Transcript QAV 404

Episode name: QAV 404 Club

Duration: 1:19:05

Cameron Reilly [00:05]: Alright, well let’s get into it. Welcome back to QAV episode 404, recorded on the first of February 2021. You’re back in Sydney, TK.

Tony Kynaston [00:18]:  I am yep. The first day, well first working day back. Got back on Friday night.

Cameron Reilly [00:23] : Am: That’s good. How is the rest of your stay in wacka wacka wacka?

Tony Kynaston [00:28]: No it was good fun. Yeah, but it just rained the whole time. 

Cameron Reilly [00:33]: Hot and wet, which is?

Male voice [00:36]: That’s nice if you’re with a lady, but it ain’t no good if you’re in the jungle.

Tony Kynaston [00:43]: We didn’t play golf. So we jumped in the car and did a bit of a tour around the local countryside.  Visited the German chocolate licorice factory and the cheese factory. The time was cool. [cross talking 00:58]

Cameron Reilly [01:06]: And you got back home, and everything was good, that house was still there? 

Tony Kynaston [01:09]: Yeah. All good. Good to be home. It’s wet here though. Today is falling up, but it’s still wet here too. Well nice, it’s nice to be home.

Cameron Reilly [01:19]: That’s good. Let’s talk about the week in the stock market, Tony. Of course, we need to start, we need to start with GameStop. People who have never heard of shorting before. Now know everything about shorting. I’m assuming everyone listening to this knows the story. But if you don’t, quite pricey, last week, a bunch of people in red collapse the stock market. Here in the United States. Basically, there’s a subreddit called Wall Street Bets. And one of the guys on the, his name is deep fucking value. It’s the username. 

Had this idea a while back. He realized that GameStop which is a brick-and-mortar retailer of games like electronic boutique here in Australia. The business has been struggling because people tend to buy stuff online these days. This guy realized some time ago that there was a bunch of hedge funds that were shorting the hell out of this stock. And in fact, they’ve shorted it to I think 140% of the available liquidity of the stock. And so he and a bunch of business. And this subreddit had a couple of million people on it before last week. Now, last I checked, it was like 6 million people that joined this subreddit. 

But he basically said some time ago, you know what, if we just buy all of the stock that’s outstanding, we push the price up. And these guys are going to be you know, struggling. Obviously, it’s not going to go down to where they think when they sold it out with their shorts. And they’ll have to buy off of us. Which if we don’t sell will push the price up and up and up. And eventually, they’ll have to buy. It’s going to cost them an absolute fortune. And this is what transpired. A bunch of people, millions of people punters on this subreddit, bought GameStop. GMV is the code in the US for GameStop. 

Not the GMA and the ASX, which got a nice bike as a result by an accident. A lot of people bought, and if you jump into the Reddit forums. As I was, spend a lot of time in there last week. They just go hold the line, hold the line. Don’t sell, there were no shares to sell. And these guys had to cover their position.  I’ll get Tony to do a recap on shorting. Which we’ve talked about before on the show. They had to buy the stock to cover the shorts that they’d sold. And the price went up and up. And last I looked at it, it gone up 19% in a couple of days. It fell back a bit and then it went rebounded on Friday. 

And in order to get, this one, the hedge fund that was at the front of this Melvin capital lost $3 billion last week. Then I think they brought in some investment for some other billionaire hedge funds. And they lost another few billion the next day when they couldn’t cover this. They had to sell all their other positions, had to liquidate in order to get cash. And of course, it just meant a whole bunch of stock got dumped on the market in the US and here. And it panicked everyone. Is that a fair price here, of what went on, Tony?

Tony Kynaston [04:46]: It is yes, a fair price. But it’s worthwhile digging into a few of the points. Because there are a few things out there, which have been settled by a lot of the commentators, I think. But they’re worth focusing on. And I think you said that. Just wanted to point out that GameStop I think owns EB Games, in Australia. 

Cameron Reilly [05:05]: Oh, really? I did not know that. Well okay.

Tony Kynaston [05:09]:  Pretty sure I read that somewhere over the weekend. That’s what it is. If people wanted to know what the game stop shop looks like. It’s in EB games shop over here. I think in the case of the short-sellers. I think there may be some rules particular today. Or it might be different in the states. But I’ve never shorted the stock. Speaking from just things that I’ve read. They had to post collateral with the people they borrow the stock from. So just the price of short selling. If I think, for example, Maya is going to go down because department stores are dinosaurs and the bricks and mortars. And their online presence isn’t that great, which is basically the thesis behind GameStop. 

Then I go into a large super fund or a large investment bank. And I say can I rent some stock from you. And they do that, and they’ll rent it to me. And I immediately sell it. And I hope that short period of time, maybe a year, mine is worth a lot less than what it is now. And I can buy that stock back in the market and return it back to the super fund I borrowed it from. And stop paying the rent. But the thing that didn’t get much coverage with the company that shorted GameStop. Was that they had to post collateral, with the funds, they borrowed the stock from. So the funds said sure we’ll rent you the stock. 

But we want to make sure that you have money to buy it back and give it back to us when, when it’s all said and done at the end of the day. So they had to post collateral. And that’s the share price went up, they had to post more collateral or find stock and sell it and return it. And so it wasn’t just the fact that they had to pay a lot more for this stock, they could easily have just said, we’ll keep paying the rent on the stock. And we’ll haul. Because GameStop is probably going to come down at some stage when the Reddit people start to sell it. And then they can close it out for a low price. 

But the problem was they had to keep finding more and more collateral for the investment banks they borrowed the shares from. And that’s what really sent them broke. That forced them to cover the short position, which also made a big loss for them. And return the shares. It was kind of a double whammy for them. So I hadn’t heard about that rising collateral problem. Before for short-sellers. But that just multiplies the risk that you take on when you’re shorting a stock. If you’re forced to do that as well. I’m not sure if it’s the case in Australia, but it wasn’t the case of this company that was borrowing stock to short GameStop. So that’s the first thing. 

The second thing, which I found interesting was that this I mean, this whole situation reminds me exactly of the whole boiler rooms, 20 years ago. Leading up to the .com crash in particular. If you picture The Wolf of Wall Street, ringing a bell, in the morning and getting 50 or 100 traders together, and say, right. I want you to push GameStop to every one of your clients today. We earn some, we’re going to make out like bandits. And then they’ll get on their phones and they ring up maybe 10 people each.  Say about 10,000, 1000 people buying shares in GameStop. And then The Wolf of Wall Street selling out when it rises. 

And that’s pretty much what’s happening with Reddit. In fact, there are long funds that are in GameStop. So there are hedge funds that are shorting it. But they’re also hedge funds that have been in it for a long time. And GameStop the investment thesis behind buying GameStop. As it was laid out in an article, I read in the weekend was that. Yes, it was a brick-and-mortar retailer. But there was an activist investor who had run an online pet food company successfully in the US. Who had bought enough shares in the company to get a board seat? And he’d written to the company and said, listen, you idiots, I know about selling online. I just bought some shares in your company, you better listen to me, we’re going to turn this around. And it started to, so the way people legitimately buying on the rebound story. And the GameStop, including hedge funds. 

To me, if you use the Quimbaya principle, it’s not a long bow to suggest that maybe there are some hedge fund operators in that credit Wall Street bubble. Stirring things up. To talk up, they’re just like there wasn’t the pump and dumps with the boiler rooms. In the past. I’ve seen this guy or this picture before. It’s just it’s got, it comes in a different guy. It’s on a Reddit sub-post, rather than telephones and people actively coordinating traits. But otherwise, it never ends well. I wouldn’t want to be holding GameStop or holding the line for GameStop. Because I think a lot of people on the wall street bubble, Reddit subpage, you’re going to get burned. When it eventually collapses again.

Cameron Reilly [10:16]: I’ve read. So one of the other things that happened is a lot of these people on the subreddit were executing the trades via Robin Hood. Which has been the darling of the day trader movement because they had like zero fees. They’re like superheroes here, or that other one that launched recently I can’t recall. And self-wealth, and superhero. And low fees and but then Robin Hood stopped allowing people to buy. And then after that, they limited their ability to buy I think to one or two shares. And they got a ton of criticism. A lot of people on the subreddit have just said that’s it. Robin Hood is dead to us after this. Robin Hood came out and said Well, we had, they had to post collateral as well for trades going through their platform.

Tony Kynaston [11:11]: With the Clearinghouse. So, again, there’s a, there’s a murky side to the stock market that most people don’t realize. But there’s a couple of maybe three or four companies that actually do the trade process. And even if you’re using a broker, or if you’re using Robin Hood, or if using comsec, or whatever. They still have to go through a clearinghouse. Which marries up one side of the trade with the other. Until then it’s all just Bits and Bytes moving around the internet. But that’s when the rubber hits the road, you’ve got to have the funds to back up that buy or sell. And that’s what Robin Hood was being asked to step up more collateral for trades in this company as well. And they fell short. So they had to raise money, and they raised $1 billion. Which brought them to start allowing trades again. 

But the interesting thing about Robin Hood. Remember we talked about it after we spoke to the superhero guy here. And that was Robin Hood is making a large part. I think almost the majority of its income from front running trades. So it sells the trading data of its trades to hedge funds. So again not a longbow. To see who’s benefiting from the Reddit bubble, Reddit, subreddit, Wall Street beds bubble, what’s going on?

Cameron Reilly [12:37]: Well, the flipside to that is that if Robin Hood makes its money out of hedge funds and users on its platform, a collapsing hedge fund. It’s gonna want to shut that shit down, pretty quickly. The other part that didn’t get a lot of coverage in this. Is the Elon Musk. The richest man in the world now. Started telling his 42 million followers on Twitter. To jump on the bandwagon. Allegedly. Part of that is because Melvin’s capital was shorting Tesla. A while back. And so he was like yeah, okay. It payback time bitches. And he jumped in.

Tony Kynaston [13:26]: Melvin’s capital would have gone terribly out of the Tesla show, as well. 

Cameron Reilly [13:33]: And the other story. This, it wasn’t just GameStop that the Wall Street bed subreddit was talking about. Was executing what they call short squeeze, or these call short squeeze, as I understand it. AMC big cinema chain in the US that was going broke. They also were plugging that. Because it was being shorted as well. And I remember seeing stories a couple of months ago. My son hunter wants to be an actor. And he sent me a link. Some story a couple of months ago saying AMC was going to go out of business, the biggest or one of the biggest cinema chains in the US. And talking about what would that mean for the movie industry moving forward. Cinemas obviously COVID, put a big, I think 600 million in debt. COVID put a big hole in their revenues, and no one wanted to bail them out. Because no one knew how long was gonna last for. Apparently, the investment bank or whoever it was, that owned most of the AMC debt. Had an option where they could trade it for stock. And when the Wall Street bids people started to push it up. They traded that debt for stock. And so AMC is back in business because they just cleared all of their debt.

Tony Kynaston [14:53]: And the banks happy because they got multiples on their debt repaid.

Cameron Reilly [14:57]: I’m not exactly sure how that played out. The story that I read said that the share price didn’t cover that debt, that they had. But that was on the weekend. Not exactly sure what they, what they traded it for, or whatever. But anyway, yeah.

Tony Kynaston [15:18]: The next thing I want to mention too was that. Well, two more things actually. Interesting side story. So in the States, as there are similar regulations in Australia, if a company wants to buy back their own stock, they have to announce it to the market, but it can be fairly vague and wide-ranging. So like quantos, for example, came out last year and say that stocks going down we think it’s good value, we’re going to buy up to let’s say $100 million worth of stock. In the next 12 months. And they can buy some or all of that. At any time without disclosing it to the market. Now they’ve told the market upfront, they’re doing. A similar thing happens in the US. And funnily enough, GameStop had issued, I think it was $100 million notice earlier in the year. That they may buy the stock. Oh sorry, they might sell new stock to the market. 

So it’s quite possible that they had issued new stock and sold it at a very high price which is also going to help them achieve as well. In the article, I read about that. They talked about another case. Which we have spoken about last year, Hertz. The rental car company that was in administration, so it was some, it was still operating. But run by administrators, and in the courts trying to sort out how much the creditors would get paid. And something similar happened there. Where people started to buy Hertz stock. And it rose like crazy. So Hertz went to the judge of the bankruptcy court and petition them to allow them to sell new shares. And the judge said does it mean more money for the creditors? And they said you bet. So he said sure go ahead. So Hertz was able to sell new shares to unsuspecting buyers, basically when they were in bankruptcy court. Just because they could. This kind of frothy market is to me a sign that it’s 2000 all over again.

Cameron Reilly [17:14]: On top of Howard Marks, capitulation. Investor Michael burry, who was featured in the book in the film, The Big Short. Is one of the guys that shorted whatever those weird housing mortgage stocks were. CDO’s Yeah, he tweeted last week around this GameStop thing. That it was the trading, and it was unnatural, insane, and dangerous. And there should be legal and regulatory repercussions. There’s been a lot of gnashing of teeth. A lot of American politicians have come out and commentators have come out. Market commentators, saying this is terrible, horrible, what these crazy Redditers are doing. I don’t see anything morally wrong with this. And then I saw other people posting on Facebook over the last few days saying just shows you what a scam the whole thing is. I’m like, Well, hold on. This is the market, right? I mean, this is just a bunch of people, they saw an opportunity to profit from this and they jumped on it. Do you see anything morally or ethically devious about this whole thing?

Tony Kynaston [18:26]: Yeah. I think it’s selling pretty close to the wind. It’s a pump and dump operation. Like I said, just insert Bobby Axelrod into the Reddit subgroup. And he’s in there under a false name. Value trader of the century or whatever. Egging them all on. Just to benefit his own book. Then once the price gets high enough, he sells. That’s a classic pump and dump.

Cameron Reilly [18:50]: Right, but Okay, so if somebody like that is caught doing that. Then that would be illegal, but assuming that that’s not what’s happening for a second. And it’s just a bunch of investors who saw an opportunity to stick into a hedge fund. Nothing wrong with that. Surely.

Tony Kynaston [19:06]: Yeah, like I said, it’s selling close to the wind. And whether it’s a question of who started and what their motives were. And whether they have profited from the whole venture and

Cameron Reilly [19:17]: Deep fucking value started it and yeah, he just made $42 million out of it. [cross talking 19:24]. He’s just, he’s just a punter who has an investing YouTube channel, he said, Hey, I reckon we can profit from this everyone jumped on board.

Tony Kynaston [19:33]: How is that different than Bobby Axelrod doing it? As a hedge fund manager? It’s the same thing.

Cameron Reilly [19:38]: Well, well, he’s not doing it secretly, or, you know, it’s not like he held a position and then secretly didn’t tell everyone he held a position. And then pumped it to dump it. He put it on a Reddit forum. Hey, you know what, if we all jump in and buy this thing, we can push the price up and make some money? How’s that? any different from anyone saying buy any stock on any internet forum?

Tony Kynaston [20:03]: Yes, it’s not. But there’s been cases like this before, like on hot copper, where they’ve, in a Penny Dreadful they’ve colluded to push the price up. And as always ends in tears, because the last person that buys, gets stuck with the rapid in the loss. Almost like a stone. Which I think will happen with GameStop, as well, by the way. So it’s dangerous. Did the deep fxxxing value sell the stock? Has he actually made $42 million, or is it just on paper?

Cameron Reilly [20:33]: Yeah, I don’t know. It’s all paper, as far as I know, well, he’s one of the guys telling everyone not to sell.

Tony Kynaston [20:36]: Well that’s different then. If he sells, I think it’s a pump and dump. [cross talking 20:42] But it’s a bit like us Cam. If I tell everyone of our listeners. Hey, stock of the week is XYZ. I think you should all buy it. And I already own a position and next week because it’s thinly traded, it goes up a lot. And I sell it. That’s illegal.

Cameron Reilly [20:55]: Yeah, but we don’t do that. 

Tony Kynaston [20:59]: I’ll change my name to deep fxxxing value and put it on the radio. 

Cameron Reilly [21:07]: It’s one of the reasons we do your journal entries. To be completely transparent about what you’re doing. You can’t be accused of that. But yeah, but if he did do that, that would be wrong. And as I said, if people aren’t doing that, if they’re using it to profit illegitimately. Through lack of transparency, then they should be held accountable. But outside of that I have I don’t see any issue with a bunch of people in a normal internet forum jumping on and buying stock. I mean, hedge funds got whacked, but that’s what comes with shorting something right. That’s, the funny thing is I saw these complaints that the Redditors were manipulating the market? I was like. What the hell do you think these shorting hedge funds are doing?  That’s exactly what they try to do. They try to manipulate the share price downwards. These guys are trying to manipulate it upwards. What’s the difference?

Tony Kynaston [22:01]: Yep, there is no difference. And the hedge funds are not the same sorts of tactics. All go out and publish reports about how bad the accounts are, and what looks wrong in them and suspicious and how corrupt the management is, and blah, blah, blah, to try and drive the price down. The same thing reversed.

Cameron Reilly [22:19]: It’s beating our portfolio up this week. And there are questions about well, what does this mean for the stock market in general, if 6 million people in an internet forum can get in and just drive stuff up and down. But I don’t know, to me, that’s just the free market man. That’s the stock market. That’s capitalism. If you don’t like it, let’s pull out Karl Marx. And we can have a serious discussion about the many, many forms of capitalism, happy to do that. But while we live in a capitalist economy, then this is capitalism.

Tony Kynaston [22:54]: Yeah. I think I wonder how many of those new additions to the Reddit subpage are actually wearing braces and smoking cigars in Wall Street? I’ve been thinking about why they manipulate it to their advantage. For sure. 

Cameron Reilly [23:06]: Of course, they were. 

Tony Kynaston [23:09]: Yeah. So I think you’re right, this one-off cross roots, Occupy Wall Street, thought movement is fine. But once it becomes a pump and dump, which you probably which it really is. That’s the end of it. The other point I needed to make. I wanted to make too is. That also shines a light on options we didn’t speak about. So we talked about shorting. But a lot of the people from what I’m reading about this didn’t buy shares in GameStop, they bought call options on GameStop. Which meant that they bought the right to buy the shares at some point in the near future, at a certain value, and they just punted that value was going to be less than what the shares were worth. 

And that in a funny sort of way, also drove the share price up. Because the person who bought the options say they bought 1000 options. Which gave them the right in a week’s time to buy GameStop at 50 bucks and the shares were at 40. Then it’s just as a way of risk mitigation, the person that sold them that option. Had to go out and buy shares at GameStop. So that if the options went above, if the share price went above $50, and the options made money, and they had to deliver the 50, you know the shares, the 1000 shares to this person at 50 bucks, they weren’t going to bleed. So they go out and buy them at 40. So they are in the market as well. Buying shares to mitigate the option exposure. 

So all these things are working behind the scenes to drive the price up because you haven’t just got someone buying an option on 1000 shares. You’ve got the person selling the option buying the shares, then we just got someone shorting. They’ve got to also find the collateral, and then buy it back when they squeeze. So there are a lot of moving parts. In this whole saga. And it reminds me of again once the retail investor starts getting into options and shorting. It’s like firecracker night. Which is now banned in Australia, right. Because people don’t use it. And as Buffett said, all these things are weapons of mass financial destruction. They really are. You start messing in options and shorts and leverages, CDO’s. You just blow things up. That’s where we’re headed. Well, we’re already.

Cameron Reilly [25:25]: Speaking about continuing signs of the apocalypse. Ray Dalio, not only as Howard Marks talking about capitulation. Ray Dalio has called Bitcoin one hell of an invention. And considers it for the new fund. Bridgewater Associates founder Ray Dalio said he’s considering cryptocurrencies as investments for new funds. Offering clients protection against the basis with fiat money. To have invented a new type of money via a system that is programmed into the computer and that has worked for around 10 years and is rapidly gaining popularity. As both a type of money and a store hold of wealth is an amazing accomplishment, Dalio wrote. A congressman Dalio wrote in a note to clients and later posted on Bridgewater his website.

There are many alternative golds like assets at this time of rising need for them. What do you make about those? [cross talking 26:23] His son tragically passed away in a car accident a few weeks ago. Maybe he’s still just in the grief process and this got him in a weak moment. But the article Bloomberg also says like others, however, Dalio said he found it challenging to put a value on digital assets. While Bitcoin has the potential to make investors very rich. As well as disrupt the existing monetary system there are risks. No kidding. He said the cryptocurrencies are probably vulnerable to being hacked and subject to restrictions by governments that want control over the money supply. Which is the thing I keep pointing out to our friend Torsten Hoffman. Producer, of the end of money Bitcoin documentary. What happens, it’s beyond the reach of governments. Really? What happens when the government just go no you can’t use that shit anymore? It’s illegal. And if you use it, we’ll put you in jail. What happens then?

Tony Kynaston [27:21]: Well they’ll regulate it. Get it tied or peg to the US dollar or something. I don’t know if you got to go on with that Dalio article, but he did say somewhere else that if you’re going to invest in Bitcoin, be prepared to potentially lose 80% of your capital.

Cameron Reilly [27:37]: That’s nothing. Yeah. It’s 80%. What’s 80% between friends, Tony?

Tony Kynaston [27:43]: I mean, this is, this all smells of almost groupthink to some respects. So these guys are investing 10s if not hundreds of billions of dollars in funds. So he’s probably dipping a toe in the water with a few million bucks. Which will have no effect on his portfolio just because everyone else is. You know, he was there last week, and they said. Hey, have you tried this Bitcoin stuff? It’s been really good in the last 12 months. So that’s all this is. I think he’s not gonna put. Well, he can’t put significant sums of money into bitcoin. Because the markets aren’t that big.

Cameron Reilly [28:19]: Another crypto that my boys were talking to me about last week was Dogecoin. Are you familiar with Dogecoin?

Tony Kynaston [28:27]: Never heard of it. 

Cameron Reilly [28:30]: It was created in 2000.

Tony Kynaston [28:32]: Is there a Reddit subpage for it?

Cameron Reilly [28:35]: Of course there is. It was, it came out in 2013 as a joke. And then actually became a real crypto coin, an old coin. And its share price went last week. It’s priced not the share price. Its price last week went from 2.8 cents US to 4.3 cents US. In like days, and then it came back to 3.6 and now it’s currently at 3.9. Hunter called me guys. I got to put all my money in Dogecoin. Both of them are calling up guys. Tell Tony to get in Doge. You call Tony and tell him to go into Doge. Good luck with that. Let me know what happens. Sorry, it went as high as 8 cents last week. 8 cents from, no shit. Check this out on the 27th of January. It was trading at .008 dollars. .08 of a cent. Then it went up to eight cents and then it came back to where it is today. 3.9 cents. Yeah, I think that was another Wall Street bits one.

Tony Kynaston [30:08]: This just reminds me so much of the .com boom. When there was a company, I forget what it was called. I think it was called something like bucks. And they raised 100 million dollars. Its IPO said. We’re raising money, we don’t have a use for it yet, the company doesn’t manufacture anything. Doesn’t buy or sell anything. You know they list it, and they put .com after its name about 10 times. The week that followed. 

Cameron Reilly [30:35]: I’ve got this story here. Yeah. Bucks.net. In July 2012 bucks secured 125 million in a funding round. This must be a different one.

Tony Kynaston [30:49]: Not a different one. What note has been called bucks, sorry? An Oculus company raise money had no use for it, and they change this thing to company.com. Went up 10 times. Same thing. That’s also happening, it’s an interesting development as well. The SPAC vehicles are listing in the states. Have you heard of those? The spacs?

Cameron Reilly [31:16]: SPAC no. What a spac? 

Tony Kynaston [31:19]: Be careful here.

Cameron Reilly [31:22]: Yeah. I know where you are going.

Tony Kynaston [31:25]: Never go full retard. Special Purpose Acquisition Company. They basically cash boxes that are listing in the states. With the raising money listing. And they don’t have any use for the money. But the idea is that when the time is right, they’ll buy something. 

Male voice 1 [31:45]: Everybody knows you never go full retard. 

Male voice 2 [31:47]: What do you mean?

Male voice 1 [31:50]: Check it out, does often a man look retarded, act retarded. Not retarded. Cant too picture your cart autistic ship. Not retarded. You know Tom Hanks, Forrest Gump. Slow yes, retarded maybe, braces on his leg.  But he churns the pants off and won a ping pong competition. That ain’t retarded, he was a God damn war hero. You know he retired a war hero. He wasn’t a full retard man. Never go full retard. You don’t buy that. That’s Sean Penn 2001, I am Sam. Remember went full retard, went home empty-handed.

Cameron Reilly [32:22]: Robert Downey Jr playing an Australian playing an African American man. In a Ben Stiller film.

Tony Kynaston [32:29]: Good stuff. Yeah. So the spacs. Again this is just like it was in the .com boom. People are raising money, listing on the stock market with no use for that money until a special opportunity comes along. And people are happy to put some money in that company. It’s crazy. 

Cameron Reilly [32:47]: Yeah. Well, it’s been a crazy week, and this is on top of what we talked about last week. Which was the US market coming back on the face in a bubble. I think this week has just driven that home. I want to give a shout out to Andy and the other guys in Melbourne. On the back of your event, you did with them last month. They decided to keep getting together and they got together last week. For Japanese again, for sushi, and they linked me in over zoom call. Because I felt like, they obviously realized after spending a few hours with you that the real magic behind the show. So they wanted to bring me in to see if I could help them make some sense. And they asked me a couple of questions and I said, you need to ask Tony that. I’m not the guy to ask those questions. I’m just the good looking one. But it’s nice, they got a little QAV club down there, now which is great. I think that’s fantastic, they are catching up and going through the checklist and analyzing stuff together and swapping notes, which is great.

Tony Kynaston [34:02]: We should just start a subreddit post for them as well. 

Cameron Reilly [34:06]: For the stocks and the QAV portfolio. Let’s talk about journal entries. Entry for last week, Tony, and we can do your stock of the week, you did one entry last week. Two stocks you talked about Cog financial COG came out with a profit upgrade recently and you put it on the buy list.

Tony Kynaston [34:30]: Yep. That one and the other one was APE. Which was kind of like stock of the week, but I had a look at it today. And I think it’s actually a bit of an upward trading site. Let me call up cog first. And I think cog may have been on our buyer list once before. Not sure I’m just going to call up. It’s only a small stock it’s a financial services company.

Cameron Reilly [34:58]: ADT 5000, I think you said.

Tony Kynaston [35:02]: Yes, that’s right. It’s $5,133 traded every day on average. Until Wall Street bits. Yeah, finance, broking aggregator, I guess. Focused on the aggregation of broker volumes to encourage profitability through scale and finance broking. Focused on motor and equipment finance. Under this business unit cog has established a nationwide distribution hub. Through its independent aggregation platform members. And equity brokers and as an advisor to the Australian small to the medium enterprise sector. And then there’s also a commercial equipment leasing business, and the HAL group, which provides IT services. Although it’s kind of sell that unit. Yeah, so well if equipment leasing and affiliated businesses. And just looking at it share chart.

Cameron Reilly [36:11]: Looks like it was going up until the end of the month and then it dropped back along with lots of things that dropped back at the end of last month.

Tony Kynaston [36:20]: So it’s actually a bit of an upward trend. It just touched that sell line again, just above its sell line now.

Cameron Reilly [36:27]: So, the high point is obvious sort of January 2017, you’re taking the end of. Would you take as the second point on this?

Tony Kynaston [36:41]: I’m taking the, just before the COVID call, so February 20.

Cameron Reilly [36:47]: Right. Not the end of January now?

Tony Kynaston [36:51]: End of January, no we simply walk down. Is just to put the ruler on the high point and then swing it down until it hit the next peak. And that was the February one.

Cameron Reilly [37:00]: Yeah. But now the end of January 21 is the next peak. The last peak, it’s above that line.

Tony Kynaston [37:06]: It’s the last peak yeah. But the bar, I’m looking at occurred in. If I use that end of February 2nd Peak, then that was a buy-in November 2020. And since then, there hasn’t been a sale. It’s for that with the sell, as it is now. Yeah. So I’m not using the right-hand peak at the moment. 

Cameron Reilly [37:32]: So it’s, it’s just crossing the sell line now. By the looks of it. I’ll put that chart up on our website so people can have a look at what we’re talking about. Well, sorry Cog, your moment in the sun was all too rough, rip cog.

Tony Kynaston [37:50]: Well I think it’s just touching the sell on it. I want to see a breakthrough first.

Cameron Reilly [37:55]: Oh okay break on through to the other side. Okay,

Tony Kynaston [37:59]: I think it’s slightly above it. Not by much though. [cross talking 38:07] It was the stock of the week, and even listen to a fascinating interview with the managing director. Which was not fascinating because of the industry. It was in which is buying and selling new and used cars but just is. Obviously, the biggest dealer network in Australia. He’s quite intermeshed with the big players around the world. And he was giving his views on electric vehicles and their take-up rates and autonomous vehicles. And basically, he thinks that governments will mandate more and more electric vehicles on the rise. And it will still only be sort of 30% of the population. Within the next vehicle population within the next 10 years. But he thinks nothing of autonomous vehicles, he doesn’t think there’ll be a thing in our lifetimes. So that was interesting.

Cameron Reilly [38:56]: Really. Wow, that’s a huge call. 

Tony Kynaston [39:00]: Yeah, he blames the fact that road networks are gonna make it hard for anyone to do a truly autonomous vehicle. And our road networks are just so enmeshed in our societies. That it really won’t change in our lifetimes, was his point. So that was interesting, but the company suffered badly during COVID. And last year, you may record. We talked about your lack of vehicle buying by the public.

Cameron Reilly [39:32]: Don’t mention, no you’re not allowed. That company that shall not be named on this podcast fourth wave forevermore.

Tony Kynaston [39:44]: So, we were talking about them and how they couldn’t sell their RVs. But then it was the same for AP’s and that crashed. But it’s been climbing up again steadily since then. And it’s done quite well. Apparently, in the last few months, the market for vehicle sales has picked up again. Which was their thesis behind companies like Eclipse as well. Which is on their buy list before. But I looked at AP’s again today as I was preparing. And it’s really one of those upwards riding. As it crosses the sell line, as well as crossing its buy line. At the same time. So I think I’d want to, just be a bit careful and look for the trained to be even more established. That is pretty impressive transits since February, March last few years, sorry. Since the COVID cough, but it is starting to flatten off a bit in the last few months.

Cameron Reilly [40:35]: Let’s talk about the chart then. So it reached the high on September 19 at $14.29. Drop down in the COVID cough to $3.04. Currently trading at 13.56. Obviously, that peak in September is the first high point. What’s the-second-high point, is it November 2020? Or lower than that? because it seems. 

Tony Kynaston [41:02]: I’m using February 2020. And so, I really should have picked this up earlier. As a buy probably around June 2020. And they got one of those upward lines which keep testing its sell line. On the way up as well, so it’s been buying and selling all the way back up again.

Cameron Reilly [41:22]: So what would you use as the second low point?

Tony Kynaston [41:26]: At the moment I’m using September, at the moment. 

Cameron Reilly [41:30]: September $9.08. Yeah. Okay, why that one in particular?

Tony Kynaston [41:38]: Again, the same thing in reverse. I’ve just taken a ruler to the low point and then swung it up until it’s hit the trough. And that’s that point there, in September. And you can see the current share price. When I put up the stock journal last night, last week sorry. The share price was above that sell line, but it’s dropped a bit.

Cameron Reilly [41:59]: Right. Right. Okay. Well, sorry APE you too. Your time has passed.

Tony Kynaston [42:05]: So no stock of the week, except for GameStop, I guess.

Cameron Reilly [42:09]: Or the Australian GME. What’s the Australian GME? I’m just looking it up.

Tony Kynaston [42:19]: It’s a resource company.

Cameron Reilly [42:22]: Right. GME resources. Wow. It’s still up too. On the 31st like, well, let’s say, the 27th of January it was trading at 6.6 cents it’s currently trading at eight cents.

Tony Kynaston [42:42]: Hold the line brother, hold the line.

Cameron Reilly [42:46]: I did read something from this a year ago. Yeah, like nothing to do with us. Thank you, I guess, the Sullivan brothers. Peter and James Sullivan on there. That’s funny. Their response to, the response to the ASX price query. They put out on the 29th of January. It’s funny. How do you respond to something like this? Why is your share price going up so much recently they’re going I don’t know idiots? The company notes recent media reports concerning trading activity in a US-listed technology company called GameStop. Which also has an exchange to decode GME, but note this company is not related in any way to GME resources limited. It’s very boring, they could have at least had some fun with it.

Tony Kynaston [43:41]: Yeah, in the article I read the guy said look we haven’t announced it in terms of mineral discoveries or whatever, but we are a good company.

Cameron Reilly [43:47]: Yeah, so that sell, you’ve bought it just keep it. It’s good, we’re in value. Listen to QAV. We should do an analysis. Have you done any analysis on GME? Are they on the buyer list?

Tony Kynaston [43:57]: No they are not on the buyer list, haven’t looked at them.

Cameron Reilly [44:01]: Oh well, let’s talk about our portfolio then, before we move on to questions. We took a beating. Last week, went down. We took more of a beating than the old lords did. Why do you think that might be?

Tony Kynaston [44:19]: I think it’s our resources stocks. The oil price dropped to $20. So that’s a force for the skew down. And gold is still sort of around that 1800, 1850 mark. So they’ve been sort of up and down. And largely down I guess in the last few months. So I think resources have done, have come off the boil, I think. In what was a pretty inflated market for anyone anyway. 

Cameron Reilly [44:45]: Right, CXC has come down as well. CX would no, C6C, I can never say that C6C. It’s a tongue twister. See Copper Mountain has come back too. I mean we’re still 91% up from where we bought it in October. But it was up like 120 last week, anyway yeah. And FMG is back as you said. Anyway, so we’ve, we’ve dropped back I think like last week when we recorded. We were like 36% up, for the financial year. Now we’re only 27% up, depending on what you look at. Yeah, but it’s okay, we’re doing alright.

Tony Kynaston [45:28]: Yeah. And that’s 27% up for QAV and 12% up for the O lords.

Cameron Reilly [45:34]: Yeah, well that figure, you’re looking at, it’s not the total return. But I haven’t, I got to do the end of month total return. I forgot to do that this morning. I’ll do that and we can report on it later.

Tony Kynaston [45:46]: But even so, it’s usually about 2%. So it’s going to be 26 versus 14%. Which is about where we should be.

Cameron Reilly [45:53]: Well, I don’t actually need to do it now because I’m using the VIX as another portfolio tool. The Vex guys are gonna come on the show. Maybe next month for an interview. Novire and Tom I have a chat with them. Last week, but one of the interesting things is, they do a comparison on their website against the total return index, somehow. Let me see if I can.

Tony Kynaston [46:31]: On a day-to-day basis?

Cameron Reilly [46:33]: I think so yeah, it seems it seems to be. I need a paid plan, I’ve come off the paid plan. I need a paid plan to be looked at the benchmark. They do that which is kind of handy. I can’t see it. Anyway,

Tony Kynaston [46:53]: So not handy.

Cameron Reilly [46:59]: Not right now. I need to upgrade actually gives you the most simple money, I didn’t see the point of paying for 2 online portfolio services. There’s data, they do that, which means I can stop doing it on the spreadsheet, which would be good. Because it’s a pain in the ass, alright. On to questions. Where are we at?

Tony Kynaston [47:24]: A bunch of questions this week. Interesting. Again, the market psychology that supplies a lot of the questions are about, tell us about what the last bubble was like.

Cameron Reilly [47:34]: A lot of those questions have come in this week yeah, which is interesting. Let’s start with Daniel though. Daniel asks. I want to know if Tony’s ever regression tested any of Tobias Carlisle’s methods from his book, The acquirers multiple. And how it failed. And I think he said that he saw on one of the videos that you had that in stock doctor as a filter.

Tony Kynaston [48:01]: Yeah. So, in the book, I think, from memory, Tobias talks about getting a 16, 17% return. So it’s pretty good. You know I was getting 18 to 20%. So that’s why I stuck with the QAV methodology. As for the filter. There’s a fairly simple calculation in the acquirers multiple. Which I was able to put into a filter in the stock doctor. About a year or two before I built the QA`V checklist filter. Which is a lot more detailed. And I did that because there’s a, there is a correlation between stocks that come up on the acquirers multiple and stocks that come up on the QAV filter. And during company reporting times I was able to use the simple calculation from the acquirers multiple runs a filter. And that will give me a starting point to go into the QAV checklist research manually, on those companies first. So I wasn’t wading through two and a half 1000 companies on the market. I was using the cores and multiples as a pre-check forum, which ones to do a detailed QAV analysis manually on. So that’s why it’s in the video. 

Cameron Reilly [49:07]: Right. So, but not useful. 

Tony Kynaston [49:10]: Yeah, because I think if someone finds KAV more complex than they want or more time-consuming. Yeah, the show uses the acquirers multiple of the returns are slightly less and of course, even being 2% less makes a huge difference at the end of life. But it is a simple calculation to be done.

Cameron Reilly [49:32]: Okay, cool. Well there you go, we should maybe add that to the investing ladder. 

Tony Kynaston [49:36]: Yeah sure.

Cameron Reilly [49:38]: Next one Li asks. I’d love to hear TK’s war stories of the 99, 2000 bubble. I’m sure he simply followed the process. However, for those of us who weren’t investing or even paying attention, then I was 16 and chicks are more important than stocks. It would be interesting to hear TK’s reflections. The bounce back from COVID has been so quick and I’d like to know about TK’s experience. When things are slow to recover and or sideways for long periods of time. I think you’ve talked about this before and I think if I recall correctly you said you didn’t have the three-point trendlines sell rule in place at the time is that right?

Tony Kynaston [50:16]: That’s correct. yeah, so talking about the 99’s tech bubble online 00. Really, I was investing but I was using like a prototype of the QAV method so. Still using stock doctor, still using the financial health ratios. Still calculating the future IVs and the current IV’s. Still looking for or waiting towards owner founders. Looking for the low, low SP. In the recent period, all those kinds of things were in there. But they just weren’t coordinated in a checklist, so to speak. So that was a prototype QAV methodology but very much value-based. And similar to what we’re doing now, in some respect, a lot of respects. But yeah, didn’t have the three-point trend lines. Which I didn’t really adopt till 2009, I guess. So 10 or 11 years ago. 

And, but yeah so, I was doing things like most value investors would do if they found the stuff that they liked. And it was cheap. But the stock was going down, I might sort of start to average, the dollar cost average my purchases into it. So maybe by 25%. This week wait to see if it was still going down. If it did buy some 25% more, maybe sit on that for a while in case it kept going lower. But if it turned up again, buy another 25%, and then if it kept going up by the last 25%. So you didn’t pick the bottom, but you kind of pick the trough if that makes sense. You got the sort of bottom of the market on an average basis. But it wasn’t until the GFC came along when I went down at least half the portfolio. The portfolio value, the last year, cost around to look for some way of improving on the process. And came across a three-point trend line. Buying and selling. 

But to go back to the 99, 00 bubble. As we’ve said before, this mock-up reminds me very much of that, that period of time. And I want to point out that I remember, I remember playing golf with a friend of mine who was working in IT. Which started off in IT together, but I moved, into general management. And he said he looked at me with like one of those sort of 1000 yards stares. You occasionally see in someone and said. Did you realize the NASDAQ has gone down, 80%, in the last month or two? And it went down from 5000 to 1000. And that was just an amazing turn of events. And people who haven’t been through that, are probably the ones who are getting all excited about growth companies at the moment. And don’t have the valuations.

And to put some concrete, other concrete numbers around that. I remember going to Seattle for a World Conference on database marketing, which was, I was running a company called My Direct. Which was basically a database, marketing company, or a catalog retailer. Went across to Seattle. And I remember the keynote speech was given by a guy called Seth Godin, who had written lots of books and made lots of appearances. Well, the purple cow came later and that’s how he reinvented himself. But before that. He was a real go-go internet stock booster. And he made a presentation in 2000, right at the very end of, before the bubble burst saying that this is why Amazon is worth $400 a share. 

And I think at the time, it might have been like 100 and you’re scratching your head saying how can you pay that much for Amazon. But he was boosting it up to $400 a share. And then like within a couple of months it was back to $14 a share. So, that’s kind of how much these high growth companies can, can, can hit the downside. When the egg is taken out of the market, and it really feels like that’s on the cards at some stage, in the future again, right now. In terms of my investing, performance, it didn’t really affect me at all. In fact, in the years following the bubble, I actually had some of my best years in a row. When value Investing came back in the style. 

Another similar thing to that time that we’re seeing now. There are so many articles around in the last 12 months saying, value investing is dead. And I remember you know they’ve been lots of, lots of articles in probably the two or three years leading up to the.com bubble bursting. Interviewing Warren Buffett saying are you still the master, you’re still the guru. Isn’t value investing dead? Why aren’t you buying internet stocks? And he just kept saying the same thing, we’ll do okay, wait for them to burst. And there was a guy in Australia called Maple Abbot from memory. He was like the Australian version of Warren Buffett ran the value fund here. And for probably three years before the 2000 bubble burst. He was under the same sort of pressure, he spun was underperforming, you know when you’re going to capitulate? When you’re going to accept value investing is dead? He kept saying no it’s not, it will come back. And it did. And it’s just like what’s happening now as well.

Cameron Reilly [55:25]: Yeah. Well, thanks. Lee Mark, Hi Cam, Tony a CCV on the watch list of three PTL sentiment confirmed as no. Looks like across the buy line in November or am, I missing something?

Tony Kynaston [55:42]: No, he’s not. Thank you for that Mark, tick, big tick. I don’t have time to go through the watch list and check the three-point thread line regularly. So I was really hoping that our listeners would pick up some of these buy trends that have occurred. That I’ve missed and so that’s great that Mark has. But yeah, I agree with him, CCV has crossed the buy line. And its share price grow.

Cameron Reilly [56:10]: Good one there, that’s your new nickname Mark, big tick mark.

Tony Kynaston [56:13]: So CCV is cash converters, the company that you go to and if you steal someone’s guitar. You go and take it to them and pull it and they sell it for you. I shouldn’t say that. I had my guitar stolen when I was living in North Colton and the cops say go down to cash converters, you probably see it there. But anyway, on either side I’m sure they’ve evolved since then. Yeah, but if you look at the chart, high points pretty obvious way over on the left-hand side. March 2016. If I drop the ruler down it touches the-second-high point, which I think is March 2018. And that gives us a buy, buy line is right around October or November probably November 2020, just as Mark said.

Cameron Reilly [57:07]: Good, one big tick, that’s tick I say, big tick Mark. Just want to be clear on that. Yeah, as I said, I think I said to Mark when he sent the email. I replied saying yeah Tony doesn’t check all of the watch list sent to him. Every, because as we’ve explained recently your portfolio is mostly full. You’re only doing that for our benefit. Putting out a buyer list each week. You’re not really going over it, with a fine-tooth comb, every week. Particularly, particularly ones on the watch list. 

Tony Kynaston [57:43] And I’m hoping that we’ll get to a stage where we can automate the three-point tread line process and then we can just run it periodically. And across the buyer list and the watch list and look for changes. Yeah. 

Cameron Reilly [57:53] Alright, so good one big tick. Brett says I think we removed KRM from the buy list for the bad news. And he’s right back in October we can because I think the CEO resigned. Is that right?

Tony Kynaston [58:10]: Indeed resigned, yep. And the founding director resigned. Which was probably the thing I didn’t like the most about it.

Cameron Reilly [58:20]: And you’ve got it on the buy list. Again, it was your stock of the week last week and so. Brett asked the question How long do we punish a company for bad news before they allowed are allowed out of the naughty corner.

Tony Kynaston [58:34]: Yeah, good question, driven by sentiment on that one, a three-point trendline so. King rose morning. Kind of going along a little bit on the increase. It’s not any sort of real upturn but it has broken through the buy line. So that’s a good enough sign for me, to put it back on the buyer list. It’s like I say the trend isn’t really strong there. But the general answer to the question is that are moving sentiment. And the other one I think we also have a similar question about although we kept it on the buyer list. Was Katmandu KMD. [cross talking 59:24] And the MD resigned from that. But sentiment hasn’t been too bad on that one. It’s continuing to go upwards.

Cameron Reilly [59:34]: And I like the look of this current chart I got to tell you, it’s a scary-looking chart.

Tony Kynaston [59:40]: Scary? In what way?

Cameron Reilly [59:42]: It’s a bit of a falling off, I think. Did we do this chart last week? It’s not on my list of charts.

Tony Kynaston [59:58]: I’m pretty sure we talked about it. 

Cameron Reilly [1:00:00]: Okay, well let’s do the chart. Just to be on the safe side. So high point is about to fall off the hedge. High points March 2016. Put my authorized QAV ruler up on the thing. It’s not long enough. What do you take as the second point there TK?

Tony Kynaston [1:00:26]: Yep, so I’m going, I’m taking the second point towards the right-hand side there. I’m going to take it as September 2020. And I’m doing that one. I think it’s important to look for the sell line when we’re doing this one. Because it’s a bit. It’s a bit more obvious if you have a sell line in their too. And the sell, the low point I’m getting is December 2019. Point 029 and then it touchback along with that price. Point 03 February and March 2020. So if you draw. That’s basically telling us it was a sale at that point. It hasn’t touched that line again. So I’m looking for the other peak here either just before or just after that, probably just after that, which is May 2020.

Cameron Reilly [1:01:26]: What about the point around June, July, August, September, no October 2020. What about that dip? 

Tony Kynaston [1:01:39]: Yeah October 2020, it was .033 so it’s probably close to the buy line to the sell line there. But I don’t think it was always going to be around .03 or .031. So it stayed above it. I think around that sort of gonna be May or September, is that second peak. Probably September.

Cameron Reilly [1:02:05]: So it was 23 cents back in March 2016 currently trading at 4.2 cents.

Tony Kynaston [1:02:11]: It was a point, sorry?

Cameron Reilly [1:02:13] : 4.2 from 

Tony Kynaston [1:02:15]: Down from 23. You did say September 16. Did you?

Cameron Reilly [1:02:19]: No sorry March 2016, it was at 23 cents. Now it’s down to 4.2 cents. It’s a hell of a falling off. 

Tony Kynaston [1:02:27]: Yeah, could be. Has been.

Cameron Reilly [1:02:30]: Okay. So I bet the answer to the question is, sentiment. 

Tony Kynaston [1:02:35]: Correct.

Cameron Reilly [1:02:37]: Good to know. That’s basically what I’ll say to Fox from now on when he’s sent to his room for a timeout. When can I come out? Got to look at the sentiment. We got to read the room. Are we still frowning? You can’t come out. Alright, thank you, Brett. Gary wondering why there was such an inconsistency in the price to cash flow between the stock doctor and the spreadsheet formulas. Does ST use a different cash flow source than operating cash flow? I always use spreadsheet calculation to sort. Is this the whole thing we’ve talked about before the different kinds of cash flow?

Tony Kynaston [1:03:18]: It’s not different kinds of cash flow. I’m pretty sure it’s gonna be different types of share numbers. I’m not picking on big differences in all the cases. But there are some and it reconciles in column AH in the master spreadsheet. Which is the difference in our calculated priced operating cash flow. And it’s different from the stock doctor. So sometimes there’s, there’s a large difference and sometimes there might be one or 2%, and sometimes they’re the same. And when I reconcile this once before. The difference is that we use fully paid ordinary shares. When we divide operating cash flow by the number of shares on issue. 

And stock doctor users diluted weighted shares on issue. And I’ve had a looked at this before. Fully paid, for fully paid ordinary shares I think is the better number personally. Because that’s the number of shares in the market. Whereas the diluted ones, try and take into account some of the shares which haven’t been issued yet. Which may be a bit like you said before, with AMC that there could be someone out there who has a credit note which can convert to shares. For example, or it could be options that management hold which might convert the shares at some stage. So I was trying to take into account some of those and do some calculations. I think it tries to read all of them because not all of them will convert. But it does try to take some of that into account.

Cameron Reilly [1:04:46]: What column did you say it is? Where were you reconciling? 

Tony Kynaston [1:04:48]: Yeah, column AH. Difference to the stock doctor. So column AG is my calculation of, price to operating cash flow. Which is simply the operating cash flow per share divided by the number of fully paid ordinary shares. Which is so on the stock doctor. But I also haven’t, let’s see what column is it. Column Z  I think it is. Yeah, columns Z is stock doctor price to operating cash flow number. And then column AH is the difference between them.

Cameron Reilly [1:05:20] : Right. Well, some of them are big, I mean. IN ZO last time you ran one and sent it to me. It’s a 114% difference.

Tony Kynaston [1:05:34]: Yeah, that’s right and that might get cleaned up as we get some of these numbers from NZI. 

Cameron Reilly [1:05:38] : Right. 

Tony Kynaston [1:05:40]: It was unlisted for a long time and it’s done a recapitalization, so there will be cases where it’s different. But in the mind. If you look at most of those, 0,1,2 or 3% difference. 

Cameron Reilly [1:05:52]: Yeah. Well, hope that helps. Who asked that? Gary If not, 

Tony Kynaston [1:06:00]: Good question Gary. If you are troubled by it. Then please do some more research yourself and have a look. Convince me that I should be using diluted shares and not fully paid ordinary shares. 

Cameron Reilly [1:06:11]: Eddie asks. I goa a query around TK using index Mundi as it only goes to November 2020. Meaning the trend you’re looking at, on the graphs could have changed by now. And I’ve also found discrepancies in the figures compared to stock doctor and other platforms such as Yahoo Finance. As an example index, Mundi has a natural gas price in  November of 2 dollars 61 versus stock doctor and Yahoo Finance that have November price of $2.88. I mean you’re looking at trends, but then November 2020. I looked at goals the same as, is that a worry, if it’s a little bit out of date?

Tony Kynaston [1:06:51]: I don’t think so. Again, if Eddie finds a better website to use then great, we can use it. I just like index Mundi because they’re all there in the same spot. And we can quickly look up all different commodities and have a look at the trends. Just a question for Eddie. He said he’s getting the natural gas process in the stock doctor. I’m not sure where that would be found. Yahoo Finance I get. I don’t think stock doctor add commodity prices in there. Anyway small point. Yes, Eddie, I’m using it for convenience because it’s a one-stop-shop for all these charts. If there is a bit light in updating with December’s figures. I don’t know if it’s just a particular year-end problem. I hadn’t noticed them being a month behind before. So it might just be this year’s end. But anyway, we are just looking at trends. 

Cameron Reilly [1:07:42] : Right. Okay, thank you, Eddie. I think this is the last one in. This is from Brent. This is just coming in very light, you might not have had a chance to look at this. 

Tony Kynaston [1:07:53]: No

Cameron Reilly [1:07:57]: Okay. 

Tony Kynaston [1:07:59]: Well, this is a big surprise question.

Cameron Reilly [1:08:01]: Yeah, I did say to Brent. Brent is a new subscriber and I said, look, Tony. Tony probably won’t have a chance to look at this. We might need to bump it to next week. It’s about virgin, the UK, and their price to cash flow score. And why it’s bumped up recently. So, do you want to bump that one to next week?

Tony Kynaston [1:08:16]: Yeah. I probably do some research on that. Thanks.

Cameron Reilly [1:08:20]: Yeah. No worries. Okay. Well that’s, that’s a full lead, I think. Unless you want to do those other couples from Daniel.

Tony Kynaston [1:08:28]: Yeah, I did prepare something for one of the questions from Daniel about the .com bubble period and we’ve kind of touched on it before. But I just wanted to read out how my funds performed around that time. And to make a point that the .com bubble happened in 2000. Like 2000 from memory. But don’t forget that the GFC is not the GFC. The World Trade Center was hit on 9-11-2001. And then there was the Gulf War 2 that followed that. So there was a lot of negative activity happening in the US markets anyway. And that sort of 2000, 2001, 2002 period. 

And it actually feels a bit like now Cam in some respects. In that there was a lot of, there was a big hit to American confidence. And the American exceptionalism idea around that time. The wind was taken out of the sales when the .com bubble happened. And then the World Trade Center was a hit. So there was a lot of, a bit of soul searching going on about just how vulnerable they were. So the markets reflected that for a time. So it wasn’t just the .com bubble that happened. I think the World Trade Center I think was a big impact on markets too. Anyway, that’s a long-winded answer to say that. From 2000, 2001, and 2002 the markets were fairly flat and sideways, but then from 2003 onwards until the GFC they took off like a rocket. 

And eventually proved to be another bubble which then collapsed into 2007, 2008. But if I look at the performance of my investments in the financial year 99, 2000. So that was before the .com bubble. My performance was up 22%. In the financial year 0001 so this is June 2001. I only managed a 2% improvement, whereas the market had 5.5% so underperformed. In 01, 02 The market went backward 5%. But I was up 10. And then when all that sort of mis cleared after the Gulf War. The victory was declared on the aircraft carrier by George W Bush. And things started to hope again. 2002, 2003 I was up 23%. The market was down 3%. 03, 04 up 25% the market was flat. By 04, 05 29% the market up 25 by 05, 06 up a whopping 42%. Market up 25. And then, of course, 06 and 07  it started to hit again. I was down 4% sorry, up 4%. And the market was actually up 28%. So I  underperformed the market in 06, 07. And in 07, 08 was the full GFC I was down 40%. At that time, and the market was down 13. So, that was the wild ride that led me to the three-point trendline. But certainly if you look at the .com crash. Came through pretty well as a value investor. 

Cameron Reilly [1:11:33]: Well, it’s interesting all these questions. How do you perform during a crash? With all the capitulation that’s going on, and the GME thing. We just came through a crash. And it looks like we’re going into another one. Two crashes in a row Tony. That will be something new, wouldn’t it? 

Tony Kynaston [1:12:01]: Yeah, there’s always something different in the market. 

Cameron Reilly [1:12:03]: This time it’s different. Two crashes in a row.

Tony Kynaston [1:12:07]: I didn’t know that’s what he meant by that. 

Male voice [1:12:10]: It’s different every time. It’s always different Tony. It’s never the same.

Cameron Reilly [1:12:14]: Thank you Allen caller. Sorry, Tony what were you saying? 

Tony Kynaston [1:12:19]: It does beg the question with all this going on, why don’t we just sell everything, and go and sit on the beach for a while. And that would be a valid strategy if we didn’t have a plan to continue buying and to use the 3-point thread lines to guide their selling. Because what I noticed in that .com era. Was that the market, even though people were calling it a bubble, even in 99. The market still went up a heck of a lot before it crashed. And the same with, before the GFC the market in 06, 07 was up, 29%. Before it crashes. So getting out of the market early can miss out on all the upsides. And then the retreat isn’t as bad So, especially if you use a 3-point thread line. So that’s why I stay, invested and use this sentiment to guide me. 

Cameron Reilly [1:13:07]: You know what I have to say about all this capitulation talk.

Male voice [1:13:11]: Don’t hit me with all of the negative ways so early in the morning. The big bad bridge will be there, and it will be there. The mother beautiful bridge. And it’s gonna be there.

Cameron Reilly [1:13:22]: I also prepared this one for you this week too.

Male voice [1:13:26]: Shame, shame, shame. 

Cameron Reilly [1:13:28]: There you go. That’s what I think of capitulation. Well, good stuff. For the people, whose questions I didn’t get to or tell you we didn’t get through this week, apologies for that we’ll get to them, next week. And I did post something on our QAV club Facebook group. During the week asking people if they could be so kind only to send us one question a week. So we don’t run out of time. Like last week we went extremely long. Don’t get scared off. Keep sending the questions. Great questions just one a week. If you can, if you send more than that, that’s fine, I’ll just split them up over weeks. That’s cool. 

Welcome to all the new subscribers we’ve had a ton of new subscribers to the QAV Club over the last month or so. Feel free if you haven’t already, to send me an email, introduce yourself. Tell us a little bit about yourself, where you’re from, what you do. What’s your background with investing, ask any questions. Don’t feel embarrassed about asking questions that may have been asked before. Doesn’t matter that that’s what we’re here for. If you have a question other people will probably have the question as well. So feel free to shoot it through, if I can answer it easily and simply by pointing you to a previous episode or something in the Bible, I will. If not, I will add it to the show notes. But feel free to send it. Either way, it’s all good. 

Tony Kynaston: [1:15:02] : Yep. Welcome to the new members. I know that the Melbourne QAV club won’t be happy they were, they were begging me to stop new members from joining. So they can have the ground all to themselves.

Cameron Reilly [1:15:10] : Right. Yeah. Yeah, well, you know, wait until the subreddit. We create a subreddit. 6 million people that are just around the corner joining QAV. By the way, remember Austin? I saw him tweet that over the weekend, something about. When I was on that QAV podcast a year ago and they mocked me. Blah blah blah blah blah. I was like dude I’m really sorry that you feel that way, we didn’t mock you, we didn’t totally agree with your strategy. But I don’t think we mocked him. I think what we said was, my recollection, as we said if we find that anything that he said was useful in terms of helping us value growth stocks, tech stocks and we determined. No, not really. 

But that’s not mocking him, that’s just we disagree respectfully. In a gentlemanly kind of way. Anyway, he’s still unhappy about it so I don’t think you’ll become. I did say that you suggested we should get him back on for an update. And I see on Twitter that he’s leaving the investment firm that has been part of for the last year. He’s gone on to do something else. But anyway, that’s a shame that he’s not the only person we’ve had on as a guest and disagreed with them and they’ve got really upset about the fact that you disagree with them, Tony.

Tony Kynaston [1:16:44]: Yes, they popped up in my podcast yesterday. And I skipped over.

Cameron Reilly [1:16:47]: Who was that?

Tony Kynaston [1:16:50] : Mr. Moriarty. 

Cameron Reilly [1:16:52]: Oh. Yes. Yes. Your arch-nemesis? Anyway, 

Tony Kynaston [1:17:00]: Just like the stock market we’re always taking different points of view and it’s a mixture of all those points of view that makes a good investing.

Cameron Reilly [1:17:10]: Yeah. But to anyone that we’ve inadvertently upset by not agreeing with you 100%. We’re sorry. Tough it up [cross talking 1:17:20].

Tony Kynaston [1:17:21]: It’s not like we’re talking about it a year later. A lot happened to the guy in between. He’s still carrying the QAV scar. 

Cameron Reilly [1:17:27]: And he didn’t like, copy me in on the tweet. So I don’t think he expected me to see it. But I did. I only look at Twitter like once in a blue moon. And I happened to see it. And I was like dude. Seriously, get over it man. Anyway, thank you, Tony. Thank you, everybody. Good luck with your investing. Looks like it’s gonna be a rocky week. But who knows. We’ll see what happens.

Tony Kynaston [1:17:49]: Company reporting season two people. So stay tuned.

Cameron Reilly [1:17:52]: Oh yes there will be a flurry of stuff coming from Tony in the next couple of weeks.

Tony Kynaston [1:17:58]: Yeah, probably next week. But yeah, it will start happening.

Cameron Reilly [1:18:01]: Take care buddy.

Tony Kynaston [1:18:03]: Okay you too, bye.

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