Transcript QAV 308

Episode: QAV 308 Club

Length: 1:23:27

 

Cameron Reilly [0:09]: Welcome back to QAV Episode 308 season three, episode eight recorded on the 13th of April 2020. My name is Cameron Reilly, if you’re brand-new welcome. This is a show where we talk about investing. And I usually get a lot of wisdom from my mate, Tony Kynaston, who’s been a professional investor for 30 odd years based in Sydney. And he teaches us his system that he calls QAV, his methodology for investing. But today we’re going to do something a little bit different we’ve got a guest on a mate of mine in Sydney, Kane Kelfkens, who owns several jewelry stores. He’s a small business.

And I’ve been chatting to him on email about how the crisis is affecting small businesses like his and how the government stimulus package in the banks and insurance and then may or may not be helping them through this and how he thinks business is going to change as a result, we thought it would be great to have him and some other people like Kane, come on if you run a small business or big business and you want to come on and talk to us about how you think it’s going to change things moving forwards and how you’re dealing with the Corona crisis and that kind of stuff. Please invite yourself to shoot me an email at cameronreilly@gmail.com we’d love to hear from you.

Anyway, obviously all relevant to investing how the economy’s doing, how businesses are doing and what’s going to happen to unemployment and confidence in the economy and all that kind of stuff. Anyway, without any further ado, here is Kane Kelfkens. And then we get the after this, we’ll get to answering some of the questions that you’ve sent us over the last week. So, mate, thanks for coming on, and being willing to chat with us. For those listening. Kane and I have known each other virtually for a few years. I think he listened to some of the other shows that I do. And I think we first met at a Sydney drinks event I put on a few years ago. And I understand that you have a number of the jewelry business, The Family Jewels.

Kane Kelfkens [2:20]: That’s right. Yes, a little bit about our company, we’re a family business. So, founded by my mother back in 1986. And we’re a multi-channel retailer, we’ve got three physical stores and an online store. And I think at the moment, we employ eight staff specializing sort of in silver jewelry and gemstones and designer jewelry, not your traditional jewelry a little bit more of a modern sort of type on jewelry.

Cameron Reilly [2:59]: Was your mother, a jeweler, or just an entrepreneur?

Kane Kelfkens [3:04]: Just an entrepreneur and a very creative person. So, she did her apprenticeship as a young girl in wallpaper design. And she apprenticed with a very famous Australian wallpaper designer called Florence Broadhurst. And then she was an actress for many years, but always sort of kept up her artistic side in the background. And then when she had a baby, she couldn’t see you acting anymore. And she needed a news outlet. My father bought her a pair of quite expensive designer earrings at the time. And she sorts of took one look at them and thought, “I could make something nicer than that”. And that’s sort of what got her into jewelry making and then retailing and I sort of grew up in the business and learned everything I could from her and here I am.

Cameron Reilly [4:03]: So, you’ve been involved in the family business since you were a young guy?

Kane Kelfkens [4:09]: Looking one way or another involved in the family business since I was about four years old. So, sitting under the market table, Paddington markets and Paddy’s markets back in the day, designing jewelry around the kitchen table and then going on buying trips around the world. And I’ve been working full time in the company. Since I was about 25. I went get a business degree and came to the company in a sort of a managerial role. And I am now 37. So, I guess that’s 12 years full-time and retail.

Cameron Reilly [4:50]: Before we get into the current situation, tell me about the time Leonardo DiCaprio came into your store. I read that story this morning.

Kane Kelfkens [5:00]: I think if you google me that’s still one of the top results. Look, this is probably about 10 years ago when I think Leonardo DiCaprio was in town filming the Baz Luhrmann film, which one was it?

Tony Kynaston [5:16]: Great Gatsby.

Kane Kelfkens [5:18]: The Great Gatsby. That’s right. Thanks, Tony. Yes. And he came into one of our stores on a quiet day, it was sort of a Tuesday and there were many people around and the girl that was working in the store on her own she had this guy come in sort of, wearing a hoodie with a sort of dark glasses followed by these two sorts of big burly dudes. And she had one other customer in the store and she sort of got quite concerned because being in the jewelry we’ve got always got to be about a little radar up for potential sort of robberies and theft. And she thought, these guys look at us and she said to the customer look, would you mind just going next door to the cafe and getting the guys in the cafe to come and check on us.

And she this good. This lady sort of ran next door and said, “Oh, God, I think the jewelry store is getting held up”. And the guys that are in the cafe next door, these Serbian families, big Serbian guys, and they thought all we’re going to help out Linda, so they run in next door. But by the time they got in there ready for a punch up. Leonardo, figured out that he got an offside and he’d sort of dropped his glasses and pull his hoodie down. And she realized who he was. So, it was sort of crisis averted, but a fun little story. And I think I told a friend of mine who is in the media, and then they did a media story. And the next morning at 3 is I feel with a call from some Hollywood gossip program wanting to interview me live on the air.

Cameron Reilly [7:07]: Right. I thought you’re going to say you got a phone call from Leonardo who offered to buy everything that you had to apologize for the distress that he causes your staff. Did he at least turn out to be a good customer or was he just [unclear 7:22]?

Kane Kelfkens [7:23]: No, he did. He made a nice purchase. He did make a nice purchase. He was alright, Leonardo in the end.

Cameron Reilly [7:31]: Have you seen Adam Sandler’s new film, Uncut Gems?

Kane Kelfkens [7:36]: Yes, I have. And I thought it was pretty good. It was pretty dark. I must say, I don’t know about you guys. But I normally would like a dark sort of dark film or TV show. But in these dark days we’re living in I must say my tastes have shifted completely to anything light and comedic. And I must say Tiger King is gotten my attention lately as the ultimate expression of America and the ultimate antidote corona.

Cameron Reilly [8:13]: No, well, I’m avoiding that I value my brain cells to highly Kane. So, you and I were chatting over email just about how you’re doing and the bailout packages that Scotty from marketing has been talking about. And Tony and I, obviously have an interest in what’s going to happen with the economy in Australia over the next six to 12 months. And we thought it would be interesting to get business owners like yourself to come on and share with us a little bit about what your thoughts are about how small businesses are going to cope with this. Do you want to talk us through your views at the moment? Recording this, by the way for context, on Monday, the 13th of April 2020, the year of our COVID.

Kane Kelfkens [9:08]: Yes, the year of our COVID? Well, look, I was thinking about, why your audience, in particular, should care. What’s happening in small business in us, small retailer, generally your show is looking at, listed companies that are generally medium to larger organizations. But it’s probably important to reflect on some figures, you don’t see mentioned in the media very much because small business being what it is. There’s not a lot of money left over for lobbying government and the government tends not to speak about us very much, but it might sort of interest people to know of the 13 million sorts of people that work in Australia ruff workforce, about 6 million of those people were employed in small business.

So, almost half the workers in the country. And I think small business activity makes up about 40% of the economy. So obviously, when small business is affected sort of seriously, there are going to be so much broader ramifications for other parts of the economy. And for medium and larger companies, many of which have their customers in small business, all their employees. So, I think that it is quite a good idea to get some insight into what’s happening in small businesses. As far as, from our perspective, the impact so far from the COVID-19 crisis, it’s all it all come very quickly upon us, and small business people generally, is a, an old saying, in small business, that you got to be a jack of all trades, your head of human resources, you’re your head of marketing your head of everything else, and it’s sort of one more cap that you got to put on to try and organize their way through the crisis.

We’ve responded in a sort of a couple of ways, as a sort of a short-term response, as you will, we’ve had to pull back our in-store sales. With the lockdown. So, we haven’t locked down our stores completely we’ve shortened our hours. It’s quite an interesting one, that’s sort of the messaging around what retail stores should be doing is quite mixed. I don’t know if you have sort of followed Scott Morrison, sort of any work that has a job is an essential worker, a line he’s been pitching.

Cameron Reilly [12:24]: No, any worker that has a job is essential.

Kane Kelfkens [12:28]: That’s right. Any worker that has a job is essential. And then I think it was in the same press conferences a couple of weeks ago, he went on to say he was talking about, what’s an essential purchase? And what sort of businesses should be open? And what sort of purchases should people be making. And he said any purchase that’s essential for your household. And then he went on to give an example saying, “Oh, my wife the other day, decided to go and buy a whole lot of jigsaw puzzles, because that would be essential for our family at this time where the kids are going to be spending a lot of time indoors”. And I don’t know about you guys, but I wouldn’t have thought that jigsaw puzzles were an essential purchase, but we’ve sort of had to take this messaging from the government then sort of figure out okay, well as a jewelry business, where does that leave us?

Tony Kynaston [13:26]: Sorry, Kane Does that hurt your respective I’ve heard people who own chains of fashion stores, say, the government needs to say, we’ll mandate we’re shutting down or we’re not. Because if we’re not shutting down, we’re still obliged to pay rent to our property owners. But if we were shut down by the government, that gives us some wiggle room, does that apply to you at all? Is that cause problems for you?

Kane Kelfkens [13:52]: I think there’s sort of two elements to that for us, Tony, is one side is certainly our negotiating position is strengthened in the stores where we’ve had to close down for very strong sort of commercial market forces. So, for instance, I have a store in the Sydney CBD that is in a shopping mall. And, with all the office workers leaving the city, while the shopping mall has remained open, there is zero trade. And so, we’ve had to make a commercial decision, they just completely closed the store, and I’ve been able to go to my landlord there. And sort of say, look, there’s no trade. So, we need your help here. And that landlord has been much more forthcoming than for instance, my landlord in Huntington, where there is still quite a lot of trade around.

And it’s not as clear whether we should be doing a full closure. The other aspect and I think that this might be behind some of the messaging from the government on this issue is that at this stage, it’s unclear whether our business could claim business interruption insurance on our business insurance policy if the government-mandated disclosure of the retail sector that hasn’t been tested yet. And I suspect that maybe the government has had input from insurance. And that’s been sort of the driving force between them not mandating a closure in our area because it doesn’t make a lot of rational sense to keep a lot of retail stores open that they have allowed [inaudible 15:44].

Tony Kynaston [15:46]: I’ve got friends in the insurance broking industry, and they’re getting all mixed messages there about how these things apply as well. And they’re also finding it a little bit harder to deal with insurance companies who would appear in some cases don’t have the systems to allow their staff to work from home. So, it’s taking a lot longer to get answers from them. And they’re also, just waiting for the premiums to go up for all these things as well.

Kane Kelfkens [16:16]: Yes. It seems like some business interruption, policies do address pandemic, fairly specifically. But speaking to quite a few other business people, in our sector, some people out of cafes, restaurants, and some other, apparel retailers, they’ve gone through their policy quite carefully. And it’s not clear that there is an exclusion for the pandemic. And, therefore, if the lockdown was mandated, they would have quite good grounds to make quite sizable claims from their insurers. And I think it’s a potential issue, if it comes to that, I suspect the government will hold off on doing that, maybe with that reason in mind.

Tony Kynaston [17:04]: Right. Do you think they should mandate it? Or do you think it should be left up to the operator to decide?

Kane Kelfkens [17:11]: I think that the government should be clearer in their messaging on what they want out of it, I think that the messaging to the public to only leave your home for very essential purposes has been very clear. What is not being made clear to the public is that we deem an essential purchase to be any purchase you think you need to make. So, if you think you need a new dress, then that’s an essential purchase, if you think you need a new pair of earrings, that’s an essential purchase by the letter of the law. So, I think the government’s playing a game here where they’re trying to influence behavior to get people off the streets. But they don’t want to take the step of being seen to close businesses, because they’re also trying to play this line of, well, we’ve got this economic crisis to deal with too.

And they know that if they mandate the closure of businesses, it’s going to be that much harder for them all, to reopen, again, with flow-on effects, like, impact on landlords’ impact potentially on insurers. But the sort of the net result is, as is often the case, small businesses like mine, and many others in Australia sort of getting left holding the bag of having to make a choice that balances our, commercial decision, is it worth keeping the doors open? We’re balancing, the safety valve staffs, balancing the safety of the community. And then we’re trying to sort of crystal ball what is the world, is this going to pass in two months, in three months in six months? And what are the ramifications of closing my doors with all those different things? It’s very unclear, and it doesn’t give much guidance to small businesses, unfortunately.

Tony Kynaston [19:19]: So, a couple of questions about all that, how’s your banking relationship at the moment are they treating you well, or are they shutting up shop?

Kane Kelfkens [19:29]: Look, I don’t know if I if we’re sort of in the minority on this, but I’ve always been very reticent to rely on a line of credit from the bank to keep the company going. So, we prefer to sort of trade within our means and use accurate financial sort of forecasting to sort of making sure we always have enough cash to conduct our business. I’ve seen a lot of businesses get into a lot of trouble by relying on lines of credit and overdrafts and things like that. So, I can’t speak to the banking relationship much. I’ve gotten a lot of offers from banks to give me great business loans.

But much like, you guys talk about the metaphor of the cafe or looking at, assessing large companies, I think if we go to the interest rate, you’d have to pay on a margin loan to get the money to fund the business, versus what you’re likely to make off that investment. If I’m taking a business loan, it’s sort of an 8% per annum rate of return. Well, if you look at the profit margins in the average business, you’re going to have to be doing pretty well, for we’d see that 8% does ever seem like a good deal to me to rely on credit.

Tony Kynaston [21:09]: Just to explain to listeners, and maybe you can elucidate the 8% is higher than a mortgage rail, I’m guessing because it’s an unsecured loan.

Kane Kelfkens [21:15]: That’s correct. Yes. So, for business loans, the interest rates are pretty high. I think that 8% figure, I had a quote from one of the major Australian banks about three months ago on basically an overdraft sort of line of credit for our company. And I just took one look at the interest rate and thought, well, it’s not worth it.

Tony Kynaston [21:44]: So, you’d meet our quality checklist for low giftedness, which is good. Let me ask the question about stock, which is always the hidden dimension to a customer in retail. You said before that you had or your mother had been on buying trips around the world for jewelry, and obviously can’t be done now how’s your stock situation sitting?

Kane Kelfkens [22:05]: I guess we’re unusual in some ways for a business like ours, we maintain quite high stock levels. Because of the nature of, we specialize in gemstones, in particular, there’s is quite large changes year to year in the availability of various gemstones on the market, depending on what mines are operating, which mines are running dry, and new mines being opened up. And there are also quite large price variations depending on exchange rates and things. So, we sort of tending to stock up on gemstones when we can when the conditions are good, and then we’ll sit on that stop for a while. And then we’ll slowly take the gyms and turn them into sort of joy creations as we go. But it means that we’re able to ride out quite a long term, [unclear 23:14] sort of travel and even a broader sort of impact of currency on our business, we can sort of basically just choose not to buy for a while and our business can keep running.

Tony Kynaston [23:26]: Let me just draw a line of questioning around how we might be able to use some of the metrics you’re seeing now and extrapolate into retail in general, how much would you say your foot traffic is down, in the last two or three months?

Kane Kelfkens [23:41]: I would say our foot traffic on average is probably down about 60%.

Tony Kynaston [23:49]: It’s a lot. Are you seeing any substitution online? How much is the online channel up by?

Kane Kelfkens [23:54]: Look, we’re seeing some substitution, but I wouldn’t say it’s massive. I mean, probably our online channel might be up, 20%. And I think that there’s a couple of factors there because while a lot more people are shopping online right now, my business like many other businesses is putting a much greater emphasis on our online channel and marketing that channel. So, I think there’s intense competition in that space right now. So, there’s sort of the competition for eyeballs for your online customer has gone up in time. So, it’s had a little bit of flattening impact on the curve. Normally we’re with our online marketing in particular, instead of spending money on rent and wages as you would normally spend in a bricks and mortar retail store, you’re taking that money and you’re spending it on online marketing as your sort of major investment, and the sort of the return per dollar spent on online marketing is way down because of that increased competition if that makes sense.

Tony Kynaston [25:21]: Say everything, all the restrictions in social isolation and distancing were lifted tomorrow, how long would you expect it to take before it was business as usual for your business?

Kane Kelfkens [25:30]: Well, that’s the golden question, Tony. And that’s the real question for our sort of short to medium term planning right now is that if, for instance, I keep the home fires burning in my stores, and we keep our doors open, albeit on the sort of shortened hours, and I get stuff on the books, and we sort of stay both in touch with our customers that are still around so that 40% of people are still walking around. And keep our eye and I think that we could return to a full level of trade pretty quick, once the restrictions are lifted, and once the probably, more importantly, the messaging goes out to the public. It’s okay to go out and live your normal lives again.

Tony Kynaston [26:30]: Sounds like you don’t have high lead times for your stock, you’ve got enough stock to be able to open the doors almost fully stocked. It sounds like too.

Kane Kelfkens [26:38]: As I mentioned before, we’re ready to sell stock-wise, for quite some time, the only issue for us would be if we have to let our staff go, we’ll send them down through this period. And all we have to close some of our stores because our landlords won’t come to the party on rent. And we just have to say, look, we’re leaving, then obviously, if in three months, the government says it’s okay for everyone to come out and shop. We’d have to find new premises, we’d have to find new staff, they’d be quite a long run that time.

Tony Kynaston [27:15]: Yes. What kind of government assistance, if any, are you getting at the moment?

Kane Kelfkens [27:19]: Well, the government is assistance side is quite interesting. I was talking about the mixed messaging before on the essential shopping sort of side, the government’s messaging on support for businesses has been interesting. They’ve announced quite a lot, you guys would be aware of some of the announcements around business support. We had the big job keeper policy that was announced two weeks ago. I think it was a $270 billion spend targeted sort of small, medium-sized business a way to help us fund keeping our staff working. So, there’s sort of a partial fun thing of people’s wages. I think that scheme sort of elucidates quite nicely. The issue around all the funding programs to date, though, is while this announcement was made two weeks ago, and the government has asked businesses to start paying their staff this extra money from the beginning of this month.

We are now what the 13th of April today, and we still haven’t received any details from the tax department on how the scheme is going to operate. So, there’s sort of been a lot of doublespeak of big announcements, but either when the details come through, it turns out to be a lot less advantageous than you think, or requires a lot of red tapes to wade through to get access to anything. Another example with the earlier IAS rebates that the government announced was about a month ago, announced that and I think the announcement was up to $100,000 with a rebate for businesses, which sounds like an amazing figure. I think we ran the numbers on that in our business, and I think we would qualify for about $5,000 with that support. It’s never as good as it sounds, and it just adds into that issue around planning for businesses because after hearing a couple of these announcements from the government, and then experiencing what the actual loan is, the stimulus starts to lose its effect because we get very suspicious of what it all means.

Tony Kynaston [30:04]: Yes, Well, I shouldn’t be too cynical. But I wonder if that’s kind of the plan and the government doesn’t want to go into too much debt. So, if it just runs a bit slow on all these things, hopefully, it’ll come out in time and not have to pay too much.

Kane Kelfkens [30:17]: I think you’re probably right there. And I think in part, it was the announcement of that policy, once again, try not to be too cynical, was probably a response to those very long Centrelink cues. We saw when this crisis came to the fore, and they realized that Centrelink couldn’t process everyone’s claim. So, they thought, I know, we’ll get businesses to be Centrelink. You can handle the bureaucracy for us. Which is sort of basically like the GST all over again.

Tony Kynaston [30:52]: So, you’re, you’re doing your forecast, you’re doing your planning, but you’re not counting on too much assistance from the government in your plans. Is that right?

Kane Kelfkens [31:01]: Not at this stage, no, look until the details when all this stuff becomes clearer. And really, to be honest, until the money hits our bank account. I’m always incredibly suspicious of any support the government offers to the business because it often seems to come with some very tricky conditions attached. So, at the moment, I’m trying to plan with that as a hopeful, but not relying on it.

Tony Kynaston [31:40]: Let me just change tack a bit, what are your thoughts about what business looks like when we come out of this social isolation period? Do you think you will change any of your practices where you have more online sales where you have fewer stores? Is there anything else you might see changing?

Kane Kelfkens [31:57]: Yes, I think that this epidemic is probably going to be a big wake up call to a lot of business people, especially now sort of sector, I think that we’re going to be focusing a lot more investment in our online platform, obviously, through this crisis, but even beyond because, today, it’s COVID-19. But tomorrow, it could be COVID-20. I hope not. But it exposes a major weakness in our economy. And it’s also I think, showing where there can be a lot of underlying strength as well. For example, my wife is a solicitor. And while the courts have had some interruption and things like that, her ability to work has been largely unaffected, she’s been able to work from home, and be able to carry on. And I think that we’re all going to have in the back of our mind will [inaudible 33:11] we position ourselves in case something like this happened again, to be able to conduct our business in a much safer way.

Cameron Reilly [33:22]: My favorite conspiracy theory at the moment is that COVID was created by zoom, to drive up their revenues. So, I’ve been preaching working from home since I was [unclear 33:38] in the mid-90s, working for Malcolm Turnbull. And a little did we know all the world needed was a global pandemic, to get people to make the jump. So, congratulations to the strategists at zoom. The big thinkers, if you’re right, and it makes sense that more small businesses will now try and think about their online strategy more and investing more in moving their businesses online. You have to wonder what that means for the future of employment in the country too, I haven’t seen our unemployment numbers alike, I don’t know if they’ve come through recently.

Well, yes. And we’ve talked on this show over the last year when we had Alan Kohler on, I remember, in particular, he was talking about the true unemployment numbers in the country and this was seven or eight months ago being far higher than the way they were being reported. He was talking about if you took the underemployment numbers, and which should be added he said to the unemployment that was people driving for Uber, the gig economy people that have got a few hours of work. work a day or a week not fully employed. I imagine a lot of those people are stuffed right now. I can’t imagine this many people catching Ubers around at the moment one of my sons told me the DD one of the Uber competitors is shut up in Australia. He catches a lot of Ubers. He said, Uber is still running, but it’s a lot fewer cars on the road. So, if we add that to the existing state of people in the underemployment gig economy before this will happen, more and more businesses now stop moving online, so we’re going to end up with more underemployed people a year from now.

Kane Kelfkens [35:47]: Yes, it’s an interesting one. On that point of Uber, losing a lot of business, I suppose there would have been quite a lot of those Uber drivers now switching over to doing food delivery. And because there’s been this massive uptick in people ordering their meals through delivery Aru and Uber Eats and things like that. So, there’s obviously, some sort of transubstantiation in the employment.

Tony Kynaston [36:22]: I saw an interesting site just to add a bit of color to that story. I was walking through Kings Cross last week and all the Uber Eats riders were sitting in one of the parks, the rail nine fountain waiting for their lunch orders, and the cops were going through on bus busting them for social distancing, they’re not social distancing.

Kane Kelfkens [36:43]: Yes, some of the interesting stories around that too, coming out of being from restaurant and cafe owners that have been complaining of the large part of the margin that those delivery services are now eating up, I think it’s something like 40% of the order value, they charge in commission. So, that’s a massive shift in where the money’s going in the economy, especially considering a lot of these companies that are owned overseas, and are quite adept at moving profits overseas without paying tax on them in this country. There’s probably some interesting impact on our national tax base here as well. But that’s a whole other sort of question. Yes, certainly, I mentioned before with our investment online, the investment really goes from, staff, and premises, rent does translate to basically, stock and advertising online. It cuts a lot of the people out of the business and it also undercuts commercial property value as well. I think it’s going to be a really interesting flow on from this, I think the commercial property could take a very large hit, especially anything close to the retail sector, your Westfield, and ally.

Tony Kynaston [38:25]: Yes, I would think retailing and office will take a hit because I think companies will realize they don’t have to pay as much rent in the city because people can work effectively from home. And I think on the other side, fulfillment warehouses will be growing because if we do shift permanently to one line, there’s more need for that.

Kane Kelfkens [38:44]: Yes. And career and the approach to retailing around Dropshipping. I don’t know if you’re familiar with the concept of drop shipping, burning meu.

Cameron Reilly [38:58]: One of my 19-year old’s is a big drop shipper who has been teaching kids to drop shipping for the last six months and he and his business partner who’s 18 started a new Dropshipping store. Two days ago, I think they did one and a half grand in sales on the first day they did six yesterday and they’re on track to do 10 grand in turnover today. He texted me earlier.

Kane Kelfkens [39:29]: Well, there you go. That’s such an interesting business model. And in that sort of business model, you’re not holding any stuff. So, you’re in essence you’re not buying your stock until you’ve already sold it.

Tony Kynaston [39:45]: Yes, no, fulfillment costs.

Cameron Reilly [39:48]: Not exactly true. As it turns out. 60% of their payments are coming via PayPal and PayPal holds on to the money in its scroll until the product has been delivered. This means they need to front the cost for the back was purchase and delivery of the product, at least for that 60%. As it turns out their credit card payments, the other 40%. They’re getting straight away. So, they’re using that to fund the PayPal component. Their profit margin we worked out yesterday is about 60%. So, it’s pretty good. So, they’re using the credit card money to fund the PayPal fulfillment side of things.

Tony Kynaston [40:40]: Until the chargebacks come through on the credit cards.

Cameron Reilly [40:42]: Well, yes, that could happen, too. But it is. It’s fascinating. And Taylor’s my son, his business model for the last six months has been teaching other, 17 18 19-year-olds drop shipping, his view is that, whereas teenagers used to go and get a job at McDonald’s, when they were in high school, and just after high school when they’re at Uni. Now, increasingly, they’re just setting up their Dropshipping stores. And in fact, the way he’s been positioning it recently isn’t that listening, you’re not going to necessarily get rich out of doing this very small percentage of drop shippers in anything make good money out of it. And there’s a whole, the algorithm behind getting the right product at the right time and the right ads and getting that combination is quite difficult.

But the way he’s positioned it to these kids is, you’re going to learn more about entrepreneurship and retailing and marketing from doing this for a couple of years in your spare time, then you’re going to learn going to uni and getting a business degree. Taylor and his twin brother Hunter both just dropped out of their third year of doing a business degree at QUT because Taylor’s doing this. So, Hunters got millions of views on Tiktok and a couple of 100,000 followers on Tiktok. He sees that as his business for the next couple of years. And they’re both this is a secret at QUT, doesn’t understand any of what we’re doing. We’re 10 years ahead of where QUT’s business professors are they can’t even wrap their heads around our business model. So, what’s the point of getting a business degree when we’re 10 years ahead of the curve?

Kane Kelfkens [42:36]: I think the trick with a lot of these little platforms is I think having a sort of a medium- and longer-term strategy and how to parlay your success in drop shipping, or even Tiktok a very interesting one. So, social media success, how to parlay that into a more sustainable sort of longer-term business model. And less some people are been very successful with that, out of sort of how to use success in one area to sort of build a customer base or build a following and then being able to find other products or services that target that, in some ways, Cameron, that’s been a large part of your success in podcasting. I think you’ve been quite effective in sort of being able to identify sort of what your audience could be interested in next, I started listening to you, I think it was a life of Caesar. I stumbled across your podcast, and then I’ve been through a couple of history podcasts. And I’ve been through the BS filter, and now I’m finding this very interesting and you wouldn’t, on the face of it, I think there’s anything related from, how to invest to the life of Caesar, but there’s been a synergy there.

Tony Kynaston [44:20]: Nice planning, Kane

Cameron Reilly [44:21]: Yes, I was looking. I sat down 15 years ago Kane and on the back of a napkin I sketched out the strategy. And it’s all going exactly to plan I have to say that.

Tony Kynaston [44:34]: Dropped out of business school.

Cameron Reilly [44:35]: Yes. All kind. Exactly the plan TK. Alright, well, listen, thank you for coming on and being so open and transparent, sharing that with us a lot of really fascinating insights. And best of luck mate. I hope that we get back to normal as quickly as possible so you can ramp your business back up again. And keep paying for my history podcasts.

Tony Kynaston [45:02]: Let me just say I hope you do come back strong and you eventually list because any sort of business that can ride out this sort of store with no debt, good stock holdings, and a quick ramp-up it’s got to be a good one to invest in. So, good luck to you.

Kane Kelfkens [45:16]: Well, I’ll take that seal of approval for me Tony to the bank. But now look, thanks for the opportunity, guys. I hope this has been somewhat informative for all the listeners and great to chat with you and have the opportunity to finally hear myself talk on one of your podcasts.

Cameron Reilly [45:37]: Well, we will probably get you back on at the other side of this Kane and we can talk about how it played out.

Kane Kelfkens [45:44]: Yes, that’d be great. I hope I can give you a success story.

Cameron Reilly [45:49]: And for all of our listeners, cashed-up listeners stuck at home looking to thank their spouses for putting up with them. They should go to your website and buy them something nice. What’s the website? Is it thefamilyjewels.com.au?

Kane Kelfkens [46:10]: That’s it thefamilyjewels.com.au.

Cameron Reilly [46:13]: You couldn’t just get cajones.com.au?

Kane Kelfkens [46:18]: I reckon that one’s taken.

Cameron Reilly [46:21]: Yes, by me. I got to get that. So, let’s see [cross-talking 46:26].

Kane Kelfkens [46:26]: What you got to do. You probably got a buy’s you wife a nice gift because she’s walked in on you when you’ve been searching cajones.com.au and see what’s on the screen.

Cameron Reilly [46:38]: Take care, buddy.

Kane Kelfkens [46:40]: Alright, thank you, guys. Cheers.

Cameron Reilly [46:42]: Before you go. What do you think of the film?

Kane Kelfkens [46:46]: I love the film. I thought it was very interesting. And I think I said to you guys on the night, I was just sorry that the film had to be birthed in such a time like this. I thought it was very interesting. And I was hoping that you would get some fabulous write-up in the paper of religious zealots protesting outside of its premiere. And a whole lot of anger and fury would have publicized it into the stratosphere. And maybe at another time that would have been what happens but there’s always the rerelease.

Cameron Reilly [47:31]: Yes. Look, my marketing line now is that the Lord was so unhappy with it. He sent a flag to shut it down.

Kane Kelfkens [47:42]: I like that. That’s good.

Cameron Reilly [47:44]: Alright. Thanks, mate. Take care.

Kane Kelfkens [47:46]: Thanks, guys. Bye.

Cameron Reilly [47:47]: Bye. Alright. Well, that was fun.

Tony Kynaston [47:52]: Yes, it was good.

Cameron Reilly [47:53]: Do you want to answer some listener questions before we wrap up?

Tony Kynaston [47:59]: Yes.

Cameron Reilly [47:59]: Alright. Here’s one from Dave. Dave says my question is how does Tony’s dollar cost average, weekly, monthly, or on Lowe’s? And then there was a, it might have been Dave or somebody else sent me an article from Morningstar, talking about how dollar-cost averaging is stupid. And you shouldn’t do it. I know we’ve talked about this before. But remind me, Tony, what’s your approach to dollar-cost averaging?

Tony Kynaston [48:30]: Yes, well, it was Steve Madden, who sent us the Morningstar article. Hi, Steve. So, let me just go through the questions separately. In terms of buying stocks, I generally dollar-cost averaging daily. So, I found it just a good way to not be impatient to be patient when you’re buying a stock because it could go down a bit from after your first identity, it could go up and sometimes you miss out on the first level ramp up. But there’s a practical reason that I haven’t changed over the years. So, my online banking account linked to my stockbroker only as we would transfer up to a volume of 75,000 a day.

So, if I wanted to get certain say buy a million dollars worth of shares, it’ll take me a while because I can buy 150,000 every two days before I have to pay the broker because settlements, T plus two. Yes, so it might take me eight 9 10 days to get into the sort of size I want in stock but I don’t mind now I’ve thought about changing it nothing yet, but you spreading your risk over a week or two weeks of buying an iPhone haven’t cost me much in terms of profit at the end of the day. And it’s allowed me to average out my buy price over the peaks and troughs over that period. So, that’s generally how I do it not necessarily waiting for Lowe’s or taking too long to do it, but over a couple of weeks now on Steve’s Morningstar article, that article was comparing someone who put money into the share market regularly. And I think they looked at the same amount going in monthly overtime. And the research shows, you’re better off if you had, for example, a big lump sum. So, say, for example, you in here, if it’s a main, the researchers in that article argued, you’re better off, putting it all into the market upfront, then rather than dribbling it in over several years.

And that makes sense as well because the share market goes up on average 10% a year. So, if you take years to put your money into the market, you’re missing out on 10 or 20% of that, right. And the research has proved that the downsides in the market, were less in number than the upsides in the sale, you’re more likely to lose out even if you put the full inheritance into the market on the day before a crash that was still in terms of their research findings only way better than drip-feeding into the market over time. So, my response to that article was yes, I understand that. Firstly, some people invest in the market by saving from their wages and putting a small amount in every month. That’s, still valid. If you don’t have the money upfront, you don’t have the money upfront.

So, I would still keep doing that. And secondly, when I talk about dollar-cost averaging, from my point of view, I’m talking about doing it over a couple of weeks or a short period, at the most. So, the researchers didn’t say, then what would it look like if you had your $100,000 inheritance and put it in the month before the crash versus putting in say, 50,000 the month before and 50,000 the month after? Which will be better. So, the research was valid, but I still dollar cost average when I’m buying shares.

Cameron Reilly [51:56]: Okay. And if you didn’t for most of us that don’t have the limitation that you have. Well, I feel sorry for you, by the way, that it’s so hard for you to do, come up with a million dollars in cash for your broker that quickly. For those of us that are investing smaller amounts where that’s not an issue, you still recommend dollar cost averaging over a week or two? Or if I had 10 grand to buy stocks today, should I just whack that 10 grand on a stock? Because it did. I also have brokerage fees every time I buy something.

Tony Kynaston [52:36]: Yes. So that all comes into play the practicalities of it. So, I hire a QAV dummy portfolio that was blind in a $1,000 lot. So, it makes no sense to break that down and think could you are paying probably higher brokerage and doing that 10 grand, you might want to consider breaking into two fives if it doesn’t cost you any more in brokerage and maybe doing one purchase now one purchase next week just to see what’s happened in the market in between. But yes, I wouldn’t do it any more than that.

Cameron Reilly [53:05]: It would depend on whether or not the brokerage was a percentage or a flat fee, I guess.

Tony Kynaston [53:09]: Correct. Yes, sometimes there are scales. So, if it was the same percentage fee for five grand and 10 grand you could do that. But if you’d like to add $1,000, it probably makes a difference. Whether you’re going all-in or whether you have.

Cameron Reilly [53:25]: Thanks for explaining that, Tony got a question from Lee. Brisbane Voices. Hi, Cameron love to hear more from Tony on the possibility of a US currency devaluation specifically what signs to look forward to now for this coming. What defensive positions, he would take gold in question, mark, Bitcoin, and what kind of reactions do we see in the market well, let’s start with that one, currency devaluation, Tony, what are your thoughts on US currency devaluation?

Tony Kynaston [53:57]: Well, I think it would be a good thing for the US if their currency devalued because then they could manufacture more and export more. So, that’s always good for the economy. And generally, whatever happens to the US stock market happens here. So, that’s probably going to be a good thing for us. Although it probably means our dollar goes up. Because as the US dollar comes down, and if there’s no change to our economy then our dollar has to go up, which is starting to hurt our exporters and manufacturers so it may all come out in the wash.

As for signs of it, it’s pretty hard to say these days, it used to be a lot easier to predict currency moves when the Fed reserve wasn’t just opening the spigot all the time and printing money every time the economy had a bit of a slip. So, I don’t know really what the signs are for dollar devaluation. My gut feelings will probably hold where it is because the Fed Reserve will keep opening the tap if it starts to drop too much. But I think it’s probably a good thing for the US economy to drop so that Philadelphia drops so that could be Manufacturing export more. Do I go to gold? No, I don’t go to gold. I have bought gold shares in the past, but that was based on them being good QAV checklist scores rather than any macro-economic sort of theory.

Cameron Reilly [55:13]: Just thinking I should invite my mate Nicholas Gruen onto the show to talk about modern monetary theory with us.

Tony Kynaston [55:22]: Yes, that’d be good. And just his take on the economy as well.

Cameron Reilly [55:25]: Yes.

Tony Kynaston [55:28]: No good.

Cameron Reilly [55:29]: Australia’s foremost public intellectual. Nicholas Gruen according to Lindsay Tanner. I think you mean after me. That’s probably right about the time Nicholas and I last caught up. Alright. How much time do you spend worrying about currency devaluations, though we’re thinking about it, to what level does that play into your strategy?

Tony Kynaston [55:59]: Almost none at all. The only time I think about currencies is in that general sort of three-finger check on the economy, I think if your dollars lower, your interest rates are low, and the petrol price at the pump is low, the economy should be strong. So, I think we’re coming into that sort of stage now we’ve had low-interest rates and currencies have stepped down from the sort of mid-70s. Now to the high 60s. So that’s helping, and the petrol pump prices going down. So, that all kind of putting a floor under the economy, notwithstanding all the problems we’re having with COVID. But that’s going to be good for the economy in the long term.

Cameron Reilly [56:39]: Right. But how does that affect your strategy?

Tony Kynaston [56:43]: Not at all.

Cameron Reilly [56:47]: Yes, that’s sort of my point. I’ve been saying this to a few people who are dedicated listeners, but they call me up and they go, so, how does all this change, Tony strategy, and QAV. And I was like, well, that’s one of the most fascinating things about going through this over the last month or two, for me, realizing that nothing changes with QAV. We’re buying less than we were six months ago. But apart from that, nothing changes. You’re just listening to the numbers to tell you what to do.

Tony Kynaston [57:28]: That’s the beauty of it. It’s been battle-tested through these kinds of whatnot, this kind of recession, but recessions in the past. And takes the drama out of it.

Cameron Reilly [57:39]: Yes. But the checklist tells us what to look for when we are going to buy a stock. And that doesn’t change in a bull market in a bear market, what’s in the middle of a bull and a bear. Is there a [inaudible 57:54] as a fish, goat market? I don’t know, what’s the middle? Just a normal market condition. It doesn’t change. It’s just the rules are the rules, as I like to say.

Tony Kynaston [58:08]: Yes, exactly. [inaudible 58:10] had a baby.

Cameron Reilly [58:13]: Next, Alease’s. Could Tony talk more about what specific news or data will likely in this little rally? It’s still been sort of going up over the last couple of weeks in the Dow and all odds?

Tony Kynaston [58:30]: It’s interesting. Well, two minds again, without me science, I don’t like forecasting it. I can’t see how the markets going to go up longer-term when we haven’t had any data about recessions about tax hikes that are going to come out because of all these government subsidies about numbers from companies reporting the sort of figures that we just heard about from Kane, it’s hard to see that that’s happy days for the market but I could be wrong. I think what’s driving the market at the moment is the curves flattening, so we have fewer COVID-19 cases every day. So, people think that might mean an end to the lockdown quickly, or quicker than they thought.

But that’s all just speculation, in my opinion. So, what’s likely to end this. All I can do is look back at past recessions and past dips in the share market. And it always ends when there’s no end in sight when everyone is depressed when people are going to cash when banks are limping along with government life support, on huge ventilators, if you like, when you walk down the street and there’s every sort of third or fourth or fifth, shoppers, Felice, when your friends don’t have jobs, that’s when the market turns and we’re not seeing that yet. So, that’s what my gut feel says.

Cameron Reilly [1:00:02]: And the whole point of the stimulus packages, though, in theory, prevent that from happening, though.

Tony Kynaston [1:00:10]: Yes, and so that’s a bit of a curveball this time, sort of stimulus packages in the GFC didn’t come about until the end. So, there’s that. I think there’s going to be a lot of wrinkles and humps in the stimulus packages, as Kane saying, is the cash going to flow? And we don’t know yet. What that’s going to cost to the economy next year, when we come through, we have quite a deferred the budget until whenever September or October. Well, if they come out there and say, we were on point, we’re creakier, and we need to put taxes up the GST is now 15%. What will that do for the economy? There are just so many unknowns there. It’s hard if you’re bullish at the moment.

Cameron Reilly [1:00:50]: And again, from my perspective, doesn’t matter in terms of QAV. It matters for a whole lot of people for a whole lot of reasons, as Kane just explained, from his perspective, but in terms of QAV, doesn’t matter, we will invest in individual companies based on their numbers, as they are available. And what’s happening at a macroeconomic level is neither here nor there.

Tony Kynaston [1:01:22]: Correct. Yes. And more effectively, we could get sucked up with the market, hysteria, and then have to sell again, if the market turns good. And we start the season, three-point trend lines that we like, and we start to see some companies that publish some figures which are okay, then we might start buying and it could be too well, you might have to sell again. So, that’s just the way it works. But again, it will be guided by the numbers not by what my forecast.

Cameron Reilly [1:01:49]: Yes, we need a motto about forecasting. We need a new coffee mug that says something about profits.

Tony Kynaston [1:02:00]: Forecasts as a flogs. That’s what I said.

Cameron Reilly [1:02:04]: Something about Nostradamus, I’ll come up with it. Got a question from Angus. Hi, Cameron, have a few questions for Tony. If you don’t mind, I don’t Angus. Well, the more the merrier. Number one, if the three-point trendline is broken to sell a stock, does he usually sell his entire holding or just a part of it? Does he take into account other macro factors for this or just use some gut instinct?

Tony Kynaston [1:02:31]: I sell the entire amount. And try not to use gut instinct.

Cameron Reilly [1:02:36]: Do you dollar cost average on your way out?

Tony Kynaston [1:02:39]: No, unless there’s a problem with the liquidity of the stock. Which I’ve spoken about before. If, in some cases in the past, I have taken a while to build up a holding in a small-cap stock that I like, and it always comes back to bite me when I go to sell it because it takes me a long time to get out. Which is I guess the form of dollar-cost averaging.

Cameron Reilly [1:03:01]: Okay, so the answer is no unless you have to for some reason, but no, you normally just dump it. Number two for maintenance.

Tony Kynaston [1:03:09]: Sorry, I’m just on that. There’s a saying in the market that the market goes up a set of stairs and down the elevator well, so as soon as you see it’s time to sell, it’s time to sell.

Cameron Reilly [1:03:19]: Yes, okay, good. Number two from Angus, hypothetically, if the trend line is broken to sell a stock, how far below that trend line would it be too late to sell? e.g., a further 5% 10%, etcetera. And the carry case some of my holdings have just passed recently, but have gone down past the line. So, wanted to check if it’s still worth selling? Or when is it too late? Is there such a thing as too late?

Tony Kynaston [1:03:47]: It’s a good question. I’ve had questions like this as well. If it’s five or 10%, below, I’d say sell. But anything more than that your kind of getting into that. The question you rather ask is, am I a buyer at this price or a seller at this price. So, if it’s below the three-point trend line, and I’m not seeing any sort of uptick in the market, or an uptick in that particular share price, I’d still be a seller. If it’s down 30 40 50%, which some of these stocks are I might think twice about that because I think we’re probably closer to the bottom of the top. So, I might hold on. But if that really is a gap call if you’ve missed the time to sell.

And it just again highlights the point that even though we don’t do much work during the year at times like this, you do have to watch things a bit closer, spend a bit more time looking at the graphs. And we also had a similar question I don’t think we had a lot to from one of our listeners in Singapore, who talked about the fact that he had been granted some stock in companies he worked for in the past and continue to be a long-term holder of those but they had now turned down and whether we would apply the same rules to that stock and I would so again, it might be too late now if you stand to see some upticks in those stocks or if they’ve dropped 40 or 50%. But if I was a holder still on, say Korsmeyer stock where I used to work, and it had info still listed, and it had breached a three-point trendline, I’d be a seller as soon as I could.

Cameron Reilly [1:05:17]: In terms of the extra work that’s required, what I did when things started to tank was because we don’t hold many stocks, we had like 20, at the best of times. So, I just went through worked out what I thought the three-point trendline sell price was, and put that in my spreadsheet. And so, once a day, really, I just look and see how close is the current prices to the sale price. And if it’s getting close to my check it but most of them well, today. We did get rid of a few, but the ones that we still have the eight or nine stocks are well above the selling price. So, I only sort of check it once a week, and nothing really, it’s not that much extra.

Tony Kynaston [1:06:07]: And I think I was the same. I was checking my portfolio maybe once a week as well. Maybe twice a week, if there was a big drop in the market on that particular day, I might go and look at some stocks I thought might be affected. But once a week, check them. And you can put alerts in the stock doctor if you wanted too as well. So, don’t they allow price alerts? But it does take a little bit more time, but not a whole lot.

Cameron Reilly [1:06:29]: Some more questions from Angus on a share selection perspective, does Tony only invest in ASX stocks, I would assume his criteria apply to all markets. We’ve talked about this before, and I’ll get you to cover it again. But before I forget, I did get an email from a subscriber in the UK the other day, and he was he’s trying to apply QAV to the footsie and I suggested he come on and play footsie with us at some stage and we can do what we did with Andre in Canada, Andre Bravo where we looked at an American stock, we can do that on the show. I think that’d be fun.

Tony Kynaston [1:07:10]: Yes, that’s a great idea. You can play footsie with us. And if a German listener out there, they can come on and pull [inaudible 1:07:15] Germany.

Cameron Reilly [1:07:18]: Start to turn me on Tony, been locked down.

Tony Kynaston [1:07:21]: No, that’s great. So, the answer to Angus’s questions is, I do only hold ASX stocks. And my reasoning for that is that the tools I have access to are cover the ASX share analysis does have overseas stocks. But the stock doctor doesn’t. When I’ve lived overseas, both in New Zealand and Canada, I found it much harder to get access to any sort of tool. Like those two tools. I know stock doctors looked at going into the US and they’re a little bit worried about people stealing their IP. So, they haven’t. But I couldn’t come across any tools as good as those overseas, maybe the UK has one but not familiar with that market. But now I stick to my [inaudible 1:08:05] I stick to the ASX. I also like the fact that I can read the AFR and it covers the stocks that I own. And I can for retailers in particular, or, or retail facing companies, I can go and look at their stores or use their services and see whether I like them or not.

Cameron Reilly [1:08:22]: The way that I’ve understood it before when we’ve talked about this is there’s just so much more added complexity for you buying foreign stocks, and you got to worry about exchange rates and international law and all this kind of stuff. You’re already getting your 19 and a half percent annual average return which is about the same as what Buffett gets anyway. So, it’s not like if you invest if you took the additional effort and risk and cost of investing in foreign markets, you’re going to double your 19 and a half percent or anything so why bother?

Tony Kynaston [1:08:58]: That’s a part of it as well. The [inaudible 1:09:00] sort of caveat I’d have on that as if the US dollar does drop a lot in the Australian dollar gets to be one to one with the US or even higher, you can do a bit of an arbitrage trades there it’d be a time I’d look to buy Berkshire Hathaway, for example, and then hold it [unclear 1:09:15]dollar drops again, which it will inevitably do. We’ll get the other profit bump from a currency rate depreciating. But that’s a good point you make and also to there’s a lot of Australian companies that have exposure overseas so you’re good you see yourself You’re good. Your foreigner skew mines, you BHPs your Rio’s when there’s four of the top 10 which are deriving most of their income from overseas. So, the ASX does have a lot of overseas exposure without having to invest overseas myself.

Cameron Reilly [1:09:48]: Last one from Angus, what attorneys’ best sources to find stocks. I know it looks on the AFR movers page, but are there any other sources he uses?

Tony Kynaston [1:09:58]: Yes, so I subscribe to other newsletters for example the Eureka report which Alan Cola Helms, they have a section on their called Directors Buys and Sells which is worthwhile thumbing through I think comes out once a week. Roger Montgomery is also a good source of articles about stocks and you pay attention to your buying patterns are you starting to change your habits and in what ways and is there a new product on the market like an apple iPhone that you’ve decided to buy that they can be leaves for investigating stocks as well? But you just read widely, don’t just stick to what you normally do you got to be a share investor act like one, and subscribe to a couple of newsletters trolls, you don’t have to like them, you drop them if you like and get another one. There are lots of them out there. And you just be exposed to stuff immerse yourself in these things.

Cameron Reilly [1:10:56]: I got a question from Cameron Riley here. He writes. Hi, Tony and Cameron loved the show. US President Donald Trump has threatened Saudi Arabia if it did not fix the oil market problem of oversupply. Trump, who has said, US output was already falling due to low prices warned Riyadh, it could face sanctions and tariffs on its oil, if it did not cut enough to help the US oil industry whose higher costs have left it struggling with low prices.

Tony Kynaston [1:11:31]: They must be quaking in their boots. They’re about the same that the US shale producers to the wall and they’re going to listen to Trump. That guy’s got steel cat boots, because he shot himself in the foot 70 times, it’s still hasn’t fallen off, it’s exactly the wrong thing to do to put tariffs on overseas oil prices, which will just raise the price of petrol or gas, as they call it at the blazers at a time when their economy’s doing it tough. So, there’ll be another significant chunk of change coming out of unemployed people’s pockets. It’s just dumb. And what’s more, by doing that, he’s supporting inefficient local producers in America. So, he’s just basically socializing losses, which is the old government problems socializing losses and regulating profits. It’s again, it’s the reverse of what you should be doing if you’re a government.

Cameron Reilly [1:12:31]: And why should the Saudis care about their competitors’ businesses? This whole thing America loves free trade and capitalism, champions of free trade and capitalism, but listen if our businesses are sucking, we’re going to come and threaten you with sanctions because your businesses are more profitable than our businesses. Just the hypocrisy. And I don’t want to get into it. I’m going to do that in the bullshit filter tomorrow. But I’ve been amused by several people I’ve seen online complaining that China didn’t let America know about the virus soon enough. I was like, well, you know, after all of Trump’s rhetoric against China over the last year or two, why would they? Did you want a trade war? How’s that working out for you?

Tony Kynaston [1:13:32]: How would that make any difference? The guys did nothing for months and months of months. So, if he’s told a couple of weeks earlier, it just makes zero difference to what he did.

Cameron Reilly [1:13:41]: As it turns out, I’ve gone through the timeline very carefully. As soon as the Chinese knew what it was and what was going on. They did alert the world sinus and the WHO, there was no delay at all. And it took them a good sort of three or four weeks to try and figure out what it was because they didn’t know. After all, no one had seen it before. They did sanction one of their doctors Wenliang because he went around saying it was SARS. And they were like well hold on. Don’t tell people that SARS it’s not SARS. We don’t know what it is. That doesn’t get talked about clearly enough. People talk about have punished him for speaking out because he was saying it was SARS. And it wasn’t SARS. It was a different kind of Coronavirus. But anyway, a lot of misinformation floating around out there on the continuation of the US, China propaganda war. But I just love the fact that he’s now trying to get stuck into Saudi Arabia.

Tony Kynaston [1:14:44]: And look, I put a link to you to an article when you sent that question through this morning or last night. This was very interesting, I thought because the other thing that we haven’t mentioned is in the last little while, maybe 24 or 48 hours, the Russians and the Saudis are proposing quite deep [inaudible 1:15:01] which will bring the price back up and stop supply from filling out the storage tanks. And I say, well, we’ll do it as long as America joins in, Trump’s going no. So, Saudis and Russia are coming to the table trying to do the right thing. And it’s America who’s saying no. So, again, both barrels and the fourth Donald Trump.

Cameron Reilly [1:15:23]: Before we finish, I want to say that the first draft of our getting started guide for club members is ready. It’s now online, if you go up to our club member resources page, on our website, you can see a link to download that PDF, with the caveat that it’s the first draft. And so, there are probably many ways that we can improve on it, and we’ll improve on it over the coming months. But use it as a one dot O version. Think of it like downloading the first version of a piece of software, it’s probably going to be buggy. give us feedback, tell us how to improve it, how to make it better, how to make it more useful, and we will do that. But one thing I wanted to clear with you obviously, the biggest question that we get from people all the time is how to use a three-point trendline. And after I sent you my first version of the document, I wrote some new words around three-point trend lines to answer Carlo’s question last week, I sent you a link to the blog post on that. Have you had a chance to look at that yet?

Tony Kynaston [1:16:26]: No, I haven’t sorry.

Cameron Reilly [1:16:29]: Let me run this past you and see if it makes sense. So, what I said is, first of all, remember to use a five-year chart of monthly prices. By the way, what that means is monthly prices show you what the price is at the end of the month. Correct? It’s not liked an average crisis at the end of the month. So, here’s the current version of explaining how we use it. If we don’t own stock, and the sentiment is generally positive, for example, the price is going up over time. It’s a buying signal. If we don’t own stock, and the sentiment is generally negative prices going down over time, the trend line through the highest prices indicates when to buy when the price goes above slash breaches that line.

Tony Kynaston [1:17:27]: Yes.

Cameron Reilly [1:17:29]: If we do own stock, and the sentiment is generally negative, the trend line through the lowest prices indicates when to sell. If the price drops below that line for a stock we own, we sell it.

Tony Kynaston [1:17:45]: Yes. That’s it. There are some tricks and caveats we’ve talked about before as well. So, I think probably the only one that springs to mind, which we might want to add is when we talk about the lowest prices, and if it’s a bit of an up and down graph, I’d be taking the lowest price and the next lowest to the right of that and drawing a line. And we have a couple of cases where the next lowest price was to the lowest and the trend line was going the wrong way in terms of being useful for us.

Cameron Reilly [1:18:16]: Right. Yes, good. So, there are some complexities. I’m still trying to come up with a nice mnemonic like a little sign for how to use trend lines. I haven’t come up with a yet because I’m not that clever, but I’m going to keep working. If anyone’s got one, let me know. Alright, so you can go up and download that I hope you’ll find that useful. The document is the other thing I wanted to point out to people who weren’t on our zoom call last week. And thank you, Tony, again for doing the zoom call. I think that was a lot of fun.

Tony Kynaston [1:18:52]: Yes, thank you. And thanks to all the listeners who chimed in, there was some good discussion there.

Cameron Reilly [1:18:56]: Yes, it’s great to see people’s faces and have that sort of real-time. Not the same as going out to dinner and having a drink with everybody, but best we can do under the current circumstances. You had a drink? Yes, you did. Somebody suggested I think it might have been Paul that we set up a private Facebook group for QAV club members where everyone can do their analysis for stock and share their QAV score.

And then the rest of us can have a look at it, then critique it and say why we agree or we disagree and workshop it together, which I thought was a great idea. So, I’ve set that up now and you can find a link to that private group too on the club member resources page on our website. At least you will be able to find it there if I remembered to put a link to it after I finished recording the show. But I will endeavor to do that. So, I think that’d be good rather than just listening to us analyze it do your analysis, and share it with the team.

Tony Kynaston [1:20:09]: Yes, good idea.

Cameron Reilly [1:20:12]: Well, we will maybe do another one of those zoom calls at some point once a month or something if that’s not working you too hard, I’m very worried about overtaxing.

Tony Kynaston [1:20:25]: I got weird marks these days. PDFs and [cross-talking 1:20:29] reboot season [cross-talking 1:20:32]?

Cameron Reilly [1:20:32]: Are they from your Mexican cleaning ladies? Thank you, TK, and thanks again to Kane Kelfkens for coming in, if you have the wherewithal you want to do something nice for Kane for coming on and support his business and whatever thefamilyjewels.com.au.

Tony Kynaston [1:20:56]: Yes, that’s great. Just before we go, what’s the Taylor of selling on his dropship site?

Cameron Reilly [1:21:03]: Well, look, he told me not to tell anyone because see, part of the secret is the product coming up with the right product at the right time is the dark magic of drop shipping, but because I know no one listening to this is going to go on the competition with him. It’s jigsaw puzzles.

Tony Kynaston [1:21:30]: Wow. Okay.

Cameron Reilly [1:21:31]: Well, they saw what’s his face. Scomo says jigsaw puzzles they went, jigsaw puzzles. And they said that it’s called pricelesspuzzles.com. Pricelesspuzzles.com goes up and buys some jigsaw puzzles to help Taylor out. But they are killing it, man-killing it. Spending, a couple of $100 a day on Facebook ads, and doing four or five grand in turnover as a result. So, just killing it.

Tony Kynaston [1:22:18]: That’s great.

Cameron Reilly [1:22:20]: It’s fascinating to just watch these young kids figure out business models and going out there and being entrepreneurs. That’s terrific.

Tony Kynaston [1:22:31]: And cutting through the bullshit, which is good too.

Cameron Reilly [1:22:34]: And doing it a time in their life where they don’t have any risk. They live at home well, he does his business partner Lucky, he lives in an apartment downtown. He grew up in Ipswich and moved to Brisbane when he started making money at a drop shipping pays for his place. I think he shares it with one or two guys. But they’re just making bank during a global recession. So, got to admire that.

Tony Kynaston [1:23:02]: Good luck to them.

Cameron Reilly [1:23:04]: Alright. Thanks. Alright. Talk to you soon.

Tony Kynaston [1:23:06]: Thank you. Bye.

 

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