Welcome back to the Rate of Change with York Wealth Management.
As advice as to some of the wealthiest families in the country, the Rate of Change is a podcast
designed to help you in the pursuit of building long term wealth through the insights of some
of the brightest minds in asset management.
I'm your host Murdoch Gatty and in today's Rockcast we're joined by Sunny Bangia, Global
Portfolio Manager at Black Wattle Investment Partners.
We'll explore the outlook for global equities, US housing, semiconductors, emerging markets
like Brazil and India, advancements in AI and memory, machine learning and the economic
shifts in China.
For me, I really enjoyed speaking with Sunny and really sitting back and digging into the
topics we discussed, but specifically for me, memory.
Why memory?
Well, as the tech world buzzes with developments in AI and machine learning, can't walk down
the street without going to a barbecue.
Someone mentioning how Nvidia is beating the price of Bitcoin as a forefront, it prompts
me to ask, what else is supporting this growth and what else is in the ecosystem that needs
to grow in order for these particular areas to reach their full potential?
Sunny unpacks the critical role of memory in powering these technologies, discusses
the interesting and increasing demands in smartphones, PCs and data centers.
I believe they need about a 50% increase in memory for smartphones and double for data
centers and the long-term structural trends shaping this sector.
These we discuss is Builders First Source, Home Depot, NVR, Nvidia, Taiwan Semiconductor
Manufacturing Company, Lam Research, Micron, Samsung, SK Hynex, ASML, ICIC, Bank of India,
Amazon, Macadalibra, Alibaba, Tencent and many, many more.
Please remember this podcast is intended for entertainment purposes only and should be
not be taken into consideration as financial advice.
Be sure to listen to the disclaimer at the end of the broadcast and keep your feedback
coming.
You can reach me at mgatty at ywm.com.au.
So with that being said, I hope you enjoy this conversation as much as I did.
So sit back, relax and enjoy.
Sonny Bangea, Black Waddle Investment Partners.
Welcome to the Rate of Change with York Wealth Management.
Thanks Murdoch.
Thanks for having me.
It's great sitting in your offices today having a coffee, getting to know you.
So I've known you for quite a bit of time now, but Sonny, why don't you tell everyone
a little bit about yourself and how you got into the wild world of financial markets?
Sure.
It's been a bit of a journey.
I started off thinking that engineering was the career path for myself.
I grew up in a family of engineers.
So it was sort of the default option at home.
Dad is a software engineer and I always found that part of the work very exciting and interesting.
But during the university period, I just pivoted towards business and economics.
Just found that just really interesting and started investing in Australian stocks.
Became absolutely obsessed.
Read all the books that you're meant to read just to learn the basics.
And really then just started pivoting further and further that way towards Australian stocks
that had some kind of global exposure.
Started investing in uranium companies in the early days thinking that countries like
India and China are going to become large middle class economies, which they have and
the demand for power will just go skyrocket.
So I was really interested in the global markets particularly.
And so when I finished up at university, I was looking for opportunities to get closer
to the stock market.
And at that time, most of the graduate programs were not funds and management orientated.
They were very investment banking orientated.
So I did the classic thing and applied to all the Wall Street banks and was very lucky
to find an opportunity inside the Goldman Sachs program, which was really my first experience
into the industry.
And with hindsight now, it was quite an interesting time.
It was just markets were booming.
We had a housing market boom in the US.
We had commodity market booms.
The emergence of the economies like China and India, it was just really interesting
period in global markets.
But I was being exposed to stocks in the stock market, but it wasn't really investing.
So I read a book called Hedgehogging.
It's quite an old book now, but it was a really fascinating read by an author named
Barton Biggs on the world of hedge funds and money management and how different funds operated.
And I really just got hooked and really wanted to move to the buy side, as we call it.
And lucky for me, an opportunity came up at the time at Platinum Asset Management.
And I had been following Platinum for years through their investor letters.
And Care Nielsen was a very brilliant, unique thinker, built a great firm.
And that's kind of how I pivoted in.
I just got an opportunity to work there, and that's where it all started for me on the
buy side about 18 years ago.
Good old Goldman's.
Yes.
It's so interesting.
I love asking these questions and learning where you've come from.
Because the one common thing I've noticed is some people are very lucky to be exactly
where they are from what they wanted at six years old.
But the majority of us, like you and I, all started our paths somewhere.
And then we ended up in finance.
And that's what I love about it.
You can be a rocket scientist, a graphic designer, software engineer.
And I'd actually argue, wouldn't you agree, you're probably better off learning something
else and then pivoting into finance.
Yeah, it's really interesting.
I think as an investor, it does help to have a generalist approach.
Not always, sometimes you do want a specialist, but a generalist approach to looking at different
industries, different countries.
It gives you different perspectives.
So I really do think that being someone that initially grew up in India, seeing what the
emerging markets were like then, doing engineering, understanding physics and science, does just
make you just think about companies and the world a little bit differently versus just
if you are just obsessed with reading accounting books.
You grew up in India.
I wasn't aware of that.
When did you come to Australia?
Oh, look, I came when I was very young.
So I came to Australia around five years old, started school here and not really knew how
to speak English.
So natural language at home spoken was Hindi.
So it was a good challenge to learn how to speak English when you started school.
Yeah, and we'll get into the fact that you got to have some Indian exposure in the portfolio
as well.
But before we get there, you've had quite a very big successful career in asset management.
So Black Wattle is quite young, correct?
Correct.
So do you want to give a bit of colour around what you were doing before Black Wattle and
how Black Wattle came to be?
Absolutely.
So when my most recent stint was at Antipodes Partners, Antipodes is a global fund manager
was set up in 2015 by a few ex-Platinum colleagues.
Jacob Mitchell was deputy CIO at Platinum and a few of us with Jacob left to set up
Antipodes Partners.
And there, co-founding the business with Jacob and some of the other Platinum colleagues,
we launched three strategies, two in global and one in Asia.
I was co-portfolio manager of those global strategies and also on the Asia strategy.
So I was there for about eight years.
It was a great journey.
I learnt a lot of things.
And the business grew from humble beginnings to approximately around $10 billion in assets
under management.
How much of that was in global?
It was all global.
So Antipodes is primarily and only does global equities with very small exposure.
There was two funds?
Yes, it was Antipodes.
So how much was in the global fund compared to the Asian fund?
So I'd say 95% of the assets, 90-95% of the assets were in the two global strategies.
Right.
So, and Black Wattle, how did that come to be?
Why are you here?
What's changed?
What did they say to get you across the line?
Yeah, look, I think what Black Wattle stands for and what's unique and differentiated about
Black Wattle is that their ethos is about becoming the most aligned fund manager in
the industry.
And it sort of comes down to a few interesting points.
So firstly, we're all Black Wattle employees.
We all have ownership in the business.
So we stand for the brand and we all want to support the brand.
And it's just a different take to how other funds management businesses operate where
you have the multi-boutique approach, which is Pinnacle and Antipodes were part of.
And that's excellent.
It's been highly successful and Pinnacle has done a fantastic job.
But here within Black Wattle, the focus here is do fewer things and do them really well.
So we want to do global equities.
We will be the only global equities fund inside Black Wattle.
And that's sort of the focus, which is good.
There won't be another large cap global equities Black Wattle fund in the next few years.
There might be a different strategy like small caps, but in large caps, it's sort of Black
Wattle will be focused, which I think is ultimately as the investor, you feel that the Black Wattle
is bringing the best product to you as investors.
The second thing is the way the incentive structures have been designed.
So no PA trading.
That is really important to me.
I think we should all have all our money in the funds.
So I'll have all my money in the Black Wattle Global Quality Fund.
So will my members of my team, who are all Antipodes.
And we're just going to be focused on that one fund.
And we want to be completely aligned with our clients.
We want to compound our own wealth in the fund.
And if we do that well, then our clients benefit on that journey.
So we just want to be 100% focused.
Let's clarify PA trading, right?
Because this is to a lot of people, they'll be like, yeah, PA trading.
Got it.
A lot of other people like, but that makes no sense.
Your personal money is in the fund.
You are PA trading.
Right.
So I'll give you a bit of color around this.
So when I was at another firm, there's like 200 people on the floor and there was a lot
of old guys still there.
And they looked after some of their clients.
Well, let's be honest, they're just practically punting their superfund most of that most
days.
Right.
And the other comment another guy made was, you know, when you go to an interview, they
don't ask, you know, Oh, how are your clients doing?
They go, Oh, what's your best personal investment you've done recently.
Right.
So it's quite interesting.
But the where this gets a little bit confusing is the difference between say a PA personal
trade compared to personal money in the fund.
Wouldn't you agree?
And please give color around this is PA PA, in my opinion means you're trading money,
not associated to the same ideas that your clients are currently in.
Is that correct?
Yeah.
So what you're currently saying is you're investing alongside your clients.
So all your investable money besides obviously property or assets that are outside of this
is if you want to be in global equities, your money's in that fund.
So any investment you make is essentially the same as your clients.
Is that what you're saying?
That's exactly exactly what we're saying.
That it needs to be you know, you got to, you know, as Warren Buffett puts it, you got
to eat your own cooking.
So we believe that, you know, we're going to try to, you know, cook some good ideas
in global equities.
And we should put all our money in that.
And so should our clients.
There shouldn't be, you know, a differentiated portfolio for the end, the, you know, the
investment staff versus the client, it should all be one.
It creates distractions.
If you're if you're if you're PA trading, you might be buying stock XYZ that the fund
doesn't own.
And because you've got your own money in that XYZ stock, well, you know, incentives drive
everyone, right?
You've got money at stake, you are going to be focusing what's happening there.
And what's our stock doing?
And you know, why wasn't that ID recommended into the live fund?
It could be because there's just generally, you know, maybe there wasn't buy in from the
remaining investment staff.
But what we want to do is we want to create buy in as in if you want us to own it, it
needs to be owned in the fund.
So you should you know, we should be having that healthy debate around the table as why
we should have it.
And as a result, the best ideas then come inside inside out inside our funds.
So Blackwater always, you know, no PA trading is sort of the policy, which which is which
is great.
And the way our incentive structures work is we commit to reinvesting a portion of our
salaries and bonuses if you know, if we generate alpha back right into the funds.
So it's always very aligned, very long term.
You know, and we all are partners of the Blackwater business.
So we're all in it for each other's success.
We want to see all our strategies do well.
We're not competing for distribution resource because we're all representing Blackwater.
Yeah, it's a very interesting point you raise there.
The rise of the business owner is coming back.
I'm so excited.
The agrarian age 200 years ago, I think was 85 percent of Americans and their own business.
I'd hate to think of the statistic now where people are owned, but a lot of things have
changed.
Now you got the ability to work from anywhere.
Laptop warriors set up a business, go to Shopify, you know, just kick it off.
I love that.
And my sisters, the head of remuneration at Sydney Warden, we have this conversation all
the time that if you want to improve or dictate how a business behaves, have a look how they're
being reiterated.
And one of the most interesting things I've seen is that if you give someone a reason
to work in ownership in that business, it's no longer a job anymore.
They won't rock up nine to five.
This is mine.
And then you end up incubating and taking care of that, and especially when you're steward
and a custodian of people's money.
I think that's incredibly important.
Wouldn't you agree?
You said it, I couldn't have said it any better than you did there Murdoch.
I'll just say that, you know, in my, you know, one of the things that I've really learned
over the last 18 years in the industry looking at businesses, incentives matter.
You know, the way we all behave as humans, we are all driven by incentives.
And it is the most fundamental thing that I look for in companies and management teams.
I was a CEO, CFO, a management team, all being compensated because ultimately, you know,
they are managing this business.
And you know, in funds management, I think it's just the same thing, you know, so you
know, no PA trading.
Well, that does force you to think about, well, you know, I've got to invest in the
product.
All the way we have ownership in our product and everyone in our team has ownership in
the product and ownership in the business.
So as you said, we think like owners, we care, we want the business to succeed.
And we really want to generate good returns because we've got all the money in the product.
And that's really our focus.
Well, cracking into the fund and also the stocks in the fund.
But before we do that, I just really want to flesh out the change that's happening in
the past, you know, half a decade, decade, regarding how people think about, you know,
being an owner of a business compared to working for a business.
So you can't from Goldman's, right?
Fantastic institution.
But a lot of these institutions, you know, they give you these flashy titles.
I'm VP, head of sales, managing director, but you're not actually an equity owner in
the business.
The one of the biggest lie that I've ever heard in that I was told coming up through
financial services is come work for us.
We'll make you a lot of money and you'll be happy.
Meanwhile, we're telling our investors to invest in a particular company because in
the future, they'll be able to sell that for a higher multiple if that company does well.
Right.
That's the basis of investing.
Correct.
Meanwhile, the businesses that we're operating, you do 30 years of your time in a major institution
and they give you a pat on the back and say, thank you very much.
And some young kid comes in and take your book.
It makes no sense.
If anyone's wondering why I run my own business, that's pretty much why.
I genuinely believe that, you know, business, I'll probably as you know, people like yourself,
Bernie and Blackwater were doing the right thing.
That if you're going to put, you know, five, 10, 30 years into a business, there has to
be a legacy and the benefit for your family at the end of the note.
I'm finding it very difficult to trust someone if they don't have that way inclined and then
the remuneration clients and the money, which you're a custodian and a steward of, you know,
it's all incentivized in the same direction.
It doesn't not make sense to you.
People spend 30 years of their life and look, I respect them.
My father worked in NAB for 25 years, right?
Phenomenal.
And he was great at what he did.
And I definitely understand that generation.
But wouldn't you say there's a lot of, there's been a massive change in how people are thinking
of, you know, working for a company compared to working for your company or being a part
owner in the company which you work.
When you say that, have you noticed there's been a big change recently?
Absolutely.
And I think it's a function of a few things.
I think people do feel that they want to, you know, they want to be part of something.
So if it succeeds, they share the upside, because they obviously will share the downside.
So it does create that sense of ownership, the level of care, the hard work, commitment,
dedication, just takes it to the next level.
But really the competitive advantage that I've always felt like, you know, with businesses,
with staff, a majority owners, is this long term thinking kicks in.
Yeah, really long term thinking kicks in.
It's not about the short term performance.
It's not about the quarterly results.
It's not about chasing the next fad.
It's about really taking the long term view.
And in a way, one of the biggest inefficiencies left in the market is long term investing.
That if you can just take a longer view, then the market can.
And the market is, as we know, very driven on fads and short term noise.
We know that in any given year, the majority of the returns of stocks are driven by price
to earnings going up, price to earnings going down, just the multiple rerating up and down.
But in the medium term, and medium term doesn't have to be that long, we're really talking
three years, five year window, where the earnings growth is really the primary driver of the
stock returns.
And businesses and business owners that can just take that longer term view, I think they're
in a very well position for the long run.
So I think that long term thinking is really where it's really important.
As an owner, you do need to think long term because you're often taking a pay cut to come
across because as you said, you can get paid very well in the corporate side.
And there's no shame in working in big corporates.
My parents have worked in big corporates, my father did for many, many years.
It was great.
And he contributed significantly to the businesses that he worked for.
But the reality is that in the owner operated world, you're typically coming in on a lower
comp because you're not thinking about comp day to day, you're thinking about how can
I create shareholder value.
And that's really what we look for in the stocks we want to buy.
So obviously, we should behave the same way.
But one thing I just want to clarify, if you don't have an opportunity, if you ask me today,
I've got $500 to my name, you're not going to kick down my house, what am I going to
do?
The number one best thing to do is go get an income paying job.
The best investment you can make is generating a salary.
And what's the expression learn before you earn?
No, I'm just, I'm 37, 37, 38.
At the age of 24, I just walk into this.
You need to build up a book, build up reputation.
You did Goldman's.
These institutions, I think are fantastic for learning before you earn, giving the salary
required to operate in this very expensive city city.
And then you build up your network, you build up your assets, and you figure out what you
want to do.
But you know, anyone that has that has a go and goes for it, a lot of respect to them.
Look, I have, you know, I've owned a company for a very long time called Taiwan Semiconductor,
which is one of the most dominant manufacturing companies in the semiconductor industry, founded
by a gentleman called Morris Chang.
He founded that company at the tender age, I think it was in his mid 50s.
He founded it at 50.
I mean, he saw an opportunity in the market, he saw a gap in the market.
And he obviously went and he plugged it.
But he spent 20, 25 years working for big semiconductor companies in the US, building
knowledge, building that ground.
So you know, look at the end of the day, you get great training in these large corporates.
But really, what we're all here to do is you're here to solve a problem.
And that's what you know, that's what always excites me about the stock market.
I mean, all companies are, you know, ultimately trying to solve a problem, or you are a problem.
And the ones that are really solving big problems, and have built a business around that, you
know, they're the ones that will generally succeed.
And, you know, they don't need to necessarily be all startups, they can be well established
businesses.
It's just maintaining that culture of entrepreneurship and ownership and skin in the game.
Even large businesses like Amazon, I would argue, you know, they still behave like a
startup at a tender market cap of 1.5 trillion.
And it's the culture and so the businesses that really makes you think what are they
doing?
And you know, they're just creating sub, you know, small little startups inside the big
organization, being very creative, trying new things, experimenting, but always trying
to solve a problem.
And that typically that's where the big payoffs are.
Speaking of solving problems, why don't we, you know, show them in the frame of the canvas,
which we're trying to paint here.
What exactly is the global fund?
What are the mechanics?
You know, what's the philosophy of the fund?
And then we'll look into the companies that are in the fund.
Of course.
So the Blackwater Global Quality Fund is a high conviction, long-running strategy of
about 20 to 30 names.
So what we like to say is these companies are marathon runners.
They're in essence, so in essence, we're looking for a particular kind of company, a company
that can endure for the long run and can withstand, you know, the challenges of running a marathon.
And you know, in a lot of cases, these companies may not be the fastest growing companies,
but they are growing companies.
They're in dominant market positions in a segment of the market that is expanding and
growing and they are just able to add value and grow and do that in a very sustainable
way on high returns on capital.
And you know, we really want to find diversity within that group of 30 companies.
So you know, there'll be exposures in emerging markets, in the US, in global industrials.
And we're trying to create that 30-stock portfolio of these unique different IDs across the world
to then give the underlying portfolio revenue diversity exposure.
So it's all correlated to one bet or it's all correlated to one outcome or can sometimes
get correlated to one outcome.
And really, we're solving the portfolio problem in the sense that how can we generate low
teens returns?
And we really want our companies to do the heavy lifting.
That's what we call them, the marathon runners, that they're going to generate low teens earnings
growth over time.
So we're not necessarily hoping for a rerate or a derate.
We're really focusing our efforts on finding those growth in the operating earnings of
the business.
Okay, so with the mechanics of the fund, what are you targeting in the mid teens?
What are the fees of the fund?
Is it daily liquidity?
Anything else we need to know about the mechanics of the fund?
Yes, so it's daily liquidity.
It's Australian unit class structure.
The management fee is 90 basis points.
And there's a performance fee of 12.5% over the MSCI All Country World Index.
And it is an all country fund.
So we do look for opportunities where they may present.
And we'll talk through some of them later on.
But also, it's across industries.
So it's not all technology.
Technology is very interesting, but there are financials, there are very boring insurance
companies in there as well, that have operated for about 80 years, owner operated, family
operated businesses.
So it is trying to just look for where can we find interesting marathon runners.
All right, so the marathon runners, right?
The fun part, let's look at the race.
So what current asset classes?
It's not an asset class, where's the money spread?
Because I think what we're discussing off air, you got money in India, US housing, semiconductors,
global growth.
Why don't we unpack first our good old housing?
That one there blows my mind a little bit, right?
And in particular, I believe, let me just pull up the article so I don't stuff this
one up, because our good friend Warren Buffett came out recently.
And he made a comment on CNBC, actually, no, a number of years ago saying something along
the lines that, you know, if he had money today, that the bet one of the best investments,
I think it was 2012, he said this.
And this is why it's interesting is 12 years later, 2012, he said if he had a whole bunch
of money saying he was a lot younger, he would buy a couple hundred thousand, couple hundred
thousand single family homes in the States.
And in his opinion, he would get them a cheap money or 30 year mortgages and that they would
outpace global equity, global equity or US equities.
Why that's incredibly interesting is fast forward 14 years, would you say that that's
actually transpired?
And do you think that's going to continue?
And if and then you've got, you know, an allocation or, you know, towards that essential thematic?
And how have you actually got about it?
Yeah, I mean, what?
I mean, firstly, I would say with that comment from Warren Buffett, I think that's very fascinating,
interesting.
He's definitely within his holding company has exposures towards US home builders and
building material companies, and obviously, he's known the space for decades.
So it's always very encouraging to see someone with a very long term view.
Think like that.
What are we seeing, which, you know, ends up coming to the stock exposures.
So the US housing market was in effect at the after the at the aftermath of the global
financial crisis was, you know, was in a terrible oversupply, probably a bit like what the Chinese
housing market is today, though they haven't had a financial crisis.
China, they've had a classic housing overbuild.
And now they've got an excess amount of inventory.
That's where the US found itself.
Now, what has happened is the the oversupply of housing essentially went away through just
natural demand.
There's three big tailwinds that US housing is going through that has helped, which is
firstly, demographics are very strong.
So the cohort of buyers between the ages of 25 to 45, there's about more 8 million more
of those individuals today.
And these are the peak house buying years.
Secondly, you've had through that demographic tailwind, demand has just not kept up with
supply in terms of housing supply.
So now you've got about three million homes that have probably been underbuilt in the
United States relative to that demand.
So creating a real surge for housing.
And we have seen multifamily like apartments really take off to try to fill that gap.
And then thirdly, the average age of a home in the United States has aged.
So you've gone from about a decade ago, average age about 29 years to 30 years.
Now it's about 41 years.
So the housing stock has really aged, resulting in a lot of houses needing to be repaired
and renovated significantly.
So you've got these three large tailwinds for housing.
So to answer your question, no, we do think it's going to persist because it is a capital
intensive industry.
It does require capital to come in.
And capital has become a bit tighter in the last couple of years through higher interest
rates.
But also what's happened over the last decade is a lot of home builders have merged, consolidated,
grown market share, home building material companies, which we're more interested in,
have effectively turned into oligopolies and monopolies.
So you've got an industry structure where you've had five to eight players.
Now you've got two to three players.
Pricing power has come roaring in.
Many companies have used excess capacity to just keep growing into.
So returns on capital have just gone up.
So some of these companies, when you just take away the name of the company and you
look at the financials, they look like incredibly high quality businesses with a lot of structural
growth.
They just happen to be in US housing.
So that's really interesting for us.
So we look at them and think, well, there is a marathon here to run.
There is a long term story here in US housing.
US housing still has these demographic tailwinds ahead of it.
So what we think now, the fourth tailwind, which is labor shortages.
So a lot of building home builders, the biggest issue they're having, putting aside financing
and all these are more cyclical issues.
The structural issue is just labor shortages.
You just can't get workers.
And so if you can find companies that can solve that problem for the home builders,
they're massively value add from that point of view.
So we like a company called Builders First Source.
So they have traditionally supplied wooden trusses, custom made trusses to the industry.
So in a way, it allows the industry to buy home builders to buy standardized trusses
very quickly, efficiently, so they can put the home up quickly.
And they've just kept expanding into different parts of the home to just get more of the
wallet share of the home builder.
Why the home builders like them is that it's fast, it's prefabricated or it can be installed
on site.
But the big thing they solve for is labor.
They need less labor, because a lot of it's already done in the factories and warehouses
of Builders First Source and they can just supply it on site.
Secondly, Builders First Source has been digitalizing the industry.
So this is an industry that is still operating the same way it operated 30, 40 years ago,
very manual.
You would go into a home builder showroom, sit down, talk about a design, and maybe you
might win the sale, maybe you wouldn't.
What Builders First Source is trying to do is trying to, it is looking to win the sale
for the home builder.
So you've got a digital software system, a CRM, that can capture all that information,
but also they can help you design the house on the spot and give you a very accurate quote
on the price of that home so that the home builder knows what their budget will be, what
their margin will be, and the buyer will also know this is what I'm paying.
And it sends off workflow to the whole industry, plumbing, electrical, tiling, hey, this is
the home we're trying to build, come on, give me your bids, and locks it all in.
So at point of sale, the home builder can feel very confident that I can lock a lot
of this in rather than carrying a very manual process over time, calling the electrician
up three, four months into the build saying, okay, I need the electrical wiring, what are
the prices now?
And there's variation in that price.
So it's a big opportunity because again, it solves a problem.
It creates an opportunity for Builders First Source to increase margins because it's a
digital business, it's a software business, it's got software like revenue, repeatable
revenue.
So that's interesting to us.
What percentage of the portfolio is associated with US housing?
It's about 15% at the moment.
How many companies?
Three companies.
So just to be clear, you're not physically doing the Buffett and buying companies.
You're not the guy that someone's trying to buy a house and then they get outbid by like
an extra 10%.
And then it's like, how the hell does that nose numbers make sense?
Then you find out it's an LLC on the backend, that's essentially just gobbling up property.
So you're not doing that, right?
So the three companies you're in all do different things with your properties.
So just to be clear, what are the different services they provide and the problems they
have?
Builders First Source provides prefabricated building materials so that the builder can
build a home quickly and with a labor advantage.
And then obviously digitalizing the home building experience.
So that's Builders First Source.
Second is Home Depot.
So Home Depot is like the Bunnings of America, very dominant, leading franchise.
It's got a great market position in pro and DIY.
And again, coming back to that whole, the average, the median age of the home's gone
to 41 years, you just need a lot more repair and renovation and Home Depot is a beneficiary
of that tailwind.
And the third one is a much smaller position is in a company called NVR Homes.
So they actually are a home builder.
So whilst we're not buying the homes ourselves, we have ownership in a company that builds
homes and they typically build entry level homes.
That's their model.
They don't take land bank.
So they're more about fine land and then build on behalf of the consumer and a very efficient,
fast way of getting your home built.
So those are our three large exposures, three exposures into US housing.
Just trying to get my head around how US works compared to what's different to Australia
because we've seen in Australia a lot of international, like the South African company, a couple years
back when it bankrupt.
A lot of in the past has been a shakeout.
It's very thematic.
If there's no supply or under supply, they get built, budgets get stressed, there's no
money coming through, they don't get solved and they collapse.
So how are these three businesses, I suppose, putting a moat around that problem from occurring?
Of course.
So in the case of Builders First Source and Home Depot, I mean, they're supplying.
So they've taken a more capital light approach in supplying materials to the home builders
who typically do the home building lifting.
Home building market is very fragmented and a lot of home builders have to buy land and
then build on that land.
So it's very capital intensive, whereas Builders First Source is more of a supplier.
So the way to think about it is it's a royalty on the home building industry.
It supplies, it's a mission critical part of a capital intensive industry where it earns
a small margin in a large, in a large, in a small take in a large sort of industry,
provide something mission critical, doesn't take a lot of capital on its own balance sheet.
So as a result, even if the home building market remains cyclical, and we definitely
think it will remain cyclical, they have an ability to take more share over time.
More home builders want to use their services because in those down markets, you realize
I need to save cost and Builders First Source with its prefabricated building materials
can help me save costs.
It can help me to top my business.
They're middlemaning these transactions, taking a split and not essentially taking the capital
risk or the debt risk.
Correct.
That's right.
And in the case of Home Depot, look, they're a more of a retailer.
So they obviously-
It's like bunnings.
They're like bunnings, yeah.
I'm just finding very interesting what's happening in that space.
And I think I read somewhere that house prices aren't going up.
The US dollar is devaluing aggressively.
So every single time your house goes up 7%, your cash balance just lost 7%.
Something crazy like that.
It's just very interesting what's happening with the world.
But let's talk about the fun part, which is what's been hammering along.
It's actually slowed down in the past three months.
The Magnificent 7 and semiconductors.
I've known Nvidia for a long time, good old gaming.
Those graphic cards are a lot of fun, but there are other uses for them in making money.
So what's happening?
You mentioned, how about we do this?
You mentioned TSM.
Can, how about we start with what is the ecosystems?
Because some people think, okay, you need a graphics card, right?
But it doesn't stop there.
There are a number of different components that are required in that ecosystem.
You know, Nvidia graphics card, TSM does one particular thing.
And then I believe you're also investing in memory.
So I wouldn't mind hearing what actually is that, you know, connective diagram of the
services and who are the best players in there.
And I actually haven't, I don't know much about the biggest players and what's happening
about developing memory.
I would find that quite interesting.
Yeah, absolutely.
Yeah, you're absolutely right.
There are different layers in the ecosystem.
But at the essence, what we're, what it's about, what semiconductors, what we're seeing
today is that you've got a chip, let's call it a GPU, which is an accelerator, computing
accelerator.
It's a lot of small little cores, very high intensity, very high throughput.
And then there's models that run on top of that.
Now the chips themselves are designed by companies like AMD and Nvidia, manufactured by companies
like TSMC.
And TSMC lead and dominate the manufacturing of these high end leading chips that go into
our data centers, into our phones.
So a big part of TSMC's customer base is Apple.
Apple is a very big chips, not chips company, but a phone company that has a chip inside
of it.
And then accompanying the chip is memory, as you rightly point out.
Memory, you know, what we're seeing today is, well, there's a lot of fanfare about GPUs
and accelerator compute, for rightly so.
This is a very exciting part we're in.
And we've all used Chachi BT and can see how amazing the fact that you can get some level
of intelligence now being programmed into a model.
And the thing that's sort of overlooked is that it's also very memory intensive.
It's not only just GPU intensive, it's also very memory intensive.
And we are going into this new era of what we need as part of the chips is something
called high bandwidth memory.
And this cycle for high bandwidth memory is going to be quite a big cycle.
And the memory companies are very well positioned to benefit from that over the next few years
for two reasons.
First reason, they were in a down market last year and that down market ended in 2023.
And now we've started an upcycle.
But the upcycle is not only starting because we are seeing a replacement demand in PCs
and smartphones, but it's also that our PCs and smartphones are going to become a lot
more intelligent.
So the flagship Samsung S24, for example, has AI capabilities.
It's got a small little language model embedded inside of it, which is going to help us interact
with the phone in a very different way in prior generations, but it's more memory intensive.
That's going to go into our PCs.
It's going to happen on the Apple devices.
It's already happening in the data center.
So the three large memory companies, Samsung, SK Hynix and Micron are all benefiting from
this.
So the way we were playing it is that whilst memory is interesting and exciting and it
has consolidated largely to these three large companies, we want to own the companies that
is supplying equipment to the memory companies, which is a company called Lam Research.
Because in the case of Lam Research, the equipment that they supply is so mission critical, it's
only them supplying it.
So they have a monopoly or near monopoly on the equipment that is going to the memory market.
They own significantly higher margins.
They also...
What is the profit margins?
So they earn a return on capital of about 30%.
They have much more stability in their earnings profile as a result.
And they also benefit from the long term structural trend we are seeing in memory demand.
So on average, our smartphones probably need about 50% more memory.
Our PCs probably the same.
The data centers are probably double.
So there's a huge memory bottleneck that needs to be solved.
The problem that we need to solve for.
And the large memory companies in Korea and Micron in the US are going to spend a lot
of money building out capacity.
So Lam Research benefits from that build out, but they are most exposed to that technology
process.
Who's Lam Research's biggest competitor?
So the biggest competitors...
So what has happened in the equipment supplier market to the semiconductor industry, you've
typically got four or five players and they all do their own thing.
So a lot of investors may have heard of ASML.
They're much more logic driven.
And in a way, they are the only game in town when it comes to logic.
And the industry has consolidated in semiconductor equipment because the barriers to entry are
just phenomenal.
So the capital that's required to build these equipment is into the billions of dollars.
TSMC's capital expenditure budget is 20 to 25 billion per annum and rising.
So it's just so much capital intensity that it can't support many players.
So everyone, all the companies have effectively built out their niches.
And in the last cycle, Murdoch, the memory intensity wasn't that high.
Okay.
And this is what I wanted to get into.
And I've been thinking about it.
So everyone's seen the share prices, what's happening with Nvidia, you know, in other
areas in the chain.
What did the share price do for memory and say, land research?
And what did they do before?
Then everything crashed.
And what's it doing now?
So you've seen that initially it was driven by Nvidia.
The more AI you're exposed, the better the share price did.
And Nvidia really led the first part of it.
And for right reasons, they are expanding into a very exciting, big market in artificial
intelligence, intelligence data centers.
As the market has evolved, it has become now more likely that this is a big market and
it's not only going to happen in the data center, it's going to happen what we call
at the edge.
And edge really means my smartphone.
It means my laptop.
A lot of the companies like Microsoft that are launching copilot, you know, they tell
us that a lot of the copilots sort of calculations and intelligence will happen on device.
Yeah.
So we've what's the code for land research?
The code is LRCX.
Land research.
And so now to, you know, to your to your question, the memory companies are starting to do quite
well.
We've seen good earnings out of micron.
We've seen good I'm looking at the chart right now.
So at the beginning of the year, so one year chart, Lam research corporation was 521 and
50.
Is that US dollars?
That's right.
US dollars today is trading at 970 and 37.
Yeah, right.
And if anyone could pick this company back in 1995, you already got it for two bucks.
I speak in which I saw a chart the other day.
I can't remember.
I saw it.
I apologize, but I saw a chart.
They put the life cycle of Bitcoin next to Nvidia.
And then the chart like ticked along.
And what it turns out right now that you would have been better off investing in Nvidia by
like double the amount as of today compared to what's happening with Bitcoin.
And it just the reason why I'm finding this conversation, I want to go back to the memory
is that, you know, it's a good old gold rush.
You know, what are you better investing in, you know, picks and shovels or, you know,
go go for the gold itself.
So I'd love to hear your thoughts on that, but back to lamb research in this memory.
I don't know much about it.
So do you know what's required to do?
What is it?
Is it a chip?
Is it a processor?
What exactly is the memory bank?
Is this in the cloud?
I don't know very little about this space.
Yeah.
So not to get too technical, but what they say, please get technical.
What they really do is they supply equipment to allow the memory companies to then produce
the actual memory chips.
It's a long lead time.
You know, you're designed in as you're going through different generations of memory, you
are communicating, you know, Samsung, Micron and Hynix are communicating back and forth
with lamb and the suppliers and the ecosystem.
And it is really an ecosystem.
That's really what I wanted to highlight.
It's not one company doing one thing.
They're all working together and they're working together because it is such a capital intensive
industry getting things wrong and having low, what we call low yields is it's painful.
And an example of that is Intel that has lagged TSMC in leading edge foundry and that cost
them billions of dollars.
And so what lamb do, they supply these equipment to the industry, the memory industry specifically,
then that allows them to then move to the next generation of memory node.
You're going into HBM and then it comes down to how much capacity do we need to build and
therefore how much equipment do we need to buy?
And obviously the bigger the cycle, the more equipment that needs to be purchased.
And that's very specific to memory.
You've got the same thing happening in logic and various other parts of the system.
Is memory different to RAM, which is your random access memory?
Because everyone knows the acronym RAM.
They say it on every single device I've ever purchased.
Is that the same thing or is that different to the memory which these companies are focusing
on?
So the memory market is effectively too.
It's DRAM, so it's like dynamic memory, moving it in and out.
And then you have NAND, which is you storing it and saving it there.
And they're the two different parts of what makes the memory market.
And we've been operating in these technology node called DDR4, then we moved to DDR5.
And now we're moving to HBM, high bandwidth memory.
And really what high bandwidth memory is just very simplistic is we're just stacking more
memory.
We're making like a tower of it.
So we're going to a stacking model.
So it just requires now a bit of an investment cycle.
It requires just a little bit of how do we make this work?
Because the GPUs are so powerful, you are solving for latency.
You want the information to move back and forth between processor and memory as low
as possible.
And it's very memory, they're very memory intensive as well, because they're doing so
much the GPU is doing so many calculations so fast, it needs to move back and forth so
intensely.
So it is an architect change from the prior era that we've been in, which has been the
CPU era.
And the CPU era, it's been more about single processing of tasks to now multi processing
of a task.
And that's what the GPU really solves for.
It can really do incredible amount of calculations so fast.
And inside the GPU, it's not just the memory you're solving for, you're also solving for
the whole equipment, the networking.
So Nvidia is leading the game because they effectively have solved for networking and
the chip.
And they can sell you the whole box in one go, which is why they've been very successful
in taking a lot of market share very early.
This space is just absolutely fascinating.
It blows my mind a little bit.
Lots to unpack.
But there's lots of things in your portfolio.
So the list of your portfolio, which you cover, what else is in the portfolio currently?
What else is exciting you?
Yeah, I mean, look, the other thing that's exciting us is select parts of emerging markets.
So taking a bit of a different tact here, we're looking for marathon runners.
So we talked about the long term opportunity in US housing, why Builders First Sources
is well positioned or Lambs Research is well positioned in the structural growth in memory,
providing a very mission critical equipment.
In the case of emerging markets, countries like India are, and I've got to be honest
here, if you tell me if I'm having a bias, the emerging markets we're most excited about
are India and Brazil, probably India first.
Demographics are very healthy for both countries.
Our debt to GDP is very low.
In the case of India, the structural reform story has been fantastic.
And the fiscal situation, that's probably the one knock on Brazil, the fiscal situation
needs to be controlled.
But in India, the fiscal situation is in a good position.
And so the economy is booming.
And the way we've sort of thinking about playing it is, look, there's really two big opportunities.
People want to just buy a home and get into that home ownership market.
But rather than owning home builders, the way we're playing it is owning retail banks
in India.
The more boring the better.
So retail is very boring.
It's very sticky type of business.
And there's effectively only three to four companies that can do it in the retail banking
market.
And we own a company called ICICI.
It's a company I've owned for about eight years.
It's compounded in the mid to high teens over that time.
So it's doing fantastically well.
It's outperformed a lot of global banks, but it's actually competing against a lot of our
global technology companies.
So it's very overlooked.
They don't do anything very complicated.
Their business model is all about getting low cost deposits, making a spread and doing
very, you know, ensuring very effective risk adjusted lending is occurring.
So they do primarily mortgages that are secured against the home for high to middle income
earners in India.
So typically cohorts that have just entered the property market, they've just got a job,
they're earning good money, they're professional service individuals, and ICICI is just serving
that demand.
And so just to give context, all household debt to GDP in India is about 11%.
And I mean, forget about Australia, but China is about 60%.
So India is so far behind its biggest, you know, neighbor.
Other countries like Thailand and South Korea are like between 30 to 80.
So even in the Asian region, India is just so far behind.
So we just think there's a lot of runway here for growth in the mortgage market.
And ICICI is just very well positioned, return on capitals in the high teens, P ratio about
14 times.
So cheaper than CBA, but growing a lot faster than CBA in comparison when you think bank
to bank.
It's quite interesting what's happening in India.
I had a gentleman who specializes in resources.
And he said that if you were in iron ore last year, you know, you thought you may have done
quite poorly because what's happening, you know, with as you mentioned, the collapse
of the property market in China and the problems they're having.
But everyone kind of got a pleasant surprise, didn't they?
And that was courtesy of our good friends in India.
Like apparently India is booming.
Yes, they produce a lot of these resources themselves.
But is it true that their demand for these resources to expand their building is outpacing
the supply that they're currently producing internally?
And then thus the banks and as you mentioned, potentially benefiting from that growth?
Is that what's happening?
Or it absolutely is.
And it's happening off a low base.
So you know, in terms of context, China is approximately a 20 trillion dollar economy,
might be slightly lower than that.
50% of China's GDP comes from fixed asset investment.
So you're talking about nine to 10 trillion dollars coming from fixed asset investment,
which is largely three things, housing, manufacturing, and infrastructure.
Now in the case of housing, we think that's kind of run its course, probably needs to
solve itself over the next few years that supply needs to catch up with demand.
So housing is no longer helping China's infrastructure, fixed asset investment story, which is very
commodity heavy.
Manufacturing, well, we know there's a reshoring to the US or reshoring to parts of like Mexico
and other countries close to the US.
So that other third of fixed asset investment, it's about three trillion.
It's not getting any more market share.
You know, if companies aren't setting up manufacturing capacity in China anymore.
And the third one is infrastructure, which is still happening in China.
When you come to the Indian economy, fixed asset investment as a percentage of GDP is
like close to 15%.
And GDP is like four trillion.
So you just offer very much more lower basis for a population pool that is nearly the same.
Maybe India is actually a little bit ahead of China now because China's obviously got
demographics that are not the best right now.
So there's a lot of demand for infrastructure.
There's a lot of demand.
Roads and highways and rail, there is a lot of demand for housing.
The big question is, can India capture its share of manufacturing?
That's the big prize out there.
I think it will.
I think the government's implemented very interesting reform like making India policy,
which is effectively making India, there's fantastic tax breaks.
You've seen the giants like Samsung, Foxconn reallocate out of China to India.
But let's not forget, there's also a country called Vietnam.
They're also very friendly to business.
They're also winning a lot of that manufacturing.
But I think it's going to be shared amongst the three countries, three countries being
India, Vietnam, Indonesia.
Obviously with India, it's a much more professional services country.
So it's obviously got the large IT service providers.
And over time, I think it will win some of that manufacturing capacity.
So it's all coming off a very low base, which is resource supportive in the long run.
I think we need an entire conversation just in Vietnam on another day because second time
I've heard that there's been a huge growth and boom in the Vietnamese market, Southeast
Asia.
Yeah, that's quite interesting.
I'm not going to go down there.
I'm going to go down there.
We've got too much to unpack.
You mentioned Brazil and then I think we'll talk into e-commerce because one of the holdings
you have is Amazon, which you mentioned before.
We'll definitely dig into that.
But let's frame this differently.
There's many different ways to do e-commerce around the world.
You've got in Brazil, as you mentioned, you've got the Macalabra, right?
That is done differently to how Amazon's done.
Then you have Alibaba in China, right?
That's the e-commerce market.
What I'm also finding quite interesting now is e-commerce is not just the shop anymore.
Now they're starting to sell you all the services, the ability to both borrow money and spend
money in the same shopfront.
Then you also have, what's the name of the Chinese one?
It starts with a W. WeChat.
WeChat, right?
Then you've got Elon Musk coming out with Twitter saying that he wants to essentially
mimic what WeChat's done so successfully, which is have a community then also supply
credit like Stripe and all these particular businesses.
This entire ecosystem, it's not necessarily just like you're discussing with the computer
chips.
There's one particular company doing everything in a jank.
Is that correct that what we're starting to see now in e-commerce is you've captured a
particular market.
Now everyone's just trying to vertically and horizontally integrate across as much of the
pie as they can grab.
Is that what's happening?
It's a really interesting topic because I think you said it, e-commerce has been done
differently in different countries.
In the case of let's say China, the Chinese shopping experience was never very good in
the shopping malls.
It didn't take much for the Chinese consumers who were already very digitally savvy to go,
well, I can now buy this on my phone and I can get access to the entire Chinese merchant
base through Taobao or T-Mall, the two apps within Alibaba.
You had JD for electronics, then you had the rise of PDD, which was social commerce and
that's now T-Mu in the West.
Oh dear God, don't get me started on T-Mu.
There's all these interesting things, but in other markets like let's say Brazil, we
say Brazil and the US are probably more similar in terms of e-commerce markets.
In the case of Southeast Asia with Sea Limited, Sea Limited is probably more similar to the
Chinese and Tencent's been a big backer.
It's been done differently.
The whole concept of super app, which is what you've touched on, is what has been more successful
in China.
That's largely because there weren't any many alternatives.
What do I mean by that?
Social services was not done well in China, payments was not done well in China, retailing
was not done well.
There was an ability to solve all those problems in one app and Alibaba and Tencent did that
very well.
They both have payment rails, they both have some form of e-commerce, but in the West,
that's been less of a problem because financial markets are more mature in the West, banking
services and payments are very, very effective in the West.
There's really only been an opportunity for e-commerce and similarly in Brazil.
So, Mercado Libre is more like Amazon versus in the East, those companies are more like
the super app model.
Even within e-commerce, I would say, or even within all these businesses, we do like Mercado
Libre.
We do think it's got a logistics moat similar to Amazon.
Maybe not quite to the same extent, but to some degree.
They've got a very strong value proposition for the customer, convenience, breadth of
offering, they have densified their network.
But the Brazilian consumer is very value for money and conscious.
So there's always room for a second player in the market to emerge.
Well, speaking of the second player, the second player ended up going bankrupt, lost what,
80 something percent of their market share because they got done for what was a tax fraud.
Their books weren't really up to scratch.
That was a couple of years ago and I believe they've been essentially absorbing, naturally,
a lot of that.
Market share, yeah.
So Mercado Libre.
Do they have, sorry, the question is, is there now a second player that's absorbed that second
player thing or has that just vanished?
Now there's a void and they've just soaked that up.
So I would say Tmoo has an opportunity, which is the PDD, the Chinese app operating globally.
Look, Tmoo has lost a little bit of momentum in the United States because, not because
it's not a group.
Same reason like TikTok.
It's exactly the same reason.
It's essentially Chinese Bioware.
But let's be honest, Google's doing the exact same thing.
Everyone's doing it, right?
It's data capture.
But you go read those contracts where you're signing, how everyone ticks the box and doesn't
read everything.
And you're literally, if you work for the government and you sign up TikTok or Tmoo
on your phone, you literally just gave away government secrets.
Nice work, everyone.
Go read the contract.
No, that's right.
So as a result, the Tmoo management team has not, I wouldn't say deprioritized America
or US.
It's still a big market.
Let's be honest.
I think it's in terms of a gross merchandise value, it could be half.
So they're not going to ignore the US, but they're refocusing down to Mexico, Latin America,
because, look, I'll tell you why.
The Tmoo value proposition is very heavily centered around value for money.
I don't mind receiving my goods in two weeks.
We discussed the value for money.
I'm being straight with you here.
I've nearly bought it a couple of times.
Say there's, I don't know, I go to a four year old and a six year old, there's a whole
lot of birthdays running around.
Jesus Christ, you get so many birthdays.
But it is quite appealing when you're looking at something that's Amazon, like, I don't
know, Spider-Man, you know, webs, you know, with a Nerf retain, that goes to like 30 to
$40.
You go on to Tmoo, that's like $6, $8, $9.
And you add up the number of birthday parties you have and how many kids are in that class
and you're doing that every single year.
For families, that's thousands of dollars.
Like that's quite appealing.
Doesn't matter if you live in a jet or you live in a caravan.
That's quite appealing for a lot of families.
Absolutely.
And they must know for sure which is the reason why they're doing it because their main interest
is not in the money, it's probably in the data capture.
Absolutely.
So I think for Tmoo, the US is an important market.
But I wouldn't say that's the only market.
I think they've done a good job in pivoting to Latam, Middle East, and Eastern Europe.
So they are, in a way, doing, you know, I think in a way where they probably think they'll
face the least amount of political scrutiny.
As you rightly pointed out, TikTok is very politicized.
So it's not going to take much to start politicizing Tmoo.
And so I think they've just got a good plan B. They've got plan B and plan C and plan
D and all these other emerging markets.
So as a result, we still think Mercado Libre has a position.
We still think Amazon is very well positioned in the US.
You know, the great thing, the difference, I would say, you know, we said e-commerce
is done a little bit differently.
Well, what Amazon has really done is Amazon has not only it's got really three businesses,
it's got e-commerce, it's got Amazon Web Services, which we you know, which has been a highly
successful business.
But the one that's been really just the massive driver of revenue over the past few years
is advertising.
Advertising and subscriptions are now as large as Amazon Web Services in terms of revenue.
And if you think about e-commerce, e-commerce is not a high margin business model, you'd
be lucky to be punching out two to 5% operating profit margin in a pre-tax operating profit
margin.
But in the case of Amazon Web Services, that's probably a 30% operating margin business.
And advertising is probably an 80% operating profit margin business.
Sorry, did you say the profit margin in advertising is 80%?
Well we think in the case of Amazon, yes, because it's a very high intent advertising
model.
I go on for a tennis racket, and I'm pretty much going to buy one on Amazon, right?
So you know, you really want to be really want to be there advertising those dollars
trying to capture that.
Well, Ozkicks kicking off on the weekend, I'm coaching on 60s bit of fun.
So I literally googled, I need a whistle.
I don't want to know Amazon Prime, it was like $7.50.
And like there was two in the pack, and I just hit buy and it turned up my door the
next day.
I'm like, that is just way too easy.
So it's very easy.
That's the amazing thing about the model that they've built such an incredible moat in logistics.
You know, in the two years of 2021 to 2022, when they did that huge build out of, they
built a UPS inside the business model.
I mean, not many companies can do that.
And it came back earlier to our conversation about the culture of the of the business to
be able to pivot at those levels, that size requires a management team and a culture that
allows you to do that.
But if we sort of look forward now in Amazon, the market thinks about Amazon, oh, it's a
mid single, high single digit margin business, we actually think it's going to go to double
digits, largely because advertising and Amazon Web Services incrementally, are just, you
know, much higher margin businesses than Ecom.
And Ecom Ecommerce is going to be a stable bedrock for Amazon, it's going to allow for
more advertising to come through.
But we still think there's a lot more runway.
And also with Amazon Web Services, there's been a perception that it's been left behind
by OpenAI.
And I think those I think that's a little bit, you know, I think that's a bit unfair.
I think Amazon's actually going to make a big comeback in that part of the market as
well.
I've got a personal question with you with Amazon, right?
You may know the answer.
You know how you purchase Amazon Prime, it's like six bucks a month, it's nothing and then
you get the content, but then you get free postage.
I've always wondered, is that, do they make money there or is that just an advertising
means?
So when you're watching Amazon, you remember, oh, you know, I'm going to buy through Amazon.
I'm wondering, is that, is that actually profitable?
That particular deal?
It's always been in the back of my mind.
Prime Video.
It will get Prime Video, you pay six bucks a month or whatever it is.
But then you get free delivery.
And everyone knows how much delivery costs.
But the fact, as you mentioned, they built their own UPS, maybe they can absorb those.
I've always wondered if that's actually been profitable.
Like they're literally giving away free delivery with Amazon Prime membership.
It's always been in the back of my mind.
Well, this is the really interesting thing about Amazon.
They don't break it out.
If I'm honest.
Right, they won't break that down into that level of granularity.
But what we can observe when we go through the accounts is there's about 30 billion of
losses sitting inside Amazon.
So if you think about everyone gave Meta a hard time investing, whatever it was, Amazon
spending 25, 30 billion dollars on what is called other bets.
And even with those 25, 30 billion dollar losses, they still are walking away with a
six to seven percent operating margin.
We think it's going to go to, you know, low teens because of advertising.
It's such a profitable company that they can absorb this.
So the question is why are they spending money on Prime?
It's a bit to your point that they want to build the brand.
They want you to be thinking about them as a potential alternative to Netflix.
It locks you in with a free delivery.
But it is part of the advertising model, right?
You are collecting more data on the users.
You're seeing their shopping habits, their viewing habits.
It allows you to just bring them build a more powerful advertising.
It's a super app you were essentially referring to, right?
It's an element of a super app.
And obviously they're missing the social.
They don't have a they obviously we don't all talk to each other on our Amazon chats.
Obviously, that's Facebook.
But at the same time, they've got very strong partnerships with Facebook.
I should say Meta where you can start buying Amazon goods off Instagram through clicking
through.
So in the West, no one's built the super app.
It's tough.
Everyone's carved out a niche.
But ultimately, Amazon, the two business models that Amazon that are very under looked, it's
advertising, which is just very high margin.
And we think then Amazon Web Services will make a comeback.
Yeah, that entire space really just blows my mind and what's currently happening there.
Is there any other opportunity you're currently seeing in the market or in the portfolio?
Oh, look, I think, you know, from from our point of view, the way we you know, we're
always looking for these marathon runners.
We think, you know, Amazon or ICICI bank, they got long marathons to run.
They're in good market positions.
They add a lot of value to the consumer or enterprise.
We definitely have got, you know, interest in China.
It is a tough macro environment.
Companies like Tmoo and PDD are on our watch list.
Companies in Brazil are on our watch list as market, you know, if a market opportunity
comes up.
But to be really honest, the big disappointment, you know, so, you know, the average P of the
market could be high.
But within that, there's a lot of multiple dispersion.
And a lot of companies that were once considered structural growers have had a hiccup.
So in the beauty, in the luxury space, in the global alcohol space, which are some very
high quality brands.
And so we've got our eye on a lot of those businesses that have, you know, they fit our
bill as in high quality, dominating a particular part of their industry and have runways for
growth, but for maybe cyclical reasons have fallen out of favor.
So we're spending, you know, we're sharpening the pencil on a lot of those names.
Well in this, in global equities, as they say, the dog wax a tail, not the other way
around.
So if stocks being the tail, the dogs, you know, the good old fashioned bond market,
the 10 year bond, there's been US rates were on hold.
What's been happening globally, I think there's been some chatter regarding, I think, ISM
data came out and, you know, everyone's saying they're forecasting that there's going to
be cuts starting this year.
But let's see if that actually happens or not.
I'd love to hear your thoughts on what's happening in global markets, you know, monetary
policy, fiscal policy.
But I suppose where my question is really coming from, just to paint the picture, if
this was after COVID, what was that like?
2021, I believe it was.
And then everything whipped so high up, you know, all that funny money was in fear missing
out was rampant.
People were just spend, spend, spend, not caring about tomorrow.
And then the market collapsed.
Right?
What's different now?
It's almost like a two speed economy.
There's a whole number of companies like the Magnificent Seven that are doing very, very
well and have pretty much dragged the Nasdaq and the Russell back up to all time highs.
Right?
Meanwhile, there's this underbelly of quality companies that can barely catch a bid.
But a lot of the asset managers like yourself and other fields, looking at these companies
is saying, hold on a second, they're better run now than they were when all the funny
money was going into them.
But everyone's feeling poor and no one wants to stick the capital in.
And the valuations in this are so much lower than they were.
Everyone's potentially making less money internally.
They've tightened the belt.
Profit margins are higher.
They're looking healthier than ever, but they can't catch a bid.
So I suppose one question that's on my mind is you're looking at the Russell, the Nasdaq
bopping around in this all time high.
Do you think this is going to break out because the second part of the market, which hasn't
really moved yet, is to come, or do you think that we're getting a double top here and we
might be seeing some downside?
I'd love to hear your opinion on what you think's happening with Global.
Yeah, a lot in that, which I like.
So I think you are right.
We've gone from the market has had this obsession with the Magnificent 7.
But I would say the Magnificent 7 have now become maybe the Fabulous 4.
And there's a very clear reason why.
Apple, Tesla have disappointed on earnings, really have disappointed on earnings.
Both stocks were excellent performers in 2023, but they were poor performers in 2022.
So if we sort of just look back, you go, well, you had a tough 2022, you had a relief rally
in 2023.
And I think 2024 is more about the earnings.
The earnings divergence, I would say.
And the companies that have delivered strong earnings divergence, or I'd say delivered
strong earnings, have kept going.
So that's your Facebooks or Metas, even Microsoft's.
And even within, say, large cap software, which is historically in that 2021 period,
2022 period, they all had a huge move, as you rightly pointed out.
But even within global large cap software, there's winners and losers.
There are companies that are better exposed to the changes we're seeing in AI, and there's
some that are perhaps lagging.
There's potentially business models that are going to get challenged.
There's a lot of debate around Adobe.
I don't know if that debate's right or not, but it's interesting the market is much more
skeptical.
I would say in 2020 and 2021, there wasn't much skepticism.
No, it was low money.
How do I get in?
It was a genuine FOMA.
And it was actually a very tough time because staying rational in those periods is difficult.
I mean, our marathon runners, they're not going to be run as fast as the sprinters.
And for a moment in the race, they might be looking like they're losing the race.
And ultimately, what we're sowing for in our portfolio is how do our companies go in the
tough times?
And what we have found, the tough times, or let's say 2022, which was a bit of a more
sharpened, tied in the belt period, like as you said, our companies did really well.
They cut costs, they pivoted, they're still very innovative, they're still creative.
And so I would say that same approach in terms of Magnificent 7 to Fabulous 4 is still very
valid for the overall stock market, US equities.
So China has had a tough period.
I would say also what is very under discussed, China has been in an earnings down cycle.
Companies on average in China are seeing negative earnings growth.
Now, they're probably getting closer to the end of that.
But that, I would argue, has been a bigger driver of the stock market returns.
When you think about Chinese state-owned enterprises, they've done fantastic.
Chinese state-owned enterprises are booming in China.
It's the private companies that are struggling.
But a lot of the state-owned companies are private.
You don't see their share prices.
If you did, they'd probably be doing quite well.
So it's always going to come back to earnings.
And I think this year is going to be the year where you do separate the winners and losers.
We are in a situation where some large-cap tech companies will continue to do well, that
have got the earnings momentum.
And then moving to that more middle part of the market that you talked about, there are
winners and losers emerging there as well.
I would say companies exposed to the domestic US economy broadly are doing better, because
the domestic US economy broadly is doing better.
You've got reshoring tailwinds.
You've still got a lot of stimulus running through the ecosystem.
You got this housing under supply.
Exposed there, you're doing well.
Non-exposed there, you're doing a bit poorly.
And a lot of those names in global luxury or beauty or in global alcohol have had a
little bit of that COVID.
But firstly, the COVID headwinds still kicking in.
We probably over-generated too much revenue in a short space of time.
And there's a bit of a kickback, probably excessive pricing power, they did.
And then China is very weak, economically speaking.
So that's hurt their earnings.
And it's always come down to earnings.
So we think in 2024, it's going to be very much an earnings story.
The winners and losers are going to be picked through that space.
So some of the sectors we've discussed, we think the semi-cycle is still very much intact.
The US housing cycle is very much intact.
Some domestically focused emerging market economies are very much intact.
And so whether the Fed cuts rates or not, that could act as a tailwind.
But ultimately, we think primarily earnings are going to drive the market or stocks.
And that's really where we're focused.
Yeah, with the election as well, I think RFK pointed out that for the past number of years,
people have just been taking bets on what the Fed's going to do.
I think I believe, I can't remember if it was the Russell or the Nasdaq, if you take
that chart and you actually put it up against a 10-year bond rate, it's literally got in
lockstep for the past, what is it, three or four years?
So if you literally just did nothing except for just follow the 10-year bond rate, you
would have caught the market near perfectly.
So why I really want to just dig into this particular topic is markets are all-time highs
again.
There was essentially a two or a three-spent economy happening.
I agree with you with the earnings and I do find that quite interesting.
But a number of these companies are driving this freight train.
And if like RFK and a lot of other people out there believe that these markets will
rise and fall purely based on what's happening with monetary policy and how that translates
to the bond market, what do you think is going to happen with these decisions and how big
an impact they're going to have?
And will we see volatility here?
Do you reckon this is going to break through or just you say to keep one eye on earnings
and then pray?
Yeah, I think a couple of things there.
Firstly, on the 10-year bond yields, what I would say is that there's a competition
for capital.
That's what it's really done.
It's made you reassess, I can earn, let's say, 5% risk-free at the short end and at
the long end, maybe 4.5%, 5%.
So earnings multiples or free cash flow yields have had to reset.
I think that's what a lot of 2022 was about, that the expectations had to reset and maybe
got too far and you had that relief rally.
That's your 100% right.
If we move higher in 10-year bond yields, let's say it moved to 5.5%, look, we don't
know.
It's going to absolutely make investors question multiples and free cash flow yields.
So what matters?
Free cash flow yields and multiples and earnings.
And so the interesting thing I would say is that Apple's probably lost maybe like half
a billion of market cap and the stock market has kept going up.
But there are other parts of the market that investors are rotating into.
The capital isn't...
Is that investors rotating into it or is that passive ETS like Vanguard, State Street, Black
Rock, it's just these super, what's called the 401Ks, just tossing money into this and
continuously buying up.
Is this smart investing or is this passive just beefing it all up and not looking at
the numbers?
Well, I think passive is obviously always invested and they're always rotating into
the large caps and that's obviously a natural support for the large cap stocks.
What I would say is if you sort of looked at the past, if Apple had a good drawdown,
it really weighed on the market.
It was hard to break out to new highs with the largest company in the world having headwinds.
So I would say we think the earnings trajectory for a lot of the companies in the US are still
very solid and therefore it gives the stock market support.
Notwithstanding, multiples can come lower.
You got to absolutely think about where the 10 years going because it will reset valuations
or people will demand a higher compensation.
If you look at Microsoft today at a 3% to 3.3% free cash flow yield, that's okay as
long as we have high level of confidence on that free cash flow yield growing and I think
investors do.
But when the 10 year bond yield gets to 6%, we may demand 4% free cash flow yield compensation.
So there is always that in the back of the mind for investors.
Where 10 years are going, I mean, your guess will be as good as mine.
I think more broadly that the US economy is in good shape.
Household debt to GDP is very low in the low 70s.
And there's a fiscal tailwind and there is reshoring tailwinds.
So I think ultimately the Fed is very obsessed in not tipping the country into recession.
So I think it's like climbing the wall of worry, I think is the kind of market we're
in.
We always have something to worry about.
But ultimately, businesses as we're seeing, they go on with their day-to-day jobs.
They go target the opportunities in front of them.
And we don't see a financial crisis risk sort of ahead for the US.
I would say the big market we were worried about potentially was China.
But being the closed economy China is and the capital surplus nation that it is, it's
able to plug holes very easily.
That doesn't mean the housing markets are fine and dandy.
There's about 30 million overbuilt homes, which is quite a lot.
But they will work through it.
It does mean a bit of lower growth for a few years.
But that was probably one big area that raised a bit of risk was how China was going to handle
with property market.
Because for a moment, the government was a little bit behind the curve, and that's kind
of where a lot of policy errors can happen.
I think the Fed is probably, my estimates would be they are overall happy with the way
the economy is going, got one eye on inflation and one eye on unemployment.
And the eye on unemployment is probably more what they're watching.
Yes, it's interesting to watch and look at allocating money into especially, I think
what I'm starting to hear a bit of chatter about, you know, when something pops up and
then you keep kind of seeing it and then you kind of can't unsee it.
In particular, it was the article regarding Boeing.
Don't get too political in here, but you know, I really don't care to it in all honesty.
I just I believe wholeheartedly if you go work, you go broke.
Look at having a Disney and a number of other entities.
But I just there's a particular phrase.
Maybe I've been late.
You know, with the election on all the RFK stuff's been popping up on my feed and the
guy's fascinating and his litigation career is a smart cookie.
And then he says things.
It just makes you question.
He pulls that veil back a little bit in the room and then you have a little look and you
go, what does he mean by that?
One thing he's been discussing, he mentioned something like 20 years ago.
I want to go into the politics, but fast forward 20 years, apparently a lot of the rhetoric
which we're hearing running around where you're getting internal arguments with civilizations,
you know, should you do this?
Should you do that?
You know, ESG, you know, what's good for the environment?
You know, why is there one rules for the West and another set of rules for the East?
Right.
You know, you have to do this here.
Otherwise, you're a pariah in society.
Meanwhile, they don't care over there.
You know what I mean?
Like tick tock, tick tock.
They push stuff to make our children dumber.
Meanwhile, they're advocating, you know, how to solve complex mathematical equations so
the kids can go to the moon over in China.
You know what I mean?
It is just, you know, I think the exact phrase was they're trying to degrowth the US.
I'm starting to hear that run around a bit and send the sunset the US so the East can
rise.
I don't know.
I'm just curious.
Have you heard that phrase run around at all?
So I would say that we've not in my investing career.
It's only been one really game in town or one superpower and the world order really
circled around it.
So the entry, sorry, I'm going a bit back in time, but the entry of China into WTO,
like I think this was one of the most largest watershed moments for the global economy because
the amount of investment, foreign direct investment, went into China when it was into the trillions
and the whole world's manufacturing basically sourced into China.
It's amazing and 500, 600 million people were lifted out of poverty.
So today we do have a genuine rivalry between these two countries and I would say it's a
Cold War.
It's definitely tensions.
I would say it comes from these countries having things more in similarity than different.
I think they're more similar in different China and the US.
I think they both want good things for their citizens.
They want to raise living standards.
There is a lot of entrepreneurship inside both those countries.
They are very proud nations, very nationalistic countries and ultimately they want to build
a sphere of influences and that's not going to change.
I can't see that changing.
We've sort of like Trump's policies in his last, he kind of unveiled the truth and the
tensions that were always simmering, but they came to the surface, whether in domestic lead
America where people felt like their jobs were being outsourced to China, but also maybe
some of the advantages China was taking within WTO were exposed as well.
Now the rivalry has just gone to the next level.
So the rivalry today is now about who can get ahead in artificial intelligence and the
United States is not backing down in its restrictions and its limitations and all the sanctions
it's imposing.
They do definitely want to limit China's development in AI because to your point earlier on, China
was probably leading the way.
I met TikTok in 2019 on a trip to China and what struck me was how much GPUs they were
applying back then and they were already building the whole algorithm on machine learning and
to just get much higher engagement.
And so it really was a wake up call for American corporates.
When TikTok came to the West, Facebook was probably behind and then it forced a huge
investment cycle for Metta, but this sort of rivalry, it's just not going to go away
and the risk is obviously more nationalistic sentiment brew in America and more nationalistic
sentiment brewing in China.
The way we think the risks are going to happen is that you said deep growth, I think there's
an element of that that's going to happen with US corporates in China.
So for example, Apple and we talked about Apple having a tough time this year, but it
looks like in China, iPhone sales are down 30% year to day for Apple, which is significant
and there is a preference to domestic brands.
Nike, which is about a third of its business in China, relied on China for its growth driver.
There is a move towards national.
And their child workers.
And as a result, there is this way.
Now, coming to ultimately incentives, incentives matter.
The American capitalistic system is incentivized to solve problems, incentivize a capitalist
system, solve a problem.
There's a huge payoff.
We don't see that changing anytime soon.
The institutions are fairly strong in the United States.
We can debate how strong.
I think the institutions are very strong in India as well.
Rule of law and all these things now matter much more today in global investing than they've
ever mattered in the past.
And so as a result, China's got economic weakness that they've got to deal with, which they
are not going to deal with at all.
But that tension and that cold war, it's not going to go away.
And we started this conversation with TSMC.
That's like flashpoint is Taiwan.
And TSMC, which is enabling all this amazing technology, sits a few hundred kilometers
off the coast of China.
And so it's always going to be a very tense moment in world politics if Taiwan is politicized.
Thankfully, it hasn't been.
Thankfully, there's been calmer things to prevail.
But I would say the East or China, it's going on a different path.
It's becoming more insular.
Now, that does create opportunities in the domestic market.
And the West is also becoming, the US is becoming more domestically insular.
And in a way, it requires a lot of investment.
So it creates investing opportunities, which in a way is the way we're thinking about it.
Well, it's a new war out here these days.
You really don't have to fire a shot.
You just go buy a renois' land.
I don't know what's happened with Biden, but the fact that he's kept those borders open
and Texas has been told not to, and there's a huge number of military aid.
There's just so much happening.
I reckon there's a war being, there's obviously a war being fought.
People are being moved.
Why I'm finding this phrase degrowth so interesting is there's one set of rules for the West
and there's one set of rules for the East.
And the West must do it for moral and ethical reasons, which are great.
But when, as you said, your biggest competitor and you're in a cold war, doesn't have to
do it, it just makes you question everything.
What's really going on?
And then as investors, we're the stewards of other people's capital, trying to make
investments and hopefully put them in an area that meets their ethical and moral concerns.
But also you're not going to get a war blown out that sees a lot of financial ruin at the
same time.
Or on the other side, it might create a huge bit of growth.
But the one thing, what's the old phrase?
A dead man doesn't pay his taxes.
So a dead man doesn't pay his debts.
So it will benefit no one if TSM ends up in rubble.
No one's going to make any money.
That's ultimately why this cold war will have very big stalemates.
Now that doesn't mean there's a push towards domestic goods in China away from Western
goods.
And the same happening in the US, like TikTok being politicized, it's obvious, right?
Facebook has got reels.
And that's as an addictive product as TikTok might be.
But ultimately, I would say the rules, there are rules for the East that don't apply to
the West.
For example, the Chinese internet market is locked out to Western politicians.
But in a way, it's important because it's a control of information.
If your domestic internet companies are Chinese, it's easier to control them.
If your internet companies are Western, it's harder to control.
So ultimately, what does it boil down to?
It boils down to incentives.
The Chinese Communist Party's incentive is to stay in power.
Whereas the systems in the West, you don't have the forever presidents in the West.
You can have long serving prime ministers in certain countries, but eventually, there
is an opportunity to vote someone else in who's got some fresh ideas.
The Communist Party's incentive is also to raise living standards.
Because ultimately, the reality is we all want better things for our children.
And if your country is stagnating, ultimately, you do get frustrated.
And so the Chinese Communist Party's done a great job in living standards.
We think they'll still do that.
But they would just do it from a much more domestically focused, how do we do it to benefit
China and always build this sphere of influence.
And of course, we talked about resources earlier.
China is very strategic when it comes to resource management.
They do take 10-year views.
And their batteries, EVs are very dominant in China.
Electric vehicles are very dominant in China.
But it's not just the electric vehicle.
It's the whole battery, the whole supply chain has been built out in China.
That doesn't happen overnight.
That's taken a decade plus to build.
And so the battery companies in China, whether it's CATL or BYD, they've got offtake agreements
with miners in Africa or in South America for guaranteed offtake.
And they've effectively secured a lot of supply chain.
That BYD business is a phenomenal business they build.
And look, I'll completely disclose.
I'm running a Huawei laptop.
But the reason being is I had it for a number of years ago.
It is, in my opinion, the best tech in the market for half the price.
Maybe that's just the frugal investor nature in me.
And look, my information, I'm not essentially anywhere in a government level that they'll
be targeting my particular laptops.
There's no difference between Google and them having my information.
And everything's backed up on third-party software for privacy reasons anyway.
So no one can get after it anyway.
I just find it very, very interesting that they're building the best tech in the market.
But meanwhile, we've been not allowed to access it for Cold War reasons.
And then hence, we have to go buy other technology when the best tech being built.
Listen, the memory companies, the TSM, where they're being built, they're being built in
Asia.
Yes.
Oh, absolutely.
Look, absolutely.
I get it, but I understand why how I was banned in Australia from building out.
That makes a lot of sense.
But it also doesn't make sense that other parts of government are allowed to go buy
farmland around military installations in the US.
It just makes no sense.
It's like double standards across the board.
No, absolutely.
Look, that's the global world order.
Every nation will ultimately set its own rules and agenda that will suit itself.
There's a lot of protectionist policies still happening in big emerging markets.
I mean, the European Union has incredibly large protectionist policies in agriculture
and locks out a lot of other countries.
Ultimately, these groups can build a lot of buying power if their economies are very large
or if they join a consortium.
China domestic market is big and Western companies have benefited from that for 10, 20 years.
So in a way, some of the biggest lobbyists in Washington for China are American companies.
Yeah.
And then their technology completely surpassed anything that the West thought that was possible.
They just took it and ran with it.
Oh, absolutely.
The level of innovation and entrepreneurship in China is mind boggling.
But I think it has woken up the US.
I think the US has realized that they were falling behind on some aspects of that.
So, look, healthy competition in the global economy is not a terrible thing.
So besides the holdings which you have in the portfolio, is there any other sectors
you're keeping a close eye on?
If that comes back to fair value, you'd get jumping in?
Yeah.
So the way we run our process is we've got our 20 to 30 stocks, our marathon runners,
and we keep an inventory of another 50 to 60 names, which we call our bench.
And I think it's important to have an inventory because ultimately, if you think about a company
that's currently owned, the thesis has changed or something's changed the narrative or the
growth isn't as good or the quality is not good.
You want to be able to substitute it off and on very seamlessly.
Also, you want healthy competition between your inventory and the actual portfolio.
So they're always fighting to get in.
And we create that structure in our business where we're responsible for stocks, but the
way we're remunerated or compensated is not how our individual stocks go, but how the
fund goes.
That's very important.
And we're never going to push it's my idea versus Murdoch's idea.
It's the best ideas only.
And so in our inventory, I would say we've got a few interesting names.
They're probably companies, a bit mentioned in that global beauty luxury space that have
fallen off the radar.
There are some interesting emerging market consumer companies that have fallen off the
radar largely because of China.
And then there's domestic American companies.
That's the other part of the market we're finding interesting is that when you sort
of look to middle American companies, the multiples come down quite a bit.
The headline PE might be 20, but the more middle American companies, maybe 15 times.
Very well exposed to interesting structural trends.
And it's just a matter of watching and waiting to see if an opportunity comes to buy and
can substitute out from one of our current portfolio holdings.
Yeah.
It's the man is the Manchester city strategy.
Essentially have two teams and then we, you know, or three teams internally.
And then like last year, they won the treble, you know, it's the way forward.
Well, if you've got all the money, you can definitely make that happen.
So what I like to finish on is what keeps you up at night and what gets you out of bed
in the morning?
So what keeps me up at night?
Still my kids, they're still relatively young, eight and five.
So every now and then they have a bad dream and they want mommy or daddy to, you know,
tuck them in, make them feel safe.
That's always, you know, that's always a tough makes sleeping a bit tough, but it's always
very rewarding.
Look, what keeps me up?
Look, I really do enjoy, you know, what we do, you know, we're in this business of money
management and it's going back to, you know, that book I read about from Barton Biggs,
Hedgehogging, you know, the you've just got to really find this.
I know it's a bit cliche.
It's a passion.
It's a hobby.
But in a way, you know, you've got to have elements of that in this role because it's
not always not always going to be easy.
Markets don't always go up in a straight line.
You do have shocks.
You do have periods where 10 year bond yields break out and creates a bit of a shock in
the market.
And you know, it creates, you know, big opportunities to buy things.
And having rationality and calmness and focus is very important.
And you can and you can do it from a position of strength.
What you're doing is, you know, you're really passionate about what you're doing and that
volatility doesn't stress you, but volatility is actually your friend.
And that's been like the big learning for me over the time that, you know, you know,
the big part of our job is just to fight our own biases.
We spend so much time doing a lot of analysis on businesses and stocks.
And we spend a lot of we spend very little time on self-reflection.
What are my biases?
What do I tend to gravitate towards?
What do I do in more of your euphoric times?
What I do more in pessimistic times?
And then just have that honest self-reflection.
And you know, I over time, I felt like, you know, things like yoga and meditation would
help.
I would say they definitely help.
Meditation definitely creates a level of calmness.
But it's not the answer.
The real answer is you've got to really be honest with yourself.
You just know that ultimately, it's yourself you're lying to.
And you've got to be able to acknowledge these are my weaknesses and then understand how
to then make them strengths.
So for me, it does, I do spend a lot of time listening to different type of psychology
book, reading different type of psychology books, or just gaining perspectives from people
who've done interesting things and what happened during those tough times and how did they
persevere.
Because it is a long term, you know, what we're trying to do is we're trying to make
long term decisions.
And there can be a lot of noise along the way.
And you got to stay in it's just, you know, remembering to stay the course and having
that patience and just fighting your emotions along the way.
Couldn't have said it better myself.
Well, Sonny, it's great having you on.
And I really appreciate your insights you shared on what you've been covering and what's
happening at Black Waddle.
Thanks, Murdoch.
Thank you for having me.
Fantastic.
All right, Sonny, take it easy.
Have a great day.
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