Transcript QAV 413

QAV 413
Dura­tion: 1:21:08

Cameron Reil­ly [00:05]: Wel­come back to QAV Episode 413 TK record­ed this day of March, the 30th 2021. What’s new with you?

Tony Kynas­ton [00:18]: Hi Cam, had a fun week­end, we had time togeth­er before that with the whiskey awards that was great. I’ve been out shop­ping bought some whiskey. Based on when we tast­ed this.

Cameron Reil­ly [00:31]: What did you buy? We drink all the AWAS stuff; how did you get your hands on that?

Tony Kynas­ton [00:36]: Yeah, one of the AWAS is for sale on their site.

Cameron Reil­ly [00:39]: Actu­al­ly, Niko said that. He said Tony just bought some stuff. I said I would buy Tony some whiskey for his birth­day. And he goes he just beat you to it. He just bought some stuff. I was like oh shit. Just FYI for peo­ple, your birth­day is com­ing up in 5 days.

Tony Kynas­ton [00:58]: It is April 4.

Cameron Reil­ly [01:00]: 29 now, I think.

Tony Kynas­ton [01:02]: Yeah, that’s right. Yeah, so luck­i­ly, we will have Alex up from Mel­bourne to help cel­e­brate. And it’s East­er so it’s always a busy time for us because there is horse rac­ing, well it’s been delayed a week [inaudible01:18]. Randy is up so he’s going to spend East­er with us. It’s real­ly nice. We have a Bar­beque every year with some friends every year on Good Fri­day. The Fishy Q it’s called. So that will be a big day for us. It’s going to be a long cel­e­bra­tion. The Fishy Q.

Cameron Reil­ly [01:35]: Fishy Q?

Tony Kynas­ton [01:35]: Yeah, they are Catholic, so they have a fish bar­be­cue on Fri­day. On Good Fri­day. A Fishy Q mind you, I think it’s Catholic in [inaudible01:42] like with all the alco­hol drank.

Cameron Reil­ly [01:44]: Well Catholics love alco­hol. What are you talk­ing about? Jesus liked alco­hol. Wine and the loaves and the fish­es and all that. Yeah,

Tony Kynas­ton [01:56]: Yeah, I think East­er com­ing up. Randy and I going away to play some golf, which will be good fun in the South­ern High­lands. Which is I haven’t explored yet so that will be good. We’re try­ing to find your place [inaudible02:05] it’s a golf course in Aus­tralia. So, we are going down to the South­ern High­lands.

Cameron Reil­ly [02:10]: Will you be drunk when you are fly­ing there?

Tony Kynas­ton [02:13]: We will have a few cel­e­bra­to­ry drinks while we are down there.

Cameron Reil­ly [02:16]: Cou­ple bot­tles of AWAS whiskey?

Tony Kynas­ton [02:18]: Yeah, that’s a good idea, I’ll take some wine. Yeah, so it’s been good fun. Last Sat­ur­day we had a horse rac­ing at Rose Hill, on [inaudible02:25] which is a huge day there. Ran third which was good for us.

Cameron Reil­ly [02:30]: Hey which horse was that? Did I have mon­ey on that?

Tony Kynas­ton [02:34]: Remem­ber the race got post­poned by a week?

Cameron Reil­ly [02:36]: Yeah,

Tony Kynas­ton [02:37]: If I car­ried your debt for­ward that would be good.

Cameron Reil­ly [02:40]: Holy crap, let me check. Pulling up Bet­fair on my phone.

Tony Kynas­ton [02:47]: And then the friends who are hav­ing the fishy cue they had a horse run­ning as well so. Their horse ran third, so it was a good day all around. My train­er was up from Mel­bourne, so I got to have a chat with him. In a day which was nice.

Cameron Reil­ly [03:00]: Hold on a sec­ond it says void.

Tony Kynas­ton [03:03]: Yeah, it might get can­celed.

Cameron Reil­ly [03:09]: You’re kid­ding me, I had it down to a place.

Tony Kynas­ton [03:12]: Oh, I had paid 7 bucks for a place too.

Cameron Reil­ly [03:19]: Oh, that’s shock­ing.

Tony Kynas­ton [03:20]: So, I had my whole sup­ply cen­ter [inaudible03:22] sup­plies, think I got about 8 or 9 to 1 for that which was good.

Cameron Reil­ly [03:27]: Unbe­liev­able, the one time I got it right. And they screwed me.

Tony Kynas­ton [03:35]: There will be anoth­er one. We have a new horse run­ning on Thurs­day, at [inaudible03:38], so you can put your mon­ey on that. And poten­tial­ly, anoth­er one com­ing up on the week­end too, called Ara­bi­an Dawn. In South Aus­tralia but I haven’t got the details yet on that. That may run on the week­end. So yeah, lots of hors­es com­ing back in the works. So yes, it’s good fun tine.

Cameron Reil­ly [03:54]: Well, we’re in lock­down here in Bris­bane as you know. I was going to wear a mask for this episode but left it in the car.

Tony Kynas­ton [04:03]: Yeah, Alex was going to come to vis­it your wife Chris­sy and Fox and all that.

Cameron Reil­ly [04:06]: And me, jeez

Tony Kynas­ton [04:07]: Also, and you. Tay­lor, Hunter, Fox, Chris­sy, and you.

Cameron Reil­ly [04:16]: Yeah, after you told me Alex was­n’t com­ing up, I texted Chris­sy and said hey Alex isn’t com­ing up. She goes I know we’ve been talk­ing all morn­ing. Any­way, let’s get on with this show because it’s a big one. Top mar­gin­al tax rate clar­i­fi­ca­tion Tony.

Tony Kynas­ton [04:33]: So last week when you were down, we record­ed. I said, the top mar­gin­al rate was 47.5 and you said, 45, I think you’re righter than I am, you’re right. So, the top mar­gin­al rates 45% But then, the income as they all put togeth­er with the oth­er income and they charge you may be on top of that. Of up to one and a half per­cent or two. So yeah, it’s 45% CGT but then the [inaudible04:59] gets added to the total income. Just want­ed to clar­i­fy that. So, peo­ple knew.

Cameron Reil­ly [05:04]: Good to know. MRC one of the stocks in our port­fo­lio. Fired their CEO abrupt­ly, last week and the price dropped by 25%. Has it come back?

Tony Kynas­ton [05:19]: What’s it done today? I haven’t immersed myself into that yet. It was up 9% yes­ter­day.

Cameron Reil­ly [05:23]: Pulling it up, I’ll have a look. What do you think about all that any­way the fir­ing was a kind of skill? It’s up 10 point one 7% today.

Tony Kynas­ton [05:35]: And 9% yes­ter­day. So, it’s the same per­spec­tive where it was.

Cameron Reil­ly [05:38]: Yeah, it was 36 cents on the 25th of March. It’s at 32 and a half cents now, so yeah.

Tony Kynas­ton [05:50]: The CEO has been embroiled in con­tro­ver­sy for a while he was up on assault charges, I think. In WA, some kind of, I for­get now exact­ly what the details are. I should be care­ful because these are all alleged charges at the moment. I think they tried to repos­sess some­thing from some­body.

Cameron Reil­ly [06:09]: A house.

Tony Kynas­ton [06:11]: A house was it. I was going to say he was being charged with invad­ing the house. So, he’s up on a cou­ple of charges. Again, these small com­pa­nies aren’t great at telling you what’s going on. So there has been no announce­ment from the com­pa­ny oth­er than the sin­gle line that they have moved on from the CEO. But you know read­ing between the lines you have to say they have had enough. Even if the guy gets off these charges, it’s still a dis­trac­tion for some­one who is try­ing to run a com­pa­ny.

Cameron Reil­ly [06:40]: Well, I’m glad we did­n’t sell it when it dropped down to 26 cents late last week. I’m glad I had you to talk to because I would have pan­icked and sell. And you were like it does­n’t affect the com­pa­ny. It’s just the guy it’s unre­lat­ed to the com­pa­ny. The guy’s issues.

Tony Kynas­ton [06:58]: Because I think I think offi­cial­ly they said there were some relat­ed par­ty trans­ac­tions they weren’t hap­py with.

Cameron Reil­ly [07:04]: Yes.

Tony Kynas­ton [07:04]: That was in the announce­ment. They haven’t said what they are yet, so it’s hard to make a deci­sion based on that, but I would­n’t have thought relat­ed par­ty trans­ac­tions will affect the run­ning of the busi­ness. So just to explain what they are. In gen­er­al, what the relat­ed par­ty trans­ac­tion is. It means that either the CEO or some­one close to them or a com­pa­ny they own are trans­act­ing with the com­pa­ny, which means, you know, it looks like he’s on both sides of the deal. And that then means it’s not inde­pen­dent and may not be in the best inter­est of the com­pa­ny but in the best inter­est of the indi­vid­ual. Com­pa­nies quite right­ly don’t like that so. But they haven’t said what’s involved, whether you know whether they are rent­ing space in their offices from a build­ing he owns. All the way down to his wife works for a PR com­pa­ny pro­vid­ing ser­vices. We just don’t know what the par­ty trans­ac­tions are.

Cameron Reil­ly [07:55]: Well, why do you think the share price plum­met­ed, when it did if log­i­cal­ly it was­n’t real­ly a big deal for the com­pa­ny.

Tony Kynas­ton [08:05]: There are oth­er peo­ple out there like you who pan­icked and sold. Yeah, we should have bought it on that day.

Cameron Reil­ly [08:15]: Well, I was read­ing just the oth­er day in some­thing Tony that the mar­ket always knows what it’s doing. Effi­cient mar­ket, a lot of real­ly, real­ly smart, intel­li­gent peo­ple that know what’s going on.

Tony Kynas­ton [08:29]: Yeah, that’s right, remem­ber this sto­ry in the wis­dom of crowds. When the Space Shut­tle blew up. Took about half an hour for the stock mar­ket the work out which com­pa­ny was to blame, it was an iron­ing man­u­fac­tur­er, but it took NASA, like, months and months to work out what went wrong. Some­times it works out quick­ly but it’s human nature. It’s a great social exper­i­ment, we saw lots of pan­ick­ing. With­in this case, which was­n’t run­ning, and it could be some more infor­ma­tion com­ing out, but at this stage. It looks like the guy has dis­trac­tions. They have asked him to leave. It’s been some kind of relat­ed par­ty trans­ac­tion, which may be the excuse. And gen­er­al­ly relat­ed par­ty trans­ac­tions. One sinks the com­pa­ny, so they will unrav­el that and work out some bet­ter way of doing it. So, I was­n’t too wor­ried.

And that reminds me too Hawthorn Resources results are out. So, I saw them in Stock Doc­tor this week. They just got their Decem­ber num­bers in. And, you know, they’re ter­ri­ble and the share prices have gone down again. So, I think we did the right thing, in sell­ing Hawthorn Resources. I’ll announce the stock jour­nal now, it’s not on the buy­er list any­more, because it’s got neg­a­tive cash flow, oper­at­ing cash flow. So, I think, what’s his name, the guy who ran the logis­tics com­pa­ny called car­go, he sold out, prob­a­bly not what was com­ing. So, I think, I think there might be a few ques­tions asked by the reg­u­la­tor of that kind of trans­ac­tion. That I think we did the right thing to sit and wait and then decide to sell, based on user exit.

Cameron Reil­ly [10:07]: I’m just look­ing at our trans­ac­tion log to remind myself what we sold it for.

Tony Kynas­ton [10:16]: It was around sev­en cents, was­n’t it?

Cameron Reil­ly [10:19]: Sev­en cents, pre­cise­ly, and today it’s 5.6 cents, good call TK.

Tony Kynas­ton [10:28]: Oppor­tu­ni­ty prof­it.

Cameron Reil­ly [10:32]: Speak­ing of results, Lin­coln indi­ca­tors, our good friends, pub­lished their results.

Tony Kynas­ton [10:40]: Well, they do every month to be fair. They do it month­ly. So, what we’re talk­ing about here are the funds. So, they have three funds. Which you can be a retail investor or a whole­sale investor, so they have some dif­fer­ent ver­sions but any­way. They have a retail fund. Sor­ry, a star stock grows fund. A star income stocks fund, and a US fund. And every month they report their move­ments in under­line assets.

Cameron Reil­ly [11:10]: So, I was look­ing at their per­for­mance to the 28th of Feb­ru­ary 2021 for the Lin­coln Aus­tralian Growth Fund investors seek­ing growth, they say that’s who it’s for. Should I be look­ing at the whole­sale or the retail num­bers?

Tony Kynas­ton [11:27]: You can look at either. I usu­al­ly use the retail one because it’s prob­a­bly more accu­rate for our audi­ence.

Cameron Reil­ly [11:34]: So, the fund, return for one year is 7.41% ver­sus all ordinary’s accu­mu­la­tion index of 9.56%. It’s the funds returned for three years, per annum is 8.51% ver­sus all ordi­nar­ies total return of eight point 11%. They did beat it there, but by a very small mar­gin, the five-year fund return PA is 8.96% ver­sus all ordi­nar­ies 11.19%.

Tony Kynas­ton [12:17]: The finan­cial year-to-date num­ber I think that’s the one I sent through to you.

Cameron Reil­ly [12:18]: 1.92% finan­cial year to date ver­sus all ordi­nar­ies 17.69.

Tony Kynas­ton [12:28]: That’s a big miss, isn’t it?

Cameron Reil­ly [12:30]: Since incep­tion, which is 2007. 3.83% per annum for the fund ver­sus 4.89% for all ordi­nar­ies. The all-ordi­nar­ies accu­mu­la­tion index is only achieved 4.89% per round since 2007.

Tony Kynas­ton [12:50]: Yeah, so that was, that’s includ­ing the mid­dle of the GFC. So, I think that’s what’s caus­ing that.

Cameron Reil­ly [12:54]: No, the GFC kicked in 2008.

Tony Kynas­ton [12:58]: Yeah, but if they start­ed the fund at the high, it would look like they are under­per­form­ing. I kind of get that, so I for­give them for that one. Yeah, that was a finan­cial year to that one that I was inter­est­ed in. I don’t know where the blog post is Cam, but I remem­ber writ­ing a blog post last year about how Lin­coln has gone away from tak­ing the val­ue out of the equa­tion. So, they are buy­ing qual­i­ty stocks at any price and they start­ed to buy all of the high-fly­ing inter­net top stocks, the growth stocks. Putting them into their port­fo­lio. I wrote a blog post say­ing I did­n’t think that was a good thing to do. Now, it’s prob­a­bly com­ing home to roost for them now and this kind of envi­ron­ment when those growth stocks are com­ing down a lot.

Cameron Reil­ly [13:50]: So, they’ve also report­ed on their Lin­coln Aus­tralian Income Fund for investors seek­ing a reli­able income and reduced equi­ty mar­ket risk expo­sure, its finan­cial year to date is 3.08%, and its five years per annum is 8.64. So,

Tony Kynas­ton [14:11]: To be fair, that one’s all about giv­ing div­i­dends for peo­ple so what’s the div­i­dend yield on that one?

Cameron Reil­ly [14:17]: It does­n’t say here. Bench­mark. That is the fund dis­tri­b­u­tion yield, sor­ry, the fund dis­tri­b­u­tion yield is 8.64% 3.08% for the finan­cial year to date 8.64% Five years per annum. So, it does­n’t actu­al­ly tell you what the growth of it is. So, the div­i­dend.

Tony Kynas­ton [14:44]: So, if you can get that kind of yield and you’re not los­ing your mon­ey that’s prob­a­bly a good result I think so. That one’s prob­a­bly doing its job. I only raised the per­for­mance I do; I do track my per­for­mance against the Lin­coln, Lin­coln num­bers, and the star stock num­bers, and the inter­est­ing thing is when they pub­lish on the web­site about the star stock stocks is always a dif­fer­ent num­ber to their fund. So, I don’t know if they have oth­er invest­ments in the fund or what they’re doing, but they’re dif­fer­ent, and the fund is always you know, track­ing the index, I sup­pose, has­n’t done much bet­ter than the index over a long peri­od of time. So, the inter­est­ing, inter­est­ing sit­u­a­tion for them but the point I was mak­ing was. They left that sort of. they used to have a val­ue over­lay some­what. And about two years ago they start­ed buy­ing heav­i­ly into the SAAS, Soft­ware as a Ser­vice stocks and the growth stocks and Inter­net stocks. The LTM’s of the world. And I think that’s come back to bite them as I thought it would now.

Cameron Reil­ly [15:44]: But in Tim Lin­col­n’s intro­duc­tion to the report, he says, the fund team remained com­mit­ted to a bot­tom-up high-qual­i­ty approach.

Tony Kynas­ton [15:54]: There was I read some­thing else from them recent­ly which said that they were look­ing at tweak­ing their mod­el so maybe they are going back to a more valu­able approach. In this sit­u­a­tion.

Cameron Reil­ly [16:03]: While with the tide remain­ing firm­ly against qual­i­ty says Tim, the fund team made a num­ber of changes to the port­fo­lio over the peri­od adding diver­si­ty to the port­fo­lio whilst dis­pos­ing of a num­ber of stocks fol­low­ing their removal from our star stock uni­verse. With the mar­ket con­tin­u­ing to chase low qual­i­ty the fund team has decid­ed to reduce its down­side risk from fur­ther irra­tional sell­ing and bulk up its cash posi­tion.

Tony Kynas­ton [16:29]: I think the mar­kets going to low­er qual­i­ty. I would­n’t call [inaudible16:33] Com­mon­wealth Bank those kinds of com­pa­nies’ low qual­i­ty. They are high qual­i­ty.

Cameron Reil­ly [16:38]: After­pay. [crosstalk16:42] well maybe time to get Kien back on and we can grill Kien again on their per­for­mance num­bers and say, oh what’s going on Kien?

Tony Kynas­ton [16:50]: I think we’re giv­ing up; I think they do a good job. I just real­ly want­ed to high­light the fact that, I think, when they changed from being grant­ed any costs from what they used to do I think they may have strayed from those straight and nar­row real­ly. Any­way, it’s up to them.

Cameron Reil­ly [17:07]: ASA webi­nar you and I both set in on last week by James Holt from per­pet­u­al invest­ments. I thought it was a good primer on val­ue.

Tony Kynas­ton [17:19]: It was a great, great way

Cameron Reil­ly [17:22]: Awe­some for him to come on and warm up the ASA webi­nar audi­ence for your webi­nar which you’re doing when there?

Tony Kynas­ton [17:29]: Mid­dle of April I think it’s the 15th from mem­o­ry.

Cameron Reil­ly [17:32]: Okay. So, what’s that cou­ple weeks, two weeks away maybe.

Tony Kynas­ton [17:36]: That’s right.

Cameron Reil­ly [17:36]: Thank you again to Steven Maab for help­ing us set that up. Any thoughts, we’ve got James com­ing on the show, I’ve orga­nized I think he’s com­ing on your show maybe in May, I think. May or some­thing like that. We want­ed to know what you think of his pre­sen­ta­tion.

Tony Kynas­ton [17:56]: Well, I, I liked it a lot, because he was, I think the thing that stuck in my mind was he was basi­cal­ly say­ing val­ue and price are cycli­cal and there’s a switch from one to the oth­er and as a cycle the play­er over the next few years where val­ue stocks will do well. That was inter­est­ing, that he’s from per­pet­u­al I think from mem­o­ry, isn’t it? So, they have a long his­to­ry of val­ue invest­ing and, you know, it might have been going tough recent­ly, they’ve been run­ning lots of ads and the finan­cial press sign to the peo­ple who invest with them to stay the course and wait for the val­ue to come back in. So, this is obvi­ous­ly what they are wait­ing for, and it just reminds me again, sort of the late 90s When peo­ple like per­pet­u­al was say­ing, you know we’re not per­form­ing as we have in the past but, you know, things will turn, and they did. And we had the.com crash and then sud­den­ly, com­pa­nies like per­pet­u­al per­form real­ly well again.

Cameron Reil­ly [18:52]: Per­pet­u­al has been around a long time right like 1000 years or some­thing, I think they came out of the Knights of Mal­ta or some­thing, been around a long time. Speak­ing up ASA the annu­al con­fer­ence is hap­pen­ing on the 31st of May and the first of June at the Sher­a­ton in Syd­ney, think­ing I might come down for that. You might even, you might get a speak­ing gig there, depend­ing on how your webi­nar does I guess in a cou­ple of weeks.

Tony Kynas­ton [19:25]: No pres­sure.

Cameron Reil­ly [19:25]: No pres­sure just screw it up, Tony.

Tony Kynas­ton [19:27]: I’ll screw it up that’s right.

Cameron Reil­ly [19:30]: That’d be great if we have a lit­tle QAV pre­sen­ta­tion at the Aus­tralian share­hold­ers.

Tony Kynas­ton [19:36]: Would be. It would be fun. Actu­al­ly, Steve will be in town too so we should catch up with him too.

Cameron Reil­ly [19:40]: Yes, yeah. I think he’s also going up there to go to Hamil­ton.

Tony Kynas­ton [19:47]: He might have already done that.

Cameron Reil­ly [19:49]: You’re going to come to Hamil­ton with us Tony?

Tony Kynas­ton [19:54]: If I have to. If that’s the only way I can meet you guys yeah okay. My hip-hop musi­cal real­ly.

Cameron Reil­ly [20:01]: That’s great like my whole thing is about with my oth­er his­to­ry shows it’s about and the film. It’s how do you make his­to­ry enter­tain­ing for an audi­ence right and you have to do some­thing dif­fer­ent with me it’s dirty jokes and humor. With them, it’s hip hop and it works it’s real­ly good. It’s real­ly clever, inno­v­a­tive try­ing to get Amer­i­cans to under­stand a bit about their own his­to­ry is turn­ing it into a hip-hop thing. It’s clever, it’s real­ly well done. Even an old fud­dy-dud­dy like you, I think would enjoy it, Tony.

Tony Kynas­ton [20:36]: Thank you. I like for you to come down before I see it.

Cameron Reil­ly [20:38]: I bought you tick­ets for your birth­day because you already beat me to the punch on the whiskey.

Tony Kynas­ton [20:48]: Thank you.

Cameron Reil­ly [20:48]: I’m actu­al­ly going to come to your house and do a pri­vate per­for­mance of the whole thing myself. Yeah, it’s a visu­al joke for peo­ple who aren’t on our live stream because we did­n’t.

Tony Kynas­ton [21:01]: I was throw­ing some signs. Is that’s what it’s called?

Cameron Reil­ly [21:01]: Yeah, gang signs. I want­ed to talk about wax per­for­mance, Tony, I saw this in the review this morn­ing. I was kind of shocked not shocked about this, there was a lit­tle chat in the fin. Tech stocks look­ing at the wax tech stocks their per­for­mance in 2020, and so far in 2021. Now we talked about after pay a lot. After pay had 300% growth in 2020 but has come back in 2021, but the rest of the tech stocks like we’re always talk­ing about growth stocks and how you val­ue them and how do you know which one’s going to do well and bla-bla-bla-bla. Accord­ing to this num­ber, the matrix has been hard to see on the graph, but it looks like Hap­pen may have had 15, 20% growth in 2020 and has come back, prob­a­bly 30% in 2021. LTM. Anoth­er one of the WAAAX stocks went back­ward in 2020 by maybe 5% And so far, gone back­ward in 2021 by about 25%.

Zero had a rea­son­ably good year in 2020 It looks like it was prob­a­bly up about 80%, but a lot of our stocks did well, but bet­ter 80% or bet­ter, obvi­ous­ly. And it’s gone back­ward so far in 2021 by 20%. After pay, I’ve men­tioned. Wise Tech went up by about 35% in 2020, again okay but not stel­lar, and have gone back­ward in 2021 by prob­a­bly 10%. And Nearmap. Wasn’t that one of Alan stocks, I think when he came on, Rudy, or some­body, some­body men­tioned Nearmap [inaudible22:55], it went back­ward by 20% in 2020 and so far, is down anoth­er five or 10% in 2021. And then they’re like, they’re like the Wax stocks. They’re like the creme de la creme of the Aus­tralian growth stock indus­try and 2020 COVID was sup­posed to be a boom year for tech stocks 2019 was a boom year. Anoth­er boom year but again okay so if you picked After the pay­out of those 6 stocks you did okay, last year if you pick any of the oth­er five. Not so good.

Tony Kynas­ton [23:31]: And the peren­ni­al ques­tion is do you sell or do you buy at the moment. Yeah, right, because I’ve got no idea because I can’t put a val­ue on them.

Cameron Reil­ly [23:40]: Yeah, because after pay I think is off again for a bit, as I said this year so do you dou­ble down, or do you pull out?

Tony Kynas­ton [23:49]: Yeah, like with our stocks, you know, if you look at their price oper­at­ing cash flow, are they still on the buy list and that kind of stuff I can decide whether I’m going to buy or sell them but with these stocks, I don’t know how you do that. Any­way, I don’t think we have to get into a val­ue ver­sus growth debate.

Cameron Reil­ly [24:09]: Well, it’s not a debate. I’m just look­ing at the fig­ures like okay. I was­n’t. I don’t hear that like I hear after pay all the time. The oth­er five.

Tony Kynas­ton [24:21]: Maybe all those peo­ple who are their share­hold­ers sold out and bought Bit­coin, we’ll nev­er know.

Cameron Reil­ly [24:26]: Maybe they sold out and bought after pay. Maybe they all dumped those oth­er stocks and they all weighed in on after pay, right.

Tony Kynas­ton [24:31]: And now they’ve got a Mas­ter­Card cred­it card that goes with their after-pay app.

Cameron Reil­ly [24:34]: So, I signed up for that this morn­ing, I begin. So, I said,

Tony Kynas­ton [24:38]: Do you have to do a cred­it check?

Cameron Reil­ly [24:39]: No, you just down­load the after-pay app on your iPhone. And then it pops up a thing and you want a Mas­ter­Card to go yes please it goes boom. You’ve got one. Good luck you’ve got a $1500 spend­ing lim­it, go nuts.

Tony Kynas­ton [24:56]: So that must be the only, only place in the world you can get a $1500 cred­it card imme­di­ate­ly with no checks, no cred­it checks at all.

Cameron Reil­ly [25:03]: Maybe they do a back­ground check because I know they orig­i­nal­ly sort of were devel­oped and spun out of touch. When I was involved with touch at the time, I was doing some brand­ing design stuff for touch. And the guys there my friends who worked there at the time were telling me all about this after pay thing they were build­ing and what it was going to be and bla-bla-bla. They were the founders, but I think Nick Mol­nar the oth­er founders sort of had their offices in touch in Syd­ney for a while and they saw Syd­ney, Mel­bourne. And, you know, they, they, they, the touch guys helped them build the back end of it because they were doing, you know, cred­it score check­ing all this kind of stuff for a whole bunch of finan­cial net­works, so they may have done that in the back­ground, but if they did that on me, I would have failed that so.

Tony Kynas­ton [26:01]: Six-year-old kids.

Cameron Reil­ly [26:02]: If any­one’s a cred­it risk, it’s me. They should not be giv­ing make mon­ey, no one should be giv­ing me any­thing, so I don’t think there is much going on in the back­ground. Yeah. It’s just maybe it’s just you got a heart­beat. Yeah, okay.

Tony Kynas­ton [26:15]: That’s just mind-bog­gling. How can you let peo­ple take out a cred­it card with­out any sort of due dili­gence, on whether they are get­ting into trou­ble by tak­ing out the cred­it card?

Cameron Reil­ly [26:22]: Well, I don’t know. I mean, I don’t think it’s a cred­it card I assume it just goes along the same terms as after pay. So, it’s just the card that you have on your phone now in your iPhone wal­let, your apple wal­let that plays the same way as after pay you still at the same pay­ment terms, I think, I haven’t read through the details, but you’ll still have to any­way.

Tony Kynas­ton [26:47]: What does Mas­ter­Card get out of it? Prob­a­bly cred­it.

Cameron Reil­ly [26:55]: Well, they prob­a­bly get some 10% fee. Well, let’s just say, after pay pre­paid. It does have the Mas­ter­Card logo on the bot­tom right so.

Tony Kynas­ton [27:09]: Yeah, that’s it.

Cameron Reil­ly [27:09]: I don’t know man.

Tony Kynas­ton [27:09]: Any­way

Cameron Reil­ly [27:11]: I did see in the thing though this morn­ing. There was a big arti­cle about Nick Mul­der. And what a fash­ion guru, he is as well. And it was say­ing that one in five after pay cus­tomers are in arrears.

Tony Kynas­ton [27:28]: Real­ly, one in five? 20%.

Cameron Reil­ly [27:31]: And the Aus­tralian gov­ern­ment ASIC and who­ev­er else decid­ed it’s not cred­it. Self-reg­u­la­tion is all that’s need­ed, but one in 5, 20 per­cent of after-pay cus­tomers are behind in their pay­ments.

Tony Kynas­ton [27:50]: Wow. I’m just bog­gled by that because you know in this day and age of post-Haine Roy­al Com­mis­sion finan­cial..

Cameron Reil­ly [27:58]: Which the gov­ern­ment did­n’t want to have, by the way, wasn’t nec­es­sary indus­try is fine, leave them alone. Doing a great job of self-reg­u­la­tion.

Tony Kynas­ton [28:09]: 20% of After­pay’s cus­tomers can’t pay their bills. Well, if they’re get­ting away with it now. Good luck to them but won’t be for one because I’m sure it’s going to be a big sto­ry.

Cameron Reil­ly [28:22]: Depends on how many peo­ple in gov­ern­ment are using after pay to fund their lifestyle yes. CVL is down 30% since we bought it, Tony.

Tony Kynas­ton [28:36]: Which one?

Cameron Reil­ly [28:36]: CVL

Tony Kynas­ton [28:39]: The mechan­i­cal engi­neer­ing one. What are we going to, I haven’t kept a look on, is it gone below its three-point trend­line?

Cameron Reil­ly [28:49]: No,

Tony Kynas­ton [28:49]: I haven’t checked it for a long time. CVL, it’s get­ting close to a three-point trend­line, isn’t it?

Cameron Reil­ly [28:55]: It’s get­ting close but has­n’t gone below it, not even real­ly close if I put my see my big ruler?

Tony Kynas­ton [29:02]: Now it looks like it’s about 45 cents and we’re cur­rent­ly a sell price and we’re cur­rent­ly at 51 and a half.

Cameron Reil­ly [29:06]: I would say the sell line is more like 42 cents. Okay, it’s got quite a way to come back. Yeah, but still stay like stick to it.

Tony Kynas­ton [29:27]: Keep it’s on the buy list.

Cameron Reil­ly [29:30]: Alright Q&A time?

Tony Kynas­ton [29:30]: I had a cou­ple of things I want­ed to update peo­ple on first sor­ry yeah. So first of all, just let peo­ple know there have been some new fig­ures in stock doc­tor. I think we for the retail­ers here you have a Jan­u­ary 31 finan­cial year and so my Kat­man­du they ring a bell straight away there are prob­a­bly oth­er ones in there. Oh, excel­lent one the shoe com­pa­ny. They’re, they’re all giv­ing us new num­bers so just be aware of that, if you’re haven’t run a down­load late­ly, you might want to. And I was going to mix my stock of the week because it’s still on our buy­er’s list. After I went through the new num­bers. And its graph is just sort of slow­ly still edg­ing up from that low point last year, it’s still, you know, got a lot to do to fix the busi­ness. But it’s scor­ing well on our met­rics, I’m going to leave it there and make it stock of the week. Have a look at the peo­ple, I’m not say­ing rush out and buy it, do your own due dili­gence, but it’s tug­ging away nice­ly.

Cameron Reil­ly [30:33]: Wow, okay.

Tony Kynas­ton [30:35]: One oth­er thing I want­ed to update peo­ple on was I had, anoth­er thing after we spoke last week on the show about MAH, and that was a stock that was on the buy­er list briefly so, it broke through its bind and it went back down below the buy. But it was above its sell, and so like­wise [inaudible30:53] is now, and I call it a hole. But I think, you know, on reflec­tion I don’t think we should have holes. It’s a bit like a Bendi­go and Ade­laide bank that I bought and sold again because of a per­fect set­up about the buy­er line and went back down again, almost straight away so I sold it. And MAH is in the same boat, it’s not a buy, it’s not a sell, like that it’s not a buy. So, if you have bought it. When it poked it head up and it’s now below, it’s up to you whether you want to sell it or hold on hold on to it but yeah, I don’t think, on reflec­tion, I’m not going to label things a hole. I’m going to take MAH off the buy­er list, giv­en its buy line now.

Cameron Reil­ly [31:30]: Ground­hog?

Tony Kynas­ton [31:32]: It’s a Ground­hog, yeah that/s right. It stuck it head out and went back in. So, anoth­er three months of pain. I mean rain, so that was in my head, what else we’ve been talk­ing about the top mar­gin­al rate. I want­ed to pose a ques­tion to peo­ple, again in my thoughts after the last, last pod­cast we did we talked about div­i­dends and pay­out ratios and things like that. and one of the rea­sons I’m pret­ty sure that com­pa­nies pay out div­i­dends in Aus­tralia. And I think we have the high­est pay­out ratios in the world. And even though peo­ple like War­ren Buf­fett and Jeff Bezos said. I don’t want to pay out div­i­dends because I can use the cap­i­tal bet­ter than you can. They don’t say that, but it’s what they mean. We in Aus­tralia we tend to pay out prof­its as div­i­dends and very high. Right. And I think prob­a­bly one of the big rea­sons for doing that is because we have frank­ing cred­its, so the div­i­dend comes attached with a cred­it to the tax that’s been paid by the com­pa­ny. In mak­ing that prof­it it’s pay­ing out of.

So, if a com­pa­ny does­n’t pay div­i­dends, and it’s mak­ing mon­ey in its tax, then the frank­ing cred­its sit on its bal­ance sheet, and they can’t be used in any oth­er way than to attach itself to a div­i­dend and give the recip­i­ent of that div­i­dend tax cred­it, which they can off­set on their oth­er income, or includ­ing that div­i­dend. So, com­pa­nies are under pres­sure a lot to unlock that those frank­ing cred­its sit­ting on their bal­ance sheet, and some­one described it recent­ly as being a free lunch the Tax Office is sit­ting there the cred­its which belonged to the share­hold­ers are not being dis­trib­uted. So, the tax office does­n’t have to wor­ry about them so it’s actu­al­ly a free line to the Tax Office. So, one of the things that I’ve been think­ing about this week is how can we unlock those frank­ing cred­its with­out going to the trou­ble of pay­ing a div­i­dend. In oth­er words, if I were run­ning a com­pa­ny, and I was pub­licly list­ed, how can I some­how unlock those div­i­dends I’m going to pose it to our lis­ten­ers and see if the hive mind could come up with a good answer.

But I think if we can come up with a good answer and start pos­ing it to some of the com­pa­nies that we’re invest­ed in you know that, to me, that’s a good result because then the com­pa­nies pay out less on div­i­dends and real­lo­cate their cap­i­tal more towards their growth, which might serve as beta return hold­ers. So, here’s a ques­tion for the week to peo­ple. And there have been some exam­ples in the past where com­pa­nies have done buy­backs that some­how will unlock frank­ing cred­its so that might be an option. But yeah, I don’t think any­one’s cracked it yet but if there is, if we can crack it, I think it’s going to be a good boom for share­hold­ers in Aus­tralia.

Cameron Reil­ly [34:23]: You’re left to feed it back to ASA via Steven Maab and we’ll put pres­sure on boards to do it.

Tony Kynas­ton [34:29]: And Stephen Miller and Steven man­age­ment too.

Cameron Reil­ly [34:34]: Before we get into Q&A, I just want­ed to let peo­ple know on our Face­book page that we launched the Andrew Flit­man ver­sion of your mas­ter check­list into the wild, last week and been get­ting some feed­back on it. Peo­ple are lov­ing it, few ques­tions about some of it but noth­ing major yet so if you have any ques­tions if you want to test it go away to and Drop­box fold­er where the oth­er check­lists are, and you can down­load it there the AF mod­el. Test it, play around with it, if you have any ques­tions, email them to me and I’m sort of col­lect­ing the ques­tions and I’ll fun­nel them back to Andrew I want to cre­ate anoth­er job for Andrew because he’s already got one, but he has said Yes, hap­py to get some ques­tions from you. So, shoot me your emails I’ll col­lect them and feed them through to Andrew and then feed them back out to every­one as we go on try not to over­load.

Tony Kynas­ton [35:29]: Thanks for your help Andrew, that’s great.

Cameron Reil­ly [35:32]: Did a great job, okay Q&A?

Tony Kynas­ton [35:35]: Yeah, let’s go for it.

Cameron Reil­ly [35:36]: The first one is from Glenn, he says, there were three stocks removed from the S&P 300, FAR, FNP and PET, which have either become insol­vent or placed in a low­er trad­ing halt, won­der­ing, would it be worth Tony com­ment­ing on these three com­pa­nies in the red flags in their P&L bal­ance sheet, etc. Pri­or to the trad­ing halt announce­ment. For exam­ple, I noticed that a cou­ple of the com­pa­nies have neg­a­tive oper­at­ing cash flow sort of a high-lev­el overview of what stands out to Tony straight away. That would be a con­cern, etc., also won­der­ing what hap­pens if you own shares in a trad­ing halt. Must be a rough ride where you don’t know the out­come and can’t sell out. I think we were talk­ing to Petra about this at din­ner in Syd­ney last year, right, she was in that sit­u­a­tion.

Tony Kynas­ton [36:29]: I think her hus­band had a friend who had a stock that was in a trad­ing halt. Yeah, well let me go through those ques­tions. So, the first one about the three com­pa­nies that were removed from the S&P 300. So, FAR is fire resources, and they’re an oil Explor­er, and a cou­ple of years ago they had a qual­i­fied audit, so they had prob­lems with the com­pa­ny going for­ward. And I think in the inter­im, they tried to arrange the sale of their assets which basi­cal­ly oil leas­es or oil explo­ration leas­es, and I think they orig­i­nal­ly had a sale to Wood­side petro­le­um worked out. And then some­body else to be so they’ve been try­ing to work through that whole sale process since then. That’s that 1. The point I want­ed to make they had a qual­i­fied audit. So that’s the red flag there which we don’t touch.

The sec­ond one free­dom foods inter­est­ing one. If peo­ple want to have a look at the share price exam­ple of what can hap­pen when a com­pa­ny gets halt­ed from trad­ing and then comes back on it drop like a stone. Right, right down to a low price. Free­dom food has nev­er been on the watch­list and this is kind of an inter­est­ing way to look at things, it’s what is bad in the share mar­ket that we can sort of learn from and then reverse engi­neer and put them into a check­list so free­dom foods. It had, it had for the last cou­ple of years its div­i­dend pay­out ratio was greater than 100% so, it’s been either rais­ing cap­i­tal, through cap­i­tal rais­ing or bor­row­ing mon­ey and pay­ing out more than its prof­it in div­i­dends. So that’s the red flag. It had neg­a­tive cash flow from Decem­ber 18 I think it could go pos­i­tive for maybe one-half but neg­a­tive cash flow. Anoth­er red flag. And its PE was over 100. So, you know, it was basi­cal­ly a high-fly­ing growth stock, and this is a real­ly salient exam­ple of what can hap­pen with high-fly­ing growth stocks. When there is a prob­lem, they real­ly drop like a stone. Which this com­pa­ny has, Free­dom Foods.

And a bit like the next com­pa­ny PET which is I think is called [inaudible38:44] which is a com­pa­ny which has a solu­tion to tak­ing LG out of order ways. Which has become a prob­lem over the last 10 years. And they suf­fered from some alleged fraud in Chi­na as they tried to expand up there. So again, this was one of the [inaudible39:01] stocks a cou­ple of years ago. That all the growth gurus were push­ing. Lots of growth on the sales line, no prof­it. So, it’s the price to cash flow. The last time that it appeared, so I went back through my old back­up from the mas­ter spread­sheet. The last time I had num­bers or the ear­li­est that I had num­bers in this form, was back on Decem­ber 19 after those results. And the price for cash flow then was 17 times. That’s way above what we look for, so it was trad­ing on a high­er val­u­a­tion as well. And again, some­thing hap­pened where there is an alleged fraud in Chi­na. And the share prices have dropped dra­mat­i­cal­ly from there.

So, I know I’m going on about these high price growth stocks and the risks that they have. But they are at least 2 good exam­ples of what can hap­pen as soon as those com­pa­nies which are priced to per­fec­tion have a prob­lem. And in a cou­ple of those, there were some irreg­u­lar­i­ties. Alleged fraud in Chi­na, I think there was even a prob­lem with some poten­tial fraud in Free­dom Foods. And that’s anoth­er issue, I mean I’m not talk­ing about those 2 stocks in par­tic­u­lar but gen­er­al­ly if you’re the man­age­ment team for a high-fly­ing growth stock. You know its price to per­fec­tion. You’re under a lot of pres­sure to get the stock increase by a lot each year. There is an awful lot of pres­sure on you to either turn a blind eye to some­thing bad that’s going on. In the hope that it will go away or you can fix it before it’s dis­cov­ered. Or in the worst case to actu­al­ly do some­thing a bit on toward your­self. So, it’s not you that some­times these growth stocks have prob­lems and then their price plum­met. So that’s the first part of the ques­tion.

What do I look for if I start­ed to inves­ti­gate some of these com­pa­nies? The first red flag I have is when I open Stock Doc­tor and on the front page is a sea of red ink. So, you’re see­ing things like neg­a­tive return on equi­ty, neg­a­tive PE’s, or no PEs. You might see the growth line going up but you’re see­ing neg­a­tives in some of the oth­er items. So, see­ing red on the front page of stock doc­tor is a big red flag for me. And in terms of, also tak­ing it fur­ther for com­pa­nies like say­ing Foss lock. I might click on it and look at the cash flow, the oper­at­ing cash flow. And if that’s neg­a­tive, that’s just a big turn-off for me. So, I don’t even go any fur­ther in terms of ana­lyz­ing it. So, there are the things I look at quick­ly. And in terms of what hap­pens when a share goes into a trad­ing halt, it’s not pret­ty. Gen­er­al­ly, if that hap­pens and there is no obvi­ous rea­son for it. Like some­one logs, the bid or the CEO has resigned. Gen­er­al­ly, it’s a bad sign and I pret­ty much write the stock off there and then.

The rule of thumb is the longer it goes the worst it gets. Man­age­ment will try real­ly hard to sal­vage what they can prob­a­bly bring in the admin­is­tra­tors. The admin­is­tra­tors are ruth­less, and they’ll just try and sell what­ev­er they can. And they’ll, first of all, deliv­er those pro­ceeds to the secured cred­i­tors, which are often the banks’ prop­er­ty. And then share­hold­ers who are last in line. So, well the staff should get the next tranche of those pro­ceeds to pay enti­tle­ments like long ser­vice leave and annu­al leave. Gen­er­al­ly, the poor old share­hold­er who foot­ed the bill all the way long gets paid noth­ing. Or cents, pen­nies on the dol­lar, so it’s nev­er a good thing to either share that goes into a long-term trad­ing halt. So, Glen, stick with a check­list and try and steer clear of these, these kinds of com­pa­nies and look to be fair, I’ve had 1 or 2 blow up in my face in the past and it’s not pret­ty and it does hap­pen even, even to QAV stocks, but we do get much less of those than the gen­er­al mar­ket does.

Cameron Reil­ly [43:05]: So basi­cal­ly, what you’re say­ing is these com­pa­nies would­n’t have passed the check­list in the first place.

Tony Kynas­ton [43:12]: Cor­rect. Yeah, and if you sort of look at why they did­n’t pass is because they had neg­a­tive cash flow, they had high PEs of 100. So, their price for oper­at­ing cash flow was going to be way above what we will pay for them. Some com­pa­nies like FAR I don’t even think have cash flow. So, you know they’re in trou­ble because they have a qual­i­fied audit which is a red flag for us. So yeah, tak­ing sort of flip it on its head and look at the rea­sons why we don’t buy into com­pa­nies like this is because they are all just red flags for us.

Cameron Reil­ly [43:42]: I’m just look­ing at the Phoslock PET share price chart. In March of 2019, it was trad­ing at 37 cents. By July of 2019, it was trad­ing at $1.5.

Tony Kynas­ton [44:03]: Hap­py days. Rock­et to the moon.

Cameron Reil­ly [44:10]: Yeah, and then by Feb­ru­ary 2020 Just before COVID It was down to 52 cents and now it’s at 24 cents. So yeah, but look­ing back at some of the news sto­ries of the mar­ket Her­ald, I think, which is put out by hot cop­per. Now I think that’s the hot cop­per new site. They had a sto­ry in Decem­ber 2019, where the Phoslock­’s Chair­man Lau­ren Freed­man said they were fore­cast­ing a 100% sales increase for 2020. Won­der how that went for them? Any­way,

Tony Kynas­ton [44:51]: Might have been illu­so­ry.

Cameron Reil­ly [44:56]: illu­so­ry? You’re just a los­er-ree. You’re a los­er if you bought into that sto­ry. Yeah, yeah. Let’s get back to the WAAAX stocks. Like how do you know, all these com­pa­nies, have great sto­ries. But as you always say you want to read; you want to hear a sto­ry buy a book.

Tony Kynas­ton [45:15]: But also, it’s not just that, but it’s when they hit a road­block the share price just plum­mets because they’re all priced to per­fec­tion.

Cameron Reil­ly [45:25]: And because peo­ple, peo­ple invest­ing and smart insti­tu­tion­al investors know that this is, you know, the dog and pony show right. As soon as it hits the wall. It looks like it’s hit­ting a mighty wall, they’re like, yeah, well we’re out, thank you very much.

Tony Kynas­ton [45:46]: Yeah, they got out before­hand, they’re just in it for the feast. Like they’ll prob­a­bly come along now and say we can, you know, refloat your com­pa­ny and fund your bal­ance sheet. Just do a cap­i­tal ris­ing for you, and we have no doubt that Phoslock will con­tin­ue as a com­pa­ny that they’ll do well, and they will solve the algae prob­lem in var­i­ous water­ways is that’s a good thing but

Cameron Reil­ly [46:06]: We have no doubt about that?

Tony Kynas­ton [46:08]: Per­haps, they are clos­er to the right price than they were last year.

Cameron Reil­ly [46:13]: Yeah, I think it’s, like, so the point for Glenn is that. The check­list is designed to weed out as best as you can com­pa­nies that are doing well. By doing well gen­er­at­ing a con­sis­tent amount of creas­ing cash. You know, grow­ing their equi­ty. Well run busi­ness­es it’s designed to the basic the­o­ry behind QAV and the check­list. You told me on day one when we start­ed this is. If you weed out the com­pa­nies that are doing well as a busi­ness. The ones that are left the­o­ret­i­cal­ly should out­per­form.

Tony Kynas­ton [46:56]: Cor­rect the mar­kets and index and if you take out the best stocks. The rest should per­form bet­ter than the aver­age.

Cameron Reil­ly [47:01]: Yeah, so the check­list is designed to weed out the bad apples and find the 20 that’s left. I mean there’ll be 100 or 50, depend­ing on where the mar­ket is. Then we try to pick the top 20 of those. And we know that we’ll prob­a­bly get it right. Six out of 10 times. That’d be pre­pared to jet­ti­son the ones where we go wrong, but it’s just about try­ing to try to find the ones that are going to do good busi­ness­es that are going to per­form well.

Tony Kynas­ton [47:32]: Cor­rect, yes. And it’s the expe­ri­ence that gets you to this type of check­list, like hav­ing cycles, hav­ing seen com­pa­nies that go broke, hav­ing seen kick boom that goes bust, you can put, put togeth­er a check­list based on all those things which you can point to and say well this did­n’t work out then, let’s just make it across on our check­list. Yeah, it’s not like that again.

Cameron Reil­ly [47:55]: Yeah, hope that makes sense Glen. Gary is some­one able to explain the math and log­ic behind the fall­en share price we might see on many stocks after they go ex-div­i­dend.

Tony Kynas­ton [48:09]: Only in gen­er­al terms, I don’t think, I think the log­ic and math is not very sci­en­tif­ic, but what should hap­pen is if the com­pa­ny pays 2% yield or a 4% yield, and then every half pays out half of that, so that’s a 2% div­i­dend and this half and a 2% div­i­dend. At the end of the year, and some frank­ing cred­its on that which have a val­ue. Then the share price should fall by, you know, two and a half per­cent. This half and then recov­er because the com­pa­ny has­n’t changed except it paid out some of its prof­its as div­i­dends, but there’s a whole lot of oth­er things that take place because it’s a stock mar­ket. So, these div­i­dend rein­vest­ment plans can have an impact. So, the big banks, for exam­ple, when div­i­dends come around, will let peo­ple buy back shares using the div­i­dend to pay for that some­times at a dis­count. So that can have an effect on that can be a slight dilu­tion of the share the shares because of that, so that can affect the share price and dri­ve it down a lit­tle bit.

There are also qui­et traders out there and momen­tum traders out there. And if the share price drops by 2% in a day, and they’re not kind of on the ball about when div­i­dends are paid. They can for some sell­ing which becomes a bit of a cycle of sell­ing. There are also div­i­dend har­vesters out there. You know there are funds out there who might buy the bank sort of three months out from a div­i­dend, and then take that div­i­dend, which is using a rea­son­able, sort of amount say it’s 3%, plus the frank­ing cred­its, maybe it’s worth 4% of the firm. And if they bought it far enough in advance and the banks gone up by three or 4%. Then they can sell the div­i­dends paid prob­a­bly wipe their face from a cap­i­tal point of view, but they make three or 4%. If they do that four times a year. They’ve got 16% That’s a great return so those kinds of plays in the mar­ket and they’re obvi­ous­ly sell­ers, after the div­i­dend is, announced or the stock goes ex-div­i­dend. So, they are sell­ing pres­sure from them.

And they are peo­ple who do things like, buy a stock and hold it for 13 months or they get it if they buy a stock, just before it goes ex-div­i­dend. Then they hold it for the 12 months they get three div­i­dends in 13 months so that’s if each div­i­dend was 2 or 3% that’s 10% per year. And then they’ll sell it and move on to some oth­er sort of giv­en its div­i­dend har­vest­ing scheme like that so. Yeah, there’s a whole, there’s a whole host of things going on, because of div­i­dends, and like I said before, Aus­tralia is a bit dif­fer­ent from the rest of the world. In that, we are high div­i­dend pay­ers. So, peo­ple can con­struct invest­ment mod­els around har­vest­ing div­i­dends. And then they sell them when they go ex-div­i­dend. And that push­es the price down. So the­o­ret­i­cal­ly it should be the stock falls by the div­i­dend amount, but the rat­ings go on and it can be it can fall by more and in some cas­es, the stock can keep on track­ing upwards too if its good news going on or if it’s a com­pa­ny which is in growth mode so there’s no real sci­ence.

Cameron Reil­ly [51:24]: Why, why should it come down by the same amount as the div­i­dend, I mean is it just because peo­ple fig­ure that the com­pa­ny is worth 2% less if it pays out a 2% div­i­dend because it’s cov­er­ing an amount of cash?

Tony Kynas­ton [51:39]: Cor­rect it’s paid out­side of its assets. You should well most peo­ple I think would say to them­selves well I’m still whole. The com­pa­ny’s worth 2% less than it was yes­ter­day but I’ve been giv­en that 2% so I’m not going to sell. There is also that kind of fac­tor play­ing into it as well. If every­one adopts that point of view, then the com­pa­ny, share price won’t change. And like I said there are these peo­ple out there who are buy­ing and sell­ing com­pa­nies based on get­ting access to div­i­dends. And so, they buy before and sell after which also push­es the price up a lit­tle bit before div­i­dends, so that’s anoth­er rea­son why the com­pa­ny might come back. Are those peo­ple out in the mar­ket any­more, push­ing the price up so there’s a whole host of things that play around div­i­dend time with com­pa­nies.

Cameron Reil­ly [52:24]: Right, I’m just think­ing of a cof­fee shop anal­o­gy if I buy a cof­fee shop, buy a share of a cof­fee shop. And it’s prof­itable and it gives me some cash at the end of the year I would­n’t think oh well, time to dump the cof­fee shop then just made me mon­ey, I’ll be like this is awe­some. As long as the right amount of mon­ey they paid me was in line with what I expect­ed it to return.

Tony Kynas­ton [52:46]: One of the pro­pri­etors of the cof­fee shop had a mate who want­ed income. And he sold his shares to the mate just before the div­i­dend came out with a deal to buy them back off him for the same price, after it goes ex-div­i­dend, offer an agreed price. So, the mate held the shares for the peri­od the div­i­dends paid. They pock­et that cash. The guy who sold the shares does­n’t need the cash. Maybe the guy who buys the shares has to pay a bit of a high­er price to make it worth­while for the guy who sells. That kind of trad­ing goes on every year for the cof­fee shop because there’s a, there’s a, you know, some direc­tors want cash and some direc­tors don’t, so they pre­pare to trade their shares and buy them back after­ward. That’s kind of the anal­o­gy that’s going on here.

Cameron Reil­ly [53:36]: Yeah, right. I hope that helps a lit­tle bit Gary. Britt, can you please ask Tony, how he decides what to sell when he needs to take cash out of his port­fo­lio for exam­ple when he bought the prop­er­ty. Yeah, good ques­tion. How do you decide what to dump?

Tony Kynas­ton [53:53]: Yeah, so gen­er­al­ly I sort of run through a cou­ple of things. I’ll be sell­ing loss­es first so if there’s a Signac like if we had that in my port­fo­lio. I’d sell that first because it’s not going any­where. In the short term any­way, it’s got good prospects so it will go some­where in the long term. But in the short term, I’ll take that. So, what I’m try­ing to do is avoid sell­ing some­thing and hav­ing a cap­i­tal gains tax lia­bil­i­ty against that sale. So, I’d sell the loss­es, first of all, sell the ones which are trend­ing down even in the short term, so I’m try­ing to even though I may have a cap­i­tal gains tax lia­bil­i­ty from that. But trend­ing down like say,
some of the ramil­ius resources are doing at the moment one of our gold stocks I will prob­a­bly sell that next. And then oth­er dimen­sions, I’d look at is to pri­or­i­ties high div­i­dend pay­ers, so I prob­a­bly sell the ones which don’t pay div­i­dends after that, because I’m still try­ing to, you know, fund my mort­gage and my lifestyle from that income. And so, I want to hang on to the div­i­dend pay­er. So, I might sell that last as well. So that’s kind of the pri­or­i­ty list, it will be dif­fer­ent each time but that’s what I’m trad­ing off.

Cameron Reil­ly [55:05]: Thank you, Brett. Daniel : would Tony still be com­fort­able buy­ing into some of the com­mod­i­ty stocks that remain high on the buy­er list even though they’ve had a mas­sive upturn with­in the last few months basi­cal­ly with the mar­ket for­ward-look­ing, and they’ve already been priced in. I’m hav­ing a ten­den­cy with cre­at­ing my port­fo­lio to look at alter­na­tive sec­tors, oth­er than resources, which come out stronger because of the recent upturn we’ve had that being said, any news on the more recent sell line if they sharply con­tract.

Tony Kynas­ton [55:35]: Yeah, so the first thing is you know, I still buy com­mod­i­ty stocks, but I think I’ve said in the past that if some­thing is in a bit of a down­turn, I wait for it to turn up first before I bought it. So, you know look­ing at [inaudible55:46] at the moment. It’s come down from $25 to $20, but prob­a­bly hang off buy­ing that until we see an uptick. So yeah, I’ve been going down the buy­er list and buy­ing oth­er things first. While it’s still going up at the moment in the short term, rather than some­thing which is going down. Some oth­er val­ue investor says, great it’s cheap­er now. And I’ll buy it. I’m going to say great, it’s cheap­er now once it starts to pick up again, I can buy it know­ing in the short term, it’s prob­a­bly going to go up. So, there’s that. In terms of the three-point trend­lines, I’m still doing some research into that but thought it might be worth­while just run­ning through an exam­ple on the show so if you pull up stock doc­tor and look at their com­modi­ties. If I have a look at. So, you go to the home­page, Go to the mar­ket sec­tion on top right CMD terms, com­modi­ties. If we call

Cameron Reil­ly [56:51]: The top right home page. What am I look­ing at?

Tony Kynas­ton [56:54]: So, on the home page there’s a research port­fo­lio on mar­kets. We want mar­kets, and then under­neath the head­ing for mar­kets, there’s a whole heap of tabs one of them is CMD for com­modi­ties. Yeah, so just pick one of those big gold for exam­ple, then click on Advanced chart­ing so we can get to our five-year month­ly graph. In fact, what I’ve been doing, I don’t know if you can but where it says find your month­ly graph on that top line there, I click on that and then go down to a tab called month­ly max line chart. Can you see that? Cus­tom lay­out so we might have to set one up for you. Then go to the range. Click on all. Yep. Now we got a long-term month­ly chart for gold as a com­mod­i­ty. If we used that to draw a three-point trend­line for gold, you can see that back in. Pri­or to the cur­rent high back in August 2011, there is a high. Back in Octo­ber 2012. There’s anoth­er peak. And if we draw, if we use those to draw a line it’s going to be a buy around Decem­ber 2019.

So, the thing I’m sort of think­ing about is if we use Decem­ber 2019 as our start­ing posi­tion in terms of where the gold chart sort of starts to go up if I go back to the five-year month­ly graph. Which we had before. If I look at every­thing to the right of Decem­ber 2019. Yeah, we can see that it’s a much tighter line to the graph, is in the sell sit­u­a­tion at the moment. So, it is

Cameron Reil­ly [58:56]: They are close, yeah.

Tony Kynas­ton [58:56]: So that’s what I’m just play­ing around with now. What I’m try­ing to do with com­modi­ties, in par­tic­u­lar, is to look at the under­ly­ing com­mod­i­ty and try not to get back to much of the recent growth if we can because with com­modi­ties, in par­tic­u­lar, they are very cycli­cal and they do tend to go through peaks and troughs. And if we have come off the peak then I want to try to lim­it the down­side, so it does­n’t go all the way back to what we paid for it. That’s my sort of research at the moment it’s doing that. I’ve done it with oil, iron, or cop­per, and then they all give us a short­er-term graph than five years. In fact, the ques­tion I’ve got is I know we’ve had this ques­tion before from peo­ple like should we be tak­ing a short­er time­frame to use to look at these graphs for com­modi­ties, so I know that some of our lis­ten­ers have already sold out of some of these things. So, I’d like to get their feed­back if any­one wants to email us or even talk to us on the show in the future about how they’ve gone in terms of sell­ing out of some of these stocks. Because my expe­ri­ence in the past is if you use too short of time frame, you just buy and sell, buy and sell, buy and sell becomes very volatile.

Cameron Reil­ly [1:00:10]: Yeah.

Tony Kynas­ton [1:00:10]: I think prob­a­bly my expe­ri­ence with com­modi­ties is lim­it­ed to the gold stocks over the last four or five years and they seem to be com­ing off now. And the recent trend since the last upturn in gold is com­ing off. So that’s what I’m bas­ing my think­ing around, but I still haven’t sort of com­ing to any big insight yet into this. I’m still research­ing it.

Cameron Reil­ly [1:00:30]: But look at this gold graph chart, if I start low point at the end of Novem­ber 2019. And then draw through March 2020. The next thing there. It cuts straight through. Straight on the line for Novem­ber 2020. The next down­ward thing. It’s like some­body is way ahead of you here. The sup­port point goes straight on the line.

Tony Kynas­ton [1:01:03]: Yeah exact­ly. And so that’s what sort of feeds into my think­ing as well which means that gold is a sell at the moment.

Cameron Reil­ly [1:01:06]: Yeah, right. so that means our gold stocks. We should take a clos­er look at it.

Tony Kynas­ton [1:01:13]: Yes, give me some time to have a look at those and to get some clear­er think­ing on this. But that’s my thoughts at the moment.

Cameron Reil­ly [1:01:22]: Yeah. Okay.

Tony Kynas­ton [1:01:22]: As I said last time, I think the fact that gold only dropped from 2000 US to 1700 US isn’t a big drop, and if you’re more clever that just hap­pened in Queens­land. And the recov­ery stalls and gold are going to come back into its own again. So, I don’t want to be too hasty to sell. Because some­times these are just short-term down­turns, But I’ve got the bal­ance out against giv­ing back the opti­mum we’ve had so far.

Cameron Reil­ly [1:01:50]: Okay, good ques­tion. Thanks, Daniel. Dun­can has a ques­tion about sen­ti­ment I’d be grate­ful if some of these could be cov­ered in the pod­cast it mys­ti­fies me some of these stocks would pass either the sen­ti­ment or the pos­i­tive upturn since their report was released. I’m par­tic­u­lar­ly curi­ous about HAW, MAH, and AGD, we’ve already spo­ken about MAH. I think that IAS may be an exam­ple of pass­ing sen­ti­ment but fail­ing the recent upturn test would love to have this explained. Are these all Ground­hogs, Tony?

Tony Kynas­ton [1:02:26]: No what they are. Apart from MAH, I think, cer­tain­ly for Hawthorns and ADG may be for IAS. In the last release, we were still using June num­bers. So, they’ve now been updat­ed in Stock Doc­tor to Decem­ber num­bers. And those results have changed. So, as I said ear­li­er on Hawthorns come off the buy­er list for that very rea­son. So that was the last buy­er release that was still on there, but that was June. That’s the same, it’s the same for AGD I think so. Yeah, so that’s, that’s what I was still show­ing rac­ing up terms as a score in the check­list. Because that was based on the June num­bers, not the Decem­ber num­bers. Right, yeah. And for AIS I think AIS is fine. Let me just have a look at AIS and the chart before.

Cameron Reil­ly [1:03:19]: I’m just doing some charts for MAH here. AIS Resources.

Tony Kynas­ton [1:03:30]: Any­ways it is quite good. In fact, I was con­sid­er­ing mak­ing AIS the stock of the week this week as well, because it’s a gold­en cop­per mine. It’s fine, it’s def­i­nite­ly got pos­i­tive sen­ti­ment.

Cameron Reil­ly [1:03:42]: Well, it’s dropped from 12 and a half cents down to 11 cents. Yes, but is that enough as Dun­can says for you to wait for an uptick,

Tony Kynas­ton [1:03:56]: Yeah, if you’re going to buy tomor­row, I’ll wait for the uptick for sure.

Cameron Reil­ly [1:03:59]: Yes, so it’s pos­i­tive sen­ti­ment but you would­n’t nec­es­sar­i­ly buy it.

Tony Kynas­ton [1:04:03]: Cor­rect

Cameron Reil­ly [1:04:03]: Until it had a pos­i­tive uptick.

Tony Kynas­ton [1:04:06]: Yeah, I expect they prob­a­bly will, I mean the pat­tern of the graph is it goes down and up, like two steps for­ward, one step back. But you can’t real­ly rely on those kinds of pat­terns. But that’s what it looks like.

Cameron Reil­ly [1:04:17]: Sounds like my bank account.

Tony Kynas­ton [1:04:19]: You got enough to pay cred­it card yup­pie. Sign up Chris­sy and Fox as well. Is that you or me? Is that after pay try­ing to offer you anoth­er cred­it card?

Cameron Reil­ly [1:04:42]: Pull the door­bell out of the bloody wall so they can’t ring the bloody door­bell. I’m look­ing at Aus­tral gold AGD, yep. So, the sell line is very low. If you’re going to do the buy line for this, you’re start­ing in August 2020?

Tony Kynas­ton [1:05:04]: I’m just pulling it up now. AGD so the buy line I’m start­ing at. Yep, August 2020.

Cameron Reil­ly [1:05:10]: Then through Octo­ber?

Tony Kynas­ton [1:05:12]: Yes, right.

Cameron Reil­ly [1:05:14]: So, it’s again, above that line, but is in a cur­rent down­turn, so we would wait.

Tony Kynas­ton [1:05:25]: I think look­ing at it now. Yeah, I think it’s the last time I had a look at it. The sell line is going to start in Novem­ber 2019. That’s the low­est point and then goes through Novem­ber 2020. So, I think it’s actu­al­ly a sell. It was­n’t the last time I had a look at it, but it’s become a sell so. Here we go, we can take it off the buy­er list.

Cameron Reil­ly [1:05:48]: That’s not the low­est point. The low­est point is Decem­ber 2018. 5.96.

Tony Kynas­ton [1:05:55]: I’ve got the wrong one sor­ry. What did I say 2020? Yeah, you’re right that’s yeah, you’re right, so the sell lines are way low­er than that at the moment.

Cameron Reil­ly [1:06:04]: Yeah, so the sell line is com­ing in at three cents. No, yeah, some­thing like that two or three cents. So, it’s above, it’s above the buy line would be 10 cents.

Tony Kynas­ton [1:06:21]: This is a bit like MAH isn’t it? So, it was a buy­back in prob­a­bly Decem­ber. Yeah, but it’s drop­ping down again so. If I bought it in Decem­ber and it turned down below the buy and then sell it again. Yeah, again, so it’s up to peo­ple what they do, it’s above the sell line, but it drops below the buy line, so I don’t like the term hold. But if peo­ple want to hold on, they can.

Cameron Reil­ly [1:06:48]: I know Dun­can’s rel­a­tive­ly new. So, the way this works Dun­can is, it’s a pos­i­tive sen­ti­ment, if you look at the buy line. It’s above the buy line so, in the­o­ry, it’s a pos­i­tive sen­ti­ment, but because it’s come it’s in a down­ward trend at the moment, we would­n’t buy it, we’re basi­cal­ly wait­ing to see what hap­pens with it. If an uptick, if it has a con­firmed uptick, then it’s def­i­nite­ly a buy but we’re this is the moment. It’s, wait and see.

Tony Kynas­ton [1:07:20]: Yeah. And I’m sort of get­ting to a point where I think that these sit­u­a­tions are actu­al­ly below the buy line. Even though it’s the right at the buy line. And, if you draw a line down to the Y‑axis, it’s, it’s above that. It’s as if when the graph first became a buy the price was 21 cents. And it’s cur­rent­ly 18 cents so it’s below the buy price real­ly isn’t it, does that make sense?

Cameron Reil­ly [1:07:53]: Well not if you, if you draw the line all the way down to the right.

Tony Kynas­ton [1:07:56]: Cor­rect, that’s what I’m say­ing yeah.

Cameron Reil­ly [1:07:58]: So why are you cut­ting it off for 21 cents.

Tony Kynas­ton [1:08:03]: Well, because I think that was when, when the buy line inter­sect­ed with the graph, it was a buy at 21 cents and now it’s not. I guess we’re say­ing the same thing it’s to the right of the buy line. So, it’s above the buy line but it’s drop­ping down. So, when it inter­sect­ed it was 21 cents and now it’s 18. So yeah, I would­n’t be buy­ing it.

Cameron Reil­ly [1:08:23]: But if it picks back up and hit 19 cents or 20 cents.

Tony Kynas­ton [1:08:28]: Yeah, It’s a buy.

Cameron Reil­ly [1:08:29]: But it’s still below 21 cents.

Tony Kynas­ton [1:08:31]: Good point. Okay. Scrub that. I’m try­ing to find a way to scribe cross­es the buy line but then imme­di­ate­ly retrace below that. And then I would­n’t buy it for a while. Is it go the buy­er list or come off the buy­er list is my ques­tion, I guess?

Cameron Reil­ly [1:08:54]: Yeah. I don’t know.

Tony Kynas­ton [1:08:56]: To date, we’ve been leav­ing them on the buy­er list because it’s still above the buy line. Yeah, but we’re not buy­ing it so it’s kind of a bit of a conun­drum, isn’t it?

Cameron Reil­ly [1:09:05]: It’s got pos­i­tive sen­ti­ment, but that pos­i­tive sen­ti­ment is cur­rent­ly neg­a­tive. Yes, [inaudible1:09:14] and slash Ground­hog. We need a new term for it. There is a free cof­fee mug for who­ev­er comes up with the right name for those kinds of things. Yeah. All right, the last ques­tion for the day from Joel, I’ve had a num­ber of peo­ple ask me about this one, a GCY, is GCY now a sell? The five-year graph is so hard to read.

Tony Kynas­ton [1:09:43]: I’m sor­ry, Cam can I inter­rupt there for a minute?

Cameron Reil­ly [1:09:45]: Yeah sure.

Tony Kynas­ton [1:09:47]: I just want­ed to talk a bit more about it, I think it’s AGD. Let’s check what that was. Yeah, Aus­tral Gold I went to the Annu­al Report which has just been released. Because I like I said I got the new num­bers this is the last day also for Aus­tral Gold. And the first thing I do of course is going and check the auditor’s report. Towards the back page 90. They’ve been giv­en a clean bill of health, but they kind of haven’t. So, this is some­thing I had­n’t seen before, just going to read out what the audi­tors have said. So, again this would be great to have some­one, one of our lis­ten­ers who works in the audit space, come on and talk to us about this. But so, KPMG is the audi­tors, they have giv­en their opin­ion that the com­pa­ny finan­cial report is in accor­dance with the cor­po­ra­tions’ act. Includ­ing giv­ing a true and fair view of the group’s finan­cial posi­tion and com­pli­ance with Aus­tralian stan­dards. So that’s what we nor­mal­ly look for.

Fur­ther on down in key audit mat­ters. The very first key audit mat­ter is going con­cern basis for prepa­ra­tion. And I’ll read that what the audi­tors have said, the group’s use of the going con­cern basis of prepa­ra­tion and the asso­ci­at­ed extent of uncer­tain­ty is a key audit mat­ter due to the high lev­el of judg­ment required by us in eval­u­at­ing the group’s assess­ment and grow­ing con­cern. Like, spilling out a whole lot of rea­sons but I read through this and went back to the talk about, like, three finan­cial reports on the finan­cial reports, the annu­al report usu­al­ly have notes asso­ci­at­ed with them to explain what sort of assess­ments man­age­ment have made to get to that num­ber. The assess­ment and man­age­ment made in this case are to say that. Well, last year was shipped. We oper­ate mines in South Amer­i­ca, they were shut down because of COVID, where we’re say­ing that we can pay our debts, going for­ward because we want to treat the com­pa­ny as if it was a nor­mal year post-COVID and on that basis, we can com­fort­ably say if the mines reopen, and we sell the gold, and we get the mon­ey we can repay our debts, and what the audi­tors are say­ing here is that they’re just draw­ing atten­tion to the fact that that’s the assump­tion that man­age­ment has made.

And may not come to pass, so I haven’t quan­ti­fied the audit because it’s get­ting down to assump­tions, and of course, COVID may be erad­i­cat­ed in South Amer­i­ca any day. And the com­pa­ny may, they may already have open mines. So, I’m just not sure whether this is a qual­i­fied audit, it’s a bit like Zim­plats. Where they talked about an issue with the, with the way the account­ing was pre­pared but was­n’t imma­te­r­i­al enough con­cerned to give it a qual­i­fied order, not sure so I think in the inter­ests of risk, or the risk in the port­fo­lio I would take AGD off the buy­ers’ list on the basis of the qual­i­fied audit. Right. Even though it’s not a qual­i­fied audit tech­ni­cal­ly. In terms of try­ing to mit­i­gate our risk or min­i­mize our risk [inaudible1:13:04]. Let’s wait and see if what man­age­ment thinks will hap­pen does hap­pen. Before we buy into it.

Cameron Reil­ly [1:13:17]: Okay,

Tony Kynas­ton [1:13:17]: So sor­ry I just want­ed to talk about it. I found it inter­est­ing that the audi­tors could tick off the com­pa­ny as being okay. Which I guess they did. The accounts were put togeth­er and they’ll be using the right stan­dard, but they’re draw­ing our atten­tion to whether the com­pa­ny is going to be a grow­ing con­cern or not.

Cameron Reil­ly [1:13:30]: They are fine unless they are not. If they sur­vive, they are going to be fine.

Tony Kynas­ton [1:13:35]: Yeah, if there’s no COVID in South Amer­i­ca if the mines reopened. That would be hunky-dory. That’s an assump­tion at this stage.

Cameron Reil­ly [1:13:43]: Last one Joel is GCY now a sell? The five-year graph is so hard to read, like a straight hor­i­zon­tal line. Tk said stock of the week for it. But won­der­ing if it’s a three-point trend line sell now. GCY.

Tony Kynas­ton [1:14:06]: Have a look at the graph, what you’ll see is that it was list­ed for a lit­tle while I did a cap­i­tal rate, which tech­ni­cal­ly gives us their low point, and if you use that low­er point, then they are still a buy because they’re above that.

Cameron Reil­ly [1:14:21]: Yeah,

Tony Kynas­ton [1:14:22]: Or do we take the point of view that they’ve been recap­i­tal­ized that we should only look at things to the right of that.

Cameron Reil­ly [1:14:30]: Even if you did that, the next low point is Novem­ber 2020 at 43 cents. And then Decem­ber 2020 and 43 cents that’d be a straight line through to 43 cents would­n’t it?

Tony Kynas­ton [1:14:43]: Well, that’s what I was think­ing of Cam, I mean, again, we have to use a bit of com­mon sense, yes, it’s a dif­fer­ent propo­si­tion for when it was delist­ed and strug­gling to get funds. So yeah, if you look to the right of that peri­od, there are two low points there, which means 43 cents is their sell.

Cameron Reil­ly [1:15:01]: And it’s cur­rent­ly 50 cents.

Tony Kynas­ton [1:15:03]: Yeah, that’s how I’m read­ing it.

Cameron Reil­ly [1:15:07]: Right, yeah. Okay, well the guy for every­one is asked to be a GCY. I read about like three or four emails about that today.

Tony Kynas­ton [1:15:14]: Yeah, it’s a tough one though. It does the low points strict­ly use the time it was delist­ed, but it’s pret­ty much a dif­fer­ent com­pa­ny now. Right, it’s recap­i­tal­ized.

Cameron Reil­ly [1:15:25]: Okay, well thank you, every­body, for the ques­tions. Thank you, Tony. Good luck with your hors­es, this week. Put a punt on Jamie and Alex’s horse and hope it does­n’t get can­celed.

Tony Kynas­ton [1:15:37]: Nev­er say nay it’s called. If any­one else wants a punt.

Cameron Reil­ly [1:15:40]: That’s a clever name. They say neigh.

Tony Kynas­ton [1:15:42]: Exact­ly.

Cameron Reil­ly [1:15:45]: What else? Oh, I watched the Chica­go 7 based on your, I liked it, all of it except for Sasha Baron Cohen’s Amer­i­can accent, which was hor­ri­ble, and all over the place. His act­ing apart from that was great but the accent was a dis­as­ter. Ter­ri­ble.

Tony Kynas­ton [1:16:04]: What a great film though. Sorkin is a genius.

Cameron Reil­ly [1:16:09]: Sorkin is very good. It’s very s Sorkin‑y. Like it was like [inaudible1:16:13]. Every­one smart-talk­ing fast, friend­ly, and jeal­ous per­for­mances, the judge was fan­tas­tic.

Tony Kynas­ton [1:16:23]: Just like the guy, the black guy from the Black Pan­thers who were bound and gag in the court­room that was just.

Cameron Reil­ly [1:16:28]: The guy play­ing Bob­by Seale, we love that actor he was in. Who is the Aus­tralian direc­tor who did Strict­ly Ball­room?

Tony Kynas­ton [1:16:36]: Baz Luhrmann

Cameron Reil­ly [1:16:36]: Baz did a TV series a cou­ple of years ago, that you would absolute­ly love called Get down, it’s about the birth of hip hop in the Bronx in the 80s. With the Grand­mas­ter Flash and peo­ple like that.

Tony Kynas­ton [1:16:54]: What’s Grand­mas­ter Flash?

Cameron Reil­ly [1:16:54]: Well, it’s a dra­mat­ic series but done Baz Luhrmann style so it’s fab­u­lous. It’s about a bunch of kids from the hood who get into hip hop and you know there’s all the, all the big ear­ly hip hop stars, play­ing, you know, in a dra­mat­ic sense and then Grand­mas­ter Flash teach­es their DJ how he had to do scratch­ing and he put a line on the record and Yep. Any­way, the black guy played a char­ac­ter called Cadil­lac in it and his moth­er was some sort of a gang­ster that owned the club, and then when he was into dis­co and they were try­ing to turn it into a hip-hop club he sort of a bit of a bad guy but a great per­for­mance like a very cool dude. That was shock­ing in the film when they gag and the judge get­ting gagged and bound in the room. Great sto­ry for peo­ple who don’t know much about the Chica­go Sev­en. As I did­n’t, I knew but I knew, Abbie Hoff­man and I knew about some of these guys, Abbie Hoff­man’s off­sider. By the way, Abbie Hoff­man, off­sider, what was his name? Shit. the oth­er guy with me Abbie Hoff­man, played by [crosstalk1:18:07]. Any­way, do you know what hap­pened to him?

I mean, quick thing. So, in the late 70s, he dumped the whole hip­pie activist thing and became a stock­bro­ker, was one of the ear­ly investors in Apple, and became a mul­ti mul­ti-mil­lion­aire, and he got involved in mul­ti-lev­el mar­ket­ing and made a ton of mon­ey out of that. And then he had a pent­house apart­ment in Man­hat­tan, but he was cross­ing the road one day and got hit by a car, I think 1994 and killed. But yeah, he com­plete­ly gets away from being this rad­i­cal dope-smok­ing left­ist to, you know, straight up, Rea­gan, con­ser­v­a­tive, mon­ey mak­er.

Tony Kynas­ton [1:18:51]: His name is not Phil Mus­catel­lo, is it?

Cameron Reil­ly [1:18:57]: He and Abbie Hoff­man actu­al­ly end­ed up doing a road­show debate against each oth­er and it was, it was called yip­pie ver­sus yup­pie. They were the founders of the Yip­pies. And then he became a yup­pie,

Tony Kynas­ton [1:19:11]: And Abbie Hoff­man put out that book called steal this book.

Cameron Reil­ly [1:19:16]: Steal this book. Yeah,

Tony Kynas­ton [1:19:18]: It’s great. I thought,

Cameron Reil­ly [1:19:20]: Great movie just about all these anti­war activists in the 60s. Real­ly well done.

Tony Kynas­ton [1:19:27]: Real­ly good. And his great end­ing as always was so pow­er­ful end­ing as well.

Cameron Reil­ly [1:19:32]: Yeah, with the big the­mat­ic music was­n’t Snuffy this time doing a lit­tle bit on the nose. Okay, we’re going to tell you when to get a tear in your eye by the music now. Aw part from that the dia­logue and the act­ing were pret­ty good.

Tony Kynas­ton [1:19:47]: Yeah, I went back and re-watch it. So, I real­ly enjoyed it the sec­ond time around as well. You get a lot more out of it too. Yeah, I rec­om­mend the book by Nor­man Mail­er about the Chica­go riots, that’s a great book.

Cameron Reil­ly [1:20:01]: Okay.

Tony Kynas­ton [1:20:01]: Read it about 30 or 40 years ago. It’s real­ly good. I think it’s some­thing like the Siege of Chica­go, I can’t remem­ber now. Yeah. Real­ly good

Cameron Reil­ly [1:20:09]: Good stuff. Alright, mate.

Tony Kynas­ton [1:20:13]: Thank you.

Cameron Reil­ly [1:20:13]: Have a good week

Tony Kynas­ton [1:20:17]: You too.