WEBVTT 00:00:09.839 --> 00:00:11.820 Welcome back to The Rate of Change with York 00:00:11.820 --> 00:00:14.460 Wealth Management. As advisors to some of the 00:00:14.460 --> 00:00:16.059 wealthiest families in the country, The Rate 00:00:16.059 --> 00:00:18.160 of Change is a podcast designed to help you in 00:00:18.160 --> 00:00:20.879 the pursuit of building long -term wealth through 00:00:20.879 --> 00:00:22.719 the insights of some of the brightest minds in 00:00:22.719 --> 00:00:25.289 asset management. I'm your host, Murdoch Gaddy, 00:00:25.289 --> 00:00:27.289 and in today's broadcast, I'm speaking with Michael 00:00:27.289 --> 00:00:30.010 Frazes, the Managing Director and Portfolio Manager 00:00:30.010 --> 00:00:32.630 at Frazes Capital Partners. Keen listeners will 00:00:32.630 --> 00:00:36.369 remember Michael from a couple of podcasts. I 00:00:36.369 --> 00:00:39.570 really enjoy getting Michael on because he specializes 00:00:39.570 --> 00:00:43.390 in the high growth tech and biotech space, targeting 00:00:43.390 --> 00:00:48.189 businesses that are growing fast. For the past 00:00:48.189 --> 00:00:53.780 12 months, they're up 80%. For me, I really enjoy 00:00:53.780 --> 00:00:56.740 getting him on. And we've had him on when the 00:00:56.740 --> 00:01:00.000 market peaked, then it proceeded to pull back. 00:01:00.219 --> 00:01:02.619 So it's great to hear his perspective on what's 00:01:02.619 --> 00:01:05.019 happening at the bottom of the cycle. And right 00:01:05.019 --> 00:01:08.719 now, as everyone's aware, a lot of these companies 00:01:08.719 --> 00:01:11.560 have had a very, very big run. So it's great 00:01:11.560 --> 00:01:14.700 to get an insight on what he's thinking from 00:01:14.700 --> 00:01:18.239 macroeconomics to specific companies and what 00:01:18.239 --> 00:01:22.060 trends and how to play it. Join us as Michael 00:01:22.060 --> 00:01:25.359 discusses his macroeconomic views, the market 00:01:25.359 --> 00:01:29.900 dichotomy, political impact on markets over in 00:01:29.900 --> 00:01:33.219 Europe, interest rates cuts, and market timing. 00:01:33.700 --> 00:01:39.060 Companies we discuss are NVIDIA, DroneShield, 00:01:39.099 --> 00:01:41.620 Transmedics, very interesting business, Clarity 00:01:41.620 --> 00:01:47.140 Pharmaceuticals, MercadoLibre, and NewBank. He 00:01:47.140 --> 00:01:49.680 also discusses, as I mentioned, the fund performance, 00:01:49.739 --> 00:01:52.980 but more importantly, as he points out, every 00:01:52.980 --> 00:01:54.780 single time we discuss this was in a specific 00:01:54.780 --> 00:01:56.879 company, but the focus of the conversation now 00:01:56.879 --> 00:01:59.920 is more on portfolio management. So, you know, 00:01:59.920 --> 00:02:02.420 there's been so many times where you find some 00:02:02.420 --> 00:02:05.140 of these businesses can rotate up like 100, 200, 00:02:05.379 --> 00:02:08.560 300, 400%, but then, you know, if you're not 00:02:08.560 --> 00:02:11.060 having a very good process of when to take profit 00:02:11.060 --> 00:02:13.840 on some of these businesses and then find, you 00:02:13.840 --> 00:02:15.620 know, where the... like an ice skating reference, 00:02:15.740 --> 00:02:17.199 like you want to skate to where the puck's going. 00:02:17.439 --> 00:02:19.159 You're leaving money on the table. You're just 00:02:19.159 --> 00:02:21.659 essentially riding the roller coaster. So Michael 00:02:21.659 --> 00:02:24.360 spent a lot of time trying to turn this into 00:02:24.360 --> 00:02:26.979 a bit more of a staircase. So he discusses the 00:02:26.979 --> 00:02:30.340 how he's managing this. And lastly, we dig into 00:02:30.340 --> 00:02:33.199 the role artificial intelligence and these language 00:02:33.199 --> 00:02:37.199 models are having on the markets, not just from 00:02:37.199 --> 00:02:40.870 how to invest, but, you know, how. People like 00:02:40.870 --> 00:02:44.330 Michael are using these tools to analyze particular 00:02:44.330 --> 00:02:47.550 companies, markets, and also just the impact 00:02:47.550 --> 00:02:50.530 they're having on everyone's work. Balance the 00:02:50.530 --> 00:02:52.750 ability to essentially do like a three -day task 00:02:52.750 --> 00:02:57.650 in two hours is quite incredible. So I really 00:02:57.650 --> 00:02:59.650 enjoyed this conversation with Michael. I always 00:02:59.650 --> 00:03:02.389 do, and I encourage you to listen to this. a 00:03:02.389 --> 00:03:04.409 disclaimer at the end of this broadcast and keep 00:03:04.409 --> 00:03:07.969 your feedback coming. You can reach me at mgatty 00:03:07.969 --> 00:03:12.449 at ywm .com .au. So with that being said, I hope 00:03:12.449 --> 00:03:14.169 you enjoy this conversation as much as I did. 00:03:14.250 --> 00:03:26.909 So sit back, relax, and enjoy. Michael Francis, 00:03:27.069 --> 00:03:29.030 welcome to The Rate of Change with York Wealth 00:03:29.030 --> 00:03:31.560 Management. Murdoch, thanks for having me back 00:03:31.560 --> 00:03:35.159 on. It's good to have you on, Michael. What, 00:03:35.199 --> 00:03:37.960 we catch up now every six months? Here we're 00:03:37.960 --> 00:03:41.659 shaking in the world of growth? Yeah, it's been 00:03:41.659 --> 00:03:45.759 an interesting period actually, always is. Just 00:03:45.759 --> 00:03:48.840 for first listeners, who is Michael Frazes and 00:03:48.840 --> 00:03:52.719 what do you do? We run a couple of funds, but 00:03:52.719 --> 00:03:55.520 our main fund is global equities focused on the 00:03:55.520 --> 00:03:57.419 fastest growing and most exciting companies. 00:03:59.879 --> 00:04:01.840 Customer love and explosive growth, they're the 00:04:01.840 --> 00:04:04.159 things we look at. And we also have a pretty 00:04:04.159 --> 00:04:07.379 tight risk framework that we use to kind of enter 00:04:07.379 --> 00:04:10.259 and exit, which has certainly tamed the volatility 00:04:10.259 --> 00:04:12.539 this year and really helped our returns, you 00:04:12.539 --> 00:04:16.339 know, the last 18 months. That's a good way to 00:04:16.339 --> 00:04:19.160 be. Mate, you've been running around the countryside 00:04:19.160 --> 00:04:23.019 having a bit of fun. You just got back from a 00:04:23.019 --> 00:04:26.220 work trip in Boston, yeah? What's happening over 00:04:26.220 --> 00:04:29.129 in the States? Oh, it was really interesting. 00:04:29.350 --> 00:04:32.490 It was the Canaccord Growth Conference. So thank 00:04:32.490 --> 00:04:35.490 you to Canaccord for hosting. It was one of the 00:04:35.490 --> 00:04:36.790 better conferences I've been to actually in the 00:04:36.790 --> 00:04:38.490 sense that you've got a lot of one -on -one time 00:04:38.490 --> 00:04:40.790 with a lot of different CEOs. Look, it's just 00:04:40.790 --> 00:04:43.250 a strange market at the moment. You know, the 00:04:43.250 --> 00:04:45.970 average company is not doing very well and the 00:04:45.970 --> 00:04:48.129 market's pretty difficult for most companies, 00:04:48.250 --> 00:04:50.170 but there's some sectors that are powering on 00:04:50.170 --> 00:04:52.230 ahead. So, you know, one meeting you're speaking 00:04:52.230 --> 00:04:54.709 to... somebody in phase one that's like a brand 00:04:54.709 --> 00:04:58.170 new exciting you know biotech with a new modality 00:04:58.170 --> 00:05:01.470 you know just under a billion dollar market cap 00:05:01.470 --> 00:05:04.250 and the next meeting you're in a company with 00:05:04.250 --> 00:05:06.550 you know 200 million dollar market cap with 400 00:05:06.550 --> 00:05:08.189 million dollar cash that is really struggling 00:05:08.189 --> 00:05:11.290 to see a path out has immense spending ahead 00:05:11.290 --> 00:05:13.759 of it so it's one of those weird You know, it's 00:05:13.759 --> 00:05:16.120 kind of like the market in Australia and globally 00:05:16.120 --> 00:05:18.160 as well. You know, there's some companies that 00:05:18.160 --> 00:05:19.879 are doing extremely well, but the vast majority 00:05:19.879 --> 00:05:22.339 is still struggling. So it's got a strange feel. 00:05:22.500 --> 00:05:24.959 It's really different. I think returns now are 00:05:24.959 --> 00:05:28.339 very focused on a handful of companies. So it's 00:05:28.339 --> 00:05:29.959 really important to be in those handful that 00:05:29.959 --> 00:05:33.519 are doing really well. So wait, so how many companies 00:05:33.519 --> 00:05:36.480 were being presented at the Canaccord event? 00:05:36.660 --> 00:05:38.360 Oh, there would have been a huge number of companies. 00:05:38.540 --> 00:05:41.399 I think I did 15 meetings in two days and then 00:05:41.399 --> 00:05:45.560 flew home. So just a bit of fun. Yeah, it was 00:05:45.560 --> 00:05:48.939 a bit of fun. Boston's nice. I like it. So I've 00:05:48.939 --> 00:05:51.420 been to New York, Boston, San Francisco. Boston's 00:05:51.420 --> 00:05:54.319 lovely. You can walk on the street. There's a 00:05:54.319 --> 00:05:56.079 lot of edge in those other cities, particularly 00:05:56.079 --> 00:05:57.800 San Francisco. You really have to kind of keep 00:05:57.800 --> 00:05:59.139 your wits about you when you're walking around. 00:06:00.300 --> 00:06:02.360 Yeah, I haven't been there in a while. What's 00:06:02.360 --> 00:06:04.060 it actually like on the ground? Is it as bad 00:06:04.060 --> 00:06:05.759 as they say it is or is it being cleaned up? 00:06:05.839 --> 00:06:06.980 I'd say it's significantly worse than they say. 00:06:07.939 --> 00:06:09.779 Okay, what does that mean, significantly worse? 00:06:10.370 --> 00:06:12.310 We're staying like say around Union Square. So 00:06:12.310 --> 00:06:14.310 Union Square used to be the center of town. It 00:06:14.310 --> 00:06:16.029 used to be like ultra prime real estate as well. 00:06:16.209 --> 00:06:18.269 I think there was a footballer that got stabbed 00:06:18.269 --> 00:06:21.490 just two days ago, got robbed in Union Square 00:06:21.490 --> 00:06:24.370 in like the flagship central district. So we're 00:06:24.370 --> 00:06:26.589 staying at a hotel, nice hotel around there and 00:06:26.589 --> 00:06:28.629 then walking maybe five, ten minutes to the conference 00:06:28.629 --> 00:06:31.449 center. And if we walked two blocks the other 00:06:31.449 --> 00:06:33.509 way, there's literally an open -air drug market. 00:06:34.629 --> 00:06:36.490 You know, got an Uber back that way one time 00:06:36.490 --> 00:06:38.610 and the guy was like, see that guy? He's ring 00:06:38.610 --> 00:06:40.779 -leaning it. And he's wearing like this big puffy 00:06:40.779 --> 00:06:43.360 jacket. They've got the table set up. And this 00:06:43.360 --> 00:06:45.680 is like in downtown. This is kind of like, I 00:06:45.680 --> 00:06:49.160 don't know, if in Barangaroo there was open -air 00:06:49.160 --> 00:06:50.939 drug markets and the business district is at 00:06:50.939 --> 00:06:52.500 Martin Place. You know, it's really that close. 00:06:53.500 --> 00:06:55.800 Jesus Christ. That's normally like the stuff 00:06:55.800 --> 00:06:59.279 that you see in a back alleyway of like the old 00:06:59.279 --> 00:07:03.600 -fashioned like Chicago or New York. But, you 00:07:03.600 --> 00:07:06.600 know, it's so brazen. Yeah, every time you come 00:07:06.600 --> 00:07:09.230 back to Sydney, you relax. Yeah, I was also in 00:07:09.230 --> 00:07:12.870 London for a bit. I saw on Fleet Street, so again, 00:07:12.910 --> 00:07:14.490 one of the major streets, heaps of people about. 00:07:14.689 --> 00:07:17.310 I saw somebody swoop and try and grab somebody's 00:07:17.310 --> 00:07:19.930 mobile phone. So they have all these motorcycle 00:07:19.930 --> 00:07:22.310 gangs or scooter gangs. So there'll be a guy 00:07:22.310 --> 00:07:24.649 driving, guy on the back, or even just the guy 00:07:24.649 --> 00:07:26.629 driving. And then if you're holding your phone 00:07:26.629 --> 00:07:28.509 out, they'll just like grab it. In this case, 00:07:28.550 --> 00:07:31.889 they snatched it, dropped it. Woman started screaming. 00:07:32.089 --> 00:07:34.370 Everybody starts looking. Yeah, this is in London. 00:07:34.470 --> 00:07:37.259 This is the middle of London. Also saw somebody 00:07:37.259 --> 00:07:40.019 in a motorbike with a balaclava on cruising around. 00:07:40.399 --> 00:07:42.620 There is no good reason to wear a balaclava in 00:07:42.620 --> 00:07:45.339 summer in London. So he was probably cruising 00:07:45.339 --> 00:07:47.800 around looking for some mischief as well. It's 00:07:47.800 --> 00:07:49.980 a little weird to talk about gross stocks, but 00:07:49.980 --> 00:07:53.459 if you think about where essentially the world 00:07:53.459 --> 00:07:56.279 was 20 years ago compared to where it is now, 00:07:56.839 --> 00:07:59.800 I wonder if people are starting to realize this 00:07:59.800 --> 00:08:02.259 whole global policy where everyone believes you 00:08:02.259 --> 00:08:04.740 can live in harmony, different cultures. probably 00:08:04.740 --> 00:08:06.699 backfiring yeah there's some really interesting 00:08:06.699 --> 00:08:08.379 stuff on that not that we want to get too political 00:08:08.379 --> 00:08:09.699 but you know there's there's things that like 00:08:09.699 --> 00:08:11.740 you know they stopped um like highway deaths 00:08:11.740 --> 00:08:13.279 started increasing dramatically in the united 00:08:13.279 --> 00:08:16.879 states so there was all those issues around policing 00:08:18.920 --> 00:08:22.480 and obviously George Floyd and the issues the 00:08:22.480 --> 00:08:24.680 police had with stopping cars. So the police 00:08:24.680 --> 00:08:28.000 actually reduced significantly the amount of 00:08:28.000 --> 00:08:32.080 stops that they would do. And so you've got fatalities 00:08:32.080 --> 00:08:33.960 and accidents rising again in the United States. 00:08:34.220 --> 00:08:35.519 So it's really interesting, like the second, 00:08:35.559 --> 00:08:37.860 third order impacts of some of these policies 00:08:37.860 --> 00:08:40.919 and some of these political movements. And you 00:08:40.919 --> 00:08:42.879 just kind of got to hope it doesn't come to Australia. 00:08:43.200 --> 00:08:46.070 So I guess it has started. You know, there's 00:08:46.070 --> 00:08:47.389 obviously a huge crime issue in the Northern 00:08:47.389 --> 00:08:50.309 Territory at the moment in places like Cairns. 00:08:51.210 --> 00:08:53.610 And there was a voter reaction in the sense that, 00:08:53.629 --> 00:08:55.370 you know, a very tough on crime person just got 00:08:55.370 --> 00:08:59.669 elected in the Northern Territory. So, you know, 00:08:59.669 --> 00:09:01.690 Australia is very lucky, but there's no guarantee 00:09:01.690 --> 00:09:05.409 that that doesn't come here. Let's actually just 00:09:05.409 --> 00:09:07.169 touch on this a little bit. And it's from an, 00:09:07.190 --> 00:09:09.509 trust me, it's from an investing point of view, 00:09:09.549 --> 00:09:12.740 right? Because... Well, we have the elections 00:09:12.740 --> 00:09:15.000 coming up in the States. You literally just had 00:09:15.000 --> 00:09:18.159 RFK cross the aisle to, you know, essentially 00:09:18.159 --> 00:09:21.279 back the Trump campaign, which is normally unheard 00:09:21.279 --> 00:09:24.980 of. You have elections pushing in the UK to try 00:09:24.980 --> 00:09:27.960 to... bring it back to the way it was. There's 00:09:27.960 --> 00:09:30.799 this entire movement of the nationalistic pride. 00:09:31.019 --> 00:09:33.200 You look at what's crazy is everyone said the 00:09:33.200 --> 00:09:36.320 Hungarians and the Polish were mad for the policies 00:09:36.320 --> 00:09:38.179 that they had, but they've got probably one of 00:09:38.179 --> 00:09:40.799 the most booming GDPs in the entire European 00:09:40.799 --> 00:09:43.980 Union. Sorry, not in the European Union, right? 00:09:44.139 --> 00:09:47.480 So I suppose my question is thinking along the 00:09:47.480 --> 00:09:50.740 lines of, yes, we're investing in today's climate, 00:09:50.879 --> 00:09:53.580 but with these elections coming through, say 00:09:53.580 --> 00:09:56.289 if... Some parties win on the nationalist side 00:09:56.289 --> 00:09:58.350 and they kind of bring it back. What do you reckon 00:09:58.350 --> 00:10:02.389 that's going to do for, you know, companies that 00:10:02.389 --> 00:10:06.210 essentially have a, you know, transnational basis 00:10:06.210 --> 00:10:09.250 or essentially enjoy the benefits of globalism? 00:10:09.269 --> 00:10:12.070 Like is that going to constrict it or is there 00:10:12.070 --> 00:10:15.809 still, you know, pathways of trade open for good 00:10:15.809 --> 00:10:17.610 businesses? Like how do you reckon that's going 00:10:17.610 --> 00:10:21.960 to impact? It's a great question. Look, it's 00:10:21.960 --> 00:10:23.820 pretty clear that some of these policies are 00:10:23.820 --> 00:10:26.179 certainly better for markets and business and 00:10:26.179 --> 00:10:29.120 arguably, you know, the population. So Poland's 00:10:29.120 --> 00:10:30.960 GDP could eventually, you know, in the near term 00:10:30.960 --> 00:10:34.220 or midterm could overtake UK's GDP per capita. 00:10:34.500 --> 00:10:37.139 And it wasn't that long ago around Brexit where 00:10:37.139 --> 00:10:39.320 there was huge political arguments about Polish 00:10:39.320 --> 00:10:41.779 plumbers. Like that was an issue. You know, all 00:10:41.779 --> 00:10:43.840 the Polish plumbers were coming to London and 00:10:43.840 --> 00:10:46.240 the UK and stealing the British plumbers' business. 00:10:47.150 --> 00:10:50.730 But now, you know, many years of policy, 2016 00:10:50.730 --> 00:10:52.370 was a long time ago, that was eight years ago. 00:10:52.590 --> 00:10:54.590 So the better part of a decade of policy, now 00:10:54.590 --> 00:10:56.149 you've got a situation where that's reversing. 00:10:56.250 --> 00:10:59.429 And actually soon Poland could be wealthier per 00:10:59.429 --> 00:11:01.929 capita than the United Kingdom, which was one 00:11:01.929 --> 00:11:04.370 of the wealthiest places in the world. So then 00:11:04.370 --> 00:11:05.789 you can see a direct link between, you know, 00:11:05.809 --> 00:11:09.570 bad policy and good policy. I think the most 00:11:09.570 --> 00:11:11.269 near -term one that we all need to worry about 00:11:11.269 --> 00:11:13.730 or certainly consider is what happens if the 00:11:13.730 --> 00:11:15.330 Democrats actually win in the United States. 00:11:16.099 --> 00:11:18.360 There's some very radical policies being suggested. 00:11:18.879 --> 00:11:21.000 Price controls on groceries probably doesn't 00:11:21.000 --> 00:11:24.559 matter so much for investors in Australia, but 00:11:24.559 --> 00:11:31.100 taxing unrealized capital gains. And the details 00:11:31.100 --> 00:11:33.159 of the policy, maybe it's not as bad as it is. 00:11:33.340 --> 00:11:37.279 Maybe it is. It's hard to tell. But if there's 00:11:37.279 --> 00:11:39.320 unrealized capital gains, people are going to 00:11:39.320 --> 00:11:42.220 have to sell stock. And it relates to your liquid 00:11:42.220 --> 00:11:44.440 wealth, which probably does capture. you know, 00:11:44.460 --> 00:11:47.559 a lot of very wealthy people. And if that's net 00:11:47.559 --> 00:11:49.340 selling, they have to sell portions of their 00:11:49.340 --> 00:11:51.940 significant wealth. That is going to have a pretty 00:11:51.940 --> 00:11:54.019 big impact and probably a very dampening effect 00:11:54.019 --> 00:11:58.600 on the United States economy. So I think markets 00:11:58.600 --> 00:12:01.120 is very clear. You know, if Trump wins, it'll 00:12:01.120 --> 00:12:03.879 probably be off to the races again. If Kamala 00:12:03.879 --> 00:12:05.539 wins, you have to think, well, you've got a very, 00:12:05.620 --> 00:12:07.620 you know, she was known as the most radical Democrat 00:12:07.620 --> 00:12:10.360 and is certainly with the handful of policies 00:12:10.360 --> 00:12:13.080 she's proven that that's actually what she believes 00:12:13.080 --> 00:12:15.559 and what she'll be running and governing on, 00:12:15.700 --> 00:12:18.879 that's probably one of the biggest risks in markets 00:12:18.879 --> 00:12:22.879 right now. What's the globalist expression? You 00:12:22.879 --> 00:12:28.019 will own nothing and be happy. Yeah, it's a tough 00:12:28.019 --> 00:12:32.960 one. But the reason why I bring that up is I 00:12:32.960 --> 00:12:35.440 always heard that essentially what they wanted 00:12:35.440 --> 00:12:39.210 to achieve was reset. um the global financial 00:12:39.210 --> 00:12:42.009 system right you know which the last time that 00:12:42.009 --> 00:12:44.269 happened was after world war ii so the only way 00:12:44.269 --> 00:12:47.190 for that really to do to work is to burn it all 00:12:47.190 --> 00:12:50.210 down and then build again and i just when i see 00:12:50.210 --> 00:12:52.129 the announcement what you're referring to with 00:12:52.129 --> 00:12:54.850 paris when she says she's going to un tax unrealized 00:12:54.850 --> 00:12:57.409 capital gains and people are like oh that's crazy 00:12:57.409 --> 00:12:59.850 but like hold on a second even in australia australia 00:12:59.850 --> 00:13:02.509 they tried to push that through with super right 00:13:02.509 --> 00:13:05.429 and it got knocked back it just makes me think 00:13:05.429 --> 00:13:08.169 that If you really want to blow someone up, you 00:13:08.169 --> 00:13:11.610 feed them a whole bunch of debt. The debt's out 00:13:11.610 --> 00:13:14.070 of control. Everyone's leveraged to the hill. 00:13:14.429 --> 00:13:16.429 Everyone's got houses. Everyone's got property. 00:13:17.149 --> 00:13:19.750 Everyone's practically up to the neck. When you 00:13:19.750 --> 00:13:22.009 go to restaurants in Sydney these days, you chat 00:13:22.009 --> 00:13:24.049 to the staff members, people aren't coming in 00:13:24.049 --> 00:13:26.610 as much as they used to. I'm just starting to 00:13:26.610 --> 00:13:29.070 wonder whether or not, talking about a bubble 00:13:29.070 --> 00:13:32.070 bursting, if Harris gets in and a policy that 00:13:32.070 --> 00:13:35.759 simple gets in, people... that are forced to 00:13:35.759 --> 00:13:36.879 sell, as you mentioned, it's going to have a 00:13:36.879 --> 00:13:39.419 domino impact. But if you look at BlackRock, 00:13:39.460 --> 00:13:41.679 BlackRock's just bought, what are they, by 40 00:13:41.679 --> 00:13:43.899 % of essentially residential housing last year 00:13:43.899 --> 00:13:46.379 in the past couple of years. They're not going 00:13:46.379 --> 00:13:49.700 to sell. So isn't there a situation where there's 00:13:49.700 --> 00:13:51.559 a whole bunch of people or companies that can 00:13:51.559 --> 00:13:53.960 essentially afford holding? Then the people that 00:13:53.960 --> 00:13:56.480 can't afford it will just crack. And then if 00:13:56.480 --> 00:13:58.139 that happens, they'll just come in and buy it 00:13:58.139 --> 00:14:00.379 cheap. And then their ownership just increases 00:14:00.379 --> 00:14:03.440 further. I'm not sure. I think these policies, 00:14:03.519 --> 00:14:05.100 they come from people who've never really worked 00:14:05.100 --> 00:14:07.899 in business, right? The wealth tax is really 00:14:07.899 --> 00:14:09.360 interesting. So I used to read a lot of kind 00:14:09.360 --> 00:14:11.139 of, I don't know, two, 300 -year -old English 00:14:11.139 --> 00:14:13.179 literature. And there's always like, you know, 00:14:13.179 --> 00:14:15.000 people losing their fortunes, you know, son would 00:14:15.000 --> 00:14:17.080 gamble and the father would be on about to sell 00:14:17.080 --> 00:14:19.799 his estate, you know, to settle the son's gambling 00:14:19.799 --> 00:14:21.919 debts, all those kinds of stories. And I always 00:14:21.919 --> 00:14:23.860 assumed that that's why so many of the landed 00:14:23.860 --> 00:14:27.230 estates were gone. The vast majority don't exist. 00:14:27.350 --> 00:14:29.389 The families aren't there. In many cases, the 00:14:29.389 --> 00:14:30.649 houses have been knocked down or they've been 00:14:30.649 --> 00:14:33.610 converted into museums or otherwise. But it turned 00:14:33.610 --> 00:14:34.870 out actually the answer was different. It was 00:14:34.870 --> 00:14:36.429 actually in the 60s and 70s. They brought in 00:14:36.429 --> 00:14:38.629 these wealth taxes, similar to what's been proposed 00:14:38.629 --> 00:14:41.230 in the United States. And so if you had a big 00:14:41.230 --> 00:14:43.409 country manor, you then had to pay a portion 00:14:43.409 --> 00:14:46.230 of that in tax. And obviously the only way you 00:14:46.230 --> 00:14:49.649 can pay that is to sell it. So that's actually 00:14:49.649 --> 00:14:52.210 where all the kind of very wealthy English aristocracy 00:14:52.210 --> 00:14:55.879 went and why most of those... most of the families 00:14:55.879 --> 00:14:57.340 that built those houses are no longer sitting 00:14:57.340 --> 00:14:59.620 in them. So it's interesting to see the long 00:14:59.620 --> 00:15:03.840 -term effects of these kinds of policies. But 00:15:03.840 --> 00:15:05.320 we'll see. I mean, in the polls, in the betting 00:15:05.320 --> 00:15:07.240 markets, it's pretty even. So it seems like it 00:15:07.240 --> 00:15:09.120 could go either way. And this is one of those 00:15:09.120 --> 00:15:11.120 moments that will be radically different if the 00:15:11.120 --> 00:15:13.220 left or the right wins in the United States. 00:15:14.090 --> 00:15:15.429 Yeah, it's going to be interesting. But I must 00:15:15.429 --> 00:15:17.990 say, like, you know, I've got young kids. What's 00:15:17.990 --> 00:15:21.190 the new one? Not MAGA. It's Make America Healthy 00:15:21.190 --> 00:15:22.909 Again. It kind of does resonate a little bit. 00:15:22.950 --> 00:15:25.250 Maybe I've just been listening to way too much 00:15:25.250 --> 00:15:28.190 Joe Rogan. Hey, that's definitely true. You know, 00:15:28.210 --> 00:15:30.570 you spend a week or even two weeks or even one 00:15:30.570 --> 00:15:32.110 week in the United States. You come back, you 00:15:32.110 --> 00:15:33.669 feel heavier. You are heavier. You know, there 00:15:33.669 --> 00:15:35.190 is something. They're doing something to their 00:15:35.190 --> 00:15:38.129 food. There's something going on there. It can't 00:15:38.129 --> 00:15:40.929 be good. But look, anyway, that's on the politics 00:15:40.929 --> 00:15:44.470 side. I just find it fascinating. So, okay, say 00:15:44.470 --> 00:15:47.629 they go through. What's the play? Do you hold 00:15:47.629 --> 00:15:49.370 what's currently in the portfolio you have now? 00:15:49.509 --> 00:15:51.610 Are there avenues that you look at? Like what 00:15:51.610 --> 00:15:54.330 happens essentially if the – I'll call it what 00:15:54.330 --> 00:15:57.230 it is. Let's say the nationalistic movement across 00:15:57.230 --> 00:16:01.509 the world gets in and then the globalist point 00:16:01.509 --> 00:16:03.570 of view kind of backs off a little bit. What's 00:16:03.570 --> 00:16:06.330 the play? The nationalists are generally on the 00:16:06.330 --> 00:16:08.129 right, so their policies are generally pretty 00:16:08.129 --> 00:16:10.330 pro -business and certainly want their own economies 00:16:10.330 --> 00:16:14.570 to thrive. They're not winning, though, so they're 00:16:14.570 --> 00:16:17.789 often winning the majority of votes or close 00:16:17.789 --> 00:16:19.389 to the majority. So you saw the Reform Party 00:16:19.389 --> 00:16:22.529 and the Conservatives combined probably did better 00:16:22.529 --> 00:16:27.450 than Labor on a vote basis. Similarly in France, 00:16:27.629 --> 00:16:29.889 you saw that in the first round of the elections, 00:16:30.149 --> 00:16:33.710 the right party actually won, but then the centre 00:16:33.710 --> 00:16:36.230 and the left colluded, pulled out some candidates, 00:16:36.309 --> 00:16:39.129 they didn't compete, and then kind of won -ish 00:16:39.129 --> 00:16:41.809 in the second round. It looks like now they weren't 00:16:41.809 --> 00:16:44.129 able to actually form a coalition and Macron's 00:16:44.129 --> 00:16:45.830 going to have to go. He's currently being impeached 00:16:45.830 --> 00:16:48.090 now. He's just basically holding on power without 00:16:48.090 --> 00:16:51.049 the mandate. So at the moment, the right is kind 00:16:51.049 --> 00:16:53.419 of... He's kind of winning, often winning the 00:16:53.419 --> 00:16:55.100 popular vote or winning a significant number 00:16:55.100 --> 00:16:56.879 of votes, but isn't actually in power anywhere. 00:16:57.179 --> 00:16:59.700 The closest would certainly be Trump in the United 00:16:59.700 --> 00:17:03.019 States. I don't think the right getting in is 00:17:03.019 --> 00:17:07.480 something to worry about for investors. I think 00:17:07.480 --> 00:17:09.539 also generally comes with more geopolitical stability 00:17:09.539 --> 00:17:12.000 as well. There's no doubt, you know, in these 00:17:12.000 --> 00:17:14.099 Biden years, the world is completely in flames 00:17:14.099 --> 00:17:16.960 and that kind of element of craziness, aggression, 00:17:17.160 --> 00:17:20.609 but also speaking to the dictators. that trump 00:17:20.609 --> 00:17:22.289 did actually was pretty effective and he didn't 00:17:22.289 --> 00:17:26.049 actually start any wars um i'm one of those people 00:17:26.049 --> 00:17:27.829 that's probably super against him at the beginning 00:17:27.829 --> 00:17:29.230 but then like you look at things like that and 00:17:29.230 --> 00:17:32.950 you're like wow actually that's um actually that's 00:17:32.950 --> 00:17:34.529 pretty good i mean the last thing you want is 00:17:34.529 --> 00:17:36.849 somebody who's not american is for america to 00:17:36.849 --> 00:17:38.849 be out there invading a bunch of countries but 00:17:38.849 --> 00:17:41.569 i saw some stat that like by the end of his by 00:17:41.569 --> 00:17:43.250 the end of his tenure obama was bombing seven 00:17:43.250 --> 00:17:46.549 countries you know from libya syria you know 00:17:46.549 --> 00:17:48.849 iraq it was just And they're doing drone strikes 00:17:48.849 --> 00:17:51.410 all around the world. I don't think anyone really 00:17:51.410 --> 00:17:55.869 wants that. So it's really the hard left winning 00:17:55.869 --> 00:17:59.150 in the United States. I think that's kind of 00:17:59.150 --> 00:18:02.250 scary. And the issue is we don't know many of 00:18:02.250 --> 00:18:04.430 Kamala's policies. What we do know is the ones 00:18:04.430 --> 00:18:07.690 she suggested are very radical. They're even 00:18:07.690 --> 00:18:10.269 being attacked by the New York Times and left 00:18:10.269 --> 00:18:12.349 -wing publications that would have basically 00:18:12.349 --> 00:18:14.309 been supporting her. So we don't know her full 00:18:14.309 --> 00:18:16.650 policies. But we could presume, for example, 00:18:17.109 --> 00:18:18.750 She would come down pretty hard on pharmaceutical 00:18:18.750 --> 00:18:22.569 companies and maybe that actually affects the 00:18:22.569 --> 00:18:25.029 industry quite significantly because without 00:18:25.029 --> 00:18:27.390 this handful of drugs that actually make a lot 00:18:27.390 --> 00:18:30.430 of money, the entire biotech industry runs at 00:18:30.430 --> 00:18:33.269 a massive loss, right? People are spending fortunes 00:18:33.269 --> 00:18:36.630 for a small chance of making it into that big 00:18:36.630 --> 00:18:38.150 pharma league, into that league where you can 00:18:38.150 --> 00:18:40.869 be acquired and have a blockbuster multibillion 00:18:40.869 --> 00:18:43.410 -dollar drug. That pot of gold is the thing that 00:18:43.410 --> 00:18:46.769 funds all the research and development. downstream 00:18:46.769 --> 00:18:49.369 of that or upstream of that rather. And so if 00:18:49.369 --> 00:18:51.970 that's cut off with radical price controls or 00:18:51.970 --> 00:18:55.250 maybe the United States, there's policies suggested 00:18:55.250 --> 00:18:58.650 that maybe US pricing matches international pricing. 00:18:58.890 --> 00:19:01.329 I mean, those kinds of things would have caused 00:19:01.329 --> 00:19:04.869 huge upheaval because the United States prices 00:19:04.869 --> 00:19:06.309 are just so much higher than everybody else. 00:19:07.910 --> 00:19:11.049 Those kinds of things would be pretty disastrous 00:19:11.049 --> 00:19:15.019 for sectors like biotechnology. But again, we 00:19:15.019 --> 00:19:18.079 don't have the policies. We don't know. Kamala's 00:19:18.079 --> 00:19:21.019 playing everything very close to her chest, doesn't 00:19:21.019 --> 00:19:23.359 really want to give interviews. There was one 00:19:23.359 --> 00:19:25.440 highly edited interview that she gave to CNN. 00:19:26.180 --> 00:19:28.420 It's been nearly two months, no press conferences, 00:19:28.759 --> 00:19:33.420 no kind of hostile interviews, no podcasts. So 00:19:33.420 --> 00:19:36.480 it's very hard to judge. But yeah, as I said 00:19:36.480 --> 00:19:38.059 at the start, what we have seen is not very good. 00:19:40.660 --> 00:19:43.089 Yeah, so again, my question is, you know, How 00:19:43.089 --> 00:19:46.089 do you invest in that? Like, oh, look, biotech, 00:19:46.089 --> 00:19:50.289 right, is a space you love. It's just interesting 00:19:50.289 --> 00:19:54.730 to see. Okay, what's interesting about saying 00:19:54.730 --> 00:19:56.710 make America healthy again, you're starting to 00:19:56.710 --> 00:19:58.910 see, which I just can't get my head around, you 00:19:58.910 --> 00:20:01.450 know, and I think we discussed it last time, 00:20:01.490 --> 00:20:04.230 like drugs like Eli Lilly, Novo Nordisk coming 00:20:04.230 --> 00:20:06.769 out were essentially. it's health beneficial 00:20:06.769 --> 00:20:08.769 people are losing substantial amounts of weight 00:20:08.769 --> 00:20:10.509 and then essentially you're losing money downstream 00:20:10.509 --> 00:20:12.849 but they insurance still refuses to essentially 00:20:12.849 --> 00:20:15.730 cover it so it's essentially it has become rich 00:20:15.730 --> 00:20:17.289 person's drug and now there's not much supply 00:20:17.289 --> 00:20:19.990 so i'm just starting to wonder if that's confusing 00:20:19.990 --> 00:20:21.369 i mean the good thing about what's happening 00:20:21.369 --> 00:20:23.609 there good thing about that i'll just give you 00:20:23.609 --> 00:20:25.970 a few like points like the good thing about those 00:20:25.970 --> 00:20:28.529 drugs is they will run off patent so you know 00:20:28.529 --> 00:20:31.029 zembik will be off patent uh not within five 00:20:31.029 --> 00:20:33.750 years But around like six, seven years, I think 00:20:33.750 --> 00:20:36.369 they've got left. And then those drugs, the current 00:20:36.369 --> 00:20:38.529 generation of weight loss drugs will become very 00:20:38.529 --> 00:20:42.789 cheap. I'm not sure what the, to be honest, I'm 00:20:42.789 --> 00:20:46.190 not sure what the policy answer is on that. Clearly, 00:20:46.269 --> 00:20:51.710 Eli Lilly and Novo Nordisk would like insurance 00:20:51.710 --> 00:20:53.910 companies to pay the current price. But I think 00:20:53.910 --> 00:20:56.609 if you're in a situation where you're covering, 00:20:56.769 --> 00:21:00.109 you know, 35, 40 million. And I think there's 00:21:00.109 --> 00:21:02.750 like maybe 45 million people on statins. So that 00:21:02.750 --> 00:21:04.549 would be kind of the upper end of what you could 00:21:04.549 --> 00:21:06.549 expect one of those drugs to achieve. I think 00:21:06.549 --> 00:21:08.069 that'd have to come down on pricing a lot. So 00:21:08.069 --> 00:21:09.589 it wouldn't be as expensive as everybody thinks. 00:21:10.690 --> 00:21:12.569 But I guess that's just playing out. To answer 00:21:12.569 --> 00:21:14.269 your question, we have a pretty tight risk model. 00:21:14.609 --> 00:21:17.009 So we'll be out of our positions if there's some 00:21:17.009 --> 00:21:19.369 massive sell -off on the back of radical left 00:21:19.369 --> 00:21:22.789 policy in the United States. There's some parts 00:21:22.789 --> 00:21:25.529 of our portfolio where that's harder. So we have 00:21:25.529 --> 00:21:28.230 some early stage companies, including Clarity 00:21:28.230 --> 00:21:30.089 Pharmaceuticals, which is still our largest position 00:21:30.089 --> 00:21:32.950 on account of going up something like seven times. 00:21:33.970 --> 00:21:37.569 What is Clarity? So Clarity Pharmaceuticals is 00:21:37.569 --> 00:21:40.750 doing a next generation of radiotherapies. So 00:21:40.750 --> 00:21:43.210 Australia's actually got one of the leading companies, 00:21:43.369 --> 00:21:46.690 Intilix, which is making serious money selling 00:21:46.690 --> 00:21:49.809 radio diagnostics. They haven't had success treating 00:21:49.809 --> 00:21:52.910 yet. Not significant success, but they are making 00:21:52.910 --> 00:21:59.690 a fortune competing against Lantheus. Clarity 00:21:59.690 --> 00:22:03.410 has got a drug which they've had in their early 00:22:03.410 --> 00:22:05.950 trials has seen much better effects than basically 00:22:05.950 --> 00:22:09.630 anything that's been seen in the treatment of 00:22:09.630 --> 00:22:12.009 cancers, specifically for Clarity prostate cancer. 00:22:13.309 --> 00:22:16.710 So that company is actually having a readout. 00:22:17.460 --> 00:22:19.740 this month. They've said this quarter they'll 00:22:19.740 --> 00:22:21.880 release results from the trial. Hasn't come out 00:22:21.880 --> 00:22:25.359 yet. These trials aren't blinded. So you do wonder 00:22:25.359 --> 00:22:27.099 if there's like information in the fact that 00:22:27.099 --> 00:22:29.420 it hasn't been released, but according to the 00:22:29.420 --> 00:22:32.119 timeline, it should be sometime this month. That's 00:22:32.119 --> 00:22:34.000 probably what will drive value in that stock. 00:22:34.279 --> 00:22:36.500 You know, if they can repeat what they saw in 00:22:36.500 --> 00:22:38.950 their earlier cohorts. It's basically a dose 00:22:38.950 --> 00:22:41.509 escalation. So they saw excellent data in the 00:22:41.509 --> 00:22:44.849 first two cohorts. Now they're trying higher 00:22:44.849 --> 00:22:47.430 doses. And if they see the same result or better, 00:22:47.650 --> 00:22:50.410 that'd be a huge value unlock for that company, 00:22:50.529 --> 00:22:53.750 even though it's appreciated so much. In terms 00:22:53.750 --> 00:22:56.690 of the rest of the portfolio, a bad election 00:22:56.690 --> 00:22:58.809 result would probably cause one of those broader 00:22:58.809 --> 00:23:02.150 sell -offs, I think. You'd have to assume taxes 00:23:02.150 --> 00:23:06.049 are going up. You'd have to assume one of these 00:23:06.049 --> 00:23:08.269 radical policies will come in you'd have to assume 00:23:08.269 --> 00:23:11.150 very significant government interference across 00:23:11.150 --> 00:23:14.049 the sector in the tech space you'd have to assume 00:23:14.049 --> 00:23:18.250 that probably m &a is a lot harder so already 00:23:18.250 --> 00:23:19.950 it's very difficult for big tech companies to 00:23:19.950 --> 00:23:25.509 buy smaller companies um so if that if that worsens 00:23:25.509 --> 00:23:28.029 that also that makes it harder it's less extreme 00:23:28.029 --> 00:23:31.920 in biotech where you know this selling to a major 00:23:31.920 --> 00:23:34.440 pharmaceutical company is quite typical. But 00:23:34.440 --> 00:23:36.339 even the tech sector, the fact that you had Google, 00:23:36.519 --> 00:23:38.460 Microsoft, companies like that that were willing 00:23:38.460 --> 00:23:41.920 to buy startups had this huge pull factor. Like 00:23:41.920 --> 00:23:43.960 that was kind of one of the targets, you know, 00:23:43.980 --> 00:23:46.259 get to a certain scale and then be acquired by 00:23:46.259 --> 00:23:47.980 one of those companies. You have to assume those 00:23:47.980 --> 00:23:50.259 kinds of deals are all off the table, which could 00:23:50.259 --> 00:23:55.960 cast a bit of a pallor over the sector. But again, 00:23:56.079 --> 00:23:57.809 you know, this is just... we don't we don't know 00:23:57.809 --> 00:23:59.910 the policies so we don't know but we we can guess 00:23:59.910 --> 00:24:02.990 that'd be pretty bad uh in that situation i imagine 00:24:02.990 --> 00:24:04.849 would would probably end up being net sellers 00:24:04.849 --> 00:24:07.289 i mean even even four weeks ago there was a pretty 00:24:07.289 --> 00:24:08.910 big sell -off at the beginning of last month 00:24:08.910 --> 00:24:11.589 i was actually just about to ask you like we 00:24:11.589 --> 00:24:13.190 can't talk about potentially what may or may 00:24:13.190 --> 00:24:15.309 not happen but we've just had practically a flash 00:24:15.309 --> 00:24:17.950 crash and then a massive run so you know what's 00:24:17.950 --> 00:24:20.529 happening there Yeah, look, we've been building 00:24:20.529 --> 00:24:23.029 for a while. The first six months, I mean, 2023 00:24:23.029 --> 00:24:25.309 was extremely strong for tech. The first six 00:24:25.309 --> 00:24:28.470 months were modestly strong. Some companies did 00:24:28.470 --> 00:24:30.130 exceptionally well. We were lucky to be in some 00:24:30.130 --> 00:24:32.470 of those, notably semiconductors. And then really 00:24:32.470 --> 00:24:34.130 from like June, July, they'd started to sell 00:24:34.130 --> 00:24:37.230 off. That was kind of the peak. And then there 00:24:37.230 --> 00:24:39.829 was that moment where you had the first polls 00:24:39.829 --> 00:24:42.769 that showed that Kamala was ahead in a honeymoon 00:24:42.769 --> 00:24:47.769 period. You had an assassination in Iran. uh 00:24:47.769 --> 00:24:50.930 presumably by the israelis but uh i did write 00:24:50.930 --> 00:24:54.009 an article about it and then was carefully corrected 00:24:54.009 --> 00:24:56.589 by an investor who said actually israel hasn't 00:24:56.589 --> 00:24:58.789 said that they did that and at the moment that 00:24:58.789 --> 00:25:02.029 is still an open question um which is fair comment 00:25:02.029 --> 00:25:04.910 uh but but that weekend we're assuming that iran 00:25:04.910 --> 00:25:06.589 was going to do one of those missile launchers 00:25:06.589 --> 00:25:09.730 uh like they did earlier in the year and so everybody 00:25:09.730 --> 00:25:13.599 was on an edge because of that um And then that 00:25:13.599 --> 00:25:15.680 Friday, there was an unemployment report where 00:25:15.680 --> 00:25:17.740 it looked like unemployment had started rising 00:25:17.740 --> 00:25:21.940 three months in a row. It had crossed some metric. 00:25:22.559 --> 00:25:25.259 And in the past, when unemployment has risen 00:25:25.259 --> 00:25:28.200 that much, that had always triggered a recession. 00:25:29.059 --> 00:25:31.240 Or not triggered a recession, but been associated 00:25:31.240 --> 00:25:34.119 with a recession that happened shortly after. 00:25:34.420 --> 00:25:36.880 And the reason for that is that these things 00:25:36.880 --> 00:25:39.829 are very cyclical. you know unemployment tends 00:25:39.829 --> 00:25:42.549 to go in one direction and trend which is not 00:25:42.549 --> 00:25:44.930 the case for most things in finance most things 00:25:44.930 --> 00:25:47.910 in finance uh the trends are very hard to capture 00:25:47.910 --> 00:25:51.250 um and very hard to pin down mathematically in 00:25:51.250 --> 00:25:53.210 unemployment generally you can have like eight 00:25:53.210 --> 00:25:55.230 year periods or 10 year periods where it just 00:25:55.230 --> 00:25:57.190 basically ticks down unemployment ticks down 00:25:57.190 --> 00:25:59.710 every month or you can have like a one year period 00:25:59.710 --> 00:26:01.670 where it goes up every month and the reason for 00:26:01.670 --> 00:26:04.400 that is you know people get fired, they then 00:26:04.400 --> 00:26:06.759 spend less at the margin, somewhere in the economy, 00:26:06.920 --> 00:26:08.700 somebody gets fired because of that, there's 00:26:08.700 --> 00:26:10.599 less spending. Or in the flip side, you know, 00:26:10.619 --> 00:26:12.940 a few extra people working, a few extra people 00:26:12.940 --> 00:26:14.759 are spending, somewhere in the economy, there's 00:26:14.759 --> 00:26:16.900 extra demand, and that results in net hiring. 00:26:17.759 --> 00:26:20.059 And then that continues into the next month, 00:26:20.180 --> 00:26:21.740 you know, there's another new set of people with 00:26:21.740 --> 00:26:23.980 jobs that are spending more. And so you get these 00:26:23.980 --> 00:26:26.339 like big trends are very slow, like unemployment 00:26:26.339 --> 00:26:28.559 spikes, and then like slowly trends down, then 00:26:28.559 --> 00:26:30.980 spikes, and then very slowly trends down. And 00:26:30.980 --> 00:26:33.670 now It looks like we're just in the early stages 00:26:33.670 --> 00:26:36.589 of one of those spikes. So the question is, you 00:26:36.589 --> 00:26:38.690 know, most of the time when unemployment starts 00:26:38.690 --> 00:26:43.130 rising, it continues with that kind of dynamic. 00:26:43.789 --> 00:26:46.250 So that also happened that same weekend. That 00:26:46.250 --> 00:26:48.990 report came out Friday. So three things that 00:26:48.990 --> 00:26:50.789 kind of hit markets. There was also some issue 00:26:50.789 --> 00:26:53.430 in Japan where carry trade was unwinding. They 00:26:53.430 --> 00:26:55.829 were going to raise rates. And so people who 00:26:55.829 --> 00:27:00.490 had... That was fascinating. Yes. All happening 00:27:00.490 --> 00:27:03.140 at once. So much so that I'm actually off to 00:27:03.140 --> 00:27:05.059 Japan like practically in a couple of weeks to 00:27:05.059 --> 00:27:07.259 take advantage of that yen. But what I found 00:27:07.259 --> 00:27:12.740 fascinating about that is when that spiked, it 00:27:12.740 --> 00:27:17.759 was literally as soon as the central bank intervened, 00:27:17.759 --> 00:27:21.140 it almost like just kicked off that unwinding 00:27:21.140 --> 00:27:23.880 and essentially that flash crash. And as soon 00:27:23.880 --> 00:27:26.700 as it just felt like as soon as when the Aussie 00:27:26.700 --> 00:27:29.119 yen was around 92. And they stepped in again 00:27:29.119 --> 00:27:30.880 for the last time and then it kind of stabilized. 00:27:31.059 --> 00:27:34.339 It was almost selling is done. And then it just 00:27:34.339 --> 00:27:36.839 started to tick along again. Yeah. Well, there 00:27:36.839 --> 00:27:38.299 was a moment where it was down. Was it down by 00:27:38.299 --> 00:27:40.740 maybe 18 %? I don't have any Japanese exposure, 00:27:40.859 --> 00:27:42.339 so it's not something I track closely, but it 00:27:42.339 --> 00:27:44.740 did look like one of those 1987 moments. And 00:27:44.740 --> 00:27:46.700 it did look like the rest of the market might 00:27:46.700 --> 00:27:49.539 follow it, but it didn't. Actually, that morning 00:27:49.539 --> 00:27:51.960 was the low and then things kind of recovered. 00:27:52.640 --> 00:27:54.759 And, you know, Iran didn't launch the missiles. 00:27:55.900 --> 00:27:58.559 things aren't doing that badly. So one data point 00:27:58.559 --> 00:28:02.980 doesn't suggest a recession necessarily. And 00:28:02.980 --> 00:28:06.519 then Kamala kind of started, had that honeymoon 00:28:06.519 --> 00:28:08.220 period and started falling again in the polls 00:28:08.220 --> 00:28:10.259 to be more and more close to the neck and neck 00:28:10.259 --> 00:28:12.539 with Trump. So those three things, actually four 00:28:12.539 --> 00:28:14.660 things, if you include Japan, kind of settled. 00:28:15.180 --> 00:28:18.299 over the weeks that followed and markets recovered. 00:28:18.660 --> 00:28:21.099 They haven't reached the highs that they were 00:28:21.099 --> 00:28:24.079 at. I kind of feel like whenever we talk, there's 00:28:24.079 --> 00:28:25.700 always like a theme in the market, you know, 00:28:25.720 --> 00:28:27.480 that everyone's doing. And I believe the theme 00:28:27.480 --> 00:28:29.700 right now is everyone's expecting or anticipating 00:28:29.700 --> 00:28:32.059 these interest rate cuts. So everyone's saying, 00:28:32.220 --> 00:28:36.819 oh, rates are being cut. You need to rotate from 00:28:36.819 --> 00:28:39.579 mega caps into small caps to essentially capture, 00:28:39.720 --> 00:28:41.960 you know, when rates get cut, small caps does 00:28:41.960 --> 00:28:44.539 well. Do you think that's going to be the case 00:28:44.539 --> 00:28:46.460 here? It's certainly happening in reverse. The 00:28:46.460 --> 00:28:48.880 issue is often the rate -cutting environments 00:28:48.880 --> 00:28:50.960 are the worst time to own stocks, not because 00:28:50.960 --> 00:28:53.480 of the rate -cutting, but because of the rate 00:28:53.480 --> 00:28:55.740 -cutting. Why are people cutting rates? Usually 00:28:55.740 --> 00:28:58.480 it happens when things are really weak. There's 00:28:58.480 --> 00:29:01.240 basically two things that can happen, and this 00:29:01.240 --> 00:29:02.759 is going to be like markets can go up or down, 00:29:02.839 --> 00:29:05.380 so it's not super insightful, but I think it's 00:29:05.380 --> 00:29:07.910 the right way to look at it anyway. Either the 00:29:07.910 --> 00:29:11.549 markets stay kind of soft and rates cut to try 00:29:11.549 --> 00:29:14.210 and stimulate things because real estate is falling 00:29:14.210 --> 00:29:17.549 in major parts of the United States. There's 00:29:17.549 --> 00:29:20.029 valid reason for inflation is down. There's valid 00:29:20.029 --> 00:29:22.210 reason to cut cuts. Ideally, you have this kind 00:29:22.210 --> 00:29:26.240 of weak. flatlining economy with central bankers 00:29:26.240 --> 00:29:28.680 trying to stimulate through the very blunt policies 00:29:28.680 --> 00:29:32.819 that they have, namely rate movements. If that 00:29:32.819 --> 00:29:35.140 happens, you could see a lot of excess capital, 00:29:35.259 --> 00:29:37.279 you know, flowing into the pointer into the market, 00:29:37.380 --> 00:29:38.960 which is kind of how it works. You know, like 00:29:38.960 --> 00:29:41.839 when money is kind of pushed into the market, 00:29:41.859 --> 00:29:44.539 it kind of flows through and really affects kind 00:29:44.539 --> 00:29:46.779 of the higher risky stuff. Similarly, when it's 00:29:46.779 --> 00:29:48.829 pulled out. you know, everything's kind of fine. 00:29:48.849 --> 00:29:51.109 The high risky stuff gets smashed the most. So 00:29:51.109 --> 00:29:53.210 the best outcome is probably something where 00:29:53.210 --> 00:29:56.049 we kind of muddle through. Things are not great, 00:29:56.089 --> 00:29:58.950 but not bad. But there's a lot of financial stimulus. 00:29:59.109 --> 00:30:01.730 That would be the best outcome for stocks. The 00:30:01.730 --> 00:30:03.470 worst outcome for stocks is actually the unemployment 00:30:03.470 --> 00:30:06.950 cycle is kicking off. And then you get more and 00:30:06.950 --> 00:30:09.190 more people losing jobs. Rates are still very 00:30:09.190 --> 00:30:10.990 high, very restrictive in the United States. 00:30:11.829 --> 00:30:14.009 I'm not sure, not as restrictive in Australia, 00:30:14.250 --> 00:30:17.779 but still restrictive. And, you know, a recession 00:30:17.779 --> 00:30:22.200 happens ahead of rate cuts. And then stocks fall, 00:30:22.440 --> 00:30:24.500 rates go down, heaps of money is pumped into 00:30:24.500 --> 00:30:26.420 the market, and we go again. So I think that's 00:30:26.420 --> 00:30:27.980 probably the worst case scenario because that 00:30:27.980 --> 00:30:30.000 would involve, you know, very turbulent 6 to 00:30:30.000 --> 00:30:35.279 12 months ahead of us. So, yeah, stocks will 00:30:35.279 --> 00:30:37.779 go up or down. They'll fluctuate, as somebody 00:30:37.779 --> 00:30:40.519 once said. It's going to be black or white, black 00:30:40.519 --> 00:30:42.519 or red. It might be a white ball. See what happens. 00:30:42.539 --> 00:30:45.839 What I do think, now more than ever, So the first, 00:30:45.900 --> 00:30:48.279 even the first 10, maybe even 15 years of my 00:30:48.279 --> 00:30:52.259 career, wait, is it 15 years? Yeah, actually 00:30:52.259 --> 00:30:55.779 I'm getting old. The markets kind of really moved 00:30:55.779 --> 00:30:58.200 in waves, you know, it was like everything up, 00:30:58.240 --> 00:31:00.920 everything down. And the junkier... you were 00:31:00.920 --> 00:31:02.799 the better you the more you went up particularly 00:31:02.799 --> 00:31:04.259 if you're a high growth tech stock for example 00:31:04.259 --> 00:31:07.140 or a biotech when markets were rallying like 00:31:07.140 --> 00:31:09.519 it's almost the worst company is probably the 00:31:09.519 --> 00:31:10.900 wrong way to put it but certainly the riskier 00:31:10.900 --> 00:31:12.900 companies rallied the most and then in the sell 00:31:12.900 --> 00:31:14.480 -offs which should happen pretty often they were 00:31:14.480 --> 00:31:16.740 short they were sharp and the riskier stuff got 00:31:16.740 --> 00:31:19.559 smacked a lot more that seems that hasn't really 00:31:19.559 --> 00:31:21.559 been the case like there was a wave in the beginning 00:31:21.559 --> 00:31:25.279 of 2023 but over the last year or so There hasn't 00:31:25.279 --> 00:31:28.140 been that big wave of everything going up or 00:31:28.140 --> 00:31:30.279 everything going down. In fact, it's been a very 00:31:30.279 --> 00:31:33.220 small number of stocks, notably semiconductors 00:31:33.220 --> 00:31:35.779 and a few independent growth stocks that have 00:31:35.779 --> 00:31:38.660 performed exceptionally well and given the market 00:31:38.660 --> 00:31:41.720 low to modest returns. And the vast majority 00:31:41.720 --> 00:31:44.599 is languished. And you can measure this. So people 00:31:44.599 --> 00:31:47.759 measure how much of the index movement is driven 00:31:47.759 --> 00:31:50.000 by a small number of companies. And at the moment, 00:31:50.039 --> 00:31:54.019 it's kind of one of the maximum of that. of that 00:31:54.019 --> 00:31:57.700 measurement that we've seen. So this is a period 00:31:57.700 --> 00:31:59.319 where you have to be in the high -performing 00:31:59.319 --> 00:32:01.359 stocks. You need to be in companies that are 00:32:01.359 --> 00:32:03.380 exciting the market, that are delivering exceptional 00:32:03.380 --> 00:32:06.240 results. We focus on companies growing over 100%. 00:32:06.240 --> 00:32:08.119 A few of our core holdings did exceptionally 00:32:08.119 --> 00:32:11.279 well in their results, and then the stocks rallied 00:32:11.279 --> 00:32:14.920 quite a lot. But the market itself has been pretty 00:32:14.920 --> 00:32:17.779 lackluster. So, yeah, I really think it's a stock 00:32:17.779 --> 00:32:20.799 selector's game at the moment. Kind of feels 00:32:20.799 --> 00:32:23.160 that way. So speaking of stocks, let's cut through 00:32:23.160 --> 00:32:25.809 them. Since we're discussing tech, why don't 00:32:25.809 --> 00:32:29.589 we begin there? NVIDIA just had their results 00:32:29.589 --> 00:32:34.109 out, which I find results so funny. It's like 00:32:34.109 --> 00:32:37.470 people expect them. It doesn't matter what they 00:32:37.470 --> 00:32:42.789 are. You could completely lose a huge amount 00:32:42.789 --> 00:32:44.829 of money, but if everyone expected you to lose 00:32:44.829 --> 00:32:47.029 more than you lost, the stock goes up. It's just 00:32:47.029 --> 00:32:50.049 madness, right? Can you explain to people what 00:32:50.049 --> 00:32:53.000 happened with NVIDIA? Why the sell -off and essentially, 00:32:53.160 --> 00:32:55.480 you know, what do you think is happening in that 00:32:55.480 --> 00:32:58.299 entire space? Because I remember you and then, 00:32:58.319 --> 00:33:00.900 oh, yeah, NVIDIA. And then we also discussed 00:33:00.900 --> 00:33:03.200 like CrowdStrike, you know, with Microsoft. Can 00:33:03.200 --> 00:33:07.279 you, what's happening in that space? Yeah, I 00:33:07.279 --> 00:33:11.500 mean, NVIDIA ran very hard, right? It had gone 00:33:11.500 --> 00:33:14.960 up substantially, you know, over, I think it 00:33:14.960 --> 00:33:17.339 was nine times. I don't think it quite hit 10 00:33:17.339 --> 00:33:20.880 times. It was very close from the lows. So it 00:33:20.880 --> 00:33:22.740 had run very hot and had basically been matched 00:33:22.740 --> 00:33:27.680 by an increase in profits over that period. There 00:33:27.680 --> 00:33:30.480 was some bad news. There was a delay to their 00:33:30.480 --> 00:33:32.819 next generation, which probably doesn't affect 00:33:32.819 --> 00:33:35.420 their long -term value at all, but certainly 00:33:35.420 --> 00:33:38.240 had a headline. I think everybody was kind of 00:33:38.240 --> 00:33:41.220 max long semiconductors if there's as much as 00:33:41.220 --> 00:33:43.400 you can. I mean, every share needs to be owned 00:33:43.400 --> 00:33:45.799 by somebody, so these things are strange. But 00:33:45.799 --> 00:33:48.490 it did seem to become a very crowded trade. And 00:33:48.490 --> 00:33:50.569 those things, the semiconductors are all unwound. 00:33:50.569 --> 00:33:53.869 They're all down 30%, 40%, 50 % major companies. 00:33:54.150 --> 00:33:57.849 So NVIDIA came out with results. It's just the 00:33:57.849 --> 00:33:59.529 way I see it is we're in a particular regime 00:33:59.529 --> 00:34:02.569 at the moment. The regime is markets, most companies 00:34:02.569 --> 00:34:05.309 do average or poorly because most people, because 00:34:05.309 --> 00:34:08.570 financial conditions are restrictive. Most people 00:34:08.570 --> 00:34:10.449 are kind of suffering at the moment. Interest 00:34:10.449 --> 00:34:13.710 rates are high. Rents are high. The average company 00:34:13.710 --> 00:34:15.730 and the average person isn't doing spectacularly 00:34:15.730 --> 00:34:17.469 well. But there's a handful of sectors, including 00:34:17.469 --> 00:34:20.809 semis, where there is immense real demand and 00:34:20.809 --> 00:34:23.369 investor demand. That's like our thesis for the 00:34:23.369 --> 00:34:25.829 current regime. Regimes don't last forever, but 00:34:25.829 --> 00:34:27.389 I think it's the right framework to think. And 00:34:27.389 --> 00:34:29.170 at the moment, we're still in that regime. And 00:34:29.170 --> 00:34:31.389 I think the result was evidence of that. So you 00:34:31.389 --> 00:34:34.769 had NVIDIA posting quarterly growth of 15%. So 00:34:34.769 --> 00:34:38.630 it's 15 % bigger than it was the quarter previously. 00:34:38.829 --> 00:34:40.570 So it's still growing, still immense demand, 00:34:40.829 --> 00:34:45.719 still... order book out into the future, effectively 00:34:45.719 --> 00:34:49.840 selling what it can make. And I think it's 120 00:34:49.840 --> 00:34:54.440 % plus over where it was a year before. So you've 00:34:54.440 --> 00:34:57.219 still got that. Now, the flip side is everyone's 00:34:57.219 --> 00:34:58.780 trying to think, okay, we've seen this many times 00:34:58.780 --> 00:35:00.639 before. Even if you're young, you've probably 00:35:00.639 --> 00:35:04.360 seen two or three semiconductor cycles. How does 00:35:04.360 --> 00:35:06.559 this end? And are there signs of that? And there 00:35:06.559 --> 00:35:09.610 kind of are signs. So there's been a couple of 00:35:09.610 --> 00:35:11.489 the AI companies that were buying chips that 00:35:11.489 --> 00:35:13.610 have folded. You know, one notably got bought 00:35:13.610 --> 00:35:18.010 by Microsoft. But the hyperscalers are still 00:35:18.010 --> 00:35:20.730 continuing with their massive 100 billion plus 00:35:20.730 --> 00:35:24.530 CapEx plans, much of which will go to NVIDIA. 00:35:24.869 --> 00:35:28.849 And so they haven't signaled any desire to pull 00:35:28.849 --> 00:35:31.730 back. And it's also become a scientific question. 00:35:31.829 --> 00:35:34.130 The question is, will these models continue to 00:35:34.130 --> 00:35:38.739 improve with increasing scale? And at the moment, 00:35:38.820 --> 00:35:40.880 they are still improving with each generation 00:35:40.880 --> 00:35:45.139 with increasing scale, which means the investment 00:35:45.139 --> 00:35:48.659 so far is justified. And there have been some 00:35:48.659 --> 00:35:51.480 announcements. You know, Klarna said they got 00:35:51.480 --> 00:35:55.019 massive cost reductions. Oracle came out and 00:35:55.019 --> 00:35:58.599 said they had huge cost reductions. The increase 00:35:58.599 --> 00:36:00.420 in productivity that I've seen in our work is 00:36:00.420 --> 00:36:04.760 just incredible. You know, you can have a meeting 00:36:04.760 --> 00:36:08.050 with somebody and, you know, it will... You know, 00:36:08.050 --> 00:36:10.210 we've got a venture studio, so occasionally we 00:36:10.210 --> 00:36:12.650 do meetings where we'll develop products. You 00:36:12.650 --> 00:36:14.389 know, you can take a meeting, you can put that 00:36:14.389 --> 00:36:18.570 recording into one of the open models, say a 00:36:18.570 --> 00:36:21.070 chat GPT, and ask it to spit out like a spec 00:36:21.070 --> 00:36:23.769 and a proposal, and it will just do that. You 00:36:23.769 --> 00:36:25.969 know, and 30 seconds later, you'll have something 00:36:25.969 --> 00:36:27.630 that could have taken hours, you know, to pull 00:36:27.630 --> 00:36:30.570 together and probably, you know, not just hours 00:36:30.570 --> 00:36:32.710 of one person, you will have to meet, discuss, 00:36:33.070 --> 00:36:38.619 finesse, structure. and then right. That's all 00:36:38.619 --> 00:36:42.139 kind of automatic now. The productivity is immense 00:36:42.139 --> 00:36:46.519 and people are seeing it everywhere. And while 00:36:46.519 --> 00:36:48.039 that's happening, we're still in this semiconductor 00:36:48.039 --> 00:36:50.800 regime. There's still benefits to having more 00:36:50.800 --> 00:36:53.960 of these. None of the hyperscalers can miss this. 00:36:54.639 --> 00:36:57.219 They can't be left out. They need to have a play. 00:36:59.679 --> 00:37:02.940 and they're all determined to win. And so at 00:37:02.940 --> 00:37:06.099 the moment, NVIDIA is the only supplier of basically 00:37:06.099 --> 00:37:09.019 the most valuable commodity in the world right 00:37:09.019 --> 00:37:10.619 now. And I say commodity, but it's not really 00:37:10.619 --> 00:37:11.880 a commodity because they're the only people that 00:37:11.880 --> 00:37:15.800 can make it. It will be at some point. There 00:37:15.800 --> 00:37:18.639 will be alternatives. And that's when the regime 00:37:18.639 --> 00:37:21.730 will most certainly change. But as of today, 00:37:21.829 --> 00:37:24.610 the message I got from that result was that we're 00:37:24.610 --> 00:37:26.690 still in that regime. And the company of that 00:37:26.690 --> 00:37:29.010 scale is still 15 % bigger than it was three 00:37:29.010 --> 00:37:33.230 months ago. And the performance is still there 00:37:33.230 --> 00:37:35.090 in the stock as well. It's still up quite a lot. 00:37:35.170 --> 00:37:36.690 Unless you bought at the highs or something, 00:37:36.869 --> 00:37:38.829 you're still probably sitting on enormous gains. 00:37:39.210 --> 00:37:42.030 And I also had a feeling that a lot of professional 00:37:42.030 --> 00:37:44.150 investors aren't in NVIDIA. I really get that 00:37:44.150 --> 00:37:46.849 feeling. On the one hand, it's ripped. On the 00:37:46.849 --> 00:37:50.440 flip side... Most investors I speak to think 00:37:50.440 --> 00:37:53.440 it's a bubble. They don't want to buy in. They 00:37:53.440 --> 00:37:56.260 think they've missed it. It's not one of those 00:37:56.260 --> 00:37:59.559 situations where everybody seems to own it. That's 00:37:59.559 --> 00:38:02.940 just my impression. Well, that's interesting. 00:38:03.179 --> 00:38:04.719 That means a whole lot of cash is sitting on 00:38:04.719 --> 00:38:06.860 the sidelines and we see what FOMO does to companies. 00:38:07.840 --> 00:38:12.079 The other comment you made in the newsletter 00:38:12.079 --> 00:38:14.360 just made me stop and think about it was I think 00:38:14.360 --> 00:38:16.039 you're talking about the different tiers, right? 00:38:16.159 --> 00:38:18.670 You've got Blue Chip. the mid cycle and then 00:38:18.670 --> 00:38:21.769 you got the bootstrappers you know i mean the 00:38:21.769 --> 00:38:23.389 ones coming up when there's money and we see 00:38:23.389 --> 00:38:25.869 it in every single sector of the market you know 00:38:25.869 --> 00:38:28.230 when essentially it's hammering but uranium bit 00:38:28.230 --> 00:38:31.170 hell you know i don't know weight loss drug well 00:38:31.170 --> 00:38:33.869 whatever it is be a tech the money just pours 00:38:33.869 --> 00:38:36.190 in the investment gets thrown at it everyone's 00:38:36.190 --> 00:38:38.789 just like right risk on i think you made a comment 00:38:38.789 --> 00:38:42.010 that you know what happens if um essentially 00:38:42.010 --> 00:38:44.929 that well of money that investment money kind 00:38:44.929 --> 00:38:47.030 of dries up then essentially the bottom tier 00:38:47.030 --> 00:38:49.510 like dominoes falls first in the mid -tier and 00:38:49.510 --> 00:38:53.250 then big might be keep going but then but what 00:38:53.250 --> 00:38:55.269 made me just think about that particular point 00:38:55.269 --> 00:38:58.730 is you said that one of the bottom tiers fell 00:38:58.730 --> 00:39:02.269 recently but microsoft just bought it so what's 00:39:02.269 --> 00:39:07.050 happening here do you reckon that if a small 00:39:07.050 --> 00:39:09.610 one stumbles just a major conglomerate is going 00:39:09.610 --> 00:39:11.920 to swallow it and then essentially just keeps 00:39:11.920 --> 00:39:16.860 going or what's happening? Yeah, I mean, again, 00:39:17.000 --> 00:39:18.880 it comes to the regime. So at the moment, you 00:39:18.880 --> 00:39:21.599 know, if a startup's bought a bunch of GPUs and 00:39:21.599 --> 00:39:23.500 they want to sell, then there's people that will 00:39:23.500 --> 00:39:26.980 buy them just for their GPUs, you know. The question 00:39:26.980 --> 00:39:30.019 is, you know, I think where I was going in that 00:39:30.019 --> 00:39:33.639 comment, I was trying to say that there's only 00:39:33.639 --> 00:39:35.980 going to be a few of these models. There's been 00:39:35.980 --> 00:39:37.400 a very small number of these models that end 00:39:37.400 --> 00:39:40.320 up making money. There'll probably be many models 00:39:40.320 --> 00:39:42.860 that, you know, are in use, but there'll be very 00:39:42.860 --> 00:39:44.820 few that actually make significant money. But 00:39:44.820 --> 00:39:49.059 they're all, it's taking huge investments to 00:39:49.059 --> 00:39:51.880 stay up to date. So, you know, if you go through 00:39:51.880 --> 00:39:53.860 them, you've got Microsoft and OpenAI, you've 00:39:53.860 --> 00:39:57.119 got Meta's Llama, which is the open source version. 00:39:58.460 --> 00:40:01.239 And I guess AWS doesn't really have one, but 00:40:01.239 --> 00:40:03.840 they are developing their own chips. And then 00:40:03.840 --> 00:40:05.659 you have Google with Gemini, who's actually got 00:40:05.659 --> 00:40:08.260 their own chips, TPUs that they're using for 00:40:08.260 --> 00:40:10.280 their own training. So you've got three there. 00:40:10.400 --> 00:40:13.900 You've got Google, Microsoft OpenAI, Meta's Lama 00:40:13.900 --> 00:40:15.820 as an open source option. Where do the others 00:40:15.820 --> 00:40:18.219 fit below then? It's very hard to say. Now, at 00:40:18.219 --> 00:40:20.119 the moment, a lot of people think Claude is better 00:40:20.119 --> 00:40:22.039 for something, so Anthropic, which is one of 00:40:22.039 --> 00:40:25.280 these startups. So maybe they find a niche. But, 00:40:25.320 --> 00:40:27.500 you know, it's like I had a Claude switch and 00:40:27.500 --> 00:40:28.940 I was like, wow, this is actually better. And 00:40:28.940 --> 00:40:30.989 then OpenAI got better. And so I canceled my 00:40:30.989 --> 00:40:32.769 clause subscription. Now temporarily, it looks 00:40:32.769 --> 00:40:34.309 like clause better. And I was like, okay, if 00:40:34.309 --> 00:40:36.090 that's, I'll give it another try and see if it's 00:40:36.090 --> 00:40:39.030 better. It seems to be. But I'm not going to, 00:40:39.030 --> 00:40:40.530 there's no way you're going to end up with like 00:40:40.530 --> 00:40:42.730 four subscriptions to these things. And then 00:40:42.730 --> 00:40:44.730 below anthropic, there's a whole nother tier 00:40:44.730 --> 00:40:47.590 of people building models. There's been a similar 00:40:47.590 --> 00:40:50.750 thing happening in imaging, in music, where the 00:40:50.750 --> 00:40:53.550 lead's kind of changing in video. But there's 00:40:53.550 --> 00:40:55.949 often like a new company that comes in and says, 00:40:56.010 --> 00:40:58.269 okay, ours is temporarily better. But then the 00:40:58.269 --> 00:40:59.829 funny thing is for those ones is often they use 00:40:59.829 --> 00:41:01.769 each other's for training. So if somebody makes 00:41:01.769 --> 00:41:05.050 a new advance, then people can use that model 00:41:05.050 --> 00:41:09.139 to then improve their own models. yeah it's just 00:41:09.139 --> 00:41:10.699 a it's just a fun you know what it's kind it 00:41:10.699 --> 00:41:13.980 is you know like from an uh you know sorry just 00:41:13.980 --> 00:41:17.820 an invent an inventor perspective it's just awesome 00:41:17.820 --> 00:41:20.400 to see it's kind of like the rat race is on so 00:41:20.400 --> 00:41:23.219 it's like a arms war or you know it's like streaming 00:41:23.219 --> 00:41:25.760 wars like you know who's gonna put out more content 00:41:25.760 --> 00:41:29.139 like it's just literally but it's not it's not 00:41:29.139 --> 00:41:31.559 negative it's literally like oh my god this is 00:41:31.559 --> 00:41:33.480 fascinating like you talk about chat jpt it's 00:41:33.480 --> 00:41:35.340 practically my best staff member and it doesn't 00:41:35.340 --> 00:41:37.980 talk back She's an absolute legend. Would you 00:41:37.980 --> 00:41:42.760 say you use ChatGPT every day? Oh, yeah. Who 00:41:42.760 --> 00:41:45.340 doesn't? It's like the efficiency is just, I'm 00:41:45.340 --> 00:41:46.719 probably going to, in this conversation, I'm 00:41:46.719 --> 00:41:48.860 going to take the transcript, stick it in and 00:41:48.860 --> 00:41:52.079 go edit it. And then that there would take normally, 00:41:52.199 --> 00:41:53.940 I don't know, four hours to do properly. It'll 00:41:53.940 --> 00:41:56.079 spit it out in like 10 minutes. It's just remarkable. 00:41:56.079 --> 00:41:58.320 I spent months to do that for our podcast, you 00:41:58.320 --> 00:42:01.719 know? I think I did as well. I paid someone the 00:42:01.719 --> 00:42:03.719 first three times, but now you just, you know. 00:42:04.360 --> 00:42:07.780 But what's crazy is it's $30 a month. I kind 00:42:07.780 --> 00:42:09.460 of feel like I'm cheaping out and I'm going to 00:42:09.460 --> 00:42:11.179 have to upgrade to the full business one just 00:42:11.179 --> 00:42:13.840 to, you know. It was a study done. I think it 00:42:13.840 --> 00:42:16.760 was Microsoft looking at how people are using 00:42:16.760 --> 00:42:19.960 their co -pilot. And it was something like, again, 00:42:20.039 --> 00:42:22.260 it was like, say, $30 a month, but it was saving, 00:42:22.320 --> 00:42:24.380 you know, a day a week. You know, it was that 00:42:24.380 --> 00:42:27.719 level of improvement for people. So you think 00:42:27.719 --> 00:42:29.619 of how much somebody earns in a day. That could 00:42:29.619 --> 00:42:32.030 be, you know. I don't know, if you're 100 grand, 00:42:32.170 --> 00:42:33.769 20 grand a year. Now, most people aren't 100 00:42:33.769 --> 00:42:35.309 grand. Let's say you're on 50 grand, that's 10 00:42:35.309 --> 00:42:38.210 grand a year. You know, the amount of value that 00:42:38.210 --> 00:42:40.309 you're getting versus the amount that you're 00:42:40.309 --> 00:42:43.110 spending, there's this huge differential. And 00:42:43.110 --> 00:42:45.789 that's part of the bull case. That's kind of 00:42:45.789 --> 00:42:47.349 why we're in this regime. That's why everybody's 00:42:47.349 --> 00:42:49.769 spending. The one that blew my mind is I was 00:42:49.769 --> 00:42:51.969 speaking to a fund manager and we were talking 00:42:51.969 --> 00:42:53.849 about CHEPT, same conversation. He goes, yeah, 00:42:53.909 --> 00:42:56.130 I asked her to do an analysis on BHP for me. 00:42:56.570 --> 00:42:58.650 His next comment, this guy's pretty high up, 00:42:58.730 --> 00:43:01.409 pretty big shop. And he's like, I fear for any 00:43:01.409 --> 00:43:02.989 young junior that wants to be an analyst coming 00:43:02.989 --> 00:43:06.170 through the ranks. Yeah, I mean, it's better. 00:43:06.309 --> 00:43:07.929 One thing, so we use a lot of expert networks. 00:43:08.409 --> 00:43:10.230 It's kind of a new development. They used to 00:43:10.230 --> 00:43:12.389 be very hard to get. It'd be something like GLG, 00:43:12.449 --> 00:43:14.780 the very... very annoying contracts, very poorly, 00:43:14.920 --> 00:43:17.239 probably purposely poorly designed. So you'll 00:43:17.239 --> 00:43:19.599 have to pay, I don't know, 20, 30 grand US and 00:43:19.599 --> 00:43:22.320 they'll give you 25 calls. And then, you know, 00:43:22.340 --> 00:43:24.900 some companies obviously spend, would spend millions 00:43:24.900 --> 00:43:27.679 of dollars on these kinds of things. And then 00:43:27.679 --> 00:43:30.980 you have to go, you do the call, you'd have to 00:43:30.980 --> 00:43:33.340 do the work before. You'd always have this thing 00:43:33.340 --> 00:43:34.920 where you kind of want to draw, there's kind 00:43:34.920 --> 00:43:37.119 of like a skill to it that you'd have to draw. 00:43:37.199 --> 00:43:38.739 You have to draw, that would have the insight 00:43:38.739 --> 00:43:40.159 that you need, but you'd have to draw it out 00:43:40.159 --> 00:43:42.099 of them. And like if you've got some chatty American, 00:43:42.260 --> 00:43:45.059 often they'll just know the most important things, 00:43:45.119 --> 00:43:46.619 but sometimes they don't. They're like subject 00:43:46.619 --> 00:43:48.860 matter experts and you have to really try and 00:43:48.860 --> 00:43:51.340 draw it out of them. But then there are these 00:43:51.340 --> 00:43:53.059 new business models, well, they're a few years 00:43:53.059 --> 00:43:55.260 old now, where people basically pay a subscription 00:43:55.260 --> 00:43:57.039 and they'll put all the transcripts online. This 00:43:57.039 --> 00:44:00.679 is Tegas, AlphaSense, a bunch of others, relatively 00:44:00.679 --> 00:44:02.619 cheap to set up. There's a lot of competition. 00:44:04.000 --> 00:44:07.010 But then every time you... Instead of paying 00:44:07.010 --> 00:44:10.090 effectively a few thousand for a call and being 00:44:10.090 --> 00:44:12.610 stuck in this awful bundle, you'd pay a few hundred, 00:44:12.730 --> 00:44:15.329 which is what the actual person gets. And then 00:44:15.329 --> 00:44:17.670 they'll put that transcript online. Well, these 00:44:17.670 --> 00:44:20.650 companies now have hundreds of transcripts on 00:44:20.650 --> 00:44:22.670 some of these companies, probably thousands in 00:44:22.670 --> 00:44:25.349 the case of something like NVIDIA. And the amount 00:44:25.349 --> 00:44:27.349 of information that's hidden in those transcripts 00:44:27.349 --> 00:44:32.469 is immense. And you say it's bad to be a junior, 00:44:32.590 --> 00:44:35.320 but you couldn't find a junior. You couldn't 00:44:35.320 --> 00:44:37.659 find a junior that could read, you know, 30 transcripts 00:44:37.659 --> 00:44:39.900 and pull out the 20 most important things or 00:44:39.900 --> 00:44:42.079 answer a question. You know, it's actually a 00:44:42.079 --> 00:44:44.119 pretty high level thing that you'd need. You'd 00:44:44.119 --> 00:44:46.300 probably need a fair bit of experience and not 00:44:46.300 --> 00:44:48.599 to mention intellect to actually do. But that's 00:44:48.599 --> 00:44:50.800 the sort of thing that a language model can just 00:44:50.800 --> 00:44:53.480 do almost trivially, you know, instantly. You 00:44:53.480 --> 00:44:55.659 know, you can drop a few transcripts into a large 00:44:55.659 --> 00:44:57.679 language model and then ask it questions, query, 00:44:58.000 --> 00:45:01.599 draw out important points. I think you just said 00:45:01.599 --> 00:45:04.400 it there perfectly. It's no longer a manual task. 00:45:04.519 --> 00:45:06.579 What it is, it's now a comprehension tool and 00:45:06.579 --> 00:45:08.460 an efficiency tool. So you still bring the juniors 00:45:08.460 --> 00:45:11.239 on to work with you and grow, but now it just 00:45:11.239 --> 00:45:15.059 speeds up everything. Yeah, I mean, it's a real 00:45:15.059 --> 00:45:17.360 question in our industry or in funds management 00:45:17.360 --> 00:45:19.320 industry of what happens. How does that, how 00:45:19.320 --> 00:45:21.619 does it change? I mean, you know, you know, it's 00:45:21.619 --> 00:45:24.119 completely revolutionized the way we implement 00:45:24.119 --> 00:45:26.409 our decision making. right because we build a 00:45:26.409 --> 00:45:27.929 risk model with the help of these models that 00:45:27.929 --> 00:45:31.210 we wouldn't have had otherwise uh that does often 00:45:31.210 --> 00:45:33.710 does things that we wouldn't necessarily expect 00:45:33.710 --> 00:45:37.170 it to do um it's kind of a different style it'll 00:45:37.170 --> 00:45:38.909 sell things that are going down because it says 00:45:38.909 --> 00:45:42.429 based on risk uh it'll take profits often when 00:45:42.829 --> 00:45:45.469 When a normal person, say if I have a stock that's 00:45:45.469 --> 00:45:47.070 gone up four times, usually I'm quite excited. 00:45:47.150 --> 00:45:49.329 It's gone up four times because you thought it 00:45:49.329 --> 00:45:51.170 was going to double over three years and it's 00:45:51.170 --> 00:45:53.150 doubled over eight months, you know, that kind 00:45:53.150 --> 00:45:55.230 of thing. Well, actually, on this point, let's 00:45:55.230 --> 00:45:58.309 talk DroneShield. Yeah, sure. Because this is 00:45:58.309 --> 00:46:01.789 a phenomenally, you know, exact example of what 00:46:01.789 --> 00:46:03.469 you're discussing, right? So walk us through 00:46:03.469 --> 00:46:06.769 what happened there with DRO. Yeah, DroneShield 00:46:06.769 --> 00:46:09.030 was basically what we look for, you know, extremely 00:46:09.030 --> 00:46:12.659 high growth. and a really interesting sector 00:46:12.659 --> 00:46:17.019 as well right like high level the drones are 00:46:17.019 --> 00:46:19.059 going to the use of drones is going to dramatically 00:46:19.059 --> 00:46:21.440 increase in the military and also obviously in 00:46:21.440 --> 00:46:23.460 civilian use but they're very focused on the 00:46:23.460 --> 00:46:27.059 military um the use of drone defenses is like 00:46:27.059 --> 00:46:28.800 it's one of those rare things where you think 00:46:28.800 --> 00:46:31.900 the market could be possibly you know 100 times 00:46:31.900 --> 00:46:34.059 bigger in the future than it is now like the 00:46:34.059 --> 00:46:36.889 vast majority of infantry platoons don't have 00:46:36.889 --> 00:46:38.809 drone protection around the world the vast majority 00:46:38.809 --> 00:46:41.329 of sites are unprotected airports are unprotected 00:46:41.329 --> 00:46:43.949 so there's one of those areas where you know 00:46:43.949 --> 00:46:45.590 you can you can actually see this long -term 00:46:45.590 --> 00:46:48.530 future where there's drones kind of everywhere 00:46:48.530 --> 00:46:51.150 and it becomes really important for security 00:46:51.150 --> 00:46:54.139 to be able to lock them down And of all the different 00:46:54.139 --> 00:46:56.619 ways of locking them down, DroneShield specializes 00:46:56.619 --> 00:46:59.519 in jamming and all the AI and sensors that go 00:46:59.519 --> 00:47:01.880 along with that, tracking, those kinds of things. 00:47:02.440 --> 00:47:04.380 And it can work in like small sizes or large 00:47:04.380 --> 00:47:05.980 sizes. So that's the, you know, you can put it 00:47:05.980 --> 00:47:07.659 on a ship, you can put it on a base, or you can 00:47:07.659 --> 00:47:11.039 have a handheld version or a car mounted version. 00:47:11.360 --> 00:47:13.460 So the big picture is like really exciting, really 00:47:13.460 --> 00:47:16.019 interesting. And then it helps that it was growing 00:47:16.019 --> 00:47:20.369 well over 100 % for the last two years. The interesting 00:47:20.369 --> 00:47:23.150 part is, you know, if this is like an extremely 00:47:23.150 --> 00:47:26.269 red hot stock, which is kind of exciting, people 00:47:26.269 --> 00:47:29.130 want to own it. Most of the things we invest 00:47:29.130 --> 00:47:31.750 in have those characteristics. You know, there's 00:47:31.750 --> 00:47:34.869 a whole like species of value investor that will 00:47:34.869 --> 00:47:37.369 buy random companies in Europe and they just 00:47:37.369 --> 00:47:39.050 won't go anywhere for 10 years. You know, they'll 00:47:39.050 --> 00:47:41.429 have the thesis and maybe that's being too much. 00:47:41.469 --> 00:47:43.590 They might go sideways for two or three years. 00:47:43.630 --> 00:47:45.800 Nothing happens. We've never had that problem. 00:47:45.940 --> 00:47:47.519 You know, if things are delivering, they're moving, 00:47:47.659 --> 00:47:49.579 you know. But the problem is you do have that 00:47:49.579 --> 00:47:51.920 hot money. And in this case, DroneShield just 00:47:51.920 --> 00:47:55.099 flicked up a crazy amount in a very short period 00:47:55.099 --> 00:47:57.960 of time, you know, kind of hit its three to five 00:47:57.960 --> 00:48:02.219 year target on a stock price target, rather fundamental 00:48:02.219 --> 00:48:04.239 target, you know, shortly after we bought it. 00:48:04.320 --> 00:48:07.000 So we... What was your entry price? So we got 00:48:07.000 --> 00:48:09.239 in at 80 cents. And I think overall, it was kind 00:48:09.239 --> 00:48:11.440 of like very low 90s in terms of our average. 00:48:12.000 --> 00:48:14.440 And then... I've done a lot of work basically 00:48:14.440 --> 00:48:17.260 reviewing every stock we've ever looked at, certainly 00:48:17.260 --> 00:48:20.059 ever owned and most of the ones we've looked 00:48:20.059 --> 00:48:22.579 at. And it seems like for these kinds of companies, 00:48:22.679 --> 00:48:24.460 not for every company, but these kinds of red 00:48:24.460 --> 00:48:27.760 hot companies, you do actually outperform if 00:48:27.760 --> 00:48:29.760 you have a very tight risk metric. So if they're 00:48:29.760 --> 00:48:34.239 selling negative terms of momentum, sorry, momentum 00:48:34.239 --> 00:48:36.900 turns negative to a certain degree, you can actually 00:48:36.900 --> 00:48:39.619 generally outperform just by selling and missing 00:48:39.619 --> 00:48:41.900 those crashes. And that was one of our big learnings 00:48:41.900 --> 00:48:43.719 was in these stocks, the downside isn't 30%, 00:48:43.719 --> 00:48:47.300 40%, 50%. It's 60%, 70%, 80%, 90%. And so if 00:48:47.300 --> 00:48:49.619 you can cut those things off at 20 % or 30 % 00:48:49.619 --> 00:48:52.880 and then have a very systematic way of reentering 00:48:52.880 --> 00:48:55.500 them, you can generally outperform. Now, that 00:48:55.500 --> 00:48:57.099 didn't happen here in DroneShield because it 00:48:57.099 --> 00:48:59.440 just performed so well. What we also found out 00:48:59.440 --> 00:49:01.960 was that if you take profits at certain levels, 00:49:02.159 --> 00:49:05.099 you can also systematically outperform. Effectively, 00:49:05.099 --> 00:49:08.280 when the red hot money comes in, the stock shoots 00:49:08.280 --> 00:49:11.179 up. It's probably got a few short sellers. Maybe 00:49:11.179 --> 00:49:15.059 it's relatively tightly held. The increase in 00:49:15.059 --> 00:49:17.000 price attracts more people. Everyone starts talking 00:49:17.000 --> 00:49:18.980 about it. You get a bunch of people jumping in. 00:49:19.039 --> 00:49:21.360 All of a sudden, the $0 .80 stock is $2 .50. 00:49:22.099 --> 00:49:26.320 And for us, the selling point is optimal seems 00:49:26.320 --> 00:49:27.780 to be somewhere between two and a half to four 00:49:27.780 --> 00:49:30.659 times. And there's only a handful of companies 00:49:30.659 --> 00:49:33.300 that do better if you don't do that. And one 00:49:33.300 --> 00:49:35.599 of the very few is actually NVIDIA. So that had 00:49:35.599 --> 00:49:40.019 a couple of 10 times rallies where... where implementing 00:49:40.019 --> 00:49:42.559 selling at 4x you actually underperform but the 00:49:42.559 --> 00:49:44.380 vast bulk when they have these spikes and you 00:49:44.380 --> 00:49:48.099 can take a 150 to 300 profit so two and a half 00:49:48.099 --> 00:49:51.760 to 4x return you can outperform so at our 80 00:49:51.760 --> 00:49:53.420 cents entry price we kind of hit that pretty 00:49:53.420 --> 00:49:56.340 quickly and then sold you know nearly i think 00:49:56.340 --> 00:49:58.699 it was 59 of the position obviously we're holding 00:49:58.699 --> 00:50:01.179 some because you know midterm price target was 00:50:01.179 --> 00:50:05.329 three to four times um But then, you know, for 00:50:05.329 --> 00:50:07.150 whatever reason, the tide turn thing dropped. 00:50:07.309 --> 00:50:10.869 It went sunk like a stone down almost to $1 again. 00:50:11.150 --> 00:50:14.590 And they did a cap raising of $1 .15. And then 00:50:14.590 --> 00:50:15.730 it got kind of interesting. I was like, whoa, 00:50:15.789 --> 00:50:17.550 this is going to be a significant part of this 00:50:17.550 --> 00:50:20.969 market cap is cash again. The long -term story 00:50:20.969 --> 00:50:23.030 is exactly the same as it was. It's been on this 00:50:23.030 --> 00:50:25.730 wild ride. We have this tiny position. Let's 00:50:25.730 --> 00:50:28.309 load up again. So we went back in the $1 .15 00:50:28.309 --> 00:50:33.110 cap raise. I think it's $1 .40 now. But I have 00:50:33.110 --> 00:50:35.420 no doubt that... that will continue. And I think 00:50:35.420 --> 00:50:36.940 this kind of stock is perfect for us because 00:50:36.940 --> 00:50:39.400 we're, we're long -term believers. It's, it's 00:50:39.400 --> 00:50:40.840 always nice when you put money into the company 00:50:40.840 --> 00:50:42.519 in a cap raise, the company gets the benefit 00:50:42.519 --> 00:50:46.099 of the capital as well. But you know, if, if, 00:50:46.099 --> 00:50:48.800 if the animal spirits take hold again and shoot 00:50:48.800 --> 00:50:50.699 it to the moon, we know exactly where we'll be 00:50:50.699 --> 00:50:53.539 selling. We'll monetize it. We'll look for other 00:50:53.539 --> 00:50:54.980 opportunities. I'll hopefully get another re 00:50:54.980 --> 00:50:56.739 -entry point shortly after. I doubt it'll be 00:50:56.739 --> 00:50:58.980 that fast. This was like a, I think it's nearly 00:50:58.980 --> 00:51:04.480 back at 150 today, 146 or something. well that's 00:51:04.480 --> 00:51:06.500 helpful you know so it's been a great it's been 00:51:06.500 --> 00:51:09.019 the whole thing's been uh couldn't have i mean 00:51:09.019 --> 00:51:11.239 it's been very lucky for us firstly that i did 00:51:11.239 --> 00:51:13.480 the cap raising both cap raisings when we're 00:51:13.480 --> 00:51:15.360 ready to put in capital secondly that we had 00:51:15.360 --> 00:51:17.679 a model that took us out um or rather secondly 00:51:17.679 --> 00:51:20.300 that you know the animal spirits took hold and 00:51:20.300 --> 00:51:22.400 gave us that very near -term exit and then a 00:51:22.400 --> 00:51:25.960 re -entry shortly after um yeah it's pretty helpful 00:51:25.960 --> 00:51:28.199 but you know we won't we will we also have that 00:51:28.199 --> 00:51:32.059 downside that downside strategy as well so if 00:51:32.059 --> 00:51:34.500 this is If it turns out they've raised too much. 00:51:35.360 --> 00:51:36.980 It's worth noting, by the way, with this raise, 00:51:37.199 --> 00:51:38.780 they've raised a lot of money. That's a lot of 00:51:38.780 --> 00:51:42.880 cash sitting on this company. No net debt. There's 00:51:42.880 --> 00:51:44.719 no reason for this thing to blow up. There's 00:51:44.719 --> 00:51:46.679 no reason to think that people are all of a sudden 00:51:46.679 --> 00:51:50.199 not going to buy drone detection. It's also an 00:51:50.199 --> 00:51:52.059 interesting, it's not quite as good as pharma, 00:51:52.159 --> 00:51:53.860 but it's very hard to get into these defense 00:51:53.860 --> 00:51:56.960 contracts. And they're selling to the CIA, to 00:51:56.960 --> 00:52:00.300 special forces, to the United States, to the 00:52:00.300 --> 00:52:03.440 EU now. You know, once you get those, they're 00:52:03.440 --> 00:52:08.500 relatively high margin. It's not selling drones, 00:52:08.880 --> 00:52:11.159 mass produced drones. You're not competing with 00:52:11.159 --> 00:52:14.659 Chinese knockoffs. You know, these are high margin 00:52:14.659 --> 00:52:18.960 defense contracts. And if they perform, there's 00:52:18.960 --> 00:52:20.760 every likelihood that they'll be expanded and 00:52:20.760 --> 00:52:23.880 increased as well as winning new ones. So it's 00:52:23.880 --> 00:52:27.340 a different dynamic. It's not, I think the bear 00:52:27.340 --> 00:52:30.079 case would probably hold if you could just buy 00:52:30.079 --> 00:52:33.590 knockoffs of this stuff. um cheaply and you can 00:52:33.590 --> 00:52:35.449 buy jamming stuff cheaply but you can't sell 00:52:35.449 --> 00:52:38.389 it to the military cheaply uh and that is one 00:52:38.389 --> 00:52:40.070 of the that's one of the stronger points of the 00:52:40.070 --> 00:52:42.730 company as well so it's an interesting one it's 00:52:42.730 --> 00:52:44.809 great great stock for us growing over 100 exactly 00:52:44.809 --> 00:52:47.309 what we look for the fact that it's like in a 00:52:47.309 --> 00:52:50.130 really cool area is great um the ceo copped a 00:52:50.130 --> 00:52:52.969 lot of flack on twitter uh for selling his shares 00:52:52.969 --> 00:52:56.110 he sold them or some of them before the massive 00:52:56.110 --> 00:52:58.489 price increase obviously we'll get loaded up 00:52:58.489 --> 00:53:01.900 through his compensation plan over time so he'll 00:53:01.900 --> 00:53:04.559 be fine but my impression i did a full -length 00:53:04.559 --> 00:53:08.219 podcast with him met him a few times my view 00:53:08.219 --> 00:53:11.420 is he's like drink he's like very very motivated 00:53:11.420 --> 00:53:14.119 to make drone shield a success i don't get that 00:53:14.119 --> 00:53:15.960 impression at all that it's one of those like 00:53:15.960 --> 00:53:18.619 enrichment schemes when you meet the ceos of 00:53:18.619 --> 00:53:21.480 software companies like even even a couple of 00:53:21.480 --> 00:53:24.800 ceos i met in boston with canaccord They just 00:53:24.800 --> 00:53:26.179 couldn't care less. Like they're there because 00:53:26.179 --> 00:53:27.599 they have to be there, but they really don't. 00:53:27.619 --> 00:53:30.199 They could not care less about investors. You 00:53:30.199 --> 00:53:31.780 know, you get that impression from the Roblox 00:53:31.780 --> 00:53:34.159 CEO, got that impression from the Twilio CEO 00:53:34.159 --> 00:53:38.099 when he gave a talk. They just don't care. They're 00:53:38.099 --> 00:53:40.460 making tens of millions of dollars a year in 00:53:40.460 --> 00:53:43.559 stock comp. They've got automated selling plans. 00:53:43.679 --> 00:53:45.559 Everyone's like, oh, they're just selling because 00:53:45.559 --> 00:53:46.840 it's automated. Well, they're still selling. 00:53:46.920 --> 00:53:48.800 You know, they're getting their million dollars 00:53:48.800 --> 00:53:50.880 a week or whatever it is from their automated 00:53:50.880 --> 00:53:54.380 share sale. They just checked out. I didn't get 00:53:54.380 --> 00:53:57.300 that impression from Oleg at all, actually the 00:53:57.300 --> 00:53:59.260 opposite. And I thought, I'm just saying that 00:53:59.260 --> 00:54:02.380 because I know that that's been a topical, it's 00:54:02.380 --> 00:54:04.980 been topical on the Twittersphere and a lot of 00:54:04.980 --> 00:54:07.300 people are talking about the share sales and 00:54:07.300 --> 00:54:10.059 the motivations. But they're my impressions, 00:54:10.159 --> 00:54:11.840 whatever they were. So DroneChill has been a 00:54:11.840 --> 00:54:15.760 lot of fun. I bet it has. Mention to others, 00:54:15.900 --> 00:54:17.659 Roblox and Twilio. So what was your impression 00:54:17.659 --> 00:54:21.280 there? Are you currently holding those in the 00:54:21.280 --> 00:54:24.889 portfolio or? No, but I certainly hold, I mean, 00:54:24.889 --> 00:54:26.530 we have to run the clock back to kind of 2020, 00:54:26.730 --> 00:54:29.869 21, that both of those companies could have gone 00:54:29.869 --> 00:54:32.150 in different directions. So Twilio, he was just 00:54:32.150 --> 00:54:36.150 a bit low, it was extremely low energy. He was 00:54:36.150 --> 00:54:38.469 paying his direct reports. It did come down. 00:54:38.489 --> 00:54:39.869 It's not as extreme as it was. He was paying 00:54:39.869 --> 00:54:42.690 them 40, 50 million US, say 30 to 50 million 00:54:42.690 --> 00:54:44.510 US to the five or six people that work for him, 00:54:44.530 --> 00:54:46.409 including like, say, legal counsel. So there 00:54:46.409 --> 00:54:48.769 was a lawyer earning over 50 million Australian 00:54:48.769 --> 00:54:51.739 just for turning up to work a year. That's insane. 00:54:51.940 --> 00:54:55.219 That's so disconnected from reality. It's like, 00:54:55.239 --> 00:54:56.579 what, you couldn't find somebody smart for $5 00:54:56.579 --> 00:54:59.340 million and save that and then multiply that 00:54:59.340 --> 00:55:01.460 across your entire organization? Of course you 00:55:01.460 --> 00:55:03.980 could. But this guy seems to think that people 00:55:03.980 --> 00:55:07.159 only work for $20 million plus. And then in his 00:55:07.159 --> 00:55:09.539 world, this is the way I see it, by the way. 00:55:09.579 --> 00:55:11.840 I've never met him. And this isn't personal. 00:55:11.900 --> 00:55:15.920 This is just purely on the business side. Imagine 00:55:15.920 --> 00:55:17.579 what it's like when you're surrounded by people 00:55:17.579 --> 00:55:19.989 that you're paying $20 million plus to. 50 million 00:55:19.989 --> 00:55:21.670 plus too you know they're going to give you a 00:55:21.670 --> 00:55:24.130 very different weird view and then Twilio has 00:55:24.130 --> 00:55:25.710 really underperformed the growth hasn't been 00:55:25.710 --> 00:55:29.789 there it's low mid single digit growth and that 00:55:29.789 --> 00:55:33.230 stock compensation line has been insane and you 00:55:33.230 --> 00:55:34.670 know if you strip that out maybe it's not doing 00:55:34.670 --> 00:55:36.389 so badly but you have to include it especially 00:55:36.389 --> 00:55:38.849 as they're selling it and it's just been a bit 00:55:38.849 --> 00:55:40.829 of a disaster all the more so because it was 00:55:40.829 --> 00:55:43.889 so red hot so it sucked in a lot of people And 00:55:43.889 --> 00:55:46.489 there was also a trap which we fell into, but 00:55:46.489 --> 00:55:48.909 then escaped from, which was trying to buy the 00:55:48.909 --> 00:55:51.190 stuff that was most smashed. That has been disastrous 00:55:51.190 --> 00:55:53.570 over the last few years. Those companies didn't 00:55:53.570 --> 00:55:56.210 recover. There were a number of opportunities 00:55:56.210 --> 00:56:00.170 to get those big returns, semiconductors, for 00:56:00.170 --> 00:56:02.710 example, as well as other companies that we own 00:56:02.710 --> 00:56:05.869 and we don't own, of course. But really buying 00:56:05.869 --> 00:56:09.190 the red hot companies from the tech boom has 00:56:09.190 --> 00:56:11.309 been a disaster strategy with Twilio, Shopify, 00:56:11.510 --> 00:56:15.840 Roblox. uh so yeah so with the strategy that's 00:56:15.840 --> 00:56:18.900 worked what have you bought say in the past 12 00:56:18.900 --> 00:56:20.519 months that we haven't discussed where a couple 00:56:20.519 --> 00:56:22.639 others you bought that's worked quite well uh 00:56:22.639 --> 00:56:24.760 there's a few i mean obviously clarity that was 00:56:24.760 --> 00:56:26.519 a new opportunity i'd say you know what i would 00:56:26.519 --> 00:56:28.320 say i'd say most of the stuff that we um bought 00:56:28.320 --> 00:56:31.000 was like 50 or 100 off the lows including something 00:56:31.000 --> 00:56:33.400 like drone chill so again you're you're going 00:56:33.400 --> 00:56:34.820 from a mode where you're trying to find stuff 00:56:34.820 --> 00:56:37.380 that's down 60 70 80 percent that's cheap and 00:56:37.380 --> 00:56:39.880 then trying to than seeing opportunities even 00:56:39.880 --> 00:56:42.099 though the stock is up 50 % or 100%. And they're 00:56:42.099 --> 00:56:43.659 the ones that went up three, four, five times 00:56:43.659 --> 00:56:46.960 for us. I guess Clary is up seven now. But I 00:56:46.960 --> 00:56:49.500 think that had not quite doubled off the lows 00:56:49.500 --> 00:56:52.420 but close when we bought it. What else have we 00:56:52.420 --> 00:56:54.760 discussed that's in the portfolio? Actually, 00:56:54.760 --> 00:56:55.480 there's a couple. I just want to give my impressions 00:56:55.480 --> 00:56:57.760 of Roblox. There's so many. And like my brain 00:56:57.760 --> 00:57:00.420 is now going, you know, one of our beloved favorites 00:57:00.420 --> 00:57:03.639 for the past like, you know, half a baker's dozen 00:57:03.639 --> 00:57:05.820 is our good old friend, Mercado Libre. That had 00:57:05.820 --> 00:57:09.090 a cracking result. Yeah, to switch to that. I 00:57:09.090 --> 00:57:12.230 mean, that was a pretty wild result. I mean, 00:57:12.289 --> 00:57:17.250 they were growing. What was it? It was 42 % top 00:57:17.250 --> 00:57:20.110 line. I can't remember the numbers, but all I 00:57:20.110 --> 00:57:21.969 saw was essentially the Aussie dollar share price 00:57:21.969 --> 00:57:24.090 went from $1 ,600 to nearly $2 ,000 overnight. 00:57:24.789 --> 00:57:29.489 Yeah, it was a 10 % net income margin. So a few 00:57:29.489 --> 00:57:32.110 years ago, it wasn't profitable. Now it is. It 00:57:32.110 --> 00:57:36.500 was like over half, $678 million. um of quarterly 00:57:36.500 --> 00:57:39.320 cash flow adjusted to be fair you know this thing 00:57:39.320 --> 00:57:41.599 is now spitting off cash growing top line at 00:57:41.599 --> 00:57:44.920 40 plus um and basically has a monopoly over 00:57:44.920 --> 00:57:46.960 what they do there's some competition obviously 00:57:46.960 --> 00:57:51.519 um but it performed extremely well um new bank 00:57:51.519 --> 00:57:54.239 had a blowout result that's actually up three 00:57:54.239 --> 00:57:57.460 times so we're now selling some of it and we're 00:57:57.460 --> 00:58:01.349 gonna we probably still got bit over half of 00:58:01.349 --> 00:58:03.030 it left and we're going to go for the so i just 00:58:03.030 --> 00:58:04.949 want to i just want to correct myself uh it's 00:58:04.949 --> 00:58:08.170 now 2061 us dollars not a thousand but yeah it 00:58:08.170 --> 00:58:11.909 went from 1600 in like a week or two weeks to 00:58:11.909 --> 00:58:13.650 like nearly two grand so i just wanted to correct 00:58:13.650 --> 00:58:15.889 myself yes that was helpful during the sell -off 00:58:15.889 --> 00:58:19.050 um you know new banks growing gross profits by 00:58:19.050 --> 00:58:22.510 88 105 million customers is one of those things 00:58:22.510 --> 00:58:25.909 that just every quarter they seem to have you 00:58:25.909 --> 00:58:29.179 know five million more customers And their income, 00:58:29.239 --> 00:58:31.300 their margins are growing much faster than their 00:58:31.300 --> 00:58:33.579 revenues. And their revenues are growing exceptionally 00:58:33.579 --> 00:58:38.239 fast. You know, so revenues plus 65%, gross profit 00:58:38.239 --> 00:58:42.079 plus 88%, their income plus 134%. So everything's 00:58:42.079 --> 00:58:45.260 going up. Obviously, it's very high margin, very 00:58:45.260 --> 00:58:48.780 high ROE credit. But you're talking about South 00:58:48.780 --> 00:58:50.679 American credit. So it's not like, it's not, 00:58:50.699 --> 00:58:53.619 I wouldn't say it's risk -free. But, you know, 00:58:53.639 --> 00:58:57.130 if we've already sold... some at 3x. And if we 00:58:57.130 --> 00:58:58.789 hit our 4x on that, that'd be a great outcome. 00:58:59.250 --> 00:59:01.449 And then we'll just wait for the next sell -off, 00:59:01.550 --> 00:59:03.230 which we'll no doubt. Because I always wondered, 00:59:03.289 --> 00:59:05.969 remember, when was that the tax scandal with 00:59:05.969 --> 00:59:07.730 their main competitor and ended up losing, what, 00:59:07.809 --> 00:59:09.630 like 80 or 90 % of the entire business and going 00:59:09.630 --> 00:59:12.530 under? And then I always wondered how that vacuum 00:59:12.530 --> 00:59:16.210 of the competition just vanished and they'll 00:59:16.210 --> 00:59:18.170 step into it but never saw the results for it. 00:59:18.289 --> 00:59:19.789 And then all of a sudden, they just had a fantastic 00:59:19.789 --> 00:59:22.150 result. Well, I think there has been an opportunity 00:59:22.150 --> 00:59:24.820 to do a new bank. And it hasn't been executed 00:59:24.820 --> 00:59:27.440 really in Australia. But I'll give you an example. 00:59:27.519 --> 00:59:29.139 There is one in the West that's really good and 00:59:29.139 --> 00:59:31.119 that's Revolut. So if you're traveling, try this 00:59:31.119 --> 00:59:33.719 app Revolut. Like you can basically on the app 00:59:33.719 --> 00:59:36.739 order a new card anywhere in the world and it 00:59:36.739 --> 00:59:38.739 will arrive and you can basically transact in 00:59:38.739 --> 00:59:40.780 any currency. You can top it up with a credit 00:59:40.780 --> 00:59:43.260 card online and then convert that into a currency 00:59:43.260 --> 00:59:45.940 and then use that by app or card. Is that like 00:59:45.940 --> 00:59:49.320 Wise? Is Wise and Revolut similar? Oh, I don't 00:59:49.320 --> 00:59:52.519 know enough about Wise. I don't think Wise has 00:59:52.519 --> 00:59:56.119 banking up that good as far as I'm aware. I don't 00:59:56.119 --> 00:59:57.460 know. That's the one I'm using to go to Japan. 00:59:57.599 --> 00:59:59.119 I'm just saying. Maybe I should use Revolut. 00:59:59.559 --> 01:00:01.800 I did notice there was a secondary sale offered 01:00:01.800 --> 01:00:04.900 in Revolut through the brokers, but I just can't 01:00:04.900 --> 01:00:06.519 do these secondaries. I'll never do another. 01:00:06.820 --> 01:00:08.599 I'm going to avoid doing secondaries, hopefully 01:00:08.599 --> 01:00:14.039 ever again. After the last five years, yeah, 01:00:14.119 --> 01:00:15.960 I'm not going to be anybody else's exit liquidity. 01:00:19.079 --> 01:00:20.539 Unfortunately, we learn our lessons the hard 01:00:20.539 --> 01:00:22.420 way, but the thing is you learn your lesson and 01:00:22.420 --> 01:00:25.619 that's the lesson and off we go. Yeah, exactly. 01:00:25.780 --> 01:00:27.880 If the CEO is putting money in, then that's very 01:00:27.880 --> 01:00:30.780 interesting. If this is a deal where the CEO 01:00:30.780 --> 01:00:33.000 or management is taking money out, it's still 01:00:33.000 --> 01:00:38.599 not that one. Anyway, yeah, that was pretty strong. 01:00:39.619 --> 01:00:42.619 Transmedics had another blowout quarter. I mean, 01:00:42.639 --> 01:00:43.880 these are stocks we've owned for a while now. 01:00:44.000 --> 01:00:45.699 We've discussed Transmedics before, but look, 01:00:45.780 --> 01:00:47.969 this is... This is one that I like because I 01:00:47.969 --> 01:00:49.769 just think there's a whole lot of moral goodness 01:00:49.769 --> 01:00:51.909 to this particular one. It solves so many problems. 01:00:52.210 --> 01:00:54.550 What does Transmedic do for the people that are 01:00:54.550 --> 01:00:56.150 hearing about Transmedic for the first time? 01:00:56.590 --> 01:00:58.469 Yes, they basically offer a way to transport 01:00:58.469 --> 01:01:00.949 organs, which in the past was done in a bucket 01:01:00.949 --> 01:01:04.309 of ice. So the idea, much of the technology was 01:01:04.309 --> 01:01:07.170 developed in Sydney. It's a Vincent's and then 01:01:07.170 --> 01:01:09.110 it was taken to the US where they really ran 01:01:09.110 --> 01:01:10.469 with it and turned it into a commercial product. 01:01:12.369 --> 01:01:15.150 Basically, the idea is if you pump a warm solution 01:01:15.150 --> 01:01:18.010 through the organ, keep it alive, monitor it, 01:01:18.150 --> 01:01:21.210 you can track all the vital signs or certainly 01:01:21.210 --> 01:01:24.449 some vital signs. You can potentially keep these 01:01:24.449 --> 01:01:29.369 organs alive longer. There's a very limited time 01:01:29.369 --> 01:01:31.210 span when you've got an organ. You need to get 01:01:31.210 --> 01:01:34.250 it inside somebody. These are extremely radical, 01:01:34.489 --> 01:01:38.230 difficult operations. Transmedics has been on 01:01:38.230 --> 01:01:40.860 a very long journey proving that. their approach 01:01:40.860 --> 01:01:43.179 was equivalent. And now they're showing data 01:01:43.179 --> 01:01:45.460 that their approach is better. But basically 01:01:45.460 --> 01:01:47.059 what they're trying to do is create a nationwide 01:01:47.059 --> 01:01:50.300 network of organ transplants in the United States. 01:01:50.480 --> 01:01:53.699 So if there's a car accident at 2am in one state 01:01:53.699 --> 01:01:56.380 and somebody needs an organ in another, their 01:01:56.380 --> 01:01:58.659 team will fly out on a transmedic zone plane, 01:01:58.840 --> 01:02:04.179 secure the organ, take it back, monitor it, deliver 01:02:04.179 --> 01:02:06.960 it to the surgeon, give it... the status of the 01:02:06.960 --> 01:02:11.199 organ um keep it alive longer but that getting 01:02:11.199 --> 01:02:14.300 some feel of how healthy the organ is turns out 01:02:14.300 --> 01:02:16.619 to be really important because obviously these 01:02:16.619 --> 01:02:18.619 are not really reversible procedures if anything 01:02:18.619 --> 01:02:22.059 goes wrong it's catastrophic um and they are 01:02:22.059 --> 01:02:24.000 the only people that do that in the united states 01:02:24.000 --> 01:02:26.940 they've got a total monopoly uh and there's evidence 01:02:26.940 --> 01:02:28.440 that they've actually increased the overall number 01:02:28.440 --> 01:02:31.420 of transplants so the idea is most organs go 01:02:31.420 --> 01:02:35.289 unused um the idea is they can By keeping them 01:02:35.289 --> 01:02:38.190 alive longer, better monitoring technology, they 01:02:38.190 --> 01:02:40.510 can keep these things, they can increase the 01:02:40.510 --> 01:02:42.869 total number of successful transplants. It looks 01:02:42.869 --> 01:02:45.730 like they've actually done that. The catch is 01:02:45.730 --> 01:02:50.650 they charge a lot for it. So it's one of those 01:02:50.650 --> 01:02:52.630 situations where people need to think about payments. 01:02:52.909 --> 01:02:57.250 It's all through who bears that cost. It's obviously 01:02:57.250 --> 01:02:59.590 much more expensive than a bucket of ice. They've 01:02:59.590 --> 01:03:02.369 proven that there's advantages to it and that's 01:03:02.369 --> 01:03:03.730 going to be the standard of care, I think, going 01:03:03.730 --> 01:03:06.269 forward. There was a moment to buy the stock. 01:03:06.369 --> 01:03:08.630 I think we bought it at $60, went to $90, we 01:03:08.630 --> 01:03:10.550 were stoked, and then they announced they were 01:03:10.550 --> 01:03:12.489 buying aircraft and it collapsed to like $36, 01:03:12.610 --> 01:03:18.929 $37. It's now about $168 .06. I was just looking 01:03:18.929 --> 01:03:22.289 at the share price now. In March, it was still 01:03:22.289 --> 01:03:26.110 $100. In November, 12 months ago, it was $50. 01:03:26.889 --> 01:03:34.929 Yeah, so we said we'd sell about $100, $180, 01:03:35.030 --> 01:03:37.150 mid - $180, say. That's kind of the limit. That's 01:03:37.150 --> 01:03:39.550 two and a half times. So we sold maybe a third 01:03:39.550 --> 01:03:41.590 of it. We'll probably sell at least another third 01:03:41.590 --> 01:03:43.969 of it if it goes much higher than it is today. 01:03:44.329 --> 01:03:45.869 But again, it's one of those ones where it's 01:03:45.869 --> 01:03:49.090 performing so well. Margins are higher than we 01:03:49.090 --> 01:03:53.380 expected. The aircraft strategy seems to be working. 01:03:53.500 --> 01:03:54.739 They're capturing more of the transaction. What 01:03:54.739 --> 01:03:56.420 is the aircraft strategy? And sorry, what was 01:03:56.420 --> 01:03:58.659 the profit margins and what's the aircraft strategy? 01:03:59.699 --> 01:04:03.219 It's not a hyper profit. It's mid -60s gross 01:04:03.219 --> 01:04:06.260 margin and they've had their first kind of positive 01:04:06.260 --> 01:04:07.980 free cash flow quarter. So it's a gross stock. 01:04:08.340 --> 01:04:10.300 You're not going to be buying this on a P, that's 01:04:10.300 --> 01:04:14.360 for sure. I think they're up to 17 aircraft now 01:04:14.360 --> 01:04:17.210 in the latest results. So they're adding to the 01:04:17.210 --> 01:04:19.409 fleet and they're doing roughly 60 % of their 01:04:19.409 --> 01:04:22.090 organ transplants on their own aircraft. So what 01:04:22.090 --> 01:04:24.250 they're taking out is they're taking out this 01:04:24.250 --> 01:04:29.610 process of using aircraft brokers to sort the 01:04:29.610 --> 01:04:31.690 transportation. So let's say you want to get 01:04:31.690 --> 01:04:34.150 an organ. In the past, what you'd do is there'd 01:04:34.150 --> 01:04:35.730 be a team. There'd obviously be a lead surgeon 01:04:35.730 --> 01:04:38.250 at the hospital. They would send out a junior 01:04:38.250 --> 01:04:42.070 at 2 a .m. They'd have to charter a plane to 01:04:42.070 --> 01:04:44.969 fly to the regional airport, pick up the organ. 01:04:48.150 --> 01:04:52.150 harvest and pick up the organ, fly it back, and 01:04:52.150 --> 01:04:55.670 then the lead surgeon would give a no -go, go 01:04:55.670 --> 01:04:59.769 or no -go on whether to proceed based on their 01:04:59.769 --> 01:05:01.730 view on the health of the organ and the likelihood 01:05:01.730 --> 01:05:03.449 of success. That was what was happening in the 01:05:03.449 --> 01:05:06.369 past. So by buying their own aircraft, they can 01:05:06.369 --> 01:05:09.650 obviously equip them specially. They don't have 01:05:09.650 --> 01:05:12.539 to pay brokers. they can manage availability 01:05:12.539 --> 01:05:15.139 and catholic capacity utilization much better 01:05:15.139 --> 01:05:19.780 hopefully get organs get that whole process moving 01:05:19.780 --> 01:05:22.719 faster so you can save time and if you save time 01:05:22.719 --> 01:05:25.179 that increases the like the geography that you 01:05:25.179 --> 01:05:28.179 can cover um and they want to cover with time 01:05:28.179 --> 01:05:31.579 you know the entire united states uh certainly 01:05:31.579 --> 01:05:33.280 mainly did you say that the planes have been 01:05:33.280 --> 01:05:35.760 well received or the people just see it as a 01:05:35.760 --> 01:05:37.260 cost even though they know it's a good thing 01:05:38.539 --> 01:05:41.760 I think it took everybody by surprise. I mean, 01:05:41.780 --> 01:05:43.599 if you're in one of these medical technology 01:05:43.599 --> 01:05:45.440 companies, you don't want to hear, or any company 01:05:45.440 --> 01:05:47.380 really, you don't want them to just spontaneously 01:05:47.380 --> 01:05:50.460 move into the airline industry. But there was 01:05:50.460 --> 01:05:53.019 logic to the transaction. And the logic is you 01:05:53.019 --> 01:05:55.800 can charge a lot for these things. So they're 01:05:55.800 --> 01:05:58.059 capturing that margin. In the past, that margin 01:05:58.059 --> 01:05:59.760 was going to the aircraft operators and the aircraft 01:05:59.760 --> 01:06:02.679 brokers. Now transmedics can capture that. And 01:06:02.679 --> 01:06:05.530 obviously it's... It's not going to be as high 01:06:05.530 --> 01:06:07.329 margin as their other business and their gross 01:06:07.329 --> 01:06:09.250 margin has come down a little bit, but it's an 01:06:09.250 --> 01:06:12.730 entirely new adjacent revenue service that dramatically 01:06:12.730 --> 01:06:16.190 improves what they can offer. Well, in short, 01:06:16.309 --> 01:06:18.369 they're essentially a career service, but now 01:06:18.369 --> 01:06:21.369 with this particular technology, it improves 01:06:21.369 --> 01:06:24.030 the probability that the organ is going to be 01:06:24.030 --> 01:06:26.309 alive and arrival. So essentially, it actually 01:06:26.309 --> 01:06:29.869 improves the odds and improves, you know, like 01:06:29.869 --> 01:06:31.909 doing it now, everyone may be shocked that it's 01:06:31.909 --> 01:06:33.570 happened, but looking at it, you know, for the 01:06:33.570 --> 01:06:35.070 longevity of your business, you could make a 01:06:35.070 --> 01:06:37.269 point that, you know, I probably wouldn't survive 01:06:37.269 --> 01:06:40.389 without it because at some point these airlines 01:06:40.389 --> 01:06:42.349 or other transport entities will hold them hostage 01:06:42.349 --> 01:06:45.949 to time schedules or costs or whatever it is, 01:06:45.989 --> 01:06:49.250 right? Yeah, I think it was a logistical pain 01:06:49.250 --> 01:06:51.389 in the neck to find an aircraft at certain times 01:06:51.389 --> 01:06:54.409 at very short notice and go. And there's obviously 01:06:54.409 --> 01:06:56.750 an industry around it, built up around it, but 01:06:56.750 --> 01:07:03.480 much better to control that whole process. That 01:07:03.480 --> 01:07:06.599 seems to be going well and the bulk of organs, 01:07:06.659 --> 01:07:12.340 certainly in heart, are going unused, underutilized. 01:07:13.059 --> 01:07:16.940 And there's huge waiting lists for donors. So 01:07:16.940 --> 01:07:19.139 there's a massive unmet need to increase the 01:07:19.139 --> 01:07:21.659 amount of organs that are successfully transplanted 01:07:21.659 --> 01:07:26.139 into those that have sadly passed away. So it's 01:07:26.139 --> 01:07:27.860 a pretty exciting one. But again, this comes 01:07:27.860 --> 01:07:29.820 back to that risk model and that risk approach. 01:07:30.099 --> 01:07:31.679 You get the two and a half times on something 01:07:31.679 --> 01:07:34.659 like this. uh it pays to sell that means we've 01:07:34.659 --> 01:07:38.280 got captured um both 100 plus organic growth 01:07:38.280 --> 01:07:41.139 and probably about 50 multiple appreciation on 01:07:41.139 --> 01:07:44.239 top that's enough for this round and you know 01:07:44.239 --> 01:07:46.619 we will get there will be something else they 01:07:46.619 --> 01:07:48.500 probably won't buy another airline but no doubt 01:07:48.500 --> 01:07:50.219 something else will happen maybe kamala harris 01:07:50.219 --> 01:07:53.260 wins everything sells off um we're sitting on 01:07:53.260 --> 01:07:56.119 the cash that we sold and then as time goes by 01:07:56.119 --> 01:07:59.599 we'll get another entry point Isn't that interesting? 01:07:59.860 --> 01:08:01.699 That's a lesson you can only learn through experience, 01:08:02.019 --> 01:08:04.659 right? Back when we started, it was all you fall 01:08:04.659 --> 01:08:06.780 in love with a business. It was the old thing. 01:08:06.820 --> 01:08:08.340 You buy it like a house. You never sell it for 01:08:08.340 --> 01:08:10.400 30 years. But these days, it's practically a 01:08:10.400 --> 01:08:13.619 fantasy football team. You buy your team. I think 01:08:13.619 --> 01:08:15.099 it's more than that. It's one thing about learning 01:08:15.099 --> 01:08:17.479 lessons, but it's also like systematizing the 01:08:17.479 --> 01:08:21.819 process. So the reason that thinking came about, 01:08:21.960 --> 01:08:25.520 which ended up being extremely costly for us. 01:08:26.060 --> 01:08:28.699 um was the fact that the idea that if you sold 01:08:28.699 --> 01:08:30.600 a stock you might kind of miss out effectively 01:08:30.600 --> 01:08:33.579 and you know if you just held many growth stocks 01:08:33.579 --> 01:08:38.239 that do 20 30 40 times after a big crash um after 01:08:38.239 --> 01:08:40.260 say the dot -com bubble many tech stocks that 01:08:40.260 --> 01:08:45.680 survived and did exceptionally But if you can 01:08:45.680 --> 01:08:48.060 systematize a risk framework that gets you out 01:08:48.060 --> 01:08:50.460 and gets you back in and then test that over 01:08:50.460 --> 01:08:52.760 all those periods from the flash crashes, the 01:08:52.760 --> 01:08:55.640 COVIDs, the dot -coms, the GFCs, and you can 01:08:55.640 --> 01:08:57.180 prove to yourself, actually, I can be like long 01:08:57.180 --> 01:09:01.880 NVIDIA, but I can also be out of NVIDIA at certain 01:09:01.880 --> 01:09:05.649 times. um and out and still outperform than if 01:09:05.649 --> 01:09:07.729 i'd held the whole way then clearly that's a 01:09:07.729 --> 01:09:10.270 better approach and it certainly cuts i completely 01:09:10.270 --> 01:09:11.670 agree with you but that's why i was going because 01:09:11.670 --> 01:09:13.489 english premier league has started i'm kind of 01:09:13.489 --> 01:09:15.210 a bit hooked on fantasy but the point i'm making 01:09:15.210 --> 01:09:17.869 is you might be playing arsenal members and they're 01:09:17.869 --> 01:09:19.609 going phenomenal but if they've got terrible 01:09:19.609 --> 01:09:21.630 fixtures for the next six games you would just 01:09:21.630 --> 01:09:24.029 be better off switching that player for even 01:09:24.029 --> 01:09:26.550 a mid -tier player because it's just not going 01:09:26.550 --> 01:09:29.250 to be their way for the next period of time you 01:09:29.250 --> 01:09:33.369 can always go back the fundamentals change right 01:09:33.369 --> 01:09:34.689 so you can be long something for a fundamental 01:09:34.689 --> 01:09:37.390 reason the stock sells off at the margin employees 01:09:37.390 --> 01:09:39.189 stop buying and start selling their compensation 01:09:39.189 --> 01:09:42.289 plans ceo stops buying at the margin starts selling 01:09:42.289 --> 01:09:45.170 when things change in the industry lots of people 01:09:45.170 --> 01:09:48.010 know the suppliers know the customers might know 01:09:48.010 --> 01:09:51.310 you know there's always i think i mean who knows 01:09:51.310 --> 01:09:53.430 what how what actually it is that makes these 01:09:53.430 --> 01:09:55.770 markets efficient but on some level the information's 01:09:55.770 --> 01:09:58.600 getting out the stock's down 20 30 percent The 01:09:58.600 --> 01:10:00.800 people who are, say, generalists like ourselves 01:10:00.800 --> 01:10:03.960 and most funds and most investors see it as an 01:10:03.960 --> 01:10:06.399 opportunity, they buy, and then actually there 01:10:06.399 --> 01:10:08.600 was things that were going wrong and the market 01:10:08.600 --> 01:10:11.359 collapses and then everybody has to sell and 01:10:11.359 --> 01:10:13.239 all of a sudden all those things go into reverse. 01:10:13.600 --> 01:10:16.500 That would be a typical kind of cycle. And then 01:10:16.500 --> 01:10:18.319 if you have the kind of risk model we do, it's 01:10:18.319 --> 01:10:19.720 like, well, it's down. We don't know if it's 01:10:19.720 --> 01:10:21.100 going to bounce back tomorrow, in which case 01:10:21.100 --> 01:10:23.079 we have to buy back, but we don't know if there's 01:10:23.079 --> 01:10:26.810 something fundamental that happens. going on 01:10:26.810 --> 01:10:28.770 under the surface. It's a much more humble approach 01:10:28.770 --> 01:10:30.289 because you don't really know. You're accepting 01:10:30.289 --> 01:10:32.369 that you don't know, but accepting that when 01:10:32.369 --> 01:10:33.770 you're right, you're going to make a lot of money. 01:10:34.670 --> 01:10:38.109 And I've always talked about this. When we've 01:10:38.109 --> 01:10:39.329 had our discussions, I've always talked about 01:10:39.329 --> 01:10:41.510 this on a stock -by -stock basis, but it's really 01:10:41.510 --> 01:10:44.090 interesting when you run that on a portfolio 01:10:44.090 --> 01:10:49.390 basis. We're up a bit under 80 % now, but up 01:10:49.390 --> 01:10:52.840 nearly 80 % for the year, calendar year. Part 01:10:52.840 --> 01:10:55.220 of it is being in the right things, but a big 01:10:55.220 --> 01:10:56.659 part of that was not being anything that was 01:10:56.659 --> 01:10:59.800 trending down. Because there's no way we wouldn't 01:10:59.800 --> 01:11:03.140 have bought some of this software stuff. It wouldn't 01:11:03.140 --> 01:11:04.439 have been Twilio, but it might have been Square. 01:11:04.699 --> 01:11:06.359 One of these companies that really hasn't performed 01:11:06.359 --> 01:11:08.220 well. And if you have a third of your portfolio 01:11:08.220 --> 01:11:11.699 that's down 20%, that can obviously really impact 01:11:11.699 --> 01:11:13.979 your overall return. Whereas we had none of that. 01:11:14.199 --> 01:11:16.039 And because we had none of that, we had a lot 01:11:16.039 --> 01:11:17.899 more of everything that did work. And that's 01:11:17.899 --> 01:11:20.869 how we got that decent return. And, you know, 01:11:20.930 --> 01:11:21.909 if we can run it. No, but I think that's quite 01:11:21.909 --> 01:11:24.430 important. And that's what's changed a lot since, 01:11:24.510 --> 01:11:26.770 you know, when we first, you know, met and started. 01:11:27.750 --> 01:11:29.510 Like, you know, you ride the roller coaster, 01:11:29.710 --> 01:11:31.489 right? But what I'm hearing now with these risk 01:11:31.489 --> 01:11:33.489 measures, you go up and there's risk measures 01:11:33.489 --> 01:11:35.590 to essentially get you out. So essentially you're 01:11:35.590 --> 01:11:38.689 not giving back as much, holding on to a sizable 01:11:38.689 --> 01:11:40.430 bit. Yeah, it might go sideways for a period 01:11:40.430 --> 01:11:42.289 of time, but then you're making allocations, 01:11:42.329 --> 01:11:44.449 you know, for the next cycle on the right things. 01:11:44.510 --> 01:11:47.170 And you're targeting, what, two, two and a half 01:11:47.170 --> 01:11:49.750 X, cycling a bunch out and then. So it's more 01:11:49.750 --> 01:11:52.130 of a staircase instead of a roller coaster. Yeah, 01:11:52.130 --> 01:11:53.329 and you're taking advantage of the dynamics. 01:11:53.329 --> 01:11:55.210 It makes a lot more sense. And around our gross 01:11:55.210 --> 01:11:56.729 stocks, you're taking advantage of those dynamics. 01:11:57.130 --> 01:11:58.909 So if you get a drone shield situation where 01:11:58.909 --> 01:12:01.810 money's pouring in and it goes ballistic, we're 01:12:01.810 --> 01:12:04.729 now monetizing that. Whereas previously, like 01:12:04.729 --> 01:12:06.069 you spoke to me like four or five years ago, 01:12:06.109 --> 01:12:07.569 it would have been like, well, results are great, 01:12:07.609 --> 01:12:08.850 so we're going to hold it as long as they're 01:12:08.850 --> 01:12:10.670 performing fundamentally. That was kind of the 01:12:10.670 --> 01:12:13.130 way we used to view it. But then you miss that 01:12:13.130 --> 01:12:16.079 opportunity to monetize. All those factors go 01:12:16.079 --> 01:12:18.500 into reverse. People start shorting it. The retail 01:12:18.500 --> 01:12:20.340 money is actually selling, not buying. And all 01:12:20.340 --> 01:12:23.159 of a sudden, it's gone from $250 to $1 in the 01:12:23.159 --> 01:12:24.920 space of a few weeks or whatever the move was 01:12:24.920 --> 01:12:27.460 or something like that. In this situation, you're 01:12:27.460 --> 01:12:29.279 in at $80, then you're out at a price, and then 01:12:29.279 --> 01:12:31.600 you're back at $150, and again, now it's at $146. 01:12:33.100 --> 01:12:36.199 Yeah, and the beauty is you can actually – this 01:12:36.199 --> 01:12:39.180 is what I think like AI – this is early days 01:12:39.180 --> 01:12:40.939 for this kind of stuff, but it's going to really 01:12:40.939 --> 01:12:44.159 change the investment industry because you can 01:12:44.159 --> 01:12:46.189 – It's just going to improve everybody's decision 01:12:46.189 --> 01:12:50.090 -making vastly. And the helpful thing is you 01:12:50.090 --> 01:12:51.649 might, it feels like, I think it's going to be 01:12:51.649 --> 01:12:53.670 a long time before everybody starts taking advantage 01:12:53.670 --> 01:12:58.289 of this stuff because people don't change. The 01:12:58.289 --> 01:13:00.369 money is very restricted on very specific mandates. 01:13:00.810 --> 01:13:05.250 The vast bulk is in mutual funds or ETFs. It'll 01:13:05.250 --> 01:13:07.069 be a mixture of passive, which doesn't trade 01:13:07.069 --> 01:13:09.569 on this stuff at all effectively, or it'll be 01:13:09.569 --> 01:13:11.869 mutual funds, which is run by people with very 01:13:11.869 --> 01:13:13.510 strict processes. They're very human -driven. 01:13:14.620 --> 01:13:16.640 It'll take a long time for these things to change. 01:13:16.760 --> 01:13:18.819 At the moment, there's a ton of alpha in using 01:13:18.819 --> 01:13:22.760 these crazy AI capabilities to improve your own 01:13:22.760 --> 01:13:24.979 decision -making. It's pretty exciting. Well, 01:13:24.979 --> 01:13:26.180 maybe that's how we should have conversations 01:13:26.180 --> 01:13:27.760 going on. They think of it as the portfolio. 01:13:28.279 --> 01:13:31.819 So right now, with the portfolio, what percentage 01:13:31.819 --> 01:13:37.659 of it's in cash and what's invested? Well... 01:13:37.659 --> 01:13:40.739 Are you fully invested or you got some cash looking 01:13:40.739 --> 01:13:43.260 for something? I'd say we're pretty fully invested. 01:13:44.100 --> 01:13:46.520 Another company we've invested in recently, which 01:13:46.520 --> 01:13:48.500 is new, which I don't think we've mentioned to 01:13:48.500 --> 01:13:52.359 anybody yet, is RxSight, which makes light adjustable 01:13:52.359 --> 01:13:57.680 lenses. So this is just one of those ones that 01:13:57.680 --> 01:13:59.699 kind of came up on our growth screens effectively 01:13:59.699 --> 01:14:03.079 for growing exceptionally fast, you know, 55 01:14:03.079 --> 01:14:09.300 % year on year, which is 82 % year on year really 01:14:09.300 --> 01:14:12.229 for the financial year. So it popped up on our 01:14:12.229 --> 01:14:13.850 screens there, so we thought we'd take a look. 01:14:13.989 --> 01:14:16.069 It's kind of an interesting medical tech company. 01:14:16.409 --> 01:14:20.909 It's light -adjusted lenses that are placed by 01:14:20.909 --> 01:14:24.350 surgeons in people's eyes for cataracts. Now, 01:14:24.390 --> 01:14:26.729 the reason it's interesting is, and the reason 01:14:26.729 --> 01:14:28.369 it's got a selling point, is that it's a premium 01:14:28.369 --> 01:14:31.390 product. It's better than the existing alternatives 01:14:31.390 --> 01:14:34.390 in the market. I'll buy more expensive. But basically 01:14:34.390 --> 01:14:36.489 what you can do is you implant it. Surgeons have 01:14:36.489 --> 01:14:37.970 to make a lot of decisions about how they do 01:14:37.970 --> 01:14:40.659 it. which give very different impacts on how 01:14:40.659 --> 01:14:43.140 your vision looks. But this, they can use UV 01:14:43.140 --> 01:14:45.000 light afterwards. So a few weeks afterwards, 01:14:45.239 --> 01:14:47.460 they can come back in, they can use UV light 01:14:47.460 --> 01:14:50.180 to change the shape of the lenses, to change 01:14:50.180 --> 01:14:52.659 your vision and to optimize it. So effectively, 01:14:52.800 --> 01:14:55.300 you've got, again, this is like a very kind of 01:14:55.300 --> 01:14:57.840 special situation growth perspective. It's not 01:14:57.840 --> 01:14:59.699 like an NVIDIA that's going to move markets. 01:15:00.560 --> 01:15:02.880 But it is a company and their tiny market is 01:15:02.880 --> 01:15:05.659 taking over. And that's because they've got this 01:15:05.659 --> 01:15:08.869 second step. The surgeon implants the lens and 01:15:08.869 --> 01:15:12.229 then they can use UV light to improve the outcome. 01:15:13.170 --> 01:15:14.869 And I think in terms of what we're talking about 01:15:14.869 --> 01:15:18.329 earlier, you know, the regime that we're in, 01:15:18.390 --> 01:15:19.729 I think companies like this are going to continue 01:15:19.729 --> 01:15:22.350 to do exceptionally well because they're just 01:15:22.350 --> 01:15:23.670 winning in their little market. They're dominating. 01:15:23.890 --> 01:15:25.250 They're bigger, better and stronger every quarter. 01:15:27.029 --> 01:15:29.369 People aren't flush with cash, but there is enough 01:15:29.369 --> 01:15:30.949 money. There's certainly enough money going around 01:15:30.949 --> 01:15:33.409 for really good investment opportunities. And 01:15:33.409 --> 01:15:36.279 this is just one of those special one -off. So 01:15:36.279 --> 01:15:39.079 I think we obviously some of our trades are getting 01:15:39.079 --> 01:15:42.899 quite mature, like Nubank, Transmedics, Clarity. 01:15:43.579 --> 01:15:45.739 So we're still looking for the next set that 01:15:45.739 --> 01:15:47.619 will drive us forward and give us another good 01:15:47.619 --> 01:15:49.979 year. And I think this company certainly fits 01:15:49.979 --> 01:15:53.000 that category of an independent growth story. 01:15:53.779 --> 01:15:55.699 Well, Michael, it's always fun having you on, 01:15:55.760 --> 01:15:58.159 that's for sure. And if anyone wants to learn 01:15:58.159 --> 01:16:01.859 more about Frazzers, Capital Partners, how they 01:16:01.859 --> 01:16:04.079 best find you? Or get in touch. Yeah, probably 01:16:04.079 --> 01:16:06.399 just our website, www .phrasiscapitalpartners 01:16:06.399 --> 01:16:09.920 .com or send me an email, michael at phrasiscapitalpartners 01:16:09.920 --> 01:16:14.119 .com or Twitter, Michael Phrasis. Fantastic. 01:16:14.199 --> 01:16:16.920 All right, Michael, thanks for coming on. Have 01:16:16.920 --> 01:16:18.779 a great day. Thanks, Murdoch. Appreciate you 01:16:18.779 --> 01:17:00.680 having me on. Take it easy. www .yorkwealth .com 01:17:00.680 --> 01:17:01.220 .au