Chit Chat Stocks - Justin Castelli & the RIA Industry

Episode Date: April 28, 2020

This week we have an interview with special guest, Justin Castelli (starts at 27:05). Justin is a registered independent advisor, running his own firm, RLS Wealth Management. Before we get to the interview, our hosts Ryan Henderson and Brett Schafer have their news stories for the week. Ryan dives into the Travis Scott concert on the Fortnite platform, and analyzes the Matthew Ball article discussing the immersive experiences (1:20). Brett discusses why Peloton is riding high during coronavirus, and whether or not we think the business model will withstand the test of time (8:48). Our favorite businesses are teaming up this week in our current state of fintwit (21:06). After current state of fintwit we have our delightful discussion with Justin Castelli (27:05). After the interview, as always, we have our Hot Water (1:07:00), FMK (1:13:04), and Anecdotal Evidence (1:14:10). --- Support this podcast: https://anchor.fm/chit-chat-money/support 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, April 28th. Today we have an interview with our friend, Justin Costelli. He's our friend. I guess we can call him that now. We interviewed him. So yeah, but it was a great interview. We'll talk about more of the details before we preview it, but yeah, I really enjoyed it. And then we also have our news stories before we get to that. So what are you talking about? I'm talking about Peloton. Not really much news. I guess really the springboard for a lot of people talking about it was they had their record for live streams on a class, and they've had a lot of momentum with the work from home. All the gyms are closed, so people are buying at Peloton, using the digital stuff more. So I want to talk about that and the momentum they're basically having with their business right now. And then I'm going to be talking about a Fortnite Travis Scott concert that went on, and Matthew Ball wrote a good piece on it, so we'll talk about that as well. And then, as always, we have our current state of FinTwit, Fuck, Marry, Kill, Hot Water, and our anecdotal evidence. Let's go.

Okay, welcome in. I will kick things off this week. uh fortnight had a concert this week and it was a travis scott concert if you don't know who he is he is an artist slash rapper um mostly for the younger generation i would say um yeah gen z millennial younger millennials are probably his demographic so i'll kind of cover what a fortnight concert looks like so i did not i wasn't actually part of the experience i didn't i was not involved or I was not on the Fortnite map. I don't play Fortnite, so kind of hard to do that.

But you're warped into the Fortnite map, and usually, if you don't know anything about Fortnite, there is sort of a 100-player cap per experience. This one was capped at 50 players. There was ultimately 27.7 million people that attended the concert, but, and I'm putting attended in air quotes, but basically, players couldn't affect what was going on. You could watch the concert, and you could see it appear,

but you weren't actually like you couldn't affect someone else's experience in the process if that makes sense you could control your player matthew ball described it as being sort of locked in a roller coaster if that makes sense if that's are you kind of understand yeah i understand that works i think that's a good analogy um you have the experience but you're not controlling it's kind of like a theme park uh with a preset thing although the concert um is technically live so and there wasn't any gaming component to it uh it was merely a social experience for a lot of the players um but like i said there's 27.7 million unique players that attended and this it's not new it's not a new concept they've done this now twice before this was pre-recorded routines and

animations um the the concert slash appearances that have happened before were marshmallow which if you don't know who he is i think he's basically like a dj um yeah he's one of those um and he his head costumes a marshmallow you don't really you know it doesn't come off or whatever but right and then there's also some star wars production stuff but matthew ball went on to state that he does not think fortnite inevitably wants to be a producer um but they recognize these experiences as more of an r&d expense expense to see what's viable see what the people like see i mean 27.7 million people attended this event it there's obviously some viability there a lot of people like it so and that obviously unlocks some potential down the road for fortnight in terms of

optionality i know people use that all the time but optionality on the platform optionality cop out always a cop out right it is a cop out but if you think about it instead of uh just be being a game platform they can kind of pivot that in a sense do you see this or do you see fortnight down the road transitioning to sort of a promotional platform yeah i mean it's definitely going to be they're going to try for more immersive things i think i know a lot of people talk about this and matt ball is probably the one we read but there is something where people have this idea they call it the metaverse uh which is not an original idea by us but it's like when real life and the internet kind of mold together a lot of internet internet based things and real

life things like and it's hard to explain but basically like there would be a platform either built by one company or many where a lot of these things that you used to do in real life you can also do online if that's convenient and this is kind of an example of that although it's really hard uh with like i guess you would describe it as latency speed you just the connectivity can't keep up with it for a million people to be on the same stream so it is segmented and it's not really the metaverse where you're actually immersed in this whole new world but could fortnite as an example take some of what live nations market share sure and then expand this to a bunch of other activities i think that's definitely true and i think also the gaming companies probably

have a good advantage just from the younger generation from the games itself i know fortnite has a giant lead in this but other companies like ea activision the big ones in nintendo even trying to immerse their uh players in that and eventually expand outside of gaming into more just like i don't know like living experiences but that seems way down the line this seems like the toughest thing they could do right now where it's actually a fun experience for people that are fans of fortnite or travis scott this feels really early on in what could be a promising development for video gaming um do you see this sort of helping or aiding in the transition i want to say transition aiding in transforming gaming from just a consumer a customer experience

to one that could be b2b so businesses sort of promoting themselves or advertising on the in this immersive experience yeah it's going to be a while for that just because most managers are like 50 or i guess the average age would be like 50 or 40 or something like that and this you know the people that are using this are like 20 to 30 but i think that's a good idea and then advertising can definitely play a big role if they use fortnight concerts or whatever fortnight events or fortnight promotional activities um i don't know if they had star wars pay them but if they were going to do this regularly like previewing clips of really popular movies or tv shows within fortnight exclusively um they could definitely charge for that i don't know if that's

going to be meaningful for how large of a business they are but there's a lot of potential there and the expansion of this platform if you have all the eyeballs there so much and like two to three hours a day people are immersed within these platforms there's a lot there's just so much potential for uh use cases for just anything besides outside of gaming even like way different yeah and i'm picturing even maybe to the extent where it's location-based so i'm i'm still thinking along the lines of artists but let's say post malone or someone like that marshmallow travis scott they've got a concert coming up in an area maybe they can promote that um for a lot of the fortnight players maybe in one area they could kind of do that 50 player cap experience in

a single area maybe that could be something down the road as well possibly possibly and then what do you have another note here about connected tv yeah i said uh does this kind of at any point replace connected tv as where we see advertising heading as these gaming platforms specifically right now fortnite no one's really on that level other no one's really gotten to that level yet but it could replace a lot of people's home screen potentially although someone like roku apple tv plus amazon fire tv are still solid growth engines but could you see potentially like the easiest thing to think about is would you go through fortnite to watch netflix maybe i don't really see why they would want to do that i think they want to do more immersive

things and interactive stuff yeah and there's i mean i don't know how much of a blend there'd be in the target audiences there either um as far as connected tv users people that own their own connected tvs probably aren't as into gaming just because the audience age there's maybe probably no i think i mean there's a decent overlap right young people are getting connected tvs um young younger people are playing games and it's usually males uh that are mainly playing games that's the larger audience but i think at least for now connected tv and video games probably won't overlap but maybe over the next decade they'll inch closer and closer to each other yeah that's possible um let's get to the peloton news though what do you have okay uh well

as you might imagine peloton has benefited a lot from the virus uh doesn't mean whatever still compassionate about it but what's your story called oh my headline if i was a cnbc writer would be peloton riding high all right good puns there uh very easy to write we'll start we'll start introducing it with the actual story titles yeah it's a little more interesting all right so peloton is riding high why don't you describe why yeah basically an editor but the bloomberg article came out uh it was it was all over everywhere but the they set a record with 23 000 writers in one live stream class they now have over two million subs with first or they had their first non-studio class because with the work from home stuff they had to close down so this is kind of seeing how

much demand they got after the uh shutdowns because obviously a lot of people with closed gyms are probably going to want to get peloton or peloton type things shares went up six percent after that if we look at some of the financials though i'm going to kind of play some of the bull case on you uh the q2 2020 was their last quarter and that ended in december so we haven't seen any numbers post coronavirus but we will see that in early may 81 of their revenue or 81.7 of their revenue is from hardware and that means bikes or treadmills mainly bikes no six no no i'm gonna kind of interrupt you there hardware almost has a negative connotation to it now they sell these things for a high price tag so there is still relatively decent margins on the bikes right

yeah so i'll go i guess i'll go to my cost reference um bullet point here it has basic bike which costs 2200 bucks you can get more accessories like shoes and things for more and that costs you 58 a month with a zero percent apr which is a sweet deal um usually typically if you have a car you get like two three percent apr at least probably higher and then their subscription for content and live stream classes is 39 bucks a month this includes bike classes but it's also strength yoga meditation anything you can do from home and then if you have the treadmill you can do things like that as well but that yeah that's how they charge so it's really expensive the treadmill is even more it's like 4 000 bucks but apparently it's super high tech so

it's actually like a treadmill that doesn't crush your knees and things like that uh but if we go back to the revenue they have 16.5 percent from subscriptions subscriptions are a lot higher margin and we're growing 107 which is a strong number first question here do you think the subscription number is going to grow over 200 the subscription revenue number both or or actual subscribers so one of the grow in sync sort of sort of uh they have you can do digital only which means you don't have the bike um and that can give you things that you can get some of the classes that aren't like uh spin classes okay uh but that's different it's like 12.99 that's kind of their freemium thing it's not free but it's the way they try to acquire customers hey you can

download this app if you don't want to buy the two thousand dollar bike um just on a whim you know you can try things out stuff like that so subscribers it's a little different but yeah number of subscribers and revenue should grow pretty much in sync because they charge every household the same for one subscription yeah i can see this growing 200 percent um at least for this quarter i can definitely see uh coronavirus propelling some of these sales numbers for them because i mean obviously people are locked in their homes or people are locked out of the gym they got to get a workout somehow i guess yeah i mean yeah it seems i mean logical i don't know uh it seems like everyone's talking either on twitter uh even the financial twitter

community which is a lot of frugal people maybe uh even quick anecdotal evidence sorry i just interrupted you there go ahead i've seen some of a lot of friends on snapchat posting after writing on a peloton and they're like where did they finish in the class because you can like see how you finished among everyone yeah so little little anecdotal but these are people that i would have never guessed would use pelotons yeah and it's not like you have to buy one for your You can buy it for your family or a household and there's not like a lock on how many users you can have so it Can go for like three or four people which kind of brings down the cost of the subscription and the bike as well But yeah

the the network effect of having everyone on the same platform competing for all their metrics or whatever the Output metrics and then also as a brand a high quality brand kind of that I know everyone describes things as an iPhone like thing and that can get you trapped uh in overpriced hardware stocks but it seems like they have that brand where people want to use pelotons just because it displays that luxurious thing that apple iphones also do but i'll get some more of the numbers here if we want to look at their balance sheet right now they have strong working capital and their cash balance is good post ipo and they have less than 500 million dollars in lease liabilities so they're more digital obviously than a lot of

compared to someone like planet fitness who was just in a world of trouble right now last six months they were operating cash flow positive but with bad net and ebita losses so they had a lot of stock-based compensation probably a lot of ipo related costs as well ipo related costs yeah we'll see what it looks like within a year uh when the ipo costs aren't uh put into the the calendar because they ipo'd i think in the yeah definitely in the fall right right it was right around the we work uh debacle because people were making fun of their s1 they we're a little uh artsy uh like we're changing the world uh s1 uh but they have a market cap right now of 8.8 billion ev to sales of 7.4 which is trailing so i bet that it's going to grow

or decrease to like three to four easily uh within the next few months here or not months within the next year they have improving gross margin especially on the subscription side it's gone up like 10 or a thousand basis points and they have improving network effects first question here do you think peloton could replace the gym for a lot of people yeah i mean i don't think it's gonna completely disrupt the entire gym business model it might supplement it in a lot of cases but i know there's a lot of people that a don't want to go to the gym they'd rather just get it done at home i it's hard to say without any product experience i would love to get like i don't i don't know anyone personally i guess there's the friends from snapchat but i don't

know anyone with the peloton i would love to ride on it and see if it can replace that gym experience if it's yeah if it's just as good as people saying i mean i think the churn numbers look strong um i know they do monthly which kind of tricks people but the churn numbers look good uh so i think that validates that people love the experience they're investing in this really high quality bike another question here do the high margin subs slash non-retail or no sorry not retail um hardware non-hardware revenues which is only 16.5 of revenue does that validate the market cap because you'd have to think that if they're not making money right now selling the bikes they want people to subscribe for 39 a month for like 10 years and that's where they're going to

make up all their money but i don't know it's kind of hard with that valuation i am curious yeah i'm curious if they were well so you said they're operating cash flow positive um and yeah for the last six months but barely basically break even and that's with 82 percent uh of the top line in hardware sales i'm with what these bikes are selling for i'm willing to bet they could stay cash flow operating cash flow positive with just the hardware sales but yeah the value is definitely in the subscriptions yeah that's going to be where they make the higher margin their overall gross margin has been expanding one like the overall question you probably have to ask is will they hit 10 million subscribers before or at 2025 because that would mean

assuming an arpu of 30 which is average revenue per user that is 3.6 billion dollars in sales from that segment and if you give them a sales multiple with that high margin stuff just from that segment if you discount all the uh whatever the bike stuff is break even that would give them a market cap of like you know 15 20 billion dollars depending on what their growth rate is um and i think that's really the question you have to be asking yeah i mean i could see a world in which uh peloton has 10 million subscribers honestly this is this is definitely all dependent on product experience which i guess you can look at in terms of churn rate but if you're really doing some deep dive on the company i recommend hopping on the bike and experiencing it especially

if you're if you're a gym goer yeah because then you can see because here's my thing i don't think they're going to take market share from people that bike outside i think they're going to take market share from people that go to the gym yeah they're definitely in the long run going to try to expand um not just have the bike right though they mentioned that before no specifics but they have the treadmill now and i definitely think they're going to go for like i don't know like you know the work at home uh yoga and uh well yoga is pretty easy not much equipment but strength stuff trying to get that strength stuff at home but at least right now um it seems like the bike is the easiest way to go about it but you have to be concerned because in a recession don't you think

that two thousand dollar bikes exercise bikes are going to be hit right maybe but i mean that thing about whole that whole thing about this is a recession for the rich a depression for the poor the poor weren't the one buying two thousand dollar exercise bikes to begin with that's interesting yeah that's probably why you're hearing a lot of people buying these things and $59 a month if you think the economy is going to recover. If you think you're going to get your job back, you might take that risk. It's not that big of a monthly expense, but for some people it definitely is. Here's where I get hung up.

So they're not going to the gym rats. They're not going to take market share from the gym rats because they aren't going there for cardio A. They're really not going there for burning calories. But 90% of gym goers are cardio. right so that's what i was going to say is if you can get that percentage of people that are going to the gym to take a spin class to stay at home there's probably 10 million subscribers within that range if definitely um that's where basically all their customers i would imagine

come from yeah yeah i mean because it's not the outdoors people because they're going to continue to be outdoors yeah and but i think some people might buy it just because you know weather you know stuff like that you know it's a flex too it is it is i'm telling you it's the luxury brand a lot of people uh do like to brag um because they have the peloton it's similar to the iphone or the tesla people know the price people know the price they know the price a a it makes you look good like oh look at me i bought a two thousand dollar bike and b it says look at me i'm staying in shape regardless of what you look like yeah yeah definitely and i used to be a big make fun ever i used to make fun of peloton because of their uh their i don't know what they would say

on their investor relations page on how they're changing the world but the business might be saved uh from like you know this huge transition of people staying more at home what do they call this they call us a white swan event the white swan where it's positive yeah no white swan it's just a positive black swan event i don't know if you say something wrong to lib and then that guy taleb or whatever sees you he'll probably like block us forever so i don't want to say anything just in case uh but i think honestly i might be if i had to choose if i had to either short or be long belt on i think i would be long uh and buy the stock but i don't think i'm buying any right now i'd love if we see momentum within the numbers and the stock valuation sees or stays you know in

a similar range i definitely think about it though yeah and that class experience is what's going to give them that churn and moat so um i don't think i could i do see this as a viable business and i'm not saying like like i don't think this is going to go bankrupt anytime soon but i would love to get some product experience um current state of fin twit i don't have much to be honest there it wasn't well first one uh tesla almost at 800 share is it fairly valued uh slight note the california stay-at-home order has been extended so the fremont factory yeah will be uh non-operational yeah the positive for the tesla but we gotta move on i got some if you wanna do you have anything or yeah so i said uh cash app and spotify are teaming up which that isn't that like everything we've

ever dreamed of yeah those are but our two favorite companies teaming up you know innovative management teams jack uh dorsey the enigma jack and daniel jack daniels jack they're a whiskey that i would love to have a i love to drink some whiskey with uh jack dorsey and daniel that would be exciting yeah but it's nice uh spotify is probably going to try to you know take more um what you want to call it they want to have more leverage over the labels you know get more direct to artists helps with margins long term go more yeah go more direct to artists i don't think they're taking a cut at anything like this but if they want to have those user donations i think this could be a step forward to it you know like all right you you know get

screwed by the labels stuff like that come to us rely on us and we'll help you with our 300 million users which they'll get there soon i guess they will be able to support you at least a little bit um and not just get paid you know not very much for how much uh quality you're putting out for maybe this is a chance to talk about last dance too because i know we're on a sports podcast but it was all over twitter last night yeah i thought it was good we watched it together but uh would have loved to see the 48 hours in vegas oh yeah yeah he uh of dennis rodman if he didn't watch he basically took a vacation to vegas yeah sabbatical to vegas right he had to go party because he was too tired of the regular season which sounds like a nice i wish i was good

enough to do that yeah all right what did you have for current state of finn twit okay well i i wrote something uh saying that i i ended up selling all my disney shares uh which you can go read about that but you know i tweeted i ended up selling disney steak i you know think it could be a fine investment, but I know a lot of smart investors like Matt Cochran and Steve Symington or Symington who is going to probably be on the show. Yeah, we've locked in an interview. Locked in the interview scheduled, so hopefully within the next few weeks we get that out here. We should probably figure out if it's Symington or Symington. Yeah, we'll figure that out. I just said that I see a lot of trouble over the next few years, and then some people responded. Steve responded. He said

it's not in his portfolio right now uh but he would love to put it in at a much lower price dan klein who i think just you interviewed yeah if i remember he said i'm a huge believer in disney parks and movies will fully recover and disney plus will become its biggest revenue driver with much less in contact cost compared to netflix that's an interesting bold case although i don't know if i agree as much on the netflix one there yeah so a lot of people were discussing because it's it's quite controversial because parks impacted a lot cruises impacted a lot movie theaters impacted a lot but disney plus probably gonna get benefited uh on the you know positive side right and so there's a there's some merit to what daniel klein said in that the content cost

will be cheaper for netflix because they don't have to build out that ip because it's already existing but that's not how you build a streaming platform um especially one in which it's recurring revenue like if people are going to pay a subscription it's because you are constantly putting out good content yeah so while they might not have to have higher content costs it is in their best interest to do so yeah i i think i agree more that um i'm going nowhere near disney plus and it's probably because i'm not a kid younger than 14 so yeah um all right well that's current that's that's all you had right yep okay so we have our justin costelli interview up next What did you like about it?

Well, you know, as people that aren't in the financial advisor community, we see a lot of that on like Twitter and stuff. And I know a lot of people are interested, but there's that big segment of just personal investors or just people that manage money or just interested in investing that don't really know much about financial advice and how the industry works. And we kind of talked about that a lot. And I thought it was interesting for anyone that wants to know about how the financial advisors do their daily lives how they communicate with clients in a more digital way how they're you

know coping with this uh work from home stuff you can't you know meet with clients individually so we talked a lot about that and what he wants to hope would hope to change about the industry and then the advisor communities that he builds uh which he'll probably get into more detail in the long interview so yeah we talked a lot about the collaboration component amongst rias and then we also talked about some of the advantages of being an RIA versus working for one of the larger institutions. I really enjoyed it. Social media is the biggest part, right? Yeah, I think just the different ways in which you can communicate with your clients, and I think it's almost more of a personal relationship. But it was lots of fun. Go ahead, give it a listen. Here you go.

all right welcome in today we are welcomed by justin castelli uh justin is a registered independent advisor and he's the founder of his own wealth management firm rls wealth management uh justin welcome in thanks for having me guys um so let's kind of introduce this by you telling your story how did you get involved in finance what kind of spurred your interest and then uh why'd you end up deciding to start your own firm? Sure. So I'm a little bit older than you guys. I'm 38, just turned 38. And when I was in college, I majored in econ, thought I was going to go to law school. I met my wife and then realized that I didn't want to go to school for three more years and needed to figure out what I was going to do. I went to a small liberal arts school. So I had

one finance class and didn't even really like it. So I would have never have guessed I'd end up being a financial advisor and having my own firm. When I got out of college, my dad introduced me to a bunch of different business people and I kind of networked and had lunches through the summer to figure out what I liked. And I really enjoyed the relationship aspect of what a financial advisor did. And then once I kind of went down that path and realized that's where I wanted to go, then I really fell in love with finance. So real quick, my career history, I was at an insurance-based planning firm. I worked at a bank. I worked at a company that did 403Bs, which is like a 401k for not-for-profits. I worked with a lot of teachers. And then I went when I

thought I was going to start my own firm to go work for a woman who had an independent firm in town that was looking for a succession plan. And after being there for a couple of years and being in the business for a while, I realized there were certain things I wanted to do, certain individuals I wanted to be able to work with that the traditional financial advisor model did not support. So that's when I launched my own firm. So in May of 2015, I left that firm. July of 2015, it was actually RL Wealth Management at the time. I named it after my boys. So I have three boys, Roman, Leo, and Silas, but Silas was not around to be in the initial name. So July 3rd is actually when I got the approval from the state of Indiana to start meeting with clients. So that's kind of

how I got into finance was just kind of lucked into it. I never would have guessed that's where I would be. And now, honestly, I couldn't imagine doing anything else. The finance part of things is fun, but I really enjoy working with individuals, problem solving, building out plans, helping people figure out what their goals and dreams are, and then kind of helping them get there. So it's been a fun journey. Okay. So let's go specifically to RLS. How is it different than the typical advisory firm? Or in other words, I guess, why would a client choose you guys? Yeah. So, you know, it's interesting about the financial planning world because I know I was looking at your guys' feed and catching some of your episodes in the past. I know you guys are

really into picking individual securities and on the investment side. And when you go to a wealth management firm, investments are part of what we do. And for a long time, that's what our profession as advisors has been associated with. But more and more, what we're doing is actually doing true planning. So advising clients on everything from budgeting to student loan payments to savings to investing to insurance. And I think what really makes firms different from one another at the end of the day, it's the principles and the values of the firm. So my firm is an independent firm. We're fee only, which means we don't take any commissions from any products. We just get compensated by the fees that our clients pay us. And one of the things that makes RLS Wealth

management different from a lot of other planning firms is that I have a subscription model. So I mentioned, I wanted to work with certain individuals being young professionals and young professionals for the majority of the profession have been overlooked because they don't have a lot of money. How can an advisor charge them? How can they make a living? So I have a subscription model that's geared towards young professionals, flat monthly fee. You know, it's a scaled down version of what I do with my higher net worth individuals, but it's a way for me to provide planning and advice to young professionals to help them grow to those high net worth people. So I would say that one of the things that makes my firm different is that

subscription model. But, you know, thinking of your listeners who might be one day thinking of working with a financial advisor, you know, not directly answering your question, but to give some direction. When you're looking for an advisor, I think it's important for you to find somebody that their values align with yours so that they're going to understand where you're wanting to go, what you're trying to accomplish. And they're not going to try to steer you away from that. They're going to try to steer you to that goal and building the plan, building the advice in line with your values. So if you're a young professional and you want to build in having a sabbatical as a part of your career, and you're meeting with an older advisor that just doesn't

understand that because different times, that's probably not a good relationship. So I think that what makes my firm different aside from the business model is the values that I have. and some people like those and some people don't I mentioned the subscription model being a different thing but at the end of the day once you get past that we all have the same tools you could go to you could have the debate of active versus passive investing so you might be a believer in active investing you probably want to find a financial advisor that that does that so I think those are the things that really make things different from

firm to firm the tools are all the same but you want to find somebody whose values align with you. So the reason my clients come to me is something about the way that I approach planning, my views on life, the way I prioritize family over a lot of things when it comes to my personal financial plan that resonates with them. And they want somebody who can understand that and help them do the same thing in their lives. And now, so it sounds like it's a very, it's different from like just individual equity investments. It's very case by case, holistic approach to the financial planning aspect of their life. Do you find that it's hard or that you kind of have to put a cap on how many clients that you can take in so that you can

commit enough time to like the individuals you have? Or are you still like kind of, all right, calm, we'll plan for you. And you know, you can take as many as you want, or is it kind of like a race against the clock? It depends on what kind of stuff, what kind of life as the advisor you want to have. You could take on a lot of clients and just never have any free time, or you could cap them to make sure that the client experience doesn't suffer, that there's a high level of service for your clients, and that you have a good balance. So I don't have a hard cap on my company. I'm actually going to be hiring another advisor to free up some more capacity to be able to help more people. But I have not chosen to have a cap. It's kind of more a case by case.

And some clients demand more of your time some clients don't and it's not even necessarily How much they have that you're managing or how much planning you're doing? There's just some people that are delegators and they basically say if everything's okay, and I don't need to worry about anything I only want to talk to you once a year and if there's something I need to do let me know Otherwise, I'm gonna go live my life. That's why I have you for my advisor I don't need month-to-month updates or even six months You could have other clients on the other end that want their hand held a lot and they want to be met with every quarter.

So it just really depends on the type of clients and what they're looking for. And I also think that from a business standpoint, that's part of what differs one firm from another is how often a meeting, what's the frequency, what's the relationship like. So for me, I have a very good mix of clients that some of them are delegators, some of them want a little more handholding and I found a good balance and it's a lot easier to do it today than it was even 10 years ago thanks to technology. Doing portfolio management is extremely easy because I custody my clients at TD Ameritrade and they have this program called iReval.

And it takes care of a lot of the rebalancing and investments and making suggestions on what needs to be moved so I don't have to calculate that myself. So technology makes it easier but I do think there is a threshold that an advisor can handle. It's just going to vary from advisor to advisor based off their business. Interesting. So let's pivot and focus more on the wealth management broadly. I'm curious, in your experience, how has the environment around RIAs and wealth management just as a whole been impacted by coronavirus? Are people fearful? Are people like, oh, I need cash now, I'd rather pull out? I mean, what's the environment like in your experience? so i'm going to compare this real quick to back to 2008 because that's the closest thing we have in the most recent memory of a turbulent market and recession and everything that's going on individuals are a lot more calm this time around and i've been doing a series of videos with other

advisors kind of asking them the same question what are you seeing with your clients and the the tone has been the same across the board clients are a lot more calm um i don't know if it's because there's the distraction of the actual virus itself and being quarantined that they're not looking at the markets. Or this time, it's not only the financial system causing the issue, there's a bigger problem. But really, the biggest change to the wealth management profession right now has just been doing a lot more Zoom meetings. There are some firms out there that are already virtual only. I have clients in a variety of states. So I've been doing Zoom meetings with them. I actually have some clients who are in the same town as me,

like 10 minutes away, but they're young professionals and it's more convenient to do a Zoom meeting in the evening. So some clients miss the face-to-face in person, but that's really been the biggest thing. Otherwise, it's business as usual. And I would say that the clients that are working with an advisor that they've done planning and that the advisor has done some education over the years talking about how markets work, why we're investing, having a portfolio tied to a plan which is tied to a goal those clients are more likely to not panic sell because they understand that this is part of the game you don't get return without taking on risk and this is what risk looks like so this is the the cost of investing what we're going through today and when

you have a plan and you're working with an advisor hopefully depending on where you are in life your portfolio reflects what your needs are so meaning by that is if you know if i was managing your portfolio you guys are going to be pretty heavy on the stocks and the equities and not a lot of bonds, not a lot of cash because you don't really need it. You've got 40, 50 years before you might even touch those funds. On the other end of the spectrum, clients that are in retirement that are living from their money today, we have part of their portfolio that are in bonds. Bonds, opposite of stocks, they should hold their value, but also kind of give us some income so that while the market's down, I don't have to sell any of their equities to give them the income that they're

living off of. And then it becomes just managing the conservative side of the portfolio to maintain that. And getting into the weeds of my portfolio management for retirees, I actually run a tactical strategy that looks at a 10 month moving average across five different funds, which will drift the portfolio. So in February, that portfolio for my retirees moved into a 50-50 allocation, which gradually moved down from 70-30. So there's different things that you can do, but my clients have been pretty calm. A lot of them are asking how I'm doing, which is pretty cool that that's where their heads are. And it's not about the portfolio and they understand this is what it is. And I'd like to think that part of that is their experience just as an investor, but

also part of that is the conversations we've had in the last couple of years was we're looking at great returns on their portfolio and dollars going up, having the conversation to say, no, eventually we're going to see a negative and how would you feel about that? And you're okay to handle that and just kind of prepping them for when this comes. It never makes it easier, but at least it's not the first time they've heard it and we've talked about it ahead of time. Yeah, I was going to ask when the times get a little tougher and the market's not doing so well, how do you reduce fear? But it sounds like a lot of it is preemptive. So making sure they understand the risk before and then also obviously asset allocation. Exactly. That's a big part of it. And some of the fears you're never going to get around.

So that's where the relationships come in. That's where the phone calls, the outbound emails, checking in on people, reminding them. One of the things I did early on, I think it was the third day we had a thousand point drop in the Dow. I don't usually make proactive reaches to my clients on a mass level because of the market but after that with the news i actually recorded a video and just sent them a video as an email just letting them know that i'm here if you have questions reach out no reason to panic and i the reason i did a video rather than emails i wanted them to see me and hear me and hear the confidence i have behind the planning work that we've done and i was afraid that if i sent them an email they read the email in their own tone so if they

were scared they may have read it as me being scared but here they got to see me smiling you know reminding them that we have plans reminding them that they're out their portfolio is allocated a certain way for a reason and they got to see that I was not scared so those little touches as well I think help out also but my clients a lot of them I've been with working with for 10 to 12 years so we went through 2008 together so they know that we've we've weathered a storm like that before and it's not fun, but I was able to guide them through that. And I think there's that trust that's built up over the years that helps out as well. So discussing the individual investments a little more specifically, I've heard you talk before about the concept of thematic

investing or like kind of investing in themes. So, you know, like the war on cash or cyber security and picking stocks and that, why is that so inviting to investors? Why do investors like that so much? And then how do you think ETFs will play a role in thematic investing moving forward? From a wealth management standpoint, at least for me, thematic investing is not a part of what I do with my clients. But being an advisor, trying to keep a hand of what's going on and being aware of what's out there and what the opportunities are, it's something that I've spent time researching and had a podcast episode with Tim Maloney about kind of thematic investing. And I think the reason that that is so intriguing to investors is we all want to believe that we can pick the right stock.

And I think more and more investors understand that picking the right stock is harder and harder to do today. The amount of stocks that are trading today is lower than it's ever been, I think. I remember reading that somewhere. It's nowhere near what it used to be. There's fewer stocks trading. There's more technology. There's more competition. So picking the right stock is hard. So now if you can go back out to, okay, I might not be able to pick the right stock, but maybe I can get the right area of the market. So whether it be cybersecurity or gaming or utility, whatever it might be, now there's a way for me to at least place a bet on one area I think can go better. I do think there's the opportunity for an investor or an advisor to really leverage

having some of these sector plays in their portfolios and overweighting, that's just not my style. So for the average investor, guys like yourself who are managing your own money, I think that it gives you the opportunity to place a bet in an area that you have a good feeling for or you've researched without having to have the risk of picking one or two companies and maybe getting one wrong. I think ETFs are probably the best way to do that because you could go out and create it on your own, but now you've got to have more capital to go out and buy 30 or 40 stocks within one theme. You can do it all for one price, you know, fractional shares are here. So you can even just do it for flat dollar amounts on certain platforms and be in

the area. So I look at that more as that's kind of the fun part of your portfolio for most people. I wouldn't put all of your eggs in one theme. I would look at it as you've got your core portfolio that's really going to do the work for you in the long run and you take a flyer on a few things and maybe you get it right but if you get it wrong it's not going to blow your plan up right makes sense yeah that makes a lot of sense uh one question broadly on investment products i know you know 60s 70s 80s it was mutual funds and then 90s 2000s and now it was kind of etfs have you know come in and become the most popular product that people invest in do you think there's a next step after ETFs? You know, do you think there's some place that the investment world is going to

go? Is it direct indexing something else? Are you seeing anything from like products being offered, stuff like that? Or are ETFs solidly going to be here to stay for the next decade or so? ETFs will definitely be here to stay for the next decade. We'll see, I believe we'll see a transition from mutual funds more and more to ETFs. I don't see ETFs going away. I do think that direct indexing has its place. Right now, it's really reserved for higher net worth individuals. I've heard rumblings of companies being able to offer it for smaller accounts, but at smaller account levels, I still think an ETF accomplishes what you need it to. It's not so different from direct indexing other than you don't have total control. Direct indexing, I think, really has a

place if you get into ESG investing, then you as the investor really get to build the portfolio that mostly aligns with those ESG principles you find most valuable. And today, if you go and get an ESG, assuming everybody knows what that means, ESG is environmentally, social, corporate governance. So it's kind of investing, weeding out bad actors or areas that you don't want to support. You could go in and invest in an ESG portfolio today, but you can't control. So there might be a company in there. Like let's say you wanted to invest in funds that had nothing to do with firearms and you didn't realize it, but Walmart is actually in that ETF because it checks off other boxes. But for a while, Walmart was the largest guns dealer in the US. You have no control

over that. But if you go the direct indexing route, you plug out anything that you don't want to be in there and you have more control. But I think that's the best use case for the average investors if you want to go down that path. Otherwise, I think ETFs are the best way to go. They're tax efficient. They're real low cost. It's very simple. You can get very specific, like we talked about with the themes, or you can just be very broad market and just be in the market and keep it simple. So I haven't heard of anything else other than direct indexing that will be new, but I've got to imagine that we will continue to innovate and there'll be something that will be a compliment to what ETFs offer.

In terms of the RIA industry broadly, it looks like we've seen a shift. I know sort of probably a while ago, it was more of like the sense of competition. Like, all right, he's an advisor. He can take my clients. He can take my money, that kind of thing. And it seems maybe it's through mass communications

or media, so Twitter, stuff like that, that it's turned sort of into the sense of collaboration. uh what and i know you there's a community that you have which i assume you'll talk about what is that and then how has it benefited you i would tell everybody whether you're in finance or not collaboration even amongst your quote-unquote competitors is extremely valuable i don't live in this world where it's zero sum there's enough for all of us to eat and even if you're selling products your product is not always going to be the best solution for everybody and rather than force somebody in an investment or in a product that's not right for them, how much better off

would you be sending them to the right fit for them? I think goodwill ends up coming around back to you. So it's always been something that I've always strived to do. I do think that social media has made it a lot easier. So I got on Twitter a few years ago and found this whole world of other finance professionals that are exchanging ideas, sharing their blog posts, going on each other's podcasts having conversations and really exchanging ideas and once I got into that world started networking you know my network of other professionals is is amazing and if there's something that I don't know I know somebody who can help me out that might be helping me out to help my client or maybe to be able to make an introduction to somebody so that they get better

service because I can't provide that specific need and that really feeds into going back to one of your questions earlier about is there a cap to clients maybe that becomes a problem or maybe as an advisor, you become very dialed in on a certain niche. So I have a friend in town that works with only optometrists, has an amazingly successful practice. If I ever met an optometrist, I don't know the intricacies of their business. I would refer them to Adam in a heartbeat. But I wouldn't know him if it wasn't from collaborating and not viewing him as a competitor. So I think since I know that I can't service everybody and not everybody is a good fit for me, why view him and other advisors as competitors when I can view them as allies?

And if I really want the financial services profession to look better and have a better reputation, it's better that we all act together. So we help the public in general, rather than fighting over who the next person is. Another thing that's kind of led to this collaboration is a move away from our profession from sales to advice. So when you're trying to sell, if you're compensated as an advisor by selling, the only way I make money is to sell you an investment, then maybe it is a little bit more competition between me and the other advisor because somebody needs to sell you a fund. It's either him or I. But if it's really about establishing relationships and having long-term relationships and giving advice, then the need to

eat what you kill kind of goes away. It's more about servicing the relationship and it gets back to the point where there does become a threshold where you can't take on more clients. So it is much more collaborative even though i see that and you guys obviously see it as a large i still think the financial services profession does not view other financial professionals as collaboration as collaborators i view it so much that another advisor and i collaborated together to start a community called the agc and the agc is basically a private community of nothing but financial advisors that's the only requirement is you have to be an advisor where we are in an online community, sharing best practices, sharing templates with each other, having conversations,

asking questions. Sometimes they're business related. Sometimes they're client related. We bring in guest speakers and it's really a cool environment because we're all learning and getting better as advisors. And it provides this sense of community that a lot of us as advisors don't have. I run my firm by myself. I have one employee right now. So there's not this team that I have, but I have 100 advisors in that community that I could go to and share successes, voice frustrations, and learn from. The collaborative environment is making us all better. I think it will only continue to move that direction. That's right. Yeah. And if you're on Twitter, I guess, in the FinTwit community, you think that everyone is collaborating with each other,

but that's just a small sliver of the overall financial population. right right i mean you you have in situations in certain larger firms advisors within the same company battling each other viewing each other as competitors and enemies if you will which is just to me is baffling but that's that's the culture of where they live when you're independent you don't have those those that structure over you forcing you in that direction and you can see that other people can help you whether it again whether it's exchanging of ideas making introductions. Collaboration has been huge for my development over the last few years in a number of ways. Right. All right. Well, let's move on to the next question then. If there's

one thing you could change about the wealth management industry, what would it be? I have two things. The first one is, and I don't have the answer for it, I wish the wealth management industry could help more people. There's a huge segment of the population that really could benefit from working with a financial advisor. And there's, it's cost prohibitive. So the people who really could benefit from sitting down with somebody to do a budget or just handle some basic financial advice, you usually can't get it. And, you know, I try to help out people when I can and do some pro bono work, but I'm just as guilty as every other financial professional, just because there's not a way to make a living as an advisor, helping those

people who don't have a certain level of income or certain level of assets because that's how we're compensated. So I wish there was a way to help more people when it comes to getting financial advice. The other thing I wish, I wish our profession would quit fighting with each other so much. I don't know if you guys see it on Twitter, but there are different business models for advisors. There's the fee only world, there's the commission world, there's hybrid, there's different types of fees. And on Twitter, especially, there's a lot of fighting over which business model is right and bickering. And I just think it makes our profession look bad. So I would rather there be a collective agreement of let's just make sure clients are being taken care of.

Choice is good. So let's have different business models. Let's have different relationships, different fee structures, be transparent and let clients choose what's best for them and not spend time bad mouthing each other. Yeah. That's fascinating what you said about the, in terms of being able to help everyone like i think that stems from financial education and sort of laying the groundwork and it doesn't seem you know financial advice seems kind of like it's behind a wall like not everyone gets access to it i would love to see that kind of laid um down at the ground level in terms of like elementary school or anything like that um and so that everyone kind of gets access to that same advice and that starts to get into some

bigger things like you look at education today i look at education today versus when i was going through school like so at least in indiana so much today from the education system is about teaching to the standardized tests and personal finance does not show up on there so they're not going to bring that in there's a lot of the thing is there's a lot of great information out there your podcast would be one of them there's a lot of great free resources out there for people just to start to get some basic information, start to get an interest and understanding of finance. But people don't, I don't, for whatever reason, I don't think individuals want to go. Maybe it's because they're not exposed to it. They think they don't have access to it. They just don't

know what's out there. It's something that I think we need to talk about more. And maybe it even goes further back to for so long. And even still today, the subject of money was taboo. You didn't talk about money. You never talked about how much you made. I didn't know how much my parents made. I didn't know how much we had in the bank. That was just not something that you ever talked about. And I think that because we don't talk about it in our family units, then we don't go out and look about it unless somebody puts it in front of us. So I agree that financial literacy is something that needs to be picked up. And I think that it can happen in a lot of places. School could be one and the homes could be another. You know, we advisors could do a better

job of finding more time for pro bono services. I mean, I see people out there who are making good strides forward, but we have a long way to go. Right, right, right. All right. One more question before we hit our, or one more question about wealth management and your business in general. How important is it for social media for communicating with clients or maybe on the other hand recruiting clients? I believe it's a non-negotiable for advisors. There are a lot of advisors that successfully grow their business without using social media. But for me and my personality type, it's the only way. I'm not going to cold call. I'm not going to go door to door. I'm not going to do seminars. Nothing wrong with advisors that do that, but that doesn't fit my

personality. For me, social media plays a big part in creating content because one, I do want to try to educate the public. Not everybody will be a client. Not everybody needs me as an advisor, but they need some information. So that's why I have a blog. That's why I do videos. That's why I do podcasts is I want to put information out there. Ultimately, I hope it positions myself as an expert, but to the business development side of things, it gives people who are reading and listening to me a chance to get to know me. So if you read my blog, you know, I have three boys. You know, I love hip hop. You know a lot about me that you can judge whether or not I would be a good fit from a personality standpoint. And then you begin to read my philosophy on

investing and planning. And now, you know, the business side lines up as well. So when you come in as a new client, I'm really deciding, are you a good fit for me where you have already decided that I'm the great advisor for you. So for me, I think it's non-negotiable. You want people to know you before they call. You want to build a fan base of clients before they reach out to you and putting yourself out there is the best way to do that. As far as working with existing clients, it's huge because clients want to hear from you in between your meetings and it's not as scalable to call every client every month or every week and not that you necessarily need to but there might be things to go through but if I'm writing a blog every week and I send them they're hearing

from me every week I really want to figure out how to use voice technology I have a flash briefing that I've kind of let go stagnant right now but have a flash briefing that goes three days a week that clients can hear from me if they want to. I think ongoing communication is very important. It continues to build the bond. It lets people know that you're on top of things. It may answer questions they have before they reach out to you.

And it's very scalable. I can create one piece of content and send it to all of my clients and in a sense have a conversation with a hundred of my clients once a week. How much? So you figure weekly conversations plus semi-annual reviews

plus a client appreciation event. Like there's a lot of contact there. and finally you can also use the content to kind of you know fight with the media saying so the media has one agenda which is advertising it's not necessarily to tell your clients the best things to do so if i know what's going on in the media i know what my clients are hearing i can break that down and help them understand it so i do a weekly video that they get every sunday that breaks down i just call it the week in the review i break down four or five headlines they may have heard what it means, explain it to them. You'll break down the inverted yield curve or break

down what the Fed is doing because most people don't know what that means and they hear about it and I can be the one to translate that to them so they can understand it. How much of an advantage do you think it is to be registered as an independent advisor in terms of nurturing those relationships that you make? Because I know I have family members that work for the bigger firms or that have worked for the bigger firms and they're limited in terms of how they can communicate. Like a lot of them can't use social media as a means for communication with clients. Do you think you have like a major advantage being that you're independent? From a content standpoint and being visible and social, 100%. Now I do want to throw a caveat

out there. I don't think being an independent makes you a better financial advisor. That goes back to my wish that advisors who quit fighting. I know a ton of great advisors that live in the bigger firms and do a good job. They can't do the content, but you know, sometimes there's a stigma that if you aren't independent, you may not be as good of an advisor. And that's not the case. And there are plenty of shady independent advisors as well. I know that's not your question, but I do want to put that out there. I really am. I want our profession to be, I want it to be elevated across the board and we need advisors in every business model doing what's right for clients. I don't think where you live always tells the full story, but from a content standpoint,

point yes they have compliance and if you think about it if you're running an organization with thousands of advisors one advisor saying one bad thing could blow things up for you and it's hard to manage what are your thousand advisors saying compared to my firm where there's one person creating content and it's me i know what i'm saying i know i'm not saying anything wrong i can put out what i need to put out there so it is a big advantage to be an independent and you're seeing a lot of firms or a lot of advisors leave the traditional business model to go to independent, not only because of the ability to be content driven, but that is part of the decision. Okay. We're going to pivot to your personal investing style before we get to the wrap-ups.

What do you do in terms of personal investing? Are you mostly ETFs? Do you take a flyer, like you said, on some pure equities? How do you invest personally? So personally, all of our investments, mine, my wife, the boys are in the same funds that my clients have. I believe that if I'm telling my clients they should be investing in certain funds, I should invest in them as well. Allocations might differ. I'm pretty risk tolerant, so I might be more aggressive than some clients, but I'm holding the same funds. And it is a mix of mutual funds and ETFs. So not to throw any specific tickers out there, but I do utilize dimensional funds for a lot of the mutual funds. And then I use just some broad-based index ETFs.

My investment philosophy really is, I believe, in global diversification, keeping costs low. I don't think that active management is dead. I don't think active management is bad, but I don't want to spend my time trying to pick the right funds. I'd rather just have my clients have market participation and focus on the things we can control within their plan. So the majority of my funds are there. I do have a Roth IRA that for fun, I pick a handful of stocks just because I enjoy it.

And I don't discourage my clients from doing the same thing. Um, if you have an interest in picking a few stocks because you enjoy it, uh, we'll figure out how much we can afford to do. And if you blow it up, your plan's not in any trouble and go ahead and do that. I want my clients to be engaged. And if somebody is engaged to the point where they want to buy a few shares of a stock and it doesn't hurt harm anything, then I think that's 100% okay. Um, and I even have a little bit of a, um, biweekly Bitcoin DCA that goes on as well.

I don't do that with clients. Again, if clients want to invest in cryptocurrencies, I'm more than comfortable having the conversation. I'm more than comfortable of giving them my opinion and helping them figure out what would be an appropriate allocation. But I'm not going to manage it. I'm not going to recommend which coins or which crypto they should be buying. But for the most part, 90% of the portfolio or so is exactly what my clients hold. You mentioned the term dimensional mutual funds, I think. What is that for anyone that doesn't know? It's a dimensional funds. It's a mutual fund company. They work exclusively through advisors, meaning as an individual investor on your own, you're not able to go to a retail broker like TD or Schwab and purchase dimensional funds. The reason they're called dimensional is they invest in factors. So factors are different areas of the market. Equities versus bonds, those are different factors. Small companies versus large, value versus growth. Those are all factors. And there's Eugene Fama and Kenneth French, who both won Nobel Prizes in their

economic studies that have identified certain factors. Dimensional funds, their funds are built on these factors. So they're not technically a passive shop, but they're also not active. They invest according with these different factors. They're pretty low cost for a mutual fund. I just really, I do believe in the factors. I believe in the science behind, even though value has gotten swamped for the last however many years. That's part of investing in value. So Dimensional Funds is just a mutual fund company. American Funds is a company people know. Fidelity has funds. Dimensional Funds is just another company like that that has a unique way to the way that they invest. Interesting. All right. Well, yeah, let's get to the two wrap-up questions

then. These are the ones we ask every interviewee. What is one financial saying that you disagree with? I couldn't come up with an actual saying, but I came up with, there might be a saying for I don't believe that you have to sacrifice everything for everything today to save for tomorrow. So I don't know a saying for that, but it's a principle of sacrifice everything today to build up this retirement nest egg that maybe one day you don't get to. I'm a big believer in balance. So I think that we can prepare for tomorrow while we enjoy today as well. And the enjoyment I think should be more in line with your values and experiences, not buying a bunch of things. So I kind of dodged that question only because I couldn't think of a saying. I couldn't

find a saying that tied into that, but that would be the one principle I disagree with. No, I like that. I don't think we've heard that one before, but yeah, I think if you enjoy having that morning coffee, you should not be like saving yourself. Like, you know, I feel like too many people are like, well, if I had all those coffees, you'd have a million dollars. So it's right. There's definitely, and that's an older, older mindset, older school of thought. And also we'll get to the next question. This will be real quick. I also think that like your retirement is not going to be like my parents and my grandparents. I think realistically, you guys need to be thinking you're going to work later in life because you're going to live longer life. And I

think that our careers will allow us to have that balance. I think because we're going to work longer, that gives us more time to save. It gives more time for the money that we do save early on to compound. And it may even be a scenario where we work like a corporate career for 30 years. And then the next 15, 20 years is consulting or freelance work to bring in some extra income, but not a traditional retirement where you don't do anything. And again, if you have more time, that gives you more years to save more years to compound i think you'll have sabbaticals that come in and you've got a plan for those things to be able to be able to do it so um i i really do believe in finding about and i personally do that for my myself so i practice what i preach okay

what is one piece of advice you have for anyone starting out in the investing world ah it's a tough one um because i wanted to go investing but i'm going to put my advisor had on. So forgive me. I think that managing cashflow and understanding your cashflow would be the first thing that's most important. Meaning live below your means. Make sure you have an emergency fund. If we're ever seeing a time where the value of an emergency fund is very important, we're living it right now. Whether you're being furloughed or you lose your job or you own a business and your business is making less money, having money that's liquid and safe because you've saved is very valuable.

So I would say, make sure you understand your budget, have a budget, live below your means. And then that's when you can kind of get into the investing. And when it comes to investing, I would just keep it simple. Right. All right. Well, thank you, Justin, for coming onto the show.

Really enjoyed it. Hey guys, I appreciate it. I had a blast. Welcome back in. Thank you once again to Justin Costelli for coming on the show. Next up, we have our hot water. i'm gonna go first all right okay go ahead uh hopefully you don't steal anything i think i

might have because this one was hilarious it was on twitter um silicon valley is in hot water because they have officially taken things too far this week i stumbled across an app called human ipo.app well you did not stumble upon it um no i other people tweeted it all right okay yeah no i stumbled across it on twitter um but here is the uh the front page of the website it says human ipos of people you believe in issue and trade human equity backed by future time it says meet publicly traded individuals so i went to one of these accounts and it says mike merrill world's first publicly traded person mike merrill took crowdfunding to a new level when in 2008 he divided his self into a hundred thousand shares and sold them at an initial public offering price

of a dollar a share uh there were people in the comments saying this is the new sass slavery as a service yeah maybe that's taking a little too far but this is a bad idea right this is uh i mean this is slavery you're selling individuals for their work i mean obviously it's a little better uh lifestyle but it's technically choosing a lambda school is technically indentured servitude although people you know it's you're not you're choosing whether to do that and this is technically a form of slavery because other people own a person but they're it's not like they're forced to do this um how to how bad of an idea is this terrible it's awful is there any scenario in which this works no maybe if they invented this in the 1300s

silicon valley there was the tweet where silicon valley uh forget who was silicon valley like what do they do they reinvent slavery as a service in the digital with using digital tools like every three months it's wild like that i mean that's just what they do it's it's it's insane like we want to you know lower the cost of human capital i mean dude come on guys like you i Would you invest in any one of these people? I don't want to own any other person. That's just too – like I love investing but no, no, no, no, no. Okay.

All right. And then the second one that I had here and this is a real one. Zoom may be in hot water because this week Facebook announced a new free video calling service of up to 50 people. Do you – and there was a lot of debate on Twitter. Do you think this poses any material threat to Zoom's business? probably not because yeah i don't think so as long as they still have the free tier for zoom and then they make all their money from businesses a lot of kids and people that are just doing it socially are going to use zoom i don't think either way and it's going to be fine i i believe

i don't know i don't think zoom was initially intended i mean initially it was intended to be b2b so yeah it wasn't for the social aspect like oh let's zoom as a family and they don't want to make money on that it's turned into that which i think facebook facebook could eventually take that from them but that doesn't hurt zoom's business model no and yeah it's big you know the social aspect of maybe just a family call or friends uh calling is just free marketing for zoom and if that goes away they're gonna have to spend a little more on marketing but you know there's gonna benefit right now i feel like businesses would never take the facebook video no no no yeah no because they know they're like no i'm not just gonna let you steal my data

and advertise yeah yeah but facebook's not it's not professional um i don't know that's just my feeling all right um that's all i had for hot water okay well i have the human ipo one so next week i get to go first because you've been stealing mine by going first usually have more though so yeah i guess i have some here all right the berkshire meeting that was in hot water charlie munger will not be participating in the live stream saw this probably worried about the corona but i don't know maybe not hopefully you know fingers crossed he's doing okay uh but the other guy if you're interested uh in berkshire if you're a person yeah he will be doing the question and answers with buffett so that'll be cool to see maybe the you know the guy waiting

in the wings um ebita though is also in hot water because covid19 is officially an ebita adjustment line it was on multiple sec filings don't know what companies but they had coven 19 related costs and then they were backing that out for their ebitda uh lines ebit uh you know i might buy an ebitda mug yeah it'd be nice i'm paying attention to ebitda numbers yeah i'm definitely i want to make a liquidity shirt to order a party but we're getting too old to uh wear t-shirts to parties anymore so that's disappointing okay uh what else let's see one more oh martin screlly haters we talked about this before but one company is prepared to work on trials for a disease cure treatments with him if he cures this virus and saves the world that would for one be quite the

twist and two should he just be released from prison and just allowed to do whatever he wants as long as he doesn't like murder people for the rest of his life like free everything sure i think what would be in the best interest of the public would be to just give him a billion or two and say you're not allowed to defraud anyone with this or up prices by a thousand percent on pharmaceuticals for people that die for that or do that but you can be rich here you go uh it's free money just do research be do everything you were doing without the money component yeah that's probably a better way um okay fuck mary kill this week the theme is earnings that come out tomorrow as of the time you guys are probably listening so wednesday april 29th

earnings that come out that day hey that's the biggest day uh it's not gonna be the companies you were hoping for this is boeing ge and ebay ebay interesting boeing ge ebay all not great not good not good um i'll marry boeing because they're too big to fail i'll fuck ebay maybe they had a nice boost and people are kind of forgetting about them and i'll kill ge just because the pension liabilities are terrible but i would own none of these now and okay yeah what do you got i'm thinking probably the same maybe there's that that value play bump on ge earnings or something that i don't see as possibility but maybe um but i think it's more likely that there'd be boeing is probably the one i'd marry and then the other two are kind of a toss-up um anecdotal

evidence though i didn't have much no i had some i've had it with young people young people you are young i know i know but i hate i can't take it anymore i was told this week that the odds of getting coronavirus are less than winning the lottery because total confirmed cases divided by the world's population is really low right right they're really smart they've probably been watching a lot of youtube videos i'm losing hope in humanity um in the future it's been a rough week but yeah hopefully it's just the dunning-kruger effect um yeah if you explain them the dunning-kruger effect i think those people would probably say like nah nah that doesn't apply to me which is rejection the dunning-kruger effect other one what did you think of the netflix movie

extraction very good um i think it's a one-timer it's not something i re-watched but it was good yeah i liked it um i liked it a lot yeah for an action movie great watch there's my subscription renewal for a month yeah that's worth the ten dollars you'd pay the movies um definitely worth it and yeah shows that pricing power although we act like we're netflix bulls we don't actually own the stock but yeah maybe we should okay what else i got one so the fangs and i guess plus microsoft are trading like they are immune to a recession do you think they are dry powder baby you got a whole lot of it i guess they got a lot of cash but what if google and facebook's ad rates plummet and the business and the revenues flatline then there goes our website

revenue yeah that yeah we don't get any money from that that podcast revenue uh definitely i don't know better rates i mean if you think i don't know you don't know i mean there's so like are they recession winning the whole winning begets winning thing i'm not buying the stock i don't own the stock i don't necessarily know if it's a good idea because just due to the law of large numbers but with that much capital you and not much free capital you can make mistakes yeah but what if you can afford them yeah i know but i just i don't think any of those companies are recession proof you know amazon i guess is anti-fragile in this situation uh but why the other ones i don't why are they not recession proof if the economy

retracts these companies are basically the economy wouldn't they retract yeah yeah the ad revenue is makes up a lot of these businesses but amazon i would almost go and say is recession proof at this point what if this recession okay this recession yes but in a recession what would amazon is not recession proof they are the consumer economy them and walmart are not recession proof they might you know they have a floor they have a high floor but they are they're not going to grow of the five i would say they are the most recession proof amazon maybe action maybe i'm taking that i might take that back i don't know microsoft would be haven't done enough digging into it yeah that's the second one but businesses though if businesses

are going out of business i mean is anyone recession proof yeah well coca-cola mcdonald's maybe yeah and i guess walmart you could have that argue that but whatever but hey coca-cola didn't make it through this recession so what do you know they did but 25 of sales were down because of restaurants stores oh right right yeah well this one i guess is a special case so maybe so maybe mcdonald's and that's it maybe yeah may and walmart i guess they're always around okay well and that's gonna do it thank you once again justin castelli for coming on the show follow us wherever you're listening. Like and review. We really appreciate the reviews. And you can email us for any ideas, anything you want to talk about at the chitchatmoneypodcast

at gmail.com. That is chitchatmoneypodcast at gmail.com. We are not financial advisors. Anything we say or discuss here on Chitchat Money is not formal advice or recommendation. Thank you guys for listening. We'll see you next week. Thank you. It's an honor.