Chit Chat Stocks - Investing Power Hour #21: Recession Risks, Starbucks Unionization, Roblox Attracting Older Users

Episode Date: August 28, 2022

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Today's episode is brought to you by our friends at Quarter. Quarter is an all-in-one investor relations app that provides frictionless access to conference calls, investor presentations, transcripts, and more, with Quarter investors can keep up to date with all their companies while on the move. I personally use it every earning season so that I can keep up with my portfolio companies while I'm on my commute to the office. They also just released a cool new feature that allows users to search across all transcripts. That means you can search and see how many companies mention terms like inflation or

cost pressure or recession or even metaverse, you name it. And the best part of all, the app's 100% free and it's on both iOS and Android. So go find it on your app store by searching quarter. That's Q-U-A-R-T-R, no E. That's quarter, Q-U-A-R-T-R. Welcome to Chit Chat Money. On this show, hosts 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 guest is not formal advice or a recommendation. Now, please enjoy this episode. Harry to live stream. Okay. This meeting is being live streamed. Welcome in. This is the chitchat money investing power hour. I am Ryan Henderson. I'm here with Brett Schaefer and the, uh, the goal of the show for anyone that is not familiar with it, we can talk anything investing, basically riff on anything news-wise from the week. And we take questions via YouTube live. If you're listening to the podcast, feel free to check it out. And it's Thursdays at

three o'clock Eastern time, 12 o'clock Pacific time. With that, the only rule is don't come prepared. Don't come prepared with a script of anything. You might have some ideas that you want to talk about, but don't come prepared with anything planned out. What have you seen this week, Brett? Anything interesting? Well, while I was eating before the show, I just pulled up the new joe rogan mark zuckerberg discussion i think that'll be probably very fun uh they talked about testing out sword fighting in the metaverse which i thought was pretty funny um but yeah that was that that's been interesting so far a lot better than zuckerberg's other interviews where people ask all those boring questions um yeah i think it's going to be good it's like three hours as

those usually are and he hasn't talked about any specific thing i think i've watched like 30 minutes of it so it hasn't been too long but i know the focus is supposed to be the metaverse they haven't talked about anything with facebook instagram or whatsapp whatsoever and all they've talked about is the the vr ar investments which you know you'll say things about zuck but he sounds dedicated to this new project and from the way he was talking about it it sounds like he's in the weeds on this every day so he's not focusing at all on the family of apps which i also thought was interesting then the other takeaway is they talked about how you can take pictures with their new ray-ban ar glasses oh i didn't see this i saw i heard this sound bite yeah yeah there's

some people on finn twit retweeting it it was very funny where they were worried about the privacy stuff and Zuck was like well it has a light on the side that you can that turns on automatically if you're taking a picture so people can't be creeps and then Rogan was like well can't you just put a piece of black

tape over it and yeah it was that was the only awkward part so far but billions of dollars invested into this light and Rogan's like oh you could put a tape over it yeah

but either way just similar stuff that they've always talked about or that Zuck always talks about nothing too new student loan forgiveness that's a big thing I don't really know bit of a political bit of a political hot spot it appears

so yeah you have to comment on it too much but we do have a company in our portfolio that is kind of affected the effects are not quite clear yet but uh there will probably be some impact to their business i don't know i honestly have no idea what to make of it i didn't have to take out student loans so i feel like wrong to say like anything negative um but i i have seen lots of arguments

lately from people that paid them off and they're like are we gonna get checks yeah it doesn't seem like they could really do any way where it was going to be fair to everyone um so that's that's the tough part you can't it seems like you couldn't make everyone happy but i think the big issue that i have is it just doesn't solve the it's kind of like a band-aid for a a huge wound that requires like 100 stitches or surgery, if you know what I mean, where the education system is not going to get more affordable because of this. So I kind of think the core issue, you know.

I imagine colleges will raise prices because of that. Well, let's do some, how about we do some, yeah, exactly. Let's do some credits for firing all the administrators at schools. The absurd amount of administrators, as we know, not too long ago, that work at these schools and eat up all the tuition. there should be a rule though if you took out PPP loans

you can't bash student loan forgiveness or if your PPP loans were forgiven which I think they all were yeah oh yeah that should be a hard rule I don't really know I mean is it yeah I mean were there

some probably small parts of it that didn't make sense probably probably but it's kind of a blunt tool. Here's the big question, though. How inflationary is this going to be? Yeah, I have no idea. I think it has to be inflationary in some way. Maybe it'll be meaningless inflation, but you think you got some people that already had some decent disposable income. They're already able to

pay rent or lodging, food, and utilities, feels like some of that money is going to be discretionary. And looking at historical trends, I doubt it is all going into the stock market as some people, I mean, some people will obviously invest in it. It goes back into the economy. Exactly. You got to be a good consumer and help our stock prices here. So everyone listening, please keep buying stuff so all the businesses continue to grow.

the cost of education a part of the inflation calculation uh what do you mean i think it's included right it's i don't know i don't know what all the inputs are in cpi but if cost of education is one this kind of in my mind would give the green light to a lot of universities to raise prices maybe i don't know we'll see we'll see what happens there we'll see what happens there if they actually raise prices here's an idea put a threshold on the amount that you can that institutions or universities can raise prices by yeah there's a lot of things that seem pretty logical that i think most people would agree with but we're apparently not doing like if you have an endowment worth more than x amount of dollars per student either have to raise your

student body or you're not allowed to charge tuition something like that where that where would the big funds get uh get funds from you know where would we get where would where are we going to get the lps come from where where are we going to get an lp in 15 years when we buy one stock and 10 bags because we got lucky um that wasn't yeah yeah it's uh yeah I don't know I guess I maybe haven't looked at it enough to think that hard about it just looking at all the tweets the best

though is when people complain about it and then the response is someone I mean you know it gets it gets really people get really feisty but the response is like a screenshot of their PPP loan forgiveness which is beautiful

that I thought that if anything was quite funny All right. Any other topics I saw? I saw Dorsey just tweeted this. You probably didn't see it because I saw it right before we came on. I just tweeted a screenshot of it. This guy belongs in prison. I'm sorry. In prison? You assume a fiduciary obligation as the CEO of a company. It's not a non-profit. Yeah. Okay. Okay. So let's give some context here for the listeners or watchers. Someone

just added Jack. I don't know if it was someone he knew already. At Jack, wondering what was your intent on Twitter and has it turned out the way you want it? It feels a bit skewed leftward right now. How do we straighten it? It seems an inordinate amount of rightward leaning Twitter users are being banned or kicked off. It can't be good for MDAU.

Okay, well, he didn't respond to anything with the political stuff, but his response was the biggest issue and my biggest regret is that it became a company, which is interesting. thought it should just be a public utility it shows i think is crypto bias which we all knew but it's got to be concerning if you're investing in this other company blocked and that's like his mindset is he doesn't want yeah this guy's uninvestable he doesn't want he wants

his own shares to be worth something no doubt and he donates a lot i mean to be fair he donates a ton of money to good causes. He did that publicly, which is great. But that doesn't change the fact that he seems to not care about shareholders, which is fine. That is fine to not care about shareholders. But if you are a shareholder, I would care about that. Yeah, 100%. And the employees are affected. Any employees that took stock-based compensation are probably going to be affected because inevitably not caring about your shareholders is going to lead to lack of demand from shareholders. And it sounds almost like an admittance that he doesn't care about, well, by saying.

I mean, he basically doesn't care about shareholders, but he doesn't care about generating cash for the business. There's no way that it's worth owning something that he runs. and yeah yeah i agree or it's risky it's really risky should the shareholders of twitter have known that he did not care about generating profits at any point when he was running the company isn't that violating any sort of obligation you have to your shareholders the people who own the company it just feels like you should be in trouble for that i don't know if he's gonna get in trouble for that but i agree well i mean not anymore he's

gone sure yeah it doesn't affect him what if he's doing this here let me put on my tinfoil hat what if he's doing this just to help out elon get out of the deal like look i was so bad i'll fall on the sword here think about that huh they're buds they're friends they do drugs together it uh maybe but i'm gonna happen you see this whistleblower complaint with twitter that was interesting as well um basically saying that well something i hadn't considered is basically it's less the sec filing say what less than five percent of monetizable daily active users are calculated to have a spammy activity right but then this whistleblower which was the head of security said they do a really good job not including spam accounts in the mdau count to

begin with basically saying he thinks the calculation is very accurate yeah among among real other real complaints i think this whole lawsuit comes down to the difference between monthly active user and daily uh and monetize mdau the non-spam daily active user i think we can just finish the court case in that in that regard yeah that was an interesting lawsuit though it seems or not lawsuit complaint that twitter irony also is that he's fighting it on twitter i mean he's really fighting this whole thing on twitter if we were all spam accounts why would you be fighting that is that's that is true that is true and then he picks like one interaction with spam accounts and he's like see i'm right like but you have a problem with their reporting

process? Yeah. Well, I mean, come on. Are we going to expect Elon to act in good faith? I don't think it's surprising to see him act like that. If you're listening to this ad right now, we know you're already a listener to our show, but for our avid listeners, we've also started a paid membership service called Chitchat Money Plus that extends beyond just our podcast. Every Tuesday, subscribers get access to one not-so-deep-dive research episode that covers everything you need to know about a company. You also get an email newsletter with our written show notes, important charts, a transcript of each show, and access to our Chit Chat Money

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closures, this is, I found some reporting that said eight of the last 19 store closures at Starbucks had union activity, which is for reference, 220 stores have unionized, have voted to unionize of their store base, which is much smaller than what eight and 19 is like 40 something percent. So it seems to be having an impact that could just be coincidence, but it seems to be having an impact on which stores they choose to close. Also, they, I think this is kind of a warning shot, the union busting action on the part of Howard Schultz and the management team there, pay raises for everyone not at a unionized

store. Oh, really? They gave pay raises to everyone that's not unionized? Yeah. Well, apparently, if you're a part of a union, you have to go through a negotiating process for changes like that. Right. And I think they did it just to highlight, well, see, we can raise your wages easily

if you're not a part of a union, but we have to go through a whole process. if you're a part of a union. So for now, we'll just give the benefits to the non-unionized stores. It's kind of a warning shot. Do you think this ends up making a difference for Starbucks? I don't know the company that well, but let me just give a take that's probably going to be wrong.

That seems like a smart move to please your employees. it this seems like a problem that is not as big as maybe it is portrayed in the media just because it's a really easy story for any news outlet to take up people know what starbucks is they know that the baristas i i don't know a lot of people go to starbucks so like if it's in the news people can relate to it love you yeah and the union stuff gets lots of clicks all the time any sort of on either side using stuff um so i think it's probably a bigger issue than people are making it out to be however it's always a risk with a restaurant or excuse me a retail concept like this i think starbucks is in a better position than a lot of other just say let's say places

with customer service people, either a grocery store, any sort of retail place, restaurant, they're in a much better spot than others because they already pay their baristas fairly well. They've already had that long-term stock option thing with their baristas, I believe. I don't know if they still do that. And they also have that moving up into management stuff. I mean, they don't have... It's all company-owned stores. So I guess people can't graduate to be you know franchise owners which is a little maybe a little more less more disappointing for a long-term employee but you can i assume they pay people fairly well um all right let me paint a picture for you though so all this all this barista turmoil uh complaints about how much

harder the job has gotten lately came kind of at the same time that the focus has been on digital orders and not really the in-store experience so and i kind of had this thought and it maybe could still end up being the wrong take that eliminating the in-store experience destroys part of the culture of starbucks um and having people sit down drink their coffee in the stores with nice seats, fireplaces, reading their newspapers, it stimulates a certain type of feeling. And for the baristas, you get the experience to know your regular customers pretty well. You get to see people's faces when they come in the stores. Maybe it feels a little more rewarding and you have time to kind of make those orders. Whereas now you're seeing these

concepts pop up where they look basically like rail cars, almost like they're just giant boxes and it's only drive-thrus and you're simply just, you're basically just an assembly line worker where maybe if you're drinking, if you're making the drinks, you don't even interface with the customers half the time. They're just driving by picking up their digital order. You don't get to know them. Maybe that's part of the... You don't quite feel the reward. It's now solely focused on throughput. Yeah. I think that makes sense. It might be better from a customer perspective to have the digital orders if it's what they want. But if the barista experience is that much worse, yeah, it can be troubling because the way you describe it, I think makes perfect sense.

part of the I think a lure of a Starbucks barista for a certain person that would want to do that job is that you got to interact with all sorts of people all day you meet your regulars all that stuff and very social experience yeah or it was maybe

they're maybe they're losing that now yeah Starbucks it goes into my too hard pile it's just not it's tough it's tough Schultz can't seem to set up the culture enough to be able to leave, which I think is just kind of a warning, a concern to me.

Schultz is, uh, after he sold, after he sold the Sonics, he's dead to me. Yeah. He's dead to us. Anyone from Seattle. Um, also Matt says the unit economics on Starbucks and China are crazy compared to the U S that ads leave it. But now you're making an investment in China. It's, Which I personally think deserves a discount relative to other regions. Yeah, I mean, the growth of coffee consumption in China has been off the charts. The growth in there has been phenomenal as they transition from tea.

Luck in coffee, deep value. Yeah, I remember luck. That thing's still alive too, isn't it? Yeah, they admitted to being fraudulent with their financial statements, but they were still a legitimate company. I mean, people are going to these stores. It's on the OTC market right now. I'm looking at Koi Fin, $4 billion market cap.

We look at the last five years, it is down 24%, but in the last year, it's up 11%. So you could outperform. You could outperform with Luckin Coffee. There you go. You'll get all it. And I'm sure they're going to return a lot of cash to shareholders, right? That'll be available outside of China.

I'm sure that'll, you know. Over the last roughly four months, the stock is a double. Nice. I think China's had broad. I don't follow the… Oh, yeah. I guess that was kind of an interesting period for them. Yeah.

I think there was… I don't know. What about this? I saw maybe the best headline this week. New topic. I guess, well, maybe old topic, Metaverse. maybe the best title this week that of

ways to spend corporate expenses here it is building the next big experiences McKinsey talking to Salesforce about the metaverse now that is a mad libs of

buzzwords corporate buzzwords that maybe I mean like I get it if it was maybe a Sony or Microsoft or a snap or something like that. What's your metaverse strategy? Yeah. Salesforce is metaverse strategy. We need, we need the people our age at McKinsey who have, you know,

we need them writing decks about, uh, what's your, what's your NFT strategy. Yeah. Remember, remember when every company, I guess you want to remember it, but the, uh, I remember how every company would have to come up with an internet strategy in 2000. And then a lot of that was just to raise cash. We got to come up with a metaverse strategy. But I thought that passed like three months ago. It did, yeah.

But McKinsey still... I mean, credit to McKinsey. They're getting paid for this. But Salesforce, I mean, talk about an OpEx line that... I saw some people talking about them today. Shouldn't their OpEx line, or excuse me, their margin should be, I would

assume, similar to Autodesk, Adobe, but it's not. I just don't understand why. If you think... They have Salesforce Plus. They have a streaming service. I'm not joking. If you think

layoffs are going to come in thick and fast shouldn't you go along the consulting groups layout wait wait say that again say what what's your what's your thesis there or the uh basically you're gonna have to you're gonna have to bring in the consultants to fire everyone because you don't want to do it yourselves you know oh oh okay basically remember in margin call when they have to bring those people in where they're like we're sorry it's it's you're just no longer a part of the fit for the future outlook at this business and then they're like please return all this stuff that's i mean that's mckinsey stepping in to to right size the cost structure of every business that's

my favorite way to fire someone is right sizing cost structure that's my favorite term i don't know if that's mckinsey but either way i look i i i'm a big you know consulting company basher kind of in the monger camp they're copying all his takes as one does they've created some goaded CEOs? Oh, well, McKinsey, yeah. And Ron, I mean, come on. No, no, no. They seem like

darn good businesses. One, it seems very, very similar to Moody's or S&P Global where it's all reputation. You're not going to go somewhere else. The brand is there. None of them are publicly traded, I think.

but they seem like pretty darn good businesses and they have that entrenchment of someone works at McKinsey's someone works at KPMG I don't think any of them are publicly traded um yeah I could be wrong on that but here like you have the people that work at these consulting firms and then they move on and work in managerial roles and that creates just a huge entrenchment of you have that prior relationship with McKinsey. If you're a CEO that used to work at McKinsey and you're looking for consulting work, who are you going to go to?

Accenture. Accenture is publicly traded, but the rest of them, yeah, they're all pretty much private. Accenture. All right, maybe we should look at them. That'd be a painful exercise though. Just like, man, these guys make a lot of money.

$60 billion last year for Accenture, or this year for Accenture. Do you think they're higher? Do you think like Accenture hires consultants from McKinsey? That would be... I would love to see that if they said that

because I think they're required to say that in SEC filings. I wonder if Accenture hires like a compensation consultant. That would be just amazing. I'd throw up. I'd throw up if I saw that. I bet their margins

are still pretty good. Let's look at that all-time stock performance for Accenture. Went public in... Well, according to Coifin, could be wrong here, 0-1. Stock up 25-2600%. Pretty darn good.

Apparently the guy that founded Tiger Global came up with the name Tiger Global because he would call people Tiger when he forgot their names. I think some people are listening to this here and saying you're making a big mistake here ryan because tiger global is different than tiger tiger global is yeah oh but i know what you mean i saw that anecdote you mean the original tiger fund julian robinson that just passed away the hedge fund legend but yeah tiger global is the one

that's around now making all those investments in carvana and stuff like that um or i guess they got out of carvana but either way they were the crossover fund that was investing in basically everything uh but yeah the hedge fund names or any investment or any financial name is just kind of all right what's something that sounds fine that you know you know like the the name just has to sound fine and that's really it oh you know remember that emotional hedge portfolio i talked about last week which maybe i could call it the grudge portfolio i still don't understand exactly what you were talking about but i it was fast it was fascinating so continue you're rooting for them to fail but if they succeed at least you benefit financially so you would own that you'd go

along their stocks but you're basically short them emotionally or like mentally um into it I think goes into that bucket. Ooh, good one. I saw a good- The TurboTax should be federalized. Oh yeah, for sure. Or they should just buy it. In that way, I would get free,

I don't have to pay in order to pay taxes, but I would benefit financially. Yeah. If it got bought out, assuming a premium. That is interesting. You have to pay to pay taxes. It's quite the- I've always found that incredibly strange, but maybe I just haven't been around for long enough.

And I suppose the case they make is that there's other tax software. So they aren't the only alternative, which I guess is a testament to the business and how sticky it is. but if i'm not mistaken they pay like a good amount in litigation to stay private oh oh they have some what litigation you mean or lobbying lobbying yeah they basically are lobbying yeah i saw quickbooks is doing quite well i saw a chart okay when i sell my business i want the best tax and investment advice I want to help my kids, and I want to give back to the community. Ooh, then it's the vacation of a lifetime.

I wonder if my head of office has a forever setting. An IG Private Wealth Advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGPrivateWealth.com. Don't you wish you could just hit skip on the worst parts of your life? You know, the same way you can skip an ad. I get it.

I'm Siaya, and I live in Ice Cove. I've made some questionable decisions that didn't end up the way I planned. And today, I'm still figuring it out. Somehow, things usually get worse before they get better. Apparently, that's how I roll. So bundle up and come along for the bumpy ride. Stream a new episode of North of North Tuesdays on CBC Gem. Someone said, speaking of animals, what are your thoughts on crocs?

I took a quick look at them the, uh, a while back. That's a good joke too. Thank you. Thank you to whoever said that. That is, that was funny. Um, I actually think it's pretty interesting business. They bought this company, uh, if I'm not mistaken, it's called Hey Buddy that has, that's just like growing like a weed. Hey buddy. This reminds me of Mohawk. This reminds me of Mohawk group and a Tyrion by saying that name.

Hey buddy, you know, some random company like that, But I don't know much about Crocs. Maybe we have to cover it. I don't know. It's a deep dive sometime, although it's not on the schedule for the rest of us. Yeah, but there's a risk. They're Coinbase earnings. I mean, probably a less risk.

EV is a little higher. It's just tough. It's just tough. For $300 million in free cash flow over the last 12 months, if I'm not mistaken, inventories jumped a lot too. So that's maybe depressed, but even if it's about a $7 billion, $8 billion enterprise value, so you're getting at like 20 times probably trailing free cash flow. But like I said, I think inventories jumped a lot. The revenue growth has been really impressive though. Yeah, I mean, everyone's wearing them right now.

But if I had to ask you, this is a question everyone has. I don't think Crocs were some huge COVID beneficiary. No, no, it's not. It's not COVID beneficiary at all. It's just trendy. I've seen my, I wouldn't call them. Let me just use, I don't know, jockey friends wearing them now. That would have never happened three years ago.

do I know that this they're going to continue wearing them three years from now I just think there's a lot of uncertainty there yeah does it is retail tends to be pretty trendy look

I'm looking at their I don't know much about the company but I'm looking at their share count pretty darn impressive down from 90 million in 2014 to 61 million right now not bad not bad whatsoever yeah this hey buddy thing

I'm telling you it's what is hey buddy it's the brand they bought it's basically like kind of fits I think it kind of fits with the Crocs MO

like what they're trying to sell to people you know happy comfortable shoes kind of thing what do they sell shoes yeah

I think they're like they look like all birds towards kids no They don't look like Allbirds. These images look like Allbirds on Google. So that could be wrong. That could just be one of the pairs.

I suppose you could say they look like Allbirds, but no, they're kind of, I don't know. They're whatever. Just fun shoes, I guess you'd call it. But I think they bought them. I want to get the numbers right. They bought them for like $2 billion or something like that. and 2 billion

that'd be a lot for their what do you mean that seems like a lot relative to their to Crocs' market cap let me check it's hey dude

not hey buddy I think hey dude okay that's where 2.5 billion that's how much they paid part of it was stock

part of it was debt but they are now expecting to do a billion dollars in sales this year and they have like 30% something margins so

getting them at like and revenues basically doubled so I think they're getting them at a little under 10 times whatever margin they report so I don't think it's that bad

yeah it's still it's still retail look yeah I mean this is just i think you just don't understand the crocs value prop i understand crocs dude i hit all my weirdo friends wear them i've always thought crocs were incredibly uncomfortable yeah other people like them i don't get it yeah kids are wearing them what about socks and crocs

uh yes i i don't know i don't look it's just like look i see everyone wearing them right now you know that this is just it's just a trendy thing it's like it's lacroix yeah that might sound like a weird analogy but it's it's lacroix they expect or they their growth initiative is to grow sandals revenue by 4x by 2026 sandals so like the croc sandals yeah yeah great that's that look i may sound cynical here but yeah that's that's great i i'm assuming that you know they want they want to grow their revenue but it all comes down to like trendiness there could be five tiktok videos from these huge accounts could come out two years from now saying that crocs are dead

and go away it's like the it's like the uh what are the the white shoes that girls wear now right that's because all the instagram people wear white shoes wait you know what i mean the white shoes the white tennis shoes that everyone wears now first ones whatever they're called you know what i mean white shoe all white shoes right and that's because the you know popular the popular instagram people wear them if the popular instagram people stop wearing them people are going to stop wearing them because everyone just copies everyone else i mean crocs has no control over what the demand is they could be you know it seems like they're good capital caters but it's just it's hard business he says uh the same person bentley who asked about uh crocs

It says $5 billion market cap, $4 billion trailing 12-month revenue, $640 million profit, and trending up. Yeah, I agree. I do share the same concern as Brett, though, around trendiness with any of these retail concepts. Hey, it could be at enough discounts. If it's at like eight times earnings, I mean, that could be a fair enough discount. And shame on us if they're buying back. Or you know what? if you are a shareholder us dismissing it so quickly is a great sign because that means the

buyback will be more creative because everyone's just dismissing it i'm kind of extrapolating out the way we thought about it to everyone else but uh i mean the more depressed the price the more creative the buyback something else i went out to a little anecdotal evidence i went out to dinner with a group yesterday and Instagram is alive and well. It still is like a staple of people's

livelihood. I don't get it. Is this a hot take? No, but now these people were slightly older than myself, but no one was talking. We're talking all genders.

Not just bros. Yeah. And they're older than us, so closer to 30. Instagram was the preferred. I didn't see anyone talk about TikTok. It was purely Instagram. And these people are

closer to 30 than 20? Yeah, 25. Yeah. It's tough to tell. I think you got like you just got to look at the numbers, right? It's hard to get anecdotes and take away anything.

Because if you look i'm seeing some tiktok fatigue anecdotally yeah remember i think we talked about it before how the facebook or meta is really not afraid to juice like not monetization but juice usage by getting people addicted to stuff really quickly and getting them on to spend like an hour a day and i feel like tiktok was that on steroids where people use it so much they get addicted and they realize shoot this isn't uh uh very healthy for me at all and it actually makes me feel super fatigued like literally like i bet you know brain fatigue whatever and they leave and because it's not um you know where this isn't nicotine sugar caffeine they actually can leave somewhat easy

but doesn't it stimulate the same part of the brain that push notification sends the same i am not a doctor uh i watched that uh netflix documentary on oh yeah yeah yeah i mean push notification sends uh whatever a dopamine rush to the same part of the brain that you get from alcohol or nicotine or sugar yeah yeah and uh cocaine and cheese this might say cocaine and cheese have the same brain the brain activity when you eat coke do cocaine and eat cheese is indistinguishable but besides the point um that uh that that like yeah i mean it makes sense but again look it's not i think it's easier to break a tiktok addiction than it is uh smoking or coffee habit because yeah i can also be totally wrong yeah i remember that but uh i wouldn't be

surprised if there's TikTok fatigue because people, when they use it, it sounds like the usage rates are super high on an hourly basis. And that just could be kind of... What kind of analogy should I use here? There's blowing... TikTok feels like it's trying to build something that's a little less sustainable than compared to maybe a messaging service. It'd be the under end of the spectrum where it's healthier, if you get what I mean. I feel like I'm describing this poorly but do you understand i think we're on the same yeah it's also so much at once it feels like everyone i know that gets on tiktok gets addicted so fast that it's almost overwhelming and kind of consumes too much of their day that they delete the app

but you know what i don't know it feels like a lot of social medias are similar in that regard The numbers still look strong. I'm going to be in New York this weekend. So I'm thinking I'm going to try to gauge market sentiment while I'm there. You're in the Big Apple now. You're going to be in the... I think I'll be around the financial district. Yeah, you're seeing a friend in the financial district.

It's like Value Investors Club when they hit you with that survey as soon as you log on. It's like, are you seeing a good amount of bargains, a decent amount of bargains, or no bargains? Those are all curmudgeons, though, that never see any bargains. It's like hitting the X. I'm just tapping through just so I can go to the next page. So I know there's no actual relevance there. That's true. That is a bad survey.

It's not. We cannot. Let's not run our economy on surveys like that. I just survey people. What's your top stock for 2020? Yeah. It would be terrible if we ran our economy and made

decisions based on surveys like that. That was... Sorry. That was sarcastic. But hey... You don't like US census data? No, no. That's legit. But other stuff. This survey says that people

like blah, blah, blah. And they're like, we need to make this giant financial decision for our country based on this survey. And you're like, oh my God, this is probably bad data. But... yeah yeah so what are you uh the big apple you're gonna see some people friends of the show anyone i bet there's people that are listening well they're gonna be listening to this

the majority of people will be listening to this when you're about sunday right these come out on sundays yeah yeah so um yeah i'll be there till monday but you're leaving monday yeah i'm leaving monday i am meeting yeah i'm meeting up with i think paul sarah who's been on a couple of times louise um sanchez who's also been on it was it twice looking to potentially come on a third time here soon and then uh i don't know there may be some others in there as well i looked up the data and it was like five five or seven seven i want to say it was seven percent of our listeners are in new york okay now yeah that makes sense probably our second biggest market or probably biggest i think it was i think it was the largest no well california is the largest state in terms

of listenership uh new york city was the largest city gotcha that makes sense yeah it uh so we'll see my dream is that someone recognizes my voice while i'm there what's the weather is the weather the weather supposed to be probably pretty good right looks alright from what I saw NYC weather I checked earlier it feels like their weather is a little more sporadic

volatile if you will than Washington weather at least in the summer a little bit of storms it's sunny all weekend nice like 80s and sunny humidity though

I get claustrophobic in that city yeah uh you know other people can live there that's if everyone wants to live there that's great with me yeah uh uh what i'm gonna say everyone everyone can live there and i'll just live somewhere else right if they all want to live there you know fine by me you all everyone else can go there yeah there are an awful lot of people there all right anything else financial wise from the week yeah we saw that uh thanks for that comment bentley have a great week as well crocs was interesting discussion um we'll see we could totally be wrong would not be surprised but wrong on those takes uh yeah earnings has been fairly boring software companies seem to

be doing fine subscription models we had a good report yesterday yeah you know always good to have a good report always right get this 17 to 24 year old demographic males and females is the fastest growing demographic in roblox users surprising they expect male males from 17 to 24 to be the biggest tracked category for them in like a few months or something like that so it is the fastest growing and they expect this trying to continue from the numbers they're seeing yeah but and i think it's like 30 percent of their users are older than 17 14 are older than 25 although i don't know what some of those much older users are doing

given that they've had some scandals shall we say oh that stuff hopefully it's not the majority of the users that are older yeah um yeah 30 of their users older than 17 and that was kind of the big question coming in coming in looking at the business it felt like is like are people just going to churn off when they get to the age of 15 or whatever seems like they made good progress on that regard, right? Yeah. Yeah, I think so. Still at, I know they have weird booking stuff.

We're still at 10 times sales though. Kind of tough. I bet. With bookings declining? Are bookings declining? I haven't checked them this quarter. I think they were down 5% last quarter. Well,

that's a tough one. I used to be way more optimistic on Roblox, but I kind of studied the video game industry more and I feel like there are easier games to play, I guess, or not games, there are easier things to invest in. Roblox has a ton of potential. Yeah.

I wouldn't be surprised if this is a $250 billion market cap someday. but there are other companies that feel more predictable I think Roblox feels very unpredictable there's just so I don't know it's kind of a weird one where there's a lot to like

things they do, management strategy the ability to have possibility of a network effect and economies of scale with all the infrastructure they're building however if kids stop playing it's all it doesn't matter yeah i mean like there's all those games within a game but at the end of the day they are competing with every other app for kids to click in there

yeah and so even though it isn't technically a game it's a bit of a platform or a universe of games it's still a game on oh another very social one as well yeah i've never been on there um seems like I don't know but what do you think about the buff dog going all in on Oxy not all in

yeah well what is it 50% no authorized to buy 50% so we'll see how much he does buy but who has to authorize that I think the SEC maybe

or some other one of those organizations FERC or FERC some one of those financial regulation organizations. Federal

Energy Regulatory Commission. Oh, not even financial. Okay. Interesting. That's probably a good idea to have that agency considering energy

is such a critical need. Yeah. Don't want the wrong people with ownership over them. That's fair. There's also Yeah. Wow.

There's also an article about how one of their Berkshire Energy subsidiaries is trying to build a giant wind farm in Wyoming to power Los Angeles. But there's a ton of people that are upset about the power lines through their ranches and stuff along the way. Pretty interesting. It's funny. I always complain about NIMBY people, the not in my backyard. We need more housing. we need better infrastructure but just don't do it on my land

I always complain but I think I'd be the same people yeah for sure yeah we don't want power lines obstructing the view but it's just the way it is can't the government just buy those

properties or sign leases of sorts I think it's how did the railways do it the rail the railroads uh i don't know it was entirely different time period because the west was like totally uninhabited by well i guess there's a lot of natives that they frankly didn't i guess they didn't care about but i believe they just sold them the land very cheaply so along the track right just super cheaply along the track and then they were able to sell

the railroad companies were able to build and then sell back the land to build these towns to people. But that would not, there was, there would just be no way that could happen today just because the land's already inhabited by people in this country.

Matt says if oil gets to $200, Oxy practically earns back the entire market cap and free cash flow. Well, that is, you know. It's not impossible, I suppose, but I got a feeling Berkshire stock will be down even if that happens. Oh, yeah, they are.

That's going to be significant costs for all the other portfolio companies they have. That they want to double from here of oil prices? Gosh, yeah. Yeah. You know what? We're saying that. Is it possible? It's possible.

I have no clue. So it's always weird when they talk about Oxy, though, with Berkshire. I'm like, is this guy on? I don't know. I'm going to take this guy to drug rehab or something. That's immediately what I think in my head. But it's interesting how, in general, they have the railroad, they got the energy company, and now potentially they're going to buy out this oil company. They're really the largest industrial conglomerate in the United States, which is kind of an interesting turn.

You may not have predicted that 25 years ago. Is Occidental somehow a derivative of Standard Oil? No, I don't think so. I read that history of oil book, and they have been their own company, I think, for a long time. They were started later. I believe, I'm probably going to get this wrong. I believe they started later more in the second wave of kind of international expansion in the, I guess, around early 20th century to mid 20th century, and then expanded heavily into the Middle East and stuff like that in the post-World War II era. um but they've been a big like non

oh gosh like they're the most american-based one if you know what i mean so there's maybe a little bit less political risk yes i was right thank you matt founded in 1920 all right i read that long book i finally remembered something the uh all right what is the worst realistic concern like what is the worst potential catalyst that could result in an absolute recession oil at 200 uh i would drive oil over 200 oh okay well uh you're talking to me trying to think like what could possibly go wrong i mean the russia ukraine was certainly a driver under investment maybe was sort of a gradual driver i don't know i guess it's not maybe oil it is probably just energy prices skyrocketing in general so not just oil maybe broadening out

right energy prices skyrocket across the board for both for businesses and individuals in the united states just like europe has been um and that would just be because I don't it seems unlikely that that would happen because of our own ability to generate fuel sources now whether it be nuclear, renewables

natural gas and oil on our own domestically so I feel like we're insulated from that but who knows let's say China invaded Taiwan oh yeah

we'd all be no not as like a fuel price catalyst but I'm saying let's say it happened what are the repercussions well Apple would be screwed right

so that's a lot who's their chip supplier TSMC yeah largest customer for TSMC I think 20% to 30% of TSMC's revenue is Apple. Wow. So, yeah. If Apple's screwed, that's the entire S&P.

I think it's almost 10% of the market at this point. It is. Wasn't it like 7% of the S&P? I think it's at... Well, it changes every day. I think it's in between 7% to 10%. I don't think it's at 10%. That's crazy.

i mean if china evades taiwan well yeah i mean do anything electronic maybe birdie's got the right holdings at that point just the private prison and cash who knows his portfolio has definitely changed we'll see an entirely different his 13 f's are absolutely useless because he's his high high turnover rate i mean those questions like the oil stuff and then the taiwan invasion stuff they're absolutely impossible to answer unless your entire job is to be a geopolitical or war strategist and have like decades of experience learning that stuff i mean the amount of stuff you need to learn is insane and whenever i read something about that i'm like i have no idea what's going on

so investing wise like i kind of think just you got to invert and say okay how do i avoid as much china risk as possible and how do i avoid as much uh energy risk as possible and i think that's pretty real like i i don't know what do you think on that like is there any is that like possible is Is it smart? It's definitely possible to limit them, to limit it relative to other companies in terms of like… Go ahead. I mean, obviously some companies won't be as affected, but if that really did happen, I think every company would be impacted in some way. like russia invaded ukraine i think most people you probably would have said i don't know if this

would affect my company that much but it will have some sort of trickle-down effect so i don't think it's totally possible to avoid it but i think digital businesses predominantly digital businesses had an easier time dealing with the fallout of a lot of those geopolitical problems um They were able to just turn off access pretty quickly. A lot of digital businesses in the Russian market, it'll impact it, but it won't be quite as hurt, quite as affected. Companies that don't operate there, I think that's one way to limit it. So, you know, if growth is predicated on China, i.e. Lululemon and Starbucks, Nike, Disney, well, not Disney entirely, but Apple, Apple, Disney a bit less, but it's a concern. It's definitely a concern. yeah I know but is like I feel like it feels smart to do that right

but will we be kicking ourselves for avoiding Disney, Apple, Nike, Starbucks Lululemon 10 years from now possibly but I would probably still stand by the decision yeah because I

mean just like you have to look at you can always be wrong but the risk is not worth the CCP, what they've said publicly is basically it's not too hot. I don't know how to even say it. It's not

great for common shareholders. It's not even great for capitalism, I guess, which whatever your leanings is, it doesn't matter, but if you're an investor, that matters quite a bit.

um yeah i saw that apple's trying to get out of china actually or not trying to that they uh they're shifting like some more production to india um for the iphone which is interesting oh let me pose this question to you if you could it's the chris bloomstrand question because he based it off how long the U.S. has been in existence, which I think was like 246 years. If you had to make an investment today, you had to put all of your capital into one thing today, and it's a 246-year investment.

You can't change it. What are you going with? has any company has any publicly traded companies existed from that time to now maybe a big bank maybe a English bank it's got to be European companies

I think I would go with I don't know oh gosh the euro no the dollar no no no no no no no no i would go with yeah land for sure gotta do land where land where pacific northwest maybe what if we're invaded we strip you of your land

well then I mean if you get stripped of all your ownership rights of anything then you know I think the question's moot but I would probably go land in a place that has good water supply although water supplies change

I might go I might go like some sort of an index fund global index fund yeah there's no if you can go global why take the risk

on a single country so yeah global index fund but I think that's almost cheating well that's cheating because then I can say I'm going to go land in

every you know every single geographical area a global REIT yeah you can have it yeah maybe maybe that

maybe that is a thing All right. I think we're getting close on time. Yeah. One o'clock. All right. So that's an hour. Thanks everyone. Thanks Matt and Bentley for the questions in the chat. If you guys want to listen to these live and ask us questions, I know I say this every week, but we're on, on Thursdays at 3 PM Eastern time, 12 o'clock Pacific time. You just go to YouTube, chit chat money. It's live. There's a chat feature. It always helps to get questions. Thank you all for listening. I'm going throw a disclosure on this. Brett and I are not financial advisors. Anything we say or discuss is not formal advice or recommendation. We are general partners at Arch Capital though. So

clients may have positions in the securities discussed in this podcast. Thank you all for listening. We'll see you next time.