Expert: Andrew Brown – Wrap of 2021 and Review of Bold Predictions

Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that covers our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. My name is Bryce, and as always, I'm joined by my equity buddy Ren. How's it going? 

Alec: [00:00:30] Very good, Bryce. Great to be back for another episode and great to be joined by our most frequent returning guest. He was our very first guest. Generous enough to give us his time when we knew nothing. And he continues to give us his time when we still don't know that much. Don't know whether that's it. 

Bryce: [00:00:51] And it's an absolute pleasure to welcome back for the last episode of 2021 before we get into our summer series. Andrew Brown. Welcome.

Andrew Brown: [00:00:58] Thanks, Bryce. Morning Ren.

Bryce: [00:01:00] So for those who haven't heard of Andrew before or have just joined Equity Mates for the very first time. Andrew is the executive director at East 72, an NX listed lessee and, as Ren said, a regular guest on Equity Mates. Now, as tradition has it, we always get Andrew in at the start of each year to bring some bold predictions along with ourselves. And in today's episode, we're going to be closing out the year by reviewing some of the bold predictions that we made. Having a look at why valuations still matters in the eyes of Andrew and then looking forward to 2022. Wrapping it all up so I can't wait.

Alec: [00:01:37] Absolutely. Valuation still matters. You wouldn't think that's a controversial statement, but hey, we're in 2021. 

Andrew Brown: [00:01:44] I think as we move through 2021, I think that's been proven. I think quite clearly. And as things are changing into 2022, I think you're going to see that that is more more of that as well. Yeah. 

Alec: [00:01:57] Well, let's look back before we look forward, though. Yeah. So at the start of the year, you came on and you shared some bold predictions with us. And some came off. Some didn't. That's right. So let's let's go through this. 

Andrew Brown: [00:02:11] Yeah. What I wanted to do is to really take what I think are two overarching lessons out of the bold predictions we made at the start of the year. And please remember before you throw tomatoes at the computer screen, you know, don't forget we did these on the fourth of February. And of course, I don't get the chance to change anything. 

Alec: [00:02:33] Well, let's also be clear sensibly, we ask for bold prediction. Absolutely. 

Andrew Brown: [00:02:37] Yes, indeed. The first overarching lesson is I've actually brought a book today, which is the sequel to Peter Lynch's original book, which is called One Up on Wall Street, which was published in I Think, 1991, and the sequel is called Beating the Street. And in many ways, it's like some of the films for the sequels actually better than the original. Okay. And in my opinion, the sequels better than the original here. Now, the reason for bringing the book and there it is 1994 yellowing pages and everything. OK, so the end of the book is got pieces. Twenty five golden rules, and I've used this golden rule so many times. It's not funny. Candace Golden Rule Number 19 OK, which is quote Nobody can predict interest rates, the future direction of the economy or the stock market. Dismiss all such forecasts and concentrate on what's actually happening to the companies in which you're invested. OK, so what we do bold predictions at the start 

Alec: [00:03:44] of the year, please 

Andrew Brown: [00:03:45] bear that in mind. But I can tell you the economy is going to do X or Y, but you should know that some of the companies that you're looking at, the economy has no impact on whatsoever. OK, viruses may, but the economy may not okay. And I think you're going to see that's a really overarching lesson from looking back, but also looking forward. Secondly, the other overarching lesson is with interest rates basically at zero. Still, it seems the valuation doesn't seem to have mattered until this year, and everybody saw us great business models, great business models, great business model and all of a sudden you guys fabulously did it. I think less than a week ago, when you published a table of, you know, great business model companies like, you know, Zoom Communications, most obviously, you know where the stock, of course, has gone from five hundred sixty down to 200, call it. And there's a load of others have absolutely fallen off the shelf in a big way. Some because the business model is nowhere near as good as what people imagined. But you know, in the case of Zoom, it's pretty damn good business model, as I think we all know, but people paying way too much for it. And as interest rates go up because they will, then valuation is going to matter more. So if you pay too much for this stuff, you're going to lose out. And in that vein, I think just one of the one at one of the runs back and Ren is trying to hide under the table because he's going red. If you go back and listen to the fourth of February, Ren shocked me off extremely briskly. Wait, wait, wait. When I when I mentioned an eight letter name called Afterpay and I mentioned that Afterpay was ludicrous, and Ren basically said, Well, gosh, you know that

Alec: [00:05:31] to be fair. To be fair, we were wrapping up the episode and I didn't want you to to get going. Sure. 

Andrew Brown: [00:05:37] Anyway, the upshot was that the time Afterpay was on and forty six dollars and seventy five cents and it's been taken over since, of course. And the stock at the time I was speaking is about one hundred and six, which went goes to show you that even with the takeover and even with the business growing and losing ever more money, you know, then based evaluation did matter. And it's quite clearly mattered in the rest of that BNPL sector, as we know. So yeah, if you unzip at that time, you're underwater and if you own Sezzle, you'll positively drown. 

Alec: [00:06:09] If you want to hear some unfiltered thoughts on Sezzle, follow Andrew on Twitter. Yes. But I should just ask one of the Afterpay thing I don't want to get bogged down. Buy now, pay later. But isn't a lot of that tied to the fact that Square is one of the businesses that is. Yeah, absolutely.

Andrew Brown: [00:06:23] Of course, you know, it's Square's fallen off. But even when Square was going okay, I mean, the full blown takeover was no more than what we were taught, you know, the share price back in January. So now you guys just put some perspective on this. By the way, when we made the broadcast back in February, the ASX 200 was sixty seven point sixty five. So the return from the air is about six per cent at the time of broadcast, and the Standard Poor's 500 was 38 71. So we're up about 18 percent. 

Alec: [00:06:52] So one, I'm not sure if you just saw Bryce shaking his head, but he's on a real vane about how pathetic our index is compared to the US 66 percent. What would you expect to see? 

Andrew Brown: [00:07:04] You expect any more Bryce in 2021 for the simple reason? Okay, so much of the indexes for banks and three major reasons 

Alec: [00:07:11] we don't have giant yeah, 

Andrew Brown: [00:07:13] the full back. So one of the four banks has done extraordinarily well, which is CommBank, because it's got great managements, got a strong business model. Yeah, but even it's sort of the sort of canary in treacle at the moment with interest rates still low. You know, what you've also got is the resource companies. You know, one of the things we saw and it's remarkable within two weeks of bold predictions going to where the world had changed completely on the 18th of February China, we said China was going to be a major feature and we'll come to the five major things. And China really chase in the 18th February onwards, and we're going to y and hand everything else. So let's let's go to the ball predictions and see how we went. So you said politics are going to play a real role in equity markets? Well, I think that was spot on, right? They did. OK. Why did they play a big role in equity markets? Because politics kept central bankers, you know, sort of drinking the juice both in Australia and in the United States. So in the US, most obviously, the deficit goes up and up and up and up, as is. Obviously, the government tries to kind of repair Covid, but obviously, you know, that continues to be funded still, despite the tapering. You know, we're seeing a tapering by the Federal Reserve, but there's still net buying bonds. Okay, so this is not by March. So, you know, I think they've been under the political thumb. And so that's played a great role because it's kept interest rates down. And what's been extraordinary is as interest rates have been kept low, the 10 year bond, basically in the whole year is one point one. When we spoke, it's been to a high of about one point seventy five. It's currently about one and a half. Okay, but the inflation rate has gone from nada to 6.2 per cent. Okay, and the core rate excluding 

Bryce: [00:09:02] making a return on the ASX with inflation 

Alec: [00:09:04] right now. Yeah, absolutely. Yeah. 

Andrew Brown: [00:09:08] Tik-tok recuperates. Four point six. Let's use the proper rate. Okay, now this is this is really relevant. Okay, so the real 10 year bond yield in the US is minus 4.7 percent. Okay, that is the lowest since probably both your sets of parents was still at school in short pants and had never met each other. 1974 Yeah, because in 1975, two hours grammar school. Okay. And of course, that was when we had the oil crisis, when oil was much more important to the world economy and it was cost push inflation because basically, what was then the Arab cartel pushed the price of oil up dramatically, and it had a massive impact on driving growth and obviously creating inflation and creating a stagflation environment which you've had wheeled out. So the big question is nothing's changed from February, except the inflation is much higher. Governments have got to extract themselves from the corner that they in their central banks have. Themselves into you, and you've had a few hints recently that that's proving difficult. Let's take two examples. Specifically, in Australia, Philip Lowe basically had to stop buying the April 2024 bond, which he already owns 62 per cent of the issue and has cost Australian taxpayers $2 billion so far, with mark to market losses and actual realised losses. And it was part of his yield curve controlled the three year yield at point one. That's stupid. I'm sorry, that is stupid. You're going against global markets. He can print money in theory, but they have much more. Okay, and basically the world started betting against him because they knew it was a one way bet. It was nearly nowhere near equivalent to George Soros in 1992 and Sterling K. It was so obvious that that rate was crazy. And so the rate went from point one two point seven. And the other thing is, obviously, very recently, we've had Jay Powell starting to say, well, why inflation things maybe not transitory? Well, Jay and I will wake up. Sonny will don, you know, everybody else been saying that for four months, mate. So we've got a problem, you know, and we're still a lot. There are a lot of the right's aware they were in January, February. Okay, where inflation inflation's now much higher and inflation is a mix of three things. It's demand pull quite clearly, you know, so we've, you know, the world's woken up from Covid by and large. And forget Omicron, you know, we'll get through that. Okay, so the world's woken up number one. Number two, you've had cost push inflation because you've had supply issues. You know, you've had droughts for, you know, in Taiwan, which, you know, push up the price of computer chips, et cetera. So its cost push. And then thirdly, I think what is starting to happen, which is the most dangerous bit of all, is the inflation expectations are starting to go up. And once expectations get into the community, then the community starts saying, you know, Oh, I need a pay rise, you know, because things are going up, I think things are going to kick out. I want a pay rise. And so it gets into the labour market and that's an issue. Okay. I think once again in 2022, we've got to try and get out of this corner somehow or other, and it's not going to be easy and it is going to involve equities coming lower at some stage. Okay. So the dislocation thing has not happened in 2020 was quite clear. We have not had a 15 to 20 per cent dislocation might be in the middle of all as we speak. 

Alec: [00:12:46] Let me let me ask you about that, though, because let's say the US, for example, a dislocation of 15 to 20 percent in the index just means that these five or six well, it's like eight seven.

Andrew Brown: [00:12:58] So yeah, these 

Alec: [00:12:59] giant trillion dollar companies that seem to print money. Yeah, need to fall off for the index to fall off. Yeah. If you if you normalise the index without them, we probably are saying that. 

Andrew Brown: [00:13:10] Is that it? That is that is a brilliant point because you are, you know, as you guys have pointed out, and as it all touched on, you've had a massive falloff in what you might want to call the second line tech stocks in. Well, not just America, actually, but globally. And one of the global aspects is really crucial and I think gives you an opportunity, you know, great opportunity as well. 

Alec: [00:13:33] So yeah, on that, like I didn't see Apple falling 20 percent if they if they just have such operating leverage and they can keep growing. So Microsoft, like maybe, maybe it doesn't, because they're so big. 

Andrew Brown: [00:13:43] That's right, Apple. I mean, they're twenty per cent. I mean, you know, you've got what I now call sort of man Mac, you know, where, you know, with metaphor obviously being the start of it. And you need to add to that in video, which has obviously been, you know, a real runner and a car company whose name I 

Alec: [00:14:01] was trying to come up with an acronym and it's like, it's A.. Amazing. Yeah, like it's not there's not a lot of letters to use to create. 

Andrew Brown: [00:14:09] One of the things that look, the big thing is, I mean, an apple is probably the best example of this. Okay, Apple's earnings have been rated upwards and upwards and outwards and upwards. Okay. And even when you've had a little bit of a shudder because of what's going on elsewhere in the world, which to some degree is out of their control, which is chips, you know, the stock's still pretty close to a record high. And the reason why is because they've got the business model that everybody wants. And you know, one of your recent guests from New York sort of outlined it really well, which is basically you have a high margin business, which is by and large recession proof. And then what you do with the cash flow is you basically keep buying your own stock back and you have sufficient cash flow to do that. And you need to model Apple for about another five years before you start to really say, Well, you know, there's sort of the debts that the net debt is starting to get up there and, you know, maybe they need to stop, you know, and if somebody puts a spanner in the works, it would be too risky. But you got to go out that far and you can. Can't really do that with Google, you can't really do that with with Microsoft, I think potentially you can with Netflix because there's a lot more competition. I think you can with Tesla and in video, you can as well, you know, because the rating now, you know, for albeit an outrageous chipmaker, it's brilliant. You know, is so very, very high. But yeah, you're absolutely right. There's 25 plus percent of the S&P 500 are in these really vastly strong companies where you know, they, you know, they're getting up there in terms of valuations, okay? And eventually people say, Oh, it's a bit too much, but you know, it's hard to see what the spanner is that derails some of them. Not all of them, some of them. Okay, regulation is the obvious one. Yeah, yeah. Clearly, so we didn't get a dislocation. OK? I gave you something, which I said this is 100 percent certainty and it's turned out to be absolutely zero. And again, things are changed really quickly within a few weeks of broadcast, which was a federal election in Australia. Yeah. And and the reason that was relevant for markets is because at the time, the Liberals and Scott Morrison were very much riding high and it was really, look, go early, go now, get another three years. And we've got, you know, basically what I think is a pretty predictable set of economics that they put forward, whether you think they do it well or not so well. Well, of course. And you know, by then, we started to have these strobe layouts, you know, the extremely slow rollout of vaccines. We started to get Covid. Too few governments are a bit slow and of course, the economy then, you know, when we went down the tank. So it's struggled more than we think. Yeah, fantastic prediction completely from left field. And I, of course, I didn't predict Covid. So we also say 2021 was going to be the year of takeovers was at what? No. Three stocks I postulated to be taken over, which will come to you. But there are tons of takeovers. And part of that, of course, was aided by the fact we had Covid too. You had what we said was, was takeover, you know, really take our positive, very low debt, lots of it available and some diverse equity valuations. But the takeovers have basically been made by private equity who've got the cash. And of course, you know, on the bigger takeovers for this year, Sydney Airport not not yet finalised, but of course, by out, you know, not for profit super funds getting together and buying a long term asset. And it's been a stream of takeovers, takeovers. You know, I've been lucky recipient of a few along the way. I don't mind you and I don't mind saying, including the cheapest takeover in Australia at an enterprise value to evict multiple of two and a half. Well, that is Primedia, which is the Channel seven or broadcaster in their regions. And that, of course, is being taken over by Channel seven to sort of put it into a half nelson with press. [00:18:08][238.8]

Bryce: [00:18:08] So that's like the Riverina and stuff, isn't it? [00:18:11][2.3]

Andrew Brown: [00:18:11] Yeah, it's New South Wales. It's it's Victoria. It's WA. Yeah, it's pretty much pretty much everywhere, not completely everywhere. But you know, of course, it's you know, this is a horrible thing that for some lousy business model might be a lousy business model. But when you're buying it with an enterprise value of less than the price of a Sydney house and it was spewing out, I mean, just amazingly, it was sort of, you know, spewing out $12 million of EBITDA is just fantastic. Right. So it had $4.2 million of cash. So that was great and that was really good. But there are a lot more like that. And you know, obviously, you know, the other big woolmer's was Afterpay. [00:18:47][36.1]

Alec: [00:18:48] And he got in on that, didn't it? [00:18:49][1.0]

Andrew Brown: [00:18:50] Not nothing. I wasn't sure which was good, but it's a very logical takeover. You know, I mean, the piecing together the two businesses is very logical. And of course, I think unquestionably spoken about this, really. But unwittingly, I think the markets started to realise that as Afterpay joined together with square and comm banks got into, you know, the sort of pain for, let's call it, yeah. What it's meant is the competitive environment in that space now is just furnace like. And yeah, and the other guys are going to struggle [00:19:23][33.2]

Alec: [00:19:24] well to speak to personal experience. I've never used buy now, pay later, but I used PayPal for a lot of my internet transactions and I I almost used that, but painful because it was just so simple. Then there was one step that made it more difficult, so I didn't do it, but I was like, That's going to be a real challenge because people like me, I'll never take the step to sign up until I can. Afterpay Dollars. Yeah, but it's there in my workflow. Yeah, if you're if you're [00:19:50][26.2]

Andrew Brown: [00:19:50] not in, I mean, Afterpay is going, obviously, but if you're not in, say, zip and I mean, that's struggled as well. Share price wise. I mean, you really have to if you're in some of these other third line players, I mean, please, you need to look at the business model. And because I've been so vociferous about one in particular which just says. All because says has got a very peculiar funding structure. What I find is that young people invest in these being pls do not understand the funding structures. I can Afterpay is very easy because it's basically two or three warehouses National Bank, Goldman Sachs, plus it's own equity and it had unlimited access, I believe, to capital, particularly early in the year. But some of these other guys don't. And if you don't have access to capital, you got done over, but you've [00:20:38][47.4]

Alec: [00:20:38] got no business [00:20:39][0.6]

Andrew Brown: [00:20:39] whatsoever in this space. So if you're holding some of these things, even though you may be losing money, please go through the business model. Please work out why your particular Baden-Powell favour. It's going to be a winner. Yeah. Okay. And if it's not, get rid of it seriously. Because they've got a zero, it will. They will go to zero some of these things. [00:20:59][19.6]

Alec: [00:20:59] So anyway, this whole is taking a step out of buy now, pay later. This whole experience for me has been a real reminder of like. It pays to pay for quality correction and like getting the number right. Yeah, in the space often is the right decision. Yeah, if it's more expensive. That's right. Like, I've fallen into this trap. So many retail investors fall into the trap of like the second one's trading on a cheap multiple and like all it needs to do is take a bit of market share. And yeah, but like, [00:21:24][25.2]

Andrew Brown: [00:21:24] you're not the only one falls into that trap. [00:21:26][1.8]

Alec: [00:21:27] Yeah, yeah. But this is a real reminder. [00:21:28][1.7]

Andrew Brown: [00:21:29] It's it's also a reminder of kind of the things that have Kilbey and people have an application elsewhere. Okay. The thing I focussed on as a negative for the sector was the cost of customer acquisition was skyrocketing. And I mean, skyrocketing. So again, you know, if you you're the fifth line player in this. Yeah. And Afterpay spending twenty odd bucks to get one customer. What are you going to do? [00:21:52][23.0]

Bryce: [00:21:53] So let's just wrap those five and then perhaps move on to valuation. Yeah, still matters. So we had just to close it out politics to play a big part in it in equity. [00:22:03][9.2]

Andrew Brown: [00:22:03] That's all. That's a tick. Yeah. [00:22:04][1.2]

Bryce: [00:22:05] Dislocation 15 to 20 percent [00:22:06][1.4]

Andrew Brown: [00:22:06] hasn't really stayed high, but it's implied vol rather than realised. Yeah, big difference. [00:22:11][4.8]

Bryce: [00:22:12] You potentially a 2020 to the federal election in Australia. [00:22:14][3.0]

Andrew Brown: [00:22:16] So that's going to be Toronto's [00:22:18][1.9]

Bryce: [00:22:19] driving economy to struggle more than we think. Correct? Yeah. But for different reasons. Yes, correct. And 2021 to be the year of the takeovers. Yeah. [00:22:27][8.1]

Andrew Brown: [00:22:27] Correct. And all that happened is that that happened. We also had other things. Okay, the other things we had, we had China, okay, that China is going to be really important. I want to come back to that because I think there is a real opportunity there now. We discussed it in the context of Taiwan. So it wasn't, you know, that wasn't quite where we're at. We talked about Covid incompetence. OK. I think to some degree that happened. So it sort of did have an impact on our on our economy. We also talked about the fact there'd be a bank takeover where there sort of was because Bank of Queensland bought any bank that's that's cheating. I do want to make one other great point about what's going on here because our three takeover stocks we had were CIMIC. That's down 28 per cent from the broadcast date to today. Treasury on estates that's up about 17 and de royalties is down about six percent. We've had a dividend, so we're caught flat between friends. Okay, so not none of those have come off, which I think illustrates a few things. You know, first of all, don't just bet on a takeover, there's got to be something behind it. But secondly, there's another lesson in there because I did make one other comment when we were talking about takeovers and I did say to you quote, you won't find a small cap fund in Australia that doesn't own mainstream mainstream. At the time, it was 98 cents, and there was this enormous takeover battle between Apex and SS and C and the eventual taker. And there was no takeover on the table. By the way, when we made that call in an eventual take out price was $2. Dollars 80. Wow. So it was not quite a tripling. Okay, so that teaches you another lesson, which is you can have all kinds of crap in your portfolio. But if you have a diverse portfolio and you have one or two things, make it bingo. Thank you very much. You will still have a winner. So all of all of you who bought mainstream after the 4th of February 2012. And I'll give you my P.O. box number. Send a [00:24:39][131.9]

Alec: [00:24:39] cheque. It's okay because everyone knows that there's no buy, hold or sell recommendations. All right. So that's all there is. [00:24:46][6.8]

Andrew Brown: [00:24:47] So if you did your own research, you did very well. [00:24:50][2.1]

Bryce: [00:24:50] So before we jump into valuations, let's take a quick break and we'll hear from our sponsors. Moving on to evaluation and why it still matters, Andrew. You know, you've certainly been a value investor since the day we've met you. You've taught us a lot in that space. So why does valuation still matter for you at the moment? [00:25:11][21.3]

Andrew Brown: [00:25:12] It matters a great deal now because interest rates are really not going to go much lower. Okay, they might trail around at this level for a while. Okay, but they're not realistically going to go any lower. And so the thing that maintains high multiples for good companies is realistically not going to get any better. And what you start to see is where there's been even a minor hiccup for some of these very, very good companies. You've had a quite significant dislocation in share price. And as we've touched already in this, we've touched on the second line tech stocks in the US. Let's just look at Wal-Mart, OK, because I think it's really instructive as to why valuation matters so much and why getting the business model right matters. And that one is Peloton. OK, a fund manager in Australia called TDM, had I thought was very, very brave, and I am in no way critical of them at all. Okay. Because like a super track record, they were brave enough to publish. And you can find it very easily on the on the internet. Their thesis around Peloton. Okay, when the stock was about 90 odd, I think, OK, I'll stand to be corrected on that at a come down from one hundred and sixty seven. [00:26:30][78.5]

Alec: [00:26:31] Well, we'll chuck it because we've shared that link a few times. We'll chuck that in China. So if people want to follow along, then they can pull that out. [00:26:37][6.3]

Andrew Brown: [00:26:37] I think it's I think it's really instructive because they shared with you why they thought Peloton could get from its prevailing customer base of about 2.3 million up to a customer base of 25 million over a 10 year period. And they went through the sort of arithmetic in the reasoning behind that. And I looked to that and I thought, Wow, you are really brave guys. Okay? Because I couldn't. You know, I love your reasoning, a lot of your work, and I couldn't disagree more with if I tried, OK? And the simple, you know, and there's the simple reason is, and I think Australia's Australia is a great example of why, you know, Peloton's come to Australia in a big way, you know, walk through Martin Place like Tesla Shire and there is a Peloton Chiron. And I think Peloton's got no hope in Australia. I don't know why they're here. Why is that simple? We have sunshine. We have sunshine. [00:27:33][55.9]

Alec: [00:27:34] I mean us as but not in Boston. It doesn't tell [00:27:37][3.7]

Andrew Brown: [00:27:39] you right now is sunshine in Boston in February. No, I can understand why Peloton does really well in, for example, the north east of the US. So no issues at all. Okay. You know, if I lived in Chicago and you know their I begin at Peloton, okay, in Sydney, Melbourne. By and large, across Australia, we're an outdoor country. Okay. Well, a lot of us have, you know, proper bikes. I don't a lot of us, you know, do a lot of other things. We are an outdoor exercise country. Okay. This is for indoor exercise countries. Plus it's expensive. Plus, I love it because the alternative cost nothing is called walking, which I do lots of you [00:28:14][34.5]

Alec: [00:28:14] know, in defence of them. Like you could say everything the sign about spin classes and classes and gyms. I have [00:28:22][7.9]

Andrew Brown: [00:28:22] no cause. I'm not questioning TDM or their reasoning. I'm just saying I disagree with the conclusion they reached from that reasoning. But the problem was if you disagree with the conclusion and it looks as though Peloton is going to be stuck in low single digit customer numbers, not moving towards 25 million over 10 years or 12 million over five years at one hundred and sixty five bucks a share, the valuation was completely cuckoo, and I'm going to contrast it with our major tech company later on in this podcast, Spotify. So what you had his Peloton started to fall apart, and because there is no valuation metric to justify where they were then, as soon as there is a bit of a problem, they're not growing as quickly as they thought. And, you know, just got to the Peloton call these and you can see that very, very clearly, particularly how poor the latest one was then. Yeah, the shares. That's that's why the shares halved in a week. [00:29:21][59.4]

Alec: [00:29:22] Yeah. And what? They're down 75 percent. [00:29:24][2.0]

Andrew Brown: [00:29:24] Yeah, and they're down. I mean, they're basically 40 now, down from 165, you know, but they were 90 a matter of a few weeks before this broadcast. So, yeah, they're the kind of things that happen. People say, Oh, no, they don't. Well, they do. Okay. When people like me started to question Cecil's funding model, OK? The stock doesn't come off a little bit in how short the stock at 10 50. I wrote a negative piece out on the company, which came out at $9. Yeah, and the stock's now got a three in front of it. Wow. Yeah, they don't fall. Ten per cent, they fall 50 or more, and that's and a lot of them have already done that. But with interest rates probably going to stay, yeah, they might stay low, but they're on the increase. You've got to get your valuations right. OK, you've got to really try and get that right because the business model Percy, unless it's amazing, may not save. You may not save you some oil. I acknowledge one of Peter Lynch's other roles is basically, you know, don't worry about a quality company getting a little bit expensive because if you just sit in the hole for a year, the earnings will catch up OK, and then you'll get rocking and rolling again. And this is, of course, in plenty of lessons about about that over the last little while. I think, you know, valuations for me, the old world, one of the features of 2021 is the old world has caught up a bit. Now there's been some stellar performances from stocks that, you know, by and large, the Millennial and Generation Z audience would have thought on the most unholy pieces of excrement. [00:31:05][101.0]

Alec: [00:31:07] Huh? Give us an example. [00:31:09][1.9]

Andrew Brown: [00:31:09] Yeah, I'll give you an example. If you know if you are ferreting around in the rubbish tip in sort of March, April 2020. And you sort of figure out are garments in the rubbish that these two old world media stocks you could have bought New Zealand media at twenty five cents, they're dollar thirty five land because they're actually not just an old oil media stock. And of course, the best of the law, you know, because, you know, Gen Z and Millennial don't know what they is, you know, when they're when they're all sort of on podcasts and everything else, you know, believe, believe it or not, they're sort of at eight o'clock in the morning, this kind of net and cliched broadcasting from Martin Place. You could have bought Seven West Media at six cents in April 2020 because everybody thought was going broke. OK? And thanks to some superb management, cost cutting and obviously people being glued at home and they're glued to the news and the media and everything else. The stock recently touched sixty six sets up, you know, tenfold, you know, from the bottom, and the debt is now sufficiently low that they're paying cash to buy the prime media assets. Of course, Prime Media is nine cents and they've been taken out of what's effectively thirty six. Yeah. And, you know, because of the way it's done, there's a bit more money in it than that actually sets a fall back from the low. And I mean, Prime Age is the worst business model in Australia yet, you [00:32:37][87.6]

Alec: [00:32:38] know, guess? Yeah, that's the worst business model. So the valuations [00:32:43][5.1]

Andrew Brown: [00:32:44] get. So as a retail investor, had you approached valuation? Okay. Valuation, look, it's you know, there's not just one way. We all know the theoretical value of a company is the discounted future value of cash flow back to the equity investor? Okay. But there are lots of shortcuts to that, and particularly when companies own loose assets like properties and things of that nature, you've got to value those separately. Okay. So to me, what it means is that whether you're doing DCFS, you know, which are not hard to do on a, you know, on a spreadsheet or whether you're doing much more sophisticated valuations like me, what it means is you just need to be a little bit more conservative. You've got a building just a little bit more, you know, higher interest, right? Not quite as aggressive a growth rate, perhaps, you know, going forward because what you're going to find is that that's what the key people in the market are going to be starting to do. The Janabi starting to pull growth rates back, they're going to be starting to, you know, demand a higher return. Okay. And so must you. And so you can't just get away with lost a great business model any longer. You couldn't last year and it crept up on everybody. Yeah, no question. I mean, you know, sorry, stress be NPL. But it's the best example in Australia has crept up on. People are going why? Why is it not going back to $9? [00:34:09][85.4]

Alec: [00:34:11] I think to the the alphabet and the Amazons and the apples of the world really poisoned a generation of investors minds around, you know, having a great business model will make everything okay. [00:34:21][10.6]

Andrew Brown: [00:34:22] Yeah, but what you've got to remember on, you know, I mean, Apple, as we've said, Apple reinvest their cash flow and stock buybacks by and large should they pay dividends. Alphabet's the ultimate sum of the parts company is not easy to do. Nobody's saying it's easy to do. It's the ultimate sum of the parts company. You know, you've got, you know, effectively search and ad. You know, you've got YouTube, which is now broken out. You've got all the other bets. You can start to put numbers on some of the other bets as some of them get partly monetised. Okay. But is the ultimate sum of the parts company? Yeah. One of the reasons I mean, you've got to remember, by the way, yeah, Alphabet has absolutely lapped virtually all the other. Yeah, certainly. If you go back to the big five, as it was, it's laps the other four this year. Yeah, it's up over 70 per cent this year. Okay. That basically is a mixture of the strengths of the business model and the earnings coming through, and that has vindicated people's some of the past valuations in that case. Okay. So approaching valuation, I think it's it's important in the sense of basically you need to be a bit more conservative in terms of actually how you do those valuations. You know, just be a little bit more wary about Mr. Lynch's advice here about letting stuff grow into the valuation. Don't throw things away. But, you know, don't go. Adding to your positions in stocks without being a little bit more disciplined would be my viewpoint. [00:35:46][83.8]

Alec: [00:35:46] Yeah. And when you say pay a bit more conservative, do you mean a higher discount rate? Is that? [00:35:52][5.9]

Andrew Brown: [00:35:53] There are two. I mean, two obvious ways that you do it a higher discount rate and a slightly lower growth rate, you know, for your, you know, for your cash flows or innings or however you you're doing that. [00:36:04][11.3]

Alec: [00:36:05] So on the discount rate, you know, there's some people that will, you know, look at like what they want in terms of expected return. Yes. Cost of capital. Yeah, look at some just will have a fixed number. You know, some people will say 10 percent is just a discount, right? And that works. How do you approach setting a discount rate [00:36:21][16.2]

Andrew Brown: [00:36:21] depends on the industry. Quite clearly, I'm prepared to be a little bit more liberal when I think there's genuine growth in the industry, and I think the industry's is at a real turning point, and I'm going to give you an example of that as we as we go on. You know, whereas in other industries, I mean, not, you know, for Prime, for example, I assumed, you know, I assumed it was going to get right when its franchises renewed in 18 months time. And so I just did a cash flow at five years and I stopped it there. So that was about the most conservative thing I can think of. So just a five year cash flow, the cash is declining and I go, it's a stage where I see the companies making a loss on cash, and so it's going to close down. Mm-Hmm. And I still go much more than the prevailing share price, as you know. Happy player. So, you know, there are things like it depends on the industry. OK, I often I mean, you said, Oh, you know, just a standard rate 10 per cent. This is not the stupidest thing in the world to actually do that. That's not really that crazy to do. You know, I might sound crazy if you're in a very, very great industry, but it's kind of markets like this when they dislocate, you know, so when markets dislocate, you might be in a hefty growth industry, but the share prices come down so much that you get your 10 per cent desired return. Yeah, in an industry that's growing 10, 15, 20 per cent, OK. And I think the one thing that I will not shy away from is that dislocation in industries, not in markets, but disruption in industries. The pace is not saying [00:37:50][88.7]

Alec: [00:37:51] no, that's the thing. [00:37:51][0.8]

Andrew Brown: [00:37:52] The pace is not slowing. So you've got to remember this is people again. Look, it's this is Harvard Business School stuff for a few years, in a few years time because Ben, please come in as a disruptor. Only a matter of a few years ago, Australia's obviously been its major proving ground. And it's been disrupted already. Why? Because the big guys sat back, sat back, sat back, let the small guys lose a lot of money. One came out of the pack because their management was far better than the others in. It's done a deal where basically, you know, it's ending up with a two way business model, you know, with with the merger with Square and the others are going to be left in the dust. And the big banks have now come into play. Hmm. OK. And PayPal's come into play. And so it's meant that all these fintechs, all these small guys that we're going to come in and, you know, make you know, they've made their fans is a ton of money because some of them. Yeah, I bet none of you read the prospectuses of how much money got taken off the table when you put your money in. So some of these guys don't care anymore because they make 20 and 40 million bucks already. So if the company goes bust, it doesn't matter. OK, there's a few. There's a few neat things to work. What's critical is those guys have been disrupted already and they were going to be the disruptors because, you know, because the payment look, the payment system is not that. I must be blunt, it's not that sophisticated. Yeah, you don't need H-II ways, you know, for me to give Ren money. Yeah, I can already do it instantly through Moscow, which is obviously, you know, part of BPA, you know, so except through National Australia Bank, get your act together that plays, you know? I mean, yeah, but Westpac, you know, Ren will have money in 10 seconds for me, for Oscar. So why do I need some sophisticated payment system, you know, run by a bloke wearing his baseball hat back? Oh, sorry. You know, you simply don't. I mean, these these other things you know, to do with crypto, to do with foreign currencies, and to do with stocks and linking stocks to innocent stuff. So there's things like that. There's only so many ways you need it. And so the disruption in part of that sector is already over. It's finished and disrupters have been buried or some of them. Yeah, yeah. So be careful because things are changing at such a pace. The you know you, you can't just sit there going, Hey, you know, I on I on the disruption trade. No, you're not. You're just being, you know, your carriage is just been unhooked. Yeah. [00:40:31][159.0]

Bryce: [00:40:32] So, Andrew, I'm conscious of time. Yes. So let's move to looking at 2022. Yeah, absolutely. And some of the key things that are playing on you. [00:40:40][8.6]

Andrew Brown: [00:40:40] I want to I want to get people to have a look at three areas, which I think have got potential to. I'm going to cover very quickly. One, I'll just enunciate a little bit further. Okay? The first is China. On the 18th of February last year, basically pretty much Chinese market peaked out. Okay, I think we all know what's been going on in China is basically the two words common prosperity, which means equality, which means obviously all kinds of reforms instituted by President Xi. We've obviously had slower growth and that's had an impact on Australia. The iron ore price peaked out at depending on which measure used roundabout sort of two thirty in early May. It was about 170 when we spoke in in February, and it's now 100 us per tonne. Okay, so that slower Chinese growth has had an impact, and that's why our market's been a bit sloppy because obviously it's pretty hard if you BHP or Rio and you're not a meme stock like Fortescue, you know, to make forward progress. Okay. But what's really happened is, of course, the China internet market really takes out in the middle of February. [00:41:50][69.7]

Alec: [00:41:51] You're telling me and or my stock of the year was Tencent. Yeah, yeah, [00:41:54][3.4]

Andrew Brown: [00:41:55] you're down to 38 per cent as we speak from the 17th century. Okay. I mean, Alibaba was down over half. It's down about 55 per cent from then the China A50 index, which I'll find probably the most useful. That's down 25 per cent from two weeks after we made the podcast earlier in the year. The Hang Seng index is down roughly the same as down 24 per cent. I think there's a great opportunity to OK, these companies are not going away. They may have had their wings clipped. Absolutely. They may have to make more donations to the government. Absolutely, but they now not expensive. What's one of the best ways to play them? OK. There's something called the crane and shares CSI China Internet ETF and Tencent. JD and Alibaba are three of the four biggest holdings in that. You know, they cumulatively about 27 percent of it. The stock code is co-EP. [00:42:52][57.5]

Alec: [00:42:53] I'm assuming over in the US, over in the US. [00:42:55][2.1]

Andrew Brown: [00:42:55] Okay, so it's a US ETF trades on the NYSE Arca, where most of the ETFs over their trade. I own it, obviously, and I bought it relatively recently because think about what's happening to these companies when they're down, you know, the smallest decline since February's Chideya is down 20. Think about them versus their US counterparts. Plot yourself a gap of just the Nasdaq 100 all day because the you know, the big five or six, 40 per cent of that. And. Which isn't easier. Yeah, it's just it's just there's no voice in this. It's just widening and widening my name. Yet, you know, by and large, they do many of the same things to a different populace. I think that's a real opportunity now. It's contrary, and I acknowledge. [00:43:42][46.4]

Alec: [00:43:42] But I'm the one thing whenever we post about, like Chinese companies in on an Instagram or Facebook group. The big question from the Equity Mates community is all around regulatory risk. Yeah, absolutely. How do you think about that and how do you like factor that into your analysis? [00:43:57][14.9]

Andrew Brown: [00:43:58] It's got to come in terms of price, the price you pay. And when these stocks are down, you know, 40 to 50 per cent on wall regulatory risk because of the exception of Alibaba. That's basically what it is because JD, for example, is still growing very, very strongly. Alibaba acknowledged the growth rate has come off a little bit, so that's what caused this dislocation. By and large. And don't forget, it means you know you. China markets down 25 percent at its height in the US market on the Nasdaq is up, you know, 25 plus. Okay. So there's a real gap there. So in my opinion, you know, I think there's a real opportunity that that hasn't been there for quite some years. So an easy way, rather than just jump on the Alibaba horse, for example, is as usual with these things because it's a thematic. Rather than explicitly saying this company is so cheap, it's a thematic. So you buy an ETF, OK, the second ETF you were never really mentioned four years ago are come in here and said, This is there we go. Is the AdvisorShares Pure US Cannabis ETF? Okay. [00:45:18][79.7]

Alec: [00:45:19] Really? [00:45:19][0.0]

Andrew Brown: [00:45:19] Yeah. Why it's really out of favour. Okay. It's had a little bit of a bounce recently and as in just with market volatility is got come back close to its lows. But we're very close now to federal deregulation of cannabis. Okay. You know, federal legalisation of it. Why is that important? There are six states in the US where there's no legalisation of cannabis. You know, the other 46 there is, but it's really hard if you're a cannabis producer or synthesiser or whatever, because trying to get banking is really difficult. You know, if you got to JPMorgan and you say, Hi, it's Andy Cannabis Ltd. and I like the two guys in the movie, they get signs of the signs of the outlook very quickly. I think the cannabis space is really interesting. And again, don't bet on one company because I think as we discussed before, even here, you know, growing cannabis is not, you know, is not a really strong business, but synthesising it and distributing it. So and this thing obviously covers all and sundry. So I think that's really interesting. I have a holding in it. And again, it's at a low MSO, as is the case, MSO as is the case. And thirdly, I do want to really have a little bit of a look at one industry which came to fruition this year. [00:46:34][75.2]

Alec: [00:46:35] Let's get into this because [00:46:36][0.9]

Andrew Brown: [00:46:36] this is really fascinating in the Australian press. You would not have known this even existed or happened. Okay, but the music industry is at a tipping point. And now the music industry peaked in 1999 when Napster came in, which you might remember was the the original movement from vinyl to CDs to streaming. The trouble is, it was obviously illegal. Okay, what people downloaded from Napster onto a C D and chart their own C days and the turnover in the music industry. But she's never been that high and it fell. You know, it really fell into disrepair in many ways because of the distribution network and what's happened because of streaming not just Spotify, but Apple and the two arms of Google. Yeah, it's really grinding it out. Of course, it's growing again because all kinds of people like, for example, Peloton need music. Tik-tok beats music, so they're got to licence it. Okay. So one of the biggest flights in the world this year when it never mentioned in the Australian finance media astonishing. This is a forty six billion euro company school Universal Music Group. It has 32 per cent of the intellectual property in music. There are two other main players there signing with 21 and Warner Music, which has got LED Zeppelin, which must make up about 15 of their 16 per cent market share. Okay, so UMG was spun out of Vivendi, which is a French company. Vivendi is controlled by Bisleri, Bolloré is controlled by Odette and Audette is controlled by itself. It's part of Vincent burglarise, what I call Breton Pulleys, where he each company controls itself. OK, if you want to see how that works, go to. The A72 AGM presentation for the 23rd of November, I show you how each company owns 50 per cent of each other on the way down and 50 per cent on the way up until you get to Odette, which is publicly listed. We have a shareholding in and it trades a quarter of what we think it is worth. It controls II, which trades at half what we think it is worth, and it controls Vivendi, which is at least at a 40 per cent discount of what it's worth. We've only spun out it has two billion euros of cash. It's spun out Universal Music Group to Tencent. Bill Ackman and the general market. It's listed in Amsterdam, and it kept 10 per cent itself. Universal Music Group controls as a side the IP. So if Ren forms a band, so we've got Ren in the Ren, it's okay. So Ren in the Ren, it's go out there and they're quite good and Universal Music comes along and I say Ren, we will give you a million dollars for your first three albums [00:49:25][169.3]

Alec: [00:49:26] undervalued but undervalued [00:49:27][1.0]

Andrew Brown: [00:49:29] until Ren and the Ren earn back the million dollars for Universal Music. Okay, they have no share in what goes on. After that, they get a million bucks up front, but they've got no share in anything after the intellectual properties owned by UMG. That means they licence it to whoever. OK, so it's not just licenced on radio and since last licences, we've said in all kinds of other income streams. And what's happening is the music business is really starting to grow rapidly now, okay? Because of that factor and UMG control the IP. How? Why data these guys are so big they can say, Hey, Ren in the Ren ads, they're really, really going well in Kazakhstan. That is our home. That's your home market. So what? You know what happens? I put all the advertising and everything into Kazakhstan. You'll be doing endless tours of Kazakhstan, et cetera. The bands make their money from tours and merch. Okay, 20 per cent of Unger's music publishing, which used to be the cash cow of a lot of these things. So, you know, if you remember you've seen legal battles about who owns the publishing rights to Beatles songs and things like that. So what's happening is UMG is buying more and more stuff. They bought Bob Dylan's back catalogue. So, you know, Bob Dylan has basically no further interest in his music kettle and cut down the catalogue and the catalogue. Because as you Generation Z people know, all the music you listen to is made in my generation. So it's all about catalogue point. [00:51:01][92.2]

Alec: [00:51:01] Bryce listened to a lot of Doja Cat. [00:51:03][1.3]

Andrew Brown: [00:51:04] Yeah, of course. I've got new artists like, you know, Taylor Swift and Ariana Grande die and people like that syringes floated. It was floated at 18. It's about twenty five euros. You know, the discounted way to get into it because it's not the cheapest company in the world. Spare you 40, but it's a very reliable income stream is through one of the baller companies, either Yvonne depolarise or Odette. They're all created in on Euronext in France. OK, so I've got that Spotify, Spotify, the other side of it. That's why this stuff's growing. That's why Universal Music Group is growing because they market. The distribution of music is know whilst people still buy vinyl and the aficionados still do. The distribution of music is through streaming. And the reason people are so cynical about Spotify is, of course, it's one of the very, very few companies like, you know, a Twitter, for example, that has a massive user base that doesn't belong to Apple, Google or Microsoft. OK, so Spotify to give you an idea. Spotify has 100, and it's 172 million premium subscribers who pay on average about $4. Sorry, four euros. 40 a month to listen. OK. And miles ahead of Apple or the Google stocks. OK, malls ahead. OK, because they have a genius as well. Daniel Ek, who runs the company, they're profitable now, and the great thing that's growing Spotify is podcasting. Yeah, and it's only really come along in the past two years, really in terms of the growth of podcasting and OK. And we know how cluttered podcasting is. I walk to work four days now, two days away. OK, I listen to Investment Podcast, but I also listen to podcasts on English football. And wow, if you think there's a lot of investment podcasts, my god, you don't know how many there are. English football I've heard everything about Manchester United is possibly in the last three weeks. So that is an enormous growth business. These guys are there now making money. They have no net debt. In fact, they got $3 billion of net securities and cash. It's a $42 billion enterprise value, roughly. But I think when you line that up against other things, it's. Actually, not that expensive for an industry that is still somewhere in the vicinity of only two thirds of its peak in 1999. Hmm. And if you think you're going to live in a world without instant access to informed commentary on whatever it is or just I don't want any foreign currency this morning. I've got a hangover. You know, I just want music and it's good. I mean, eventually, of course, you know, it will completely. It won't. There are two industries from the past that have survived every attempt to kill them. One is cinema, and I think that will still go on and they'll still never die. And the other is radio. And I think radio's on its last legs. [00:54:16][192.1]

Alec: [00:54:17] Yeah, yeah. [00:54:17][0.3]

Andrew Brown: [00:54:18] Radio is on its last legs now. [00:54:20][2.3]

Alec: [00:54:20] Yeah, we're big fans of Spotify. I don't know. I think I Bryce. But it's had a tough year. It's had a tough year. [00:54:28][7.3]

Andrew Brown: [00:54:28] And that's that's why it's interesting, [00:54:29][1.2]

Alec: [00:54:30] down 40 percent from February 25 percent in the last month. Yeah. So what's the what are you saying? The market's not saying, Oh, how does the month was the market saying this company? Did the [00:54:40][10.1]

Andrew Brown: [00:54:40] market look? The stock got over orange when it was free. Sixty five roughly. OK, back early this year, so the stock got sort of over and and everybody was just too you logistic about it. Compare what are said about Peloton. Okay, so we I mean, at one stage, Peloton had a bigger market cap and Spotify. And if you telling me the total addressable market of $5000 particles plus, you know, $50 a month, you know, whatevers is bigger than Spotify. Well, you know, we can have a seriously robust debate because it's not only what's going on now is quite clearly some of the growth stocks are being hit. It's being just put in with a basket of that. There's ongoing cynicism about Spotify that there's a battle, if you will. You know that it's a zero sum game between, let's say, Spotify and Universal Music Group. I disagree profoundly with that thesis,

Alec: [00:55:35] because isn't the model that it's like a percentage of Spotify as revenue gets distributed to the to the publishers? Yeah, absolutely. So I like their incentive structure is to draws you in.

Andrew Brown: [00:55:45] You're half of you increase revenue is from some of comes from streaming and a bigger stream of Spotify. They need Spotify because that's what's changed your angle. I'm Scott. OK? That's what's changed music's landscape. This will put music on a growth path. 

Alec: [00:55:59] The incentives are pretty aligned. 

Andrew Brown: [00:56:00] Incentives are extremely aligned. In my opinion. Other people will, you know, produce a thesis where they know there are so many good podcasts about both of these companies, which are analysed in detail. Patrick O'Shaughnessy has done two of them. Yeah. 

Alec: [00:56:17] Business breakdown. 

Andrew Brown: [00:56:18] Business breakdown on UMG it. Please listen to that and you understand what what a business model really is then. And he's also interviewed Daniel Ek, as well 

Alec: [00:56:28] as interviewing twice daily life hasn't come on our show, which is a real, real thorn in our side. He should. He should 

Andrew Brown: [00:56:36] be. Yeah, alongside the obvious, you know, Tim Cook's and people like that. He yeah, I think he's absolutely fantastic. Finally, I've got a couple of fallen angels in Australia. One is trading on 14 times earnings. It's it's currencies in U.S. dollars. It's benefiting from what's happening at the moment, which people have forgotten, which is it's one of Australia's best run companies, 15 per cent return on invested capital. And so when you compare that to the rest of the Australian market, I think that's really cheap. That's fallen angel. [00:57:06][30.9]

Alec: [00:57:07] It's only trading on 14 to 

Andrew Brown: [00:57:09] only 14 times. Remember, the earnings are given to you in US dollars minus 71, and that's pretty cheap. The other one, which I think you know I've discussed in the past, is Lendlease. I do believe that as as we get over the virus and perhaps this Omicron thing is giving you another opportunity to have another and a few things. Yeah, then basically people will gravitate back to their community and I think people will gravitate back to where culture is and they will not leave by the seaside. I acknowledge there are reasons to live by the seaside and yes, you can work from there. But people crave relationships with each other. And I think that means that cities which you stop growing will now start growing again. And Lendlease is the prime builder around the world. It's one of the great builders around the world in urban renewal. So obviously you can see what they've done in Sydney and Melbourne, Sydney's Barangaroo, which is by and large built by Lendlease. But, you know, they've got huge projects in London, San Francisco, Milan and other places as well. The shares are less than half of what they were 21 years ago. Wow. OK. 

Alec: [00:58:15] So that's a tough that's a tough one. 

Andrew Brown: [00:58:18] Yes, there are some reasons behind that, and everything else is I've got a new MD. And you know, I think they're particularly interesting. They're a very difficult valuation play. I just looked at them for years and years and years. So I've always been an advantage. But they're kind of two things I'm looking at in valuation space fallen angels, but not Norman Bryce companies in Australia. 

Bryce: [00:58:37] Love it, Andrew, 

Andrew Brown: [00:58:38] where you go? We got their final word. Yeah, you may have gathered if I'm looking at Spotify, if I'm looking at II, which is a conglomerate, if I'm looking at Chinese internet stocks, if I'm looking at cannabis, Australian property developers and basically, you know, protective glove manufacturer, is that telling you something that in 2022, you are not going to be riding a single same as you may be have been able to in 2021 with the big five six seven? Right. Okay. You are going to have to be eclectic and esoteric in your investing. You're going to have to look in corners. You may not wish to look okay, but, you know, pull the spider web away and have a look. What's behind it? That's what's going to be important because I think it's going to be that kind of market. It's not going to be easy. Okay. Finally, I have an apology to make to someone who will not listen to this podcast. His name is Bindi Chadha. He's a global market strategist from Deutsche Bank in New York. And on February the 4th, it was broadcast that I thought whatever bindi chatter is smoking, I want some of it. Because his earnings estimate for the S&P 500, when the consensus was one six five for 2021 was 194. And guess what, Bindi? You are wrong because it's 204 pictures, and that that is why the US market is up 20 per cent. Because the one thing I got badly, badly, badly wrong last year was, I said US earnings overblown back in February, and no way, no, they were 165 estimate. Then they're going to come in over 200. Okay, and that's what's driven you 20 per cent gain in the US market, not a rerating from year and things like that. So to Mr Chatto, my profound apologies, sir. And on that note. 

Bryce: [01:00:41] Well, love it, Andrew. Thank you so much for your time. As always, plenty of insight for us to digest. Absolutely. We're about to hit a bit of a recording break for Alec and I. We are doing our summer series, though we've got 12 episodes coming up. Diving into some of the companies we spoke about, we have Peloton. We managed to get the country manager into the studio to speak with Karen. So stay tuned with that. Plus a bunch of other amazing companies from both here in Australia and over in the US. And Andrew will have to get you back to stick with tradition and do bold predictions for 2022 when we're refreshed and ready to go the year next year. But as always, thanks for the support and thanks guys. 

Andrew Brown: [01:01:24] Absolute pleasure to be here and happy New Year to everyone.