QAV 410 Transcript

Episode: QAV 410 Club


File Length: 01:02:25

Cameron Reilly [00:05]: Welcome back to QAV, TK, Episode 410. How are you today?

Tony Kynaston [00:10]: Yeah. Good. Good. Had a very productive day downloading Google Chrome. [Cross-talk 00:18].

Cameron Reilly [00:20]: Don’t start that again. Well, we haven’t done a Q&A episode for two weeks, so we’ve got a huge one today, but a few news things we should get into before we get into the Q&A. Buffett newsletter, Christmas in March, as you call it for value investors, what were your…I posted some of my highlights in our newsletter last week. What were your highlights?

Tony Kynaston [00:46]: Yeah. I think Buffett was saying people should stay clear of bonds at the moment. So, he’s predicting interest rates going to rise, which I think is telling because they’re one of the world’s big insurance companies, and they use their float to invest in stocks, but most insurance companies use their float to invest in bonds. So, they’re in trouble, I think, which will help Berkshire Hathaway because that will improve their returns as an insurance company. So, watch out for bonds. So, Buffett’s basically telling people interest rates are going to rise. That was the first thing. He mentioned that they had $138 billion of float. And just to remind people, float is the premiums that sit in the insurer’s bank account, waiting for someone to need to make a claim and then the claim comes out of the float. So particularly for life insurance, it’s a huge pool of money and it’s really the secret of Berkshire Hathaway I think they’ve got. They don’t have to go to the bank and borrow cash. They don’t have to sell assets to fund a new acquisition. They just keep getting this premium income which they invest into the next purchase. That’s one of the real secrets of Berkshire Hathaway, I think.

So, a huge float. They’re buying back their shares, which is always a real good sign that it’s a good time to buy Berkshire Hathaway shares. I haven’t, you know because I’m a little bit worried about what will happen when the, was it 98 years old and the 90-year-old finally reached their expiry date. So, but you know Berkshire Hathaway will continue. It’s just a question of whether it keeps rolling along at 20% per annum as it has done under Buffett. But yeah, they’re buying back their share, so it’s always a sign that Buffett thinks Berkshire Hathaway is undervalued, and if people are interested, they could buy the shares now. Berkshire is the highest owner of fixed assets in the USA, so bigger than any other company. And fixed assets mean property plant and equipment and real estate. So, a huge investor in the USA. And of course, Buffett famously says don’t bet against the USA. So, he’s all in. And just bought the book which hasn’t come yet by a guy called Jim Haslam that Buffett referred to in the letter. He runs a company called Pilot Travel Centers and that book is called Co-Piloting, which Buffett recommended in the letter. So, I’m going to have a look at that when it arrives. And then lastly stay tuned for the 1st of May when the Berkshire Hathaway AGM will be online again with Yahoo Finance with both Warren and Charlie this year, live from LA, which will probably start as I think it did last year, early in the morning, Sunday morning, our time.

Cameron Reilly [03:36]: You going to get up for it?

Tony Kynaston [03:38]: Absolutely. At least we can watch it [inaudible 03:40].

Cameron Reilly [03:44]: Yeah. That’s good. I posted some of my highlights in our newsletter last week, as I said on the first page, he reports Berkshire Hathaway’s compounded annual gain for the years 1965 to 2020, which is a neat 20%, as you said before.

Tony Kynaston [04:00]: Against the index is 10%.

Cameron Reilly [04:02]: Yeah. And I always look at that as a great number. I mean, you know, as I’ve said on the show lots of times, I think if that’s the performance of the most successful, I’d think, an investor in the last hundred years that’s a nice thing to aim for and you’re very close, so that’s a good benchmark getting close to 20%. So, I think some people want to get to, as we said, with David Waldron last week, people are trying to…What did he say? Like a lifetime’s worth of gains in a single year or something like that. 20% is a good benchmark to get if that’s what Buffett gets.

Tony Kynaston [04:42]: Yeah. I think that’s the upper right. Really, isn’t it? It’s going to be hard to beat that but we try.

Cameron Reilly [04:49]: Well, no, I think that if people are new to serious investing, they might think, well, 20%, that’s not much. I want 100% year on year. I remember when you first told me you got 20%, part of my brain was, was that good? I don’t know. What’s good? I don’t know if that’s good. What’s good? So, I think the fact that Buffett’s got that since 1965 on average is a good indicator of, well that’s good, 20% is good.

Tony Kynaston [05:23]: Yeah. It’s the consistency that’s the important thing. I mean, as you say, you can do better than that in some periods and obviously worse. But its over time getting that 20%. That means you’re doubling every sort of four to five years, four and a bit year, which isn’t…

Cameron Reilly [05:39]: The next highlight I loved is that he straight out of the gate in the newsletter talks about one of his screw-ups. He said he paid too much for Precision Castparts, which is hard to say 10 times quickly, PCC in 2016, which resulted in an $11 billion write down. He says, “PCC is far from my first error of that sort, but it is a big one.” I admire that about Warren, straight out of the bag, goes, “Yeah, I screwed up, made a huge mistake, cost us $11 billion. Well, that’s probably won’t be my last mistake either.” It just says a lot about the guy’s character, I think that he is happy to admit that he’s not perfect and he makes mistakes. I think that’s helpful. That’s great to see.

Tony Kynaston [06:24]: Yeah. And self-awareness, I mean, you’re right. How many CEOs who were like in a job for four or five years ago would admit to that kind of mistake? It’s obviously got a lot of comfort around being in the partnership and then in the company for 40 years. But yeah, he does it all the time. I think almost every annual report will fess up to some kind of a mistake. And what he’s really doing is taking pressure off himself. He’s telling people we all make mistakes. I forgive myself, you should too. It’s going to happen.

Cameron Reilly [06:59]: Warren wants me to forgive myself. Here are some of my other favorite quotes. Investing illusions can continue for a surprisingly long time. Wall Street loves the fees that deal-making generates and the press loves the stories that colorful promoters provide. At a point also the soaring price of a promoted stock can itself become the proof that an illusion is a reality. Eventually, of course, the party ends and many business emperors are found to have no clothes. Financial history is replete with the names of famous conglomerateurs who were initially lionized as business geniuses by journalists, analysts, and investment bankers, but whose creations ended up as business junkyards.

Tony Kynaston [07:48]: And we can all name a few of those, can’t we?

Cameron Reilly [07:51]: It’s just a great piece of writing. It’s just great. Great. I love it. It’s great. I thought this one sounded like it came from you talking about golf. Furthermore, as Ronald Reagan cautioned, it said that hard work never killed anyone, but I say, why take the chance?

Tony Kynaston [08:08]: Exactly. I agree. I mean the interesting point there is, I think when a lot of people first get into investing, they’re so conditioned to it being a job, they think they have to be busy all the time.

Cameron Reilly [08:26]: Right.

Tony Kynaston [08:26]: They think they have to be like performing in front of their boss, right. They have to be the first in, last out, every day and look busy all day. And that’s kind of the reverse of what Buffett’s saying there now. Eventually, you’ll have to make a decision, make it and move on, and do nothing until the next time you have to make a decision.

Cameron Reilly [08:43]: Right. Well, okay. That’s enough of that. What else is on the news? Oh, the Waldron interview. I thought that was really good. I enjoyed that. He’s a nice guy. One of our listeners who will remain anonymous suggested that if you ever decide to hit the golf tour permanently, full time, I could replace you with David Waldron. I was like, “Yeah. You know if Tony drops dead of a heart attack. You can just whip in Waldron. Put a little red wig on him and off we go.” No, I thought he was good. He’s very nice, very humble. And you know sent me a very lovely email afterward saying that he and his wife listened to the show or watch the video and just thought you did a great job with the questions you asked and the whole thing. They thought you were wonderful. So, yeah, that was nice.

Tony Kynaston [09:41]: So, they thought that I was wonderful but they sent you the email.

Cameron Reilly [09:46]: Well, I emailed him and he emailed me back. I was going to forward you the email but there’s only so much room on your video screen there. And I didn’t want to, I will send you the email. I thought you were too busy to read it because it’s reporting season.

Tony Kynaston [10:01]: Well, I’ve got the other 40 emails you’ve sent me today as well.


Cameron Reilly [10:07]: I know. I’m sorry. I try not to send you emails but things are happening.


Tony Kynaston [10:11]: That’s alright.


Cameron Reilly [10:12]: Yeah. And I thought that was great but just on the interviews, so on your suggestion, I did run a poll on our Facebook group about how many interviews people want to see. Because last year, we would do an interview a week sometimes and put out a Q&A show. And then I think when you were in Melbourne at the dinner earlier this year, people said don’t need to do two, just one or the other. But then we ran a poll and people said they only really would like one interview a month if we’re going to replace the Q&A episode. So, we will try and stick to that schedule. And if we do any other interviews beyond that, we will add them as an extra show, I guess, a month. Because we’ve got some good people lined up, including Chris Stott from 1851 Capital. I think he’s a former Wilson Asset Management guy and he’s got his own ship now that’s doing very well. So, looking forward to getting him on at some point in the future.

Tony Kynaston [11:00]: So am I.

Cameron Reilly [11:04]: What else? Sydney event, we’re going to do a Sydney dinner in a couple of weeks. We’re recording this by the way on March the 8th.

Tony Kynaston [11:13]: International Women’s Day.

Cameron Reilly [11:15]: It is. Yes. Hello to all of our lady listeners. We’ve had quite a few ladies sign up for QAV Club recently. So that’s nice to see. It’s been a little bit of a boy’s club, nice to see some more ladies signing up.

Tony Kynaston [11:28]: Which investing in businesses. So that’s great. Yep. Shout out to all those ladies, please join and we need to get some female interview subjects as well, if we can.

Cameron Reilly [11:36]: Yeah.

Tony Kynaston [11:37]: If any of the female investors out there want to come on the show and talk to us about either their investing performance or a business they’re running, that’d be great.

Cameron Reilly [11:46]: Yeah, that’d be great. So, Sydney dinner coming up in two weeks. I’ve sent out a newsletter or an email today, our newsletter with the details in it. Also, it’s on our Facebook groups. So, if you want to come along to that they’re always a great time. Click a link. And also, Tony and I will be going to a Whiskey event the previous night, the afternoon nights that my mate Niko is running the Australian Annual Whiskey Awards. So, if you want to get in on that, I think there are still some tickets available. There are also links in our Facebook group and the newsletter for that too. It’d be nice to come along. And my son Tyler is coming down to Sydney. He’s not coming to the Whiskey Awards because he’s not much of a drinker, but he is going to come to the QAV dinner. So that’ll be nice to have him there.

Tony Kynaston [12:35]: Yeah, will be. Will be, it’d be great. Good to see Tyler. I Zoom him like a couple of times a week for our [inaudible 12:43] business, but it’d be good to see him in the flesh.

Cameron Reilly [12:47]: Yeah. So, you and Taylor and a couple of other guys have got another thing that you’re doing and but yeah, he’s never been to your place. So, he’s looking forward to coming up and hanging out with you in Sydney for a couple of days. That’d be nice.

Tony Kynaston [12:59]: Yeah. It’d be great. Looking forward to it.

Cameron Reilly [13:03]: All right. Well, that’s all my news. You’ve done a ton of journal entries this week. Got a stock of the week out of all of those?

Tony Kynaston [13:11]: I do. Before we do, just going back to International Women’s Day, I saw something, I think it was on… Anyway, it was on an email today, in the Fortune 500 companies, only 7.4% are run by females, have female CEOs, which is just incredible, isn’t it? In this day and age.

Cameron Reilly [13:32]: Yeah. And I know that your wife Jenny is one of those and has been…

Tony Kynaston [13:38]: Has been. Yeah.

Cameron Reilly [13:39]: Has been one of those and has been very active. You know we’ve had lots of conversations with her about female representation in the boardroom and management. She’s been fighting that fight for a long time, she and her sister.

Tony Kynaston [13:53]: Yeah. And not just that fight, but the diversity fight. I mean, there’s plenty of research around there, but a diverse team works better than a homogenous team.

Cameron Reilly [14:04]: Yeah.

Tony Kynaston [14:05]: They don’t compete against each other. They don’t worry about trying to knock somebody off to take their job because they’re all different. They can’t do that.

Cameron Reilly [14:12]: Yeah.

Tony Kynaston [14:13]: Yeah.

Cameron Reilly [14:15]: So, Tony, how do we get more women in CEO positions?

Tony Kynaston [14:18]: Oh, you know, personally, I think things like childcare helps. One of the main reasons’ women drop out of the workforce and interrupt their careers is because they have to stay at home and look after kids. So, I think, subsidized or even universal free childcare is a big step in the right direction.

Cameron Reilly [14:38]: Yeah.

Tony Kynaston [14:38]: Yeah. I think John McFarlane, who used to be the CEO of ANZ had a rule that every time he had a shortlist for a senior management appointment it had to have at least one female on it. So just getting them in front of people, I think is a big thing. And then there’s plenty of evidence around the recruiting process, the famous case of the, I think it was the Boston Philharmonic when they interviewed violinists for the senior roles, they put them behind a curtain. So, they couldn’t tell whether it was male, female black, or white, and straight away, they started recruiting more females. So, there’s a lot of unconscious bias going on. So just simple things like that I think all help. It all adds up. It won’t change overnight, but it will certainly help. But at the moment, as you talk to women and they just so weary. It’s like they’ve just got to step over all those hurdles. It’d be different if it was just one, but there are so many [inaudible 15:38]older women. And I agree with you. I’ll pay tribute to Jenny and to my daughter, Alex, who’s doing a master’s now. They’re just sensational at what they do and great role models.

Cameron Reilly [15:49]: Yeah.


Tony Kynaston [15:50]: It should be more.

Cameron Reilly [15:50]: And I know for the research that I did for the book, the Psychopath Epidemic that the vast majority of psychopaths have blokes. So, one way of getting less psychopaths in positions of corporate power, organizational power is to have women running things.

Tony Kynaston [16:08]: Yeah. Good point.

Cameron Reilly [16:08]: That’s not to say women can’t be psychopaths, but for some reason, it tends to be a male trait.

Tony Kynaston [16:13]: Yeah. Good point.

Cameron Reilly [16:15]: And that says you know, my position, I took it at the end of the book, is that the biggest cause of a lot of the problems that we’re facing around the world today is the result of psychopaths in positions of power in all of our institutions, not just businesses, but politics, religion, the media police, the military. So, the more women we can get into positions of authority in those places, hopefully, the less psychopaths we have doing the damage.

Tony Kynaston [16:46]: Exactly. Yeah. We’ll see.

Cameron Reilly [16:48]: I’m all for it. I think men have been running things for the last 10,000 years, time for us to take a break and let the ladies run things for the next 10,000 years and see how it turns out.

Tony Kynaston [16:59]: They will follow Ronald Reagan’s advice for a while and avoid some hard work.

Cameron Reilly [17:05]: I thought you were going to say trust but verify. The other piece of it, limited wisdom.

Tony Kynaston [17:14]: My favorite interview with Ronald Reagan was about the freedom fighters in Nicaragua during the Contra [inaudible 17:14]. “Mr. President, why are we fighting the freedom fighters? Well, the freedom fighters, they’re fighting against freedom. That’s what they’re doing. Follow-up question, Mr. President. I can’t hear you. Helicopter. What was that? Sorry.”

Cameron Reilly [17:37]: Yeah. Yeah. If they’re on our side, they’re freedom fighters. If they’re not on our side, they’re terrorist rebels.

Tony Kynaston [17:44]: Yeah. Exactly.

Cameron Reilly [17:46]: Speaking of which, Fox has just finally got into watching the Star Wars films and we were watching, we got up to Return to the Jedi the other day, we watched that. So obvious that you know, I’d heard before over the years that when Lucas was making the films in his head, the rebels were the Viet Cong and the empire was the United States. But it’s a little bit hard to pick that up when they’re all white. The rebels were all mostly white aliens. But when you get up to Return of the Jedi and the Ewoks are taking down the empire with sticks and rocks and pieces of rope, I was like, “Holy crap, they’re the Viet Cong. There you go.”

Tony Kynaston [18:26]: Little people. Little teddy bears in the jungle.

Cameron Reilly [18:31]: Suggesting Vietnamese are little teddy bears, but just the sort of developing country, undeveloped technologies against the might of the empire.

Tony Kynaston [18:42]: Yeah. Right. Good point. Good analogy.

Cameron Reilly [18:45]: It didn’t make the film any better knowing that, but still Fox love.

Tony Kynaston [18:49]: Not my favorite of the Star Wars films, I’ve got to say.

Cameron Reilly [18:52]: Well, I’ll tell you what, to a six-year-old, he thought it was great.

Tony Kynaston [18:54]: Yeah.

Cameron Reilly [18:54]: Particularly, when an Ewok is just trying to swing a Bolero, a rock on a rope and hits himself in the head with it. Fox, he’s watching that clip on YouTube over and over again. Any who. Moving on. I wanted to before we get into the stock of the week, actually, you told me to sell some stocks that hadn’t hit their three-point trend line a couple of weeks ago. And then one of them bounce back up and you said it might’ve been your Buffett moment.

Tony Kynaston [19:21]: My Buffett moment?

Cameron Reilly [19:23]: Yeah.

Tony Kynaston [19:24]: Capitulation. I said it was a good example of capitulation.

Cameron Reilly [19:27]: Oh, okay. Well, I’m saying it was a mistake. That’s all.

Tony Kynaston [19:35]: Yes, it was.

Cameron Reilly [19:31]: Do you think [inaudible 19:31].

Tony Kynaston [19:35]: Yes, it was. No, it was Hawthorn. Hawthorn jumped about 10% after we sold it, I think and it’s trending back down again. Now RMS also jumped. They had a good…One day they jumped about 14%, I think one day after we sold it. But it’s been up and down again too. So yeah, I mean, the reason for selling was that those were the only two stocks that were underwater in our portfolio. And gold has been in a bit of a slump recently. So, I didn’t see the point in holding on waiting for the turn round, even though they hadn’t breached their sell lines.

Cameron Reilly [20:12]: But we have rules, Tony. What happened to…?

Tony Kynaston [20:16]: Rule number one, don’t lose money.

Cameron Reilly [20:20]: But we’ve had stocks before that have gone below their purchase price and you tell us to stick in there. Hold on.

Tony Kynaston [20:28]: Yeah. I’ve been thinking a lot about the commodity type stocks we’ve got and I was going to talk about it a bit later in answer to a question, but I’ll bring it up now. And certainly, some of the questions we’ve had recently about it have been prompting me to think about it too. I don’t want to get caught waiting for a three-point trend line that’s quite low to sell a commodity-based stock when regression to the main says that if we bought it when it was starting to trend up and we sell it when it gets back to that low point, we may have missed out on all the upside. So, I’m just trying to think through that at the moment, whether it means we have earlier sales signals by using shorter periods like has been mentioned by some other users in the Facebook group or we look for some kind of signal at the price to cash flow once it reverts to the mean or something like that.

I don’t know, but I am conscious of the fact that if we buy gold at its low point when it’s time to trend up again and wait all the way back to that low point, we basically held onto it for too long. So particularly with the commodity stocks and gold sort of is showing that that kind of behavior at the moment. But having said that and again I want to talk about it later. Oftentimes in the three-point trend lines, the last sort of the right, most of the graph will have the biggest swings in it. And if you think about it, if you look at the graph in hindsight, you’re seeing peaks and troughs all the way as it goes up to the right, the last one is probably going to have the biggest volatility, but it will be smaller as we move on in time. The next one will be bigger.

So, the fact that gold has come back a little bit now isn’t completely worrying to me because I think it might be just this kind of widening oscillation that I sometimes see in the graphs which will eventually over time prove to be a smaller oscillation as we get the bigger ones as we go down the time series. So, there’s that and I think the other thing about gold at the moment in particular that I’m thinking about which may mean this slump is a good time to buy rather than the time to sell, is that if inflation does start to increase, then people see gold as a hedge against inflation because it’s a lump of metal, which you can put in a safe and we’ll always have a value going forward, which isn’t affected by inflation. So sometimes when inflation starts to take off gold will too. So, there’s that. Although that involves prediction, which I’m not keen to do.

And the other thing which I find interesting is that gold has dropped from about 2000 US dollars an ounce back to sort of 1700-ish, which is a relatively small drop of, what’s that about 15%. But the gold mining stocks are down sometimes, you know, 30, 40%, which seems strange to me because if their margin really outsized profits at $2,000 an ounce, but they’re still making great profits at $1,700 an ounce. So, I think the market may have overshot with the gold miners as well. But all that aside, I just decided that it was my predicting abilities are pretty crap, and it’s not worth the risk of holding onto something, which is going to fall well below our buy price, just for the sake of waiting for it to come back. So, I’ll put this all in the sell.

Cameron Reilly [24:01]: So, it’s the Eddie Donato capitulation.

Tony Kynaston [24:05]: It’s definitely capitulation, especially if it comes back quickly afterward. Yeah. And it is capitulation. I mean, Hawthorn Resources were different. Hawthorne Resources, we had a 30% shareholder sell and leave the board. And you know, that could have been a trigger straight away, but I wanted to see what the market thought about it. And the market clearly thought there was something wrong there and the share price had dropped back from I think around $10 at the time down to $7, $10 or 10 cents, 10 cents, I think down to 7 cents. So that was a big drop. And I think the tribe had spoken on that one. So, I thought it was time to sell. But that was for a different reason.

Cameron Reilly [24:45]: Yeah. Okay. Thanks. Good. So…


Tony Kynaston [24:49]: Stock of the week.

Cameron Reilly [24:52]: You’ve got a stock of the week?


Tony Kynaston [24:53]: Yeah, I have. I actually picked out a couple. So, the stock of the week I was going to make is DSK Dusk, which again was a question that came in today as well. So, we can talk about it later if you like. Yeah. And I had a couple of probably worthwhile people looking at, the ones that sort of caught my eyes this last week, AIS, which is a copper miner. So again, it’s a copper play. ANZ, which is another bank, which has just crossed it three-point buy line and kept going during the week, which I think was one of the best performance last week. And AX1 one, which is the shoe company that we spoke about with Steve Mab before, it’s back on the buy list, but it’s a bit like JB Hi-Fi where it’s down the bottom of the buy list. Potentially, it comes on the buy list after its results, but it might shoot up again and people might miss it if they don’t look at the bottom of the buy list. So, they were three honorable mentions, I guess, as well as stock of the week.

Cameron Reilly [25:47]: Right. Okay, good. And we’ll get to DSK later.

Tony Kynaston [25:51]: Yeah.

Cameron Reilly [25:52]: All right. Well, if you’ve got nothing else.

Tony Kynaston [25:55]: No, that’s all.

Cameron Reilly [25:57]: Get stuck into the 4,000 questions that we have this week. See how many we get through before we run out of steam. This first one is from Mark. “Hi, Cam. The Getting Started Guide states that TK will generally hold onto a stock until (A) [inaudible 26:11] results, which changes its valuation. (B) Its share price breaches the three-point trend line. (C) He needs to liquidate some of his holdings to make a major acquisition, generally dot, dot, dot. In recent times, a few new reasons to sell have appeared. Rule one doesn’t lose money, sell even though shares are above the sell line, but below purchase price. Sells shares above the sell line to gain exposure to the upturn and commodity prices. I’ll leave it to you whether these are the reasons to sell deserve a mention in the Getting Started Guide. “Well, I think we’ve already talked about those.

Tony Kynaston [26:45]: Yeah. That probably should we should go in, I think and there’s a couple of other ones. There was obviously the resignation of a major player that should go on the list of reasons to sell, which is the Hawthorn Resources situation. And just to clarify too, the sell shares to make a major acquisition was more about buying something outside the share portfolio, like a new property rather than another share.

Cameron Reilly [27:12]: Yeah.

Tony Kynaston [27:13]: Yeah.

Cameron Reilly [27:14]: A boat.

Tony Kynaston [27:18]: I don’t have a boat and I wouldn’t. One thing better than owning a boat is having a friend who owns a boat.

Cameron Reilly [27:26]: Do you have any friends who own boats?


Tony Kynaston [27:27]: Yup.

Cameron Reilly [27:31]: [Inaudible 27:29]. Question from Mark, once shares are sold that have not crossed their sell line, what does Tony then use for the new buy line?

Tony Kynaston [27:41]: Yeah, so I use the old buy line, but generally we are selling something which is for whatever reason the share price is going down, so I wouldn’t buy it again until it started to go up again.

Cameron Reilly [27:52]: But you just use the normal buy line.

Tony Kynaston [27:56]: Yeah. I use the normal buy line. So generally, there are circumstances where we’re selling, where those stocks are still on the buy list. You know resignation of a major player, rule one, not losing money. They’re still in a buy situation, but the share price is declining in that buyer situation. So, if we decided to trigger a sale for that event, and sometimes we don’t, as you said before, we’ve had shares that fall into negative territory. I was just particularly, as I said before, concerned about commodity prices regressing to their averages in respect to gold which I need to think more about, but I will and do some research. But waiting to see what the market thinks is a major player resigning in the case of Hawthorn resources. It’s still a buy. The share price or whatever is trending down. So, I wouldn’t buy again until it started to trend up. And I would want to see at least a month of an upward trend there, maybe even two before I consider buying it again.

Cameron Reilly [28:50]: Otherwise, you’re trying to catch a falling knife. Correct?

Tony Kynaston [28:53]: Yeah.

Cameron Reilly [28:56]: Thanks, Mark. Eric. “Hi, Cameron. Hope you’re well.” I am well, thank you, Eric. Very well. “I’m running the numbers for BLY Boart Long Year. The score is coming up fairly high, but that is because it is very cheap. However, the earnings per share are negative. As a result, a lot of the data fields like PE and EPS feature a blank. The default position of the spreadsheet is to leave these blank if no data and so do not get counted into the score, which is actually increasing it rather than penalizing it. But my gut is telling me if a company has negative earnings, you shouldn’t touch it with a barge pole. The score seems contradictory in that way. Should we be treating negative EPS the same way as a qualified audit and not even consider it in the shortlist? And I noted at the time that BLY was on the watch list with positive sentiment and got a score of 0.48, which was a pretty good score.

Tony Kynaston [29:55]: I think it’s on the watch list with negative sentiments. Oh sorry. I can’t interrupt.


Cameron Reilly [29:58]: Oh, well it might have changed since then. I don’t know.

Tony Kynaston [30:02]: Yeah. Look, you want to call up the graph for that? It’s a hard one to work out. I scored it as a negative sentiment.

Cameron Reilly [30:12]: Right. Okay.

Tony Kynaston [30:13]: Have a look at the graph though, and I’ll tell you why.

Cameron Reilly [30:16]: Yeah. Bringing it up now.

Tony Kynaston [30:18]: Okay. Oh crap. Now I’m in Google Chrome, I have to remember what my password was.

Cameron Reilly [30:26]: Just open separate residue, dude and do it in the other browser.

Tony Kynaston [30:30]: Okay.

Cameron Reilly [30:30]: You can have two browsers running at the same time and you’ll see [inaudible 30:33]. I tell you what, it’s a good thing you’re rich.

Tony Kynaston [30:46]: Well, I’m coming from an age when you couldn’t have two operating systems going at the same time on the computer.

Cameron Reilly [30:50]: Just imagine that you going for a job interview. Yeah. Like What? If you can run two browsers? It took me an hour to download Chrome. What the…

Tony Kynaston [31:00]: Okay. Thank you for that. I’ve just uploaded Stock Doctor Boart Long Year down, 15.57% today.

Cameron Reilly [31:08]: Right. And this graph is a shocker. What the hell?

Tony Kynaston [31:12]: Yeah. I marked it down as not having a positive sentiment.

Cameron Reilly [31:17]: No. Well…

Tony Kynaston [31:19]: It’s even pretty hard to work out what the low point is to try and work out.

Cameron Reilly [31:24]: So, for the people who are in front of a screen, its high point was back in October 2016 at 35 or $34.55. Then it plummeted down to a low on June 17 of $6.55 or something. Then it jumped back up to $21. Then it jumped back down to $3.41 and then it went down, down, down to 80 cents and now it’s at 51 cents. But it’s just sort of been hovering somewhere between 50 and there about 70 for the last couple of years.

Tony Kynaston [32:02]: Yeah. And it’s possible that it is actually on a buy, in terms of the graph is sort of hard to tell because it’s so compressed on the right-hand side. But if it isn’t a buy, it’s really going sideways and it will come back to a sell, I think at some stage pretty soon.

Cameron Reilly [32:19]: So, if you did a buy line, that’s pretty easy. You’d go through the big peaks.

Tony Kynaston [32:24]: Yep.

Cameron Reilly [32:25]: Actually, there’s a little peak there just after like February 2017. So that would give me a buy price or buy back in February 2019, around a 1.50 or something. And it’s below that. But…

Tony Kynaston [32:45]: Well, there you’ve got sell lines. You can see the sell; you can see the low points easier in the past November 18 and May 19. And the share drops below that line around about February 2020. So, the COVID cough probably March 2020 and that low point is 46 cents. And there’s another low point further down at 44 cents. So, if you use the 44 cents and the next lowest to the right, it’s I think it’s in sell territory, it’s below those sell lines.

Cameron Reilly [33:27]: I mean, just looking at this chart, it’s kind of a falling knife and bunny boiler, and [inaudible 33:37] really would you?


Tony Kynaston [33:39]: It’s a knife falling and it is now sliding along the floor. So, watch out for your feet.

Cameron Reilly [33:45]: Yeah. Like it’s just doesn’t look like anything really is happening with it. I think over the five-year. Like on a five-year chart level, it just looks like there’s got to be better options out there and something that looks like it.

Tony Kynaston [33:58]: Yeah. I think so too. So, I’ve never had a positive sentiment on this one, even though it comes up with a good QAV score. It’s possible, I mean, we can probably play around with the graph to increase the resolution of the last couple of years and that might change my mind eventually. And that will probably happen anyway, as we scroll through time and those high peaks come off back in 2016, but until we see something that’s a definitive upswing, I’m not prepared to buy it.

Cameron Reilly [34:29]: But back to Eric questions about negative earnings per share.

Tony Kynaston [34:34]: Yeah. Yeah. Well, I leave stocks on the buy list that have negative earnings per share and there’s a couple on there now. NGA is a listed investment company that invests in energy stocks, particularly I think in New Guinea. For example, listed investment companies can have their piece or their earnings per share can swing from positive to negative because it’s mainly driven by their portfolio performance. So, you know, like what’s a profit for the coffee shop, which is just simply, I’ve sold more cups of coffee than it’s cost me to make them. It’s different for some companies like listed investment companies, for example, where they might have had a period of under-performance, but you know, those swing around again as their investments bear fruit. So sometimes negative PEs aren’t all they’re cracked up to be. And the other example is, for example, my which is also on the buy list, it’s pretty much acknowledged to me in a turnaround situation. So, you know, people are going to forgive it the last half of it made a loss because they expect it to make a profit in the future. So, the sentiment still positive on that stock and it scores well. So, I’m happy to have negative earnings per share in some of the stocks on the buy list on that basis.

Cameron Reilly [35:59]: Well outside of those examples though, if you had a company that was losing money but was still getting a good QAV score, could it get a good QAV score if it’s losing money?

Tony Kynaston [36:18]: Yeah. I mean, it could be, for example, it’s a start-up minor or any sort of start it up, but its metrics are really good on the other dimensions, but it’s not going as positive yet. It may turn on positive next half.

Cameron Reilly [36:33]: Yeah.

Tony Kynaston [36:34]: I could see that that would be another case too.

Cameron Reilly [36:36]: Right.


Tony Kynaston [36:37]: Yeah. I see [inaudible 36:39], it’s just one metric rather than just being a no-go no like a bad sentiment or qualified or what it is.

Cameron Reilly [36:49]: By the way, I look at the current watch list. You do have it with negative sentiment and you’ve got it with a QAV score of 0.19. So, I think the one I looked at must’ve been an outdated watch list.

Tony Kynaston [37:00]: Yeah. It must be because if I have a look at this, I’ve got. I’ll just look at mine now. I don’t know. I’ve got 0.19 as well. So, I agree with you.

Cameron Reilly [37:10]: No, that’s what I’m saying. The most recent one is 0.19, but when I got Eric’s email and I looked it up, we had it at 0.48. So, it must’ve been an outdated watch list. Something that you hadn’t looked at for a while I suspect.


Tony Kynaston [37:22]: Yeah, I guess so. And we don’t have the most recent numbers for it either. It’s still showing June 20 numbers.

Cameron Reilly [37:28]: Right.

Tony Kynaston [37:29]: And given that it’s minus 15% today, I’m guessing something’s come out about its results perhaps.

Cameron Reilly [37:36]: So, Eric says my guts telling me that if a company has negative earnings, you shouldn’t touch it with a barge pole. What you’re saying is that there are some exceptions.

Tony Kynaston [37:44]: Yeah. And I mean, I remember Jeff Wilson who runs Wilson Asset Management many years ago, getting up and saying the best time to buy a resource company for example, is when the P is at its lowest or even negative. So that’s another example of where you could have a negative P but the company’s good.

Cameron Reilly [38:00]: Well, you could have Afterpay.

Tony Kynaston [38:04]: Yeah. That’s right. Afterpay won’t score on our watch list for other metrics. But yeah, it could be other companies of that ilk, which is, you know a startup that has other good metrics to it but isn’t making money yet. [Inaudible 38:21].

Cameron Reilly [38:22]: Have you looked at After pay share price recently? It’s dropped.

Tony Kynaston [38:26]: Last I heard that it dropped dramatically after the results came out.

Cameron Reilly [38:30]: Yeah. It’s dropped from 151 or something. I think it hit down to 111 in the last couple of weeks.

Tony Kynaston [38:39]: Yes. [Inaudible 38:39] growth stocks again, that’s a sign of the market thinking that interest rates are going to rise. I think, although After pay, I think with the capital raising and I think some of the founders sold down, so that’s also driving that.

Cameron Reilly [38:54]: Right, 158 it was, gone down to 110, [inaudible 38:59] 11. Any who. Okay, thank you, Eric. Hope that helps. Jamie Oliver, a question for the next podcast on the impact of unlisted share options. I had a small cap that was going really well and then a huge trench of options was exercised by the chairman at a big discount to the market price. The price fell markedly. And my assumption is that it was due to this event rather than something else. How does Tony think about this? Should we be on the lookout for big amounts of share options not yet exercised?

Tony Kynaston [39:33]: Before we answer that question. Sorry. Can I go back to the first question? I forgot to add a comment. Talking about when we might sell something which doesn’t breach the three-point trend line. Another example would be if we have a need to reduce capital gains tax.

Cameron Reilly [39:51]: Okay. So, we lock in a loss for the…

Tony Kynaston [39:53]: Yeah, correct. So, for example, if I had a big capital gains tax bill this year, and I had Hawthorn Resources in my portfolio with a loss, I’d sell it to offset the capital banks tax.

Cameron Reilly [40:04]: Right.

Tony Kynaston [40:05]: Yeah. So sorry. So, getting back to Jamie’s question. So, he’s talking about whether I pay attention to the options that are outstanding or that can be exercised. The answer is no. I kind of expect that analysts in doing their forecasts and therefore in sentiment will in fact [inaudible 40:22] the potential for the options to be exercised. I’m a little bit curious about this example and I’d like to know the company that he’s talking about because generally exercising options won’t cause that to happen. I’m guessing there was something else involved. So, were the options exercised and then the person who exercised and did they sell their shares? That’s often something that can drop a share price. Again, it’s like the founder selling out. And I expect in especially in the small-cap world, the CEO and the major players should have lots of options because it gives them skin in the game, which is what we want to see in all companies. But it usually becomes a sort of more outsized in smaller companies. So, no I don’t pay attention to it, but I’m wondering what the example was here. I could probably look at that a bit further if I knew which company it was.

Cameron Reilly [41:17]: Yeah. Let us know, Jamie. It would be good to look at. Daniel question TK. We’ve talked about seeing the banking sector appearing a lot on the buy list. I’ve looked at a few closely myself recently bought ANZ but it’s hard not to notice looking at their graph some of these big banks are trading at the highest prices seen in the last five years. And often we’ve talked and I’ve read a lot about reversion to the main means from a common-sense perspective, I’ll expect them to trend down in the future. What’s TK’s take or experience on this?

Tony Kynaston [41:51]: Yeah. So, I had a look at the longer-term graph for banks. That’s probably the first thing to look at because if you look at say ANZ and look at it over time, it’s been generally in an upwards trend. And again, this is an example of what I was talking about before the sort of downturn in the last few years is like a big oscillation that’s coming at the end of a long trend. But the trend is generally upwards. So, I think potentially reversion for the main for banks means I go back to being in a general upward trend rather than they should last sort of three or four or five years when they’ve been in a downturn for various reasons. Without trying to forecast things or to put myself out as a banking analyst, there are a couple of headwinds, tailwinds now, which I think are there for the banks.

The first one is that banks generally benefit from interest rates rising. And again, you know, Warren thinks the interest rates are going to go up and I’ve got no reason to doubt him and at some stage they will because they’re at their lowest that they’ve ever been. So, whether it’s next week, next month or next year, or next five years, I don’t know. But banks make money when interest rates go up because they do what’s called, they borrow short and sell long, which means that they’re in the market. When interest rates go up, the yield curve is going up as well and what that means is that long-term interest rates are forecast to be higher than short-term interest rates because they’re going up, right. So, the banks in the markets all the time, borrowing short term and then bundling that up as mortgages to people who are going to have them for four years and they can get a bigger margin because the interest rates are going up.

So, at the moment, and in the last little while interest rates crunched down to almost zero. The margins have been compressed and they’ve been buying short term and trying to sell long-term when it’s been difficult because if the long-term rate is like if I was borrowing in a short-term market at 2% and the long-term rate was 1%, it makes it hard to charge someone a 40-year mortgage at 3%, right. It’s being pulled down towards their borrowing costs. But if they’re in the market borrowing short-term money at 2% and the long-term rate is 4% and it makes it easier for them to charge 3% on the mortgage. So, I expect that’s a major headwind, a major tailwind for banks going forward, or the removal of a major headwind for the banks. And secondly, the thing which I think really draws bank prices is right back at provisioning. So, they’ve been riding back the provisions they’ve taken for COVID doubtful debts and they took very harsh provisions and they writing them back now. And that’s just a reversal of a cost to their balance sheet back into profit. So that makes them much more profitable.

Cameron Reilly [44:50]: Good. Thank you for that.

Tony Kynaston [44:55]: Some banks as well, I expect that there’ll be bank branch closures, which will save them costs because I think COVID showing them that they can do a lot more and also people, they can do a lot more of their bank transactions online. So just like retailers, their online numbers are up. So, I think that’s going to be positive for the banks in terms of their cost reduction going forward. And it’s forced them to go more digital, which I think will be a benefit for the banks. Even though they’ve moved slowly, like all big companies, once they get on board the digital train, they’ll dominate just from their sheer size.

Cameron Reilly [45:26]: Except, you know it’s only a matter of time before Apple says, you know what? We don’t really need you anymore. Everyone is paying for everything on our phones now. What value do you add?

Tony Kynaston [45:41]: The banks will just buy Apple.

Cameron Reilly [45:44]: Oh, you think?

Tony Kynaston [45:48]: The banks are [inaudible 45:48] anyway.

Cameron Reilly [45:51]: So, what’s Apple’s market cap?

Tony Kynaston [45:52]: It’s big.

Cameron Reilly [45:54]: Yeah.

Tony Kynaston [45:56]: No, I’m joking.

Cameron Reilly [45:57]: I honestly expect Apple to cut the banks out.

Tony Kynaston [46:02]: Yeah. What do you think Apple is going to get into the mortgage loan business or the loan business?

Cameron Reilly [46:07]: No. Just the retail transactional side of it.

Tony Kynaston [46:15]: The credit card business? Yeah. The banks have been worried about that for a long time and they tried to stop Apple Wallet from having Australian credit cards on it when it first came out.

Cameron Reilly [46:22]: Yeah. And they failed. They capitulated.

Tony Kynaston [46:24]: ANZ capitulated. Yeah.

Cameron Reilly [46:26]: Yeah. So now, I don’t know about you, but I really take my wallet with me anywhere. It’s usually in the car as an emergency if I need it. But…

Tony Kynaston [46:35]: Because it’s empty. It’s just like, why carry the extra weight?

Cameron Reilly [46:42]: Wow. Well, that’s true, but still. What do you walk around with? You know lots of hundred-dollar bills in yours. You’re like Tony Soprano, you just got a roll of hundreds that you can peel off to hookers and stuff when you’re walking through a King’s Cross, go for your morning walk.

Tony Kynaston [47:01]: Not hookers. I give it to the homeless sometimes.

Cameron Reilly [47:05]: That’s nice.

Tony Kynaston [47:05]: I’m with you. I don’t carry any cash usually either.

Cameron Reilly [47:09]: Right. So, I just pay for, I mean, and they’ve been since COVID, been pushing us to do contactless payments, which is just perfect for Apple, they just own it for people who have their phones anyway.

Tony Kynaston [47:23]: Look, I think credit cards are in decline, so that’ll hurt the banks but it’s not a major part of their business.

Cameron Reilly [47:28]: And then they’ve got After pay as well on top of that. People don’t need to pay for stuff with credit cards when you’ve got After pay.

Tony Kynaston [47:36]: Yeah. As I said, I think credit cards are in decline and it’s not a major part of the banks. It’s profitable, but it’s not going to kill them.

Cameron Reilly [47:42]: Yeah. Stop touching your cord.

Tony Kynaston [47:44]: Sorry.

Cameron Reilly [47:47]: Yeah. Well, so it will be interesting to see what the future holds for them. But again, we don’t need to forecast because we’ll just play the numbers.

Tony Kynaston [47:58]: Correct. Yeah. My gut feeling is I’ve seen this before. Like when we start giving lots of players in an industry on our buy list, generally that’s the start of something. You know I can think back to the airline stocks that kept coming on the buy list a few years ago, obviously, the resource stocks all go in [inaudible 48:17] like that too. And it generally is a sign that people have confidence in the sector.

Cameron Reilly [48:22]: Okay. So, you’re not worried about what Daniel’s pointing out. He’s got another question, it’s a bit cheeky, Daniel, but we’ll see if we can sneak it in. The column that involves whether the founder is a board member, does a board member hold a large percentage? What’s Tony’s take on if the whole board collectively holds a large percentage of shares? Has he ever read up or stumbled across anything about this? Surely if the board members own a large percentage of the company, they’ll have the right incentives to do what’s best for that company.

Tony Kynaston [48:59]: No, I think you can answer this one. Yeah, that’s great. Yeah.

Cameron Reilly [49:01]: So, it doesn’t have to all sit with one person. If it’s the same with the number of board members, 5%, that’s your magic number. If the board owns 5%, more than 5% of the company, then they should get a positive score for that.

Tony Kynaston [49:13]: Oh, you’re testing me now. I can’t remember what the checklist says. I think if the 5% applies to an individual, but yeah. I mean, I think if the board had maybe 10%, but between some peoples that would be just as good.

Cameron Reilly [49:24]: Right.

Tony Kynaston [49:25]: Yeah. So yeah, I think Daniel’s right. It’s another good sign too.

Cameron Reilly [49:32]: Say three Hail Mary’s for a sneaking in a second question there Daniel. Hail Tony’s. Hail Tony full of grace. The Lord is with the Lord being Warren Buffett. Ben, hi Tony, and Cam, I’m interested in Tony’s thoughts on dividend reinvestment plans DRP, the Democratic Republic of Prussia, especially when the company in question is still on the buy list, EG, FMG, or BOQ, and when the actual dollar amount of the divvy is less than $500, so unable to use that money to buy from the top of the list.

Tony Kynaston [50:10]: Well, we’ve spoken about this before, but just a summary. I always take the cash rather than reinvest because I use the cash to pay off my costs, particularly borrowing costs. But they’re also the other costs of running a portfolio that people need to defray, like your accountancies, any tax you have to pay. And that brings me to the point that if people do want to do a DRP, they might want to do it partially because they will have to pay tax on the dividend, which is seen as income. So, if they reinvest a hundred percent of the dividend and they’ve got no cash to pay for the tax, that’s got to come from outside the portfolio. So that’s another thing. And generally, if I was going to use a DRP, I’d be looking for some kind of discount which is usually the case. But some companies don’t do it. So, yeah. So, if you don’t have any costs or if you funding your cost from outside your portfolio, then sure. As this person says, who was it? Daniel? As Daniel says yeah, if it’s a company on the buy list, then sure. Buy more shares because you’re right. 500 bucks. You have to save that for a long time to buy another position in your portfolio probably. It was Ben actually. Thank you, Ben.

Tony Kynaston [51:23]: Sorry, Ben.

Cameron Reilly [51:25]: That’s all right. It’s my job to keep track of the names. Paul, a question in three parts. Oh, geez.

Tony Kynaston [51:35]: One question per episode, Paul. Do you think Paul is a lawyer, pressing the envelope here?

Cameron Reilly [51:45]: I’ll give you one part. You can ask the other two when he come to dinner. First one, can Tony talk to us about investing through high inflation or high-interest rate environments, such as the 1980s? What company’s been ours…Three parts? Okay. What companies benefit and which suffer? What effect does it have on his portfolio and investment choices?

Tony Kynaston [52:07]: Yeah, so I was struggling to try and think of an answer to this one because I guess the overwhelming sort of memory is that it doesn’t change things really. The process still rolls on. But there are some things at play when interest rates go up. So usually the dividends. But also, to people like retirees can fund their retirement from sources outside of the share market. So, some of the money gets taken out of the share market and put into bonds. For example, if the bond yields are rising, that can happen, definitely, dividends go up. So that kind of stock comes into [inaudible 52:53]. So, as we’re seeing at the moment, just a mere whiff of interest rates rising has sent a lot of the growth companies tumbling in value or the stock price tumbling in value.

So, growth companies get hit hard when interest rates rise and the banks and the resource companies and the good dividend payers all come back into [inaudible 53:14]. And that’s another reason why bank stocks I think will do well. And value stocks, come back in the vibe as well because the companies that the growth brigades see as boring, suddenly take on a life of their own. You know the old bricks and mortar companies, the retailers, et cetera, do well. So, resource companies tend to do well because it’s probably a chicken and egg thing, but if inflation is going up, it’s often because of the inputs into the economy, which are increasing in value. And obviously, raw metals are input into the economy. So as oil prices go up, which they are starting to do and have been, we’re starting to see inflation rise. And that’s a chicken and egg scenario, but obviously, that’s playing out as we talk in terms of the resource companies and potentially the bank. So, they’re probably my impressions from investing in high-interest rate environments, but generally, it doesn’t change my process. It just means we have a different set of stocks to play with, usually.

Cameron Reilly [54:23]: Can you imagine us getting back into a high-interest rate environment anytime in the near future?

Tony Kynaston [54:27]: I don’t think in the near future. I think what my gut feel is and again I don’t want to forecast, but this is what I’m thinking is that the central banks around the world will try their hardest to keep interest rates low until we’re clearly out of any sort of COVID recession. So that becomes a bit of a, I’ve seen this play out before, too. It becomes a bit of a little boy with his finger in the dark type scenario where inflation is clearly taking off, asset values are taking off, but the Reserve Bank of Australia or the Fed is buying bonds with their magic fairy dust, trying to keep the interest rates down. And eventually, even they capitulate and say, we just can’t keep up and inflation runs away and it’s not until then as a Fed, I think it was Greenspan said a famous fed quote. You know, the role of the fed is to remove the punch bowl out as the party’s getting started. So, the party is just getting started now. I suspect the Fed will try and take the punch bowl away for a while, but, you know, eventually, things just get out of hand. And we go through the whole cycle again of interest rates rising, economies tanking. We have a crash, and then we come back to relying on the Fed to prop us up again. So, but that might take eight years to play out. So, I think we’re at sort of ground zero for that scenario. So, I think the next couple of years, my gut feel is that the Reserve Bank of Australia, in particular, is saying that they’ll try and do whatever they can to keep interest rates down for a couple of years. And eventually, it will break, inflation will break out and they won’t be able to control it.

And just the fact that they’re saying that, I mean, oftentimes one of the biggest weapons the reserve bank has is to do what they call jawboning. So just by coming out into the market and saying, we’re keeping the interest rates down as where they are now for two years is enough to keep the market in check for a couple of years. But eventually, they won’t be believed and I’ll have to spend vast amounts of money on bonds to try and keep the interest rates down. And they’ll go through that sort of cycle. And eventually, they’ll go, okay, we could pitch. Like we can’t. We’re embarrassed to spend this much money on our balance sheet without putting any cash in the market to pay for these bonds. We’re talking you’ll get to the stage where there are trillions of dollars of bonds on the RBI’s balance sheet, which they’ve never paid for.

It’s just been a balance sheet entry, you know a debit without a credit, which I still find amazing but they seem to be able to do it. That will become embarrassing. People will ignore it and interest rates will break out with inflation, but that might be three or four years down the track, or it might be in the next six months. I just don’t know. Plus, the other thing, which I keep sort of watching eye on, which people aren’t really talking about is that if COVID does keep borders shut, or if the trade war with China hots up even further, it must drive cost into the supply chain because if we can’t keep buying cheap goods from overseas either for COVID reasons or trade war reasons that has to make prices rise as well, which will mean that inflation will take hold then too.

One of the reasons why we’ve been in a low inflation environment is because everything’s been outsourced to China and then to Bangladesh and, you know, parts of Africa, which has been keeping our costs down. But if there are barriers to that developing, and that will force the prices up. The other thing which I think might if I argue against that, which people have put forward in various new service is that one of the big drivers of inflation coming down is and interest rates coming down is that technology has improved productivity. And that’s still very much a case in our economy. So that might swamp everything else. I’ve just said if companies like Uber and Uber Eats and Deliveroo, et cetera keep the economy going bigger and longer than we thought.

And certainly, pressures against that. There was a case in the UK recently where the UK determined, UK government I think determined or the law determined that you have to treat these gig workers as employees. So, they get long service leave and sick leave and annual leave, entitlements, et cetera, which pushes the cost up of the gig economy, which again becomes inflationary. But if that doesn’t happen and we have more disruption in our current companies and institutions and banking might be one of those, as you said, that’ll keep interest rates down for longer, that’s disinflationary. But the economy working more productive and taking out costs. So, it’s hard to say my gut feel is that they’re at rock bottom now and that they’ll revert to the main at some stage.

Cameron Reilly [59:31]: Just I’m looking at the time we’re an hour and five. Do you want to cut it there or push through?

Tony Kynaston [59:36]: I’ll keep going. We’ve only got a few more questions, haven’t we?

Cameron Reilly [59:38]: No. Ten more.

Tony Kynaston [59:41]: Or we have 10 more. Okay. Let’s stop it there and we’ll do another one next week.

Cameron Reilly [59:45]: Okay. All right. Well, that’s all we have time for today. Unfortunately, folks sorry if your question didn’t make the cut this week, but we’re over an hour.

Tony Kynaston [59:56]: You can blame Paul for asking a three-part question.

Cameron Reilly [01:00:01]: Yeah. It’s Paul and Daniel, it’s all their fault. So yeah, hopefully, your questions can hold out to next week. If can’t and you need an urgent answer to something, just shoot me an email and I’ll call Tony on the golf course and see if I can get something for you. Oh, how did the horses go this weekend, Tony? I lost it. I lost my 20 bucks the previous weekend. I forgot to replace my charity donations last weekend. How did they go? Well, I think it did well, it ran third Bella Platina. So that was a good result for us. But yeah, you would have lost your money if you backed up for the win.

Tony Kynaston [01:00:34]: I was so expecting an email from you to go, “We had a winner!” When I wake up this morning. I was like, Oh God, if they win this weekend is the one weekend, [inaudible 01:00:43] I’ll be furious. Well, he came back in third place too, which is always a good bet for Bella Platina. And we had another friend, I went down Randwick because we had another friend whose horse was racing at Randwick called Cheese Ideal and it lost by a nose. It got very close to winning. So that was exciting. And they took me into the matting out with him, which was great. And I also had another bet called a [inaudible 01:01:09] which paid off for me because Bella Platina ran a place and their horse ran a place and I had them both going, so that was good. Good results.

Cameron Reilly [01:01:19]: So, you’ve got horses running this weekend?

Tony Kynaston [01:01:21]: No, nothing for Wiley. I’m just wanting to find out where they run next.

Cameron Reilly [01:01:25]: Okay.

Tony Kynaston [01:01:26]: I’m hoping Bella will come up to Sydney but it’s not planned yet. She might go to Adelaide for the Adelaide Carnival.

Cameron Reilly [01:01:33]: Okay. All right. Well, thank you, Tony. Thank you, everybody. Don’t forget Sydney, folks. Get your tickets to the Sydney dinner. It’s always a good night. We’re having it at the same place. We’ve had it before. [Cross-talk 01:01:48].

Tony Kynaston [01:01:49]: Closing down their restaurant and giving it to us, which is always good.

Cameron Reilly [01:01:52]: Yeah. Great service. Great food. It’s always fantastic.

Tony Kynaston [01:01:56]: Yeah.

Cameron Reilly [01:01:56]: All right. Well, I’ll talk to you next week, mate. Have a good one.

Tony Kynaston [01:02:14]: All right. Thanks, Cam.