Chit Chat Stocks - Investing Power Hour #2: Bitcoin 2022, Costco vs. Amazon Prime

Episode Date: April 9, 2022

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Welcome to Chit Chat Money. On this show, host Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guests is not formal advice or a recommendation. Now, please enjoy this episode. Well, this is the CCM Investing Power Hour, take two. This is the second one. We did one that was like a beta one. So, I don't know. What is this show? We make sure we have no prep.

You can't prepare anything. You might have some ideas in your head. You have to. Yeah. You can't take any notes. It's required. Raw, unfiltered, unedited. We're going to talk for an hour. It's live streamed on YouTube if you're listening to this on audio, but the replays will be on YouTube, Spotify, iTunes, whatever. And we're just going to talk about anything that's happened in the past week

or any ideas we've had in the investing finance world. I'm here with Ryan and Ian Gray, as always. Ian's been joining us now. When he has his new job coming up, he might be dipping out, but at least for the next few months. How are you guys doing today? Ian, you're on a live stream this morning. How was that? Or Spaces, right? No, it was a Zoom. So I'll give a quick shout out to Nathan Warden. He puts on a thing called The Market every month. It's a little stock pitching game where six people get to pitch

a stock for three minutes and they do a couple of rounds and vote on the winner. And so it's a fun thing to get to hear a couple of new stocks. There's a bunch of new stocks today that i hadn't heard of before so um you pitch always i did pitch wicks i don't know i'll have to admit i don't think i gave the uh best pitch today i had a little bit of a fiasco this morning and so i was actually pitching in the car trying to go through my powerpoint on my phone so um i did not win this time um but it was it was a fun experience nonetheless give us the interesting stocks give us the thumbnails of your pitch i want to hear it yeah so the the thumbnail of the pitch for me is, uh, basically it's, it's fairly straightforward. Wix has a good business

with sticky customers. Once people are trying to, um, once they build a website, it's a real pain to switch which place you're on. And I've got about 116% net revenue retention. So, um, they're getting more and more from each customer every single year. Um, and so, you know, fairly sticky customers there. They've got massive secular tailwinds because as much as it seems like there's already websites everywhere, everything I build basically nowadays, you need a website for. And so people are constantly... I think I've made 3 websites in the last 6 months. People are constantly making new websites. Ecommerce, even though it feels like it's getting towards maturity here in the US, it's supposed to grow cumulatively another 50% over

the next 4 years. So I think there's just a bunch of tailwinds. I don't think they have to grow market share that much. They just have to maintain market share and then continue to grow with their customers. And then the valuation case today, I think they're trading about a four times EV to sales, which if you assume 20% free cash flow margin, if you assume that they can get up to that sometime in the next five years, which I think is reasonable on their creative subscription business, their gross margins are about 75%. So if they can get up to around 20%, that implies basically a market-free cash flow multiple of about 20 times. And so then you're getting revenue growth

less dilution as you return. So I think it's likely that over the next five years they have double-digit revenue growth and fairly minimal dilution. And so then it leads to double-digit returns. that's what i did say that um i don't know yeah let's see what happens i would have i needed i needed you guys to jump in to help me skew the vote we needed the chit chat money listeners in there but yeah the uh oh we're gonna get to probably some more talks but i forgot to say

today we do have uh i do have to talk about a sponsor first knack bags you may have heard it on the podcast but i do have a bag in studio yeah let me talk about them ian you haven't seen these But if you use the link in the show notes You will be able to buy one of these great backpacks If you look at this Ian, what do you think? It looks pretty snazzy No one's watching so everyone's listening

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bag for if you're a professional or whatever. Um, all right. Any topics today, guys, I wanted to talk about some things I was seeing on the Bitcoin 2022 conference, which I thought were kind of fun you guys have any topics i know musk twitter thing's kind of old now but there's there's some other stuff this week right yeah i've got no uh i i didn't watch the bitcoin conference so i don't have any hot takes on that twitter news i don't know if i want to go down that whole everyone's covered that the last few days ian is there anything that's been i think we got it we don't have to start with it but i think we do have to touch on the twitter news just a little bit. I don't want to dwell on it either, but let's start with Bitcoin. I saw a little bit of

the conference, but I didn't see much of it. So I saw some tweets of some quotes from the Peter Thiel keynote and they were quite wild. So I decided to watch it. I got to say it was wild. It was like he was riling up. It was like a political rally almost. It was quite strange. Like he would say, well, what's funny is whenever he would say Bitcoin and he would compare it to like gold or something the market cap or something like that everyone would start cheering and then he would talk uh well first off at the beginning he he showed like two hundred dollar bills as an example what they used to do with paypal to show how it's just like a form of money or whatever and he was like who wants this and someone took it and he was like i thought you guys hated fiat

which was a good joke but uh he i don't know had this speech and it was quite strange he called very explicitly, Warren Buffett, a sociopathic grandpa from Omaha, who is the enemy. And I thought like, wow, all right, are they going to give us, what are we going to get at the Berkshire meeting a month from now? Like, are we going to have to defend this? But it was weird. The Bitcoin conference in general seems strange to me. They had that like mechanical bull as they're trying to become the new Wall Street or something like that. But I kind of think- I don't think, not a mechanical bull. It's not mechanical.

It was like a tech, it was like made of metal, right? Like real. Yeah, you couldn't like ride the bull, but the. Right, right. Yeah, it was, he was meant to like emulate the Wall Street bull, but. Here's the gist of the pitch for Bitcoin is that Teal said in 1980, gold and stocks were one-to-one in market value at like $2.5 trillion. dollars now equities at 115 trillion dollars and gold's only at i don't know 12 or something

and bitcoin's below a trillion and his thought was well bitcoin's gonna be as much as the stock market because it's the new gold and that was the pitch and everyone's like yeah that makes sense and all the comments on youtube said wow this is the best speech at the conference i kind of came away underwhelmed because whenever i watch one of those things i kind of just think like this is it trying to convince everyone to buy something I would think there would be more to it is all I'm saying I didn't watch the Cathie Wood and Michael

Saylor one they had a joint discussion which was 45 minutes sorry I couldn't watch that but maybe another time I don't know why but for some reason I feel like I have to defend Buffett that's like my impulse whenever someone insults

him as if like he can't defend himself um but i just i don't it makes me lose so much respect for peter teal like he is yeah he's a big macro guy buffett's like the picture of integrity like he he's lived like he has such a good track record of like being honest and forthright and transparent like he why go after him well he likes fiat that's why he's a part of the fiat system yeah was it just to please the crowd i mean i think it was i think it was they started booing i don't know what it's kind of like that scapegoat type thing that you know what i mean like they started they

started sick it was weird the crowd the i don't know you know and it takes up bitcoin 2022 i'm surprised the stock the price of bitcoin hasn't jumped up i thought this was supposed to get the momentum going again well i think it i don't know i don't really have any thoughts or anything at least smart to say i think um i don't know i think it's interesting because bitcoin is in this weird spot now where everybody does know about it right there's not like you don't run across anybody who's like never heard of bitcoin which like five years ago you'd still run into people who haven't heard of bitcoin majority um right and so it's it's gotten this widespread adoption really fast and so you can't really like i think back in the day back in 2013

14 15 16 maybe even 17 you could say that well this the price is going to rise just because more people are going to learn about it and there's going to be more demand for it and all this type of stuff why there's going to be demand you know is a little bit a little less clear but but now like it's not like anybody goes out and goes hmm you know what this bitcoin thing i didn't know about it now i do now i should go buy some like everybody already has some opinion on bitcoin um and so i think i i don't agree with the teal argument if i'm taking word for it but that that it just is going to go to match the stock market because that's what it wasn't you know that's what the gold thing was in the 80s he had a little bit more than that it

was comparing because it was at the end of the 70s really high inflation era and he basically said that's happening again which may or may not be happening it's only been about a year of high inflation right now and he said at the end of that gold kind of took off and matched it and that's kind of why you want to be in bitcoin i think that that that there is a correlation there maybe but i don't know if like just if there's a correlation it means it's guaranteed to work sorry if you had anything else there no i i think that that's i think that's good i think um i don't know like there's i own a little bit of bitcoin i think i've talked about that before It's less than 1% of everything I own, of all my assets.

And it's just kind of sitting there. And if it goes crazy, it goes crazy. If it doesn't, it doesn't. And it doesn't affect my life. I think that there's some value for Bitcoin, but whether that's a dollar per Bitcoin or a million dollars per Bitcoin, I have no idea. And that's probably the wrong way to talk about it anyways,

talking about it relative to fiat. One Bitcoin is one Bitcoin. Yeah, come on. Yeah, yeah, exactly. So I don't know. I, I think that the conference conferences like that get me worried because I think it just whips people into a frenzy and gets people who, I don't know, it just feels too salesy and you're getting people excited about something that, that is a speculative asset. Yeah. Did they have the same thing at Berkshire 2022? Do they have parades for the U S dollar? Do they have like. yeah they do i mean technically i mean they have patriotic parades you know i don't know no i know

but like when they introduced the us dollar were they like yeah yeah we want we want more when the fed uh yeah when the fed got invented i don't know yeah it's a it's a tough one i guess we will okay here's the thing after reading that book about peter teal from by max chafkin which probably was biased against him but still right yeah it probably was but it's hard and even when you like look at his his like historical actions it's hard to say that anything every time i look at like his actions i think there's some sort of an agenda behind it and a lot of his actions previously have been like politically motivated and so the book was good though really on the history yeah i feel like his hedge fund blew up his hedge fund blew up no you know whatever

his hedge fund blew up because of qe that's uh because he was betting against qe so i mean he might have one and no wonder yeah no wonder no wonder he hates it yeah i mean that when you understand that then maybe that's why he has hatred for the system but yeah i feel like he's darth vader though so i don't want to say anything bad about him because i feel you know like he'll send i feel like he'll he'll send you obviously not do that but i feel like he'll send his droids that from me you know it's possible well and i will say it's scary even though he doesn't he like mumbles and he kind of like talks like elon musk uh he feels scary to me i don't know why well he's very calculating like kind of like you were saying ryan i don't think peter teal does

much that he hasn't thought down the road two or three steps you know he seems to be and he's he's known for being a chess player too right and i think watching him it's clear that he's he's always thinking um and whether you love him whether you hate him whether you agree with him whether you don't i think he's the type of thinker he's a deep thinker and i think the type of thinker that is worth taking seriously and what i mean by that is whatever he's saying you don't have to agree with it but i think it's worth considering and worth like not just dismissing out of hand because um because there's something i don't know he's just one of those guys when he says stuff i tend to want to try and figure out what he's saying right and and understand why he's saying

that because i don't i don't come across him very often just making these like surface level yeah you know kind of analysis right there's there's a great debate um that i watched one time i actually was watching a bunch of like debates between different people a couple months back and there's a debate between him and mark andreessen um where mark andreessen's trying to make the point his side was i think it's like 50 minutes long but his side is basically technology is is great technology has been making all these advances in our life all this type of stuff and we are you know headed towards potentially a deflationary environment that type of stuff and this was probably about five or six years ago peter teal is on the other side of that saying

technology hasn't done much and what's the what's the founders fund motto we wanted flying cars um but we were given 140 characters instead or something like that. I'm paraphrasing it, but he basically is trying to make the debate that everyone thinks that technology is so important and that it's done so many things, but we actually haven't done that much with technology. It's just been all these gimmicky little things that don't add that much value to life.

You mean he, his arguments over the past like 30 years, right? I think that's insanely wrong. Like we're, we are having a discussion right now in three completely disparate locations locations with people available to watch it live and ask questions and then we're gonna download no one's on right now to ask questions but eventually they will be i mean my entire my

entire life's been changed by it i think i don't know people always make it seem like it's right and he would he would say that part of part of what he cites is that there are like for the amount of scientists we have today the amount of output we have is way less right the output per scientist is less like that for the amount of people you have worked on problems or businesses that there's actually just not that much productivity and so we've kind of had all these advances with like the iphone but that that there haven't been like the massive society altering changes and i i tend to agree with you right i think that i i'm more on kind of mark andreessen's side of that debate but um but i think he brings up i don't think everything

he's saying with that is entirely false you know i think there's there are some i think it's surprising to me how slow some of um like there's obviously been some great medical advances but i also am surprised that there haven't been more medical advances in my lifetime um today uh and i think like some of the community stuff some of the environment stuff i think you know there's there's advances going on but i think people are optimistic um i don't know it's the flying cars thing right you would have thought if you asked someone 100 years ago whether there's going to be flying cars in 100 years i'm sure they would have said yes and i think flying cars why does that mean anything though because like just because

some joe schmoe's like yeah we're gonna have flying cars well it's not physically possible or or it's it's more like economically practical to have flying buses aka airplanes like we do essentially like we can go anywhere in the world we want this episode is brought to you by La Quinta by Wyndham here you are miles from home and ready to start your vacation good thing you're staying at La Quinta by Wyndham they have free high-speed wi-fi to stream all your favorite movies and in the morning get fresh waffles with their free bright side breakfast or squeeze in a workout at their fitness center. Either way, you're ready to conquer the day.

Tonight, La Quinta. Tomorrow, you triumph. Book your stay at LQ.com. Yeah, what's interesting on that, yeah, like, it's hard, like, when you say medical stuff, it's hard to say, like,

what is the spectrum of success versus not success? I don't know. We just invented a vaccine in a year, like, that was really done in three months. The average lifespans double what it was a hundred years ago if i'm not mistaken like i think that's some good medical improvement but one of the other sociopathic grandpa said a few months ago he said the biggest

problem monger this is monger for anyone that is that's listening he said the biggest problem that poor people around the world well at least maybe half maybe the western world plus china is that they're too fat that's a pretty good problem to have like in all in all sense and right that should be a solvable problem like it's like it's a problem i would take that over starvation yeah that's it's a way better problem to have than we had for most of human history we're having to hunt my food every night yeah the interesting thing about saying yeah hunting the food every night uh the interesting thing about the saying there's no innovation is it seems like the period that there was a ton of innovation uh what would you say like 1920 ish to 1980 something like that

is probably i think the argument i've heard teal say maybe it was 1960 that yeah he was one of his paramount examples just to to help you was um we put a man on the moon right we put a man on the moon with computers like that pale in comparison to the iphone today yet today we're not doing anything of that magnitude would kind of be his his general argument there okay here's the contrasting thing and this kind of contrast or two things i contrast there is one he founded the thing that he is complaining about and got rich off at facebook too this is the problem i kind of have like the libertarian bent is that they you know you want to be libertarian but then the time when we were the most innovative is when it was kind of

all most of it was coming out of government spending on deep scientific research so i kind of like those things don't make sense to me those were i mean yeah there was a nationalized service that got us to the moon but it's like no everything has to be privatized so i i don't know some of the stuff that those type of people silicon valley people say don't make too much sense to me um i don't know it feels like not hypocritical it's just contrasting like i i don't understand the logic but i don't know do we want to move on to another topic more yeah yeah do we uh i don't So does anyone keep an eye on the chat? Do we have anything on the chat?

No, we have three people watching and one of them is me. So if you're watching, add into the chat. Maybe I'll respond to you. I think I have my little computer here. But I was watching Investor Day this week. I kind of wanted to see what your guys' thoughts are on these Investor Days that go on. Because they can be like two hours and the management goes up and they bring out everyone and they kind of talk about their vision. And I kind of feel like they can be a bit dangerous.

What do you guys, you know, like dangerous for an investor to get convinced. What do you guys think? Oh, a hundred percent. I was listening to a, I was listening to a podcast this week called Bad Bets. It's like a new one. And they, it basically, the first season at Chronicles Enron, essentially from like the point of view of a journalist from Wall Street Journal. And they, they bring in a prudential analyst who was covering Enron at the time.

They said they went to a shareholder meeting when the stock hadn't been doing super well. And then it was this big sort of grand event and skilling comes on. And he's like, now you may want to listen closely for this next part because what I'm about to say is going to revolutionize, blah, blah, blah. He's like, we're no longer going to ferry the old, we're no longer going to ferry the old fuel, the fuel of the old world. Now we're going to be fueling or ferrying information. And he like announced broadband. And then they like had the Sun Microsystems CEO come out to like music and everybody got out of their chairs and was like jumping and cheering because they were like. Like Ballmer and the developers.

they're like we're going into broadband and like the stock shot up like 30 percent that day and like every she said that like everyone was literally calling their like all all like the people back at work like oh go you go go recommend a buy go recommend a buy and then broadband was a giant flop well it's like in the in the book right they outline how it was failing right from the start like immediately failing yeah yeah i mean they were they uh the prudential analysts like two months later was there was a job uh job opening at as for analysts at her shop and a bunch of the broadband employees from enron were applying and then she's like why are all these people applying they're like top-notch like resumes they're like why are all these people

leaving enron it's supposed to be like the next hot thing and they're like oh we're just we're it's an up or out system and they just weren't, they weren't good enough. And it's like, no, you're folding the, you're folding broadband and you're just not saying that. Yeah. That's, that's the extreme example of a bad investor day. Ian, what are your thoughts on investor days? Yeah, I think investor days and I'll lump in investor presentations that you just, because I often don't go listen to investor days,

but I do find myself when you get that investor presentation and I've got all their pretty graphics and they've got all their charts going up and to the right um oftentimes a lot of chart crimes all that type of stuff it is easy to get wrapped in like whoever's making those presentations whether it's um some sort of uh whether they've contracted it out or whether it's an internal team that's doing it those people their sales pitches right and so they're trying to they're trying to tell a good story as they should but um you really have to guard yourself because i do find myself kind of nodding along being like oh i hear where this going oh yeah this is a problem oh this is how you solve it oh this is why you're better than

all your competitors and one of the things i do to combat that um is i'll try and read i'll try never to just read one um on its own i'll go look at a competitor as well because it's very easy to get like wrapped up in um like why they're the best right and then if someone asks you oh why is you know why is fiverr better than upwork then you're like uh well um no they had a lot of nice things in their investor presentation you're like that's the one i read that's the first one i started and so um i think like it's just part of psychology like they are and this isn't like a nefarious thing but they're just whether it's investor days or investor presentations um even like the shinier annual reports they're trying to tell a story and

And so I think it's something that as an investor, you have to constantly be aware of and not just buy into the story because it's easy. They've laid it out for you and they help connect the dots. And it's even like the thing that we hear on conference calls sometimes where people are asking the model questions, right? How should I model this? How should I model that? Right.

Can you tell me this or that or the other thing? And it's very easy for management to walk you through to get you to the feeling or the price target or whatever it is that they want you to get to that's that's part of their their goal as a you know as an executive team particularly as a ceo in a lot of cases it is it's funny because we are we're all going to a shareholder meeting in a month like it's like a parade so it's like and we're making fun of these and we're making fun of people worshiping peter teal and i wanted to say that we basically worship buffett i don't know about ian but me and ryan so it's like you on a poster behind look behind me well for the one person that's watching look behind me we

literally i have the custom it's a great poster the custom goodfellas poster i talk about it whenever i can but yeah what do you guys think and you can't say that the automaker that starts with a t is the best chance to be an enron today do you have anything that comes to mind i was impossible almost but like one stock that maybe you don't own that feels a sizable company it has to be yeah it's probably hard to think off the top of your head but like for me it's got to be I don't know like the revenue looks good it feels to me like it has to be where the earnings have looked good but like the cash flow isn't there I guess I haven't really whenever I see something like that I kind of discard it but I don't I don't I I don't the it's hard to do anything

it's hard to have anything in size like that i think with today's in like world of investors maybe i'm wrong but the like in spack land there's a lot of related party transactions going on and self-dealing that i think maybe isn't fully noticed because it isn't disclosed properly yeah and if someone's making up numbers for earnings then it's impossible to know in hindsight, unless you really like dig deep. So I guess you can't really have a hunch, but there, I think it's some of the FinTech companies come to mind for me where they could totally be not pulling investors legs, but given that they're financial companies and they might be lending or something like that, it like the situation I just have, it's just a hunch. I could

be totally wrong. Could be much worse in certain situations than some of those companies make it out to be. I think a lot of the ones that tend to be real problematic are, like you said, those types of things, whether it's a financial company or companies that, um, have kind of an interesting capital structure that makes it a little bit more opaque where things can be deteriorating or things can blow up real fast without, um, without it showing up in like the profitability or revenue necessarily. Um, and then all of a sudden one day they're just underwater and you're like, Whoa, what happened um and and i think like i think it's like most of the time you don't see people fudging revenue numbers or profit numbers or things like that it's hard i think it's very

hard to do apple might be a facade yeah i don't i don't i haven't seen an iphone in a long time so it's probably you know the bubble burst on that one that just hasn't shown up in the financials but that's i will say that's one of the reasons i i tend to stay well i don't really invest in uh chinese companies um and part of the reason is just because some of the some of the regulation on them the fraud right just i worry about the luck and coffee situation because in that case they actually were right faking faking revenue numbers if i'm remembering right and um 400 growth you gotta believe it can't believe it 400 growth who are you to say like it's hard as an american investor like i don't know how you figure that out yeah right maybe there were some

signs there i haven't done deep into that but like you just kind of take generally as american investors we just kind of take their word for it that the numbers we're getting are the right numbers and then we're going to make a decision based on those numbers but if there's any doubt about what the right numbers are like that just has to so dramatically increase your required return um at least for me and my risk tolerance that i just i can't i just can't justify it but yeah i agree with all that what are you guys thoughts on china having this little covid outbreak kind of and then shutting down their economy in a few in shanghai i did see some insane videos from shanghai yeah they brought in the military i haven't i don't know any of

the details but everyone shut in and apparently some people aren't getting food like they just get delivered like a few potatoes i was reading the ben thompson he interviewed some chinese guy I sometimes worry I sometimes worry what information I worry about the Accuracy of some of the information on China That I get Well this guy's from China

Yeah the Twitter sphere Sometimes you don't know Zero hedge you know Check your sources But I mean Not even the thoughts on that in general Not even politically but just like how That could affect inflation

And any physical company that's trying to get goods over to the Western world. Seems like it could be another roadblock. Yeah. Yeah, potentially. I don't know. Apparently, Apple's finally hitting some sort of roadblock, like Foxconn and stuff.

It's hard to... I don't know. Seems like a risk, a sizable risk to me. I'm tired of trying to forecast the impacts of COVID outbreaks because it's impossible it's impossible and like i don't know how like governments are going to react obviously like it sounds like china's been more uh controlling like like like tried to control the situations more than some other countries um but what bearings does that have on trade i i really don't i have no idea or really your portfolio

of companies yeah yeah i think the one thing the one effect that i've realized is going to happen and this is has a positive effect for some of the companies negative effects for others but i think there's going to be more and more redundancies in supply chains um and i think that's that's something i'm fairly confident about that there's going to be more manufacturing in the united states more manufacturing in north america more manufacturing in europe um and as just as is people try and insulate themselves so that they don't have to be worrying about whether it's geopolitical or whether it's COVID or other diseases or viruses. And I just,

I think that that's the one fairly sure bet that there's going to be a lot more, like I said, redundancies and supply chains moving forward. And I think we've started to see that. And it's one of the things that makes me like interested in what's the company we looked at the other day applied materials that that goes out there and helps or basically provides the manufacturing equipment for for the chip makers um but it is semiconductors and um you know i i haven't started a position in that but it's just something that those are the types of opportunities that i think make some sense right now it's just a question of whether how

much of that's priced in yeah it's it's a tough situation i try to just avoid any like investment stuff and it's tough to invest in stuff that's not gonna hopefully not gonna be directly impacted by that type any sort of thing whether it's positive or negative which is why unfortunately i just apple and starbucks and nike for me are kind of no-goes i do try to limit my exposure to china just broadly in the portfolio and i know it's hard because like it's such a big opportunity And so it's almost like, do they, do they just avoid the opportunity to grow altogether just to have like a sense of security from the financials? That's kind of, I don't know. It's like, I do get worried when a company has 30, 40% of their business in China. Yeah. Or most of the growth or a lot of the growth. kind of that's what kept me out of starbucks was this was a couple years ago but i remember looking

at it and being like okay i like this business i think there's some automation opportunities that may improve margins and stuff like that but when you look at it basically all the growth is coming from china and i was like i don't really want to be making that bet you know yeah and they partner with alibaba and that seemed great but then now all the ceos have i think and richard now is it richard liu the jd.com was the last guy he's out now all those founders are gone so it's like how big is that partnership with alibaba mean like uh i don't know what do you guys think about starbucks the new uh what happened with the well what do you guys think again yeah what do you guys think about starbucks today today it's probably gonna be hard to lose money you think unless china

blows unless their china business blows up which is unlikely but it probably seems like it's hard to lose money cox panoramic wi-fi includes advanced security to help protect all your connected devices you'll get real-time alerts oh like this one so you don't have to worry about malware or when your kid downloads a song from a shady link and now all your computer can play is red color red color where are you all blocked thanks to advanced security included with cox panoramic wi-fi advanced security must be enabled in the panoramic wi-fi app restrictions apply yeah schultz didn't they get into nfts no no that wasn't them i don't think so

chipotle you can get burritos and roblox now that's huge that's like the least that's probably the last thing i would think would go to like the metaverse is chipotle but hey or like physical food like literal calories like how do you well what do you guys think about starbucks and more serious note schultz has had to come back like three times now like isn't that kind of a red flag that he's not good at setting up a culture for long-term success like if he has to be there that's a slight red flag to me. Yeah, I, I agree. And I actually kind of worry about Starbucks is, uh, and maybe it's starting to fade now, but I was worried about their durability at like have sitting in the coffee shops gone forever. And I think that that culture, uh,

was a big part of starbucks that environment of being able to sit down and like enjoy your coffee and have sort of that italian experience which was it italian or french that schultz tried to emulate from the beginning i think it's italian i think that might be gone and i'm seeing a lot of these starbucks's pop up that are they have no lobby or they have no like uh dining area it's just like a grab and go and does that make you that almost put puts you more on level footing with the typical coffee shop as opposed to what you used to be maybe yeah and there was what that one below your apartment that used to live in ryan yeah i never it's pretty busy though i never saw one person go in there no i walk by it every day coming to the office and there's people picking

stuff up it's it's pickup though so it's like people aren't in there you know what i mean The economics are probably better on those, but it's very small. Yeah. But that's ruining the experience. And the coffee is not that great. Like for people, I don't even drink that much coffee. So. Right. But, but to that point, and this is anecdotal, but no one, if I asked someone what their favorite coffee shop is or where they'd like to go to work, you know, if they are going to go for that coffee shop experience and get, you know,

bring their laptop or have a meeting or do stuff like that. Like no one says Starbucks, right. It's never like, and i don't know if that's a big deal because people still use starbucks and like the good thing about starbucks is you know the experience you're going to get right i was i was in puerto rico a couple months back and i needed to get some work done and there was a starbucks down the road and i knew it was going to be good right and the wi-fi was going to work and all that type of stuff and so like when i'm traveling i find that i gravitate towards starbucks if i'm in my hometown i tend to try and find other coffee shops because there are better experiences out

there but there's something about knowing what you're going to get yeah there's people i mean the drive-thrus are still i don't know 15 minute waits so i think that's a good sign that people are still willing to do that but i just don't know where the growth comes from that's and what do you think about union kind of unionization thing yeah and it looks like you're right the uh There is some talk of NFTs with Star Wars. No way. I'm sure it's made some announcement. Yeah.

I told you. I told you. They're talking about worker benefits and digital innovation using NFTs. Well, now I'm bullish. Red flag. Big red flag. Going in the short book. Yeah.

I don't know Starbucks' financials at all recently. I haven't followed it closely. I comped them. This is a while ago, but I did like sort of just like some financial comparisons to Dutch bros. And I thought Dutch, Dutch at the time was like wildly overvalued. I haven't kept up with it since, but the economics at Dutch bros, I believe were better like prof like the contribution profit margins.

Even though Starbucks doesn't report that, but the store growth, starbucks has a much bigger store base obviously and the store growth rate was similar yeah which is pretty shocking yeah it's interesting i don't have like i feel like there's just so many easier businesses to own than starbucks maybe i'm wrong i don't know what their valuation is but i remember it being like 30 times earnings and it's just like it just seems like there's a lot easier things to own at 30 times earnings kind of like i mean it's it's a bit like costco i don't think it's just as high quality of business as costco but it's one of those where you know the growth isn't

going to be that high so why are you paying up so much for it you know costco's costco's insanely priced right now if i remember correctly yeah well it's like doubled in the last year something like that like the mult yeah the multiple has like let me check let's get on the old coif in here yeah so just to touch on starbucks real quick starbucks um is trading about 25 times free cash flow netball park so 25 about yeah about market multiple a little bit a little bit expensive but um and relative to earnings they are like 22 times 23 times uh last 12 months okay i don't know i don't know what this tells but costco current ev to sales for the last 12 months which well maybe they're more profitable uh was is 1.3 times versus 0.8 times last year

Yeah, I mean margins can't have been gotten that much better It says here, PEs can be wrong On the aggregators, but it says here PE last 12 months is 48 I mean that's I don't know, maybe just they're like one of those Never sells, so like no one's selling So it doesn't matter

It'll cancel eventually EV to EBITDA last 12 months Wow Current to last 12 months EBITDA Is 25.7 times Last year it was 17.9 times So there's been some multiple expansion and EBITDA is a bad number for them

yeah but I'm just copying it versus last year free cash flow is let's see which number is that yeah free cash flow is

it's about 50 times right now wow that's expensive even Munger was like listen I'm not going to sell it but I want to buy it right now and he's on the board and he's been there forever to go back to starbucks and work just generally about some

automation um oh let's look at this at the end of i'm just gonna make one last comment on costco actually at the end of 2020 costco was at like 16 times free cash flow dang now it's at 50 um this tended to be around well it's jumped around a little bit it's been between basically 20 and 50 times which is a pretty big range with a big chunk of time around 50 i did see a quote i did see a quote where if you god i'm kind of blanking on it but if you bought costco above 30 times at above 30 times earnings at any point in the last 20 years you would have made money over like a like five year or you would have beat the market over like a five-year period 30 is different than 45 though

yeah it's way different but and I do think it's pretty insanely priced but the that is maybe that is why it belonged in the best businesses of all time discussion yeah

spoiler that's for teasing it for the round table whenever we release that I think people will assume that it's in that discussion maybe Hey it wasn't in line To give a shout out for that discussion That was one of my favorite episodes we've ever done

So that's coming out next week Or the week after is that right Yeah I don't remember it's what everyone Brady chooses To do first so we have two bonuses In the queue It's coming out 4-13 so that might actually be coming out Before this No no this will go on the podcast tomorrow

Well this is live right now I know but when we publish it to the podcast It'll go on the podcast this weekend so no this will come out beforehand but yeah that was a good one do you have your guys' list I actually forgot I have my list I'm committed to memory

alright yeah I had Hershey in there Brett's frozen am I saying that right does Brett look frozen I'm not I'm in or is that just me I think it was just you but I think everyone's good now alright my list

I'll redo it wait no if this is coming out first I don't want to do it yeah tease it just tease one maybe tease well costco's in there all right costco's in there and ian well you had you had something that was uh kind of a bit of a wild card right if i'm forgetting yeah i've got i've got a bit of a wild card on my list it's uh i won't even say what it is but it's a a very popular private um family-owned restaurant restaurants right right right Might or might not be closed on Sundays. You'd call it fast food.

You would call that fast food? Fast casual, right? Oh, that's definitely their fast food. Their fast food. They're not like Panera. They're on the better side, I suppose. They're high quality fast food, but I would still call them fast food.

Yeah. Yeah. It's a shame they're not open on Sundays, man. It's always, that's like the day I crave it the most. That's when you want it. Yeah. You drive by and you're like, oh man, I'm going to get some Chick-fil-A today Oh, you spoiled it

Well, no Well, it could be Chick-fil-A, maybe We're just saying That's just a few of those restaurants that are Highly popular Restaurants like that that may be closed on Sundays You know, there is a company That went public

Recently called Portillo's That's like a hot dog I thought it was called They call it Portillo's I thought it was Portillo's. Portillo's? Maybe that's what it is. I think it's Portillo's. They're like Chicago hot dogs,

but they have the highest sales per restaurant of any restaurant. Of any fast casual restaurant, I guess. They have a couple in Phoenix. I've been there once or twice. It is crazy. There's just always people

just packed in those places. What's so special about the hot dogs? They are good hot dogs. they just put chicago on and then it's good yeah if you put chicago on anything in phoenix it draws a crowd but apparently you're not allowed to have like chicago hot dogs you're like not allowed to have ketchup isn't that a thing yes they have a few different versions of hot dogs you can get there and i get a chili dog when i go there generally but um it's they're just good hot dogs they're not too expensive you feel like you can get a lot and it just fills you up and it's good

And particularly, there's a lot of people who go during spring training out here because there's one by one of the spring training fields. And so, before the spring training games, it's just packed with people getting their hot dogs at Portillo's before they go and get their hot dog at the game. Are they franchised? Probably not. They're at two-time sales. Wow, could be interesting to take a look at. Never heard of them. Nothing beats the $1.50 hot dog soda deal at Costco, though. It might be the best

If I were just super broke I think I'd eat at Costco every day It's worth a membership Why do you have to be super broke? What if you're just really committed to investing As much of your income as you can That's my I would eat at Costco every day if it was a little closer

Wow, Portillo's This is getting interesting Let's take a look I'm still looking at it Not investing in bikes I think you can Can you eat at the Costco's without a membership?

You used to be able to. Recently, though, when I've gone, they've been asking for my card. I think they may have wised up to that. Yeah. I guess it's not the healthiest meal in the world.

No. Hot dog and unlimited Pepsi. No, it says 100% beef. Probably healthy. Have you had any of those? I have to ask this too. have you ever had one of their chicken baits it's a little more expensive but those things are good i think i got food poisoning from them i'm pretty sure and that like and maybe maybe it wasn't specifically from that but i had it one time and then like i just got insanely sick and i haven't

been able to have it since like it's like a scarring when i smell it i'm like uh all right what do you think has more pricing power costco membership or amazon prime Costco You gotta go with Costco yeah What does it cost right now I think they're actually Fairly close on price Costco membership

Isn't Costco like 100 a year Yeah but they raised it so Yeah I think it's only They've got a couple different types of 120 Is that Costco or Amazon 120 at Costco Amazon's 140 I think you may be able to get one for $60

maybe so they have something where you have to do like affiliate cardholder thing I'm not going to read it but yeah I mean that Costco deal I mean yeah if you I mean any family you have to I don't have a prime membership really

yeah I'm on my family's so I actually don't shop on Amazon very much I shop on them constantly like all the time the thing that would determine i'm strange i just hate going to the store for me costco has more pricing power unless i started um getting a bunch of groceries through like amazon fresh or um whole foods like delivered to me if i started getting a lot of my groceries

from there then it would switch where that was where the prime membership would be more important but for now the costco membership is more important just because that's where i do more shopping yeah it's different for me because i like shopping in the store for groceries but everything else i i do dislike a lot so i think amazon prime has more pricing power for me but if i had a family i think costco would have more pricing power like what do you buy like i i agree with you i i prefer shopping online for just about everything but let me go through i like i like buy something on amazon like once a month you know like let's let's look look at the orders here i actually got prime my myself but then i told my family was on it and i was like

hey guys you want to you're using it why don't you uh maybe you've four works i know this is before this is while i was still in college all right screen protector and screen you didn't just get that when you checked out at the store no i i got the i got my new phone online they didn't have it as like in a like an attached like you kind of buy it with it no i didn't come with it because i got that free deal uh i got some oatmeal some like oatmeal is the easiest thing in the world to buy on amazon you just it's like perfect box size and save subscribe and save i do uh i got some rice proud of india let's look well i was in mexico this is all like food stuff you know That's like if I was getting my food stuff on Amazon.

Yeah. I get both. I just haven't needed like that. Maybe, maybe it's just like, I haven't needed that much stuff recently. And honestly, if I want some,

maybe I'm just like a procrastinating shopper, but like yesterday I needed something immediately. Like I needed this headset to record and I'm like, I don't want to take the risk of Amazon potentially being like a day late. True. And so I'm like, I'm just going to go to the store. It probably would have been cheaper on Amazon,

but i like the the i can get it immediately yeah i got some mouthwash i like to get my bathroom stuff on there like if i know something's running low i know it'll get there in like three days minimum and then i don't know yeah all right well uh any other topics any questions in the chat i really liked it better when we had two questions we had three people watching no no questions in the chat we got like 10 minutes left here will you lob us one thing i've got a little bit of a topic here that all right i almost brought up a second ago but this is going back towards the starbucks example a little bit um or this starbucks discussion we're having earlier but it's more of just a kind of an example to use what do you guys think about

automation over the next number of years um and are we going to see that have a positive impact on margins for some businesses because that was what was got me interested that was what got me interested in starbucks a couple years ago was i started thinking man if instead of having you know two or three or four baristas here they've got like one person and the rest is just all automated it's a little bit of a capital investment up front but you know does that give them a few extra points of margin and change the profitability um you know in a substantial way for something like starbucks and especially when they they're dealing with um all these union unionization fights right now i wonder does it spur movement towards that even faster and with mobile orders

like there's already so much like i i don't know what the numbers are in starbucks but i assume a big proportion of their um orders aren't even happening in person right that people are doing it on their app and then coming and picking them up but i just i i keep thinking that there's going to be some businesses here that we look back on in 10 years and go man that was stupid of me like clearly they were going to automate that and it was going to become more cost efficient and they get all this extra you know this this margin expansion because of it and i should have seen it coming but i didn't i just wonder about you know starbucks being one of those examples but i wonder about other businesses kind of in that vein as well starbucks might be able to they might

be doing it i guess and i i just haven't noticed i don't i've seen costco doing it out of their like the food part the whatever the restaurant part like it's all kiosks now and people just like like grab it and put it up there but that's obviously not going to move the needle for costco i think the most the most the one that's probably a layup is just getting rid of cashiers or whatever you'd call that check out people and it's all going to be automated potentially all going to be licensed out by amazon with that software they seem that they really have nailed down now but with food handling it's it's not i don't want to say infinitely but it's way way more difficult well uh maybe grocery store operating margins will expand without uh if everything's

like self self-checkout amazon's will i don't know about i don't know if they'll get replaced by that same license but i think yeah grocery stores potentially they could have margin expansion because of that but i think just restaurants are in a tougher ball tougher um i don't know it's just a tougher game and you have to ask okay you have to have this capital investment into these robots or whatever in automation and how much how fast is that truly depreciating i think there's just a lot of uncertainty like amazon was supposed to be doing this what with stuff with kiva robots right i'm sure they've gotten some efficiencies out of that but right now they have over a million employees so they needed humans what have you

guys heard about the uh amazon union just headlines haven't researched it i like the stock so there was like a wall street journal podcast about it and they had sort of the organizer of the union they interviewed him and uh at first i was like well i'm not sure the union's ultimately in your best interest but then like by the end of it he kind of got me like on on team union because there was a leaked memo from within amazon from like management that said like we're gonna use this guy to show like how bad of an idea unions are because he like wasn't super articulate and like like what you're gonna follow this guy and for that to get leaked just shows that just shows like that's just fuel to the fire because it feels like management is so like demeaning and

degrading to like the frontline workers their accident rates are yeah amazon's accident rates are quite high too compared to other warehouses so i don't know they provide pretty good benefits but just from an investing perspective it gets me concerned when companies have to have a lot of manual labor because right now those and as just like a person it makes me happy but those that demographic are not demographics the wrong term that cohort of workers has a lot of operating leverage so amazon starbucks anyone like that like it just gets me concerned about employee costs and i don't know if i've ever like and maybe it's just because amazon employs so many people But there's a lot of negative – just a lot of negative press about working at Amazon and just maybe the job conditions.

I don't know if it was the people peeing while they were driving to meet the quota that kind of put me on that union track. but it's that is that's like a concerning aspect because people like the public always sides i think with like the labor most people side with labor yeah and so to have like that negative reputation i don't know i think i think it puts potentially like sales at risk well that's sales margins right are you saying well margins because you'll see wage pressure but also like maybe there's people consumer backlash consumers that are like well if I

have the if I can get the same product somewhere else I'll favor something that isn't a big corporation that's like treating workers poorly I don't know I don't know if they're actually treating workers poorly but if they have that reputation I think maybe there's like a push for the little guy

yeah yeah well Amazon was not in our highest quality no one AWS made it for uh for one of those amazon was on amazon was on my list as well actually yeah but is it was it because of aws or um yes to some extent but it was it was i put the whole business on there yeah i mean prime's a great prime's a great model dude i think i think aws is still like like masking their true profitability.

They did 30% operating margins and they've been growing like gangbusters for the last five years. I saw an AWS ad on the back of a bus in Seattle the other day. And I'm like, what are you doing here? Like, I know damn well that marketing budget is going nowhere.

Like, who do you think is going to see this? Like some CTO is going to be on the bus and be like, well, you know what? Maybe I'll shift the whole system to the cloud. I haven't heard of AWS yet. What is that? Yeah. Now that I've seen it on the back of a bus, maybe I'll…

Should they spin AWS to get the value and let people buy what they want? Or does AWS give them a cushion because retail might not be as great of a business as people think? I think because of AWS, they've made retail a potentially worse business. They haven't needed to extract the margins out of it They probably could have But they've invested so much Back into it Maybe a bit reckless

It gives them more leeway to take risks Within that segment Well they're burning $4 billion a year on Alexa Let's just get rid of that That flopped Let's get rid of it It is still so Alexa's just

It's gimmicky still yeah well when i like when i ask alexa something i still am like oh look at me using a robot there's no yeah it's like just a dad it's like a dad thing to show off to the neighborhood party i mean where's the roi like alexa's cool but where's the roi that's all right yeah yeah i don't see it but who knows maybe they'll come up with another kindle or another um another big product amazon fire phone that could come back the fire yeah i mean they've had a lot of failures they haven't had a big product that's really succeeded lately but maybe the skunk works you know that's kind of how skunk works goes sometimes you have a big dry period

so we could be fading yeah and i think that's the good thing about the and why you know the retail business isn't like the best part of amazon obviously but i think it gives them a pretty incredible platform to to be able to try new things right when you've got that many that much volume happening on your site every single day and you've got that many customers um who trust you being able to pitch them new ideas like you said obviously it doesn't always work out but um it gives them gives them access to to a lot of growth if they can hit if they can get a good product out there and so um and even like the ad business right being able to like just layer stuff on top of the retail business that's more profitable um i think is i don't know i i wouldn't

mind if they spun out aws i think that would probably unlock the value and i think that the retail business is good enough on its own and they can continue to layer stuff on top of it that it would be a reasonable bet like i think at this point there's no reason those have to be connected and in a lot of ways if aws was spun out um like i'm sure there would still be some hesitancy but it would probably make people less worried about using the service too than as directly as a part of amazon yeah how microsoft's gotten all the retail competitors yeah that's interesting hey uh we may want to sign off here is it yeah yeah it's been an hour all right that's gonna do it give us a review throw a disclosure throw a disclosure on it we haven't and oh do we uh but

Also, tell them when we do this every time. I know we had it off today by an hour. Yeah, we're trying to do it every Friday. It's going to be every Friday. And we're trying to do it at 10 a.m. Pacific, 1 p.m. Eastern. Get the notifications on YouTube if you want, but they will be recorded. So if you don't want to listen to it live, no worries.

We would like to have some people join the chat. And it's just Ian trying to populate that right now. Give us a review on iTunes or Spotify. And again, it's just going to be on the same chitchat money feed for all of these. So don't think you have to follow anything new if you're already there. Remember, or no, no disclosure. I think that's going to be it.