Chit Chat Stocks - Power Hour #13: FCC Tik-Tok Ban, Inflationary Tug-of-War, UBER Stock Potential

Episode Date: July 3, 2022

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Restrictions apply. Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guest is not

formal advice or recommendation. Now, please enjoy this episode. This is the Chit Chat Money Investing Power Hour. I am Ryan Henderson. I'm joined by Brett Schaefer. I got to silence this real quick. And we are live at, it is 1224 on the West Coast, but 324 on the East Coast. We typically do these at 12, so I apologize for the delay.

We had a power outage, so. We did have a power outage, so not our fault. Hopefully our few listeners or our few viewers that watch us live are still sticking around. And if you have any questions, feel free to throw them in the chat. What do you have this week? Anything? Well, maybe I should introduce the show. We riff on anything, financial markets.

I actually talked with a listener or friend of the show last week, and he said he really enjoys this type of episode because we are more candid and honest, even if it's sometimes brutally honest. So, we're going to try to be extra edgy today. Okay. No promises. Well, TikTok was reportedly the FCC wants to ban it, right? So, every advertising company is saved?

I guess. Well, not advertising company. Every advertising platform in the United States. And then I saw there's been a bunch of stuff in crypto. which seems to be totally blowing up, although the Bitcoin price, I don't know what's connected and what's not, but

the Bitcoin price isn't in too bad of shape, but there seems to be a lot of blowing up. Well, it's below $19,000. Oh, it is. It's back down below $19,000. It's in the teens. And Michael Saylor bought more. Yeah. Well, what do you expect? All right. Wait, hold on.

There was a question that was posed this morning. Is he an idiot which i know is a little harsh or is there a way that he comes out of this making a bunch of money for himself or both yeah it's definitely both he's definitely gonna make a lot of money i think it hasn't it been his kind of personal piggy bank since the dot-com bubble uh but who knows it could totally blow up but i mean how is it not going to blow up i mean come on levered up to buy some magic beans but it's such a weird situation i don't even know what to think about it how could you live life like that like knowing at any moment you could get

i mean he knows when he would get it but being living life so close to the edge like with that margin call like he can't i guess it's he can always file company bankruptcy and be fine himself i'm sure he ends up rich out of this somehow but i don't know i could not i could never fly that close to the sun yeah he is seeing any clips of him he's an interesting character for sure he's dedicated he thinks of it in almost religious kind of religious right you know what i mean like it's like a it's not you know not necessarily religious but he says in bitcoin we trust very similar to the the common line in god we trust exactly exactly all the dollar bills yeah but what about what did you think of the f did you see the fcc write the letter asking uh

google and apple to take tiktok off the app store app stores i didn't read the letter but i saw the news did you read the letter i did it basically was what you know people were tweeting about he just said that um i don't know this wasn't the head commissioner it seemed like it was just a deputy but yeah he was just saying that there's a lot of evidence that what tiktok says that all the data in non-chinese places stays you know localized is not true and that there's a lot of evidence that there's a direct access for the CCP and blah, blah, blah, blah, blah, all that

stuff. And that violates a lot of Google and Apple's policies and should probably be banned because of it. A lot of people... And maybe it's surprising

or maybe this is just because I have a way different idea about TikTok than a lot of other people. A lot of... I don't know. just maybe it's just twitter twitter people but think of it as they kind of equivocate or how am i not why am i saying the right word like they compare it to you know facebook and google and whatever and all the other social media companies and say well tiktok's doing just what these other social media companies are doing and it's but it's from china and i kind of think

well yeah that's kind of why like two reasons one the ccp has basically direct access to almost all the large companies um you know nudge them to do what they want blah blah blah there's a lot of evidence of that and two uh china banned all u.s apps so it seems a bit unfair or not all u.s apps majority right majority of these long large ones so it seems a bit unfair to just let their you know not state-sponsored product but their you know facebook of china kind of deal see what i'm saying does that make sense allow them to operate willy-nilly in the western world well we can't operate and google's down there isn't it he i am 95 sure that it is banned although there was reports they were working on a chinese-based one but i'm sure that is scrapped

now giving the relationships have um between the two countries are way farther apart than they were like five years ago all right well that leads into uh something i wanted to talk about even though i know we're not supposed to come prepared with anything um right okay the i read uh sort of sort of a friend of the show, a friend of mine writes this newsletter, um, called the coffee can portfolio. Kind of interesting. He talks a lot about macro and he listed a whole bunch of, in this newsletter, he lists a whole bunch of stuff that a whole bunch of factors contributing to like the labor shortage, the supply chain, um, price inflation, like all the different factors. And basically, I'm going to name them to you and you tell me whether you think it's temporary or here to stay.

Oh, wow. This sounds like such an easy game. Okay. China lockdown due to the surge in COVID cases. You mean what's the certain one or just perpetually having new ones coming down the line? is that what he means let's say let's say like perpetual lockdown well not like different ones pop up you mean like shanghai might be locked down in 2020 late 2023 well given their policy of no covid uh zero covert whatever policy through 2027 that they just outlined and reaffirmed i will say that will continue in all likelihood semiconductor shortages temporary caveat if we get another crypto bubble i want to revise my opinion but it's i mean the who's a good fault

who is it take him reporter for the for bloomberg has done a lot of work on how or not work he's kind of just made this Twitter thread, which I'm sure is accumulating to some good work on it, that, what are they, GPU prices? A lot of the stuff is coming down in the secondhand markets. So I think supply is opening up. But that is only a small part of the market. So maybe some of those automotive stuff, whatever, won't be fixed, but we'll see. So if Bitcoin hits $10, you think the chip shortage is over? That would be helpful. If there was no demand for crypto for semiconductors, that's clearly helpful, right?

Yeah. I mean, yeah, it has to be. All right. Another one. Early retirees due to the wealth effect. I think you can probably answer this one. It's sort of hindsight. Yeah.

that one's easy temporary both crypto and stock market and housing price well housing prices we'll know within the next year

but I guess what we talked about last week still firmly in the camp that housing prices are totally unsustainable given the

mortgage rates but yeah the wealth effect probably over well or it'll be because I guess

it's like a spectrum it'll be way lower on the spectrum unvaccinated employees quitting due to vaccine mandates I kind of forgot about that I don't know if that's still going on well not Major League Baseball

but the Blue Jays have an advantage because in Canada you have to be vaccinated and some players on the teams can't go across the border so they have an advantage when the Blue Jays are playing in Toronto. That's besides the point. I didn't even know this was still a headwind or what, an inflationary thing.

I mean, that's got to end, right? All those things. I mean, we live in a pretty, you know, area that was pretty strict about COVID. That stuff seems to be ending, right? Yeah. And there's been apparently a big wave of COVID cases and I haven't seen any policies really change.

like any we didn't go back to what we were at uh yeah is there we'll say that one's temporary then there's no it seems like all the government officials in the united states or the vast majority have forgotten um or not forgotten decided that you know the juice isn't worth the squeeze anymore china is definitely a big concern for COVID related stuff. What about trade war with China? That is

all those questions I've been answering with maybe I sound confident some of them they're just guesses this one I have no clue who knows it comes down to who's in office in all the different offices

in the United States Is she gets reelected Or not reelected Quote unquote Reelected Yeah Right I mean who knows

Alright Under investment In Like Scarce resources So Oil Oil production

Facilities Natural gas Pipelines that underinvestment? Do you think that continues or will it be cured? This is another impossible question because there's so many variables, but it cannot be cured within a short, short time period. It's got to be at least multi-year from what I've read. So what's your definition of temporary? Two years or less. I mean, if the definition of that being solved is oil prices come down,

then I way, way am unsure. But if oil prices just come down from demand destruction, it's so hard to answer. I mean, who knows? We could start ramping up nuclear. We could start doing a whole host of things but it given like the long-term nature of a lot of the how long it takes to build up a lot you know the stuff we're talking about here it can't be solved within a year so this episode is brought to you by lakinta by windham here you are miles from home and ready to start your vacation good thing you're staying at lakinta by windham they have free high-speed Wi-Fi to stream all your favorite movies and in the morning get fresh waffles with their free

bright side breakfast or squeeze in a workout at their fitness center either way you're ready to conquer the day tonight La Quinta tomorrow you triumph book your stay at lq.com I want to say passed all that one but I would say not temporary oh that's devastating I don't know I could totally be wrong i literally i have no idea that's such a that's such a hard question there's so many variables at play we got a question i think is that is that all of them and uh those are something oh it's alex but i got a question from alex and i'll say i loved your uh bumble right up this week if it's the alex i'm thinking of probably is he says if we can pitch questions uh in regards to the last convo if the u.s takes real action against tiktok comfortable owning are you comfortable

owning starbucks nike long term or ultimately face significant pressure on their china biz in retaliation great question thanks alex go check out his stuff at the science of hitting uh we've had him on the show before do you want to answer that one i think that's a tough one that's a tough one i'll let you go first while i think of my answer uh it i am not uh well let me say i am discouraged from owning nike and starbucks because of the china situation and that's why i'm also discouraged from owning apple what's the other big one like costco although costco is only a small amount there's a few others there's a few other companies lvmh maybe stuff like that

And I guess if there was real action against TikTok and there could be a sort of escalating thing going on, yeah, I would be nervous about owning them unless I could get a good discount because those are just such solid brands in the Western world. So I feel like if you could get a good thesis going or... Not a good thesis. If you could have a nice pitch or a good, you know, the valuation looked good X China, which right now with both those companies, likely it doesn't, although I don't follow them too closely, I would get, I would not be tempted to own them at all. Does that make sense? I feel like I tried to answer it without answering. I haven't, I haven't followed Nike that closely and I kind of, I guess I could say I've followed Starbucks just because I read Alex's write up on them. And Howard Schultz, I believe, said he thinks they will have more stores in China long-term than the U.S. Yeah, I didn't like that.

I did not like that. That would be extremely discouraging. I mean, yes, there's the opportunity there. It just feels like you're adding more risk, if you go with it, right? You kind of agree with me. Things could work out fine, totally. And Starbucks could have a huge business in China. And shareholders could do quite, quite well.

But it's still always in China. That business is still always over there. Yeah. And I saw something this week that all foreign companies now have to set up some sort of separate bank. Gosh, I didn't read this. So this could totally be wrong, but they had to set up even another sort of bank account or something with the CCP or something like that so it makes me yeah skittish yeah that's probably right i'd say i have probably a similar take um and in regards to starbucks if you had to bet i i'm sort of i've i've grown like less interested in starbucks as of late and there's been part of like the union stuff good point kind of kind of weird uh probably probably doesn't help them but also they're

reformatting their stores to be more accommodative accommodative to uh like this new style of order and a lot of pickup and less like sit in and i feel like that kind of erodes the value that starbucks has like i think part of starbucks's value is that it's like this experience beyond just the coffee and if it's just like this um giant like drive-through is it that much better than another drive-thru. Yeah, interesting point. Yeah. I don't know.

I never understood Starbucks, but the lines are still long. Maybe that's just the drive-thru lines because no one's in the stores anymore. Good point. That's a good point. Although I haven't checked comp store sales, so maybe they're up and I'm wrong.

no the business looks healthy ish yeah i have a hard time getting baristas don't like it there's outrage from baristas yeah well that was in that was in alex's write-up yeah it feels like there's easier places to play i mean it's a it's a quality business here's the here's one that makes me a bit nervous is that schultz can't seem to set up a culture where he it can be run effectively after he's gone so yeah that's concerning for long-term shareholders he's always got to come in and play hero yeah he also sold the sonics so yeah so he's dead to us forever exactly i'm biased against him i do not like him i read i think it was in saudi america that he was like,

I would not have sold if I knew they were going to Oklahoma. And he said he was just selling it to a different owner, but he thought it was going to stay in Seattle. I don't know if I'd buy that. Yeah, that's wrong. That's definitely a lie.

But that's not... That's Seattle sports stock. Let's go to investing. definitely never owning Starbucks on that what about Nike have you kept up

with Nike at all yeah I mean when we did a show on Lululemon I kind of looked at them just because they're one of the largest competitors

I was looking at the younger there was a great who does it it was one of the investment banks does the teen survey every

half year I think maybe every quarter and it's basically people under 18 or people under 21 and it's just looking at what's

your favorite brand or company or items across a variety of different things like food apparel electronics blah blah blah and nike dominates for the most liked across both well what men hire which makes sense but uh woman or i guess teenage girls you know blue 11 as expected is higher but nike holds that quote-unquote market share of likeness and it's quite quite high they were the most distinctive if you kind of get what i mean like separation between one and two across all of the different things so like what was number i think the top three for food was Starbucks,

McDonald's, Chipotle. They were pretty tight. But Nike and Peril just crushed everyone. However, What are the odds of an Under Armour comeback? I don't think that's the biggest threat here. Lululemon is a decent threat,

although they do serve slightly different markets for a lot of their products. Jordan's a great brand. They locked up a lot of the good athletes there's still some china risk though and that's tough here's here's the i think apparel is a little even tougher in china because i read a story about how h&m oh gosh was it h&m i think it is yeah they had a great business in china and then they made some mistake. And magically, a year or two later, no one was buying their products. And that seems like just a terrible risk that you don't know. You can't quantify. It's not a risk of permanent

loss of capital because these businesses don't have 100% of their businesses in China. But it's a risk that for whatever, like, I mean, if they can just convince people to not buy H&M for whatever, however they did it, that's, they can do that to your company as well. That's, at least that's my huge, that's my big concern. So what do you do? Let's say you're running Starbucks. I don't know when they started in China, 15 years ago.

Oh man, it's impossible to operate. You have to keep going. you've saturated the us and north america i don't know if they have i think they've still grown store count pretty quickly even in the us not quickly but a decent amount um would you go to china or no i think it's a i don't think it's a two-way door are you saying 15 years ago yeah i mean let's say you're a business like starbucks today you saturated the rest of the world do you try to enter china that's such a hard question it's such an i mean it is an enormous market

that's such a it's an impossible question i would much rather i can't fault them you can't fault them for going after china but it does if that's baked into the valuation today yeah you're less likely to uh become a shareholder that's what you're saying for sure for sure i don't think that's i think a lot of people this is not some hot take at all no it's not did you listen to the chris bloomstrand berkshire interview no i did not i saw it i obviously did a fan i already know he did a fantastic job i have read too much listened to too much about berkshire i know the business too well and i'm never gonna own it so i'll never say no but i don't need more i don't need more i've heard that story a hundred times i'm sure it was fantastic i i i he does the

best work on brochure but no i did not listen i'm sorry no well it's worth the listen anyways but the uh i i i disagree i haven't listened but i disagree i've listened to this stuff a hundred times i want to learn about other i mean it's not just about berkshire he's talking about like the dynamics of being a holding company how certain or an insurance business beyond berkshire like the disadvantages it's worth the listen i'm having listened yes i know what berkshire fair fair if you haven't heard that stuff before but as someone who's listened to that same spiel that you just described a hundred times i'm not interested you're gonna listen one day and you're gonna be like oh it's wrong oh yeah i've heard yeah wow holding company how do you operate

decentralized oh no bureaucracy oh my god thank you no no it's more there's more to it you'll listen you'll see guarantee guarantee i i am i am not gonna i will i am not gonna listen there's thousands of millions of podcasts and millions of conference calls i mean i've i know too much about berkshire hathaway for a company i'm never gonna own like i i know so much about it there's no such thing there's no harm in knowing something about you no it's just about something you want i kind of realized like is it just a waste of time for me to study berkshire too much Also, why would you say you'll never own it? Well, I mean, sure, if the price collapsed by half tomorrow, yes.

I mean, what if the value was still there? People probably said that in 2018, 2019. Yeah, but it's not, again, I know I'm not going to buy it unless it got stupid cheap. What's stupid cheap? One where it's way below where they're buying back. So, look. The most discouraging thing for me is that it's like the most followed company. Yeah, I don't.

As the, you know, I got all the quotes from the Buffett and Munger in my head. As they say, fish where the fish are. I'd rather go somewhere else. I mean, look. this episode is brought to you by kpmg as a business leader how can you innovate build trust and move forward in a digital era kpmg can help by bringing together the right talent and technologies generating insights that spark opportunities to explore their thinking visit read.kpmg.us slash opportunities it's just i feel like not worth after you've studied it

It just, I'd rather use the lessons from studying Berkshire Hathaway and getting how they were so successful, you know, whatever, there's probably a dozen key tenets over the years of why they were so successful and using those lessons to search for those traits in other businesses and studying Berkshire even more while not being a shareholder feels like a waste of time when I could be spending that time studying a different company. the uh do you think you would have passed on it in the 90s uh that's the only time no that's the only time i know i wouldn't have bought the 70s because of the ownership structure that's the only time i feel like i would have like looked at it as a potential buy but i'm sure i would have passed no i mean no we own some berkshire like like stuff so yeah i owned a berkshire so that i could go to the meeting well no i'm saying we own berkshire we don't we well yeah we like we like a berkshire shareholder i know that's that's a fake that's a fake i have one that's a fake

thing. I don't want to be sure it's fake. I mean, we own Berkshire-like businesses. You know what I mean? The holding companies, the conglomerates. We like those. We like looking at those. So I think, yes, I would have gotten interested

for sure. I have no idea whether I would have hopped on the train. But definitely in the 70s and early 80s, there's no way I would have been looking at that complicated ownership structure and saying, what is this? This could easily have been a fraud, right?

Or we were talking about that with someone. You know, you'd look at it, you'd be like, wow, like self, not self-dealing. I mean, some stuff that looked like maybe self-dealing. His son's on the board. His son was on the board. You'd have been like, oh, red flag, red flag, red flag. And yet it was turning into one of the best

performing stocks of all time. So I feel like you could have probably just heard him talk like once and been just like been completely like if you listen to one annual meeting any any gripes you would have had about management it's like competence or self-dealing it's a good point if you went yeah we're going to the annual meetings if you read the letters and went to the meetings yeah that's a good point have you looked at anything recently worth uh worth talking about Wise just had their annual report Really really interested in them

Transfer wise X yeah Used to be transfer wise Now wise I heard something about the CEO's Taxes Oh he's avoiding them Did you hear about I don't know

I just heard something about this Well Avoiding taxes is never good But as a shareholder i don't think that's a giant red flag given that i would like them to avoid taxes for me as a shareholder as well so yeah i haven't looked through the whole report but let me pull up the valuation here it has really really strong margins and it's trading at about five and a half times sales profitable

yeah here last year it came to light that last year it came to light that the uk tax authority hmrc her majesty's revenue and customs had fined wise's ceo cristo carmen 365 000 in relation to an outstanding tax bill of 720 000 never mind he was illegally evading taxes i do not condone that legally get finding loopholes That's fine as a shareholder But that's not a good look I mean, I don't think $365,000 is that big of a deal

No It's not, yeah I thought it was just like one of those You know, Bezos type ones Where he didn't pay any taxes Or blah blah blah, you know what I mean But it was legal Yeah

I don't think there's a whole lot to take away from that I mean, we covered Wise. We haven't done... No, we didn't do a deep dive interview. We just covered them on the show, I think, basically a year ago. They IPO'd a year ago. Very, very intrigued about these new age, what are they called? Remittance companies. At the time, I think I was just getting caught up in the crypto hype. I was worried about crypto being the big competitive threat for the remittance market. Not a chance. But after researching that more, yes, I agree. Not a chance, given the fee structure of those. I mean, Wise has... They seem to have a great head on their shoulders. Their strategy is sound of lowering fees

to give themselves a competitive advantage over everyone else. Remittance market has inherent competitive advantages because of the regulatory stuff you have to set up in all the different countries. And I mean, they're not even to the point of Western Union. It's been years and years and years. um they're adding on very high quality products anecdotal use the product the debit card is great if you basically transfer to this the foreign currency within the app you can use the debit

card with no fees and it's fantastic i will say i'm not a fan i'm actually not a fan of the name change and i think that might sound stupid but i think transfer wise when you're looking let's say you're trying to be like a new remittance customer or trying to remit money and you're looking for something new transfer wise might catch my eye a little quicker than wise which they're trying to brand essentially it's like a neobank yeah i wonder how much of remitley's like traffic is organic uh i don't know how serious you are there but i mean their volumes were up 40 last year so i don't know i don't think it's a huge concern how much does the marketing spend up I have not checked. I can confirm that

for you. Wow. I think they just lost a good, easy, organic funnel to attract potential customers. Yeah, maybe. They're a UK business

so they don't have the worst financial statements, or at least they're the most different than SEC filings, so they're just annoying to find all the stuff i don't even know where sales and marketing would be on here let's see what a comment from ian did you see that our old name yeah oh my gosh i'm not even going to repeat that he says everyone i will repeat it says everyone knows crypto solves this

i wonder if If, okay, let's say crypto went, and by crypto, I'm just going to use Bitcoin as like a proxy for the whole crypto market. I know like crypto, anyone that's in the industry probably hates that, but I'm going to use Bitcoin. Let's say it went to, I don't know, 10 bucks for a Bitcoin. and you were a wealth manager or you manage money on someone's behalf and you put money into it how do you rationalize or how do you explain that today after well

i don't know because i wouldn't do that i mean you can't Like, there was no, like, thesis, right? Well. Other than everyone else is buying. Yeah. I mean, the thesis is digital gold, which basically means everyone else is going to buy. Yeah, it'd be tougher to defend, for sure. It would be tough to defend.

Would you rather own gold or Bitcoin? Don't. what's the thing from Daldegon Knights? Don't you put that evil on me? Gold. Why?

Although I will never buy both. Gold feels less scammy. Although that is saying

something. All right. I have a thought on Uber. Okay. I think it might make a decent investment over the next few years. Okay. All right. I'm serious. Yeah. And I know they're hemorrhaging cash, but- Pitch it. Pitch it. I'll listen. Pitch.

All right. Uber has drastically increased prices over the last year or so, at least in my experience. I think they have talked about that. by basically consolidating the market to them and Lyft cabs are essentially becoming Ubers. If I heard it correctly, they've partnered with Uber in New York. They have those two have the power to raise prices at will and demand may fall some but i think the people that need designated drivers which i imagine is a still a decent chunk of their population will have to pay that's it that's my pitch i mean how big is that tan come on like that's what the business was built on initially no no no no the business

was built on letting people drive to work for four dollar rides that cost the company ten dollars no no no no yes the black car okay sure sure sure original but i'm saying it got to the size it is today like how that market can't be that big i think it's probably pretty large and there's certain scenarios where you need an uber or a lyft and without taxis with them being the two participants in the market essentially they've i mean yeah well i guess maybe a new player could come along but yeah i mean i took one last week i'm not saying i wouldn't use it but it's a bad business plain and simple I don't know

I see a world In which They could win Oh yeah They're going to get To 10% adjusted Even to March It's going to be so great

Look Here's two things That concern me With Uber One Everyone talks about this I'm going to I'm going to sound

I'm going to clip this Little sound bite here And play it back In 2030 And we'll see We'll see We'll see Let's see where the stock

Is right now Because if it's in the shitter Maybe I have Less optimistic oh wow I love other market gaps for still

40 billion that's funny I love that stock based I love that stock based compensation all right well yeah

the valuation one in 2015 was like 60 billion I mean that was the same but okay here's what concerns me about Uber and this isn't

some novel take this is what everyone has if gas prices go up, which is out of their control. Labor prices go up because they have to fulfill that for their drivers

because they don't pay that to whoever their labor pool. What? Consumer pays it. I know, but that's like, even if they're able to raise prices because

of that, it's not coming down the bottom line. Two, their net wages that people are earning on these things are still way, way lower than a lot of other jobs they can get. So the risk of wage inflation is much, much too high. I swear every Uber driver I've had lately

has bragged to me about how much they're making on Uber. I know, but that's net. No one's doing math. their gas prices are through the roof i don't think they'd keep doing it if they weren't making the money that they okay all right and uber is what uber is what right now let's let me let me pull up the old this is uncoiffed so not confirmed let me pull up the old cash flow table Positive operating cash flow over the last Oh my god

They have generated $181 million In operating cash flow over the last 12 months Correct Wow That's amazing Free cash flow is negative Up from negative $4 billion

Yes Well that was But yeah Hey, look, they could fire a lot of people. I guess it could work if they fire a lot of their employees, but I don't think the business is going to stop. I think they're going to run with less employees. I think there's a world in which there's a lot of cost savings that come down the pipe and the business doesn't change. They raise prices and they're fine.

Yeah, but how is the stock going to do well? Why is this $100 billion? Why is this a $70 billion? Sorry. why is the stock price at $35 a share five to seven years from now? Because they generate enough cash to warrant it. They have never generated positive free cash flow.

Wrong. Oh, all right. Give it, I say, give it a year. All right. Okay, look at the trajectory. So at the current – How much they generate in cash, yeah, that's a question worth having. But there is definitely a path for them to generate positive free cash flow.

Look, is this a bankrupt company? No. I did – no. I mean, that's out of – I think that's out of the cards. Thanks for the comment, Alex. He said, if I like cash flow, I should check out this company called Berkshire. right here at Bloomstrand, just at a bottom. Thank you. I was a bit harsh with that, but still, I've done learned about... Forget it. We don't need to revisit that. That was in jest, mainly.

But okay. They're at $40 billion market cap, right? So you basically get positive returns, yet eventually think... And I learned this from Buffett. So another joke there. You got to get to a 10% free cash flow yield at some point. So when are they going to get to $4 billion in annual free cash flow? 2026. You think that's possible? I'm just finding out a random number. I think it's possible.

What's their gross profit right now? $7.7 billion? I mean... Can't lie, it's possible. Might not be likely, but it's possible. It's possible. Can this business run with half of its employees? hard to tell yeah i honestly have no idea so i probably should have a take i mean look customer

support's pretty high with this too yeah i'm laughing alex thank you that was that was a great joke i am uh i yes do you know what country has the highest amount of oil reserves in the world oh it's then it's not going to be saudi arabia then if you're if you're asking me this it's not saudi arabia correct wow all right the united states no no way jose all right lay it on me what is it venezuela oh wow and they did quite well with that right no how are they not Like Yeah I saw a chart here

I think Saudi Arabia Was number two Oh they gotta be They have that gigantic Oil field So big Really it's Venezuela The

Something That I heard on the Berkshire podcast That Chris did That he talked about Which I found kind of fascinating I don't know if I've told you

About this but The This podcast he did Have I told you He mentioned if you were running an oil company or oil and gas production company, let's say, and you were printing record profits and the government was essentially forcing you to be public enemy number one, what would your incentives be? or they were basically trying to find every way to threaten your business as possible, would you be incentivized to pour a bunch of that profits back into CapEx? Yeah.

Well, let me just repeat what I've heard from other people talking about oil. Isn't everyone spooked from the too much CapEx five to 10 years ago, right? Yeah. I mean, the government's going to treat you the same no matter what, just because it's a great talking point politically. Yeah, I agree with you or whatever his point was going to be. Like, I kind of get where his point was going to be that they're going to keep supply constraints unless they're incentivized. There was an interesting take, I forget who I was listening to, that said, I don't know how much this would fly. But the US government or, I don't know who, could promise a price floor where you can sell oil for, say, a price floor of 70 over the next five years.

And that floor would really help the oil companies know that they're not going to go bankrupt if they just pump up supply too much. but it seems like one of these again it seems like a bad business that can go through some times where they're insanely profitable because and look i don't know jack i don't know anything about oil and gas or energy but what always just makes me nervous is when people say the cure for high prices is high prices and seems like that's the case well if that's the case then how is this industry predictable at all yeah so what's a high price exactly i don't know i think i might just go long oil

everyone says that whenever like prices get high so if everyone's saying that they're all avoiding it maybe it's like I know that's something Nick Seipel said but until the CapEx shows up you've essentially I guess well it goes beyond just the US's CapEx

yeah it's also tough when the biggest producers are in a literal cartel I mean that's that's tough yeah so according to this list the u.s is number nine nine wow i thought that would have been higher what's the top five venezuela saudi arabia canada iran iraq canada nice it's basically the u.s

i'm serious i'm serious uh i mean in this regard it's basically like why because they pipe a lot of the oil in no just politically oh if you go what i mean yeah it's tough tough look for europe there venezuela how does venezuela like even the kings i've got to look at or whoever i don't there i guess it's not necessarily a um a monarchy but the political elite there have got to look at saudi arabia and be like man they're really doing like how are we not you know how is our income inequality not turning us into as rich as them but that's besides the point i guess it's tough that iran has that huge it's kind of a tough location huh i'm uh i can no longer say anything

intelligent or nor did i about oil so all right new topic to uh callaway okay why callaway now we went to the top golf lounge and needless to say it diminished foolishness what would you give it i want to give it two thumbs down maybe one thumbs down right yeah one thumbs down maybe two thumbs sideways nah what is what is two thumbs sideways man it was it was mediocre overpriced no doubt and there was like no one there yeah would you have paid what was that what did that come out to what forty dollars an hour per person for three people yeah would you have paid that for the typical bay like ours was just the lounge that was inside would you have paid forty dollars for yourself in one of their like big outdoor ranges

yeah sure sure in a fun group sure but i just don't like how you can't use your own clubs or how it's lame to use your own clubs because the clubs are shit well you go in there with a different mentality than most people it's well that lounge thing is like an experimental concept So I'm glad they're not rolling it out because it was strange. Yeah. I wasn't the biggest fan. Yeah. I like Cal.

I mean, I like top off a lot. So I don't know why. I don't know why we've discussed it a lot. We've looked at it. What for the past year? I don't know why it's still in that too hard pile. What has sat in your,

what do you think you've sucked your thumb on the longest? What one company? that's a weird phrase way to put it but I understand what you mean it's been there you thought it was

you probably know good returns you probably know better than me I mean Roku maybe no no that's been expensive that's been super expensive

yeah I'm talking about something that for a while you thought like this is generally good returns let me look at my watch list i mean i would have said latch good thing i never bought that i think eventually i just bit the bullet on everything that i that's been in there and now that the prices have

come down it's giving me reason to yeah i mean a lot of stuff hasn't done well so on the watch list i suppose i have been watching for a little over a year yeah yeah coupon I don't know what I'm missing what price would you buy meta at oh gosh that's a tough

question I feel like if I actually went through the math I would say today you're gonna say I would go through I would actually look at it go through the math and be like oh man maybe I should buy it today I mean man this looks cheap i don't know why this isn't on my watch list

facebook yeah whatever you want to call it i mean maybe that's the one i've sucked my fun on for the longest although i guess in a good you know in a good way yeah to our benefit yeah dang it's cheap wow 60 billion dollars in cash flow operating cash flow obviously wow they have yeah they have decent capex yeah it's still like 10 times free cash flow yeah i don't i don't think but the thing is it's been the value bros have been all over it for oh i mean everyone's been over i don't think it's just

it's i don't think the like i don't think the question is any sort of trailing multiples here it's it could be a 10 it could be a 15 it's gotta just be durability not even growth just durability of the cash flow which is interesting because maybe two

three years ago free cash flow or the operating cash flow because CapEx it sounds like it's going to change yeah but a lot of the

reality labs is OpEx right or am I are you talking about something else I don't follow the company that closely so I thought a lot of it

was CapEx too no it would be I thought they pledged to like 10 billion or something no that's

that's total expenses so not not CapEx either way though it's a cost yeah I don't know why

I don't know why I don't own this I'm gonna say this right now it's hard like Instagram is so sticky

even though I think it's a terrible product for society disregarding that don't you think also if let's say tiktok did get bad in the u.s how much i mean real benefit to instagram reels would get yeah it would be it'd be great but i mean you can't bet on that you can't bet on that that's that's my friends though reels and i think they have like a similar facebook product uh people that can go on

yeah that's yeah well the facebook one can go on to the facebook dating pile of wasted product development but yeah instagram real seems to be getting great great traction i don't know though that's like such a great blueprint just to copy everyone else's products for a billion person user base, whatever it is. Yeah. Instagram.

Yeah. Gosh, social's so hard, but it might be discounted enough. It's such a hard question for speaking on the stock. Like,

I think social media is a tough business. Just given, you know, trendiness and stuff like that. but what social media is in the last 10 years 15 years maybe even say have fallen off uh or gotten worse in terms of users look i like forget myspace yeah yeah well i mean twitter right at some point

i'm just looking at bigger you know still substantially bigger twitter sort of i mean it's a bigger business than it was but let i'm going to put up on wide charts here twitter meta platforms snap and pinterest we're going to look at returns over the last five years compared to the s&p 500 you want to put your guesses in well how many have killed it how many like two or years ago or something like that so it's a bad sample size but now these are are there any other social media stocks okay is there any would you call match group social media no where would you bucket that utilities no it's its own category uh all right the s&p 500 total return was 38.4 percent in the

last five years or sorry shit we got to x out ah all right since since pinterest went public in 2019 uh it's 38.4 why not why not social media got those were all like those were all extremely bit up in 2019 if i remember correctly wasn't snap like towards like 50 times sales but 2020 uh no that was in 2020 snap was totally like uh yeah i mean pandemic was a benefit to them all four of these stocks underperformed yeah i think i don't i think it's a tough business regardless of users facebook's uh take whatever profit metric you want free cash flow operating profit sure has overperformed that's a good point might just be sentiment around social medias now twitter i know has

been whatever bad but i'd be splitter is the i i'm a fan of the seattle mariners and twitter is like seattle bears you get optimistic every year and they fail you yeah that's about right every year their new revenue strategy could change the game that's right there's a new prospect coming up do you honestly do you think if elon musk is ceo or running the company do you think there's any way that he actually drives no way no way he's not even gonna do the guy just flies around in his private jet like he has no time for this where's he been by the way m.i.a he has been off any any speculative theories here as we wrap up why he's off okay i have one he's gonna come back and there's gonna be a story that

he went to the factory for 20 days and slept in the office room and had no time for social media because he was like working so hard grinding so hard at the giga factory that remember that video he's had this tweet in his drafts for 20 days waiting to like explain how hard he's been working remember that video they had with one of the morning shows once where he uh he was like yeah i've been living at the factory and it was like one of those it was like the michael scott moment for the little bench thing that he's like yeah just curl up here and he had that little couch he's like yeah just curl up here i'm like dude people can track this private jet like you live in a private jet you have like two of them why if you count your brothers

Who is buying this stuff? Whatever. But yeah, that makes sense. I think that you could be right there. Or he's in legal trouble, but I don't know. Something would have come out by now. Yeah, yeah, definitely. Or he's like just in ultimate regret mode on the Twitter deal.

So he can't face the app. so he's like rebelling like a self-protest uh yeah I wonder if they give him a special app he has 100 million followers you know

that'd be you can't let that thing crash you know what I mean we barely get any notifications on Twitter I had to turn them off like the little bell thing that has the little numbers

Yeah I don't know how that works I've never His whole thing probably just says One million plus Forever I mean it's just totally useless for him Yeah alright I think we gotta sign off here

Yep that's an hour Alright if you listened On the podcast We do these on Thursdays At 12 o'clock pacific time 3 o'clock eastern time On YouTube So if you just YouTube Chit Chat Money

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