Profiting from Chaos – QAV America 46

QAV AMERICAN 46 Club

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[00:00:00] Cameron Reilly: Welcome back to QAV America, episode 46. Tony Eson. How are you?

[00:00:08] TK: Very good. You wouldn’t know it’s QAV with my QAV shirt on and QAV cap on.

[00:00:13] Cameron Reilly: For people that aren’t watching the video feed. Yeah, it’s Tony’s birthday, so I gave him a QAV cap ’cause I ran out of ideas and time. Uh, well, you know, it’s some, it’s something you should be proud of. Your contribution to the world of investing. You’re a given, not a taker. That’s what they said about you in prison anyway.

[00:00:39] Cameron Reilly: Um, that’s what you had to establish yourself. Very early on in Bogger Road, very famous prison in Brisbane where my grandfather actually went and learned to play chess, which was a great thing. It’s become a family tradition now.

[00:00:54] TK: chess or he was there and he learned how to play chess.

[00:00:56] Cameron Reilly: I, that’s the way I sell it. Yeah. He, he thought, where’s the best place I can [00:01:00] learn chess for free?

[00:01:00] Cameron Reilly: I’ll go do, go do two years in Bogger Road.

[00:01:05] TK: Oh, okay. We’re

[00:01:08] Cameron Reilly: Tony.

[00:01:09] TK: before too.

[00:01:09] Cameron Reilly: Yeah, yeah, yeah. I was gonna say it’s a great, and then he started a great family tradition. What gonna prison? No playing chess. Yeah. Well, so far, yeah. Yeah. Breaking and entering.

[00:01:21] TK: Oh, was it? I was gonna say, was it annoying people

[00:01:24] Cameron Reilly: Uh,

[00:01:25] TK: the public?

[00:01:26] Cameron Reilly: you can’t go to prison for that yet, Tony. Um. It’s been a crazy week on the, well, just in the world, um, in the, uh, stock market. Of course, it’s been a crazy week. I think as, uh, we’re recording this, which is the 31st of March, Australian time. The Dow Jones over the last week is down the s and p 500. Over the last week is very much down our portfolios in the us.[00:02:00]

[00:02:00] Cameron Reilly: I can’t get this to gimme a week, but in the last month, our US main US portfolio, the one we’ve been running for a few years is down 12% in the last 30 days versus the s and p down 8%. But for all time, and this goes back to September, 2023, our portfolio is up 83% versus the s and p up 42%. So we’re basically doing double market over the whatever, two and a half years.

[00:02:34] Cameron Reilly: Is that two and a half years? Seven, five, yes. Two and a half years. Which is not too shabby. Um, happy with that. The light portfolio that I’ve started late last year, 22nd and December for the last 30 days is actually up 4% in the last 30 days when everything else is crashing. Yeah. The s and p is down 8%.

[00:02:58] Cameron Reilly: We’re up [00:03:00] 4%.

[00:03:00] TK: Didn’t, uh, happen to trade some oil futures 15 minutes before a major announcement. Do it.

[00:03:04] Cameron Reilly: No, that was not me. Uh, I did buy some oil stocks in this portfolio, though. Uh, so yeah, that’s probably had a lot to do with it all times since, uh, 22nd of December we’re only up 2% versus the s and p down 8%. So, uh, we’re still outperforming, um, some of the big wins. Remember last week we talked about Eastman Kodak.

[00:03:26] TK: Yeah.

[00:03:27] Cameron Reilly: when I checked it was up 21%. Since I added it the previous Monday, it’s come, it came back a bit last night. Now it’s up 12%. I dunno why Kodak dropped overnight, but um, some of the stocks are doing great. Cord energy is up 53% in the light portfolio. Eco petrol is up 21. Murphy Oil, we only talked about it, we added a few weeks ago, is up 21.

[00:03:52] Cameron Reilly: Neighbor Industries. Neighbors Industries, NBR, the um. Uh, energy industry technology [00:04:00] provider firm is up 12%. Geo Park is up 11 SSPW Scripps, we talked about the television stations. Business is up 10%. Um, so yeah, all doing, uh, quite well despite a chaotic market. Um.

[00:04:20] TK: And, and of course, you know, we, we were buying all. Companies before recent spike on the oil price, but it hasn’t, it certainly hasn’t hurt. Um, and these stocks could come back if there’s a breakout of peace and sanity in the, in the world, what, what’s the likelihood of that?

[00:04:41] Cameron Reilly: Yeah, not much chance of that with the current administrations that we have around the world. I think Tony, um.

[00:04:47] TK: I was gonna say is that we are ready for it. If they do come back, we’ve got our sell

[00:04:51] Cameron Reilly: Yeah.

[00:04:52] TK: and procedures, so yeah.

[00:04:54] Cameron Reilly: Yeah. Things have been going, uh, very well despite the [00:05:00] chaos.

Marker

[00:05:01] Cameron Reilly: Trump wants another $200 billion to finish the war that he said was won a month ago.

[00:05:07] TK: Well, all he has to do is, as we know, is to, is to get into the, your market 15 minutes before he posts on true social. And he’s got that, that inflow to do whatever he wants. Yeah.

[00:05:17] Cameron Reilly: I am not sure he is gonna spend that profit on, uh, financing the war. Um. So, yeah, we, you mentioned this article, so I saw this in Fortune the other day, the, this is by Steve Hanky, who’s a professor of Applied Economics at the Johns Hopkins University, and a member of the board of Directors at the Federal Fiscal Sustainability Foundation. He says The treasury just declared the US insolvent. The media missed it. The US government is insolvent. That’s not hyperbole. It’s the conclusion drawn directly from the treasury department’s own consolidated financial statements for fiscal year 2025, released last week to near total media silence. The numbers 6.06 trillion in [00:06:00] total assets against 47.78 trillion in total liabilities as of September 30th, 2025. Importantly, the 47.78 trillion in reported liabilities does not include the unfunded obligations of social insurance programs like Social Security and Medicare. Those are the close separately in the off balance sheet.

[00:06:23] Cameron Reilly: Statement of social infrastructure, consolidated balance sheet position, excluding the SOSI. Deteriorated nearly 2.07 trillion between FY 24 and FY 25, reaching a staggering negative 41.72 trillion. liabilities are now nearly eight times the value of reported assets. The largest drivers were a $2 trillion increase in federal debt and interest payable.

[00:06:54] Cameron Reilly: Now 30.33 trillion and a 438.8 billion increase in federal [00:07:00] employee and veteran benefits payable. Now 15.47 trillion goes on and on and on. But, um, the, sort of the, they break it down into more relatable numbers later on. said most people cannot relate to trillion dollar figures on a government ledger.

[00:07:17] Cameron Reilly: So consider this, this is their, uh, coffee shop analogy. Divide every number by a hundred million. Drop eight zeros in federal finances look like a household budget and free fall. That household earns $52,456 and spends 73,378 running a 20,932 annual deficit. total liabilities in unfunded promises amount to 1.361 million against just $60,554 in assets leaving at 1.3 million in the whole Uncle Sam by any accounting standard is insolvent. Congress has clearly lost control of the nation’s [00:08:00] finances. America is facing a fiscal catastrophe. The reckoning, long deferred is becoming impossible to ignore.

[00:08:08] TK: The coffee shop analogy is the right one to use. Uh, except that misses one important factor, and that is that in the coffee shop that the US government runs, they have a magic printing press in the basement. And uh, they can keep. Funding their liabilities by either printing more money or issuing more debt.

[00:08:28] TK: Um, I, I did a bit of research into this article ’cause it, it’s, it’s always bothered me. Um, and this isn’t the first year the US government’s been insolvent on any sort of balance sheet reckoning. It’s the 29th year that the, um, the, uh, what’s it called? The GOA, the government, whatever the government agency is, that signs off on these accounts has refused to sign off on the account.

[00:08:53] Cameron Reilly: Government accounting office or

[00:08:55] TK: Yeah, that’s it. GAO. So they haven’t signed off on the accounts for 29 years for [00:09:00] the reason that it’s technically insolvent. And again, it, it gets back to this. Cycle of lowering interest rates that, that governments could just keep issuing debt, which became cheaper and cheaper and kicked the can down the road for the day when debt starts to increase.

[00:09:15] TK: And then they can’t service that debt. And so they have to print money, um, to, to help do that. So it’s, it’s not a good situation and it doesn’t mean it’s not gonna go on for another 29 years, but what’s gonna happen at some stages is either gonna be a reckoning, uh, you know, a serious recession or depression when inflation gets really high, when the US currency gets the value.

[00:09:39] TK: Uh, ’cause you can’t keep. Printing money forever without the currency going down in value, or, which is probably the most likely option. There’s another default currency and a better government, um, issuing or a better government, uh, risk in terms of being able to issue bonds, which is probably gonna be China, I would’ve thought, um, down the track.

[00:09:59] TK: And [00:10:00] then the US has some real trouble then because it’s traded on the fact that you can always issue bonds at a cheap or cheaper rate than anybody else, any other government, and its currency is the default world currency that helps prop up this house of cards. Um, and it may continue to for another 10, 29 years, but it, it won’t do it forever.

[00:10:20] TK: Um, so.

[00:10:20] Cameron Reilly: privilege as called it, I think it was the, uh, British Foreign Minister back in the fifties or something, the exorbitant privilege.

[00:10:32] TK: Yeah, and I mean, you compare, I, I compared it to Australia just to see if we were on the same sort of, um, dimension as the US and we’re not. We we’re all along the way, but we’re not as bad. So, uh, in the Australian case, we have total assets of 9 25 0.8 billion total liabilities at approximately 1.570 billion.

[00:10:59] TK: Um, so [00:11:00] negative 644 billion and net debt estimated to be about the same at 587 billion, which is still reasonably high. 20% of GDP. And we are running a deficit, but it’s, it’s the kind of deficit that the government can get back into surplus if it needs to. So it’s not a runaway deficit like the US is. And hence, Australia is one of a small number of countries.

[00:11:22] TK: I think there’s 11 in the world, which still have AAA rating with all three agencies. Um. Around the world. So, you know, standard and pause, uh, Fitch and I’ve forgotten the third one. Uh, but, so that’s countries like Australia, Canada, Denmark, Germany, et cetera, et cetera, Singapore, Sweden. Um, so we’re kind of managing this much better than the US is, but we don’t have the, we don’t have the assets.

[00:11:50] TK: The US has no one’s, you know, our government bonds are more expensive. In terms of what you need to pay as a yield to attract people. Our currency isn’t the reserve currency, so we’ve gotta be more [00:12:00] responsible. Um, when the US kind of starts to lose those privileges as it will one day, then they’re gonna have to be more responsible, but they’re further down the track, and it’s gonna be a real problem for whoever who inherits that.

[00:12:11] TK: Uh, and I remember Warren Buffet going on about this for a long, long, long time, and he, he talked about, uh, the US maxing out its credit card back in the nineties and living beyond its mean. And he had a, he had a, what he called his five minute solution to the problem. He proposed that if the federal deficit exceeds 3% of GDP, all sitting of members of Congress should be ineligible for reelection, which is not a bad solution.

[00:12:38] TK: Um, so yeah, so it’s not a, it’s not an immediate problem, but it’s not a great framework to go forward with.

[00:12:44] Cameron Reilly: that’s like my lie detector for politicians that I’ve been pushing for 20 years.

[00:12:50] TK: Lie detector test?

[00:12:52] Cameron Reilly: You remember that one?

[00:12:53] TK: No. What’s the question gonna be?

[00:12:55] Cameron Reilly: No. It’s always, well, if, um, uh, well, I, I have. [00:13:00] Two, two tests. But one is if you make a campaign promise

[00:13:04] TK: Mm-hmm.

[00:13:04] Cameron Reilly: and then you get elected and you break that promise, you immediately get five years

[00:13:09] TK: You don’t know you. You don’t remember why the politician’s strength is it’s word salad. Right? So you put them on,

[00:13:18] Cameron Reilly: Doesn’t

[00:13:18] TK: did you break this campaign promise? Well, the economy changed. The boils stopped.

[00:13:23] Cameron Reilly: And there’s no excuses. That’s the thing. Did you promise something? Did you deliver on it? No. Five years hard time.

[00:13:30] TK: So then you get election campaigns like we’ve had in the past where the opposition just says no, and that doesn’t develop any policies. A small target campaign.

[00:13:38] Cameron Reilly: That’s okay. Just don’t promise stuff and don’t deliver it. That’s okay. I don’t mind if you don’t promise stuff. Just don’t promise stuff that you can’t deliver on.

[00:13:45] TK: Yeah. Okay. That’s, that’s

[00:13:48] Cameron Reilly: is

[00:13:49] TK: of an issue. But,

[00:13:50] Cameron Reilly: Politicians need to set a lie detector test, once a year they fail five years.

[00:13:56] TK: but the fundamental problem with democracy is [00:14:00] that we, the people don’t set the agenda, right? We should, we should be a board which says, um, we’re gonna have an election. Everyone’s gonna vote. Who can best sort out these problems? And here is a list of the problems they have to sort out. We decided, so we have a referendum first, and we say, you know, there’s only, we are only allowed to vote on 10 issues, top 10 because, and you’ve got four years to fix them.

[00:14:22] TK: And we all agree on the top 10. And then we say, okay, we’re gonna vote for A, B, and C to do that. And in four years time we’re gonna say, here’s a scoreboard, here’s a scorecard. You in all, you’re out.

[00:14:32] Cameron Reilly: Love it. Love it. By the way, it was, uh, the guy who came up with exorbitant privilege wasn’t British, he was French. His, uh, name was, uh, re he was the French foreign Minister in 1965. He, uh, um. Oh, he’s the one who put the specific phrase into the public record. The intellectual architecture behind, behind the critique came from Mabb, [00:15:00] Jacque Ruth, a French economist, an influential advisor to Charles Dega, famously described the American situation as a deficit without tears that the US was the only nation that could run massive trade deficits and pay for them by simply printing its own currency, which other nations were then forced to hold as reserves.

[00:15:19] Cameron Reilly: And that was in 1965.

[00:15:21] TK: Wow. And of course, that’s the other reason why the gold price has been going up is because central banks are buying gold, knowing that at some stage the US is gonna have to print a lot of money to pay its debt or devalue its currency and they don’t want to be holding US dollars, uh, without a. Hedge when that happens.

[00:15:39] Cameron Reilly: Well, and you know, uh, apart from the extra $200 billion that the Trump administration wants to finish the war, he’s already won with Iran. Is, uh, in add that’s in addition to a massive $1.5 trillion base [00:16:00] defense budget or war budget. Now that it’s the Department of War, I guess, for fiscal year 2027, which is a 66% increase over previous levels.

[00:16:09] TK: Well, that was the other thing I noticed in that article when you sent it through about the US deficit, the GAO said the numbers they were using were approximate because they can’t get mon, they can’t get numbers out of them. Ministry of Defense or Ministry of War, whatever it’s called now.

[00:16:23] Cameron Reilly: Yeah.

[00:16:25] TK: So it’s probably a.

[00:16:27] Cameron Reilly: Talking about US issues. Um, this isn’t in my notes, but I, ’cause I just saw it a little while ago. This is in Reuters today. Uh, Iran blows hole in US aluminum supply chain with smelter strikes, with attacks on the two biggest aluminum smelters in the Middle East. Over the weekend, Iran struck at major supplies to the United States of a strategic metal.

[00:16:50] Cameron Reilly: The world’s biggest economy does not produce nearly enough of domestically. Analysts said the weekend disruption from the Iran War centered around the difficulty of [00:17:00] shipping aluminum and raw materials through the strait of mush, which has been effectively closed by Teran. But on Saturday, Emirates Global Aluminum said it’s roughly 1.5 million metric ton per year. Al we last site in Abu Dhabi had sustained significant damage from Iranian attacks. Aluminum. Bahrain said it’s 1.6 million ton per year plant was targeted on the same day. the US um, only produces about 40% of the, uh, aluminum that it needs every year. And aluminum prices lept 6% to $3,492 a ton, close to a four year high. So we may see, um, aluminum stocks back

[00:17:47] TK: Yeah.

[00:17:48] Cameron Reilly: buy list very soon.

[00:17:50] TK: Capra comes to mind,

[00:17:51] Cameron Reilly: Uh

[00:17:53] TK: but um, like it’s again, just a, another one of these shortsighted issues and it’s Trump’s been, you know, [00:18:00] walking around like a rooster saying, well, we don’t need oil from the Middle East. Haha, you can fix it Europe, but it’s, but there, oil isn’t the only thing that comes outta the Middle East.

[00:18:10] TK: And I remember going to Dubai for a, a holiday and seeing the huge aluminum smelter on the side of the coast there. Um, yeah, I can’t remember the exact details, but there was like a desal plant, which of course they need, and a huge elec electricity, uh, generator, um, which both an aluminum smelter and a desal plant knee.

[00:18:33] TK: So they put them side by side and stuck a generator next to them. Um, and uh, yeah, it was big. Let me tell you, it was like a big refinery.

[00:18:42] Cameron Reilly: I am, uh, aluminum’s already a buy on our buy list. So, yeah, I, I did see a couple of stories in the news this morning that Trump’s number one strategic objective in Iran now is to open the Strait of ous. So the thing that the war created is now the number one strategic objective of the [00:19:00] war. His war blocked it. Now he needs to open it.

[00:19:05] TK: Well it’s, that was, I was gonna make that point, but when moved on, when you were reading the article out, it said, when Iran, since Iran closed the Straits F on war, I’m thinking they didn’t close it. It was the US and the Israel that closed it.

[00:19:18] Cameron Reilly: Yeah. Oh dear me.

[00:19:22] TK: There’s also been, there’s also a debate around CAA about whether Bo site was the relevant commodity or aluminum.

[00:19:28] Cameron Reilly: Right

[00:19:29] TK: ‘ cause aluminum itself isn’t really a commodity, it’s the output of refining bulk site. Yeah.

[00:19:34] Cameron Reilly: Yeah. Right. August last year looks like it was the last time it was on our buy list. Well, fun and games. Uh, the other story, of course is uh, traders bet $500 million on oil price just before Trump’s post on delay to Iran attack traders bet heavily on crude 15 minutes before Trump announced delay to attack [00:20:00] oil prices plunged 15% after Trump’s post on Iran talks. Yes. I wonder who that could have been that had 15 minutes warning

[00:20:14] TK: I wonder. But um, the interesting thing is it’s, that happened, it’s almost a week ago now. Not quite. Perhaps it was a week ago. I think it was this, this time last week we were talking about it. Um, and no one knows who benefited, like.

[00:20:29] Cameron Reilly: Yeah.

[00:20:29] TK: It’s on, it’s on a publicly traded platform, probably nymex, which is where the US WTI, um, works.

[00:20:38] TK: West Texas. Intermediate oil gets traded. Uh, so open platform, it’s, it’s not like someone ducked into a alleyway and saw a guy in a fedora and sunglasses and the raincoat who said, you wanna buy some oil. It’s like, it’s on a public platform. Buyer and seller. Someone needs to know who’s on both sides of those trades.

[00:20:59] TK: Now [00:21:00] there’s probably, there’s probably privacy issues. Like I get that, but ha has reporting sunk to such a low debt that no one can work out who actually benefited from that trade.

[00:21:11] Cameron Reilly: Don’t worry Tony to Donald Trump has his best people looking into it right now.

[00:21:16] TK: That’s why we don’t know after a week.

[00:21:18] Cameron Reilly: It’s like trying to get information out of, uh, the Pentagon where all the money’s going. Don’t worry about it. We’ll get

[00:21:25] TK: Yeah.

[00:21:26] Cameron Reilly: that. Yeah, we’ve got our best people. Our best people are working on it.

[00:21:29] TK: Hey, by the way, going back to those, um, US accounts, hasn’t Doge made a big difference to the cost base?

[00:21:35] Cameron Reilly: Yeah. Fantastic. Doge. Such a win.

[00:21:38] TK: Mm. Winning.

[00:21:40] Cameron Reilly: the oil price, Dr. Was at $97. It dropped down to 88. It’s now $102 50. This is, uh, WTI.

[00:21:49] TK: Yeah. Right.

[00:21:50] Cameron Reilly: whoever shorted it got out pretty quickly because it didn’t stay down for very

[00:21:55] TK: It didn’t, did it? No, that’s right. Well, I think they were selling, so [00:22:00] they didn’t, I don’t, I think the story is they sold their, their holdings of oil. So that’s the other thing too, like, again, it shouldn’t be too hard for someone to dig into the paperwork and find out who holds that much oil to sell.

[00:22:13] TK: Narrow it down, dig around and find out who benefited, where’s, where’s wood and Bernstein these days.

[00:22:19] Cameron Reilly: They sold futures. LSEG data shows that between 10 49 and 10 50 GMT traders placed bets on 5,100 lots of Brent and WTI crude futures worth well over 500 million based on a Reuters calculation.

[00:22:35] TK: Okay, so maybe they didn’t have o Oftentimes a professional unit trading a commodity like that in the futures will have some kind of real asset backing in case it goes south. Um, but they can do it what’s called a naked trade and do the futures without that commodity backing. But either way, there’s a paper trail.

[00:22:53] Cameron Reilly: yeah.

[00:22:53] TK: How, how do you know you’re gonna get paid if you don’t know who the counterparty is

[00:22:57] Cameron Reilly: Yeah. Yeah, yeah, [00:23:00] yeah, yeah, yeah, yeah,

[00:23:01] TK: or somebody doesn’t know who the counterparty is?

[00:23:03] Cameron Reilly: Well, the United States Securities and Exchange Commission when asked about this, declined to comment, and the Commodity Futures Trading Commission was not immediately available for comment. So it’s just No comment. Tony

[00:23:19] TK: Everyone knows which side of the bread their butters on in the US, don’t they?

[00:23:23] Cameron Reilly: No idea what’s going on. Uh,

[00:23:26] TK: We’re looking into it so we can do it ourselves next time. So bugger off.

[00:23:30] Cameron Reilly: We’re gonna have a, we’re gonna have a complete investigation

[00:23:33] TK: Yeah,

[00:23:34] Cameron Reilly: this. Uh,

[00:23:36] TK: time.

[00:23:37] Cameron Reilly: the, uh, chairman of the, uh, SEC is a chap by the name of Paul Atkins. Paul Atkins, uh, was appointed or nominated by President-Elect Trump December, 2024. And, uh, yeah, so, you know, I’m [00:24:00] sure he is. I’m sure he is doing a great job. Great job.

[00:24:03] TK: Well, I’m sure he is too de, depending on your perspective. Profiting from chaos. That should be the title.

[00:24:09] Cameron Reilly: Oh, that’s, well, yeah, that’s pretty good. So today, Tony, in my deep dive, my pulled pork, I’m talking about a company called Pitney Bows, which I feel like I’ve heard of.

[00:24:24] TK: Yeah, we have,

[00:24:25] Cameron Reilly: Have we? Oh,

[00:24:26] TK: I have, oh yeah, it’s,

[00:24:27] Cameron Reilly: okay.

[00:24:28] TK: um, supplies and I think in the past paper, I’m, I’m gonna look it up, but I wouldn’t mind betting it was the basis for the office. The sitcom,

[00:24:40] Cameron Reilly: The British show.

[00:24:42] TK: well, originally British, but uh, now Amer the American version. I’m just gonna see what

[00:24:48] Cameron Reilly: I think the British version was the inspiration for the American version.

[00:24:52] TK: Yeah, it was, but I wouldn’t be

[00:24:54] Cameron Reilly: I don’t think they were a paper supplier though. These guys, they’re, um. Mostly male sorting. [00:25:00] Anyway, if you’d asked me before I did this, what they, what Pitney bows did, I would’ve said toilet paper. So I would’ve been, uh, not in tissues.

[00:25:08] Cameron Reilly: So I would’ve like Kleenex. I would’ve been completely wrong. Anyway, they’re listed on the New York Stock Exchange, uh, market cap of about $1.63 billion. Their website says Pitney Bows is a technology driven company that provides digital shipping solutions, mailing innovation, pre-sort mailing services with a nationwide.

[00:25:30] Cameron Reilly: Footprint across the United States and financial services to clients around the world, including more than 90% of the Fortune 500 small businesses to large enterprises and government entities rely on Pitney bows to reduce the complexity, increase the security, and eliminate the potential for fraud in the sending of mail.

[00:25:49] Cameron Reilly: And parcels wonder if they include electoral votes, postal votes.

[00:25:56] TK: Dun, the Mifflin was. The name of the office in the us [00:26:00] so

[00:26:00] Cameron Reilly: right.

[00:26:00] TK: it is a paper company though, so it may not be based on the ChatGPT says that neither was based on a specific company.

[00:26:07] Cameron Reilly: Right. So Pitney Bowes has been around since 1920, founded by Arthur Pitney, the inventor of the first commercially available postage meter. He merged forces with Walter Bows of the Universal Stamping Machine Company. Now, um, interesting backstory with these guys. Pitney had worked as a clerk in a wallpaper store where he identified a problem that was costing his firm time and money.

[00:26:40] Cameron Reilly: Fixing postage stamps to hundreds of envelopes. And it also led to stamp theft apparently. So he was like, there’s gotta be a better way of putting stamps on envelopes.

[00:26:52] TK: Well, I don’t know about you, but I’m old enough to remember the franking machines. Do you, you ever use one of those in an office?

[00:26:58] Cameron Reilly: I did, and I’m glad you [00:27:00] mentioned that because do you know where the word franking machine comes from? Why it’s called a franking machine?

[00:27:05] TK: It was what? Either Pitney or Mr. Pitney or Mr. Bows called Frank.

[00:27:10] Cameron Reilly: If you, if you look it up in Wikipedia, as I did, it says there was a guy called Edward Franks, whose real name was Engel Franken mla, who was a Norwegian inventor who invented the franking machine and had the Franking Machine of America and blah, blah, blah, blah, blah. Then Gemini says, yeah, that’s a myth he never invented.

[00:27:36] Cameron Reilly: There’s no, no evidence of a Franking Machine of America company ever existed. It’s a myth that has been around for a long time and it keeps popping, getting back into, keeps getting removed from Wikipedia, keeps getting put back in, keeps getting removed. It.

[00:27:52] TK: So Wikipedia hallucinates as well, does it

[00:27:55] Cameron Reilly: Well, the people who write things in Wikipedia, halluc, but it is in books, so [00:28:00] there, his name appears in books. Somebody reads a book, they go and add it to Wikipedia, but it’s according to Gemini anyway, and I checked it in a couple of places. Yeah, it’s not true. I checked it in, I did my Dave verification in Grok and um, and, uh, Claude and they both said this is, uh, true.

[00:28:18] Cameron Reilly: So, uh, franking comes from the word Franks. Which means free in Latin, but it means free in Latin. As in, uh, do you mind if I speak frankly, Tony for a second? Means freely, right? Comes from the same route.

[00:28:31] TK: Yeah. Right.

[00:28:32] Cameron Reilly: It comes because the Franks, the Germanic people who conquered Gaul modern France in the fifth century, they were the ruling class and they were the only class that had full civic rights and were free from the obligations of the rest of the citizens, their Gallo, Roman population.

[00:28:54] Cameron Reilly: And by the 12th century, the name of the tribe had become synonymous with the status of being a [00:29:00] free man. I’m a frank, so I’m free. So yeah, the, the word sort of evolved into Frank, meaning free, frankly, Frank King. Yeah. So in Old French, uh, Frank meant free So. Uh, in the 17th century, it began to get used, I think it was like 1660, the right of certain officials in England, members of Parliament to send mail for free.

[00:29:31] Cameron Reilly: They would sign their name on the envelope to Frank. It.

[00:29:34] TK: Ah, okay.

[00:29:35] Cameron Reilly: Indicating that it was exempt from postage, and then it eventually shifted to the privilege of free mail and the physical act of marking or stamping any mail to show that postage had been paid. You had the franking machine in the context of the Australian tax system, which will mean nothing to American listeners, but for Australians.

[00:29:57] Cameron Reilly: We know that we have franked credits, [00:30:00] franking credits, CEO of Frank Dividend, where a company’s already paid, uh, corporate tax on their profits so you don’t have to pay, uh, additional taxes on the profits. By the way, diesel, I did a deep dive on diesel and the history of diesel the other day and was surprised to learn that it was named after its inventor, Rudolph Diesel, and he’s not a meth.

[00:30:24] Cameron Reilly: Apparently. Rudolph Diesel was not a myth.

[00:30:27] TK: Not and, and not diesel, the guitar player.

[00:30:30] Cameron Reilly: Johnny Diesel. Yeah, I thought that’s where I was gonna say, yeah. Johnny Diesel, Australian. Pop star from the eighties. Um, Walter Bowes, the second part of Pitney Bowes was an English born salesman. In 1908, he was selling check endorsing machines. A year later, he bought the Universal Stamping Machine Company, and within a few years had established relationships with the US Postal Service, providing stamp canceling machines to them on a rental basis.

[00:30:58] Cameron Reilly: While he was [00:31:00] successful, he felt that postage stamps would soon become obsolete. And guitar bands were on their way out as a record producer Told the Beatles in 1963. He thought that we should be a more automated way to apply postage, and a postal office worker suggested he contact Arthur Pitney, who had been working on a device for nearly 20 years.

[00:31:22] Cameron Reilly: They met in 1919. Pitney had already invested $90,000 in his business, but the patents were expiring, and his company, the American Postage Meter company, wasn’t doing very well, so they merged. The two companies together came up with the Pitney Bows postage meter company, built on the idea that businesses would pay to automate their mail.

[00:31:46] TK: Well, it’s not a big stretch from going from a machine, which stamps a stamped to say it’s been used to which stamps a letter to say the postage has been paid. It’s sort of

[00:31:58] Cameron Reilly: Yeah.

[00:31:59] TK: really, isn’t it? [00:32:00] Yeah.

[00:32:00] Cameron Reilly: Simple idea to solve what was a big problem.

[00:32:02] TK: Yeah.

[00:32:03] Cameron Reilly: Pitney was the inventor. Bows concentrated his activities lobbying in Washington for the passage of LE legislation that would open the door for the postage meter. In 1920. A year after they merged the United States Congress passed the enabling legislation and the first piece of metered mail, which was a letter from bows to his wife, was posted on December 10th, 1920.

[00:32:30] TK: So all this talk of postage reminds me of the old Dave Letterman. Choke, which you can edit out if you need to, about, uh, about LA issuing a stamp to celebrate the, the hookers on the boulevards. And it’s a 25 cents stamp, but it’s a dollar 20 if you lick it.

[00:32:47] Cameron Reilly: David Letterman said that.

[00:32:50] TK: I

[00:32:50] Cameron Reilly: Really? Wow.

[00:32:52] TK: with someone like that. Yeah.

[00:32:53] Cameron Reilly: Good joke.

[00:32:54] Cameron Reilly: Oh, I’ve got so many, so many jokes I could move into now, but I shouldn’t. Tell you off [00:33:00] air by 19 22, 400 meters were in service accounting for more than 4 million in postage. They went public on the New York Stock Exchange in 1950, but sadly, the partnership didn’t work out very well. They, they hated each other, had a dispute in 1924, they’d only been together for five years.

[00:33:20] Cameron Reilly: Pitney resigned. And said that the creation of the whole thing in his efforts brought him very little joy. Bows got no joy out of it either. Pitney suffered a stroke in 1927 and died in 1933. A 1939 article in time notes that Walter Bowser’s nervous, restless, he hates a desk in office hours, prefers to putter about his home.

[00:33:45] Cameron Reilly: He ended up spending most of his time racing yachts and horses. So he is your kind of guy. In 1929, he sailed his six meter sima to an international yachting championship. So there you go. Didn’t wanna work for a living, would race horses [00:34:00] and sail yachts. He was a man of after your own heart.

[00:34:03] TK: Yeah. Well, based on Frankie.

[00:34:05] Cameron Reilly: Yeah. So the core business of Pitney Bowes today, um, basically they’re the unglamorous plumbing of American Business Mail.

[00:34:14] Cameron Reilly: If FedEx is the company that delivers things to your door, these are the back office guys that sort it and meter it and route it. Uh, they tried to go into business against FedEx, didn’t work out too well. I’ll tell you that story in a minute. They make their money. Sorry.

[00:34:30] TK: gonna say, just before you leave that topic, I mean, this is a bit like a broadcast TV station. It, it’s, it can’t be year on year. There’s gotta be less letters in circulation. I mean,

[00:34:41] Cameron Reilly: There is. There are.

[00:34:43] TK: Den Denmark or somewhere has stopped delivering letters. Doesn’t,

[00:34:46] Cameron Reilly: Have they?

[00:34:47] TK: post post delivery anymore.

[00:34:48] TK: Yeah.

[00:34:48] Cameron Reilly: Well, there was some talk of Australia Post doing that a couple of years ago too. It’s

[00:34:52] TK: to every second day now, aren’t they? Mm-hmm.

[00:34:55] Cameron Reilly: they’re bleeding money.

[00:34:57] TK: Yeah.

[00:34:58] Cameron Reilly: It’s probably ’cause the [00:35:00] CEO was. Buying gold watches for everybody or something. Can’t remember what that scandal was, but it was a scandal a year or so ago.

[00:35:06] TK: The

[00:35:07] Cameron Reilly: That was it.

[00:35:08] TK: Yeah. Cartier watches.

[00:35:09] Cameron Reilly: Gold watches

[00:35:11] TK: Yeah. And do you have a good re

[00:35:13] Cameron Reilly: you get a QAV hat, so come on. Like that’s your bonus for the year. You get a QAV hat.

[00:35:21] TK: Yeah. Any company watching or listening to this podcast can send me their hat and I’ll wear it.

[00:35:26] Cameron Reilly: Oh, okay. Yeah. Had a week. That’s good.

[00:35:29] TK: included

[00:35:30] Cameron Reilly: Yeah, so the, here’s the. Lemme take you through the key segments of Pitney Bows. So Send Tech is the main engine room of the business. Imagine you’ve got a mid-size business, like a law firm. Every day you’re mailing off invoices, legal notices, correspondence, instead of buying stamps at the post office, having somebody lick them.

[00:35:56] Cameron Reilly: Stick ’em on. You have a Pitney bows machine sitting on a [00:36:00] desk. It weighs the envelope. They kind of, I saw, like, I’ve never seen one of these things in real life, but I saw a photo of one on Wikipedia. I think it looks like a fax machine or a photocopier. Weighs the envelope. Prints the exact postage. Like I haven’t worked in an office for 25 years.

[00:36:15] Cameron Reilly: People cut me some slack when I last worked in an office. We had fax machines. No, I don’t know. I do remember the fact we’ve talked about this before. I remember when I worked at Citibank where your wife was working at the same time in the same office or the same building

[00:36:30] TK: Wow.

[00:36:31] Cameron Reilly: 20 years before we knew each other.

[00:36:33] Cameron Reilly: Um, my floor, I think it was my floor, had a telex room enclosed in glass telex, operators in there with lab coats and white gloves. Um, you, you weren’t allowed to go into the room. You had to write your telex and put it in an in tray and they’d come and get it and they’d go in there and they’d type it in.

[00:36:55] Cameron Reilly: And then I remember when we got our first fax machine and we were like, ho, ho [00:37:00] we, we have, we have the power.

[00:37:03] TK: Can’t wait for somebody else to buy another one.

[00:37:05] Cameron Reilly: Yeah, well there was someone in New York, in Citibank, in New York that had another one, so we were email, uh, faxing the people in New York. It was a big thing. You could send your own messages and they’d get it within a couple of minutes.

[00:37:20] Cameron Reilly: In New York, it was crazy. Uh, anywho. So, uh, these things weigh the envelope, print the exact postage directly onto it, and then deduct that amount from a prepaid account. You don’t have to go to the post office. No overpaying a stamp, licked or not. They lease these machines and charge a monthly fee, plus a small margin on every dollar of postage that flows through the device.

[00:37:47] Cameron Reilly: So literally punching the card every time it goes through. It’s the original, maybe punch the card business model. And they do this for over 90% of Fortune [00:38:00] 500 companies and hundreds of thousands of small to medium sized businesses. And it’s obviously

[00:38:08] TK: though mails in decline, it’s still a very big business, isn’t it?

[00:38:10] Cameron Reilly: huge and it’s not. Disappearing. I mean, it’s been declining for years, but it’s not disappearing overnight. And it’s a recurring revenue model. Basically a software as a service business from the 1950s.

[00:38:24] TK: Well, the other thing too is like in Australia, we do a lot more digitally than, uh, compared to when I was living in Canada six or seven years ago,

[00:38:32] Cameron Reilly: Hmm.

[00:38:32] TK: may have changed, but like, um, there was no, uh, account to account. Payment available in Canadian banking. So like if you wanted to pay your rent, you wrote a check to the landlord and posted

[00:38:44] Cameron Reilly: my God.

[00:38:45] TK: yeah. So like mail was still a big thing or

[00:38:49] Cameron Reilly: Yeah.

[00:38:49] TK: there? Yeah.

[00:38:50] Cameron Reilly: Hmm. I remember when, um, you know, Chrissy and I would go visit her mother. Um. Before she had Alzheimer’s, um, 10 years ago, [00:39:00] uh, in Utah, and she was still writing checks for everything and sending ’em off to pay bills coming from Australia. That was like, what,

[00:39:07] TK: haven’t, I

[00:39:08] Cameron Reilly: nine?

[00:39:09] TK: in I don’t know how many

[00:39:10] Cameron Reilly: Yeah. 1985. Called Wants your checks back.

[00:39:16] Cameron Reilly: Um, so revenue’s obviously been declining as physical mail volumes fall, but the cash conversion is really, really solid. They also hold the PB Bank, which manages $575 million in client deposits. The. So clients park money in the deposit account, in the postage account, and they earn float interest on that, uh, while they’re waiting for people to spend it on stamps.

[00:39:42] Cameron Reilly: So I’m surprised BRK hasn’t bought this in the past and, uh, added it to the Geico float business. You know,

[00:39:52] TK: Yeah.

[00:39:53] Cameron Reilly: maybe 575 million’s, not big enough for Warren to be interested in. The other sort of the [00:40:00] business is what’s called pre-sort, which is like pre-crime In minority report, they can tell you before you even.

[00:40:12] Cameron Reilly: Put something in an envelope, what you’re gonna be putting in it. No, pre-sort is, uh, pretty clever. Uh, so the US Postal Service apparently offers huge discounts to mailers who pre-sort their mail by zip code before handing it over. ’cause it saves the USPS labor costs.

[00:40:31] TK: Mm-hmm.

[00:40:32] Cameron Reilly: The more mail you pre-sort, the bigger the discount.

[00:40:36] Cameron Reilly: But the discount tiers require huge volumes that most individual businesses can’t get to by themselves. So Pitney Bows acts as an aggregator. They pre-sort the mail, they get the discount, they pass some of that onto the businesses. And you know, it’s a great business, right? They can do it in volume. Yeah.

[00:40:58] Cameron Reilly: Really clever. It [00:41:00] is like an arbitra, a log logistics arbitrage play. Um, that

[00:41:05] TK: when I, when I ran a company called My Direct, we had a pre-sort, um, system. It’s like a whole series of conveyor belts and gates that open and close to

[00:41:15] Cameron Reilly: Wow,

[00:41:15] TK: into

[00:41:16] Cameron Reilly: that was 30 years ago.

[00:41:18] TK: Yeah.

[00:41:18] Cameron Reilly: years ago. Yeah.

[00:41:20] TK: Australia Post trucks, depending on where they were going. And then we

[00:41:22] Cameron Reilly: Wow.

[00:41:23] TK: a the rate for doing that.

[00:41:25] TK: Yeah.

[00:41:26] Cameron Reilly: Look at you. You know, all of this stuff. You’ve been around. Oh, hold on. Here’s my, uh, green smoothie delivery service. Thank you, ma’am. It’s not very green. We still had a spinach. Yeah. Mm. Don’t mind me. Well, I get my protein shake. So that’s a bit of a moat. I think this pre-sort thing. Um, again, it’s gonna be declining, but it’s a great, great little business.

[00:41:52] Cameron Reilly: They did have a business division called Global e-Commerce, GEC, which is dead. And this was [00:42:00] their attempt to compete with UPS and FedEx in the last mile delivery. Um, Claude called it one of the more, more spectacular corporate misadventures of the last decade.

[00:42:13] TK: And given our history of Pulled Porks, it’s, it’s

[00:42:15] Cameron Reilly: Oh, that’s saying something. Yeah. Hey, nobody died in the making of this episode, so that’s, that’s something they’ve got going for them. Hmm. Whew. Okay. No one has died in the last a hundred years. Yeah. Um, so around 10 years ago, they were watching e-commerce, exploding, Amazon deliveries, all that kind of stuff.

[00:42:38] Cameron Reilly: And they were like, you know what? We already moved mail. We’ve already got this massive logistics operation. We’ve got relationships, we’ve got a national footprint. Why not expand into parcel delivery? Easy money. Easy money. So they basically pitched themselves to Wall Street as the affordable alternative to UPS and FedEx for [00:43:00] small to midsize online retailers who were getting crushed by shipping costs.

[00:43:06] Cameron Reilly: And they spent a fortune building it out. They acquired a firm called Newgistics. One of the Barry and Stan’s, uh, less successful branding, uh, operations Logistics. It was a returns logistics company. Bought it for $475 million in 2017. Spent years trying to integrate the technology, build delivery networks, win retail clients, and then COVID hit, um, and.

[00:43:39] Cameron Reilly: That was good for a bit, but this was a, this is like a huge, you know, logistics build out exercise, which we know ’cause we’ve seen this. Over and over and over again. It’s not easy to build these things out. Like building these things out takes decades of [00:44:00] experience and refinement and capital investment, et cetera, et cetera.

[00:44:03] TK: Yep.

[00:44:04] Cameron Reilly: And of course your entrenched competition are gonna do everything they can to squeeze your margins and run you outta business and you know, do whatever they do to can do to keep clients. They’re gonna try and. Screw you 20 ways from Sunday when there’s competition. If there’s one thing capitalism hates it’s competition and innovation.

[00:44:25] Cameron Reilly: So, uh, UPS and FedEx. Hmm.

[00:44:28] TK: and I.

[00:44:30] Cameron Reilly: Well, it’s not a ran that they hate, it’s that they don’t own and control Iran’s oil. If we control the oil, we’re more than happy.

[00:44:38] TK: Mm-hmm.

[00:44:39] Cameron Reilly: than happy when they controlled Iran’s oil before Mossek had to get involved. And then. The ayatollah had to get rid of the shark. So anyway, UPS and FedEx has spent decades and tens of billions of dollars building out their infrastructure.

[00:44:53] Cameron Reilly: And it’s, it, it’s like Scali laws that, that apply to this, right? The more packages you [00:45:00] deliver, the cheaper it is per package and. The whole integration thing with Newgistics was messy. Retailers needed reliability. A missed delivery or a damage return can cost them a customer. They weren’t really sure about this new operation, and GEC developed a reputation for inconsistency, which made it harder for them to win and retain bigger accounts.

[00:45:25] Cameron Reilly: Then when COVID hit e-commerce, volumes spiked massively. Which temporarily masked how bad their unit economics were. Plus all of a sudden, I’m sure their volume doubled or tripled very, very quickly. You know, you, that’s a tough business. It sounds good as a business if you’re gonna, if your volume’s gonna double, but when you forecast.

[00:45:51] Cameron Reilly: 5% annual growth and all of a sudden you get 200% annual growth, not good, uh, particularly when no one can work and [00:46:00] supply chains erect and all that kinda stuff. Anyway, they, they got through that period, but when volumes normalized in 20 22, 20 23, the losses became impossible to ignore. They were burning through $136 million a year by 2023 with no credible path to pro profitability and.

[00:46:19] Cameron Reilly: By mid 2024, the board had had enough. There was no clean sale option. No buyer wanted it at any meaningful price. They sold an 81% controlling interest to Hilco Global, which is a firm that specializes in liquidating distressed businesses. They sold it for essentially nothing. Hil CO’s job was to wind it down under a Chapter 11 bankruptcy, which concluded early in 2025.

[00:46:48] Cameron Reilly: There was a one time cash cost to PBI for the exit of about 150 million on top of years of operating losses. The total damage over the life of the venture was [00:47:00] in the hundreds of millions of dollars. But the bit you are gonna like about this is the, um, role of the activist investors that came in that, that, that forced this transition.

[00:47:16] TK: Mm-hmm.

[00:47:17] Cameron Reilly: So this is an interesting sort of situation, this company where like a lot of these businesses we’ve talked about recently, um, I’m scrolling down my notes. Institutional ownership is huge. 74% of outstanding shares are controlled by institutional investors. Vanguard, BlackRock are

[00:47:36] TK: Mm-hmm.

[00:47:37] Cameron Reilly: Um, and you know, it it, as we’ve talked about when we’ve talked about ETFs and things like that over the years.

[00:47:45] Cameron Reilly: When, when you have these massive institutional investors that have a lot of sway over how these companies are run and they own 75% of every business, uh, businesses have [00:48:00] limited say in how they run their own businesses, the executives. It’s, it’s an interesting conundrum. But anyway, there was a company called Hestia that took a stake, Hestia capital and ended up basically.

[00:48:15] Cameron Reilly: Outing the ousting, the board. So the current CEO is a guy called Kurt Wolf, AKA, Mr. Wolf gentlemen. I talk very fast and I act very fast if I am abrupt. Gentlemen. Yeah, I apologize. Um, he joined the board. He was so, he was one of the founders of Hestia Capital. Joined the board a few years ago and became the chair of the Value Enhancement Committee.

[00:48:49] Cameron Reilly: Um, sounds like a title Elon Musk would’ve had. And, uh. Then basically started to get rid of the rest of [00:49:00] the board. Now, I, I went to Hestia Capital Partners’ website. They call themselves a deep value focused long short fund, which seeks to maximize long-term risk adjusted absolute returns where risk is defined as the probability and magnitude of long-term loss of capital, not monthly variability.

[00:49:22] Cameron Reilly: The core long only deep value portfolio is augmented by a long short extension portfolio, which generally consists of investment ideas, which originated from deep value research. So in December, 2022, they took a big stake in PBI and basically said that Pitney Bowser destroyed 80% of shareholder value over the prior eight years.

[00:49:50] Cameron Reilly: Under the chair, Michael Roth and CEO Mark Laton, Bach. Stock had created the balance sheet, was [00:50:00] drowning in debt. The GEC segment was hemorrhaging. Cash management had no credible plan to fix any of it. Hesia held about 7% of the outstanding shares at that point. Enough to be taken seriously. He was able to basically take over the board and have himself appointed CEO.

[00:50:16] Cameron Reilly: And he’s kind of driven the turnaround as I understand it. Um, so. We talk about activist investors a lot, but you don’t often see them end up as the CEO of the company.

[00:50:28] TK: That’s interesting. You mentioned before that, uh, when you were doing your research that Louden back came up as the CEO It did when I did my research as well, and my note was this company needs a turnaround specialist, so it sounds like. Hesty, you got caught in front of that. And it’s happening because it’s, it’s, out for it, isn’t it?

[00:50:48] TK: It’s a, it’s a old economy company with strong cash flows, but every time they try and move to the new economy, they slub their toe. So

[00:50:57] Cameron Reilly: Yeah.

[00:50:57] TK: yeah.

[00:50:59] Cameron Reilly: [00:51:00] Yeah. So, um, this Kurt Wolf, I mean, great name for a, you know. Investor takeover. Gordon Gecko. You got Gordon Gecko and Kurt Wolf, I mean together. Wow. Powerful.

[00:51:14] TK: wolf than wouldn’t you?

[00:51:15] Cameron Reilly: Yeah. Um, Lautenbach was, uh, formerly with IBM funnily enough, and, uh, he’d been there at 27 years. They appointed him CEO in 2012. And then he, uh, very successfully, which he learned from IBM run the company into the ground.

[00:51:36] Cameron Reilly: And, um, so good job. Well and bark. So, um, that’s the Kurt Wolf story. He formally served on the board of GameStop, uh, where he was a member of the strategic Planning and Capital Allocation Committee. So, uh, I, I, I dunno the backstory behind that. I didn’t have time to look [00:52:00] into that, but, uh, GameStop obviously been part of that whole, uh, crazy, uh, meme wars thing over the last few years.

[00:52:10] Cameron Reilly: So, uh, the, the whole GEC debacle is the big sort of reputational drag I think. I think so you’ve got a couple of things. Reason why this is, looks like it’s undervalued is obviously male. Is like televisions, as you said before, everyone knows there’s a, there’s a hard stop on that as a business model. They tried to transition to something, they failed.

[00:52:34] Cameron Reilly: Um, really, I don’t know that there’s any sort of, uh, future narrative. They haven’t done any big acquisitions or anything since that, for obvious reasons. They’re carrying a ton of debt. Um, so, but they, they’re generating good cash. So, um, it’s in an interesting position. It’s a classic sort of a cigar butt where they dominated a space for decades and decades and decades that [00:53:00] that business is going away.

[00:53:01] Cameron Reilly: But it’s not going away overnight, but it is going away relatively quickly. They tried to. Plug in a new business. They failed. They burnt through a lot of money in doing that. New guys come in, he’s cutting out, cutting, cutting out all the deadwood. It’s a bit like we talked about Kodak last week. Uh, very, very similar.

[00:53:19] TK: what I was thinking of. And they had a

[00:53:21] Cameron Reilly: Very similar,

[00:53:21] TK: involved. Yeah.

[00:53:22] Cameron Reilly: yeah. Very similar to the Kodak thing, right?

[00:53:26] TK: Yep.

[00:53:27] Cameron Reilly: so yeah, look, that’s the story. Um, sort of a bit of a stu play the financials. Price is about $10 87 Market cap. As I said, it’s about 1.6 billion. The um. Quality rank is 83 out of a hundred. The stock rank is 93 out of a hundred. The Petrovsky F score is seven out of nine.

[00:53:50] Cameron Reilly: So the current shape of the business looks really good in terms of its, uh, financials. Like it’s very, very. [00:54:00] Solid, despite the fact that they’re carrying a ton of debt, uh, it, it still stacks up pretty well. The price to operating cash flow, at the time I did my analysis was 4.25, so not, I think Kodak last week was like 1.6 or 1.8 or something.

[00:54:17] Cameron Reilly: It’s not that good, but still quite a good deal. So four year, 4.25 year payback on your investment today. Pretty good for a business like this with this great thing about this is like, um, we’ve talked about these sorts of businesses in the past. When you have that sustainable revenue, they have these contracts locked in for these machines.

[00:54:41] Cameron Reilly: They’re not going away. They’re not disappearing. It’s not, you know, there’s no real competition to buying franking machines. They have 90% of the Fortune 500 and hundreds of thousands of SMBs as clients. You know, no, no one’s out there going, you know what I’m gonna do? I’m gonna invent [00:55:00] a better franking machine, a better, a better, uh, stamp application machine than Pitney bows.

[00:55:06] TK: stander. I, I did, I must admit, I did wonder about whether AI would disintermediate it, because what you are describing is almost like a software of a software as a service company. you are renting a machine. It, it does a little bit of ip. For you. Um, and you pay a little bit for it. So whether someone can come up with a better app that can, you know, um, work out how to pre-sort or work out how to, charge your mail account or do a better deal for you or whatever. Um, or not, I mean, that’s probably the risk I think doesn’t,

[00:55:41] Cameron Reilly: You still need a,

[00:55:42] TK: will go away because they, you still need the mechanical side of things, but

[00:55:45] Cameron Reilly: yeah,

[00:55:46] TK: they may well get a margin compression from AI competition.

[00:55:50] Cameron Reilly: well, you still need a machine. To stamp the stamp on the envelope and they’ve got the mail sorting side of things, which I imagine is a huge [00:56:00] piece of capital infrastructure that you would have to replicate if you’re gonna take that side of the business. Yeah, I don’t know that the software part of Mabb weighing an envelope and calculating the postage is a big deal.

[00:56:11] Cameron Reilly: I think that’s like, you could probably run that on, uh, a pocket calculator. The amount of intelligence you need to do that.

[00:56:18] TK: Hmm.

[00:56:19] Cameron Reilly: Anyway, um, that’s basically it. The yield’s about 3%, so it’s okay, but not great. PE is actually not too bad. Um, PE is, uh, 8.6. Um, EPS is $1 26. Forecast. EPS for one year is a dollar 46, so it’s got a positive on that.

[00:56:43] Cameron Reilly: So we scored ’em, uh, for, we gave them, gave them a score for quality rank. We gave them a score for stock rank, got a score for F score. They’re, uh, IV number one in our system is $6 46, so they’re trading quite a bit above that at $10, whatever it is, 80. But the IV number two [00:57:00] is $15 18, so they’re below our IV number two, which is good.

[00:57:04] Cameron Reilly: So they get a score for that. Um, didn’t score for price less than book, but, uh, or price less than book plus 30 even don’t have a new three point uptrend. They’ve been in an uptrend for a while. One of the very few stocks, in fact, one of the reasons I’m doing this is it was very hard to find a stock that, uh, wasn’t a Josephine, where the price wasn’t going backwards in the us

[00:57:31] TK: Yeah.

[00:57:31] Cameron Reilly: Had to go.

[00:57:33] Cameron Reilly: Well, even the oil companies were going backwards. The ones that I looked at. Yeah, the ones that we hadn’t already bought. We’ve already bought one. I had to go way down the list to find a stock that actually, uh, had a share price that was going in the right direction.

[00:57:46] TK: Hmm.

[00:57:47] Cameron Reilly: Um, growth over PE is not greater than 1.5.

[00:57:51] Cameron Reilly: Book value growth is not positive. Yield is not greater than the bank debt rate. Um, forecast over year is not greater than. Twice the, uh, share price. [00:58:00] So at the end of the day, um, scored on a bunch of things. The, the quality score was eight outta 12, and the QAV score was 0.16, but they’re carrying a couple billion dollars of debt.

[00:58:16] Cameron Reilly: As I said, I think their long-term debt’s about $2 billion, uh, sitting on about $300 million worth of cash. Total assets, 3.3 billion. Total liabilities is 3.9 billion. So shareholder equity is deeply negative, but, um, you know, it’s a, it’s a story. It’s a, it’s come through a really tough period. It, but this Kurt Wolf guy.

[00:58:47] Cameron Reilly: I, I like the sound of deep value Investor has come in it. It reminds me of Warren buying Berkshire, you know,

[00:58:54] TK: Right.

[00:58:55] Cameron Reilly: in 1955 or whatever it was.

[00:58:58] TK: Yeah. If I [00:59:00] can use the money with a better rate of return, then. Milling cotton, then we’re gonna use it for something different.

[00:59:06] Cameron Reilly: They’ve got the float from the bank. Like that’s a, that’s a straight up,

[00:59:10] TK: Yep.

[00:59:11] Cameron Reilly: straight up buffet Munger play. Right? You generally, you’ve got all this cash sitting here. Oh, okay. I can do something with that. I don’t know what his plans are for it. I didn’t go into that level of detail, but he sounds like a guy who knows what he’s doing.

[00:59:23] TK: yeah. And I think the play, he’ll know the playbook, which is if it doesn’t make money, get rid of it. Try and get some money for it. Focus on the cash generation and then think about how to put that cash to work.

[00:59:34] Cameron Reilly: Mm-hmm.

[00:59:34] TK: And, um, don’t, don’t go big. Just, just try and, you know, find something which is pretty solid and with that. Um, the interesting thing, I think about what you’ve said is the high institutional ownership, because they would see a company like this, particularly in this kind of market as a safe haven. It’s a solid cash generator. It’s an infrastructure type business. It’s been around for a long time. We can trust it. [01:00:00] But your price isn’t really gonna affect, you know, the, the mail that goes through too much. There might might mean a increase in the price of stamps if US Post has to recover its fuel costs. But, uh, it’s, people are still gonna need to mail checks or whatever. Um, or invoices. So yeah, it’s a, it’s a solid infrastructure, cash generating type business.

[01:00:23] TK: Um, probably unloved, um, probably a turnaround play, probably at one of its worst points in its history. but looks like it’s set up to, to increase.

[01:00:35] Cameron Reilly: I’m just gonna finish with, um, letter to the shareholders that Kurt Wolf wrote, um, eight months ago. Just the end part of it. He goes through all of their numbers, the second quarter, numbers, et cetera, et cetera, that we’ve sort of talked about. Talks about the appointment of, uh, new CFO, um, that he brought over from GameStop.

[01:00:57] Cameron Reilly: He was on the board of directors at GameStop. [01:01:00] Um, but at at the end, he says, update on ongoing strategic review. I’ve spent the first 70 days of my tenure year conducting an initial assessment of the organization’s challenges, opportunities, and priorities. The work has already paved the way to accelerate prior leadership successes and better focus the team on the most important value enhancing priorities.

[01:01:21] Cameron Reilly: In addition, this intense internal diagnostic has helped uncover significant tactical operational op opportunities for increasing shareholder value, even as we continue to evaluate the company’s best strategic options and path forward. As one example, we are acting on identified but paused, high return, low risk investments in pre-sort.

[01:01:42] Cameron Reilly: While each of these opportunities may have only a small impact on EBIT in the aggregate, they add up to a significant number. It’s also important to note that we are well positioned to further explore ways to leverage our global financial services business, which houses the Pitney Bowes Bank. Finally, after the internal portion of the reviewers done [01:02:00] and targeted improvements of solidified, we plan to begin working with independent legal and financial advisors to evaluate a broad spectrum of additional value creation opportunities.

[01:02:12] Cameron Reilly: He goes on with an updated 2025 guidance but finishes by saying, I’m pleased to end this letter by stating with confidence that Pitney bows is at its strongest point in years after making significant progress to restructure the organization and realize efficiencies. We’re beginning the work of continuous improvement across our highly profitable cash generating businesses.

[01:02:34] Cameron Reilly: We’re also pursuing additional goals that including returning more cash to shareholders, eliminating higher cost debt, and expanding the coverage we receive from research analysts. As we do this, new management will pursue any and all avenues to maximize value. You now, normally I take such statements from CEOs with a grain of salt, as you say, that’s their job is to make big statements [01:03:00] to market the business, right?

[01:03:03] Cameron Reilly: Yeah.

[01:03:03] TK: Hmm.

[01:03:03] Cameron Reilly: But this is a guy who’s a, a value investor, runs a capital investment fund, um, and. Seems to know what he’s talking about. So I, I put a little bit more stock in this. Not to say that he probably doesn’t have very big challenges, uh, ahead of him to manage the turnaround, but, um, he’s been a, he’s a value investor who’s taken over a business that generates cash, so, yeah, we’ll see.

[01:03:30] Cameron Reilly: So anyway,

[01:03:30] TK: noises and it’s got a bank, he’s gonna love that. He’s gonna have fun with the bank, I would’ve thought.

[01:03:35] Cameron Reilly: yeah.

[01:03:36] TK: yeah.

[01:03:36] Cameron Reilly: Yeah.

[01:03:37] TK: and by Lucky’s approach, it’s like we’re gonna make, we’re gonna do the one percenters in male thought we’re gonna do the one percenters in overseas, and they’ll add up to a meaningful change,

[01:03:46] Cameron Reilly: Yeah.

[01:03:46] TK: what you want to hear.

[01:03:47] Cameron Reilly: Yeah. So that Tony is Pitney bows. PBI do your own research, everybody, but I added it to our light portfolio this [01:04:00] week.

[01:04:00] TK: And just for context, I mean I’m looking at the graph for pit bows and it’s going up at the moment, at least on a five year monthly basis. How many stocks on the buy list were there this week that were, um, had positive sentiment?

[01:04:14] Cameron Reilly: Uh, well, positive sentiment are you including, you know, second byline, latest byline.

[01:04:24] TK: Yeah, yeah, yeah. So in Australia there’s like half a dozen, and most of those were all companies.

[01:04:29] Cameron Reilly: Yeah, I look, there was a lot of companies to be honest, but, um, when I was checking their, um, Josephine status, they were all down a bit like, just for this week. But if I, I, I, I’ve just brought the buy list up. So there were 46 companies.

[01:04:56] TK: many. Wow.

[01:04:57] Cameron Reilly: Yeah. They were on the buy list.

[01:04:59] TK: [01:05:00] now I’m kind of surprised given the experience in Australia.

[01:05:03] Cameron Reilly: Yeah, sorry. So yeah. But as I say, a lot of them I couldn’t, I couldn’t talk about, I couldn’t buy because their share price was down over the last couple of days. They were still a buy technically on a three point trend line basis, but their share price was retreating just because of the, you know, volatility and the craziness.

[01:05:22] TK: they were up at a daily basis. They were down short term.

[01:05:25] Cameron Reilly: Yeah,

[01:05:26] TK: Yep.

[01:05:26] Cameron Reilly: the number one stock in the buy list was career and electric power, which is actually down, you know, we’ve have that in our portfolio. We’ve talked about it before. It’s, um, the one big loser in our actual main portfolio. It’s down 18%. Since, um, I added it not that long ago. Let’s see, I added it in, uh, November 24th of November.

[01:05:50] Cameron Reilly: It’s down 18% since then, but the buy list had it as number one. So it’s, uh, our buy list is still saying there’s [01:06:00] a lot of value in that. Um, it’s 20% cheaper than it was when we bought it, so that’s why.

[01:06:05] TK: We don’t have new numbers. Yeah, no, that makes sense. But I guess my point was, if a company like this, which is, you know, pretty basic cash generation, been around for a hundred years or more type company is going up in this market, it’s

[01:06:20] Cameron Reilly: Right.

[01:06:21] TK: probably underlying the sentiment behind this.

[01:06:23] TK: This turnaround.

[01:06:24] Cameron Reilly: Yeah. Yeah, that’s a lot of people obviously think there’s something good going on there. It’s not just us.

[01:06:32] TK: Yeah.

[01:06:33] Cameron Reilly: By the way, the other stocks on the bio on the top of the buy list, so it was KEP, ZFA was number two Z XL xpl, LR infrastructure that we talked about. Eastman Kodak was number three. Uh, eco Petrol was number seven.

[01:06:49] Cameron Reilly: Dan aos was number eight. IHS Shinhan Financial Company. You know, a lot of the same companies gas that we have in our buy list or have talked [01:07:00] about IVR. Yeah. A MX. Oh no, that’s different. That’s American mobile cord in the top 20. Hmm.

[01:07:09] TK: like in Australia that happens to, we go because we’re, you know, driven by new numbers. If you’re in between reporting periods and there’s not much happening on the share price, the bias isn’t gonna change that much.

[01:07:20] Cameron Reilly: Yeah.

[01:07:21] TK: Yeah, which is a good, both good and bad. The good thing is you got plenty of time to buy stocks if you wanna take your time or the situation isn’t right for you

[01:07:29] Cameron Reilly: Yeah.

[01:07:30] TK: revisit stocks.

[01:07:31] TK: Yeah.

[01:07:32] Cameron Reilly: But if I just look down the top 20, apart from Eco Petrol, none of them are, uh, oil companies. There’s a gas company in there, stealth gas. Um, yeah. So, uh,

[01:07:48] TK: their share prices have jumped too much.

[01:07:50] Cameron Reilly: could be, yeah, could be.

[01:07:54] Cameron Reilly: Well, that brings us into after hours. Tk. It looks like you’ve got some fun things in after hours for this [01:08:00] week.

[01:08:00] TK: Yeah. So, uh, have, have you seen your friends and neighbors? I think it’s on Apple.

[01:08:07] Cameron Reilly: watched it yet. It’s the John Ham

[01:08:09] TK: It is.

[01:08:10] Cameron Reilly: on Apple. Hmm.

[01:08:11] TK: Yeah. So, uh, Jenny’s away this week in Japan having a holiday with her sister. And, um, I’ve been trying to find something to watch and hooked onto this and have just. I think it’s terrific. Just loved it. I actually, I, I think from memory, I actually watched like half of the first episode when it came out.

[01:08:27] TK: It’s been out for a while now. The second series is about to drop, um, on Friday, so I’m looking forward to that. But I kind of watched the first half of the first episode and went, uh, okay. Because there are so many US series now, which I call it the Breaking Bad Syndrome. It’s like the first episode is guy’s comfy in his world, he’s successful or he is doing okay, and then something hits him out of orbit and he turns like he, he’s.

[01:08:54] TK: Left the fend for himself and he turns to the dark side and the life of crime. And that was the breaking bad episode. [01:09:00] It’s, it’s this one. John Ham loses his job and you know, he’s in a, up to his neck in debt and he’s a stockbroker and or a fund trader or something in the US fund manager. Um, and his life spirals and eventually he turns to a life of crime.

[01:09:13] TK: When you get to that life of crime, geez, it’s good. It’s a really great

[01:09:17] Cameron Reilly: Oh

[01:09:18] TK: series. Like every episode’s a cliffhanger. Um, he’s just out there and doesn’t know what to do and he is being beaten up and he’s a suspect in a murder case, and he’s trying to juggle three or four things at the same time while still being, you know, the father to his kids and all that kind of stuff.

[01:09:33] TK: So it’s a lot of fun. I really enjoyed it.

[01:09:36] Cameron Reilly: It goes back, did you ever watch Weeds

[01:09:39] TK: Oh, yeah,

[01:09:41] Cameron Reilly: that came out three years before breaking Bad? Same premise. Her

[01:09:45] TK: yeah, right.

[01:09:46] Cameron Reilly: drops dead of a heart attack and she has to become a weed dealer. Right. So

[01:09:49] TK: Well, it’s the, it’s the hero’s journey. It’s Star Wars, right.

[01:09:52] Cameron Reilly: yeah, except the hero’s journey is, I think usually the person [01:10:00] isn’t like hugely successful before they go on that thing. Right? They’re

[01:10:04] TK: but they’re still in a stable sort of environment where they’re, they get knocked out of orbit, so to speak. And Wizard of Oz is the classic example. Dorothy gets sucked up in a hurricane. Yeah,

[01:10:13] Cameron Reilly: Yeah. Uh,

[01:10:17] TK: yeah.

[01:10:17] Cameron Reilly: think breaking bad is like the opposite of the hero’s journey though. ’cause you’re not becoming a hero. You’re not having to find your purpose and become a great, you know, believe in yourself and go on this journey.

[01:10:27] Cameron Reilly: You are actually becoming a

[01:10:29] TK: Well, he does, he does though. He does believe in himself. Yeah. Well that’s, that’s Walter White when he becomes, goes from, you know what, whatever he was called to Yeah,

[01:10:39] Cameron Reilly: Well,

[01:10:39] TK: when he puts, when he puts the hat on with the Gotti. Yeah, he’s, that’s

[01:10:43] Cameron Reilly: yeah. Becomes a Heisenberg.

[01:10:46] TK: Heisenberg. That’s a, that’s what I was looking for.

[01:10:47] Cameron Reilly: one who

[01:10:48] TK: Yes. Yeah. And John Ham’s like that. There’s a, like, he, he does a voiceover at the end of each episode, and one of them, I’m gonna paraphrase here. He says, you [01:11:00] know what this life is, it’s a difference between working to earn a living and working to live.

[01:11:06] TK: And the motivation is a lot different.

[01:11:08] Cameron Reilly: Yeah. Yeah. Good. I’m sort of, you know. There’s just so many Apple TV shows. Every celebrity of every note has their own TV show. Now on Apple. It’s crazy. And I’m kind of, I don’t know, uh, holding off. I’m not sure what are the good ones and what are the good

[01:11:27] TK: Yeah.

[01:11:27] Cameron Reilly: good.

[01:11:28] TK: It’s hard, isn’t it?

[01:11:29] Cameron Reilly: Game of Thrones again ’cause Taylor just finished it and I’ve been telling him all along, like, yeah, the last episode sucks.

[01:11:35] Cameron Reilly: He goes, I dunno what you’re talking about. Last episode was exactly what you would expect.

[01:11:40] TK: Oh, okay.

[01:11:41] Cameron Reilly: He said, yeah. I said, what about Ari? She turns crazy. He goes, that’s the point. She was a Arian. They’re all crazy. She was, you know,

[01:11:50] TK: Yep.

[01:11:51] Cameron Reilly: warning you that the whole, every, as soon as he hooks up with her. He’s telling everyone. I don’t know, man. She’s a Arian, so [01:12:00] I, I’m trying to tease the good out of her, but I don’t know, man. She’s the descendant of the Mad King, and she goes mad, right? He goes, that’s the

[01:12:09] TK: Yeah,

[01:12:09] Cameron Reilly: Like she could, her genetics took over and she ended up crazy and destroying everything. I was like, eh, okay.

[01:12:17] TK: makes sense.

[01:12:18] Cameron Reilly: Maybe you

[01:12:18] TK: Because, ’cause the, not, not John Sto, but his brother, the, the deaf, dumb and blind kid who becomes the king at the end.

[01:12:27] Cameron Reilly: dumb and blind is

[01:12:28] TK: Oh, whatever he is. He’s blind, isn’t he? Brand? Thank you.

[01:12:30] Cameron Reilly: He,

[01:12:31] TK: he is, he’s the reverse. The,

[01:12:33] Cameron Reilly: Cripple. Mm

[01:12:35] TK: cripple, but he’s the good guy to tagan. Denise, the nearest targets Bad person.

[01:12:42] TK: Yeah.

[01:12:43] Cameron Reilly: John

[01:12:43] TK: and yang. No, Noran.

[01:12:46] Cameron Reilly: Iran. John Snow was as well because he was only half

[01:12:49] TK: He was,

[01:12:50] Cameron Reilly: Well, I guess everyone’s half taggar, but he had some good DNA anyway, so Chrisy and I were like, ah, maybe we’ll give it another go and watch it again,

[01:12:59] TK: well go and watch [01:13:00] the seven, seven, what’s it called? The night of the seven kingdoms.

[01:13:03] Cameron Reilly: Yeah. Okay. Yeah, that’s

[01:13:06] TK: That’s, that’s really good.

[01:13:08] Cameron Reilly: I thought you said it wasn’t good. You said you

[01:13:09] TK: No, I’d say that was fantastic.

[01:13:11] Cameron Reilly: Oh,

[01:13:12] TK: there’s, you are thinking of the, the two prequels that Matt Smith was in. House of Dragons, I think it’s called.

[01:13:19] Cameron Reilly: right,

[01:13:19] TK: Yeah. The first season of that I really liked. Second season I thought was pretty ordinary, but this is a new season, which is a prequel 200 years before Game of Thrones.

[01:13:28] Cameron Reilly: prequel. To the prequel.

[01:13:29] TK: Yeah, it’s like, and or, you know, or, um, yeah,

[01:13:33] Cameron Reilly: Okay.

[01:13:35] Cameron Reilly: All right. story, whatever it’s called, you know, or Mandalorian. Um, but yeah, it’s good.

[01:13:40] Cameron Reilly: All right. And tell me about your punting downloads.

[01:13:45] TK: Uh, so one of the, if there’s an upside, one of the benefits of having a bad back recently is I got plenty of spare time. I’m not playing golf or it going to the gym. Um, and I’ve persisted and persisted and persisted to try and get chat GPT to help me [01:14:00] code.

[01:14:00] Cameron Reilly: Get

[01:14:00] TK: it worked. It worked.

[01:14:03] Cameron Reilly: Yeah.

[01:14:03] TK: And I did, I downloaded the court, it’s still sitting on my

[01:14:07] Cameron Reilly: Uh,

[01:14:08] TK: desktop and I’m like, no, just, I’ll get chat GPT to work.

[01:14:12] TK: I don’t need Claude. And it worked. But you know what? The secret was just a firm hand. Like I,

[01:14:20] Cameron Reilly: just like a

[01:14:21] TK: it was, I think I spent about eight hours last Friday, and after about six, I’m like, can you please stop? Pumping my tires up and telling me that we’ll find a solution and everything’s going well. It’s not

[01:14:34] Cameron Reilly: Yep.

[01:14:35] TK: you just tell me the next step in the process and I’ll send you a screenshot of the output.

[01:14:40] TK: And like, it just flipped on a dime and just started saying, try this. And I try it, send it to the output. Here we go. Okay, try this. And that’s all we did for a couple of hours. Like must have been rated 20 or 30 times and it worked and it was, so it, I would,

[01:14:55] Cameron Reilly: do?

[01:14:56] TK: oh, so it goes to, uh, a website that has data for the [01:15:00] racers on the weekend, um, which I’ve used for years to, as you would, um, guess populate a spreadsheet, which works out what to bet on and how much to place on the bet.

[01:15:11] TK: Um, but it was, it generally would take me an hour to two hours to run it through manually.

[01:15:17] Cameron Reilly: Mm-hmm.

[01:15:17] TK: And now it’s happening very quickly. It’s just great.

[01:15:20] Cameron Reilly: It’s a great

[01:15:21] TK: Which,

[01:15:21] Cameron Reilly: it?

[01:15:22] TK: Well, and it means I can industrialize the process too and you know,

[01:15:25] Cameron Reilly: Right? I.

[01:15:26] TK: not just bet on the main venues on Saturday. If I can make it work in other places, I’ve got the ability now to do it quickly, which is good.

[01:15:33] Cameron Reilly: and Taylor and I were having a conversation, I was also having a conversation with Fox at the moment. ’cause Fox is coding on scratch. Do you know the Scratch platform? It’s been around forever.

[01:15:45] TK: is this the gaming platform?

[01:15:47] Cameron Reilly: Yeah, you

[01:15:48] TK: Yeah. Okay.

[01:15:48] Cameron Reilly: a coding thing. It’s like a jigsaw puzzles. You drag and drop modules into a

[01:15:52] TK: Oh, okay.

[01:15:53] Cameron Reilly: games and he can code other stuff as well.

[01:15:56] Cameron Reilly: But it’s mostly very, very sort of simplistic games. [01:16:00] But

[01:16:00] TK: Mm-hmm.

[01:16:00] Cameron Reilly: were, at least Taylor was into it when he was young. And Fox has been into it for a few years and he’s getting a real kick out of, at the moment, out of building games that his friends then at school play.

[01:16:12] TK: Yeah. Right.

[01:16:13] Cameron Reilly: And he’s getting that sort of endorphin rush of, I build something and then my friends play it and they love it and they, they give me suggestions for new features and then I go and I build that and I, you know, and I was

[01:16:26] TK: Okay. Talk to me about the pricing model.

[01:16:28] Cameron Reilly: Yeah. Yeah. He’s starting to, you know, figure out that you can get endorphins, not from just playing games, but from building things that

[01:16:39] TK: Oh, nice.

[01:16:40] Cameron Reilly: appreciate. And I was talking to Taylor about this and how, for us at the moment, coding is the new gaming. Like it’s ’cause it’s, hits all the same sort of things.

[01:16:49] Cameron Reilly: You have a problem

[01:16:50] TK: Mm

[01:16:51] Cameron Reilly: to figure out how to solve

[01:16:52] TK: mm

[01:16:52] Cameron Reilly: And you come at it 20 different ways. You finally get it, you, and you’re so close all the time

[01:16:57] TK: mm

[01:16:57] Cameron Reilly: if I could just get this bit to work or that bit [01:17:00] to work, and then you get through that and it works and you’re like, the feeling of euphoria is fantastic, you know?

[01:17:06] TK: It was, yeah. And um. It, it hit home to me what you’ve been saying. I mean, I, I, I could never have worked out the coding that was required and all the JavaScripts and stuff. ’cause it, it, it looked like, and I could be wrong, it looked like the website I go to goes to great lengths to try and protect itself from being scraped

[01:17:24] Cameron Reilly: Mm-hmm.

[01:17:25] TK: to, to download.

[01:17:26] TK: So, you know, I could never have worked out how to do it. Um, so yeah, GPT is a level up in terms of what I could do. It’s, it’s pretty powerful.

[01:17:37] Cameron Reilly: And the thing that, um, from Anthropics been talking about, I may have mentioned this already, but he’s been talking about it for the last couple of months, is their focus for the last couple of years has been to build out the coding side of Claude.

[01:17:55] TK: Mm-hmm.

[01:17:55] Cameron Reilly: Because once you have an AI that can [01:18:00] code, can start to code itself.

[01:18:03] TK: Yeah. Right.

[01:18:04] Cameron Reilly: that’s where the giant leaps start to happen when it’s coding the next iteration. And then that iteration is coding the next iteration. And, you know, so all of the other problems and issues I think that ais have at the moment are taking a backseat while they get it to code really, really well. Figuring

[01:18:24] TK: also too, like it’s from, from all the false starts we had and iterations we had coding’s actually a good thing for ai. ’cause it, it can’t hallucinate if it hallucinates, it doesn’t get the output it needs. So it can fix its own hallucination straight away. Yeah,

[01:18:37] Cameron Reilly: Speaking of which, I had an incredible experience with Claude. A couple of days ago was researching, um, century French politics, uh, 14th century French politics for um,

[01:18:50] TK: because, because 15th is no good.

[01:18:54] Cameron Reilly: No, because of the leper scare of 1321, Tony, the, [01:19:00] the original, the OG conspiracy theory was, um, when the French decided the lepers were poisoning the wells, were gonna poison the wells to kill them all and take over. And so they burnt all of the lepers at the stake

[01:19:12] TK: Wow.

[01:19:14] Cameron Reilly: and then they decided that the lepers were conspiring with the Jews.

[01:19:17] Cameron Reilly: So they burnt the Jews as well. Then they decided the Jews were conspiring with the Muslims, couldn’t get to the Muslims. But you know, that was part of the justification for it. Anyway, I asked

[01:19:27] TK: We’ve really evolved, haven’t we?

[01:19:28] Cameron Reilly: Yeah. So, so much. Um. I asked Claude a question about, uh, one of the, the French Kings at the time, um, and his attempts to centralize the economy of France to gimme some, because it was a line in a book I was reading.

[01:19:47] Cameron Reilly: It said he, he was well due to his attempts to centralize the economy. And I said, gimme some context on that. And Claude said, I’m not really sure I can do a good job of that. Honestly, I, I’ll probably get confused between the various kings. It’s [01:20:00] something that I don’t feel confident at giving you a good answer on, and I don’t wanna, I don’t wanna lead you in the wrong direction, so I’d rather not, um, what I can do is suggest some reference materials that you might want to go read. And I was like, that’s the first time in three and a half

[01:20:15] TK: Yeah.

[01:20:16] Cameron Reilly: had an AI go, you know what? I’m not sure about that. And I jumped into the Claude Subreddit and I said, this just happened. Is this a common thing? ’cause I’ve only been using Claude. for a month, and every, everyone said, yeah, yeah.

[01:20:29] Cameron Reilly: That’s how it’s engineered now. It has two systems, one’s checking, the other one’s work. So,

[01:20:36] TK: wow.

[01:20:36] Cameron Reilly: you know, they’re, they’re, they’ve

[01:20:37] TK: Mm-hmm.

[01:20:38] Cameron Reilly: already started to build in that fact checker. And I was like, oh, that’s, that’s huge. That’s

[01:20:44] TK: Yeah. So I can’t bluff anymore.

[01:20:47] Cameron Reilly: Well, I can, it still gets things wrong. Um, when I was doing my prep for the American show today on Pitney bows, it gave me a, the current CEO and then I [01:21:00] was reading the website and I thought, that’s not the current CEO.

[01:21:02] Cameron Reilly: And I said, Hey, it got the former CEO and the current CEO

[01:21:05] TK: Yeah, right. Okay.

[01:21:07] Cameron Reilly: still can make mistakes, but it, you know, lucky

[01:21:10] TK: other thing I.

[01:21:10] Cameron Reilly: check everything

[01:21:11] TK: The other thing I noticed about it, the using AI using chat PT anyway, was that it, it has changed, I think recently to get you to take out a subscription, which I did, took out the lowest level subscription on Friday so I could keep going. ’cause like you ask, you can ask a certain number of questions with the free one, and it says you can come back in three hours before you can ask your next question now.

[01:21:36] TK: Whereas before it would downgrade you to a, an older model.

[01:21:39] Cameron Reilly: right,

[01:21:40] TK: Now it just stops you.

[01:21:41] Cameron Reilly: right.

[01:21:42] TK: so, and, and I don’t know if this is for another reason, but it struck me as that every time I even now ask ChatGPT a question, like on, you know, Brookside energy or Pitney bows or whatever, it gives me the answer and then it gives me a prompt to ask another question.

[01:21:58] TK: It’s almost trying to get me to run the [01:22:00] meter up to get to a higher level of subscription. So they, they’re becoming a bit more commercial.

[01:22:05] Cameron Reilly: I think

[01:22:06] TK: I know that,

[01:22:07] Cameron Reilly: you?

[01:22:07] TK: but it’s.

[01:22:07] Cameron Reilly: Yeah.

[01:22:08] TK: It struck me as, yeah,

[01:22:10] Cameron Reilly: yeah, yeah. Would

[01:22:11] TK: it struck me as the real reason behind it. Yeah, exactly.

[01:22:15] Cameron Reilly: Um, was a. Yeah, there’s a, there was a line I read in a Reddit post a couple of weeks ago, which was the, the mindset shift that people are going through now is thinking of Claude, in this case as infrastructure,

[01:22:31] TK: Yeah.

[01:22:32] Cameron Reilly: something you chat with, but as infrastructure.

[01:22:34] Cameron Reilly: And so I, I’ve spent the last couple of weeks thinking about where do I spend a lot of my time now? And one of the areas is publishing podcasts.

[01:22:41] TK: Mm-hmm.

[01:22:41] Cameron Reilly: I have to publish, you know, four or five podcasts a week. And the process to publish a podcast is, you know, it’s not overly onerous, but it takes me probably an hour to 90 minutes to publish a podcast.

[01:22:56] Cameron Reilly: All the different, I have to, that’s not even the ones I edit, but [01:23:00] then I have to export all these different, like there’s video versions and a couple of

[01:23:03] TK: Mm-hmm.

[01:23:03] Cameron Reilly: and a transcript, and then I need to turn it into show notes and I need to get album art and then I need to upload them all and I need to enter all of the things in.

[01:23:11] Cameron Reilly: Then I need a blog post and it has to

[01:23:12] TK: You.

[01:23:13] Cameron Reilly: in that,

[01:23:13] TK: You don’t need to do all that. It’s a bit OCD. No, you just put out the podcast, put out the audio.

[01:23:20] Cameron Reilly: You’ve, you’ve, you’ve never published a podcast and had people going, Hey, where’s this? Where’s that? Where’s this bit? Gimme show notes, time coded. I wanna know Time codes. I wanna know. Yeah, please. Geez. Anyway, I coded the whole thing, so now it’s basically one click button and it does everything. I

[01:23:40] TK: Wow. Yeah.

[01:23:42] Cameron Reilly: click a button and it just publishes all the podcasts.

[01:23:44] Cameron Reilly: And now I’m getting it to do the tiktoks well, where it’s gonna take an hour long video, look at the transcript, pick out all the best bits, give me a script of how that would look. I can then edit and go, no, [01:24:00] add this bit, delete that

[01:24:01] TK: Yeah.

[01:24:01] Cameron Reilly: Then it will build them, splice them all together and build them and do the captions.

[01:24:06] Cameron Reilly: And so all I

[01:24:07] TK: Wow.

[01:24:08] Cameron Reilly: drop the upload in. So just this idea of, okay, what takes a lot of time and effort and mental energy that I can just it and so it becomes a one click thing rather than an hour of my brain energy. And then I can put my brain energy into other time, other things, hopefully more productive.

[01:24:24] Cameron Reilly: But we’ll see.

[01:24:25] TK: Well, I hope that’s the future of ai. I mean, um, certainly has been for me. When the internet first came along and I started to use that, I was reminded of a story from I think the forties or fifties, I can’t remember who wrote it, Arthur C or Henan, one of the greats, I think it was called Waldo, but, or the, it was about Waldo.

[01:24:45] TK: So the SF author coined the phrase, which, um, was about somebody, I think they were in a. Rocket ship around the earth or something, but they didn’t have much strength in their arm. So they would plug into [01:25:00] these two handles, which would then have these big extensions to their arms and allow them to lift heavy things and manipulate things.

[01:25:06] TK: Kind of like you’ve seen in movies where someone puts their hands and, and then an arm goes and picks up the radioactive isotope and Yeah, manipulates it or whatever. But it was a, it was a, like a muscle multiplier,

[01:25:18] Cameron Reilly: Mm-hmm.

[01:25:18] TK: and that was back in the forties and fifties where, you know, that was the germane thing.

[01:25:22] TK: And I of, I often thought the internet was like that for my brain. Like it gave me the ability to know and learn much quicker and,

[01:25:29] Cameron Reilly: Mm

[01:25:30] TK: and more thoroughly than what I had in the past by just, you know, having to go to a library or encyclopedia. And now I’m kind of hoping AI is another leg up in terms of that waldo effect on the brain.

[01:25:40] TK: It’s like, as you say, we can hand over the menial tasks and think about the big. Pass more and then uses AI to help us with those issues rather than the mundane ones of putting out podcasts or whatever.

[01:25:54] Cameron Reilly: Yeah. Well, uh, lemme give you a [01:26:00] quick, uh, couple of my, my after hours tips for the week. I discovered a band, another, I think from the eighties, uh, the wipers ever come across them.

[01:26:10] TK: And I haven’t, no.

[01:26:12] Cameron Reilly: Um, American punk rock band from late seventies, early eighties, um, discovered ’em through a sort of backwards, process of somebody who had rerecorded one of their songs, but really digging it, really digging their, uh, sound. Um, uh, flea has a new album. Uh, his solo jazz albums just come out. Do you know Flea The

[01:26:41] TK: Yeah, I’ve been listening to it.

[01:26:42] Cameron Reilly: Oh, you’ve been listening to the album.

[01:26:44] TK: Yeah, it’s great.

[01:26:46] Cameron Reilly: Isn’t it Great? His

[01:26:47] TK: Yeah.

[01:26:48] Cameron Reilly: the cover of Witch Linesman.

[01:26:50] TK: Which is one of my favorite recordings anyway. Not, not necessarily their cover, but I love Wichita Linesman,

[01:26:56] Cameron Reilly: Great

[01:26:57] TK: Webb.

[01:26:57] Cameron Reilly: that deep, that that sort of [01:27:00] riff that he

[01:27:00] TK: Yeah, yeah,

[01:27:01] Cameron Reilly: hypnotic. It’s

[01:27:02] TK: yeah.

[01:27:03] Cameron Reilly: I just loved, I’ve been listening to a lot of Nick Caval week and then that came out and I was like, uh, holy shit. And Nick’s voice on that track. Like he, I was saying to Chrissy, like, as he’s gotten older, he is just got this real warmth and, and, uh, gravitas in

[01:27:22] TK: Mm

[01:27:22] Cameron Reilly: A bit like Leonard Cohen or Johnny Cash

[01:27:25] TK: mm

[01:27:25] Cameron Reilly: older. Know it’s amazing.

[01:27:27] TK: Yep.

[01:27:28] Cameron Reilly: But I gotta tell you the story. So I was having breakfast with Hunter on the weekend, uh, on Sunday at a cafe, and we were talking about creative, um, blocks. And I was saying, well, you know, uh, Nick Cave says he gets up at every morning, puts on a suit, goes to his office, sits in front of the piano, stays there until o’clock, and then goes home, treats it as the office, you know, there’s no excuses. And he goes, who? I said, Nick Cave. He goes, never heard of him.

[01:27:54] TK: You are kidding,

[01:27:55] Cameron Reilly: Cage.

[01:27:56] TK: huh?

[01:27:57] Cameron Reilly: Cave. He’s like, one of Australia’s greatest [01:28:00] rock exports. He goes, no, never heard of him. And he looks at up, he goes, he’s got like 4 million followers. He’s nobody. And I

[01:28:05] TK: Oh.

[01:28:05] Cameron Reilly: on. I started turning to people in the cafe and I was like, excuse me sir, excuse me. You ever heard of Nick Cave? He goes, yeah, of course. Excuse me, madam. You ever heard of Nick Cave? I did that for like 60 seconds just asking everybody, young, old, you ever heard of Nick Cave? And they’re like, of course Hunter was pissed. He’s like, yes. Fuck, you’re so embarrassing. You’re such an idiot. Actually, he said, I can’t believe anyone’s ever been married to you. You’re the most annoying human being on the planet. Like Yep,

[01:28:33] TK: Uh, yep. And did you say genetics are a bitch?

[01:28:38] Cameron Reilly: Yeah, yeah. No, I didn’t.

[01:28:41] TK: Uh,

[01:28:41] Cameron Reilly: TV show, I started

[01:28:43] TK: sorry, can I interrupt there? Talking about Nick ca, have you seen that Matt Smith series that Nick Cave wrote? It’s a based on Nick Cave book. Came out last year. Yes. Funny. Mabb Monroe.

[01:28:57] Cameron Reilly: but I haven’t seen the series anywhere. [01:29:00] I knew that they were doing it, but uh, I love the book.

[01:29:02] TK: Yeah. It’s not bad. It’s worth checking out anyway. Yeah,

[01:29:06] Cameron Reilly: I’ll try and find it. I haven’t seen his second documentary either. I saw the first one, the 40,000 hours or whatever, but I haven’t seen the second one.

[01:29:14] TK: yeah. What’s the second one? It’s good too.

[01:29:17] Cameron Reilly: I, I’ve been listening to his catalog all week just on repeat, uh, you know, just mix and just. I mean, just constantly astounded by the quality of his song catalog and how, how he’s morphed over the years and just incredible,

[01:29:37] TK: yeah. We used to go and see the, the birthday party,

[01:29:41] Cameron Reilly: Yeah.

[01:29:41] TK: which was just out there.

[01:29:44] Cameron Reilly: And you

[01:29:45] TK: Gothic,

[01:29:45] Cameron Reilly: that

[01:29:46] TK: gothic art. Yeah.

[01:29:48] Cameron Reilly: he’d be wearing a suit

[01:29:49] TK: Correct. Yeah.

[01:29:51] Cameron Reilly: singing songs of love and loss and

[01:29:53] TK: Yeah. I remember it was, I think it was Royal who used to say every day he got up and, um, [01:30:00] walked into his, uh, shed

[01:30:02] Cameron Reilly: his cottage at the back.

[01:30:04] TK: act out in the back and wrote for eight hours and then got up and came inside.

[01:30:07] TK: Yeah. Whether it was cold or raining. Yeah. Yeah,

[01:30:09] Cameron Reilly: with him with that. He had his writing desk. He

[01:30:11] TK: yeah. Mm.

[01:30:12] Cameron Reilly: and sit and write. Have you seen, um, Ray finds. As rolled Dahl. I think it’s Rae

[01:30:19] TK: No.

[01:30:20] Cameron Reilly: There was a series of shorts that, wheres Anderson Made for

[01:30:23] TK: Oh, yes, I have seen that one. Yeah.

[01:30:25] Cameron Reilly: it’s Ray Fines, who does the rolled Dahl in the cottage with the writing desk and

[01:30:31] TK: yeah. That’s probably where I’m, that’s probably what I’m thinking of. Yeah. Oh, speaking of writers from that era, I saw a, um, a post recently about Ian Fleming, who, neighbor, he was annoyed with his neighbor for using an architect who’d, who’d built this kind of brutalist structure that he didn’t like.

[01:30:54] TK: So he decided to make one of the villains the name of the architect, and he

[01:30:58] Cameron Reilly: sorry,

[01:30:59] TK: was [01:31:00] sued, uh, and I think the guy I lost, but I’m not sure, but can you guess what the name of the architect was?

[01:31:06] Cameron Reilly: Blofeld.

[01:31:07] TK: Gold Finger.

[01:31:10] Cameron Reilly: That was the actual name of the architect.

[01:31:12] TK: Yeah. Yeah. Well, if the post was right,

[01:31:16] Cameron Reilly: finger.

[01:31:17] TK: it? Yeah, no, Blofeld was actually based on somebody as well.

[01:31:22] TK: ’cause um, there’s a famous cricket writer for the, um, for somewhere in Britain who used to come out to Australia. And I saw an interview with him when I was a kid, and he said, um, and his name was Blofeld. And the, the interviewer said, uh, you know, any relation to the James Bond character. He said, well, funny story.

[01:31:40] TK: Ian Fleming didn’t get on with my dad. So he named the character Blofeld.

[01:31:44] Cameron Reilly: That’s gold.

[01:31:46] TK: Yeah.

[01:31:46] Cameron Reilly: One of the great, great reasons to be a writer. Im immortalize Your Enemies. Um, last thing is a TV show. Uh, Seth Rogan directed 2017 ran for a few seasons on Netflix [01:32:00] called Future Man.

[01:32:01] TK: All right.

[01:32:02] Cameron Reilly: it’s pretty silly. It’s a comedy basically about a gamer who beats this first person shooter game and the characters from the game suddenly appear in his bedroom and they’ve come back from the future. He needs to, the, the game was a recruitment device that

[01:32:19] TK: All right. Yep.

[01:32:20] Cameron Reilly: a time to find

[01:32:21] TK: Mm-hmm.

[01:32:21] Cameron Reilly: and he needs to go and save the future, save the, save the human race, blah, blah, blah. But he immediately says, hold on. This is the plot to the last Star fighter. You’re just ripping off the

[01:32:32] TK: Yeah,

[01:32:33] Cameron Reilly: Star

[01:32:33] TK: I was just thinking that. Yeah.

[01:32:34] Cameron Reilly: And that’s, the whole show is basically riffs on time, travel, movies, and sci-fi. know, it’s just, they’re just, it’s like in jokes, making fun of travel and sci-fi tropes.

[01:32:51] TK: Yep.

[01:32:52] Cameron Reilly: It’s pretty violent and pretty funny and um, yeah, it’s a bit like the boys, but less [01:33:00] violent, but in the same sort of genre. Have you seen the boys?

[01:33:02] TK: I haven’t,

[01:33:03] Cameron Reilly: Oh, it’s, it’s good but

[01:33:05] TK: is it okay? I’ll watch it.

[01:33:07] Cameron Reilly: extremely gory, like that? Um, not as much, but yeah. Kind of, kind of funny, good cast. But I, I, I discovered it ’cause I told you last week about the David Lynch

[01:33:17] TK: Mm-hmm.

[01:33:18] Cameron Reilly: hotel room thing. Glenn Heley is in the

[01:33:20] TK: Mm-hmm.

[01:33:20] Cameron Reilly: of that I found out that she dropped dead while making this Seth

[01:33:25] TK: Oh, wow. Okay.

[01:33:27] Cameron Reilly: was like five, she plays his mom. She was like five episodes into it, had a pulmonary embolism, age 62, drop down, dead. And um, and I heard, and I thought, oh, I’d never heard of this show before. So I went and checked it out. That’s pretty good. Not great but good. I mean, it’s good, it’s entertaining. Silly, funny, you know, a lot of gags in it.

[01:33:47] Cameron Reilly: It’s pretty good. got Keith, David in it. Do you know Keith? David?

[01:33:51] TK: No,

[01:33:52] Cameron Reilly: black actor, American actor. He is in kind of everything. Um, you wanna, you want a cool black dude? Middle aged with a deep [01:34:00] voice who’s very smooth. You get Keith? David anyway?

[01:34:04] TK: that was like, Alex and I caught up on the weekend and we were talking about the new dinosaur series,

[01:34:10] Cameron Reilly: Oh

[01:34:10] TK: and I’m like, and I’m, she’s going, oh, it’s good. And I’m going, is it David Attenborough or Morgan Freeman? It’s Morgan Freeman now.

[01:34:18] Cameron Reilly: Or Kenneth? Kenneth Brenner.

[01:34:19] TK: What can Brownie? Yeah.

[01:34:20] Cameron Reilly: of those. Yeah. I, I started listening to the Anthony Hopkins autobiography on, um.

[01:34:25] TK: how was it?

[01:34:27] Cameron Reilly: Okay. But it’s Kenneth Brenner doing the narration.

[01:34:32] TK: right.

[01:34:32] Cameron Reilly: I think he might be Welsh too, but he, it sounds in moments like he’s doing an Anthony Hopkins impersonation,

[01:34:40] TK: All.

[01:34:40] Cameron Reilly: which is kind of weird. I’m not that far into it. He’s still in his childhood and talking about how much he hated his parents mostly. But um, yeah, just weird. Kenneth Braner is now the voiceover guy.

[01:34:55] Cameron Reilly: So anyway, that is, uh, QAV America for this [01:35:00] week, Tony,

[01:35:00] TK: Thank you. I loved it. Like a, talking about a company that we know of, um, and a process that we’ve used. Um, and it’s not an overseas. Nothing wrong with an overseas company, but it’s listed locally on the, uh, New York Stock Exchange. And yeah, people will have experienced it. That’s, um, added thrill. It’s good.

[01:35:20] Cameron Reilly: and a deep value investor to be involved. Thought you’d like that bit.

[01:35:24] TK: Yeah, I

[01:35:26] Cameron Reilly: Thanks, dk. Have a good week.