Transcript QAV 351 — BUNNY BOILERS

File: QAV 351 — - BUNNY BOILERS

Length: 1:09:168

Tony Kynas­ton [00:05]: I said I was ready and I real­ized I had a cup of tea brew­ing so; I can get it.

Cameron Reil­ly [00:09]: Okay. Out­side your room?

Tony Kynas­ton [00:15]: Yes, I’m sit­ting in a qui­et bed­room in Wag­ga, who would know that in Wag­ga could be so noisy.

Cameron Reil­ly [00:21]: What’s going on in Wag­ga?

Tony Kynas­ton [00:23]: Cars?

Cameron Reil­ly [00:26]: What are you doing in Wag­ga? Tony.

Tony Kynas­ton [00:28]: Vis­it­ing my friend Mark Rudd, hav­ing a [inaudi­ble 00:30] time.

Cameron Reil­ly [00:32]: Did­n’t you just get on the piss with him like a week ago? I thought you were still recov­er­ing from being on the piss with Mark the last time we talked.

Tony Kynas­ton [00:40]: It a com­mon theme. We had a good old chin­wag and a half a bot­tle of scotch and a few bot­tles of red wine on Sat­ur­day night, which was good. [Cross-talk­ing 00:49].

Cameron Reil­ly [00:49]: Which scotch were you drink­ing?

Tony Kynas­ton [00:51]: The cheap ones. I bought that bot­tle that you were giv­en.

Cameron Reil­ly [00:55]: Ben­Ri­ach.

Tony Kynas­ton [00:56]: It’s the one. But we haven’t opened that one yet. We’ve been get­ting rid of all the old Glen­morang­ie, which is not bad.

Cameron Reil­ly [01:04]: Well, wel­come back to QAV. Every­one. Episode 351 was record­ed on the sec­ond of Novem­ber 2020. Two days, I guess in Aus­tralia before the pres­i­den­tial elec­tions in the Unit­ed States just had the elec­tion in Queens­land on the week­end. And a star was brought back in and picked up some seats. I think so, I assume that’s a lit­tle bit of a golf clap for her for keep­ing our bor­der closed despite the furor from the Mur­doch media.

Tony Kynas­ton [01:42]: Do you think the bor­der should be open?

Cameron Reil­ly [01:43]: I think the bor­ders should be open when our chief med­ical offi­cer deter­mines that it should be open.

Tony Kynas­ton [01:48]: Yes, I agree. Do you know the polit­i­cal affil­i­a­tions of the chief med­ical offi­cer?

Cameron Reil­ly [01:53]: I die. But I’m not qual­i­fied to make any deci­sions about any­thing real­ly, lit­tle I know how he han­dles a pan­dem­ic.

Tony Kynas­ton [02:06]: Well, I think you’re right, Cameron. I think Aus­tralia has done incred­i­bly well at man­ag­ing the pan­dem­ic. So, it’s hard to crit­i­cize, isn’t it?

Cameron Reil­ly [02:12]: Yes. Well, look, on one hand, Queens­land has been fair­ly open since June.

Tony Kynas­ton [02:17]: Fair­ly open? Or you mean with­in Queens­land?

Cameron Reil­ly [02:20]: With­in Queens­land, yes. Queens­land has been open for busi­ness inter­nal­ly. We’ve gone back to nor­mal since June. Mean­while, Mel­bourne was shut down for many more months and the rest of the world’s explod­ing. I don’t know. I’m rea­son­ably hap­py with the way all of our politi­cians have han­dled it. I mean, the Mel­bourne thing was unfor­tu­nate, but out­side of that, I think every­one’s done a good job and deserves a golf club.

Tony Kynas­ton [02:48]: I’m in full sup­port of that Cameron. And I think all these peo­ple who are try­ing to make par­ty polit­i­cal points; how­ev­er, they’re not see­ing the for­est for the trees. Real­ly.

Cameron Reil­ly [02:56]: Tony, one thing that you and I a cou­ple of awk­ward and uncom­fort­able things we should prob­a­bly talk about this week. The first is I will be return­ing the car­diac watch that you gave me at the end of our last finan­cial year because I don’t want you to have to resign over it. That would be dis­ap­point­ing.

Tony Kynas­ton [03:19]: But again, that’s a bright shiny object, isn’t it the land around the air­port gets sold for 10 times its val­ue but to look over here, this per­son gave car­diac a watch to this guy.

Cameron Reil­ly [03:35]: I got to tell you, any­one who knows me knows I’m not a huge fan of Aus­tralia Post. I spend way too much of my life com­plain­ing about what an absolute clus­ter Aus­tralia posters oper­a­tion is. So, there are many rea­sons that I would have liked to have seen her resign or get fired. This isn’t one of them. But from a cus­tomer’s per­spec­tive. I just find Aus­tralia Post com­plete back­woods stuck in the 1983 dis­as­ter. A bit like [cross-talk­ing 04:08].

Tony Kynas­ton [04:09]: Just want to say I don’t share that point of view. And if Aus­tralia Post wants to stop deliv­er­ing to [inaudi­ble 04:14] that’s fine with me.

Cameron Reil­ly [04:18]: Hey, don’t give away my address on the pod­cast. You want me to start giv­ing away your address.

Tony Kynas­ton [04:22]: You have already.

Cameron Reil­ly [04:25]: No, I post­ed a pho­to, and then I took it down.

Tony Kynas­ton [04:29]: Okay, we did­n’t run this.

Cameron Reil­ly [04:33]: Well, in the case went out to lunch with Steve Mad­den the oth­er day and he goes I believe it was your birth­day. Okay, yes did you bring me any­thing? He said no. I said okay. He did shout Tay­lor at our lunchtime so, I can’t com­plain. But if peo­ple want to send me a belat­ed 50th birth­day address now they know the street address any­way.

Tony Kynas­ton [04:51]: Just don’t use Aus­tralia Post.

Cameron Reil­ly [04:54]: You get a [inaudi­ble 04:55]. Don’t go to Aus­tralia Post. We did that inter­view with Steven Mori­ar­ty. And that we put out last week and he made some com­men­tary on Kate ver­sus Kel­ly, before that ear­li­er in the week, and he was­n’t hap­py. And I did a lit­tle bit of a pre­am­ble before I put the inter­view out. Thurs­day, I think it was the peo­ple who already know the sto­ry. But I guess do you want to add any com­ments? Or is that just like­ly to get us into more trou­ble?

Tony Kynas­ton [05:33]: Well, the only com­ment I’ll add is that, if we’ve offend­ed, Steven, I apol­o­gize, not they are intend­ed. I think the con­text for what I said about Kate and Kel­ly affect­ing the per­for­mance of my port­fo­lio would have been put into the prop­er con­text by our lis­ten­ers, who knows that I’ve done such test­ing in the past to see if I can improve based on things, we’ve learned by inter­view­ing peo­ple. And in this case, it did­n’t work for me, it does­n’t mean I was dis­parag­ing Steve’s book or his method­ol­o­gy. And I think even dur­ing the inter­view, we both said, or after the inter­view, we both said, Look, it sounds like a great sys­tem for some­one who does­n’t want to go to all the trou­ble of stock pick­ing as we do. And I still stand by that. And I’d also just invite Steve, if he wants to come on and talk about it with us or rec­ti­fy any mis­takes, he thinks we’ve made, please come on. We aren’t in the habit of doing hatch­et jobs on peo­ple. And that’s not what they are intend­ed. And I thought it was a good inter­view at the time. And if he wants to come back, he’s more than wel­come.

Cameron Reil­ly [06:40]: Well said, we might talk a lit­tle bit more about Kel­ly, lat­er on, depend­ing on how we go with the time. But before we get into that, mar­kets, tak­ing a bit of a beat­ing again, so far today, Tony, but is some­thing that I just want­ed to point out to our lis­ten­ers, some­thing that I’ve been think­ing about a lot is the way I see our job. My job now as a fresh­ly mint­ed val­ue investor. Baby steps wear­ing dia­pers val­ue investor is my job is to beat the [inaudi­ble 07: 22] in Aus­tralia to beat the mar­ket. Ide­al­ly, we want to dou­ble it, but that’s it. That’s all I care about when I’m look­ing at our results week on week, month, or month, year on year, is are we achiev­ing what we want to achieve? And what we want to achieve, I think is, out­per­form­ing the [inaudi­ble 07:45] get­ting our 15 to 20%.

On aver­age com­pound­ed year on year, with rel­a­tive­ly low risk, not no risk, but rel­a­tive­ly low risk, we’re not tak­ing huge risks here, we’re invest­ing in com­pa­nies that we think are under­val­ued and per­form well and aren’t going to dis­ap­pear tomor­row. And we’ve stopped loss if they go south for some rea­son, and with­out putting in a huge amount of effort, don’t have to spend 50 60 hours a week on it. And just to get a 15 to 20% or to dou­ble the [inaudi­ble 08:20], depend­ing on what the [inaudi­ble 08:22] is doing, we say 15 to 20%, because it usu­al­ly, on aver­age over time per­form some­where between 9 to 11%. And that’s it. So, I feel good about that. As long as I look at that thing. And we’re at the moment, as of this par­tic­u­lar moment, my dum­my port­fo­lio says the [inaudi­ble 08:39] growth since the 31st of August, when we clicked over into our new year with our port­fo­lio, because we start­ed at the begin­ning of Sep­tem­ber last year, [inaudi­ble 08:48] is up 0.13% was neg­a­tive about an hour ago, were up 1.4% in the same peri­od. So, 1.4% does­n’t sound like a lot, although it’s only two months. But com­pared to the [inaudi­ble 09:00], it’s sig­nif­i­cant­ly bet­ter. So, I’m good. Is that how you think of it? Or am I off track?

Tony Kynas­ton [09:09]: Now that’s how I think of it, I’d prob­a­bly add a cou­ple of things there. You could say its kind of a false [inaudi­ble 09:16] to say we’re at 1% when the ordi­nar­ies are flat, and that’s a great thing it is. But ide­al­ly, we want to get more than that. But I think we are some­what tied to the mar­ket. So even though I try and be con­trary and it’ll be very unusu­al for us to be going up when the mar­kets going down, for exam­ple, or vice ver­sa. So, we are still direc­tion­al­ly fol­low­ing the mar­ket. That’s why I think the dou­ble mar­ket is a good result. And I think if we’re not get­ting that sort of 15% plus fig­ure then we should look at alter­na­tive peo­ple out there who are get­ting more than we are and invest with them and from time to time that hap­pens but over the long haul, I think I’ve been able to beat most of the oth­er per­form­ers in the mar­ket. And that’s impor­tant that you judge things over a 10 or 20-year hori­zon and not last year, or even the last cou­ple of years, or the cur­rent months sort of thing.

Cameron Reil­ly [10:10]: That’s hard to do if you’re just get­ting start­ed. So, it’s okay for you to do that. But for us, how do we mea­sure our suc­cess year on year?

Tony Kynas­ton [10:19]: Well, they report the fund man­age­ment per­for­mance every six months. So, Morn­ingstar, do it and Con­star do it. So, you can always go and have a look at those. And they gen­er­al­ly will have a long-term return for the peo­ple who’ve been in the mar­ket for a long time. But gen­er­al­ly, I find that for fund man­agers that we can invest in either their funds are get­ting so big, that they start to have a bit of iner­tia, as Buf­fett always says, they do because of the amount of cash they have to deploy, or they can’t sus­tain high per­for­mance for a long peri­od. So, what­ev­er their sys­tem is, it works. It goes in cycles. Where­as if we’re sort of try­ing to take out the bad stocks from the mar­ket and find the good ones, and then find the good ones with the price well, I think, yes, we’re kind of direc­tion­al­ly going to fol­low the mar­ket, but we should do bet­ter than the mar­ket. And that’s the aim.

Cameron Reil­ly [11:16]: My ques­tion in terms of the 20-year thing is, I can’t look at my 20-year per­for­mance, mea­sure how it’s doing, all I can look at is, week to week, month to month, and what should I be look­ing to achieve in that peri­od? I guess? That’s my ques­tion is, how do I know if my port­fo­lio’s doing as well as it should? Should I be com­par­ing it to the [inaudi­ble 11:39]? Or should I be com­par­ing it to some­thing else?

Tony Kynas­ton [11:43]: Should com­pare it to the [inaudi­ble 11:44] if we can’t beat the [inaudi­ble 11:45] and go and buy an index fund and golf and play golf, and don’t even both­er try­ing to do it for your­self. But I think we can do bet­ter than that. My sec­ond point was when you have enough his­to­ry, then go and com­pare your­self to some of the oth­er fund man­agers and make an edu­cat­ed deci­sion about whether you should be invest­ing with some­one else or doing it for your­self. But I think you need a cou­ple of years of his­to­ry behind us before you start mak­ing that big deci­sion.

Cameron Reil­ly [12:12]: Until then?

Tony Kynas­ton [12:15]: Keep doing what you’re doing. If we under­per­formed the all ordi­nar­ies change, but now I think we have to keep doing what we’re doing.

Cameron Reil­ly [12:23]: Right.

Tony Kynas­ton [12:25]: I once read a book many years ago, I can’t remem­ber its exact title, but it was some­thing like growth with the dou­ble mar­ket and the author set out to show that the good com­pa­nies and I guess like kind of class myself as a com­pa­ny because I’m in the busi­ness of invest­ing. Invest­ing seems to be mon­ey into stocks, but it could be mon­ey into wid­gets. And gen­er­al­ly, I for­get what the num­bers are but once you get to about dou­ble mar­ket growth, then you’re sort of real­ly max­ing out the abil­i­ty of some­one to work well giv­en the con­straints of oper­at­ing in a par­tic­u­lar mar­ket. And I think that’s impor­tant to know, as well. You could prob­a­bly look at some peo­ple’s returns in the short term. And if they’d been invest­ed in some of the inter­net growth stocks or the buy now pay lat­er stocks, they’ve had a ter­rif­ic year. But I know I would­n’t feel com­fort­able invest­ing in those because I don’t know when they’re going to turn south and turn south heav­i­ly.

Cameron Reil­ly [13:25]: Well, I fig­ure if Buf­fet­t’s sort of goal per­for­mance has always been bad dou­ble mar­ket, then that sounds like a pret­ty good bench­mark to go for.

Tony Kynas­ton [13:37]: I agree. That’s one of the bench­marks, which we should use is, again, if we can’t beat Buf­fett, then let’s put them put their mon­ey in Berk­shire Hath­away.

Cameron Reil­ly [13:47]: $400,000 to buy a share?

Tony Kynas­ton [13:49]: Well, they do have a baby book. So, you can buy frac­tion­al shares.

Cameron Reil­ly [13:53]: I’ll do that. Okay. So, I’ve been read­ing the lit­tle book of Behav­ioral Invest­ing by James Mon­tier recent­ly. Are you famil­iar with that one?

Tony Kynas­ton [14:04]: No, but I’ve read [inaudi­ble 14:05] think­ing fast and slow. Is it sim­i­lar to that?

Cameron Reil­ly [14:08]: Well, the begin­ning of its exact­ly that instead of talk­ing about [inaudi­ble 14:15], sys­tem one and sys­tem two. I like this because he calls it McCoy and Spock, the McCoy brain, and the Spock­’s brain.

Tony Kynas­ton [14:28]: That’s not bad.

Cameron Reil­ly [14:31]: So, he says, The McCoy brains the emo­tion­al one. And the Spock brains, the log­i­cal brain. And he talks about the prob­lem that we have get­ting our brain to think log­i­cal­ly and not jump to con­clu­sions. And he talks about these three ques­tions, which I’ve seen before they pop up on Face­book and stuff, and I’m pret­ty sure that these were all part of my inter­view ques­tions when I was inter­view­ing for Microsoft 20 years ago. But he says Shane Fred­er­ick of Yale, for­mer­ly of MIT has designed a sim­ple three-ques­tion test which is more pow­er­ful than any IQ test or SIT score and mea­sur­ing the abil­i­ty of the SI sys­tem as he calls, I think that’s the Spock brain to check the out­put of the x sys­tem togeth­er. These three ques­tions are known as the cog­ni­tive reflec­tion task, the CRT, con­sid­er the fol­low­ing three ques­tions a bat and a ball togeth­er cost $1.10. In total, the bat costs $1 more than the ball. How much does the ball cost?

Tony Kynas­ton [15:37]: [Inaudi­ble 15:36] in total a bat costs how much more than the ball? Sor­ry?

Cameron Reil­ly [15:40]: A $1 more.

Tony Kynas­ton [15:42]: Okay, so the bat costs $1.5, and the ball costs five cents.

Cameron Reil­ly [15:48]: Tick. All right. Okay, you go through to the next round, Tony. Ques­tion num­ber two, if it takes five min­utes for five machines to make five wid­gets, how long would it take 100 machines to make 100 wid­gets?

Tony Kynas­ton [16:04]: That’s a good ques­tion. It sounds like these are quick ques­tions. And it’s try­ing to get me to say five min­utes. But if five machines take five min­utes, then 100 machines should take 20 times as long maybe. So, 100 min­utes?

Cameron Reil­ly [16:19]: No, five min­utes?

Tony Kynas­ton [16:21]: I got it right the first time.

Cameron Reil­ly [16:28]: And the third one’s the old thing about the lily pads dou­bling in size every day. If it takes 48 days for lily pads to cov­er an entire pond. How long will it take to cov­er half the pond?

Tony Kynas­ton [16:40]: 47 days.

Cameron Reil­ly [16:42]: Right. So, he says psy­chol­o­gists have explored this ques­tion and come up with the fol­low­ing con­di­tions which increase the like­li­hood of X sys­tem think­ing when the prob­lem is ill-struc­tured and com­plex when infor­ma­tion is incom­plete, ambigu­ous and chang­ing when the goals are ill-defined, shift­ing or com­pet­ing when the stress is high because either time con­straints and or high stakes are involved when deci­sions rely upon inter­ac­tion with oth­ers.

Tony Kynas­ton [17:12]: So, I think that point about stress is real­ly impor­tant. And that’s one of the things we spoke about way back at the start of the pod­cast is if we can think in units rather than think­ing dol­lars, and get used to man­ag­ing mon­ey and push­ing mon­ey around and becomes less stress­ful for you, as the num­bers get larg­er.

Cameron Reil­ly [17:32]: You think of it in terms of just pieces on aboard.

Tony Kynas­ton [17:39]: Yes, Buf­fet­t’s always said, it’s not the dol­lars that moti­vate him it’s the game that moti­vates him. And so, if you think of it as a game, and these are just units you’re play­ing with or tokens, it’ll take all the stress out of it. And I think I maybe con­tro­ver­sial­ly said to peo­ple go down to the race­track with 1000 bucks and get used to mov­ing mon­ey around that might hurt you if you lose it.

Cameron Reil­ly [18:05]: This is not finan­cial advice. Just want to be cleared Tony is not a finan­cial advi­sor.

Tony Kynas­ton [18:09]: You said that last time. And I’m also try­ing to segue into my Mel­bourne Cup tips as well.

Cameron Reil­ly [18:16]: Well, let’s leave that to the end of the show, make peo­ple sit through every­thing before they get to that. Now peo­ple are fast-for­ward­ing, so we’ll put it in actu­al­ly 20 min­utes and the peo­ple who fast-for­ward­ing.

Tony Kynas­ton [18:26]: We talk about that 19 min­utes ago?

Cameron Reil­ly [18:33]: Or did we? You have to lis­ten to the whole thing to find out. My point was going to be one of the things and I know I’ve prob­a­bly said this in dif­fer­ent ways before but one of the things I real­ly like about the check­list sys­tem is it’s helped me remove the emo­tion from invest­ing once I felt con­fi­dent that the sys­tem worked, which most­ly I had to accept ini­tial­ly on your say so, but then we did our first year of the port­fo­lio. And that added addi­tion­al evi­dence that it works cer­tain­ly beat the [inaudi­ble 19:08]. And then, once I’m con­fi­dent in using the check­list, how to get the QAV score and rank the QAV score, these days when I go to buy some­thing or go buy a stock. I feel very lit­tle emo­tion involved in it. It’s like okay, well, this is a trans­ac­tion, I’m buy­ing one of the stocks that the sys­tem has pro­duced, the stock may or may not do well if it does­n’t, I know what to do if it does great. But the chances are that it will prob­a­bly do well. The odds are that it will do well rather than it won’t do well. And it’s just made it sort of a lot eas­i­er for me to exe­cute it. It’s kind of a weird feel­ing when I’m doing it, now it’s like, I’m sort of a lit­tle bit removed from the fear and the emo­tion and the anx­i­ety of throw­ing my mon­ey out there.

Tony Kynas­ton [20:09]: And [inaudi­ble 20:10] That’s right. And Buf­fett and Munger have always said that have a sys­tem or a frame­work to invest in, and that’ll take the emo­tion out of it. And I mean, crit­ics of this kind of style of invest­ing will often say it’s robot­ic. But to me, that’s one of its big advan­tages. It’s robot­ic. We’re apply­ing an algo­rithm and it takes the think­ing and all the emo­tion­al input away from it.

Cameron Reil­ly [20:32]: And if you trust the algo­rithm, and the sys­tem will work over the long term, okay, it’s like, turn on the light switch. I’m not ner­vous as to whether or not the lights are going to work, or the elec­tric­i­ty is going to flow. I just trust the sys­tem. And if it stops work­ing, then I’ll wor­ry about it, then most of the time, it just works any­way. But I like the McCoy and Spock brain bet­ter than sys­tem one, sys­tem two, I like that. That’s a fun way to think about it.

Tony Kynas­ton [21:01]: It is good, isn’t it?

Cameron Reil­ly [21:02]: One of the things that Dami­an Park­er sug­gest­ed we do was pick three stocks each week to talk about that if you were going to buy some­thing this week, what three stocks would you buy? And why? Do you want to start there?

Tony Kynas­ton [21:22]: Apolo­gies, I’ve only real­ly got one to talk about this week. And as you know, I’m hav­ing a bit of a break in August. So, I haven’t done a down­load for a cou­ple of days. But I did write a stock jour­nal last week before I left. And in that jour­nal, peo­ple may have seen it. But MFF, the Mag­el­lan fund is has bro­ken at three-point cell lines. So, we’d say up. But sand fire resources and the code are SFR has just become a buy. So that’s that would be the one that I would ask peo­ple to look at. And again, this is anoth­er rec­om­men­da­tion. I think even when Dami­an sug­gest­ed this, he sug­gest­ed we do this as a way for him to start his research. And I think that’s a real­ly good way of con­tex­tu­al­iz­ing it. So, sand fire resources have come into the buy list. And if I had some spare mon­ey this week. That’s the one I’d be buy­ing. And if I just do a bit of a talk about or sum­ma­ry of Sand­fire.

Cameron Reil­ly [22:20]: Can I stop you before you do that? It’s way down on the buy list. Why are we look­ing at that with a score of point two, sev­en, and not some­thing with a high­er score?

Tony Kynas­ton [22:35]: I’ve got point three, three. So, I take your point, the rea­son why I’d be look­ing at is its aver­age dai­ly trade, which is over $4 mil­lion per day. And that’s one of the things that I have to do when I’m fil­ter­ing stocks on my buy list is to take the one that we pub­lish, but then pull out the ones which are too small to invest in. And that leaves the big ones. And so, I’d be look­ing at the sand fire, which has 4.156 mil­lion trad­ed every day, on aver­age.

Cameron Reil­ly [23:05]: Okay, fair enough. So, it’s a big enough stock for you. But what date did you do this down­load the one I’ve got up in my port­fo­lio. The last buy­er list is on the 27th of Octo­ber. That’s Tues­day.

Tony Kynas­ton [23:19]: I think it was after that. And I just have a look at the stock jour­nal yes­ter­day at 5 pm. Yes, it reads Hi, Cam MFF cap­i­tal invest­ments breached that cell line recent­ly is removed from the buy list. And sand fire resources have just crossed its byline. And is added to the buy list with the QAV score of point three, three.

Cameron Reil­ly [23:39]: Yes, did­n’t get it [inaudi­ble 23:40].

Tony Kynas­ton [23:41]: Any­way, I did­n’t do a full down­load. I raised an alert for a price alert for it in stock doc­trine, which is why I got a mes­sage from them say­ing it had become a buy­er. I think on Fri­day after­noon, I got that. And then did a bit of analy­sis over the week­end and came up with it, edit it to the QAV buy list. So, it’s a gold and cop­per min­er. And I think that’s a fair­ly impor­tant thing because both of those com­modi­ties are doing well at the moment cop­pers just turned up. Gold’s been up for a while. And I’ve got an only sand fire in the past before dis­clo­sure, but I’ve breached its three-point trend line a lit­tle while ago. Let me have a look at the chart here. Sand fire went right up to a high of like $9 and then start­ed to come off. And I sold it on the way down as we do about, I would think some­where around $7.50. So, it was­n’t too bad for me.

And it’s just head­ing up again. The thing I need­ed to just out­line about sand fire resources is its mind. And there’s always been a ques­tion over how long that mind has to go before it exhausts the audits in the ten­e­ment. And the last time I looked at it was about three or four years, so It’s com­ing to the end of its men­tal life, which always makes peo­ple a bit ner­vous. But it is tak­ing an awful lot of mon­ey and explor­ing for replace­ments to that mind. And in the last week or so it signed a deal for a ten­e­ment next door to the grace of mine, which is the one I’m talk­ing about, which gives it I think it’s like 80%, I think of joint ven­ture own­er­ship of that par­tic­u­lar ten­e­ment. And so, it’s try­ing very hard to find oth­er mines in the area, which will allow it to lever­age its cur­rent infra­struc­ture at the Grasa. But con­tin­ue to mine gold­en cop­per, after the Grasa runs out of all.

Cameron Reil­ly [25:41]: Okay. And you bet you like this, for what par­tic­u­lar rea­son, the just the cop­per uptick side of it?

Tony Kynas­ton [25:49]: I think so. The share price has ticked up, I think last week, because of the sign­ing of the JV with the mine next door to Grasa. So that’s prob­a­bly what’s dri­ving sen­ti­ment at the moment. But I think the cop­per price increase will also start to see the share price going north as and if you think about mines, as high­ly lever­aged plays on the under­ly­ing com­mod­i­ty price, so every time it’s a bit like think­ing about inter­net star­tups, when they talk about every new cus­tomer goes straight to the bot­tom line, once the com­mod­i­ty price reach­es break-even for the mine, every dol­lar of all sold goes straight to the bot­tom line. So, the under­ly­ing com­mod­i­ty prices are impor­tant and cop­pers just turn is going to go up. So, if it con­tin­ues to go up, then it’ll be real­ly pow­er­ful in terms of sup­port­ing the share price for all cop­per min­ers, but poten­tial­ly this one as well.

Cameron Reil­ly [26:47]: Okay, so not finan­cial advice. But if you’re look­ing for some­thing you might want to do some analy­sis. That reminds me of last week, we replaced think some­thing in our port­fo­lio. Remem­ber what it was?

Tony Kynas­ton [27:11]: I think we took out grange resources and put in CAA and C6C.

Cameron Reil­ly [27:16]: And there was some dis­cus­sion on our QAV club, Face­book page, about one of those, whether or not it was gained ben­e­fit. Let me just dig that up. Tim sug­gest­ed I don’t buy into CAA on the Face­book page. I think because he did­n’t want the Cameron curse to kick.

Tony Kynas­ton [27:45]: Fair enough, Tim. It’s only [inaudi­ble 27:48] port­fo­lio at the moment. So, you’re safe.

Cameron Reil­ly [27:51]: There we go. It was from Brett, what Brett said real­ly inter­est­ing to hear fol­low­ing the three PTL of com­modi­ties which led to buy­ing CIA from what I can tell the CIA pro­duces Alu­mini­um prod­ucts, not Alu­mini­um itself. So, with high­er Alu­mini­um prices hurt rather than help them.

Tony Kynas­ton [28:11]: That’s a real­ly good point, I think it depends on the pric­ing pow­er of the CIA to sell Alu­mini­um prod­uct. But gen­er­al­ly, I would have thought if the com­mod­i­ty inputs going up the like they would be able to put their prices up. And I would think most peo­ple in the mar­ket will do that. But it does require I would have to do a fair bit of analy­sis to look at the pric­ing pow­er of the CIA. This is what they call low cor­ti­sol costs cost­ing come in. So, I don’t know where CIA sits on that kind of graph, but the com­pa­ny that can pro­duce the prod­uct, the wid­get, the Alu­mini­um wid­get in this case, but the low­est court or price will get the most ben­e­fit in terms of pric­ing pow­er. So, I’d have to do a lot more analy­sis to work out whether that’s the case or not. So, I take the point that was made. It’s not nec­es­sar­i­ly the com­mod­i­ty input price that will cause prob­lems if they can’t pass it on to their cus­tomers. But I would have thought that giv­en all the Alu­mini­um pro­duc­ers will have sim­i­lar price increas­es that they prob­a­bly will pass on those prices.

Cameron Reil­ly [29:34]: Right. [Cross-talk­ing 29:35]. Well, good ques­tion, Brett. We’ll keep an eye on it.

Tony Kynas­ton [29:39]: I’m try­ing to think of an anal­o­gy. It’d be a bit like if a steel­mak­er could not pass on. Its price increas­es even though the iron old prices of its all-time high at the moment. They prob­a­bly are still mak­ers out there who can’t do that.

Cameron Reil­ly [29:56]: Well, I was going the oth­er way when the RBA put out an inter­est rate cut, and the banks just don’t reduce their home loan rates. The inverse of that sce­nario.

Tony Kynas­ton [30:11]: And that’s one of the things that Buf­fett looks for is there some kind of moat that they can keep their prices high­er even though the inputs are ris­ing? And the banks have a moat? Because they just all have to look across the street and see what the oth­er bank is doing. And if they all decide not to pass on the rate decrease in hap­py days for them all.

Cameron Reil­ly [30:34]: I thought, when you were say­ing moat there, I thought you were gone like region­al Aus­tralia, you were like hey mate, how’s it going mate? You’re good mate?

Tony Kynas­ton [30:45]: No, his name is the moat that Buf­fett talks about the moat around the busi­ness. And it’s the quick sum­ma­ry it’s a moat exists when a com­pa­ny can raise prices when oth­ers would win at a high­er rate than their inputs when oth­ers can’t.

Cameron Reil­ly [31:01]: Like apple?

Tony Kynas­ton [31:02]: Yes, exact­ly.

Cameron Reil­ly [31:06]: The top-of-the-line iPhone now is like $2,000. It’s crazy.

Tony Kynas­ton [31:14]: Yes, it is, isn’t it?

Cameron Reil­ly [31:18]: Imag­ine going back 20 years ago and try­ing to tell some­body you’d be pay­ing $2,000 in 20 years for a mobile phone. We thought every­thing would get cheap­er.

Tony Kynas­ton [31:29]: The thing was 20 years ago; we were pay­ing $2,000.

Cameron Reil­ly [31:34]: That’s right. Well, in 1990, when I bought my Motoro­la, my first Motoro­la brick phone. I think it costs 1000s. You’re right. And had about 30-minute bat­tery life. I had to screw on the anten­na. And every­one who saw me using it would call me a Yup­pie Wang.

Tony Kynas­ton [32:01]: Exact­ly. I’m guess­ing you’re dri­ving a BMW back then too.

Cameron Reil­ly [32:05]: No. those were before the BMW years. No. I wish. Okay. John men­tioned last year. And so, he asked the ques­tion last week, but he want­ed some clar­i­fi­ca­tion on it this week if we can. Last week’s ques­tion was, some of the com­pa­nies on the buy list use their retained cap­i­tal more effec­tive­ly to make more prof­it than oth­ers? This is mea­sured by return on equi­ty or assets. Some also grow their sales more than oth­ers. Could we rank these high­er? And I think you said its sort of fac­tored into some of the finan­cial rat­ings that we look at. And you also sug­gest­ed John may be test­ed out. And this week’s ques­tion is, how does he test this out?

Tony Kynas­ton [32:54]: Good ques­tion. I’m not sure that are we and sales growth are fac­tored into the check­list. So, it’s worth­while explor­ing. And I’d prob­a­bly add return on invest­ed cap­i­tal to that list as well, which is, I think what John’s also allud­ing to with his ques­tion. So, both of the met­rics of return on invest­ment in sales growth are avail­able on the stock doc­tor. So, we can cer­tain­ly do some fil­ter­ing on the cur­rent results. But unfor­tu­nate­ly, we don’t get to fil­ter the his­tor­i­cal data from the stock doc­tor so, in an ide­al world, we’d have, say, five years’ worth of data for our check­list com­pa­nies. And then we could add the two new met­rics return on equi­ty and sales growth and see if those were added to the check­list, whether it would help us to improve our returns. And at the same time, I think what I prob­a­bly do is also just look at the report, I rank com­pa­nies by those two met­rics, are we in sales growth, and take the top 20 and look at those returns and see if they are inde­pen­dent of our check­list did bet­ter or worse than our now QAV the returns because that can also be a good way of see­ing whether they should be added to the check­list, the prob­lem is get­ting access to that data.

So, I have thought over the course of the pod­cast series, I should go to the stock doc­tor and see if we can some­how get maybe a data dump of all data. So, we can do tests like this, so I’ll do that. But the oth­er way to do it is to accept the fact that we don’t have a deci­sion now. And if John wants to, he could add a cou­ple of columns to both the stock doc­tor QAV fil­ter that we use and the mas­ter check­list down­load, and over the next six to 12 months, just see if those two things are improv­ing the score, or they’re improv­ing the returns on the check­list. And also, as I said, do a sep­a­rate down­load for just those two met­rics. And then rank com­pa­nies by tak­ing the top 20 com­pa­nies and see if a port­fo­lio that was only invest­ed in com­pa­nies that scored high on those two met­rics out­per­formed QAV because that’s anoth­er inter­est­ing analy­sis to do.

My gut feel says and I haven’t done that, but I think those two met­rics are ones that peo­ple com­mon­ly focus on. So, I would think that the top 20 com­pa­nies by ROE and sales growth would prob­a­bly be heav­i­ly pop­u­lat­ed by all the very high-priced com­pa­nies. So, it’s real­ly inter­est­ing to see how things have evolved in the mar­ket because ROE, in par­tic­u­lar, was always some­thing that peo­ple, like I think, from mem­o­ry Peter Lynch, would say was the go-to met­ric you want a com­pa­ny that if I invest $1 in it, and then it earns $1, and it can rein­vest that dol­lar and make a good return high­er than the mar­ket return. And that’s kind of like an invest­ment fly­wheel. So, it’s get­ting my dol­lar and it’s rein­vest­ing it at a high rate of return, and there­fore, it’s going to com­pound quick­ly. So, back before the Dot­com Boom, com­pa­nies that could be very light with their man­u­fac­tur­ing, or maybe adver­tis­ing com­pa­nies that did­n’t have many assets, would typ­i­cal­ly fall into the hier­ar­chy camp. So, they could grow earn­ings and grow sales, with­out hav­ing to invest too much in their busi­ness. Then along comes Dot­com Boom. And sud­den­ly it had, I guess you could call them fac­to­ries pro­duc­ing prod­ucts, but they just did it all dig­i­tal­ly.

And so, yes, you still had an invest­ment in data­bas­es, and I.T cost but they were often­times a lot less than hav­ing to go out and buy or build fac­to­ries, or go and buy and build stores. And so, there are always were high mul­ti­ples high­er than a typ­i­cal indus­tri­al fac­to­ry. And so, they became very pop­u­lar because up until Dot­com Boom, peo­ple were always push­ing that ROE was a great met­ric. So, I think my gut feel says if we added ROE to a check­list, we’d start to intro­duce some of the high­er val­ue com­pa­nies into our analy­sis, and my Sor­ry, not high­er val­ue com­pa­nies, high­er price com­pa­nies into our analy­sis, and they prob­a­bly fall off at the hur­dle of price to oper­at­ing cash flow. So, I guess what I’m say­ing is, it’s a good analy­sis to do. But we’re mov­ing away from being val­ue investors if we start to invest in that type of com­pa­ny. Is that clear? Cam? Do you have any ques­tions?

Cameron Reil­ly [37:28]: Yes, I do. So, our check­list already looks at con­sis­tent­ly increas­ing equi­ty.

Tony Kynas­ton [37:37]: Cor­rect.

Cameron Reil­ly [37:38]: Does­n’t that in a way pick up, return on equi­ty com­pa­nies that con­sis­tent­ly increas­ing their equi­ty, get­ting a bet­ter return on equi­ty than those that aren’t con­sis­tent­ly increas­ing their equi­ty?

Tony Kynas­ton [37:53]: Yes, it does. As long as the ROE com­pa­ny is putting its increased prof­its back into equi­ty. I’m just think­ing out loud here. You could have, for exam­ple, a min­ing com­pa­ny with a high ROE that uses the return it’s made on its equi­ty to drill for new mines, and there­fore the equi­ty isn’t grow­ing. So, there should be a cor­re­la­tion. But it does­n’t always work that way.

Cameron Reil­ly [38:18]: I see. So, they can have a good ROE way, but not con­sis­tent­ly increas­ing equi­ty at the same time.

Tony Kynas­ton [38:25]: Yes, they should. But some­times, if they’re devel­op­ing prod­ucts, or look­ing for new mines and stuff like that, they’ll use up that high prof­it and pull it back into their own com­pa­ny. We are to invest in the com­pa­ny, but nec­es­sar­i­ly the equi­ty.

Cameron Reil­ly [38:40]: Right. Well, John there goes if you want to test that out.

Tony Kynas­ton [38:44]: And look, it’s the way I do things, I often have thoughts like this. And then I set up like a side­bar in my spread­sheets and do a down­load and check maybe a cou­ple of hubs of returns and see if it’s mak­ing a dif­fer­ence, as opposed to going back and try­ing to get data and do a regres­sion test. So that’s how I do it.

Cameron Reil­ly [39:05]: This could be a way of just get­ting access to a big dump of his­tor­i­cal data, you would think? [Inaudi­ble 39:13].

Tony Kynas­ton [39:13]: I guess that some­one like Reuters, or the peo­ple who are apply­ing or pro­vid­ing data, the stock doc­tor will have it, but they prob­a­bly charge a lot to get out. So, I think the first port of call is to talk to the stock doc­tor who already has it, and see what oth­er arrange­ments we can get from them to get access to his­tor­i­cal data. Because if you look at the stock doc­tor you can go back into the pri­or halves and see what a dif­fer­ent era we use. And cer­tain­ly, we could go back for those com­pa­nies that were in our port­fo­lios in the past and see if the ROE was high that’s anoth­er way of doing it or if their sales growth was high, and try and form a view as to whether we’d be bet­ter off invest­ing in com­pa­nies that were on our check­list, but we’re also high ROE in high sales growth. Just by doing it man­u­al­ly look­ing at the his­tor­i­cal dol­lar and stock doc­tor. [Cross-talk­ing 40:09].

Cameron Reil­ly [40:22]: Yes. Next ques­tion. Anoth­er one from Brett, I’ve been going through the lat­est buy and watch list and have some ques­tions by list. LYL Lycopodi­um. Has it lost its sen­ti­ment looks like it crossed the cell line at some stage? Dur­ing each of July, August, Sep­tem­ber, and Octo­ber. A bit of a falling knife he asks LYL.

Tony Kynas­ton [40:56]: I agree, I think it says a sell, we should remove it from the buy list. And look, this is one of the issues. We need some­one like Brett to come through and check these things. But one of the issues is there’s a lot of stocks on our watch list or court. So, the ones that get down­loaded but don’t become buy because the sen­ti­ment has­n’t been con­firmed as a buy with­out going but some­times if it to a com­pa­ny, I think might be inter­est­ing, I’ll work out what I think the buy price is and raise a price alert and stock doc­tor. And like­wise, for com­pa­nies that I own, I’ll go through and work out their sell price and raise a price alert and stock doc­tor. That’s still fair­ly labo­ri­ous.

And the oth­er prob­lem, of course, is that they need to be updat­ed. Because the price alerts can go out of fash­ion or out of rel­e­van­cy every month if a new high comes along, or a new low comes along. So, it still has to be mon­i­tored. So, I haven’t cracked yet how to do this in an auto­mat­ed sense. But I guess at some stage we will. And then we can spit out a report which says go back and look at things like a podi­um, it’s become a sale. And until that time, you have to do it man­u­al­ly. So, thanks, Brett, you can be our intern of the week for doing that man­u­al­ly for us.

Cameron Reil­ly [42:20]: So, do you have the Lycopodi­um chart in front of you?

Tony Kynas­ton [42:23]: No, I don’t but I call Lycopodi­um.

Cameron Reil­ly [42:25]: I’m just won­der­ing what you think the byline looks like on this?

Tony Kynas­ton [42:34]: So, I think from mem­o­ry, we said it was a buy when the high point was just before the COVID crash, and then the next high point was just to the right of that. So, the buy would have been some­where around about April of this year. For those 40. It’s gone up and then down again since then. So, let’s come back to being a cell. So, Bret­t’s right. And the cell would have occurred prob­a­bly around August has he said it would have been a cell. So that’s what we always say Cam that things are on the buy­er list. But take it as a start­ing point for doing your research before you buy because the buy prices and sell prices may be out of date. And until we can auto­mate the process. We are going to back in check.

Cameron Reil­ly [43:31]: You’re not check­ing the graph on each of every week?

Tony Kynas­ton [43:34]: No cor­rect.

Cameron Reil­ly [43:37]: Okay, more from Brett here. He says on the watch list. CCV cash con­vert­ers look like it broke the byline about three to 4 pm on the 26th of Octo­ber. Being very spe­cif­ic, their Bret­t’s byline on the 26th of Octo­ber was 0.201. Then it hit point 205. Sim­i­lar to what hap­pened with RXP on the 26th of the eighth at 11 am that bumped up at sen­ti­ment CCV.

Tony Kynas­ton [44:07]: What was I doing at 11 o’clock on the eighth? CCV cash con­vert­ers. Well, I most­ly heard about cash con­vert­ers. I think it’s a lit­tle bit below its price at the moment. So, I’m look­ing at the first time point being March 2016. And then the-sec­ond-high point being March 2018. And I’m get­ting a buy price if I use my three-point train cal­cu­la­tor of 19.8 since, and it’s cur­rent­ly 19. So, we can find it and so I said the-sec­ond-high point was March 18. But if you go down and use the right­most peak, which I was­n’t inclined to do in this case, because there if I use that and draw a line with the high­est point it did leave a peak exposed above that line. So that’s why I did­n’t use it. But if you drew the sec­ond high­est peak, then it could be a buy. That’s a fudge. So, if you use the right­most peak is the sec­ond high­est peak, then it could be a buy, but it’s that’s a fudge.

Cameron Reil­ly [45:15]: Okay, I’m just going to do a screen­shot of these because some­one asked me to include some three-point bylines in the week­ly newslet­ter. That would have been Nick Bai­ley, Nick sug­gest­ed he said, you know, I’m still strug­gling with the graphs and I would like some more visu­als each week. And if you could send them through in the newslet­ter, that’d be great. So, good sug­ges­tion Nick I’m going to do that. So, let me do the ones that we spoke about today. Which I think of it.

Tony Kynas­ton [45:49]: And I think just cash con­vert­ers I think Bret­t’s right it could be a falling knife because the share graph is high up left on the x‑axis, it drops down to the low right on the graph and so it is in a down­trend. So, we need to see a fair­ly good break­out before we can say it’s a buy, I think.

Cameron Reil­ly [46:16]: Okay. RXP was Brit­t’s oth­er one here. RXP ser­vices are lim­it­ed. All right.

Tony Kynas­ton [46:36]: What was Bret­t’s ques­tion about RXP?

Cameron Reil­ly [46:39]: He said it was sim­i­lar to cash con­vert­ers looked like a broke the byline.

Tony Kynas­ton [46:45]: I’ll just have a quick look at it. So, I don’t think it has I’m going to look at this. I’m going to say that the high­est point is Novem­ber 16. At $1.035. And if I start to hold a ruler up to the screen, which is a sim­ple test. And start at that high point, the next high­est point, I think is going to be in Decem­ber 2019. At 53 cents.

Cameron Reil­ly [47:21]: That’s where I had it as well.

Tony Kynas­ton [47:23]: In which case, it’s slight­ly above the share price at the moment where it cross­es the x‑axis. It’s cur­rent­ly trad­ing at 34 cents as we speak. And it looks like it’s going to be just a bit north of that by a cou­ple of cents.

Cameron Reil­ly [47:36]: May have been above that when Brett looked at it on the 26th of August.

Tony Kynas­ton [47:42]: That’s right.

Cameron Reil­ly [47:43]: I don’t know. But there was it was a while back.

Tony Kynas­ton [47:46]: We’ve often seen month­ly graphs that can move over the month from being a buy­back to being a hold.

Cameron Reil­ly [47:52]: But he was say­ing RXP bumped at cin­na­mon on the 26th of August. That was two- and a‑bit months ago.

Tony Kynas­ton [48:03]: And it could of because that was the right­most peak is the end of August. So, chances are it could have been high­er at the time, in which case it may be in buy, but it’s time again.

Cameron Reil­ly [48:12]: The last one Brett asked us to look at does [inaudi­ble 48:14] DKM he said it looks like across the byline in August and has­n’t gone near the cell line since. Is there anoth­er gate I’m neglect­ing its qual­i­ty score is only 36%? But QAV scores point two three. So maybe based on poor qual­i­ty? The chart for this one is inter­est­ing. It’s got a high point back in Sep­tem­ber 2016, which was pret­ty much the same price. It was at the end of August 2020, 27 15.

Tony Kynas­ton [48:50]: And so, before that equal High Point came up. The next going back to the left, the next high point would have been 26 cents in July 2018. And then draw­ing a line from the first high point, which is as you say, Sep­tem­ber 16 through July 18 would have giv­en us the share price just below that peak of 27 cents in August 2020. So, it would have been a buy then it’s now slipped back below that buy, but it’s way above its sell line. To me, this looks like it’s sort of trad­ing side­ways. And in that range, which shares can some­times do but no Bret­t’s, tech­ni­cal­ly right? It has become a buy and we should add it to the list. And I just had a look at my lat­est down­load.

Before we came on to the show. And Brett said I think he had a QAV score of about point two, three due to mine. But I get point three, sev­en. And I think the rea­son why we dif­fer­ent might be and Brett might want to check­list him­self is that when [inaudi­ble 50:03] was on our down­load list, but the sen­ti­ment was entered as no, none of the man­u­al­ly entered data was in. So, chang­ing that sen­ti­ment to yes. And then going back and look­ing at the oth­er man­u­al­ly entered data, boost­ed the score up for me to point three sev­en. I don’t both­er putting into man­u­al­ly enter data if the sen­ti­ment is not a buy.

Cameron Reil­ly [50:28]: Just more work. So, before we move on, talk me through this one again. So, I’m not quite sure I under­stand it. So, it crossed its bylined. In August, then it’s dropped back below the byline. But as it’s above the cell line, it’s still a buy.

Tony Kynas­ton [50:48]: That’s a good ques­tion. No, I think it’s a hole. So, if some­one bought it back in August, they can hold on, they don’t need to sell because it’s way above the cell line, which is going to be around about 13 cents, I would think. But I would stop buy­ing once the buy price drops back below the buy price.

Cameron Reil­ly [51:09]: Right. Okay. I thought I’d missed some­thing there but you know.

Tony Kynas­ton [51:13]: No, I see what you’re say­ing. So, should it be added to our buy­er list or not? Good ques­tion. Think­ing about it, maybe not. Because it stopped being a buy. It’s not a sell, but it’s not a buy.

Cameron Reil­ly [51:32]: And it’s not a [inaudi­ble 51:33] either. Because it’s above the cell line.

Tony Kynas­ton [51:38]: We’ve had cas­es like this before, where it’s the share price has gone above the byline for a lit­tle bit, but then dropped back. And I think in one of the gold min­ers’ case, we saw because that was dur­ing the month. It was intra­month and I was­n’t. I did­n’t think the end of month price would be above the ball line. So, we sold it. But cer­tain­ly, in this kind of case, I would stop buy­ing if the uptrend was­n’t con­tin­u­ing.

Cameron Reil­ly [52:02]: It’s in pur­ga­to­ry. It’s nei­ther alive nor dead, me walk­ing the earth nor in the after­life.

Tony Kynas­ton [52:11]: It’s, it’s what the stock­bro­kers will call a hold.

Cameron Reil­ly [52:17]: Right. That’s bor­ing. I like poet­ry bet­ter we’re going with that. It’s in pur­ga­to­ry.

Tony Kynas­ton [52:24]: So, we have to pray for it, that’s right.

Cameron Reil­ly [52:27]:  Well, if you’re so inclined. The last ques­tion is from Mark. M. He was ask­ing about a sell­ing price for SUL super retail group. This is a fun­ny one. I had a look at this the oth­er day when Mark post­ed on a Face­book group. And I was like, I don’t know what to do with this one man. This is crazy. Can you walk me through this one, TK?

Tony Kynas­ton [53:00]: Okay, so let me have a look, I’ll just call a graph up. What’s the ques­tion? Sor­ry, is it a buy or sell?

Cameron Reil­ly [53:06]: Well, what’s the sell­ing price? Because if you look at the low­est price on the chart like Noah said, March 2020, some­thing like that. What sec­ond point do you take here? Because it just goes pret­ty much straight up in that. I know we’ve done straight up some­things like this before, but maybe but remind me.

Tony Kynas­ton [53:30]: Okay. So, in this case, I think what we’re see­ing is a whole series of buys and sells. So, you’re right, the buy­ers back on Decem­ber 15 and then prob­a­bly on August 16. So, it’s a buy def­i­nite­ly by August 20 but maybe even the month before that you’re prob­a­bly August 20. So, then we’re look­ing for a cell line after August 20. And so that cell line would be the first low­est point on the graph is still March 2020. But then the next trough after our buy is going to be Sep­tem­ber 2020 which means that almost straight away it becomes a sell again so but then it goes up and becomes a buy again and then sell so it’s a bit like San­tos and some of those oth­er ones which are going up steeply but in gear but it’s almost like an upward Schro­ding­er or an inverse Schro­ding­er.

So, I see these are just being con­tin­u­ous until there’s a real­ly strong trend con­tin­u­ous­ly a buy than a sell and a buy and sell. So, you see the first sell point in March. When did you say the sec­ond one is? Let me have a look. Sep­tem­ber 2020. And that’s on the basis that the buy the stock was or the month before that in August 2020. I’m look­ing for the next trough after the buy. Where can I draw a sell? [Cross-talk­ing 55:12].

Cameron Reil­ly [55:15]: Right? But you’re still start­ing it before the buy?

Tony Kynas­ton [55:18]: Yes, I’m still tak­ing the first. Because basi­cal­ly what I’m doing in short­hand is say­ing, if I take the low­est point and the next low­est point, it becomes a sale, and a sell and a buy. And then that becomes a new cell line. So, if you do it like as if you’re a com­put­er and iter­at­ing, it’s a whole series of buys and sells. So, the last step in our iter­a­tion is to find the most recent buy and then look for the cell line after that.

Cameron Reil­ly [55:43]: So, then it would have breached the sell line at the end of Sep­tem­ber, but then it went up in August. So how would you draw the new byline after that?

Tony Kynas­ton [55:54]: Well, it’s like I’m say­ing it’s an upward Schro­ding­er. It’s a buy and sells at the same time after that, isn’t it? I don’t think it’s call­ing you by a line from there. Because it’s been sell­ing.

Cameron Reil­ly [56:06]: Sell line keeps going up.

Tony Kynas­ton [56:08]: It’s a sell. But at the same time, it’s above its last byline, but we keep get­ting sell sig­nal. So, it’s a bit like these shares, which are falling nice, where they keep sort of jagged­ly going down. This one’s jagged­ly going up. And unfor­tu­nate­ly, that’s a short short­com­ing of this process, because it’s giv­ing us mixed sig­nals.

Cameron Reil­ly [56:36]: My brain just goes are too hard to find some­thing else.

Tony Kynas­ton [56:40]: Yeah, I think mine does too.

Cameron Reil­ly [56:41]: Too com­pli­cat­ed. It’s not like there’s only one stock to look at when I find charts like that, that is gone wacky. I’m like, too hard. It’s like meet­ing a gor­geous woman at a bar when she’s on the third bot­tle of wine and starts telling you some crazy sto­ries. You’re like, this is going to be too hard. I’m out, there are oth­er fish in the sea. I don’t need to process this one.

Tony Kynas­ton [57:17]: So instead of call­ing the Schro­ding­er as we should call them bun­ny boil­ers. That’s what we used to call crazy when you meet in the bar after bot­tles of wine.

Cameron Reil­ly [57:28]: Should say that the same applies to men. Bun­ny boil­ers, you can have male bun­ny boil­ers. Okay. Bun­ny boil­ers. That’s the new term. That’s the title of this episode. Bun­ny Boil­ers I like it. [Cross-talk­ing 57:47]. We’re an errand five in prob­a­bly no more time to talk about Kel­ly Invest­ing. But you can give us your cup tip.

Tony Kynas­ton [57:57]: I want to talk about Kel­ly. So, look next time next week, we need to spend a good 20 min­utes talk­ing about the Kel­ly cri­te­ri­on of the Kel­ly for­mu­la. Not enough time to dial a guess but let’s make it top of the list next time. Okay. We bumped it twice now. And giv­en it’s been a bit of a top­ic with our inter­views with Mr. Mori­ar­ty, then I think we should talk about explain what we’re talk­ing about to our lis­ten­ers.

Cameron Reil­ly [58:25]: I was going to call you Sher­lock this week. Because your Neme­sis is now Mori­ar­ty. I for­got to do that at the begin­ning.

Tony Kynas­ton [58:36]: Yes, we don’t mean that. Steve, we’d love you to come back and talk to us on the pod­cast if you’re avail­able and want to.

Cameron Reil­ly [58:43]: Maybe we do. Maybe I do. I watched a bit of a video by Tobias Carlisle. Coin­ci­den­tal­ly, dur­ing the week and he and these guys were talk­ing about Kel­ly, the Kel­ly cri­te­ri­on for invest­ing. I still don’t under­stand how you would apply it to stocks. And I don’t think they do either. They were just like Kel­ly’s Okay, to a cer­tain point and then it just becomes more trou­ble than it’s worth. They kind of dis­missed it as being over­ly com­pli­cat­ed to try and apply to stocks.

Tony Kynas­ton [59:16]: I think that’s a good sum­ma­ry in terms of stocks. I think that’s a good sum­ma­ry. But I real­ly would like to go through it with their lis­ten­ers, because I think it’s a great piece of his­to­ry and a great piece of math and I find it very inter­est­ing.

Cameron Reil­ly [59:30]: All right, well, let’s do it when you’re not in Wag­ga on the [inaudi­ble 59:33]. The Wi-Fi on the [inaudi­ble 59:39].

Tony Kynas­ton [59:39]: I’ve got Wi-Fi prob­lems.

Cameron Reil­ly [59:41]: All right, give us your cup tip.

Tony Kynas­ton [59:43]: All right, so, cup tips. And again, I’m apply­ing the qual­i­ty val­ue cri­te­ria here. So, I’m going to drag this out for five min­utes. But the way I look at the Mel­bourne Cup and it tends to only work for the Mel­bourne Cup and I’m not sure if that’s because you’ve got real­ly good hors­es in the Mel­bourne Cup or whether it’s because the hand­i­cap­per medals a bit more in the Mel­bourne Cup than oth­er races, or because it’s a two-mile race, which is very long and car­ry­ing even a kilo or half a kilo, in white dif­fer­ence can tell on the horse over that time. Over that dis­tance, sor­ry, but what I like to do is to look at the writ­ing of the horse, and just quick­ly, all the hors­es in the Mel­bourne Cup, all the hors­es that write in Aus­tralia get a horse rac­ing. And it’s a way of try­ing to stan­dard­ize their per­for­mance across dif­fer­ent venues and dif­fer­ent coun­tries. In oth­er words, if some­one wins a group one over­seas, they’ll receive a rat­ing.

And that’s done sta­tis­ti­cal­ly look­ing at the per­for­mance of hors­es who won that race. So, when they come to race in Aus­tralia, we can judge the rat­ings of the hors­es here against the rat­ings of the hors­es over­seas. So writ­ing is a good way of check­ing for qual­i­ty. But because this is a hand­i­cap race, hors­es will car­ry dif­fer­ent weights. So, what we’re look­ing for in our hors­es is a high­ly rat­ed, car­ry­ing light­weight. And we start that process by look­ing at the top weighed in the Mel­bourne Cup, which is a horse called Antho­ny Van Dyck. And he car­ries a rat­ing of 122 which is a very high rat­ing inter­na­tion­al­ly. But the sec­ond rat­ed horse in the Mel­bourne Cup is a horse called Sir Drag­onet, which is only rat­ed one rat­ing list, but it’s car­ry­ing a lot less weight than it thinks is car­ry­ing two and a half kilos less and Antho­ny Van Dyck so that’s the val­ue com­po­nent, we’re find­ing a qual­i­ty horse car­ry­ing less weight, which means it’s been well hand­i­capped to win the race. And there are two hors­es in the Mel­bourne Cup, which are like that, the oth­er ones called Russ­ian Camelot, which is a cou­ple of reign­ing points low­er than Antho­ny Van Dyck, but it’s car­ry­ing three kilos less than what all it should be car­ry­ing com­pared to Antho­ny Van Dyck.

So, they’re my two tips Russ­ian Camelot and Sir Drag­onet. I’m find­ing it a bit hard to split them, but I’m lean­ing towards Russ­ian Camelot, which is the Aus­tralian horse. So that’s my tip. It’s cur­rent­ly about 13 or $14 in the mar­ket, if you also want­ed to bet Sir Drag­onet, which is a good horse, it’s about $9 in the mar­ket or $10 in the mar­ket, so they’re both good val­ues. Two more hors­es fit the pro­file but don’t get as much of a weight drop as those two and they are the favorite Tiger Moth at $9. And a horse called Warn­ing at $51. Which one that is the VRC Dar­by last year and they’re both again well wait­ed for their rat­ings but not they don’t get the white props that Russ­ian Camelot and Sir Drag­onet do. So, if you want to have a tri­fec­ta, box those up, but I’m going to prob­a­bly buy Russ­ian Camelot and so drag­on a prob­a­bly lean­ing towards Russ­ian Camelot just a lit­tle bit. That’s my tip.

Cameron Reil­ly [01:03:01]: What time is the rice on?

Tony Kynas­ton [01:03:02]: Good ques­tion. It’s usu­al­ly around three or four o’clock. It’s race sev­en. So, three o’clock tomor­row after­noon.

Cameron Reil­ly [01:03:10]: I should prob­a­bly get this pod­cast edit­ed and uploaded before then. But then they don’t get to hear all your analy­sis, but I’ll try and get it done.

Tony Kynas­ton [01:03:28]: And then you can go once Russ­ian Camelot wins. We can just go all up into the pres­i­den­tial elec­tion on Tues­day night.

Cameron Reil­ly [01:03:37]: I’m doing a live show Wednes­day morn­ing with Ray we’re going to be cov­er­ing the Russ­ian. The Russ­ian. No, that was a slip of the tongue. Sor­ry. I know noth­ing about the Rus­sians. Amer­i­can elec­tion we’re going to do live cov­er­age of it just for shits and gig­gles on Wednes­day. You’re wel­come to come and join us to give us a live com­men­tary.

Tony Kynas­ton [01:04:00]: I’ll be in the car dri­ving back to Syd­ney I think, you could be doing that com­men­tary for months because I don’t know if we’re going to know who wins the US elec­tion after Yeah. Tues­day night, us time.

Cameron Reil­ly [01:04:10]: I caught up with my friends David and Maria yes­ter­day, David just turned 95 on Sat­ur­day, Marie turned 84 the week ear­li­er and she’s going in for hip replace­ment surgery on Novem­ber 11. And she said to me, what, if I don’t come out of the oper­at­ing the­atre, I’m okay with that. I’ve kind of lived long enough. I’m good. And I said, don’t you want to know how it all ends? And she said, I just want to know that Trump’s gone. That’s all I need to know. And I said, Well, I hate to break it to you. But I don’t think you’re going to need to know that. But you’re going to know that by Novem­ber 11. You’re going to need to come out and you need to stick around for at least anoth­er three or four months. We’ll see how it plays out.

Tony Kynas­ton [01:04:50]: Quite pos­si­bly, unfor­tu­nate­ly. It will be inter­est­ing, what­ev­er hap­pens.

Cameron Reil­ly [01:04:54]: So, I’ll David turns 95. He greet­ed us with a song when we walked in and I said what are you read­ing at the moment? He goes I’ll show you and he go off to his bed­room and he comes out a mas­sive book on the col­lect­ed writ­ings of Emmanuel Kant that he’s halfway through. And he’s on it for 60 years book on some advanced math­e­mat­ics prob­lem, the Rosen­crantz and Guilden­stern func­tion or some­thing. And he said, I bought this book 60 years ago when I was at MIT he said, this has nev­er been solved this prob­lem and I got angry because I could­n’t make it, he flicked me through it. It’s just like, com­pli­cat­ed equa­tions that the entire book. He’s been sit­ting on this book for 60 years and he’s just cracked it open again. And he said now I get it all now I’m lov­ing it fly­ing through it it’s ter­rif­ic. He’s 95 solv­ing advanced math’s prob­lems. That’s what he does in his spare time rates can’t solve math prob­lems. I think that’s inspi­ra­tional.

Tony Kynas­ton [01:05:56]: It is, isn’t it? It like keep­ing your mind active is a good lead­ing indi­ca­tor for a long life hope­ful­ly. Did you ask him what the secret to his longevi­ty was?

Cameron Reil­ly [01:06:04]: Just good genes and mar­riage. He said to us he eats bad food nev­er tak­en care of him­self. But it’s the love of his wife. He said I you know I stick around because I love being with Maria. I don’t want to be with­out Maria. They’ve been mar­ried for 40 odd years. 40 45 years I think and their sweet old cou­ple. They love each oth­er to bits. He’s deaf as a post and has been for 10 years I’ve known him so he’s always What. What. It’s I showed Chris­sy the night before the Fawl­ty Tow­ers episode with the deaf woman with a hear­ing aid is this a piece of your brain and was very rel­e­vant, because that’s exact­ly what it was like catch­ing up with David. But no, he said the like the old age thing is just genet­ics. His grand­fa­ther lived to 107 his moth­er lived to I think 97 98 but he’s always kept his mind active like at that age. Most peo­ple are veg­eta­bles, but he is killing it man, always read­ing and wants to argue his­to­ry and pol­i­tics and sci­ence with me. It’s fan­tas­tic.

Tony Kynas­ton [01:07:14]: That’s great. Well, next time you go there, can you get a like a lock of his hair or a piece of skin fol­li­cle, and then we’ll run it through a CRISPR and find out what that long live gene is.

Cameron Reil­ly [01:07:25]: Splice it into our­selves. Okay, well, good luck on the ponies tomor­row. Tony, have fun. Say good night to Rod­dy for me. And I’ll talk to you next week.

Tony Kynas­ton [01:07:37]: And we’ll do Kel­ly next week. Well, hope­ful­ly, we can do it next Mon­day in the world has­n’t col­lapsed after the US elec­tion and every­thing’s hunky-dory.

Cameron Reil­ly [01:07:46]: Well, when you say Kel­ly, I assume you’re talk­ing about the Kel­ly’s Heroes cri­te­ri­on. That one.

Tony Kynas­ton [01:08:08]: That’s right. So, we’re call­ing episode. Kel­ly’s Heroes.

Cameron Reil­ly [01:08:13]: Talk to you lat­er. Bye.