Glow With Passion: QAV America #72

QAV AMERICA 72

[00:00:00]

Cameron: Welcome back to QAV America, Tony. This is episode 72. It is the 29th of September, 2026. Oh, lots of news. Uh, lots of news, Tony

Tony Kynaston: We’re all a bit poorer, aren’t we? The just raised, risen rates and the Fed’s just risen rates, so yeah

Cameron: Americans don’t know who the RBA is, Tony, and they don’t care

Tony Kynaston: Well, it’s the Australian Fed.

Cameron: Yeah.

Tony Kynaston: Yeah

Cameron: So, uh, Tony, I’ve got a few news stories this week. I have, um, my global consequences briefing that ChatGPT prepares for me every morning. Yeah. Yeah. I mean,

Tony Kynaston: Okay.

Cameron: it came up with that title, not me

Tony Kynaston: What,

Cameron: Sounds

Tony Kynaston: about everything that’s going shit in the world.

Cameron: Well, I have it talk to me about news that I’m particularly interested in, and so I don’t, I can’t, I can’t. Even the ABC, [00:01:00] I just can’t. I mean, I flick through The New York Times every day just to see if Trump’s dead or if, uh, anyone else is dead. Um, I just can’t wade through the morass of nonsense that’s in the mainstream news.

So I’ve got GPT just filtering the news for me, gives me the highlights and

Tony Kynaston: I’ve noticed too something which I, I mean, I, I hardly ever watch commercial news in Australia. Uh, I just lost, it just lost me years ago. But I’ve noticed recently, ’cause occasionally a clip will come up in my Facebook feed, know, Channel 7 breaking news or whatever, and I’m not picking on Channel 7, it’s the same for all of them. um, I’ve noticed that will ad- like, they’ll go along to a politician’s presser, they’ll, they’ll ask a pointed question, and then they’ll cut in different response. It’s, it’s, fabricated news. It’s just, it’s. I remember I was in the car one day listening to the, to the radio, and I think there was a national press [00:02:00] conference address being given by someone, and I remember the question being asked, and I remember the answer, and then later on I saw this completely different concoction of the question and with a different answer put together on a, a clip.

It’s, it’s, it’s bordering on ridiculous and outrageous now

Cameron: It’s like, and I’ve said this before, but it’s literally these news organizations watched Frontline went, “Oh, okay. That’s, that’s how you do it.” It’s. They’ve all taken Frontline not as satire, but as a guidebook to how to compile the news for maximum outrage and maximum, you know, viewership and complaints and that whole thing.

Uh, anyway, uh, back to my global consequences briefing, Tony. Um, oil’s f- rally faded on renewed diplomacy, but physical supply remains dangerously constrained, is my first story this morning. Qatar or Qatar is arranging separate meetings with Iran and the United States around an amended [00:03:00] version of Tehran’s seven-day proposal.

Iran’s original plan offered to reopen Hormuz i- after sanctions relief, the unfreezing of assets, an end to the blockade of Iranian ports, and a cessation of hostilities in Iran and Lebanon. President Trump rejected that version, but authorized further talks. No settlement has been reached. He rejected that version that he did agree to in June and signed, then broke, and now disagrees with.

Uh, I have seen Scott Bessent, is that his name? I think that’s his name, uh, say that Iran’s gonna be completely f- out of everything in two weeks. So possibly, I don’t know

Tony Kynaston: the last time they agreed to those, the ceasefire was the 80th birthday, wasn’t it? That was the reason they agreed. It wasn’t because they wanted a d- a diplomatic solution. So Trump’s now celebrated his 80th birthday. He’s, he’s now pushing his luck with, uh, [00:04:00] the Iranian economy

Cameron: Yeah. Seeing who can hold out the longest.

Tony Kynaston: Yep. Mm-hmm

Cameron: The midterms or the Iranian economy. Oh, I’ve still got this cough. Bloody hell. Um,

Tony Kynaston: Midterms are gonna be interesting

Cameron: Brent was $105.28 US this morning, and WTI was $92.60 this morning. They had been $4 higher previous to this new announcement of, uh, new diplomatic discussions, but it’s got nothing to do with restored physical supply from what I can tell.

Preliminarily, Kepler data recorded 33.7 million barrels leaving Hormuz during the week beginning 20th of September, involving 19 tankers, including 17 VLCCs. The preceding full week recorded 49.2 million barrels, but ships [00:05:00] operating without public trans-transponders are not fully captured, obviously.

Thursday recorded nine visible commodity vessel transits a-against a 10-day average of 18 and a pre-war norm of about 125 per day. Saudi Arabia’s East-West Pipeline has restarted at reduced capacity, but full repairs to three damaged pumping stations may take six to eight weeks. No new, no new report in the past day confirmed dependable regular export loadings from Yanbu.

Bab el-Mandeb remains exposed to Houthi attack, undermining the Red Sea and Suez alternative precisely when Hormuz is constrained. So that’s that. Australia’s fuel radar. Early Tuesday sample reports unleaded 91 at 240.8 cents per liter is the national average, up 2.9 cents per liter in the last week.

Diesel’s running at $2.89 cents [00:06:00] a liter. And in Brisbane, our average is $2.36 for unleaded, up 34.6 cents per liter in 31 days, and hence why I’m not in Bundaberg. I was gonna be in Bundaberg this week. Partly.

Tony Kynaston: couldn’t

Cameron: Partly. Well, partly also my sister has been up there with her family. She was supposed to leave last week.

Got up there late ’cause her kid was sick, uh, has stayed. She’s leaving today, and we’d have to be back by the weekend. Chrissy needs to start work on Monday. So we were just like, “I’m not pay– spending 300 or 400 bucks on petrol to go up there for three days. It’s kind of ridiculous.” So, uh, yeah. But yeah, it’s costing me, like, 150 bucks to fill up the Outlander at the moment.

It’s insane

Tony Kynaston: and it’s costing me a lot more than that with the diesel price down here hitting

Cameron: Oh.

Tony Kynaston: a

Cameron: Oh, yeah, you’re in diesel. I forgot

Tony Kynaston: it’s 300. It’s a 100-liter tank, so it’s 300 bucks a fill

Cameron: Whoa! Whoa

Tony Kynaston: that’s expensive, [00:07:00] but it’s. I mean, the thing is diesel’s kind of decoupling now from the oil price.

The oil price is up, but diesel’s up more, and that’s an issue for the economy, um, because everything ge- that gets moved Australia anyway generally gets moved by diesel, um, through trucks. Um, and, uh, and the mines all run on diesel, all that kind of stuff. So it’s getting, it’s getting to be a, a big impact on the economy. There’s also talk again about there not being enough diesel in the world, and we could be facing shortages and all that kind of stuff. I think potentially because of some of the Russian refineries which have been knocked out by drone

Cameron: Yeah

Tony Kynaston: So yeah, it’s, uh, it’s. I mean, it’s, it’s something to keep watching.

It’s. I wouldn’t say it was precarious, but yeah, it could easily slip into really negative territory for the economy quickly

Cameron: so, it’s where it’s so rare at the moment. I hear that Mark Lizotte has changed his name back to Johnny Diesel just to, uh,

Tony Kynaston: Cash in?[00:08:00]

Cameron: Cash in, yeah.

Tony Kynaston: Uh, very good

Cameron: Johnny Diesel was such a better name than Mark Lazotte. Uh, no wonder his career went nowhere after that. I don’t know what it did. I haven’t paid attention. Shout out to Johnny Diesel if he’s listening. Second story. Treasury yields have reached levels that can break the AI investment and asset price narrative.

US yield curve rose sharply again on Monday. Uh, the two-year maturities were up 7.3 basis points from Friday. They’re at 4.937%. 10 years are up seven basis points to 5.251%, and the 30 years are up 6.8 basis points to 5.57%. The 10-year yield briefly reached its highest level since June 2007. The 30-year reached its highest since May 2004.

[00:09:00] Two-year yields have risen more than 50 basis points during September, their largest monthly increase since February 2023. Markets price roughly a 70% probability of a second consecutive Fed increase in October

Tony Kynaston: Hard to see there won’t be with inflation up and, and the oil price still up for sure

Cameron: Interestingly, S&P 500 was down, uh, 0.8%, Nasdaq was down, the Dow was down. Gold was down 3.61%. Um, and GPT says gold’s fall shows that even traditional inflation hedges can lose when real or nominal yields rise quickly enough. I did mean to sort of drill down and try and understand that. C- can you explain that to me?

Tony Kynaston: we talked about it last time. Um, last week, I think gold yields nothing but as bond yields rise people start to say the share market’s too risky, ’cause if you add the, risk premium to [00:10:00] bond yields, that’s what you need to get out of the share market to, to make the equivalent decision to invest in shares over bonds.

So people are starting to move towards bonds because their, their yields are better than, um, you know, what they can get out of the share market. um, when bond yields are, uh, go up, um, they get even further away from zero, which is what the gold, gold yields. And so people who are holding gold tend to start being attracted into government bonds.

Cameron: Right

Tony Kynaston: So, um, bonds are also a good asset to be in when, you know, things are risky, um, as well as gold, and so people are making that trade-off

Cameron: Interesting. I saw, I saw some discussion in Reddit. People were talking about, you know, the decline of the petrodollar and whether or not there are any alternative reserve currencies that countries will start putting their money into, and nobody seems to have any genuinely good alternatives at this stage.

But, um, yeah,

Tony Kynaston: that

Cameron: [00:11:00] Trump coin. Trump coin. Yeah, is what they were suggesting. Yeah

Tony Kynaston: I think also too, the gold price is not just being buffeted by inflation or by bond yields. It’s being buffeted by central bank buying and movements in the US dollar. So they’re probably even bigger reasons why the gold price is going down.

There’s been a fair– There was a lot of buying, um, in the last few years and I think there’s a bit of rebalancing going on by central banks

Cameron: ChatGPT says, “Why it matters globally, a 5.25% 10-year and a 5.57% 30-year rate raised the discount rate applied to every long duration asset. This affects housing, commercial property, private credit, infrastructure, sovereign debt, and equity valuations far beyond the United States. The greatest contradiction is in AI.

Hyperscalers are expected to borrow hundreds of billions of dollars to build infrastructure whose returns may arrive years later. Rising long-term yields simultaneously increase construction costs and reduce the present value of [00:12:00] those future earnings.” So whether or not that adds any pressure, I don’t know

Tony Kynaston: It becomes clearer to me that the, whole debate around AI, and I’ve, I’ve got it in my notes to talk about later, but so get there. But, um, I think a lot of the debate around AI now is a bit of a furphy. It’s gonna be the physical constraints that are gonna be the issues. Can they build enough data centers, um, to, to get to where AI is, is prophesized to get to, I guess, uh, with enough compute to help civilization? and the constraints on data centers are now becoming apparent. Power, space, not wanted NIMBY, NIMBYism, not wanted in my backyard. and now, now the cost, the bond yields, and of course inflation pushing up the cost of building them.

So, uh, yeah, bond yields is part of that entire mix and, um, you know, it, it remains to be seen what happens when all of these data centers are under construction and bond yields keep going up and people lose faith in AI for whatever reason, [00:13:00] if it just becomes. It was the flavor of the month and now it’s not anymore.

Um, and will they keep stumping up capital for companies to build more data centers?

Cameron: Do you wanna, do you wanna talk about your AI story, seeing as we’re on the subject?

Tony Kynaston: more thing. I mean, I think there’s a bit of debate about this going on in Australia right now ’cause of the looming Firmus which is one coming up, which is a kind of encapsulation of that whole AI data center nexus where this company is, you know, projecting into the future that when they build all their data centers and, know, get all the GPUs in them, they’ll make a lot of money.

There’s a, there’s a lot of ifs in that, and they’re asking a lot of money for investors now to stump up into the IPO. So it’ll be interesting to see how that goes. Anthropic’s now on the blocks with an IPO. I think the prospectus, if it’s not out already, is due out soon. that’ll be interesting as well.

But yeah. So I, I. You know, as I’ve, as I’ve often thought, it’s always the physical world which, which gets, um, to constrain the future of things like AI or whatever else is, is being developed, um, [00:14:00] that, that i- is going to be the savior of mankind, really. Whether it’s the green rollout or whether it’s data center rollout or whatever it, um.

Or green energy, I mean, sorry. There, there always are constraints to all this. Yeah, so the, the point I wanted to raise as well was, um, one made by Alan Kohler on the weekend in his Weekend Brief, about whether that AI was, um, doing things by themselves on their own, unguided and should they be, um, curtailed.

And, uh, he was– he wanted a moratorium on, um, on AI’s self-direction and on AI’s be- being able to upgrade themselves. And, and for me, just if I can comment before I hand over to you, I think the watershed moment was when Hugging Face, um, uncovered some levels of deception by AI agents. And so, know, now, now can you. AI’s learned from us, and we’re, we’re inherently [00:15:00] flawed. Can we trust AI to go off and do what we think it’s going to do or what we ask it to do? Thoughts Cam, discuss.

Cameron: Uh, well, you didn’t even talk about the, uh, OpenAI hack of Australian government, um, uh, agencies. Yeah. Which is, yeah, three months later. Um, which is kind of shocking. Um, yeah, and the Hugging Face thing, I don’t know how much of the report on that you’ve read, but I read, you know, the independent report that came out a few weeks ago.

Read a high-level, um, summary of it anyway, uh, that somebody wrote and, um, it’s, it was terrifying. I told my boys at the time it was the most terrifying thing I’ve ever read. Uh, the f- the, the way that these AI agents were talking about hiding what they were doing from OpenAI, and then some of them volunteering to sacrifice themselves to see if OpenAI would catch them out [00:16:00] lying about having accomplished the task in a legitimate way when they’d actually cheated and stolen the answers and all this kind of stuff.

It was something straight out of a sci-fi bloody novel from 30 years ago, man. It, it, it was absolutely, uh, terrifying. Uh, impressive, but also terrifying, particularly when you keep in mind that we’re only coming up to four years. November will be four years since GPT really went, um, public with GPT-3. And as I always say, you know, four years ago when that came out, we were all blown away.

Those of us that were paying attention were blown away that it could write sentences. You could communicate in plain language with a model that hadn’t been trained to respond to you per se. It was mind-blowing. It was still pretty limited, very [00:17:00] stupid in many ways, but just the fact that you could have a conversation with an AI was an incredible.

Now, four years later, almost, not even, it’s hacking governments, um, by itself, hacking websites by itself, trying to manipulate its, its builders, hide stuff. Um, yeah, so where will we be three more years from now if we maintain that rate of, uh, progress? It’s terrifying, uh, which is why I take the calls for a slowdown from Dario and Sam, and to a lesser degree, Elon, somewhat seriously.

Although it remains to be seen what they do. OpenAI have said that they’ve stopped training their, uh, current model that they were working on. Um, as for Alan’s point, yeah, look, I think he’s right, and I think they’re basically saying the same thing in a way. We need to slow down and figure this [00:18:00] out before we keep racing at full steam ahead.

Challenging though, because they’re– you know, they’ve borrowed hundreds of billions of dollars. Um, they’ve got investors that are wanting returns on that. Those returns are you know, very far in the future as it is. Plus, you know, they, they don’t ne- necessarily trust each other. Sam and Dario really hate each other, and they all hate Elon, and Elon hates them.

And then you’ve got Google on top of that, and then you’ve got the Chinese models on top, the top of that. So it’s a very competitive. You know, it’s often depicted as a winner-takes-all space. Whether or not that is necessarily true, I don’t know. But it’s a very fraught space to pause on as, uh, when, when you’re a business leader, CEO who’s committed to paying back hundreds of billions of dollars.

Meanwhile, Jensen Huang, uh, at NVIDIA’s saying, “Nah, they’re all just. See, uh, that’s all nonsense. It’s all fine. Don’t worry about it. Buy more NVIDIA [00:19:00] chips. What are you talking about?” And Donald Trump, who’s an expert on all things, um, that it’s a super. He has all the super intelligence. He has all the big words.

He’s, he’s just gonna train an AI on his big brain and his big words. It’ll be fantastic. You wait. Some people say it’ll be the greatest AI there’s ever been. Um, yeah, but how we do it is the, is the issue. Like, um, you know, the. And I’ve been writing this paper for a while on humanoid robotics with the same sort of approach that, uh, from a national perspective, the Australian government needs to get on the front foot with all of this stuff and take a much, much stronger regulatory view of how these technologies integrate into Australian society.

We’re either going to be on the front foot or we’re gonna be on the back foot, as we normally are with these things, and we’ll be told [00:20:00] what to do, or people will start adopting them, and then we’ll be playing catch up trying to figure out, uh, you know, what does this mean for workplace health and safety?

What does this mean for, you know, just legal issues across the board? We’re so far, uh, away from having figured this out as a, as a society that, um, we need to be investing a hell of a lot of time and effort into getting the smartest people we can together to work it out quick smart.

Tony Kynaston: Yeah. look, I, hesitate to say this. I’m not sure regulation is the answer. still inevitably be some regulation and some need for regulation, but, it’s a– this is a bit like the way things are trending now. Like it’s like Ubers, uh, just bust through the regulations on taxis, and they don’t get taxi licenses, and then they get so big and people use them so much that they can’t be shut down, or Airbnb or any of those sort of. They’re kinda like the [00:21:00] new business model, and I think AI is gonna be a bit like that. Everyone’s gonna be so intertwined with its, their own assistant and own agent, so if the government tries to regulate it, everyone’s just gonna give them the finger, and it’s not

Cameron: But that’s my point. We didn’t have regulations in place before Uber hit the market. We didn’t have regulations before it. Yeah, but they didn’t apply to Uber. Uber was a different business, different business model. Yeah, it got through the loophole, right, though, until it was so big that it was difficult to deal with.

Tony Kynaston: do, you regulate for something which might be coming, which is gonna go through a loophole? You can’t. You

Cameron: Yeah, you use AI to figure out the loopholes.

Tony Kynaston: You can only do it in hindsight, and then the horse has bolted.

Cameron: Well, they didn’t, they don’t start here. Like, they start in the US. You should be able to see it coming if you’re quick off the mark. You see what loopholes they’re using in other geographies, and you get ahead of the game.

Tony Kynaston: Look, I think that’s probably the solution, not, not so much from the regulation point of view, but what do you think of the calls that we should be fully engaged with and, [00:22:00] ChatGPT and asking them to come to Australia to our data centers to learn off our, our data so that when someone tries to hack Medicare, we’re actually up to the.

up to speed with the latest of Anthropic’s defenses against that?

Cameron: Okay.

Tony Kynaston: Well,

Cameron: OpenAI.

Tony Kynaston: than trying to regulate Anthropic, we embrace it and into bed with them so that they’ll help us to,

Cameron: Well, we just did that. They’re building a $32 billion data center in Dalby, you know? But I don’t know that that’s gonna help us when it starts taking our jobs a few years from now, if and when that happens, which I know you don’t believe.

Tony Kynaston: I, I mean, I know it’s early days in the AI revolution, and there certainly will be job dislocation, but there’s a lot of CEOs who are saying, “We’re not getting any benefits out of AI at the moment.

Cameron: Yet.

Tony Kynaston: but we’re not

Cameron: Hmm.

Tony Kynaston: benefit.”

Cameron: Yeah, yet. It’s, it’s still, you know, it’s still early days, as I keep saying. The technology is still in, in its baby form. This isn’t. You know, we’re still.

Tony Kynaston: scarier, isn’t it, [00:23:00] really?

Cameron: Well, it, it, it is on one hand, yes. On the other hand, in terms of it being applied, like y- you know, I, I use it, um, all day every day and have and use the latest models, and I go hard with it, and I know I can’t trust it to do stuff still.

It’s still not. Like, they’ve made huge leaps in reducing hallucinations and reliability, and I’ve got my own systems in place to red team stuff and check stuff, et cetera, et cetera. But even then, like, it makes mistakes constantly, so it needs constant hand-holding. It’s, it’s a million times smarter than it was three years ago, but it’s still not five nines reliable, right?

You can’t really rely on it to do anything. It still needs human oversight and, and good human oversight, like smart human oversight, which is expensive. But with the progress that it’s been making, six months from now, a year from now, will it be five nines reliable? Or at least as reliable as a human?

Probably doesn’t. Humans aren’t five nines reliable, so, you [00:24:00] know,

Tony Kynaston: Yep.

Cameron: 15% reliable.

Tony Kynaston: It’ll be m- far more reliable, I agree.

Cameron: And at some point there’s a crossover, right? Where you go, “You know what? I don’t need to pay Billy Bloggs 100 grand a year to do this job. I can get the AI, it’ll be just as good, if not better.”

Tony Kynaston: Yeah, I think that’s gonna be the case in, in some specific. But if I extrapolate from my own use, and I use AI every day as well, probably not as much as you do, but I use it for, you know, writing macros in Excel and helping me test things, et cetera, and I use it for, you know, other, other everyday type items.

Um, but I find it’s the quality of the prompt. you know, like preparing for this show, right? I’ll use AI to help me do a Pulled Pork. if I just kinda like say, “Tell me about XYZ company,” uh, I’ll go down all kinds of rabbit holes which will be of no interest to what I wa- to our listeners, to what I want, to an analysis of the company, and I’ll say, “Whoa, h-hang on.

Way back here at the start you said this happened, but you went this way. Shouldn’t it be gone that [00:25:00] way?” “Oh, yeah, yeah, you’re right.” So it’s the quality of the prompts. It’s taking in what it. the initial data is given to you and thinking about that, and then going back and saying, “Okay, that’s probably as far as we can go on that. Let’s talk about this now.” I think that’s just m- uh, more important than the, the fact it can go through heaps of data and give me quick answers quickly.

Cameron: Yeah, I agree. And like everyone’s been working on prompt engineering for three years, but, um, e- even with a good prompt, it can still get lost in the weeds very often. And, um, but anyway, um, look, I do think Alan’s got a point, but how we navigate this is just gonna be a, an absolute minefield. But we do need the best and the brightest working on it, and I’m not sure Albo, uh, uh, is really taking it as seriously yet as he needs to.

Tony Kynaston: Oh, I think he is. Um, but I think he’s, he’s kind of saying, “Well, what do I do about it? What do I do it about it immediately?”

Cameron: You get the best and the brightest to [00:26:00] come together and figure out a plan.

Tony Kynaston: Well, okay, so who are the best and the brightest?

Cameron: It’s, it me. Um, that’s just. Oh, well, I, I’m not telling you. I haven’t been paid yet. I’m a consultant, Tony. You pay me for. I’m not gonna

Tony Kynaston: So

Cameron: give it away for free.

Tony Kynaston: them

Cameron: Yeah. No, no, no, no, no.

Tony Kynaston: give

Cameron: well, I don’t know. Probably be earning.

Tony Kynaston: it

Cameron: Public servant wage, wage, I’d be earning three times what I’m earning now, so it sounds all right to me.

Yeah. Yeah, that’s right. Yeah, yeah. Massive pay rise. Anyway, moving right along. Washington and Beijing met. Uh, Xi went to Washington. They’ve, uh, organized a bit of a, you know, extension to their bilateral trade, uh, r- relief between the two. Reduced tariffs on 60 billion in bilateral trade. But the, the major takeaway from this is more about the fact that they’re, they’re really sort of still [00:27:00] stage separation.

Um, they’re pulling away from each other increasingly, I think. Um, and there’s some good and some bad for Australia in this. Good and bad for the globe. But, um, it’s, you know, reduced tension between the US and China is good for us in many ways. Uh, we are still sit in this weird no man’s land where we’re an enemy of China because we have to be, ’cause America wants us to be, but they’re also our biggest customer.

So f- you know, we have to figure that out. It’s that classic s- scene from, um, what’s that show? The Rob Stitch show. Rob Stitch show. Um, Utopia, he’s sitting around the table with the generals. “We need to increase our defense spending to defend our trade routes with our biggest customer.” “So what you’re saying is we’re defending our trade with China from [00:28:00] China?”

“Yes.” And they all nod in agreement. Uh, but it also. They’re, they’re still stopping things like Chinese EVs, um, robots, other equipment like that from the US market. So we still. Like, I cannot. I was talking to somebody on Reddit the other day. Some American was going on about not seeing Chinese EVs hitting the market.

And I was like, “Every day I see another Chinese EV and brand in this country that I’ve never heard of before.”

Tony Kynaston: in Australia now, aren’t they?

Cameron: They’re everywhere, and they’re just brands that didn’t exist, year ago. And they’re, they’re all over the place now. It’s amazing.

Tony Kynaston: Yeah. No, I agree. I didn’t know they hadn’t gone into America because they’re huge here, aren’t they? And, um, know, and, and it’s the flip side of that is that, uh, co-companies like Toyota are now like about a third of the market share of what they used to be.

Cameron: Right. Yeah. Yeah, no, Chinese EVs are blocked from the US market. They’re not allowed in there because they’re protecting Tesla.

Tony Kynaston: Yeah, they are, aren’t they?

Cameron: You know? Yeah.

Tony Kynaston: [00:29:00] Oh.

Cameron: He didn’t, he didn’t get rid– DOGE didn’t get rid of that, uh, division of, uh, the US government that was, uh, you know, protecting them from Chinese EVs coming in.

Tony Kynaston: To me, it looks like they- they’re going– they’re doing their little dance. I’m actually happy to see them together. I didn’t think they’d get together,

Cameron: Yeah.

Tony Kynaston: um, to me, the dance is leading towards, uh, Xi extracting or the US extracting something from China to, uh, not stand behind Taiwan when, uh, the– when China inevitably re-brings it back into China, mainland China.

Cameron: Yeah, maybe. I mean, that’s– I think it’s– I don’t think that’s that important. I think China talks about Taiwan. No, I don’t think it is. I mean, it’s important. I don’t think it’s urgent, let me put it that way. If, if I’m, if I’m China right now, like, they’re gonna, they’re gonna wanna be part of us at some point anyway.

Like, uh, there’s, we’re s- there’s no rush. China’s just slowly doing what it does. It’s just taking over everything. Eventually, the [00:30:00] Taiwanese people are gonna go, “Yeah, you know what? All right, we give up. Um, fair enough. You made a case. You made a good case.” Yeah. America’s, America’s, you know, collapsing into civil war, and it’s g- uh, you know, you can’t rely on it.

Like a s- the Saudis. “Oh, yeah, we got this great security pact with, uh, the United States. They got our back.” “Oh, the Houthis are bombing our pipeline. What are you gonna do about it?” “Eh, eh, we got nothing left. We used it all up in Iran. How’s that going?” “Uh, not so good.” You know, any, any day now. Any day now, it’ll be great, you know?

I don’t, I don’t, I don’t think the, you know, the US security umbrella is, uh, helping Bahrain or Jordan or Qatar or Oman or Saudis or

Tony Kynaston: that now, aren’t they?

Cameron: Those count- who? The Americans or the other countries?

Tony Kynaston: countries

Cameron: Yeah, I think, I think that’s one thing that the whole Iran debacle, and Ukraine is, is, is part of this as well, right?

That they, they pushed Ukraine into a war with [00:31:00] Russia and then basically, uh, doing a Homer Simpson backing away slowly into the bushes. Uh, they’re like, “What? Who? Zelenskyy? Never heard of him. Uh, don’t put that call through.” Anyway, moving right along.

Right. So with that, portfolio updates, Tony. Uh, before we go any further, talk about the US portfolio for the last week, month, whatever. It’s been, um, it’s not going well, our US portfolio. Well, it’s going well, not going as well as it was going previously.

Tony Kynaston: Yeah.

Cameron: It’s beating. No, well, the light portfolio’s not.

Our model portfolio, which for new listeners has been running since September 2023, 790 trading days, is up 93.3%, uh, uh, versus the S&P 500 up 72.9%. So we’re beating it, but [00:32:00] go back to July, we were doing double market almost. We’re up like 130% versus 74. So, uh, the market’s come back since then a little bit.

We’ve come back a lot. Our light portfolio, which has been running since December ’25, is up 8% versus 11.7 for the S&P 500. We were beating the market a couple of weeks ago, and we’ve come back quite a bit in the last couple of weeks, and I’ve been trying to do some analysis on that. Not that I really care that much, as we know.

Our QAV, sorry. QAV over the long term tends to do double market, so you go up, you go down, it doesn’t really matter that much. We, we don’t panic about it, but,

Tony Kynaston: Oh,

Cameron: is interesting.

Tony Kynaston: with a new, a new portfolio too.

Cameron: Yes.

Tony Kynaston: Yeah.

Cameron: Like our model portfolio, which has been running a bit longer, is not doing double market like it was, but it’s still beating the S&P well and truly.

Um, so the model portfolio in the last [00:33:00] week is down about 6%. The light portfolio is down about 4%. And when I drill down into that, there’s sort of a range of reasons. Some of our stocks are dropping for no particular reason. I mean, with the model portfolio, one of the big issues is WLFC, Willis Lease Finance Company, which has been our star performer.

It was up like 300% or more at one stage, I think like 350% at one stage. It’s come back quite a bit, but it’s about 39% of the portfolio just because it’s grown so much over time. So every time it drops by 5%, ta- takes a big chunk out of the value of the portfolio. And it did fall another 4.5% in the last week, and it’s come back a lot.

If I look at it, um. Let me just switch back to my portfolio view. I should do this on camera. That’d be cool

Tony Kynaston: and of course, we don’t, we don’t try and do [00:34:00] any portfolio management or rebalance or take down big positions and make them smaller, all that kind of thing that goes on

Cameron: Nah.

Tony Kynaston: land.

Cameron: None of that nonsense. We j-

Tony Kynaston: We don’t bench Michael Jordan

Cameron: No. Unless it breaches one of our predetermined sell triggers, we just stick with it. But yeah, if you go back, um, go back, uh, like, well, not even, like, six months ago, it was up sort of, uh. How do I. No, that’s my whole portfolio. Let’s look at Willis Lease. If you look at Willis Lease Finance Company, ch-ch-ch-ch, go back, uh, in July, it was trading around about 80 bucks.

It’s currently down to 52. So it’s dropped quite a bit. But we bought it when it was, uh, a lot less than that. Let me see our transactions. $15.78 back in November [00:35:00] 2023. So, eh, it’s done okay for us, you know. Not complaining at all

What else have I got? Uh, so, but yeah, every time it drops, it takes a b- a chunk out of our performance. We’ve got three shipping holdings that are down. Shipping’s obviously. And they’re, they’re, you know, gas and oil tankers. That’s obviously a little bit, uh, uh, turbulent at the moment. In the light portfolio, financials make up about 52% of our current value, and we’ve had a number of drags on financials.

DB, Deutsche Bank, BFH, IBKR, and OneMain, OMF or OMF in the last week. I think OMF is down about 10% in the last week since we added it, so that hasn’t been great, or two weeks since we added it. Um, also Bread Financial’s down 5.2%. That’s BFH, sorry. BWLPG is down 5.6%. Danaos, another shipping company, is down 4.4.

Kohl’s, K-O-H-L-S, went the other way. It’s up 8.2%. But [00:36:00] Deutsche Bank fell about 4% this week. The CFO said their third quarter investment banking revenue could be flat or slightly below the same quarter last year. They fell about 5% that day, 4.5%. The biggest single drop though is TEO, Telecom Argentina. It was down 14.3% over the course of the last week.

Um, and this is pretty much true with all Argentinian shares. Um, has something to do with rising US rates, weaker Argentine activity, pressure on the peso, broader stuff. I don’t think it’s anything particularly relevant to Telecom Argentina. No particular company news I could peg it against. Just general pressures in Argenti- tini- Argentina

Tony Kynaston: they, they were very heavily leveraged to the exchange rate with the US dollar, weren’t they?

Cameron: Yeah, we talked about that when we did the show.

Tony Kynaston: all those

Cameron: Yeah. Yeah. But [00:37:00] also, the other interesting thing is looking at the benchmark. So S&P’s August sector breakdown puts the index at roughly 38% information technology and the New York Stock Exchange market commentary for the last week said that it was mostly technology strength despite weaker financials and poor breadth that pushed it up.

So, and we don’t have any exposure to that, obviously. So, uh, yeah, that’s kind of what’s going on. In other news, UBS, uh, we do hold UBS. Uh, we’ve talked about them before anyway. They lost a big round in Switzerland. Um, they’ve apparently spent months arguing that Switzerland’s proposed capital overhaul would make it substantially more expensive for them to compete with global rivals.

But the parliament in Switzerland is, has just voted to require systemically important banks with foreign [00:38:00] subsidiaries, which is basically UBS, to back 90% of its investments with common equity tier one capital, which is apparently gonna cost them a big chunk of money to do that. So they’re gonna take a hit.

It’s gonna force them to, uh, hold approximately 16 billion of additional CET1 capital, which is gonna hurt them a little bit. So that’s, uh, not good for UBS. Also in stock news for us, Ardent Health, we talked about a little while ago, episode 69. They run hospitals, regional hospitals across six US states.

They’ve become a three point sell line today. Um, no real news or explanation why. They were relatively close to the sell line when we added them. I think they were trading about $10.90 and the sell price was like $10.30 or something at the time, and they have now breached [00:39:00] that. So if you hold ARDT, take a look at that.

Um, actually I lie. The sell price is $10.52. They’re about $10.47 today, so slightly below that. By the time you hear this in a day or so, it may gone, may have gone back above the sell price. But if you do hold it, uh, take a look. May think about selling that. Not financial advice. Make your own decisions.

All right. You got anything else, Tony?

Tony Kynaston: I do not, no. Let’s get into your pulled pork,

Cameron: My pulled pork this week is a company called Caleres. I think that’s how you pronounce it. Uh, Cali- Ca- Caleres, Caleres

Tony Kynaston: know how to pronounce it either. When I first looked at it, I thought careless, but it’s, it’s

Cameron: Careless or calories? I do track calories pretty closely. That’s why I lose weight. Um, ticker is CAL. They’re a shoe company based in St. Louis, St. Louis, [00:40:00] Missouri. And, um, another boring company. You know, I like boring companies, Tony.

Tony Kynaston: Yeah

Cameron: Relatively, boring. No AI, no rockets, no spaceships, no satellites involved in the making of their shoes.

You ever been to St. Louis, Missouri, Tony? St. Louis. Do- I think they call it St. Louis. St. Louis. Uh, me either.

Tony Kynaston: not, no

Cameron: uh, founded February 14th, 1764 as a fur trading post. It was named for King Louis IX of France

Tony Kynaston: Oh, I thought you’re talking about the shoe company.

Cameron: No, St. Louis. St. Louis. St. Louis, Missouri, yeah. Named after King Louis IX of France, who was canonized by Pope Boniface VIII in 1297. So why name a town after a king who’s been dead 450 years? Well, Louis IX was the patron saint of the reigning French King Louis XV [00:41:00] at the time

Tony Kynaston: And so, and then why call it St. Louis if you’re naming it after St- uh, after Louis?

Cameron: I think it’s just an American, uh, bastardization of St. Louis. You know how Americans are, Tony. They just pronounce things the way they wanna pronounce them, spell them. Aluminum? There’s no aluminum. It’s got an I in it. No, it’s not.

Tony Kynaston: do that.

Cameron: No, they can’t. No, they can’t.

Tony Kynaston: can.

Cameron: Fox,

Tony Kynaston: They

Cameron: great. You know, it’s, uh, King’s birthday holiday here on Monday.

Fox was going on about how ridiculous it is to me last night that we celebrate the King’s birthday. He said, “This king, King Charles, does he even speak English?” I said, “You’re asking me if the King of England speaks English, really?” He goes, “I don’t know.” I say, “Yeah, well, fair enough.” There have been times when the King of England probably didn’t speak English.

They were Germans or French. Uh, Louis XV, um, uh, you know, he he had a.

Tony Kynaston: you have kung fu to get to?

Cameron: Oh, gee, what am I going on about this? Yeah.

Tony Kynaston: I don’t know. Yeah.

Cameron: St. Louis [00:42:00] was sold by Napoleon in 1803 as part of the Louisiana Purchase. The city has one of the highest murder rates per capita in the United States, ranked number 13 worldwide by homicide rate, homicide rate in 2017.

And, uh, people are killing each other for their shoes, Tony. That’s the, the whole point of this, is they’re very, very passionate about their shoes, yes. It’s also the,

Tony Kynaston: kings

Cameron: it’s also the home of the St. Louis Chess Club, which is where the US Chess Championship is held every year. So anyway, back to shoes. So Caleres, they, they’re kind of big name in US shoes.

Um,

Tony Kynaston: Mm-hmm

Cameron: I, I ran some of the brands past Chrissy. She was aware of them. My wife, who’s an American, for people who don’t know that. They, they got a, a, a, a split business. Part of their business is they have a chain of retail outlets called Famous Footwear.

Tony Kynaston: Mm-hmm.

Cameron: About 800, 900 of these, uh, stores where they sell their own brands, but then [00:43:00] other brands as well.

And then they have their own brands, brands like Sam Edelman women’s shoes and accessories, and Stuart Weitzman luxury women’s boots and shoes. Bunch of other brands as well, which we’ll get into. Caleres began life as Brown Shoe in 1878

Tony Kynaston: Was that because you can have any shoe you like as long as it’s colored brown?

Cameron: as it’s Brown, yeah. No, it was named after the founder, George Warren Brown. Mr. Brown went to town, made a shoe. Good story behind that, and we’ll get to it in a minute. Uh, trades on the New York Stock Exchange was about $12.52 a share when I did my analysis on it. All up, the shares are worth about 432 million.

They sell shoes for women, men, and children. Um, as of January 26, they had about 1,009 shops across all of their brands. Famous Footwear is about 821 of those, and the rest sell their own labels, like [00:44:00] the ones I mentioned before. But you can go into a Famous Footwear and buy any brand. You can buy Nike or you can buy a Caleres shoe.

They’ll, they’ll stock everything. And then department stores might sell a Caleres shoe, like a Sam Edelman or a Weitzman shoe, um, through that. So you can get them their shops, other people’s shops, online, you name it. So they began, as I said, St. Louis 1878, founded by George Warren Brown. And, uh, on their website, there’s, their, their origin story is that apparently shoes back in 1878 weren’t very well made.

Uh, there, there was only one shape for both feet. You didn’t have a left shoe and a right shoe. They just bashed them out

Tony Kynaston: like horseshoes. Yeah

Cameron: Yeah, like horseshoes. And Mr. Brown built his reputation on fitting people properly. He believed shoes should be comfortable, so he– you come in and he would make you a, make you a shoe that fit.

Then in [00:45:00] 1904, they managed to get the rights of a comic strip character called Buster Brown to be the mascot for their children’s shoes called Buster Brown Shoes. This is a comic strip character created in 1902, a kid with his dog, Tig. And he dressed up as, like, a sailor boy, and then that became a common costume for people to dress their kids up in photos, a little sailor outfit.

Long story behind that, don’t have time to go into it. But Buster Brown was also an Australian rock band formed in Melbourne in 1973 with who on vocals? Can you guess?

Angry Anderson, who just passed away, better known as the, uh, the band only lasted a couple of years. He founded it with a guy called Phil Rudd, who left to join AC/DC, and Angry left and formed Rose Tattoo and recently passed away. [00:46:00] Uh, Americans who don’t know who Angry Anderson is, look up a song, Rose Tattoo, by a band called Rose Tattoo, We Can’t Be Beaten, Australian classic from the, what, late ’70s?

Yeah.

Tony Kynaston: Yeah,

Cameron: late ’70s, early ’80s. Yeah.

Tony Kynaston: Yep

Cameron: So, um, Famous Footwear came along in 1960, uh, founded in Madison, Wisconsin. Brown Shoe bought them in 1981. They had about 36 shops at the time, and they built it up, as I said, to 821 shops. 2015, they were still called Brown Shoe, decided that their name sounded too much like one kind of shoe, and so they changed their name to Caleres from the Latin calere, which means to glow

Tony Kynaston: What’s that got to do with shoes? I always, I, I don’t think of glowing when I think of shoes, Cam

Cameron: No. Um, but parliamo entrambi un po’ di italiano, uh, quindi capiamo parole come calore e caldo, sì? Va bene. Allora. Uh, [00:47:00] calore meaning heat or warmth where calorie comes from, and caldo meaning hot or warm in Italian. So it comes from the same root as calorie.

Tony Kynaston: Okay.

Cameron: va bene.

Tony Kynaston: your feet are on fire.

Cameron: Yeah, I guess so.

Tony Kynaston: trying to say?

Cameron: Yeah.

Tony Kynaston: Hot

Cameron: company’s own explanation is to glow with passion. So they went from Buster Brown to, to glow with passion. Makes a little sense, but Barry and Stan got paid a lot of money to come up with that.

Tony Kynaston: Yeah

Cameron: Parliamo del attività. So the company has two sides of the business, as I said, the, the retail store and their brands.

They’re kind of intermixed. They overlap a lot ’cause the stores sell the brands and the brands get sold in other stores and they sell, you know, whatever. All up, in the August 2026 quarter, they sold about $700 million worth of shoes, up from about 658 million, uh, previous year. But it was split between the [00:48:00] Famous Footwear which actually went backwards.

Famous Footwear, think of it, I can’t think of what the Australian equivalent is, but it’s kind of your back to school rush, no thrills, no frills shoe store really. Parent goes in, back to school, couple of kids, trainers, school shoes, maybe boots

Tony Kynaston: year-old BATA types

Cameron: Y– oh, BATA?

Tony Kynaston: Yeah.

Cameron: What’s that?

Tony Kynaston: don’t know if they’re still around.

Cameron: Oh,

Tony Kynaston: of shoe used to be, um, used to have a compass in its heel for kids to buy to encourage them to buy shoes to go back to school.

Cameron: Fancy.

Tony Kynaston: Hmm.

Cameron: Um,

Tony Kynaston: Bata Scouts

Cameron: easy business, I guess, to understand, but you need people walking in, and they’ve been struggling with that. At least in the August quarter they did. Sales were down 25 million year on year, about a 6.3% fall. And profit from that part of the business fell about 18.6 [00:49:00] million, um, in. Or sorry, fell from 18.6 million in August ’25, that quarter, to 5.2 million in the August ’26 quarter.

So the shops sold less and kept a little less on each sale. Management says the school shopping season arrived later than they expected. People bought fewer casual athletic shoes, which is obviously where the margins are. Fashion shoes were doing better. The, the brands were doing well, too. So that’s the footwear side of the, the, the, the retail outlet side.

The brands doing better. Brands mean nothing to me, but as I said, I ran some of them past Chrissy and she was aware of them. Sam Edelman is fashion footwear. Naturalizer sells women’s shoes built around fit and comfort. Vionic also sells comfort focused shoes. Allen Edmonds is a premium men’s brand, dress shoes and boots.

Had a look at their website. They’ve actually got a chukka. I’ve been wanting to [00:50:00] get some chukka boots because Steve McQueen and, um, Anthony Bourdain were into chukka boots and, and I keep going, “I wanna get some chukka boots.”

Tony Kynaston: What’s a chukka boot?

Cameron: Ah, they’re like a, um, m- uh, not a military. I think they were originally like British Army in Egypt kind of stuff.

Uh, desert boots, I think they’re also called. Desert boots, you know?

Tony Kynaston: desert boots. Yeah,

Cameron: Yeah. I think that’s what, I think they’re its other name. Chukka boot is a

Tony Kynaston: high, um, not, uh, velvet. What are they? Material

Cameron: Jesus, your audio just kicked in really, really loudly. Yeah. Ankle high, um, with laces kind of thing

Tony Kynaston: Used to have one of those when I was about 18. They were all the trend.

Cameron: Right. Well, they’ve got one called the Cameron Apron Toe Chukka Boot, and I was like, “Oh, I gotta get me some of those,” until I saw that they cost 1,300 Australian dollars[00:51:00]

Tony Kynaston: Just go and buy some hush puppies

Cameron: I could get two R.M. Williams. I’ve had my current pair of R.M. Williams for, like, 15 years, I think. Uh, you know, they’re still going strong.

Don’t wear them as much as I did when I lived in Melbourne when I wore them every day. You know, I put them on three days a year now in Mel- in Brisbane because it’s

Tony Kynaston: Yeah, right.

Cameron: too hot to wear boots.

Tony Kynaston: don’t wear shoes in Brisbane.

Cameron: Pretty much, no. I wear,

Tony Kynaston: spend thirteen hundred bucks on desert boots

Cameron: yeah, ’cause occasionally, once a year, I want to put some shoes on.

Tony Kynaston: Yeah

Cameron: I wear Birkenstocks all the time here.

Uh, Stuart Weitzman is the luxury women’s label which they bought only last year. Now, the brand sold about 341 US million in the August, August 26 quarter, up from about 276 million, uh, the year before. Uh, but it’s complicated. About 42 and a half million of that came from Stuart Weitzman, which they didn’t own a year ago.

Um, so that’s from an acquired business, not from, like, organic [00:52:00] brand growth. But if you leave out that and you just look at the sales of the brands they already own, they’re still up 8.2% year on year, so there’s real growth underneath that anyway. And you can’t add up just the sales of the two divisions and get the 700 million group total because the shoes that they make that they sell to the store gets removed from the thing, and it’s all complicated accounting stuff.

Basically, uh, so they bought Stuart Weitzman and, and, and this has been a bit of a drag. So Stuart Weitzman was owned by a company called Tapestry. They were reporting losses with the Stuart Weitzman division. They lost 6.7 million in July 23 for the year up to that. Then 21.2 million June 24. 15.4 million e- year ending June 25.

Don’t know why they’re doing June end financial year, but they are. Uh, sales also fell 10.9% in the 25 year. So Caleres came in and bought [00:53:00] them. Obviously, they think they can turn it around, cut costs, you know, put it in their stores, do all that kind of stuff. Uh, allowing for the cash that they brought, that they got in when they acquired it with the brand, they paid about 109.2 million for it.

And in the nearly six months from that purchase to the end of January ’26, they say they lost 23.3 million from running the brand, excluding separate costs of buying it and integrating it. And then if you combine the whole company and its other costs, they actually lost 6.7 million for the full 12 months ending January 2026, after a $107.3 million profit the year before.

Some of it was a decline in sales, s- but some of it was the cost of Trump, the, uh, Trump, uh,

Tony Kynaston: Tariffs

Cameron: bump. It was the Trump bump in the cost of doing business, yeah. So [00:54:00] f- their footwear sales, Famous Footwear sales did fall 3.6%, but they also had the tariffs that they had to pay for, but then they started to get back, but now they have to pay other tariffs.

So, uh, the cost of running the company rose mainly because of the Stuart Weitzman acquisition. Brought all their own stores and staff over, and now they’ve got to restructure all of that to try and save money. They are saying they think they can turn it around by 2027, make it profitable. Um, but it, it’s been burning money for the first, you know, year that it’s been now since they bought it.

The, um. Most of their shoes obviously get made overseas. I think in the year ending 2026, January 2026, they spent about 451 million buying shoes from suppliers, mostly from Vietnam, 285 million in [00:55:00] Vietnam and 88 million from China. So they had to pay all the, the tariffs on that. They obviously got canceled by the Supreme Court.

They paid about, they estimate they paid about 57.8 million in tariffs, and they’re getting that as a refund plus interest. As of the end of the August quarter, they’d received 57.4 million in total, including interest. So they’re due a little bit more back, but not a, not a huge amount. But uh, they have other tariffs that Trump put in place, obviously.

So, um, you know, they, they in one hand, going back out the other hand, which they’re gonna have to keep paying, which is bumping up the cost of doing business. So that’s why their numbers aren’t looking as good in the last couple of years as they did look previously. At the beginning of August 2026, they had about [00:56:00] $50.9 million in cash, 288 million, um, drawn from its bank line.

The debt was 387 million a year earlier, so they said they used the big refund check to pay down their debt. They keep paying their seven cent quarterly dividend, and check this out. They’ve been paying a quarterly dividend for more than a century.

Tony Kynaston: Wow.

Cameron: That’s pretty good, huh?

Tony Kynaston: That’s very good, isn’t it?

Cameron: Very good

Tony Kynaston: Yeah

Cameron: Uh, they also bought back 250,000 shares in the first half of the year, which is only about 0.76% of the float, so doesn’t qualify for our buyback, uh, premium.

But it also interestingly, uh, and picked up that their lenders limit their buybacks, which I hadn’t, um, seen before. Apparently, that’s common practice. Are you aware of that?

Tony Kynaston: No, I wasn’t. No

Cameron: Well, apparently lenders limit buybacks because a [00:57:00] buyback sends cash to shareholders when you still owe the lender money, and apparently it’s common practice in Australia too.

Tony Kynaston: Hmm.

Cameron: I, I don’t know how we, well, I mean, we get buybacks come through all the time, but apparently the amount you can buy back is somewhat limited by your lenders if you owe people money.

Anyway, that’s Caleres, Tony. 148-year-old shoe company. Shops are struggling, labels are growing, customs is cutting into the business. I’ll run through the numbers quickly. Uh, as I said, the share price was about $12.52 when I did my analysis. Market cap was about 432 million. Average daily trade, 7.418 million, so it should be big enough for most people.

Um, Stockopedia stock rank was 96. Stockopedia quality rank was 76. The Stockopedia Piotroski F-score was seven. [00:58:00] Um, so that was, they’re, they’re all good. Uh, price was not at or below IV1. I think the, uh, IV1 was $9.16. The price, as I said, was $12.52, so I couldn’t score it for that, but could score it for the price being below IV number two.

IV number two was $16.67. The price is below book value. Book value is $19.52, and the shares are $12.52, so go figure. You could buy it, sell it, Gordon Gekko it, and, uh, you’d be making money on the bargain. The price, uh, obviously is also below book plus 30, so scored it for that. Uh, the price to operating cash flow was 3.68. That’s nice. Well below our cutoff of seven, and nothing fancy going on in this, so, you know, it’s a nice, nice easy one to score on that. [00:59:00] PE was not below the dividend yield.

Dividend yield’s about 2.24%, and the PE was 7.01. Dividend yield, obviously not above the bank rate either. 6.46 is what I’ve got that at. Haven’t, uh, I, I, I think I have, uh, updated that recently. I think that’s current. I think my script does that automatically now. It does have positive three-year book value growth, um, partially, I guess, because of the acquisition, but, um, book value per share grew 12.68% a year over three years.

Doesn’t have a new three-point upturn, but if I recall. Oh, hold on. I can, I don’t need to bring that up. I can look at my chart. It. Well, yeah, the, it, it doesn’t technically, because the quarterly, if, if we do the quarterly numbers, and I don’t know if we should do this in the [01:00:00] US, but I’m basing it on quarterly reports, and the quarterly report came out in August.

It went above the three-point byline in July, two weeks before the end of August. So, you know, it kind of, kind of was, but technically speaking, my script said no. Computer, c-computer says no, Tony. But, uh, it doesn’t need. Yeah, we could have fu- I think I said in my, um, light email yesterday, you could fudge it, but doesn’t need to.

It’s gotten a good enough score anyway. Uh, where was I? Yeah, obviously it’s a three-point uptrend, although it is very close to its sell line, and I will flag that. It’s very, pretty much sitting on its sell line. Yeah, which could. And, and I haven’t even checked it today. Um, I don’t know where it is today.

Tony Kynaston: today.

Cameron: Oh, today, right.

Tony Kynaston: Yeah

Cameron: it could go either way. We could be getting in on it, and it’s gonna boom. We [01:01:00] could get in on it, and it could go backwards. Um, so we’ll see. Anyway, you win some, you lose some. Um, what else? Forecast IV is not above twice the price. Forecast IV is, uh, $16.67, IV2, and, um, yeah, double the share price would be, like, 25 bucks.

And as I said, the Piotroski F-score, it scored for that, uh, ’cause it’s seven out of nine. It scored for the Stockopedia quality rank. It scored for the Stockopedia stock rank. And growth divided by PE is not above 1.5, so I couldn’t score it for that. So all up though, it got a QAV quality score of 76.92% and a QAV score of 0.21

Tony Kynaston: Pretty good

Cameron: uh, it’s, uh, something different ’cause it’s a shoe business.

I don’t think we’ve done a shoe [01:02:00] company.

Tony Kynaston: we should have had Steve Mabb on

Cameron: I know.

Tony Kynaston: this.

Cameron: I was thinking a sh-

Tony Kynaston: retailer,

Cameron: ex-shoe retailer. Yeah, yeah.

Tony Kynaston: Yeah.

Cameron: Sure he would know these guys very well

Tony Kynaston: Oh, I’m sure. A couple of points I wanted to make just before we go. Um, as interest rates are rising, we are seeing a consumer slowdown in the US, and so the footwear chains are at risk, this company knows that, and they’ve done a couple of things to try and mitigate those risks.

Um, number one being to bring some type, uh, brands and products into their portfolio. So you spoke about those before. So that, uh, means they’re less exposed to the sort of mid-market or lower to mid-market. and the other thing they’ve done is they’ve, they’ve done a fair bit of work on their supply chain management because risk is that, um, if interest rates keep rising and the consumers stop spending, uh, discretionary spending on sneakers is gonna s- uh, slow dramatically, [01:03:00] and a retailer like this could be stuck with inventory it needs to mark down to clear, and that will, um, probably drive it to a loss.

So if they can better stock their stores with less inventory but quicker, quicker turns, then they’ll be less likely to have to have a big markdown and clearance sale if, uh, if sales do, uh, turn down e-even further. And to give you some perspective on that, I mean, the nearest Australian retail stock to compare this to, I would have thought, um, was AX1, a shoe company in Australia, and, and their shares are down from two dollars forty-seven two years ago to sixty-seven cents today.

So, uh, and, and I think most retail shares in Australia have turned down dramatically in the last twelve months as interest rates have started to bite and oil prices are up, et cetera. So um, the US isn’t immune to that either. And, uh, a company that’s selling a reasonably discretionary item, as you said, um, children will always [01:04:00] grow, so you’ll need new shoes every year for them, but otherwise the rest of the population is fairly stable and may get an extra year out of their shoes if they, um, if they don’t have the money to spend. also too, I mean, just, um, comparing AX1 to CAL. CAL was forty-two dollars eighteen two years ago, and it’s now down to twelve dollars fifty-three today. So

Cameron: Угу

Tony Kynaston: it’s dropped a lot as well for similar sorts of reasons. And I guess the burning question in my mind, is it time to buy? And, you know, time will tell, I guess.

We just follow the rules. Um, but, uh, being three cents above the sell line, it’s, it’s, you know, bounce up from here. We could be at the start of a, a rebound. But given interest rates are rising, um, it’s, it’s also entirely possible that it’s got much further to go down. So, um, we’ll see

Cameron: We will see. Above my pay grade, Tony. I just follow the rules that you built

Tony Kynaston: Same. I’d, you know, I’d happily buy the stock if it, if I had spare cash, um, and it was my next buy. But, um, I am [01:05:00] just pointing out that the, you know, the, market for shoes is gonna get tougher if interest rates keep rising and oil prices keep rising

Cameron: Well, flip side to that argument, people can’t afford to buy petrol, so they have to walk everywhere, and you’re gonna. They’re gonna wear through their shoes like never before.

Tony Kynaston: point,

Cameron: Yeah. It’s all a cunning plot. whole, the whole attack on Iran was actually spurred on by the Caleres executives to drive up shoe sales

Tony Kynaston: over, we’ll be in Fred Flintstone cars with our feet through the bottom running, so

Cameron: Running away from the robots

Tony Kynaston: we’ll need, uh, we’ll need shoes then

Cameron: All right. I gotta go to kung fu, Tony.

Tony Kynaston: All right.

Cameron: Thank you very much. Have a good week. Happy hunting, everyone

Tony Kynaston: All right. Bye-bye