Chit Chat Stocks - Investment Talk | Matchgroup & PayPal

Episode Date: March 2, 2021

This week we are joined by Investment Talk to discuss Matchgroup, PayPal, and much more. Before the discussion, Brett and Ryan share their favorite stories from the week including Warren Buffett and Walmart. Stay tuned after the interview to hear about this week's hot water, buy-sell-hold, and anecdotal evidence. Let's go! Follow Investment Talk on Twitter: https://twitter.com/InvestmentTalkk?s=20 Subscribe to 7 Investing with the code "CCM": https://7investing.com/subscribe/ Subscribe to our YouTube channel: https://www.youtube.com/c/ChitChatMoney Follow us on Twitter: https://twitter.com/chitchatmoney Visit our website to see more from your hosts Ryan and Brett: https://www.chitchatmoney.com Email us: [e-mail] Timestamps Stories | (3:28) Fintwit | (23:11) Interview | (31:55) Hot Water | (1:39:29) Buy-Sell-Hold | (1:48:15) Anecdotal Evidence | (1:51:19) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. Today is Tuesday, March 2nd, and today we have an interview with IT Investment Talk. It was a lot of fun. We've been waiting on this one for a while. I think it's been, we've been trying to get him on the show for a while, right? Yeah, for about a month we were planning on how to do this, so exciting. I mean, we talked PayPal, we talked Match Group, two stocks he knows a lot about. Yeah, his investing style is similar to ours. Definitely, and we went thorough, like kind of deep dives on both PayPal and Match Group. We've even moved on over to Bumble and Square a little bit as well.

Yeah, yeah. That format was great. I think that's kind of something we're trying to repeat. Yeah, definitely. But before we get to that, we have our stories for the week, and I'm going to be talking Buffett's letter. What do you have? Yeah, I know people wanted to talk about in our poll on Twitter about ARK Invest,

but we're going to hold back that a lot of, I guess, not really. That was a bit of a lot of flack. Yeah, we did. So we'll talk something more neutral, which is Walmart getting into fintech. Very interesting developments from them that could shake up some of the financial industry. So excited to talk. And then, as always, current state of fintwit, hot water, buy, sell, hold, anecdotal evidence. But before we get to the show, sales pitch time, and it's big.

New recs. Huge. Large recommendations. Yesterday, new recommendations. Oh, right, because you're probably listening to this on Tuesday. But, yes, on Monday they came out. And what was your favorite? My favorite, I will say Matt's because usually he's probably got a very similar style to what we do.

I like his company. But I will say that all the picks are great for different styles. I mean, you've got Manisha and Max kind of with, you know, those scientific picks. Dan has his certain style. Simon. Dan's always consumer-focused. Okay, I think if I had to pick one, I might go either Simon's or Dan's. Dan's really interesting because it's one that's totally overlooked

and always has incredible returns. Yep, and then if we want to talk about what their returns are, they've almost hit 40% versus the S&P 500, so that's amazing returns over the past year. This is their one-year anniversary, so congrats to them. Ooh, wow. Yeah, so they finally hit one calendar year, 40% returns versus the S&P 500. Fantastic numbers.

We've got to say, though— If you want to celebrate their one year, make sure you sign up using the code CCM at checkout because you get $10 off the first month, and it's usually $17. So it's only $7 for your first month, and you can look at all those yearly recs. It looks pretty nice. Yeah, perfect timing to start out now. If you're going to start out with 7investing or you're planning on doing it, there's no better time than right now.

Okay, that was our sales pitch. We are going to get to the show. Here you go. 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 Chitchat Money by Ryan or Brett or any other podcast guest is not formal advice or a recommendation. Now please enjoy this episode. All right, welcome in. I'm going to kick things off with Buffett's annual letter. I've got a few quotes, a few anecdotes. It's going to be shorter than probably your story, but I don't know, because it feels

weird to judge to like criticize the small things for buffett because he's been doing it for a long time but i'll start with a quote here the best results occur at companies that require minimal assets to conduct high margin businesses and offer goods or services that will expand their sales volume with only minor needs for additional capital yeah doesn't it seem like i said we we probably are in no place to criticize but doesn't it seem a little counterintuitive to some of his businesses which are pretty asset heavy yeah it is interesting because i've heard this take many times from him and other people and it makes sense in theory right but it seems a lot more disruptable than say an amazon or a walmart right and those are capital intensive businesses

i don't know you know the the moat around some of these low uh what would you call it asset light businesses seems low and they seem rarer now i would argue a company like google well they're a little bit capital intensive with servers but a company like ea electronic arts or activision blizzard yeah those are capital light and they have a moat from their brands and partnerships and stuff like that but it seems rare and not as solid as a moat from someone that's more capital intensive but yeah again you got to watch out uh where someone invests versus what they say yeah yeah agreed um another anecdote here berkshire acquired bnsf railways in 2010 for 44 billion i believe uh since then it has paid out 41 billion in dividends to berkshire

pretty nice yeah nice it makes me like it makes me want to become a dividend truther i know sometimes uh altria put your whole portfolio on altria no don't do that don't do that but it's so it is strange because you know berkshire doesn't offer a dividend but obviously it's for a different reason because he trusts his own capital allocation skills more than the shareholders or the shareholders have entrusted him with their money yeah that's just it's got to be so nice to have something that gives you four or five billion in operating income a year and then you just can rely on that like this business may not grow or may grow at a small rate but man is it gonna just it's just gonna give you money and then you can use that money the holding company structure

period it amazes me every time because of how it's not as like i think he may have been the one to come out with it it's a nice life it's brilliant it's brilliant all right another quote here this one's more about the bonds uh and interest rates it says in certain large and important countries such as germany and japan investors earn a negative return on trillions of dollars of sovereign debt fixed income investors worldwide whether pension funds insurance companies or retirees face a bleak future yeah i kind of agree more i think everyone I don't think that's a super rare take, but odds are a bad place to be. I will emulate whatever Charlie Munger says.

Nothing to add. Nothing to add here. He's totally right. They have also spent nearly $9 billion buying Verizon stock. This was announced, obviously, prior to the letter, but does this surprise you? No, it does not surprise me. It feels right up Buffett's alley, actually. Yeah, it feels very, yeah.

I mean, he loves businesses that have regulatory moats. But this is another capital in terms of business, correct? Right? Or am I wrong? I think it's true. Remember in like 1999 or 2000, people were like, why aren't you touching any of the communications businesses? Shouldn't you be invested in them?

And he's like, yeah, that's just not what we focus on. And now he's 20 years later. Why aren't you invested in Lemonade? They're disrupting your business. Geico. Sorry. Hey, don't bash Lemonade. I used Lemonade the other day, and it is a sleek little thing.

I'm not sure. 80 times sales. Makes sense. Yeah, that part maybe is a little crazy, but I'll move on. They own $120 billion worth of Apple stock. For reference, the market cap of Berkshire is $580 billion. um so it makes up about 20 22 percent of the market cap do you think they have maybe a little too much exposure to apple do you care i don't care about that they've trimmed right yeah they

did i mean whatever on that uh definitely one of the best trades of all time for sure they had so i mean nominally best trade of all time but he doesn't know tech yeah he doesn't know tech apple's not even tech sometimes it's it's almost fake luxury consumer goods it's it's it's i think it's more consumer goods for sure because like their tech is always worse than their competitors i just imagine like the samsung meeting every time they're like guess what guys we got a better camera we got we got everything's faster than the apple phone like i bet this thing's selling like hotcakes and i'm like nah that one's got an apple on the back of it the iphone like i'm sitting here staring at a mac well it doesn't always work that well but uh it's got an apple

i like it uh the uh but yeah best trade of all time one roaring kitty with gamestop two apple and then then george soros taking down the british pound that would be the big three okay they repurchased five percent of their shares they now have 138 billion dollars of insurance flow do you see him doing anything with that flow anytime soon i mean i don't know repurchasing that like five percent is what like 25 30 billion dollars i if you're a sure if i was a shareholder in berkshire i would be applauding this five percent rate of repurchases that i mean that just seems over the course of a decade that can be so meaningful and man if they're going to discount the value of all their holdings why not yeah and he went long-winded onto why he

likes buybacks and it made me feel much better about owning dropbox so yeah yes yes for sure for sure and you get the engine of apple buying back shares and then berkshire buying it's like a double buyback i mean i would sell lbo on lbo well berkshire doesn't have much debt but apple does but the uh that's true i i bet i would just salivate if i owned all that much apple and they were buying back stock, and then I was buying back my own stock. It's beautiful. Okay. Last quote. Actually, sorry. No, a few more quotes. In no way do we think that Berkshire shares should be repurchased at simply any price. I emphasize that point because American CEOs have an embarrassing record of devoting more company funds to repurchases when prices have risen than

when they have tanked. Our approach is exactly the reverse. My question is, do you think too many executives just use buybacks as like uh well we have cash we got to do something with it regardless of share price yeah i am not a fan of when they just seem to put it on autopilot uh but if the you know way like all right if the business is really steady unless the valuation is just so extreme it's probably value accretive but yeah i do get bugged on autopilot especially when they turn autopilot off only when the shares drop like 30 percent that people do that you would think that they wouldn't but then you know we all know what happens during bear in the markets people get spooked and uh yeah a lot of people cut them in march yeah which that was a little different

because of a lot of well for some businesses like they had real liquidity issues but yeah some of them cut it and they didn't need to yeah that's kind of what i'm which is when And they could have really used it. Yeah, that's a big, you can really, I don't know. You can kind of weed out management that way. No, I wouldn't say necessarily management. The CFO, CFO. Yeah.

All right, last quote here. At Berkshire, we have been serving hamburgers and Coke for 56 years. There was like a Phil Fisher, I think, quote about like making sure your shareholders know what they're getting, whether it's a cheap burger and Coke or extravagant meals, that kind of thing. And so he said, at Berkshire, we have been serving hamburgers and Coke for 56 years. We cherish the clientele this fair has attracted. The tens of millions of other investors and speculators in the United States and elsewhere have a wide variety of equity choices to fit their tastes.

They will find CEOs and market gurus with enticing ideas. If they want price targets, managed earnings, and stories, they will not lack suitors. Technicians will confidently instruct them as to what some wiggles on a chart portray for a stock's next move. The calls for action will never stop. well written and i don't think he'll ever start stop bashing active trading yeah yeah like or hyper hyperactive trading uh-huh nothing to add there nothing to add there okay charlie um i just i love doing that overall thoughts on the annual letter uh i know he got slack from some clickbait

article for being tone deaf since apparently buffett is now the spokesperson for all things social problems yeah i can't wait for his appearance on the view should be fun i don't know that stuff is just ridiculous he's an investor who cares but last thought only last thought i have is if you read it and you see all the investments they're making for the energy subsidiary i'd say my hot take is that they're probably doing more for the energy infrastructure of the united states than someone like tesla i think and they're not bragging about it i would ask you uh re-evaluate what they're actually doing like our our sports cars take a lot of energy to make batteries and stuff like that or is getting the infrastructure actually set what's more

meaningful they're investing tens of billions of dollars into it um yeah before we go bashing buffett for being an old timer i mean they're he is doing a lot in terms of renewable energy yeah like come on yeah let's not bash him for that uh unless the guy basically went zero to what is it a hundred billion dollars and he's giving all the charity like that's the yeah that was the big thing a lot of people were commenting on it like oh he wasn't acutely aware of all the social injustices if anything if only he had focused more like the gates foundation if he could maybe get involved with that somehow yeah this um people are going insane i don't know he also had the wherewithal

to recognize that maybe he doesn't want to do it on his own so he'll give it to someone that can yeah yeah he's very good at i would rather take that than someone who tries without no with knowing that someone else can do it better yeah but did he pump gamestop buy call options and then say he was donating it to the barstool fund no so he's a total loser he doesn't he doesn't get it he doesn't get it there yeah once again sorry if we were triggering people but uh that's our take on that that is yeah that is our take all right a little more exciting stuff walmart getting into finance why don't you yeah so this one we'll keep it short uh they're not much news it's just a lot of rumors and walmart actually decided to poach two of goldman sachs executives uh omar ishmael

and david stark who both work at goldman's commercial banking division so that was kind of the big news like well why is walmart hiring some people from goldman that doesn't make sense but is a part of walmart's management sorry walmart's push to get a quote super app for payments to try to create an end-to-end product for its core customers kind of coincidence we talked about uh with it paypal doing that as well or they're launching something later this year sometime soon uh walmart has also created a fintech startup in partnership with ribbit investments which is a venture firm, and they're going to, quote, create unique and affordable financial products for customers and employees.

First question, this seems like an easy slam dunk for Walmart. What goes wrong here outside of execution? So I don't quite understand it. They just want some super app, financial super app? No, I mean, it's kind of, you know, they'll provide consumer banking products and stuff like that to customers, employees. you already have locations seems very easy for their core customers

what do you think? I always feel weary whenever I think Walmart getting into something that's sort of younger and sleeker Walmart Plus has been great they've done well with e-commerce though I guess

if they can get it right it'll be big I still don't understand exactly what the app's supposed to do well just think of it like a Like a checking account? Don't overthink it, yeah. Don't overthink it. Just consumer financial services.

Yeah, I guess I don't know why people would move their money to Walmart's consumer banking service. Well, because they'll be able to do partnerships with all the stuff they sell in the store. So also to be able to partnership. It's a cash app. With their own boosts. Sure, but they can also do a lot of other stuff.

Like, I don't know, they have pharmacies, I think. They're launching some healthcare stuff. There's a lot of ways you can do it. I mean, you could get integrations with Walmart Plus. Plus, you have those locations. There's a lot of the country that still runs and needs cash. You have those locations, and a lot of Walmart's customers, I don't know, just make it a lot easy for them. Second question, though, and this kind of reminds me of some of the mergers that happen during speculative bubbles

that can kind of be an indicator of capitulation from legacy companies. Why wouldn't Walmart just go out and buy SoFi and supercharge them? yeah i mean that's i guess that's true they probably would have to pay a premium right now but uh quite yeah i mean yeah i i don't know they they do they seem to do okay when they do stuff organically right e-commerce they did well and they bought jet.com and that was kind of a mistake even though it turned into walmart.com a bit yeah and i i guess the more that i think about it now Well, a consumer finance app for typical Walmart goers seems synergistic, even though I know that's an overused term.

I can definitely see the synergies there and why people would use it. I'm not sure they need to go out and buy something people already use. That's going to make it probably even tougher to explain the narrative. If they just go, here, keep your cash in this app, and then you can get deals within the store. Yeah, you've got to connect it to the store somehow. I'm not sure exactly how they would do it. The people that are within the company probably know a lot more ways

to get everything going, but what kind of products do you think they could offer? I was thinking they could do buy now, pay later, basically integrated for Walmart Plus and stuff like that. They could do short-term lending that isn't predatory because people got to get their goods and services if they know they're part of whatever Walmart's bank. That is true. They could really get better rates on that

because a lot of people out there, they have problems with cash flow and if they just break that timing up, That's why people go to loan sharks and stuff. If Walmart could get that into a more less predatory, you know. I guess the payday loans, I've always had an issue with the payday loans from the lending side. Just that, like, I guess if, okay, someone's in the store and they're like $20 short, I'm sure there's no problem in lending to them at 5% interest. But I don't know.

Like, is that really the crowd you want to be lending to? Well, they need, I mean, it's better than 100% at the Shlone Sharks. That's fair. You can give better rates. Buy now, pay later. Seems interesting. There are a lot of different things. I see probably the best avenue for customer attraction is probably in-store discounts.

Keeping it like Cash App Boost, but just use it for Walmart products. Walmart Plus too, right? Yeah, and does Walmart have their own little premium brand? I assume they do. I don't know I don't think so I wouldn't call anything premium in the stores

yeah they're not going for premium they're going for affordable affordable I think they gotta have their own stuff there's probably

Walmart investors listening to us right now like oh you idiots you don't know about that we don't know much about Walmart the company the ins and outs of it so

I don't know I think I do like the loan idea just because I don't know serving as like people usually use payday loans

for what trying to they're just trying to stem yeah they're trying to get like you know short-term purchases that they need yeah it's just stemming the the like if someone has cash flow issues it just helps with that and you know that type of stuff could really help if you know what kind of credit uh now flipping it around do you see any big threats i mean paypal might be a little bit in trouble here not entirely who you know they're going to compete with and yeah potentially take out i mean it's probably consumer banks like someone like i don't know you know like the consumer side of bank of

america or something like that that could be a big threat to this i don't think someone like venmo or cash apps really threatened because they're really going after people like us who are 20 year olds in the cities and it's a little different than the walmart demographic but it'd probably be consumer banks i'd say thinking from a consumer perspective i think the most important thing they could do is instant deposit to Walmart's app, whatever this ends up being.

Because I feel like there's going to be a lot of people that aren't just keeping money in the Walmart app, but are sending money to it when they need it. So, who would they compete with on that? They're probably not, I don't know, they're probably not stealing a whole bunch of money from

traditional banks. I would say they do compete more with Square Cash App. because what do you use Cash App for? Boost? I spend with it. I don't know. I just use the card.

But don't you usually use it for Boost too? Isn't that kind of one of the big features as to why you're there? Yeah, but... I'm thinking like because they have those grocery store discounts on Boost so it's like

if Walmart can offer better discounts that's sort of who they're going after. Yeah, but I would say Cash App maybe, yeah, but But most people are using bank accounts at Bank of America or Wells Fargo or Chase. Yeah, I just don't see it as a place where people store a whole bunch of money in there. It's on a per-need basis. Well, basically, if you can replicate your Walmart account, or sorry, whatever account you have at any of these banks,

If Walmart can replicate that and you shop at Walmart all the time and use it for a ton of stuff, a lot of your purchases, wouldn't you rather switch it over to Walmart? Yeah, but no one ever does. I mean, it feels like it's so hard to pull people away from their legacy banks no matter what, no matter how valuable the other offering is. It's got to be a good value proposition, but we'll see. I think that's the biggest threat. yeah it could be viable um current state of fintwit you have anything else uh nothing else from walmart so car no yeah all in all it seems like a good idea and there's no problem in trying it no if it i mean if it flops who cares yeah walmart will still be doing fine

and uh it's weird it's like a startup so it's not even they don't even own all of it It'll be interesting to see what happens. But most likely the status quo will still stay there for the finance industry. They could possibly shake up some things and start competing, but it feels like one of these sell the news, like in five years,

is Walmart really going to be taking over versus these people? They might have a little bit of a value add, but that's another big thing for me. is there's always these new Walmart announcements and I just really don't care because it feels like nothing moves the needle for them anymore.

Yeah, or because of, I mean, commerce is retail. Yeah, announcements are great, but getting millions of customers, that's a thing. I know Walmart Plus, that's meaningful, but it feels like it's like Facebook announcing product features where that turns into news just because Facebook announced it. And a lot of the times that is a big sell the news.

Yeah. All right, current state of Fintwit. You have something that I guess both of us want to talk about, but I'll hit two questions that I have here. First, did you see all the deep fake stuff on Twitter? Yeah, kind of scary. Can't trust those videos anymore. Did you see the Buffett video?

I did not. I'll have to find that one. Was it funny? It was pretty funny. It's like those memes where they have him swearing and stuff like. Yeah, except there's a real video. Now they can make it into video. That's pretty good, I guess.

good for the deep fakes that's great stuff on the Buffett ID on the Buffett concept does it frustrate you or do you feel

bearish when you see sort of anti-Buffett anti-Munger type conversation commentary going on because I feel like there was a whole lot of it

this week yeah I don't know why I don't know just let them do their thing they're kind of old they're trying to have some permanent capital base

and they're trying to have these investments last forever. That's what they're trying to do and they're going to be really patient. So what if they're not investing in Digital Turbine? What's wrong with Digital Turbine? I don't know, that's the name I thought of. But stuff like that. ARK Invest, let's talk ARK.

I'm going to say, this will be a little bit different, but I'm not going to say anything by name. I'm going to take, just imagine this, all right? Let's say there's an actively managed fund. It's an investment fund. But unlike most investment funds, ownership in this fund is split into shares and is publicly traded. And it gives access to every investor.

Theoretically, an infinite amount of shares can be created or split for this fund as long as there is investor demand. But on the flip side, shares can be taken away or redeemed if investors decide to part ways with this fund. and there is some creation blocks and there are things that mitigate some of this with third parties that market makers uh what do they call them accredited purchasers or something like that but we don't need to get into the details of that five years after the creation of this fund this fund has put up tremendous returns leading to tremendous inflows of capital giving it aum of 50 billion dollars across its various strategies now the fund owns greater than 10 percent or more of dozens of stocks and has a copycat strategy in another country that's adding

to its exposures and investment banks are now selling structured products to help large investors lever up their exposure to this fund it has been all inflows except recently when for a few days investors started pulling money out of the fund what do the fund managers do they decided to buy more of the small cap names illiquid names and richly valued securities it has been known for It has also decided to stop publicly disclosing all of its trades and has tripled the amount of disclosures on its trading documents. If you held money in this fund, would you be worried? I would be.

I'm not saying anything by name. If you're a big... You're a sexist. I'm saying nothing by name. If all that information was there. All the liquidity concerns seem very real. And it has nothing to do with who's running it. Like, that's the structure of the fund.

That's the downside to it. Yeah. And maybe there's mitigated risk from the market makers that help them do the net asset value stuff and creation blocks and the ETF structure. But at some point, the money has to be returned to investors if they pull out the money. There is a part

of me that does think like, well, you think they don't understand it? Like, you know, the kind of well, they are probably aware of this. Well, they don't even understand their own Tesla model.

So I don't know. I can't trust that. I'm sorry. We've gotten some hate on Twitter for that. I don't, I can take it. Alright, the only thing i'll say is the the path forward where things are fine is they don't get any redemptions or money keeps flowing in then the party keeps going but they've set themselves up where if they ever have major inflows or outflows excuse me of say like 500 million dollars a day for 20 days

i don't know seems like the positions they hold are going to be screwed and then you can get i mean do they have any what's their like cash reserve i mean do they have any i don't know i don't know their cash reserves but on a down day they bought a bunch of illiquid small caps and tesla on a down day so i don't know it reminds me i guess the last thing i'll say is uh tobias carlisle who runs etfs so he knows about this he said that his theory is if tesla goes art goes and then there could be a nice little sell-off but he said it's a little speculative i'm not gonna he didn't he didn't predict that he just said that that's an interesting theory um and i kind of think that there's there's a possibility they're not saying it will happen

and there's no reason that arc is like it's not guaranteed to fail but if you're an investor in arc and there's a chance they fail i don't know that's a little bit risky like yeah it doesn't mean they're going to though but there is i mean that presents a lot of opportunities for good companies that they own things like square or spotify because those things get sold off because of arc's exposure to them yeah now i thought initially i was like all right square and spotify something like that they might be too big but with all the outside like people that fault basically copycatting their trades and then the structured notes i don't know it feels like there might be more exposure than just the single etf again that's way above that's not something

we're going to know but if they only own like one or two percent of like spotify then that might not affect it as much it's really those small caps where they own like 10 or more of the outstanding shares where on an average volume day it would take them like 20 days sometimes or 10 days to sell out of their positions that'd be hard to do based on normal volume okay um i think that's all we have for current state of fin twit did you have anything else nope that's it don't get mad at us please i don't want arc to fail i would just it's an interesting story yeah um next we have our interview with it investment talk i guess we already kind of touched on it but what was your highlight if you had to have one well match group discussion i thought was good yeah i mean we're

all investors all three of us are investors in match uh we talk about the hyperconnect acquisition how bumble's working all the different parts of that business why we like them going forward yeah that's it and paypal is good too yeah digging into the details on match is probably my favorite part um there's some good stuff at the end though as well so overall overall one of the favorite interviews we've done so all right uh here you go 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. Today, we are welcomed by Investment Talk. Connor is, as we now know him, and we got to know Connor through Twitter a little bit. And he also has a great newsletter worth reading. So why don't we start there? How did you come to start the newsletter? And then what do you want to do with it in the end? What's the sort of big goal? Yeah. So in terms of that, first, I'd just like to say thanks for having me here today. enjoy listening to your podcast really good um so in terms of the newsletter so throughout my kind

of investing journey i've always kind of documented my own research for the purpose of you know going back and looking at my kind of thought process and you know kind of what i was basing my opinions on i think it's useful you know um if you're selling out of a position you can go revisit that decision see kind of what your mind state was like at the time so i've always done that and then last year kind of prior to lockdown just coincidentally i just started a twitter account to kind of share my thoughts and connect with some other like-minded individuals um because surprisingly even though working in the kind of investment industry i don't didn't have many peers that were like super interested in equities so i just wanted to kind of have that discussion um after a few months

I decided to launch a newsletter just to share my own research and insights because I noticed a lot of people I was discussing with, there was a big range of, you know, kind of there's industry experts, there's literally people that are running hedge funds that you can DM and talk to. But then there's also a big kind of population of people that wouldn't even know how to read a balance sheet. So I think initially when I started the newsletter, it was more so for the education, you know, just to put out stuff.

um where people could learn how to you know read through a 10 case which to some people might just be pretty simple and second nature but for a lot of people there's a lot of jargon there there's a lot of misinformation so before the news that are actually just published you know a few guides just taking someone through how to read each of the financial statements and then that kind of rolled into a newsletter um at first i was doing that every day whilst also being fully employed i did that for about six months and then it became a bit too much um so i changed it to three times a week which has been a lot more manageable people quite understanding about it which was good the primary reason for doing it is mainly to spread the kind of

educational aspect um so half of what i do is like it'll be you know kind of discussing kind of stuff that's going on in the macro environment or even just a specific event that's taking place in the markets over the past couple of weeks and then the other half is typically just you know like research um but i always make sure that you know if i'm going through a filing i'm not just you know glancing over terms or jargon i make the point to actually explain what i'm talking about you know you can't just assume that someone knows what deferred revenue is always make the point of chucking a few sentences in there just to kind of explain what that is and how that works and why highlighting it um but yeah it's grown it's grown nicely um there's a good community there behind it

which is really good so yeah it's been fun how do you like uh substack substack is good um for what it does they've only recently over these last couple of weeks started rolling out changes i was quite critical saying i've been with them for about a year now and i hadn't really seen any innovation um and when you consider you know twitter's just bought review um you've got other ones like convertkit mailchimp ghost um they seem pretty good sub stacks so sub stacks good for what it does the 10 fee that they they charge is quite high i know that review just cut theirs to five percent i was looking at review but they don't really offer the same kind of depth of optionality so for now

Substack's good but yeah it's good for what it does I think yeah it's grown phenomenally have you ever thought about

sort of going independent starting a website and kind of making it private that way or do you

prefer the Substack format I think I was actually thinking about this the other night in bed and I was

you know looking through all the kind of alternatives you know you have Wix Wix are doing quite a lot of

interesting things they just built out their app which looks quite good um so i've been looking at things you know the 10 even if you're cutting that to five percent or lower that's you know that's saving you a lot as like a content creator so i don't think sub stack is like a long-term thing i'm looking to eventually kind of maybe create a website and then figure out how to do that independently just not quite there yet okay that is still early in

the uh the project so should we uh talk the companies now because we're planning so we're planning to talk uh match group and paypal and we'll probably dig into bumble a little bit we're going to start with match you want to hit yeah so i guess the first one you know match group they had the big acquisition i think 1.7 to 1.75 billion dollars of hyperconnect kind of out of the blue and it's a south korean company um people at first didn't really even see how it fit into match group's portfolio so what are your thoughts on the acquisition of hyperconnect and how does it fit in with match groups other properties yeah so first up hyperconnect was a company that i wasn't familiar with and then when match groups say they're acquiring it for i think it was 1.725

billion you know it's quite a substantial fee so i was like i better dig into this company in terms of the deal uh last time i checked match group had about just under 750 million dollars on that cash line item and then they also have another 750 million in terms of revolving credit facility which is good they said they were going to be offering 50 cash 50 newly issued shares to purchase this with the option to pay 100 cash um which was interesting i don't think they would pay 100 cash i think management basically said that because the market's quite volatile at the moment and you don't know what's going to happen by the time they close the deal so it's just good to have that kind of clause in there.

Being South Korea-based, they obviously have a large presence in Asia. I think 80% of the revenues come from Asia. And then Match Group have this target of 25% revenue composition from Asia by 2023. Right now, that stands at about 18%. And management expressed in the earnings call prior to this announcement

that they feel that goal might have been pushed back an extra year just because of COVID. so it's good on that front you know that the land grabbing in terms of asia in terms of how it kind of fits into match groups offerings i think it makes sense because in asia you have this kind of dynamic where online dating is still stigmatized between the kind of millennial age group and then you've seen that in the way that they've kind of marketed their products in several Asian countries.

In Tinder, they advertise Japan as kind of a place to meet friends more so than a place to find a love interest. So I think it kind of, over on that end of the world, social discovery is this kind of more attractive kind of offering. So they're just attacking that.

And I think it fits into their overall kind of projections. They have Abloh, which is an interesting one. I don't personally think any of their social offerings are that great um ablo was their existing one and then when they're acquiring hyperconnect they're also acquiring azar which is a which is hyperconnect's biggest revenue driver it's basically a social discovery app where you can have live video discussions with

people from around the world and it has the way they monetize is through kind of aliquot items in app currency and last time i checked it had about 500 million downloads so that's an interesting one the quality of the app itself i didn't think it was super great um but i don't know if that's just more in line with what the asian consumer likes and then they have a smaller app called hakuna live which is similar but slightly different it's more so people are hosting live streams as opposed to you're like swiping right and connecting with new people So I had a few weeks playing around on Hakuna Live. The quality, again, of the experience, I found it to be quite low.

But that's the fastest growing app, catching up in terms of revenue with Azar. And that also features the kind of typical Alucard and in-app currency purchase items. So I think that kind of social discovery element blends in with what Match Group are trying to do in the longer term, because they're heavily concentrated in the online dating space. Whereas really you want to be attacking more kind of mediums than that. And if you've got social discovery, I think it kind of diversifies your offerings a little bit there because they have tried in the past to kind of create that social appeal with Tinder.

I remember at one point you could search for friends. I don't know if that's available in the US, but in the UK, you can't do that. On Bumble, you can. There's a feature. I don't know how heavily used that is. I'm not a user of dating apps myself. But over the last few weeks, I have been downloading them all for research. Yeah, there's a bit of research in there. Yeah, I made sure to put in my bio.

I'm just here to ask questions. Just to cover my ass. Yeah, so I think it's an interesting one. I think in terms of the deal itself, I don't think they paid a ridiculous premium. So HyperConnect generated about $200 million in revenue for the most recent year to 2020. they're expecting about 50% growth on top of that next year so about 300 million and then when you take in the purchase price they've paid maybe six times forward sales which in a regular market environment might be considered you know kind of

an average price but right now it looks relatively cheap compared to what some other stuff is trading for yeah and they're profitable margins are about 10% management said they're going to be pushing it up to about 20 30 percent over the next few years which would kind of match um match groups overall margin anyway in terms of operating so i think it makes sense um the apps they have are not great in my opinion but i can see you know they're just they're going into asia they're acquiring a lot of customers and consumers where the kind of preferences are different so i can see i can see why the deal makes sense i don't think they paid a ridiculous price for it. Yeah, that's kind of my quick two cents on that one.

That was good. What do you think the importance is of gaining that foothold in South Korea? Because Match has said they've struggled with that before. And they made that acquisition with pairs in Japan, another market they were struggling in. Do you think that could really be what makes this deal work? I think so. Because with the pairs acquisition, um prior to that they had very little presence in japan um and then when they went in they acquired pairs now they have this what management quote one one two punch deal where basically pairs and tinder are just dominating the japanese market so i think you have to take a different approach in the west we're very i feel like um you know we're all young guys i feel like online

dating is there's no stigma to it you know no if you've met your wife or your partner on tinder i I don't think anyone really cares. Whereas when you're talking about the Asian kind of continent, the sentiment's a little bit different. So people might be interested in finding, you know, relationships online, but they might not necessarily be interested in an app that's, you know, advertised and focused on that topic. Yeah, I actually forgot what the question was.

I was going to say, what do you think about the, it feels like there's kind of this push towards video. So we saw it with the acquisition of HyperConnect and then Hinge has rolled out some features where it's like, would you like to FaceTime or video chat? What do you think? Because like Western, maybe it's just Western culture, but like my first impression when I'm like screen window shopping, online dating is not to video call someone that, so it feels like maybe money wasted to me.

Or do you think that's sort of just my view as a consumer? Yeah, and Ryan's saying that because HyperConnect does have expertise in this video stuff. So one of the reasons they talked about during doing the acquisition is to port all this into Match Group's existing properties. Yeah, so I think one of the good things that they acquired was basically, you know, they're taking in the existing team at HyperConnect. They're a founder-led team, and they were one of the first to kind of, you know, bring out low latency, high quality video across Asia around about 2014, I think, because when they released Azar, their first product, it featured all that kind of innovation. And this is especially important in Asia,

where the low latency works better on cheaper handsets. iPhones don't have a huge presence in certain Asian places. Android's the most popular app store there. So that was good. They basically acquired this team that has the understanding of this impressive video technology. And then, as you stated there, Hinge have been kind of experimenting with you know online face-to-face dating plenty of fish also has a similar feature owned by match

group whenever i think about this i always try to frame it you know i'm kind of thinking about my own biases i wouldn't personally like to just open up a dating app and be faced with someone directly um but the kind of perception might be different in asia and i think that's maybe something that you might gloss over it being from the west you might think why are they investing in that um but the kind of data tells you that that's what people want you know as ours had over 500 million downloads over the five to six years um hakuna's catching up pretty well it might just be part of the kind of attractive appeal of these apps in asia um so it's an interesting one i don't know if it's wasted time i think it i think they kind of

just have to dabble in that and see how it goes it'll be interesting to see if they roll out similar features across their kind of flagship app like tinder but i do agree i don't think it's like a big appeal uh maybe in europe and the us to have video dating but given the circumstances that we've been in for the last year and a half you know um but it's hard to say i like i've not i don't use dating apps so luckily don't have to kind of think about that but yeah it's an interesting one okay um what about potentially hitting sort of saturation saturation in terms of subscribers where do you think they the rest of their growth for match group as a whole will come from um because i guess the risk is that tender's really big obviously we i mean as a

biased shareholder i think there's a lot of industry tailwinds still ahead but what do you think match group can do to kind of up its subscriber count from here so it's interesting um so they have currently just over 10 million or close closer to 11 million paying subscribers across match group um and about if you think about tinder 30 of that will be a la carte items and then the rest will be in the subscription base and then but if you look at hyper connect about 90 of their overall revenues come from a la carte items so that just kind of gives you a picture of the difference in behavior between the Western and the Asian consumer. The Asian consumer might not like the idea of subscribing to something on a monthly basis. They prefer using

the in-app currency to buy things at the moment in time. And a la carte items will typically have a higher markup on them. So I think you could see a shift in composition between the subscription and a la carte items. I think in terms of subscriber growth, how they're going to generate that is just purely land grab. You said there's tailwinds. I still believe that those tailwinds from online dating are going to continue for the next decade or so. Here, obviously, everyone's familiar with it, but I think you've got huge opportunity in places like India. There's just so many people there. And the more you get them engaged in online dating, the more they're going to be subscribing and then eventually paying for the products.

um so i think there's big tailwinds that you you can't ignore you know more people are going to be dating online whether that gets absorbed by match group or not i don't know um they do have some good competitors out there like bumble um which i'm sure we'll probably discuss at some point the market in general i described it in certain areas as kind of like an oligopoly so you've just got a few big players with considerable pricing power um and match group are definitely kind of at the top of that hierarchy you know they own a portfolio of brands across different age segments um they have considerable pricing power and it's just it's an interesting market because you have people that will typically subscribe to or at least use multiple dating apps

i can't remember the exact figure but i remember reading that the number of apps on average that you know the kind of young individual users has kind of doubled i think it was just shy of four maybe so you might have someone that's using hinge bumble tinder and something else whether they subscribe to each of those is a different story typically you might imagine them only paying to use a couple but it's kind of yeah it's an interesting market i think the subscriber growth will continue compounding over time just because of those tailwinds and then if they if they're entering asia you know they're just opening themselves up to a bigger kind of mass population so that could help drive subscribers as well it'll be interesting to see

how the hyper growth acquisition impacts their overall paying subscriber count over the next year or so right yeah i think the key is a lot of people talk about it they're looking at something like bumble and they're saying all right that's growing quickly they're like all right is that replacing tinder but people don't realize is that people use multiple apps it's not a zero-sum game you know both apps can really win in the long run that's what i think is interesting um because when Bumble, you know, now Bumble is public, everyone's like, well, like, you know, like they're the more attractive name, like they stand for women empowerment and all that kind of thing, kind of giving a bad thesis to Match Group.

But then really, as you just said, people use multiple apps. So I don't think it's a winner takes all. It's just a factor of, you know, which one's more attractive and which one can kind of pull those existing customers and, you know, entice them to subscribe there. Yeah. And that's part of the match group thesis is that each person that's looking for dates or relationships or whatever is looking for certain things. So if they can serve all different types of customers with the various apps, I mean, there's no one size fits all approach like a social network like, you know, Facebook when it was kind of a big one. It's similar to maybe what social networks are today where there's really a lot of small ones out there. But Ryan, do you want to hit the next question here?

Yeah. What about, well, let's talk about valuation. I mean, that's one of the big concerns, I guess, is they're trading out what a sales multiple somewhere in the teens and operating margins are in the teens as well. No, they're 30% to 35%. So I guess what do you make of the valuation? It's obviously gone up a little bit here in the last year or two. So do you think it's still reasonably priced?

It's a hard one. And like valuations for me comes last in my process. So typically, you know, it's hard to say you don't know what the valuation is before you go into start researching a company because the information is there. I don't really like focusing on it at first just because it kind of blinds your judgment. The valuation is quite expensive. I think, yeah, you're right. they're trading in the mid teens in terms of price to sales which um is maybe two-thirds or double what they were trading at when they separated um i just think it's um it's kind of a

it's just the market in general right now everything's trading expensive so you're kind of asking yourself so it's a tough one because you can say that about everything like i would say probably like 70% of the companies in my portfolio are just really overpriced. I wouldn't be buying them right now. But it depends on your mindset. If you're thinking, if this company is trading at what, $40 billion to $50 billion right now, do I think it's going to be worth $40 billion to $50 billion in 5-10 years time? If you feel like it might be worth the same, then it's probably expensive. If you feel like it's going to be worth close to $100 billion, then that's a fair

compounding rate over five years um i would say it's expensive i bought it at quite an expensive price i think i was in around 120 um and i've averaged costed as it you know kind of oscillated around that kind of 120 to 150 mark so yeah for me personally i know it's expensive but i just know that i wanted to kind of have exposure to online dating if it continues to fall in the future i'll probably just buy some more but yeah i would say it's expensive for sure yeah because you look at it you're like all right well maybe a few years of growth is already priced in but it's so hard to market time you don't know if there's going to be a dip so it's not something it's you can end up really hurting yourself if you're like all right i'm going to sell and wait

for the pullback that can just i mean you could really lose all the compounding effects over the long-term yeah i think it just depends like as an investor like there's so much kind of like common market knowledge out there and i don't think it always applies to everyone you know like when someone says buy the dip buy the dip you know some people that works for some people that doesn't for me personally i'm still fairly young all the capital that i'm investing is you know sunk costs i don't expect to be kind of wanting to access it for five ten years um so for me it's you know i can handle trading flat for what two three years if i've overbought a certain valuation so yeah i think it really just depends on your personal preference um yeah okay and then the

last thing we'll do with match group is the risk so what do you see as any potential risk with the company we'll probably hit bumble a bit talk about their competitive positioning and is there anything that can disrupt their place in the online dating space i know people talk about you know instagram and other social apps doing that what are your thoughts on any risks uh with match group really interesting one because you have tinder you have tinder's their main kind of flagship product and match group as a whole you know up until really the last year or so were known for their online dating and that's kind of what separated them from social media companies as you see them now slowly starting to roll into the kind of social discovery space then they're kind of entering a

new market where i wouldn't say that you know they're not competing with twitter or whatever anything like that but it's kind of that screen time you know you would spend time on tinder and ok cupid for dating purposes but now if you're going to be spending screen time on match groups offerings for other things like social discovery then you're inherently competing with other with other apps there so the competition comes from i would say anything that kind of takes screen time away from someone and then you also have apps like bumble that are coming up which are small i don't really think they have the firepower to go on an acquisitive rampage and kind of catch up with match group right now but there's something you have to consider from larger

companies facebook have been trialing i forget what it's called but they've trialed in ireland and canada kind of like a dating service i don't think people would really want to have their facebook account linked with their dating account people like to compartmentalize things like that but then i was thinking if instagram launched a dating service you know facebook's a different one because face a lot of people have facebook because it's just like you know it's just like a landing page for who they are you know if someone needs to find you or connect with you but then instagram is more about kind of accentuating what you're doing in your life yeah you know a lot of thirst goes on there so i feel like instagram would be an app that you

wouldn't really mind having a dating profile on so it'd be an interesting one because instagram has you know billions of users and then also you just have to consider the fact that some big tech company could just like build something in-house that's completely separate facebook could do that and just not have from facebook slapped over it like they do with everything else um so yeah but right now they're the leader in the market they have a pretty strong hold over it they have considerable considerable pricing power yeah i think that the fact that some other big company could just launch a dating service is always going to be looming and you know if anything like that happened you probably see some short-term volatility

everyone facebook announced maybe a year or two ago that they were entering the dating space my match group stock took a dive yeah um but then if you if you zoom out and look at what has done since you know wasn't such an issue you couldn't see it on any of the earnings statements there was no change in the growth or at least i don't think it might have been tiny you know yeah what do you think about in terms of competition i mean bumble is interesting it's growing faster anecdotally it's pretty big in the u.s right ryan you'd agree it's pretty big but tinder is still growing fast and then hinge is doing really well in the united states what are your thoughts on that are you is that growing at all in europe at least anecdotally i'm gonna go ahead i'll add

something there the other part with hinge and hinge introduced a feature here in the u.s that uh it's called roses i think and it's it's basically this now catalog approach where instead of just one instead of seeing one account and swiping right or left yes or no you can spread all these different accounts and pick one which that feels to me uh and then you only get like one once a week but then if you want to do it again you can pay 99 cents or 2.99 or whatever that is part of the alex card thing yeah right and that to me feels like it it sort of eliminates the instagram as a threat because that's the great thing about instagram is you can look at it sort of like a catalog and slide into the dms if you're if that's your style on any number of accounts

I think Hinge, that Rose feature, that catalog approach kind of eliminates that threat from social media services. Yeah. But what are your thoughts on Hinge at all? You think it could go global or anything in Europe? So Hinge is an interesting one. And I wouldn't say it's huge in the UK, but it has a different approach. They market themselves over here as the app that you want to delete kind of thing. It's more focused on finding someone and then removing the app. During the last few weeks, I actually downloaded a few dating apps and created a profile stuck in my bio. I'm just basically here to ask questions and listed the questions,

and I got a surprising amount of responses. A few of my takeaways from that. One, Bumble was the most impressive to me. I used Bumble maybe like three years ago when I was single. It was it was quite basic at the time um but they had a lot more kind of functionality they asked you straight away for for your height your interests um you can search for people based on interests whereas tinder's just still you know swipe left swipe right so tinder to me felt kind of not rudimentary by any standard but it didn't feel like it changed in the last three years since i've used it apart from a lot of ala carte menu items bumble just seemed a lot more put together. It looked like it'd been crafted to really find what you're looking for. But what

was interesting when I was asking females about their perceptions on Bumble versus Tinder and Hinge, a lot of them were not really phased by the fact that women can message first a surprising amount. And when I asked if they felt empowered by that, none of them really said they felt empowered by that. They didn't really feel that women messaging first was the primary reason they were using it um which was interesting it's obviously a very small sample size and they're all from the uk so like anecdotal at best and then when i was asking about hinge you know a lot of them said they'd used it but they primarily just used tinder and bumble so i don't really think hinge is like you know caught on so much here um but the app itself is pretty good it's pretty

clean i like what it stands for you know you're downloading it to delete it um yeah so it's interesting because bumble to me was it looked like the superior app like i would probably rather use bumble if i was single um but then a lot of the women i was asking said they don't like how focused it is on all the questions they're asking you um the fact that they have to message first sometimes which i feel would be an interesting thing in when bumble eventually move into asia because in asia the kind of culture is that women are a bit more reserved i know that's blanket statement to say um and it's definitely not the case with everyone but just in terms of the stigma of online dating makes that in with this kind of culture of women being slightly more

reserved on the aggregate i don't know how that would function if bumble would have to remove that um somebody asked me an interesting question the other day about bumbles you know flagship women message first idea as being a competitive advantage and it kind of made me think well i don't think it is i don't be interested to hear your thoughts on that but my thoughts were i don't see how that's competitive advantage to me a competitive advantage is something that's you know difficult to replicate on scale it gives some kind of leverage or an edge and i just i don't know i don't think it adds so much to the product that's a competitive advantage so i'd be interested to hear what your thoughts on that one yeah i agree with that there's probably a reason

that match group hasn't done it with any of its products if they saw that it was so worthwhile i think they would likely copy it yeah well i mean what do you people wanted us to talk about bumble so what do you think of that business independently we can kind of discuss that yeah any of the i mean do you think i guess one concern i have with bumble is like it's not really global it's only in the western world do you see them able to go you know globally like like tinder kind of is doing yeah so you guys probably have more insight into the s1 than me i've not had a lot of chance to kind of read for it yet i had a quick glance at the figures um that is basically bumble and then a little add-on with badu when they kind of merged the two companies together

the growth rates looked good until they merged when the accounts got kind of messy um i didn't really dig into it too much further than that they report their users slightly differently to tinder you know tinder just uh match group just report paying subscribers whereas i can't remember how bumble do it um but they do it where it makes it seem a little bit better than it might actually be yeah i remember thinking that um but bumble as an app the product's good i think it's good as i just said i would ponder how it's going to work in asia just with the kind of cultural differences um and then you have the company that's kind of leveraged all on one app you know bumble is basically the flagship product i know that's kind of the case at match group but they

just have such a wider variety of offerings and then even the smaller ones are growing very fast hinges growing in adoption pairs has grown revenue at like five to six hundred percent of the last five years somewhere between there um so i think it's a tough ask to say if they're ever going to be big competition to match group but you know it's still early days i think they have a good product if they have the firepower to acquire some smaller ones or build other apps in-house that could be interesting um yeah so it's kind of you know they're on the radar but i don't really see them as being a huge threat to match group at this point but that's certainly interesting and as we said earlier i don't think it's a win it takes or market i think you know

yeah i mean as an investment bumble like i mean look at it right now it's obviously training at really high valuation but uh and the growth looked good a little bit less consistent than match group which you probably see with the the basis on you know one property but well yeah the management kind of concern with you know the the history of there i don't really know any of the details but that there's a few red flags of that and the fact that our i guess i don't know yeah it felt just a little sloppier in terms of how the business was run maybe that's just because of where they're at in the life cycle um i don't yeah it wasn't i wasn't as excited but at the same time you could say it's younger it's got more growth ahead of it it could be a lot like

match group in the future uh well i'd say if you're a match group shareholder i'm kind of thinking like all right i'm gonna track what bumble's growth is if it consistently puts up higher growth rates than match group maybe that's concerned but i i see no reason why they can't grow in tandem like you know last last question on match before we move on what do you think of covid uh what do you think the impact will be of sort of a grand reopening if everyone's starting to go out again do you think that will spur more engagement on these apps or will it kind of reduce that um or do you think it'll just have no impact so it's an interesting one um and it also affects the outlook so i'll probably discuss both so in terms of the guidance that they gave for the full

year 2021 management basically just said you know we're going to match the current year which was i think 19 percent revenue growth which would take them between 2.75 to 2.85 billion for the full year management make the made the point of saying you know we're not expecting anything amazing to happen you know in the second half of the year when we quote unquote open up if that happens So they gave quite conservative guidance. And I thought that was good because, you know, you're managing expectations. If, you know, if we don't see a surge in demand in online dating, then the 90% growth rate is still good. You know, you're not upsetting anyone. I personally think they will see a surge in demand. So I think they'll top that fairly easily. but I like that from management you know they're staying realistic we really don't know what's going to happen in the UK we just got guidance saying that we're going to be kind of everything's going to be open by June 21st you know so that leaves the second half of the year where people

can you know get out go to festivals go to restaurants meet other people in person and in terms of the company and the stock I think it's interesting because when you close the economy and everyone's in their houses you know people still desire connection and human interaction you know people are more active on social media you know so in terms of the online dating aspect they're still seeking to meet people and you can see that tinder's subscriber growth has still been growing growing 19 in a year that kind of stops people doing what your apps kind of facilitate people doing which is meeting up in person and dating is still pretty impressive they weren't hit as hard as you might expect but on the kind of other side of that coin the share

prices kind of ran away with itself so when we do reopen you might see some you know selling or whatever i don't really like paying attention to that but you might see some kind of typical selling for the reopening trade but in terms of the actual company itself i think they stand to benefit from a reopening of the economy just purely because you know humans want to go outside and interact and do things and go to festivals eat food so i think people will still be using the apps but they'll also now be you know benefiting from the fact that they can actually go meet up with these people and you know do whatever people do after they match on tinder um so yeah i don't think it's a huge impediment that the economy is opening i think it's good for

the company obviously for the stock uh i don't really know and i don't really care in the short time you know right okay should we talk paypal paypal yeah all right i'll i'll kind of hit the first question so it uh unlike square or some of the yeah or some of the other um payments companies paypal isn't as intuitive so do you want to kind of describe what exactly the business does yeah so paypal is an interesting one and we're probably going to talk about it um but they have some really interesting plans for the next five years. But on the base of it, if you just imagine PayPal being kind of this platform in the middle, and on the left hand side, you have you have merchants, you know, small businesses, large businesses, and on the right hand side, you have

consumers. So they've got this platform that connects hundreds of millions of consumers with 10s of millions of merchants. And they're offering kind of value propositions to each party. And those value propositions kind of intertwine whereby the consumers benefit from having merchants on the platform and vice versa. Typically for merchants, they'll be offering kind of the access to the payments platform to facilitate payments through their business across more than just the PayPal payments system. They can use Google, Apple Pay, all that kind of stuff. It's not limited in that sense. So it's kind of an agnostic platform for merchants for their kind of digital checkout as well as the digital wallets um they also off

they have a side of the business that offers credit to these companies um and kind of fraud detection all that kind of stuff and then on the consumer end you know digital wallets they also they also offer credit facilities to consumers as well um yeah so it kind of just facilitates all that kind of commerce so everyone calls them a payments company but i think over the next five years they're going to be growing into the e-commerce space because they're actually planning on building kind of an e-commerce platform within their own app which they titled the super app and during this year we're probably going to see some pretty revolutionary changes to both the venmo and paypal app interesting in terms of that they're going to be facilitating

everything from a kind of e-commerce platform with a wish list that consumers can add items to And then the merchants can get access to that data, you know, see what they're interested in and send them directed ads for that. They're also going to open up their investing capabilities. So right now you can purchase cryptocurrency through PayPal. You can store it in your digital wallet. But they're going to be opening up to, you know, different asset types like securities and fixed income. They're talking about having high yield savings accounts on PayPal. They're also talking about expanding the digital wallets.

and there's a few other things they had in there as well they have so much it's like a whole it's like a conglomerate at this point so i haven't really tracked it as much so you're saying that they're kind of planning uh to roll out this one-stop shop for all things consumer finance i guess intermingle that with commerce as well is is that are they planning that for this year yeah so they started talking about it um a few quarters ago they're basically just saying you know we're next year we're going to be doing some pretty radical things to both the paypal and the venmo platforms you know because right now everyone thinks of them kind of just as digital wallets but they basically said um during the investor day dan shulman the ceo talked about how

you know we have 50 apps on our phone we maybe only use 10 on a weekly basis um why do you want they be using you know five different apps for five different things we want people to come to paypal and be able to access their kind of e-commerce needs their digital wallets uh needs for sending and receiving payments if they have savings accounts their investing accounts um so yeah a super app they basically just want everything in-house on the paypal platform with a brand that people can trust so yeah it's pretty pretty exciting okay well who are their main competitors then because i know you look at square with the cash app a bit um you look at visa and mastercard they're kind of frenemies the the big bear traditional banks have always been known

us to be like the you know the enemy they were trying to disrupt back in the early days or even shopify now is are they a competitor uh who do you think are their main competition uh you know going over for the next few years i think the bad question to ask is who is not their competition because as you just said they have so many different competitors from so many different angles you've got shopify with the kind of e-commerce and then also shop pay with the payments you have even apple with apple pay i know apple don't disclose a lot of information on apple pay but that is huge you have square who kind of as time goes on i'm noticing that square and paypal are kind of you know offering a lot of the same things like they're branching out

individually as companies, but then that's kind of also intersecting with what each other do. Square are known for their point of sale hardware. PayPal acquired iZettle a few years ago, which do the point of sale. They also have their QR codes, which is based on their kind of not online or offline kind of e-commerce idea. So I think Square is an interesting one. And it's probably the easiest one to draw to because people talk about them a lot. But I think PayPal just have competition everywhere. Payments providers, e-commerce platforms, brokerages now probably in 2021,

any company that's offering cryptocurrency like Coinbase who are going public had a quick flick through their S1. Very interesting. Yeah, so I just think they have competition coming from all angles. And despite that, they've gave some pretty bullish guidance over the next five years for what they call you know the next five years at paypal they've been separated from ebay for five years now so the whole kind of idea this year when they were looking back at the last five years was like

here's what we've done for the last five years here's what we're going to do for the next five years and the next five years look a great deal more promising than the last five years and the last five years have been pretty great um so it depends whether you believe they're gonna you know pull that off right they start to execute yeah what do you think of sort of this growing battle i was going to say between venmo and cash app but it sounds like potentially their super app and cash app how do you think that plays out do you think uh we see a winner in that space or is it sort of a rising tide lifts all boats scenario it's tough because it's a very competitive space and you know people like i don't know how many payments platforms you use but i currently use

a few i do have cash app i have apple pay which is the one that i use by far the most i also have paypal we don't have venmo over here in the uk um in terms of cash app directly versus venmo you know venmo has more users i think 70 million roughly um i've not read through the cash app earnings report but i think it was 35 somewhere around there 36 million yeah yeah you know so they're catching up they're growing a lot faster as well and cash app at the moment offers a lot more than venmo does if you're looking at it from a bird's eye view but as we said during this year venmo are planning on rolling out crypto across every market not just the us they're also planning on rolling out you know a kind of brokerage system where you can buy other assets as well

kind of creating that super app so i think memo is going to become although they're ahead i think it's going to become you know a bigger battle even as soon as this year cash app in the uk is not heavily used purely because it's very basic and i know in the us you guys can buy crypto and stocks as well and do a lot of stuff with cash app but in the uk it's basically just a p2p app that you can send currency to your friends in the uk or the the us um so yeah i think if cash app want to kind of compete you know they have to expand what the cash app does in europe you know it's a big market i know the us is huge but they really need to kind of line grab the uk and the eu because right now the cash app over here is just very basic and it

doesn't have half the functionality that it does in the U.S. So I think to make it more attractive, you know, they have to improve on that. Okay, so there's still a chance, like it's not, you know, in the U.S. it's kind of a closed deal where it's Venmo and Cash App. They're kind of the, I mean, it's going to be really hard for someone to come up. But in Europe, there's still potential for anyone. In Europe and the U.K., so many people use PayPal because it's kind of, it's there and it's the most commonly used one.

cash app just it doesn't have the functionality of even the paypal app right now so you know people less incentivized to use cash app but i think if square can just you know put their finger on the button and just make the cash app in the uk or the eu the same as it is in the us then they're going to grab a lot of share because they're brilliant at marketing um and they're brilliant at just kind of promoting the cash app so i think need to get on that quick because venmo isn't even available here as well so okay yeah you said something interesting there which is uh using multiple apps i think that's probably true for a lot of people like for me at least yeah you like in the u.s you have to have venmo uh you don't necessarily have to have cash app but

it's basically whatever your friends are using or whoever you're paying for let's say they buy you a meal or something you want to pay them back like it's got to be whatever they're using so you kind to have to have both apps yeah yeah it's not hard to get um we're going to talk about crypto a bit but i wanted to talk about maybe i know a lot of people do look at paypal it's not a standard business yeah you're not just looking at revenue profits whatever i mean they have those but what are the most important metrics when tracking the success of paypal because i know like if someone's new to the company it can kind of be overwhelming and it looks a bit like a black box so i would say the bulk of paypal's revenues come from transaction revenues so on the customer and

merchant side you know when a customer is buying something and they're going to be taking a little fee off that if it's in a different currency they're going to be charging a currency conversion rate same on the merchant side as well they take a little fee everywhere and transaction based revenue is you know the bulk of their revenue and you can kind of see how that grows by looking at the kind of total payments volume so i think total payments volume is one to watch you want to be looking at the net active account ads um they added over 70 million accounts this year and typically the net actives are in the kind of mid-teens to 20 range on a yearly basis um maybe slightly higher than that i don't have the numbers in front of me but for next year

they're suggesting 50 million net active ads for accounts which is still considerably high if we ignore this year and this is part of that you know the super app thing that they're going to be rolling out they think that they're going to be getting a lot of engagement there um so yeah i would say the key metrics you want to be looking at is just basically how much payments volume and how many new accounts are they opening and the engagement there as well they provide a lot of different engagement um rates kind of metrics and one of the things that they talk about is they tier their customers between kind of low engaged medium engaged and highly engaged and they stated that the number of users over this last one year that have moved from medium engaged to highly

engaged is three times what it usually is and the kind of byproducts of having highly engaged users and the reason they're having more highly engaged users is purely because their product portfolio is expanding you know they have crypto buy now pay later each of these two products increasing engagement and when you have something like a user going from a medium engaged to highly engaged then the typical uh number of payments they're using on paypal doubles and on venmo at times is by 10. so just from going up that one segment um so i think that's something to watch out for as well they're the key kind of indicators i watch over okay yeah i mean there's so much to look at with PayPal. We can talk about it forever. You mentioned crypto a bit as a way to get that

engagement up. What are your thoughts on this crypto stuff that they're doing? Do you see it as more of a marketing tool or are they talking about being an even bigger part of the PayPal portfolio? Dan Schulman is very, very bullish on the whole digital. I think he unironically calls it the new paradigm which you know but he calls it the new you know digital market and he's very bullish on that um and crypto is obviously a huge part of that he's maybe not like a jacked or a dorsey jack yeah yeah jack dorsey um he's maybe not like as clearly enthused but he on the digital kind of scope he's very kind of bullish on that he gave a lot of good guidance for it um For me personally, Bitcoin is not something that I'm that interested in.

I don't feel like I understand it well enough to have that great of an opinion, which I'm comfortable with. But then as two of my favorite companies, Square and PayPal, are kind of moving more into that direction, it makes me sweat a little bit. I know the question wasn't about Square, but Square recently just bought more Bitcoin. that's now 5% of their cash balance. So if you're not following Square carefully, you might trip up over some of the kind of logistics of accounting. You know, it's indefinite life intangible on their balance sheet. So what happens in that case is you, when the company,

when the value of the asset kind of sinks below their cost basis for the asset, then you'd have to write an impairment, reduce it on the balance sheet that would go through your income statement but then on the other end if Bitcoin flies by 500% you can't do an upwards revision and record

that the only time you can really record any gains is when you sell it so it's just an interesting one with such a volatile asset I don't think 5% of Square's balance sheet is an issue right now sorry if you can hear that no it's okay

yeah I don't think it's a huge issue with paypal right now they're just facilitating a lot of bitcoin transacting and it has like ridiculous engagement you know people check their app 50 percent more um they transact more when they're a crypto customer so i think it has spillover effects that i do like and that you know someone might come to paypal and they're like they've never used paypal before they open a digital wallet and then they kind of have access to they might open a kind of digital wallet for fiat currency when the super app rolls out they might start investing through paypal they might take a loan you know so it has all those kind of ramifications um paypal i think offering crypto

payments across all 27 or 29 of their 27 or 29 million of their merchants as well this year which is interesting i think for me i just don't have an informed enough opinion on bitcoin to really know how much it scares me right now all i do know is that it's not like a huge part of the business just yet and you know for like square and for paypal yeah so i don't think it's like an issue in terms of liquidity or solvency which is kind of the first box ticked but then if i was to see something like you know paypal make bitcoin 30% of their cash balance. It's a tough one

because I don't dislike Bitcoin, but I don't really believe in it so much. So it's hard when you have one of your favorite companies really driving into this. But then I don't know. Dan Schulman's obviously a great deal smarter than me, with John Rainey, the CFO as well.

It's a tough one. What are your thoughts on that? As long as they're not going all in, you're probably cool. We've been falling square for a long time. It's not something we own, but 5% of the balance sheet seems okay. It's not something I love, but if they went up to 30%, like you said, that would be a huge concern for me. The narrative used to be Bitcoin, those services, Bitcoin as a whole is just a customer acquisition cost. It gets more people onto the cash app or a customer acquisition tool. It gets more people onto the cash app,

and then they transact in other ways. But now it's starting to become, I guess, riskier. The price of Bitcoin starts to matter more when they start throwing it on the balance sheet. Yeah, it's less predictable. Yeah, I guess if they keep it below a certain amount, who cares? But sometimes it just worries me that the whole thesis is becoming a little Bitcoin-centric on Square.

And less with PayPal, though, right? Sorry, what was that? Less with PayPal, right? because they're not putting anything on the balance sheet yet. Exactly. Yeah, I think Square is slightly ahead because obviously I was reading through a little bit of their earnings report today.

Obviously, they have more exposure to it. The way they kind of report the revenue from Bitcoin transactions acting has people up in arms as well. I think really if you just spend five minutes and read the report, you can see they have to report it like that. They don't have a choice.

um yeah it's just it just makes things messy and when it's something that you're not overly enthusiastic about you kind of second guess yourself if i ever got to the point where i consider selling because of the exposure to bitcoin yeah that's a question i'll have to ask a little later down the line but it's an interesting one that's a question you hope that you never have to answer yeah exactly yeah the other thing is like every quarter you don't really know what's going to happen because if Bitcoin's price skyrockets, there's the idea that more people are probably going to be transacting because the price becomes its own rationale and there's euphoria around it. So I'm just curious what happens if Bitcoin dropped 80%,

like it did in 2016 or whatever, what happens then to the rest of the cash app? What happens the transaction volume um and user growth in and out yeah i'm just worried that it goes both ways that's the issue because if they're then you know right now we're saying it's not like a big issue for solvency or liquidity but then engagement has those nice spillover effects but then if people suddenly for whatever reason you know stop transacting in bitcoin you know the top line is going to plummet and although we know that it doesn't really matter because it's the gross profit you're really looking at there engagement might fall people might only be using cash app for that and then if this thesis kind of bakes into one that's like cash app is this great app

and it has all these features and it's just like bitcoin mania and then if you remove that if it ever comes to larger you know reason why people are on there and then that kind of gets removed you know the sentiment might change and sentiment's really important um yeah i was reading over the twitter earnings or the 8k that came out today and the sentiment shift in that company has been incredible so just you know it goes to show you and a lot of these companies are trading at very high valuations so i feel like they're very sensitive to a change in narrative um i think yeah this is a tough one okay wrap up questions yep all right uh first one uh what is one financial saying that you disagree with yeah so i actually tweeted this exact question out just

for inspiration earlier and i think i would just say a lot of investment advice is like really great you know when you have things like you know buy the dip or discount average but then i don't think they actually apply to everyone's situation for me i don't see the point in buying the dip quote unquote you know if you own something that's ran up 100 and it falls five percent you know i'm not going to be you know cutting my lunch break short to go like smash the buy button and buy something I already own for 100% more I think you just need to be a bit more sensible um yeah so there's a lot of things that I maybe don't necessarily agree with for myself but I feel like they are good for some other people you know if you're someone that likes

to discount average in every week and there's a big dip there five to ten percent then yeah you should probably be buying a dip because it just kind of emphasizes the reason that you're discount averaging um yeah i think that's mainly one of the ones that i find a bit more disturbing um but i think on the whole like most advice is specific to kind of whatever you know kind of vibe that you're going for if you're investing i think the biggest thing you should do is kind of make it match your personality um and then if you know kind of what your personal investing style is you can kind of fill out what advice kind of applies to you um you know some people will say that the only thing that matters is kega and then some people say you have to be comfortable holding

a company that's flat for five years for like some ultimate payoff you know a lot of these things don't really marry each other so you just have to kind of know yourself know what you're comfortable with understand the company um which sounds obvious but you know a lot of people will just buy based on some kind of like fleeting evidence and then if it tanks 25 they might not understand why they should have conviction or believe they have conviction um and then you know it's just it's just a bad way to do it over the long term um i'd be interested to know what you two guys favorite is favorite saying uh that we disagree with or agree with yeah that you disagree with yeah disagree with i would say i know what you're oh mine is by quality companies at any price i

I mean, I, I, I debate this on Twitter all the time. Price, price matters to me. Um, and, uh, I know a lot of people do well buying companies and ignoring price and just buying the best companies, but I believe it's a, uh, what are they called? The horse track thing, the pair and mutual system where, you know, the best horses are going to have the high, the worst odds. So yeah, that's me. I don't know.

I'll go, I'll just copy you. I think, uh, seven investing asked us that on our interview with them. Yeah. I forget what I said, but yeah, I, I can agree. I'm not, you know, just buying quality because it's quality. You're, we're all value investors, uh, in, in some way. So if it's not going to be worth more than what you paid, it's not, uh, it's not a good investment. All right. Um, last one. Yeah. So what is one piece of advice you'd have for anyone who wants to get into investing? And I'm going to toss one on special for you. Where do you see your newsletter going?

in like five years ideally where do you see the investment talk newsletter at okay um so first one tackle that question first i think my advice is pretty boring like and it's biased towards what i did so i when i first started investing it was just like small sums like i did make all the classic mistakes you know buying small caps i didn't understand buying stuff about you know reading statements um just buying the news basically um i think that's like a really important part of it so if you're going to be investing in individual companies just make sure it's a very small amount something that's like you know pocket change it's not going to hurt you it's not going to be life-changing i think you need the only way you can really experience the

kind of emotional side of investing is through experiencing it you know with your own kind of portfolio. I don't think you can read about that. And I think it's inevitable that everyone makes mistakes. So if you're going to make them, make them with small amounts of capital. Even if you have a large amount of money you want to invest, if you want to dabble in individual stocks, but you have no understanding, I think you should just use a tiny amount. Take an amount, half it, half it again, and play with of that um another one would be just line basic accounting it's not super difficult um but if you can just read through an income statement a balance sheet and a cash flow statement as well

as understand what the notes to those financial statements kind of mean you know it's all there in a 10k or a 10q um to really understand what the company's doing and a lot of people just don't have a basic kind of understanding of accounting so think if you can get that and it doesn't take much work you know youtube's great you can buy some books um you don't have to set a cfa or an aca you can grab an understanding so that you can kind of translate that so you can read through them and see well you know that their liquidity is good the solvency is good you know they're covering their interest they're highly leveraged um you can just kind of like translate the health of the company with your own eyes

without having to base your opinions from someone else. So I think understanding accounting. And then lastly, I know a lot of people say like reading's overrated. You know, it's the 21st century, whatever. I think reading is not overrated.

I think you just have to read. You don't have to read a lot, but if you read from great sources and what you read doesn't really kind of dictate what you're going to do. Like the first book I read was Intelligent Investor. I'm sure it was many people's first read.

I didn't really take away from that a lot in terms of the value investing approach. Buying cigar butts was never something I thought was that interesting or compelling. But the big thing that I got from that book was just the mental philosophy. I feel like it just fit my personality. All talking about Mr. Market, being comfortable with volatility, I think one of my core strengths is the ability to kind of dissociate the emotion from volatility. I don't do anything particularly unique.

And I think one of the core strengths is I can sit and chill looking at my portfolio getting smashed like it is doing this week. You know, if you're looking out a longer time horizon. So I think read books, understand basic accounting and you should be fine. I think, yeah, if you get those right, um over time you know through experience actually investing as well you should be fine and don't

use paper trading accounts i think that's a waste of time as well okay and then yeah what about the newsletter oh yeah um so yeah the the newsletter we'll just call it a one year so it's been it's been one year since i've been doing it it's been growing very well you know we're approaching 5 000 leaders which is fun and the community kind of thing is the biggest part i get from it um i interview quite a lot of people on a weekly basis and i do it written form this was like previously because i was anonymous for a while and the whole video thing was you know just kind of a roadblock to that so but i actually like the written form because i can send out questions and someone you could think about their answers and articulate what they want to say and the message they want

to get across so i think that really helped drive the growth in terms of where i wanted to go um just today actually i registered it as a private limited business um so that's all been good accountants signed bank account opened all that kind of stuff so i think in the future that's going to be something that i'm working on just as hard as i've been working on it over the past year or so and just continue to grow it and compound the kind of shared knowledge there, the community. I don't really know where it's going to go. I started it without any kind of ambition of monetizing or doing anything in particular with it. So I'm just kind of keeping an open mind and seeing where things go. The newsletter itself has opened up quite a lot of

opportunities for me personally, which is good. Being still relatively young, I've only been in the corporate sector you know for a few years now and it's given me the opportunity to earn you know significant income on the side as well as you know job opportunities and stuff like that um which i might have something more to say about in the coming months um yeah what's that called like an easter egg or something yeah um but yeah it's been really fun it's something i'm really passionate about like i've always enjoyed writing um and kind of i don't like saying educating because that sounds kind of dominating but just you know just like allowing someone to understand something better i think is the core value

ad that a lot of readers get from it so if i can continue doing that then it's all good awesome okay well that's all the questions we have connor thank you for joining us where can people find you what's your twitter handle yeah so my twitter handle is investment talk with two k's on the end and links to like everything else i do should just be in my bio on my twitter account so perfect perfect thank you connor cool thanks welcome back in thanks again to it for coming on uh but next we have hot water i have three i got two okay i'm gonna go first uh clubhouses in hot water because i listen in on a few spaces this weekend you have access now huh Yeah, I guess you're not an iPhone user.

Update does not come in on my Galaxy device. They're kind of cool. It has a better camera. They're pretty cool. It was one with like 1,000 people, so I didn't speak up, but listening is kind of fun. There was one with Rich Greenfield involved. It was kind of cool.

Nice. So definitely they got it right. It's better than Fleets at least? Yeah, well, so yes. I mean, anything's better than – Fleets sucks, okay? so that was the worst product rollout ever um but the uh i mean i haven't used clubhouse so i guess maybe i shouldn't say that they're on hot water but if spaces does well i have no inclination to

use clubhouse yeah we'll see if they can do it but yeah i don't know i think like uh i hate to be the constant contrarian but i'll fade clubhouse i'm i'll fade it hard podcast for the you know you're what i'll fade at clubhouse like uh you know everyone likes clubhouse you know i'm everyone seems to be thinking whoa this is a new thing billion dollar valuation i i disagree classic classic contrarian all right uh second one is kind of derivative off that scott galloway haters are in a little bit of hot water because twitter has been on a hair and he is a shareholder a long time uh and he got a lot of crap for it um and i mean he gets more crap for his bearish takes but he doesn't short this too yeah he doesn't short it short

stuff yeah i mean he's always been wrong about tesla robin hood and peloton those are clear mistakes but he doesn't like short so it doesn't matter uh yeah the people with the anti-galloway portfolio most of those people like are really smart i love following their new ideas and stuff but you've got to admit, this guy put $10 million on the table on Twitter and it might turn into $100 million. You've got to stop talking about him. I mean, he couldn't buy an island in the Caribbean with this investment. I don't think he cares that you have the anti-Galloway portfolio at this point.

All right, third one here, short-seller haters are in hot water. And, you know. For good reason. Yeah. So once again, this week a short seller has basically proved its worth. Because there are a lot of people that are like short sellers serve no value, that kind of thing. Whatever, it's a take I disagree with. But the CEO of MyMedX, I might be saying that wrong.

I think it's Memetics. Memetics? I think so. All right, well, sorry. But Parker Petit is the CEO. He's going to J. at it, so I guess I'm just on a bad articulation

day today. He is going to jail. He was convicted of securities fraud. He'll be in there for a year, and three years ago Mark Cohodes went to a shareholder meeting and called him out in front of everyone. Mark Cohodes is sort of a famous short seller. If you haven't watched the video, go do it, because it was electric. Probably one of the most

entertaining things I've seen in a long time. The energy was in the room. Must have just been awesome. He walked up to the stage and security had to like remove him and then he had to he stayed and he was just shouting the whole time and it was great and he was proved right it's like in the big short when he goes i gotta stand for this you know and he does the thing about what did we ever get so far you know and the i think the

funniest thing was the look on the shareholders faces that were like i mean there were like real shareholders there in front of him sitting in front of him like that didn't know about it And they were like, oh, man, because he kept asking questions, like, basically with his short case, sort of citing the concerns and potential fraud. Yeah, it was a complete fraud, right? I'm not sure exactly what the fallout was. Enron or Theranos? Is it real fraud or just partial fraud? I know that he, like, refused to hire an independent auditor.

Ah. And then, like, someone else in the room was finally like, yeah, why won't you do that? He's like, listen, if I was a fraud, I would have been figured out by now. Three years later. Then they were, gosh, what was I going to say? Oh, I mean, another one he found out, or was this a Chano's one? Wirecard. Remember that one from this summer?

Oh, man. Do you know, did you read that story? Partially. Whatever the CFO, he's gone. They can't find him. Yeah, that one's insane. Guess who was an investor in Wirecard? Who?

reminds with a arc yeah A-R-K yeah alright um okay

what do you have alright GE's culture this is from an account E W-E Deming

I don't know oh gosh I don't know he's always got provocative pictures yeah I don't know if that's like just an anonymous account or if it's actually her

whatever this is a very funny anecdote though from the new GE tell all book uh Uh, if you've heard of Jack Welch, uh, his reputation now is taking a little bit of tumble. Um, I guess we'll try to read this. We might cut it if it's too long, but it's a really funny. Uh, he says, quote, we had to brief Jack. So the president of the appliances division, the CFO

and I headed to GE's Connecticut headquarters in the boardroom. About 20 guys sat around a huge table with Jack at the head. My boss gave a few remarks as did the CFO. Then they turned to me to make a detailed presentation about how quickly the compressors would die. They were having a issue with you know part for refrigerator refrigerators i'd uh i brought charts and graphs and a knowledgeable assistant a ge statistician who had asked to help me explain how the failure was going to unfold the stats guy was in his early 60s near the end of his career and he was scared to death i started off by describing how the repairs worked i knew the details firsthand since all the managers including me have been donating coveralls and going out on

repair calls i talked about how we were trying to be as efficient as possible but giving that there were millions of affected fridges the company would have to take a 500 million dollar charge then the biggest write-off in ge's history i'll never forget jack's reaction reaction jack is jack welch the ceo fleas head back in his chair so violently that he was looking at the ceiling he screamed and just was like ah like like he's screaming to the heavens the meeting got worse from there several people tried to appease jack you know maybe if we sprayed zinc oxide on the compressors they wouldn't fail offered walter rob uh who ran ge's research lab jack's reply walter shut the fuck up sorry don't want to say i meant to believe that out but uh when rob kept

talking jack wouldn't have it shut the bleep up he repeated or i'm going to throw you out the window great culture then the statistician i brought with us stood up to speak but he was so mortified No sound came out of his mouth. He was like the Tin Man in the Wizard of Oz. Total lockjaw. So I got up again and tried my best to explain the guy's failure curve charts and the logarithms he'd brought that predicted when the next wave of outages would hit. I was out of my depth, and Jack knew it.

And he says, you don't know what the hell you're talking about. And he just started yelling. So sounds like those earnings per shares meetings, when they were trying to hit the number, they were pretty intense jack welch has uh he used to be like the king of he's like the tim cook or who's the disney guy uh eiger and now it turns out he was a little bit of a psycho yeah maybe it's just a bad day could have been a bad day but uh all right

number two number two yeah sorry i think that was worth it for that story uh credit cards are a firm is releasing a quote buy now pay later card so they're releasing

a credit card they're releasing a credit card that will replace credit cards buy now pay later it's brilliant

it's so not a credit card we're innovating that's all I have on that are they going to put a rate on it yeah I don't know are they going to

charge interest that'd be smart no yeah it's like Robinhood's 3% cash management account that stuff's great yeah that never happened

Okay, buy, sell, hold. The theme this week is beneficiaries of low housing supply. So for anyone who hasn't been paying attention, apparently the supply of houses is like an all-time low. We've been talking anecdotally with people, and it's off the charts. Yeah, house prices are soaring. But the problem is that there really aren't that many houses for sale. People are struggling to find sort of the house they want.

And so the three companies that I have here are Home Depot, so they would kind of help with people revamping or stuff like that, kind of be a beneficiary that way. KB Homes, which would be a home builder, sort of build the way out. And then a REIT ETF, I don't know, just a general play on housing. A residential REIT ETF? It's interesting, you can play it three different parts of the value chain. I'd probably go, since I don't know.

okay i don't know i'll probably sell the home builder i don't know anything about them i'll hold home depot although they are this is just short term but they are probably going to get hit by those lumber prices skyrocketing uh i'm not sure if that if they incur the cost on that but either way they're going to have to pass that on to the consumer and that could temper some stuff um again that could be out of my league but i'd probably rather buy the residential reit since I don't think I have any sort of expertise or knowledge about that industry. I might buy the home builder.

I feel like you've got to build your way out here. It makes sense. If their balance sheet's good. What do you think's driving the lows? Are people just moving out of the city and low mortgage rates? They feel like they can just buy their time horizons or forever?

Everyone's got a 30-year mortgage. Yeah, everyone's been refinancing too. I think the combination of low mortgage rates and remote work is pushing everyone back to want to get a big house, get some acreage, get a plot of land.

That's a real asset. That's not a bold take. I think a lot of people are in concurrence with that, but the supply catching up with demand is going to be interesting to see who benefits from that. Maybe it'll be the home builder. I'd be buying the home builder, I think.

if you hold the rate because if you don't know enough about real estate it's probably best to go with hand it to someone who does but if you're selling a home right now that's got to be pretty nice yeah but then you think that but then what if supply goes down again

and then you can't buy a new home yeah that's always confused me about the people that are like well your home's part of your equity you got to buy and i always think like well you always got to live somewhere so you could rent for a few years but then you're hoping the market kind of crashes yeah i mean you gotta buy you gotta live somewhere i don't know so if you sell a home it's not like you're realizing that gain unless you decide to rent yeah okay whatever anecdotal evidence uh i have two i have not It's really unentertaining, so sorry, listeners.

But Kakao M, I'm not sure who they are. I don't either. But they are a band, I think, in South Korea. They could not reach a deal with Spotify. Oh, their label, or is it just them? It might have been a label. Either Kakao M is the band, or they are a label. I'm not sure.

But it's sort of a big, popular name in South Korea. They did not reach a deal with Spotify. do you think they will learn here soon what happens as a spotify shareholder anyone that's walked away has come back that's true and you know what the funny i was looking at the mentions and it was backlash all against cacao m or whatever so it wasn't you know back in whenever it was when taylor swift walked away everyone was like yeah you know more power to her good for her and then she came crawling back when you realize that the entire audience is on spotify so So, I mean, can you build a successful,

it's hard to be a successful artist without being on Spotify, right? Yeah, I mean, as a bowl, we own shares of Spotify, so I would agree with all those statements. Maybe it's less prominent in South Korea. Yeah, because they just entered that market, for sure. It's a K-pop band. Yeah, I mean, it gets in the international exposure, though.

I think it'll be an interesting time. This will be an interesting event for Spotify, for sure. We'll see how much, I don't know. You never see the insides of the deal, so it's hard to tell, but it'll be interesting to see how this plays out. It's another one of these people trying to resist. I'm not saying I know what's going to happen, but it'll just be interesting to see how Spotify deals with it.

Okay. Did you watch the Roblox Investor Day? Yes, very good, very exciting. Bullish. direct listing is in what eight days I don't expect it to go out of any valuation that makes sense but

the company seems it seems great everyone's been saying this so we're not saying anything crazy here but it's I mean I love that they're keeping everything in house too they're even making their own GPUs we should maybe try to craft a bear

thesis like a really prominent bear thesis you know get people talking yeah so the evaluation comes out good for altimeter though getting in there early i was pretty jealous that they got in that pre-ipo or pre-direct listing what uh what do you have okay short ones verizon is planning to integrate sports betting onto yahoo sports and yahoo fantasy sports do you think this has any chance of success yahoo is yeah trying to integrate sports betting and stuff like that into yahoo sports and yahoo fantasy sports yeah i do i'll tell you why because when I was like 12

and they did the million dollar bracket challenge I was all in so I built like 12 brackets and so they've got the reach, they've got the excitement the allure, they should probably start with the March Madness tournament

go from there but no, I don't think they stand a very good chance they don't? No there's a lot of people throwing money at this reminds us of the show that will be coming out Thursday, but we already recorded it, about Evolution Gaming. I know the price is expensive,

but compared to all the companies going after sports betting, which seems like a total commodity, and Yahoo being another one now that's going to be investing millions of dollars into that, it seems like you'd much rather own the picks and shovels. I don't know if I'd call it a commodity. What's the difference between any of the apps? I think Barstool's got the only difference.

Yeah, probably. But the actual offering itself might be commodity. That's not repeatable, though. Yeah, that's true. Barstool's like a one in... They kind of stand alone because of the community. Well, maybe that lets them win, but again, it seems like there's a lot of money coming after this. Who's going to power it?

Potentially Evolution Gaming. Now, I know Evolution Gaming doesn't do sports betting right now, but whatever. All right. Anything else? Coinbase is planning to go public at a reported valuation of $100 billion. $100 billion Bitcoin. Yeah, that would be, that's so much, that's way too much money. Wait, you got it wrong.

There's only $21 million out there. But they must have, so Schwab's worth like $60 billion, right? This must mean that Coinbase, a brokerage, has twice the AUM as Schwab, right? Or am I getting that wrong? Yeah, you know, there's so much takes on it. And here's what I don't understand is, like, why are they worth, what is it, 10? How much is Bitcoin worth? Well, it's a little different because there's a lot of cryptocurrencies out there.

Yeah, but Bitcoin's sort of the big one that's bought and sold, isn't it? It's the number one, yeah. There's also Ethereum. There's some that are meaningful for sure. But, yeah, Bitcoin's number one. Oh, no, Schwab has a market cap as big as that. Never mind. It's ruined.

My joke was ruined, but it's about the same, I think. Well, yeah, it doesn't make any sense to me. Why aren't their commissions going to go down? I think I saw Brad. I'm going to steal some Brad Freeman. Why aren't their commissions going? Why aren't their commissions going to go to zero like Robinhood? How is that not a commodity?

It's a total commodity. Cash App's Bitcoin service could probably IPO at $100 billion right now. Yeah, they could totally expect it. It's a spin-off value creation. Oh, God. But you know how people have been trying to identify what an AOL Time Warner merger could be?

Legacy Player with the new upstart that doesn't make any sense for the bubble stuff? I think a Coinbase Schwab merger would be a total AOL Time Warner. Barf. I know, barf, because it would be a total value destroyer. but something like that, I mean, dude, Coinbase, maybe I'm missing something

because it said their operating margins were great, but man, I don't know. Aren't commissions all going to zero? Am I crazy? Yeah, I don't understand how that doesn't get pressure from competitors. It doesn't make any sense to me. Each week I feel like I'm losing my mind more and more.

Okay, well, maybe you are. That's going to do it for this week's show. Thank you guys for listening. Thank you, IT, for coming on. As always, use our code CCM at checkout, 7invest. We are general partners at Arch Capital, so us or LPs may have interest in securities discussed on this podcast. We're also not financial advisors, so anything we say or discuss here on Chit Chat Money is not formal advice or recommendation. Thank you guys for listening.

We'll see you next time. Bye.