They score on the qual­i­ty met­rics, usu­al­ly, and they have to be throw­ing off lots of cash. So, I guess our faith, or our invest­ment the­sis is that there’s a good man­age­ment team behind this com­pa­ny and they’ll know what to do to deploy the cash, and they’ll mul­ti­ply that cash in future years back into the com­pa­ny. So, it goes against our the­sis to sell too ear­ly those good stocks.

Cameron 52:58
And I total­ly under­stand Dav­e’s point, and a lot of peo­ple have made this point, is they want to take prof­its off the table and rede­ploy it some­where else. And if we could be sure that the stocks that we rede­ployed it into would per­form real­ly well then great, but we can’t be sure. I mean, QAV is a sys­tem of try­ing to iden­ti­fy the stocks that will out­per­form the rest of the mar­ket, but six out of ten times is what we’re look­ing for. So, we don’t know what we’re putting our mon­ey into when we sell one. When we’re on one that is per­form­ing real­ly well, we’re reluc­tant to give it up. You can divorce your hot wife and mar­ry a younger mod­el and think that, you know, you’re gonna get a good ten years out of that one, but you don’t know what’s real­ly going on until you’ve been mar­ried to her for a cou­ple of years.

Tony 53:57
And then you have a kid when you’re our age run­ning around.

Cameron 54:00
Don’t remind me, it’s why my hair is so grey. Yeah, you just, you don’t know what you’re get­ting your­self into. Even like, even with QAV, you still don’t know what you’re buy­ing. I mean, you hope that we’ve done our research and odds are that it’s going to do well, but you don’t know.

Tony 54:20
That’s anoth­er good point, yeah. If we’re get­ting six out of ten right, then if we sell one of those six that’s got­ta low­er the odds and we rein­vest it with a 60% accu­ra­cy. If you keep play­ing that game too much sud­den­ly the odds, swap, and it’s a 40% suc­cess rate, which is going to kill us.

Cameron 54:35
But, you know, peo­ple should feel com­fort­able — do what feels right for you. You know, you don’t have to do it the way Tony does it. But we can’t be sure what the results will be. Go do it, and then as you always say, come back in five years and let us know how it went.

Tony 54:50
Yeah, and if some­one can tell us when a stock is right for sell­ing at the top of its mar­ket, great. Let us know.

Cameron 54:56
Who did we have on? Oh, was it Michael Gold­berg? The inter­view­er has­n’t gone out yet, but we spoke to Michael Gold­berg from Collin’s Street a week or two ago, and he was telling us a sto­ry about one stock that they bought and they made, sort of, 50% on it. And he thought that’s good, then they got out and it went up anoth­er, like, 100% in the next year, and he was kick­ing him­self that he did­n’t stick with it. I can’t remem­ber which com­pa­ny it was. Alright, Kush has a ques­tion. “Hi Cam. I owned UPST, Upstart in the US, which is going through a dif­fi­cult peri­od. It would be great to have TK’s long term per­spec­tive on the AI/financial sec­tor. Thanks, take care. Kush.” How famil­iar are you with the AI finan­cial sec­tor, TK?

Tony 55:44
I guess AI’s arti­fi­cial intel­li­gence. I’ve got no idea on the AI sec­tor. I guess my com­ment about — if that’s what it is — my com­ment is, yeah, look, I’ve been through, this is now my sec­ond dot­com bub­ble that’s burst. And, you know, I’m not gonna say peo­ple can’t make mon­ey out of invest­ing in hype stocks and stocks that may one day deliv­er future ben­e­fit to all of mankind. But twice I’ve seen it hap­pen, and peo­ple tend to come out with their ass­es hand­ed to them.

Cameron 56:15
Isn’t it going to be three times now? The dot­com crash, GFC, and now this one?

Tony 56:22
The GFC did­n’t real­ly have a dot­com com­po­nent to it. Like, obvi­ous­ly, there were growth stocks in the GFC which came off, but the dot­com bub­ble in this one, there’s been a bit of a dot­com boom; Tes­la, all the WAAX stocks and all that kind of stuff going on, and they’ve all come back quite strong­ly. So, again, it just says to me that unless you know what you’re doing, you’re prob­a­bly gonna find that, or unless you’re trad­ing, you may make some mon­ey on the way up, you lose it all on the way down. And my guess is, and this has­n’t played out yet, but prob­a­bly only about two or three of the stocks that were hyped dur­ing the boom are going to go on to be good busi­ness­es, just like it hap­pened last time round in the dot­com boom, you know, with Ama­zon and I’m strug­gling to think of any oth­er ones — maybe Yahoo, maybe Microsoft.

Cameron 57:09
eBay.

Tony 57:10
eBay after the dot­com, boom. It’s going to be the same this time around as well. So, that’s my take on the AI mar­ket, be care­ful buy­ing into stocks that don’t make any mon­ey and require you to keep tip­ping into cap­i­tal rais­ings. It’s just that to me, it just always ends in tears. On the finan­cial sec­tor side of things, I’ve cov­ered it ear­li­er in the pod­cast that there’s wor­ry now about the banks tak­ing pro­vi­sions for bad and doubt­ful debts. So, that will crimp their share prices in the short term. But I think in a ris­ing inter­est rate mar­ket, assum­ing inter­est rates con­tin­ue to rise — and that’s also not a giv­en in the long-term sense — that the banks will do well, they’ll do bet­ter than what they have in a low­er inter­est rate envi­ron­ment. So, that’s I guess my broad brush take on the finan­cial sec­tor.

Cameron 57:55
For those peo­ple won­der­ing what upstart is, UPST. Accord­ing to their web­site there like an auto­mat­ic, like an online lender by the sounds of it. Found­ed by ex-Googlers, Upstart is a lead­ing arti­fi­cial intel­li­gence lend­ing plat­form designed to improve access to afford­able cred­it while reduc­ing the risk and costs of lend­ing for our bank part­ners. By lever­ag­ing Upstarts AI plat­form, Upstart pow­ered banks can offer high­er approval rates and expe­ri­ence low­er loss rates, while simul­ta­ne­ous­ly deliv­er­ing the excep­tion­al dig­i­tal-first lend­ing expe­ri­ence their cus­tomers demand. $25.4 bil­lion in lend­ing, 74% of loans ful­ly auto­mat­ed. So, yeah, it’s basi­cal­ly a tech com­pa­ny.

Tony 58:42
A Fin­tech. Yeah, so my take on the fin­tech sec­tor is that, at least in Aus­tralia and I can’t real­ly com­ment on Amer­i­ca, but I sus­pect it’s the same, the banks are big lum­ber­ing beasts that get fat and lazy. They have com­pe­ti­tion amongst them­selves, it’s been a long time since there’s been small, nim­ble, upstart play­ers com­pet­ing with them. My gen­er­al expe­ri­ence in that kind of sit­u­a­tion is that if a com­pa­ny does do well, like Upstart may be doing, a bank will buy them out and adopt their tech­nol­o­gy and put it on their own plat­form.

Cameron 59:11
And screw up that process, and all the founders will leave, and it’ll just become anoth­er bor­ing bank ser­vice.

Tony 59:18
Yeah. But the banks, I mean, the banks acknowl­edge that they do need to improve their abil­i­ty to ser­vice appli­ca­tions quick­er. I mean, you know, go and try and apply for a hous­ing loan. That can take cou­ple of weeks. I called it cardi­gan coun­try, like, I used to sit in one of the banks when I was con­sult­ing to one of them and watch their mort­gage depart­ment. There’d be, like, guys in cubi­cles with paper high­er than the cubi­cle walls, they were the mort­gage appli­ca­tions on paper they were pro­cess­ing, and they’d walk one across to the next cubi­cle and add it to that pile. It would take a cou­ple of weeks for the paper to get through the sys­tem. So, yeah, it’s ripe for dis­rup­tion, but whether that will be prof­itable for a fin­tech, or whether the fin­tech will get bought. I guess if you’re a share­hold­er and the fin­tech gets bought out by a bank it prob­a­bly will be prof­itable, but that’s prob­a­bly how it’s gonna play out.

Cameron 1:00:03
Or the flip side is the fin­tech crash­es and burns. I mean, anoth­er fin­tech, a clone of it gets bought out and does well. It’s part of that whole thing where you’re spec­u­lat­ing about its future. You don’t real­ly know, right? Its gam­bling.

Tony 1:00:16
I don’t have it up in front of me, what’s the share price been doing for Upstart and what’s its PE like? Can you see it?

Cameron 1:00:22
Over the last year, it’s gone from… Octo­ber 2021, it was trad­ing at about $390 USD a share, its cur­rent­ly trad­ing at $35 USD a share. So, not a great time for investors in UPST in the last year. It’s only down what­ev­er that is, like 90% in the course of a year. So, it’s PE…

Tony 1:00:54
I just called it up, cur­rent­ly 21 times. In the last peri­od it’s been up as high as 35, but I imag­ine when it was at its peak, it was 100 or some­thing like that.

Cameron 1:01:03
But its finan­cials look good. Its rev­enue’s up 154% year on year, net incomes up 223% year on year, $32 mil­lion. Earn­ings per shares is about 34 cents, up 209%. Net prof­it mar­gin­’s up 30% year on year. So, on the basis of those finan­cials it looks like it’s doing okay, but the shares have crashed. Maybe they’ve bot­tomed out and maybe they haven’t.

Tony 1:01:30
Might be one of those stocks that does sur­vive, and it comes onto our buy list at a cheap price. But it’s in the US, so I don’t know.

Cameron 1:01:36
It’s not going to come into our list here, no. I hope that helps Kush, I sus­pect not, but there you go. Dave asks, “hi Cam and TK. I want­ed to share my cur­rent per­for­mance, and dare I, ques­tion rule 1.” You dare, obvi­ous­ly Dave.

Tony 1:01:53
Join the line, Dave.

Cameron 1:01:54
“80 to 90% of my sales have been rule 1. In eight months since incep­tion, the port­fo­lio has turned over not once but twice because of rule 1s alone. Aver­age hold­ing time for rule 1 stocks has been about eleven weeks and as short as one week. Port­fo­lio is down 50% ver­sus mar­ket 10% total return. The rule 1 sells amount to a 25% realised loss on the port­fo­lio. Per­for­mance of GRR has sin­gle-hand­ed­ly dragged it back up to neg­a­tive 15%. To test rule 1, I went back and sim­u­lat­ed the port­fo­lio ignor­ing rule 1 and rely­ing on the oth­er sell rules only thanks to the Bret­te­la­tor, a great tool. I found I would have got a return of neg­a­tive 3% ver­sus mar­ket neg­a­tive 10%, an 18% improve­ment and with far few­er sells. My sus­pi­cion is that rule 1 may be use­ful in a ris­ing mar­ket but dif­fi­cult to com­bat in a side­ways or falling mar­ket where 10% fluc­tu­a­tions are more fre­quent. The 10% loss is locked in at the first avail­able oppor­tu­ni­ty time and time again. This makes it very hard to estab­lish a new port­fo­lio. More philo­soph­i­cal­ly, rule 1 seems at odds with the QAV phi­los­o­phy; the qual­i­ty, val­ue or price sen­ti­ment of a stock is unre­lat­ed to the price at which one indi­vid­ual has bought it for. So, I’d like to ask if such a high pro­por­tion of rule 1 sells is com­mon, and sec­ond­ly, will it be pos­si­ble to do a sim­i­lar ret­ro­spec­tive sim­u­la­tion on the QAV dum­my port­fo­lio, i.e., ignor­ing rule 1 sells? I’d offer, but I have three kids under four. Sor­ry for the lengthy ques­tion and thank you for the show. Dave.” While you answer this I’m going to go fill my glass with water because I’m get­ting parched, because I’ve still got the air­con on, and it’s hot. So, you talk.

Tony 1:03:45
What time is it over there, by the way?

Cameron 1:03:47
5:35 in the after­noon.

Tony 1:03:50
That should be cool. Should’ve cooled down by now.

Cameron 1:03:52
Yeah, it’s only prob­a­bly 40 degrees out­side.

Tony 1:03:56
All right, I’ll answer the ques­tion. Thanks, Dave. So, a cou­ple of com­ments I would make. The first one is you’re talk­ing about that rule 1 may be use­ful in a ris­ing mar­ket but dif­fi­cult to com­bat in a side­ways or falling mar­ket where 10% fluc­tu­a­tions are more fre­quent. Well, you’re pos­si­bly right and it has been a very unusu­al mar­ket in the last, say, six months where the mar­ket was going side­ways and we were turn­ing over the port­fo­lio a lot more fre­quent­ly than we nor­mal­ly did. So, yes, it’s pos­si­ble that the rule 1s will be neg­a­tive­ly impact­ing our port­fo­lio com­pared to just hav­ing 3PTLS as our sell pol­i­cy dur­ing that time. But, if I look at the longer term, that’s one six month peri­od in the last twen­ty plus years that I can think of where we’ve had that kind of tur­moil. It was cer­tain­ly one of the most tur­bu­lent peri­ods, if not the most tur­bu­lent peri­od, I can think of. Where the rule 1 does come into its own is not nec­es­sar­i­ly in a ris­ing mar­ket, I think it comes into its own in a falling mar­ket which is what’s hap­pen­ing now. And we’re stop­ping out when we lose 10% and prob­a­bly putting it into cash to be ready to rein­vest it at some stage in the future when things are cheap­er. So, I’m glad I’ve been stopped out of all the stocks, and cer­tain­ly that’s been a bless­ing. Yes, my port­fo­lio is down, it’s still not down as bad as the mar­ket just like our dum­my port­fo­lio, so I think it’s worth­while doing. Look, I think there’s always going to be peri­ods where any of these rules will look like they under­per­form, but over the long term they out­per­form. So, rather than try­ing to cher­ry pick when I apply the rules, I’m just going to apply them and not have to think about whether it’s a chop­py mar­ket or an up mar­ket or a down mar­ket. Because, often­times those things don’t reveal them­selves to you any­way until you’re well into them, and then its too late to change the rules based on your per­cep­tion of how the mar­kets going. So, appre­ci­ate what you’re say­ing, Dave, and how it’s worked in par­tic­u­lar for your sit­u­a­tion. But, you haven’t con­vinced me to change what we do.

Cameron 1:05:58
Yeah, and I’m sor­ry to hear that your port­fo­lio is down 15%, Dave, that’s got­ta be dis­cour­ag­ing. But yeah, it’s unfor­tu­nate­ly just this last year when you start­ed has been the worst pos­si­ble time, prob­a­bly, in some ways. Apart from the edu­ca­tion­al aspect of it, you know, you’re get­ting edu­ca­tion by fire — tri­al by fire. I mean, I don’t know if, well, yeah, you did do the analy­sis on would it have been bet­ter off if you had­n’t sold? But yeah, that’s, uh, as Tony said, it’s just seems like it’s a not a big enough data set over a longer peri­od of time to deter­mine whether or not it works. We prob­a­bly could do that with the dum­my port­fo­lio, but I don’t real­ly have the time or the incli­na­tion, but maybe we can get our intern to do it.

Tony 1:06:43
Our intern’s intern­ing some­where else at the moment, so no, we can’t do that.

Cameron 1:06:47
Well, we need a new intern.

Tony 1:06:49
Yeah.

Cameron 1:06:49
By the way, best thing about being in the US is Clam­a­to juice. Love Clam­a­to juice. Still annoyed that I can’t get it in Aus­tralia.

Tony 1:07:00
Put some vod­ka in it.

Cameron 1:07:02
Thank you. Thank you.

Tony 1:07:03
Bloody Mary.

Cameron 1:07:04
The offi­cial alco­holic of the show, put vod­ka into every­thing.

Tony 1:07:09
I’m not the alco­holic. Who was the one who post­ed on Face­book you were doing the down­load with a bot­tle of scotch beside you?

Cameron 1:07:20
You’re a bad influ­ence on me.

Tony 1:07:22
I was talk­ing with Alex because she was meant to be, like, she had a week off because of her exams and stuff. And she goes, “Cam did the down­load with a bot­tle of scotch. Is it okay? I did­n’t see the results.”

Cameron 1:07:33
No, it was prob­a­bly ter­ri­ble. Well, you know, it was a big one.

Tony 1:07:40
One last word about rule 1s. I always view rule 1s and stop loss­es as an insur­ance pol­i­cy. Some­times you claim on it, and some­times you don’t. But, I like the fact that there’s an insur­ance pol­i­cy in place.

Cameron 1:07:52
Yeah, like it gets back to that thing with the three-point trend­line what­ev­er. It’s not going to work in your favour every time, but long term we believe it will.

Tony 1:08:01
Well, we know it will.

Cameron 1:08:03
Petra asks, “when the mar­ket drops like it has, is TK tempt­ed to buy a won­der­ful com­pa­ny at a fair price and ignore sen­ti­ment? Are there some com­pa­nies he would own if on sale regard­less of sen­ti­ment? MQG springs to mind,” Mac­quar­ie Group.

Tony 1:08:19
Yeah, again, this is anoth­er ver­sion of the last ques­tion. It’s, are we val­ue investors, or are we val­ue and momen­tum investors? I’ve found over time that the ben­e­fits of adding the sen­ti­ment check­ing and rule 1s to our port­fo­lio has improve my returns. But yeah, a tra­di­tion­al val­ue investor would be rub­bing their hands now and prob­a­bly dol­lar-cost aver­ag­ing into stocks like Mac­quar­ie groups. So, good com­pa­ny, share price is down, will always be around, will always do good going for­ward and even­tu­al­ly it will turn up. So, I get that, that’s just not how I invest because Mac­quar­ie Group could go a lot cheap­er, and I’ve invest­ed cap­i­tal which I could have been either putting in cash or some­thing else while wait­ing for Mac­quar­ie group to estab­lish an uptrend. So, to me that’s just, sort of, basic log­ic, and I think it’s an improve­ment on val­ue invest­ing and it’s proven to be for me. So, no, I won’t buy Mac­quar­ie Group at the moment, it’s still a falling knife. But when I see sen­ti­ment return, and assum­ing that Mac­quar­ie Group’s still on the buy list, which it prob­a­bly will be because it’s a good com­pa­ny, then I’ll buy it at the right time.

Cameron 1:09:22
Yeah, so it’s cur­rent­ly trad­ing at $162. It was as high as about $207, and we did buy it.

Tony 1:09:30
I bought it.

Cameron 1:09:30
Yeah, I bought it and bought it for QAV, too, I think around about $200 — $198, some­thing like that, I recall, then had to rule 1 it. But let’s say it went from $208/$209 at its peak only back in April, and let’s say you bought it at $190, it had dropped 10% and you thought “ooh, you beau­ty, I’ll get in there.” Now it’s $160and it could drop fur­ther, so you don’t real­ly know, right? How long it’s going to drop for, when it’s going to turn around, et cetera, et cetera.

Tony 1:10:04
Cor­rect. So, I just pre­fer to step aside when the drop hap­pens and then re-enter when it’s a good time to re-enter.

Cameron 1:10:11
TK, I’ve got three late ques­tions that came in today that don’t require any prep. Are you will­ing to just, you know, han­dle them extem­po­ra­ne­ous­ly?

Tony 1:10:23
Yeah, sure. I mean, we’ve been going for, what, an hour and three quar­ters, so…

Cameron 1:10:27
We prob­a­bly won’t do one next week, because I think I’m going to be hik­ing in a canyon some­where, so I think I’ll put out an inter­view, I’ll put out Michael Gold­berg’s inter­view next week. Just think of this as two weeks of shows crammed into one.

Tony 1:10:40
That’s why I thought we did the Michael Gold­berg inter­view. Oh, and by the way, before you put that inter­view out, I will fore­shad­ow a lit­tle bit. We asked him for his best idea which he said was Link Mar­ket Ser­vices which was under a takeover offer, I think from a Cana­di­an pen­sion fund or some­thing sim­i­lar. It looks like they’re gonna walk away and the share price has dropped a lot. So, I’ll just, I like Michael, and I just want­ed to put that out there that when peo­ple lis­ten to that best idea, then do your own research.

Cameron 1:11:07
Yeah. Well, all right. This one comes from Sue: “Hi, Cam. Was won­der­ing what TC rec­om­mends when you get jumped on rule 1? An exam­ple is…”

Cameron 1:11:17
TK.

Cameron 1:11:17
What’d I say? Oh no, she wrote TC. Who is TC? It’s you and me, Tony Cam. Yeah, we’re, it’s like JLo, no not JLo, like one of the celebri­ty cou­ples. That’s our celebri­ty cou­ple name, is TC, Tony­cam. “An exam­ple is, I got NHC and on Fri­day I was sit­ting at a neg­a­tive 9% return. Today it plunged to neg­a­tive 12%, so I’m sit­ting at neg­a­tive 21% with­out blink­ing today. Would Tony still sell this on rule 1, or is there a sce­nario where it’s gone down so much where he thinks it’s too late to sell? I feel like I remem­ber an episode in ear­ly pan­dem­ic times where the dum­my port­fo­lio missed a rule 1 win­dow, may have been HAW, and it was bet­ter to hold than sell. I could­n’t be dream­ing this.” I think it was you and AMI. Was it your own port­fo­lio? You missed AMI?

Tony 1:12:09
Yeah, it does ring a bell.

Cameron 1:12:09
I think you said you missed the rule 1 and then you thought “screw it, I’ll just hold on to it.”

Tony 1:12:19
Yeah, well, I think I raised it on the show because it was the wrong thing to do, so…

Cameron 1:12:25
It kept going down, or it stayed down for a long time.

Tony 1:12:28
Yeah, so I got stopped out of NHC yes­ter­day myself and it was down more than 10% when I sold it, so I think you should still sell.

Cameron 1:12:37
So, you would still sell? Yeah, okay. You still want to stop your loss, cut your loss­es and get out.

Cameron 1:12:42
Cor­rect.

Cameron 1:12:43
There you go, Sue. Philip asks, “for stocks that have had big gains and now have a large dif­fer­ence between their cur­rent share price and the 3PTL sell price, what is the view on fudg­ing the 3PTL sell price? Eg. cham­pi­on iron ore, CIA and Grange resources, GRR, are two exam­ples. Both are down neg­a­tive 10% today, and if we wait until they hit the 3PTL sell price as deter­mined by the Bret­te­la­tor, they’ll have lost more of their val­ue before sell­ing. Should we fudge and still take a prof­it?” The answer is obvi­ous­ly, no.

Tony 1:13:14
Cor­rect, yeah. So, like, I mean, first of all, 10%. Big deal. They’re up a lot. I’m famil­iar with CIA more than GRR because I own it, and if you look at the graph it does have an almost like a fac­to­ry roof to it where it goes up and down by big swings. So, I’m not wor­ried about that. We spoke about the iron ore graph, it’s quite pos­si­ble that the fudge sell for iron ore will hap­pen before these stocks reach their 3PTsLs, so I’d be watch­ing that. But yeah, fudge away peo­ple. If it makes you feel unset­tled, then go ahead and sell it.

Cameron 1:13:46
Pack that fudge like you’re Tom Cruise, but we will hold on.

Tony 1:13:50
Yeah, so I own CIA.

Cameron 1:13:52
But if you’re going to fudge any­thing, it’s going to be the iron ore sell price, not the stock sell price.

Tony 1:13:58
Cor­rect.

Cameron 1:13:58
And the last one is from Kurt. Again, “in these times of steep declines.” Sounds like a Paul Simon song. “In these times of steep decline.” I should start singing these ques­tions if it goes down any fur­ther. Speak­ing of singing, we went to see Ben Folds last night with Chris­sy’s sis­ter and broth­er-in-law. It was great. About ten or fif­teen min­utes into the show, he point­ed out that the piano was bro­ken. He would hit a note and it would sus­tain, he’d hit it and walk away from the piano, the note would just keep sus­tain­ing. So, he, with very good humour, I was real­ly impressed, he was like, “I think we need to take an inter­mis­sion and have some­one come and look at this piano.” So, we just took a break for fif­teen min­utes and these tech­ni­cians came down and messed with the piano and then he came back, and the piano still was­n’t work­ing prop­er­ly, so he would con­stant­ly play stuff and he’d have to reach in — it was a grand piano — he’d have to reach in and man­u­al­ly knock the bumpers down when they were being stuck up. In full cred­it to Ben Folds, I don’t know if you’re a Ben Folds fan, but I have been, you know, for twen­ty years. No?

Tony 1:15:05
Oh, so-so.

Cameron 1:15:05
I’ve seen him live a bunch of times. He’s a very fun­ny guy, like, he’s great with the audi­ence, he’s very enter­tain­ing as a per­former, and he han­dled it with aplomb. I had to give him cred­it. Like, a lot of per­form­ers, you know, they turn up, they expect to have good pianos. I don’t know if it’s the venue or the pro­mot­er, or who­ev­er organ­is­es the piano, but he could’ve thrown a tantrum and, you know, set the thing on fire — some­body in the audi­ence did sug­gest he should set it on fire. This being in Amer­i­ca, pull out an AR15 and shoot it up, maybe. But, he han­dled it very well.

Tony 1:15:38
I went to a WHO con­cert once when Pete Townsend did­n’t like the sound com­ing out of the app, so he put his gui­tar through it.

Cameron 1:15:44
Does­n’t he just do that for shits and gig­gles?

Tony 1:15:48
Prob­a­bly. I did­n’t know you were a Ben Folds fan; I did­n’t think you were.

Cameron 1:15:51
Love Ben Folds. Yeah, just, I real­ly dig Ben Folds. His songs are, sort of, bit­ter­sweet with some humour, and yeah, he’s great live. Gets the audi­ence involved singing three-piece har­monies. I remem­ber see­ing him, you know where you had your 50th? I think it was that pub or some­where near that. Saw him do a lit­tle venue. He lived in Ade­laide for a long time. Saw him play at this is lit­tle venue there once, and he’d spend, like, ten or fif­teen min­utes just doing music the­o­ry tests with the audi­ence. Like, he’d just play real­ly obscure chords and see if the audi­ence could work out what the chord was. And he had, obvi­ous­ly, a bunch of music nerds there and they were com­pet­ing to see who could call out the chord name first. He’s very pop­u­lar with music nerds, which I’m not, but Chris­sy is.

Tony 1:16:44
He did­n’t have the Shat with him, did he?

Cameron 1:16:45
No, but you know that track with the Shat?

Tony 1:16:48
Oh yeah.

Cameron 1:16:49
Well, he kind of, he rein­vig­o­rat­ed the Shat’s musi­cal career with that song — which is a great track if peo­ple haven’t heard it. Dark, dark, real­ly dark. Hey, did you lis­ten to that inter­view with the Shat that I told you about last time?

Tony 1:17:05
No.

Cameron 1:17:06
The Bill Maher inter­view, you got­ta check it out, man. It’s gold.

Tony 1:17:10
I will, okay, thanks.

Cameron 1:17:11
Anoth­er good Bill Maher one I lis­tened to on the way here — I know it’s not after hours yet — while it’s top of mind was with Sam­my Hagar, which was real­ly inter­est­ing. And you would have liked it, I think, because they talked at length about the Bea­t­les doc­u­men­tary. So, what Sam­my was say­ing was how dis­ap­point­ed he was when he watched the doc­u­men­tary with John Lennon’s atti­tude. And he said, “I’ve been a huge Lennon fan all my life, love Lennon.” And he said, “I thought at this stage of the Bea­t­les career, he was just hero­ined out of his brain, but he did­n’t seem to be hero­ined out. He just was being dis­rup­tive, and every time Paul would have an idea, John would just take the piss out of the idea, dis­rupt pro­ceed­ings,” and Bill Maher was like, “I did­n’t get that at all. I thought he was hav­ing a good time.” And Sam­my was say­ing, “lis­ten, I’ve been in bands my whole life. Bad dynam­ics I know real­ly well.” Obvi­ous­ly, hav­ing played with Eddie and bro­ken up with Eddie and all that kind of stuff. I get it. He said, “man, I could read the room there, and Paul was just pissed. John was just caus­ing prob­lems.” And he said, “it broke my heart to see John just being a dick,” you know, in the whole thing. So any­way, inter­est­ing. Any­way, last ques­tion, Kurt. “In these times of steep declines, like many of you, I’m just cur­rent­ly wit­ness­ing a lot of my shares which have proud­ly been in the green over the last nine months quick­ly dis­ap­pear. Like in the past month, 30%-11%. I appre­ci­ate that still above the ASX, but what’s con­cern­ing me is that I’ve nev­er sold a share since I start­ed in Sep­tem­ber last year for any prof­it. They all go back to zero or neg­a­tive 10%. Does this sound wrong?” Does this sound wrong? Was that wrong? It’s a George Costan­za line. “Was that wrong?” When he had sex with the clean­er under the desk. He’s like, he gets caught and he says “was that wrong. Because if any­body had told me that we should­n’t do that, I would­n’t have.” “I always record the three-point sell line from the Bret­te­la­tor, but it rarely seems to rise acute­ly enough for the down­turn to recov­er any prof­its. Hope­ful­ly that makes some sense. Thanks in advance.”

Tony 1:19:17
Well, same answer as before, isn’t it? It’s unusu­al times. So, yeah, the fact that you — I think you said he was get­ting out and break­ing even’s actu­al­ly good in this kind of mar­ket. So, look, it’s gonna always be the case. You can look back and say, you know, this stock was worth 30% more, I wish I’d sold it. But, unless you knew that in advance, it’s use­less doing that.

Cameron 1:19:37
But well, that’s the ques­tions for today, TK after hours, what have you got for me and after hours…

Cameron 1:32:52
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.

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