Chit Chat Stocks - Roku, Fubo, & ConnectedTV - Rick Munarriz

Episode Date: June 1, 2021

Rick Munarriz joins us this week to discuss Roku, Fubo TV, and the world of connected television. Listen in after the interview to hear Brett and Ryan discuss their favorite stories from the week including new SPACs, Amazon stories, and even Apple events. Let's go! Follow Rick Munarriz on Twitter: https://twitter.com/Market?s=20 Subscribe to 7 Investing with the code "CCM": https://7investing.com/subscribe/ Subscribe to our YouTube channel: https://www.youtube.com/c/ChitChatMoney Follow us on Twitter: https://twitter.com/chitchatmoney Visit our website to see more from your hosts Ryan and Brett: https://www.chitchatmoney.com Email us: [e-mail] Timestamps Interview 1st Half | (1:59) Interview 2nd Half | (20:19) SPACs, Amazon, Apple, and more | (46:57) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. Today is Tuesday, June 1st. You know what that means. New picks, new recs. Right, right. I remember that now, yeah. Yeah, so go check them out. Use our code CCM for 7investing and you get $10 off. And remember, the prices are going up next month. Am I getting that right? Yeah, they're going up in July. Check out their website for more details. You can talk to anyone. They'll give you all the full information if you're confused at all. But if you want this cheaper price now get it while you can get it while you can in june either way you get ten dollars off your first month or ten dollars off your first year amazing team over there you know great addition to your research process and today we have an interview with

rick munarez uh i think i'm saying that right i always suck with names another current theme here another miami investor that we get to add to our uh repertoire the growing city as everyone on twitter says you know he's got to be there what uh what were your big takeaways from the interview yeah so it's fun to talk roku and fubo those are two kind of big streaming companies that people have different opinions on some people really love those companies some people don't really get it it was interesting to get his thoughts he was he's very knowledgeable about the you know streaming and media industry so it was fun to ask him questions about that and then afterward we got our typical stories for the week but without further ado here we go

Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guests is not formal advice or a recommendation. Now, please enjoy this episode. All right, today we are welcomed by Rick Munarez. We actually just tried, just did about 10 or 20 minutes of an interview and our computer crashed. So, this is round two. Take two. It's okay.

That's all right. But Rick is a senior analyst at The Motley Fool. He's been there for a long time. I believe one of the earlier employees, earliest maybe. So how did you end up there? How did you get your start at The Motley Fool? Yeah, it was in 1995 is when I started, basically two years after Tom, Dave, and Eric Reitholm started it as a newsletter, basically out of the garage, out of a shed actually that they did. So at the time, I was already in the online investing scene, so to speak. There was a service put up by General Electric called Genie, which was their attempt sort of at a CompuServe kind of service. And then Prodigy came out with a better interface. Then America Online came out with an even better

interface. And I was the co-sysop of the investors roundtable on the Genie service. So I saw it and it was a very small service. It was very limited. It was all ASCII. So it was just tech space, not a very intuitive platform. So I was happy when I saw Prodigy come out. And then I was really excited when America Online came on the scene. So I wanted to see what was going on there just in case if something would happen to Genie. And I happened to see the regular Vanilla Investors Roundtable, which is decent enough on American Online. But then I stumbled into The Motley Fool, which is where all the cool investors seem to be gravitating to because here were these guys, anti-establishment, putting out advice to stocks that actually,

like research that no one else was really looking at, a very active online community. And I became an active part on that. And as fate would happen, they had a post of the day award that they gave. And I happened to win two within a span of a week, one on Discovery Zone and the other on Rainforest Cafe, two companies that one business doesn't exist anymore. And the other is part of a larger Landry's restaurants companies now. But at the time they were like up and coming, you know, not so much Discovery Zone, but Rainforest Cafe was an up and coming investment back in the themed restaurant space. And it got the attention of Tom Gardner, who reached out to me and said, hey, you look like you know restaurants. We need someone to cover the

restaurant stocks. We're doing something called industry focus. We're getting industry specific people to cover these markets. And we think you'd be a good fit for this. And I said, sure, absolutely. So I became MF Edible, then TMF Edible. Now I'm just TMF Breaker Rick because of the Motley Fool Rule Breaker service that I've been part of. But that evolved into eventually a couple of years, like two years into it, a Rainforest Cafe was opening. I'm in Miami, Florida, and a Rainforest Cafe was opening right here in Orlando, Florida. So I invited Tom Gardner said, hey, you know, you probably don't want to come, but I mean, they have this opening here. It's going to be quite an event. Lyle Berman from Grand Casino is going to be there.

Donald Trump was there long before, you know, he had aspirations when he was just a celebrity at that point. He was there. And I said, hey, do you want to come down? And then Tom said, hey, you know, I can't do it, but my brother will. And I was surprised because I had never met David Gardner. I mean, even informally talking or anything. And then he showed up and we spent along with Paul Larson, who covered the casinos for Industry Focus. Now he's an Invesco fund manager at Invesco Funds. And the three of us really hit it off. And I think David Gardner and I connected that we saw we had a lot in common investing style. And he had all the stuff, the right thing, everything that drew me to the Motley Fool a couple of years earlier,

as far as on AOL, I saw it right there. I mean, I got really excited just being in the same room with him. Everything he said just made so much sense to me. So, and as time went on, every time there was a new project, he would suggest me to do it. And then when he launched Motley Fool Rule Breakers in 2004, he made sure that I was part of the original launch team with two or three other analysts that launched it along with him. So I've been with the Motley Fool ever since. 25,000 bylines on the fool.com free side, and I've been part of the Motley Fool Rule Breaker service now 17 years. So it's been an amazing journey. And what, I'm familiar with Rainforest cafe but what was discovery zone discovery zone again it was it was it was it was a it was a

florida company sort of like by wayne huizenga who did blockbuster and waste management and they were let's say chucky cheese um but without the animatronics it was basically like these big playgrounds with bounce houses and stuff like that uh and it was really popular with young kids basically in the 90s but they were they they went bankrupt in the late 1990s so it was the post was actually how to save Discovery Zone. So it's just kind of like this long thesis on how I would rescue Discovery Zone. And obviously, it didn't work. Not that anyone heeded it. It was unsavable at that point. But yeah, that was Discovery Zone. All right. And then, you know, you've been at The Motley Fool for a while. How, I guess, has The Motley Fool evolved over the years? And how

has it helped you evolve your investing style? Yeah, I mean, I think The Motley Fool has evolved. And in the early days, we were basically, it was this anti-establishment, not in a bad way, but more or less saying like, money managers are only out to do one thing. And who wants these high-end mutual funds? Just buy a Vanguard index fund if you want mutual fund exposure, pick your own stocks, create your own destiny. A lot of that is still in place, but obviously, we are covering a lot of ground these days. We have stuff on options, on real estate, on credit cards. We have a lot of different areas within the Motley Fool these days. So that has evolved out of need just because you have to cover all the bases as you grow.

But we are still picking these dynamic growth stocks. Back in the 90s, it was the Iomegas, you know, the Amazons, dot coms of the world. Now they're just equally dynamic with the Shopify's and the MercadoLibres. So there's plenty of dynamic growth stocks that fit into that Motley Fool, the David Gardner mindset of these rule breaker kind of companies that are still alive and still continue to happen. So that hasn't changed, but obviously we've become a much larger company as far as scope and reach and all the other things. How's that helped you, uh, kind of evolve as an investor? Yeah, definitely. And again, I mean, it's, I, early on, I wasn't so much an investor. I mean, I was like, uh, my, my story basically was I had my, my, I went to university in Miami. So I was,

I wasn't born in Miami. I was born in New Jersey, but I've been in Miami since I was five. And I went to university in Miami and I had a band that was signed to Columbia records. and, um, you've never heard of us. So don't, you can look up Paris by air. We are on Spotify and Apple, uh, iTunes, but you know, we're not, you'll, you'll see you're like maybe 400 monthly listeners. So, um, don't necessarily follow it. This was 1980s electronica and new wave music. It's probably not your cup of tea. Our producer was Louis Martinet who did expose and pet shop boys and a lot of, uh, you know, the Miami dancing stuff. But in the eighties, we were actually in, I'm sorry. And yeah, in the, in the late eighties, 1980s, we were signed in 87 to Columbia and I

graduated at 1988 and I didn't know what to do, I didn't want to just say, all right, I'm done. I'm going to just give it all to music because that would be silly. But I also didn't want to give up music and say, I'm just going to go to the workforce. So I was able to get a graduate assistantship, which means that I got my MBA for free and got paid. I just helped the professors with research and stuff like that. And getting my MBA, I bought myself more time. And then I still wasn't famous at the end of the MBA in 1990. So I had a lot of free time on my hands. And that is when I started just saying, all right, I have an MBA. I can put that to work in the market. So I started investing then. The tiny means that I had at the time, obviously, I wasn't making money

on the music side and I wasn't putting my MBA to good use because I still wanted to be going to the recording studio every couple of weeks, once or twice a week rather to record. I had to be flexible. And that's why the online services appealed to me just as a place to explore and expand and become a better investor. But yeah, as an investor, I've evolved since then, since the time I first met David Gardner. I'm no longer as concerned like I was in the old days. I think a lot of new investors, they come in and go, well, what's the price earnings multiple? What's it going to be? Or, hey, there's no dividend here. What's going to happen here? Oh, this company reported a loss. So you become to forgive a lot of the initial instincts that what you learn is

good investing practices. And you realize that valuation, while important, it's not so much about valuation now. It's valuation for what a company is able to do three, five, seven, 10 years from now, which is why I don't mind paying. I can't even tell you the revenue to market cap multiple of some of the stocks I own because I'm looking beyond that. I'm looking at how large the companies will be in general if they succeed and exceed expectations, which is what the market is pricing them now for ad. Right. And we're going to hit a few individual companies. One industry that you cover, I think a lot on fool.com is streaming video and all the different companies associated with that. And a big one is Roku. So, I guess we have a few,

we had a few questions on the first part, but I think we can maybe start out now. What's the thesis with Roku? You know, I don't know if like you own it or anything, but you know, why can this business, I guess, grow over the next few years? Yeah. And I do own Roku personally. I've owned it thankfully since early 2008, so 2018, sorry. So, I've done well with it. But to me, Roku, is it is a miss it was a misunderstood company in the fact that it is a software platform it is a platform for watching tv uh and it's something that in the early days people looked at it more as kind of like hardware like oh there's only these dongles and these uh setup devices that plug into your tv uh you pay 20 30 50 80 dollars uh for a device so you can stream tv but roku is

always about the platform which is where the high margin revenue is where they it's it's it's now in 38% of the smart TVs being shipped in this country. It is now in more than 50 million homes. And these people that have Roku, we're not talking about 50 million individual people. We're talking about families. I mean, I have one Roku account, but it's consumed by everyone in my household.

And we are spending hours on it. And the average Roku user is spending three and a half, four hours a day streaming through Roku. And that means basically, it's not that you're like watching Roku content. It means that you're firing up your TV. It just defaults to Roku. And there are ads there, of course,

But you can just go right into Netflix, right into Prime, Amazon Prime, right into Hulu, into YouTube TV and into Fubo. So whatever TV service, whatever you want to see, it's all there for you. But they control the gateway. And that means that when you're done watching, they can they can hit you with other ads. And more importantly, with a lot of these services, they have an ad sharing agreement with some of these services. They're also promoting services. So like if you're if you're firing up and there's this new service at launch and you're saying, why is why is Roku so happy? why are they promoting this new service I've never heard of? It's because they're getting paid to do it, obviously. It's advertising. So, it's a model that I think has a lot of upside, even as a free service, just as it grows, not only in its ability to grow its audience,

which it will, not in its ability to grow in its kind of usage, because three and a half, four hours is pretty amazing. You can't spend, you know, 24 hours is too much. You can only go so high, even though you can share the account with family and stuff like that. So, it may be different number. But I do think that the potential here is for them to grow average revenue per user, even above everything else. And of course, internationally, there's potential too. But right now, it's doing well in its own market. There's a lot of upside still untapped there. I'm a, yeah, I'm a Roku user myself. And it's a good layout. It's just intuitive. It's really easy. I guess, where do you think the majority of that platform revenue growth is going to come

from in the future? Do you think that's more ad-based or is it kind of like the take rate type stuff that you see with like Apple services? Yeah, I think it's a combination of both. I mean, I think, you know, over the last year, we had a lot of services last year. You know, in late 2019, we had Disney Plus and Apple TV Plus. But then right after that, we had the Peacocks, the HBO Max, the All Access, CBS All Access. Then now, I mean, CBS All Access, sorry, earlier this year became Paramount Plus. So you have a lot of services looking to get noticed. And that's great news for Roku. So they can generate money either just by signing people up and getting a piece of that, like a little take of that, or they can also generate money just by becoming the hub

of all these places and just sharing ad revenue with these platforms, especially the free services so that everybody wins. And I think, you know, Roku is a win-win for everybody at this point. Do you get, it's obviously had a pretty incredible run. The stock has, I believe. Do you get worried at all with valuation concerns? I know we just talked about Yeah. Thinking about the business five to 10 years out, how do you think about that with Roku? Yeah. I mean, the stock's corrected a bit. I mean, obviously it was one of the big pandemic plays when people said, oh, we're going to be at home. But oddly enough, I mean, Roku, and to me it was always surprising because I mean, I owned, I haven't the luck into owning

a lot of the stocks that did really well in the pandemic before, you know, I was, I wasn't even anticipating the pandemic when I bought into Peloton. Zoom, I did buy sort of at the early days of the pandemic, but these stocks were all taken off. Netflix was doing really well because They had Tiger King right out of the pandemic, like the first couple of weeks of the pandemic. Boom. You know, oh, my God, there's this great wild show. Everybody started talking about it, obviously not in the real office, but virtually. And Roku just pretty much was stagnant through the first six months of the year. Then it took off in the latter half of the year.

I think once people realize that, hey, Roku is here to stay, it's a player, it is growing, it's expanding, it's average revenue per user. So, yeah, I mean, as far as valuation goes, it's not cheap, but it wasn't cheap a year ago. It wasn't cheap two years ago or three years ago. And I think that's the whole thing of putting beside the fact that you're telling me if Roku was a $1 billion company, would I still feel the same about it? No, I think, I mean, there's limits to what can happen, but I think Roku is not anywhere near its ceiling. I think we have yet to see what Roku can do basically internationally, basically as it grows. I mean, right now they're generating an ad revenue is basically about less than three dollars a month in ad revenue, which is actually a lot lower than even some of the services, some of the live TV streaming services that are available through Roku. So there is upside everywhere you go, especially in this connected TV times where a lot of advertisers know that people are no longer watching ads or no longer watching linear television.

You need to reach them while they are streaming services. So if you have a message, you have to go through Roku to get these 50 plus million highly engaged viewers of TV. What do you think differentiates Roku? I'm just curious because you have the Fire Stick, the Apple TV, Chromecast. Why is Roku able to get 38% market share? Yeah. So again, I think it would help them out. And again, obviously it's hard these days because I know they've had disputes with HBO Max and Peacock before putting them on. They're obviously in a tussle with YouTube TV right now. But what's always separated them is the agnosticism. So it's the tech giants. You would think Roku can't compete against Apple, Amazon, and Alphabet's Google, like three of the four wealthiest companies on the planet. And Microsoft put out a stick, you know, it'd be four for four. And that's inevitable. But you see stuff when every time there was a time early on in Roku when like Comcast was going to have their own streaming hub and Roku stock would take a hit. And all you have to think is about how is Comcast going to make a difference in this market? People hate their cable service. How is this going to matter?

But the same thing with big tech. They're sort of looking out for their services. So if you want an Apple TV Plus, if you have an Apple TV, they want you to go through their iTunes video ecosystem. They want you to go through Apple TV Plus. Amazon, of course, a great company, of course. Fire TV, the Fire TV itself hasn't been that hot. but they're trying to funnel you into the Amazon Prime library or their own rental and streaming library. They have a lot of stuff they're trying to protect. And so, they're basically butting

heads with the other tech giants. So, you see that happen a lot. Roku has pretty much said, oh, we have thousands of apps. I think it's like 5,000 or something that are actually accessible. You just don't realize it because you only have so many channels that you pick on your home screen. But there are thousands of options for your Roku. And I think that sets them apart. And that's why if you're a smart TV maker, and I don't mean smart, smart TV maker, I just meant, well, yeah, you're a smart, smart television maker. You're going to tell yourself, I want the Roku. I want to have the platform that I know is going to play nice with everybody. Because if I line up, if I make a deal with Google and with Chromecast, and then Google gets into a fight with, let's say,

Amazon and Prime Video is no longer showing, these things are happening. You're stuck with a dead TV. I had one of the original, Google had a Google TV and I still haven't looking at it. it's it's nobody uses it in my house we just use it like to play video games on um but it was just a google tv it was i think i paid a thousand dollars for like a small size tv uh that it just streamed and it was a terrible interface uh but they didn't really get it the way roku has roku has been there from the beginning the very beginning uh of digital video recording they've been a part of it uh and that's why the company's done so well do you think so we're big uh shareholders in Spotify. And one of the reasons, there's a few reasons for our investment thesis,

but one of the reasons is that they have the focus versus their competitors. Their number one priority is to win audio streaming and Apple and Google's, it's way down the list. Do you think that's one of the reasons Roku has the success? Because Apple could frankly, they're not making that much revenue compared to say like a watch or AirPods or the phone. Yeah, definitely. And I mean, I think focus, I mean, again, a company like Apple is so much money that they can throw more money behind the Apple TV than Roku could possibly spend, and not even blink, because they have the resources to do it. But yeah, focus wise is important. You mentioned Spotify. Again, they've gotten to be so popular. It's all audio. It's all focused on streaming. And they're pushing into content through podcasts, just as Roku is now with Roku Originals. And you make these steps that are logical in expanding your ecosystem, as Spotify has, as Roku has, that it's very hard. And again, I mean, Spotify is another company that basically competes with Apple and other platforms, but they can win. The little guy can win if they are there early, if they have a product that has basically an established interface, and they have the audience. And that's Spotify is almost like the agnosticism that you have with Roku. They have it on the streaming audio side.

Right. That makes a lot of sense. I have nothing more for Roku. So let's have a quick ad break and then we'll talk some streaming services in the back half. Cox Panoramic Wi-Fi includes advanced security to help protect all your connected devices. You'll get real time alerts. Oh, like this one. So you don't have to worry about malware. Or when your kid downloads a song.

from a shady link and now all your computer can play is red color red color where are you all blocked thanks to advanced security included with cox panoramic wi-fi advanced security must be enabled in the panoramic wi-fi app restrictions apply welcome back in uh next we're hitting some particular streaming services uh the three i think we're talking about is uh disney netflix fubo which is a more controversial one i guess you could say uh the first one uh news kind of came out this week and you are a netflix shareholder if i'm not mistaken right so you told the story uh the the uh you've been a shareholder for a long time you still you're still holding on to the position right yes yeah yeah i mean yeah i've been an investor since 2002

and unfortunately i've sold 98 of my shares in netflix t uh but it's still my largest holding that two percent is actually large enough to be my largest holding so yes and still netflix are older that's what uh that's what a hundred beggar can do uh to the portfolio oh yes yeah uh so they there's a rumor kind of that came out this week about uh them possibly entering video games do you think that's an avenue that netflix should pursue i know you've talked with reed hastings in the past um and he said that he wasn't interested in it so what's your take do you think it's an area they should go into yeah i mean i was able to interview reed hastings uh way back in the past, even before they were a streaming company, it was pretty much a DVD and Blu-ray

by mail with the Little Red Envelopes company. They still do that. I think 2 million subscribers still get it that way. But at the time, we'd ask them because, again, I mean, a lot of us in the Motley Fool were big fans of the video game market. And we just saw, hey, why aren't you renting video games? My Redbox down the street, I can rent movies and video games. Blockbuster, I can pick up movies and video games. Why aren't you doing this? And he just said, no, we're just not going to lose focus. This is what we do. We're going to be laser focused on what movies and entertainment and just delivering it as best possible to our consumers. And that evolved through obviously the digital streaming where they disrupted their own model, which I always

love that when a company says, I know that this is our cash cow, we're the high margin company where we have dozens of distribution centers all around the country, where we ship out these little red DVDs mailers with discs in the day or two, you can have it after you order it. But they were willing to disrupt it by just giving streaming, the model that would eventually undo its original model. And you're seeing a lot of these big Hollywood companies doing the same thing right now, doing what Netflix did and just burn your own boats to make sure that you have to go forward. And so I think with Netflix, it's the kind of company that their potential in video games is something that it's clear it would happen. It would be a hit because we'd have more than

200 million people already globally on Netflix, but at what cost? And I think that's what Reed Hastings is probably struggling with, even though I have not picked his brain at all in more than a decade, I'm pretty sure that if he was going to do it, he'd say, okay, yeah, we're going to get incremental revenue. And it may even be high margin revenue because we can have deals with video game players. People can stream stuff. They'll spend more time on Netflix. They'll go nowhere else. But what will that do to the Netflix brand as far as a streaming entertainment video consuming service? I mean, Netflix has even been very hesitant to go into live TV, which is a form of television. How would they be just jumping all into video gaming?

I don't see it happening. But then again, we're talking on a day where Amazon has made it official. They're buying MGM for the content. So who knows what is possible? There's just a discovery in AT&T just a week ago. A lot of crazy things are happening. Anything is possible.

But I don't think, I think Netflix will do just fine without video games. But if it does, it'll be a hit. But again, I'll just wonder if that'll hurt the brand in the long run. Yeah, there's, the interesting part about that is they're big on streaming. You don't download anything.

that's kind of you know they stay with that and it seems like we're at least a few years if not five years out from video game streaming becoming realistic because we've seen stadia kind of flop the tech doesn't seem there yet maybe it's like five years from now when um you're able to really bring the quote netflix of games i can actually stream stuff that might make sense but it's kind of tough to see in the current current environment it is hard and again you mentioned stadia i mean again, I had like an offer because I was YouTube TV. I got like a free Stadia game controller and I had a three month subscription. I never tried it once. And this is in the element of full disclosure. My oldest son is a software engineer at Google, not on the YouTube side. He's on the

cloud side. So, I mean, it's I have all love for Google. I'm a Google investor. And obviously, you know, it runs in the family. You know, I want Google to succeed. But I just didn't see the purpose of this. You know, why do I need another game streaming service? And I wound up not trying it, which is to my lament, because it was free. I should have actually taken advantage of it. But yeah, so it is the kind of stuff where if they come in, it may be almost like when Amazon launched into their streaming product with Prime. Most people were just, no, I don't care about Prime Video. I just want my deliveries to be here and be here in two days. That's all I really want to be a Prime customer for. I think you may see that with Netflix too. But again, I don't put it

past them. And if they did, I wouldn't say, oh, sell Netflix. I mean, that was my mistake when I sold 98% of Netflix, uh, when I thought, uh, you know, it hit a point where it was worth unloading at that point. Uh, but I definitely don't think it's, it'd be the smartest move for Netflix right now when they're doing so many things right with what they know the best. Right. That makes sense. Okay. Uh, Disney is also another company we kind of want to hit on. And the big story for them this last year has obviously been Disney plus. So, uh, they've had also some launches, um, I believe like new movies they've launched purely on Disney plus. I know that was kind of in the heart of the pandemic um so i'm curious how you think their relationship with the theaters is going to play

out in the future do you think it's going to be a big part of their sort of release uh schedule uh or do you think it's going to stick with disney plus yes i mean last year was weird uh for many different reasons and and in disney's case uh they stayed out of the movie theater so when soul came out um they delayed movies for as long as they can i mean movies like jungle cruise and cruella and stuff that they just said, all right, let's just keep pushing them back so they don't have to release at this point. But when they said, all right, we just have to put it out like a movie like Soul, it came out. Or Mulan, the live action Mulan. Neither one played in theaters. They just were available to, Soul was available to Disney Plus subscribers right at the very same day,

you know, for free if you're a Disney Plus subscriber. But with Mulan, they did what they call Premiere Access, something that they've done with Raya, The Last Dragon in March. And they're doing again later, basically this Memorial Day weekend with Cruella, which is where if you pay $30, you can have access to it, streaming access to it for three months before the rest of the Disney Plus subscribers get it at no additional cost. So I think that that's going to eat into obviously theater revenue, but I think you are, Cruella will open Memorial Day weekend. It's opening right now as we speak at theaters everywhere. So you do have a case where they're going to be keep moving, putting movies into theaters, but also using this very important,

And if you want to stay at home, which has become very, a lot of people spent the last year, a lot of times at home. And even though they want to get out and go to the movies and enjoy the experience, they've also grown very comfortable in getting the best TV possible, the most comfortable armchair possible to enjoy entertainment at home. Disney is going to be able to cash in on both ends. And hopefully it adds up to more than they were making before just through movies. But I think it's a very interesting model that I think all of Hollywood will eventually

benefit from. And the movie theaters, they're going to struggle, but they're not going to die because I think there's still a market for that especially for the big tentpole movies the big action superhero films and obviously disney is a big part of that with their marvel and there's and their lucasfilm star wars and indiana jones coming up and the new avatar series uh four more avatar movies are coming out uh in the coming years disney's behind all that that's going to be very big in movie theaters but it's also going to be very big in your own living room yeah i'm curious if you have any takes on uh how you think the future of theaters plays out just generally i know amc

kind of turn into a meme stock, but like, yeah, not, not, yeah. Regardless, disregarding that part. Yeah. Yeah. It's just, do you, do you think people will return to the theaters? Will it ever be what it once was? I know as a consumer, I kind of get that nostalgic feeling where I'll be a little upset if theaters go out of business. What's your take there? Yeah. And I'm not a bear on AMC and I know, and I know that sounds weird and it's almost like I should have my full title stripped from me because I know a lot of my fellow fools are pretty bearish on AMC. But I think AMC has done a lot of smart things uh in the pandemic uh first of all they stayed open again and by stayed open means they were closed for a few months but when they opened again over the summer

they stayed open unlike regal that they just basically you know shut down for months and they lost a lot of momentum so amc took the brunt like it basically said all right i'll take the hit i'll stay open and all the you know the bad movies that couldn't release at any other time are going to come out now no one's coming to the theaters i'm going to stay open through that and lose a lot of money uh but they did it to have the momentum that they're going to have now as we head into the summer season with a lot of big movies coming. So, but I think the future of movie theaters, if you look at AMC in particular, they did a lot of smart things. First of all, they were already doing like reserve seating in some theaters, but once the pandemic happened, they had to figure

out a whole system that how, if someone picks this one seat, I have to make all these other seats around them unavailable to social distancing. So, they beefed that up. Mobile ordering is something that we may just take for granted now. You know, you get it at Starbucks, you get it at Chipotle. But in movie theaters, especially in AMC, only a handful of movie theaters had mobile ordering where you can mobile order your concessions and then just pick it up when you get at the theater. Now, every AMC has that, which is a big advantage because there have been times where I'm going to the movies and I live two blocks away from an AMC. So I go to AMC a lot pre-pandemic. I had the AMC stubs. So I basically could see three movies a week. I didn't see three

movies a week, but I had that movie pass-ish version of AMC plan. And if the line was too long. I said, you know, I really don't need the popcorn that bad. I don't need to pay for the $7 soda. And I just move on. But with mobile ordering, the times that I have gone since the theater reopened and I've been vaccinated and I feel safe, I have no problem mobile ordering and picking up my order. So it's gotten better at that. And AMC also had movie rentals. I mean, you could rent out a whole theater for as little as $99 and invite up to 20 of your friends. And they would play whatever movie that they had. They had like a catalog, like 30, 40 movies. You'd pick one and you could just rent that event, which early in the pandemic was important. But now,

especially when people want parties and something differentiated, especially they're not using all their... Over here by my house, it's a 24 multiplex AMC. They don't need them all right now. So they did a lot of very smart things. And I think it's that kind of thinking that's going to help AMC. The stock itself is going to maybe not do so well because they've had their share count has basically exploded fourfold. They've done a lot of stuff to stay alive. But I do think it's a very promising company that is very underrated for what they did during the pandemic to stay alive and to evolve. And I think we're going to see that when we come out of the pandemic with more people coming to the movies from Memorial Day weekend and into the summer season.

Right. It seems like a force then to kind of just disrupt themselves. They got pressured. It seems like I haven't investigated those things, but it seems like what you're saying, those are all very smart tactics. Do we want to hit Fubo TV, Ryan? Sure. All right. Yeah. So Fubo is an interesting one. I know the stock's been trading wildly. There's a lot of short reports. There's a lot of investor criticism out there. There's a lot of very, you know, some people are very bullish, some people are very bearish. What potential do you see in this business? Kind of what's the thesis for Fubo going forward?

Yeah, the thesis for Fubo is that a lot of people are cutting the cord. They're getting rid of their cable TV service, they're getting rid of their satellite television plan, and they're getting streaming services. And the problem is that as great as Netflix is, as great as Disney pluses you still need your access to the stuff you used to live sports uh your your live channels and while you can get basically high def you know hd antennas and stuff uh to stream some of the stuff you still need access to to the disney channels to the espns to all the stuff that you get through what they call live tv streaming service and this is what fubo is and they compete with youtube tv which is the top dog with a three million actually they're not they're three

million subscribers uh hulu plus live tv which is owned by disney is the top dog with a little less than 4 million subscribers right now. Fubo is less than 600,000. So they're like fifth or sixth on the food chain, but they're growing faster than anybody else. Their subscriber base has doubled over the past year. So you think 600,000 isn't a lot, 570-some thousand, wherever they are, it's not a lot, but it is growing a lot faster. Hulu plus live TV went from 4.1 million to 4 million to 3.8 million in its last two quarters. So it's declining sequentially. Fubo is gaining. A lot of the critics, a lot of the people that are knocking Fubo expected fubo to actually decline in subscribers during the first three months of this year

and even fubo itself was bracing people for that reality that's what it has always done since it's a sports first kind of service it really thrives in the second half of the year when you have a lot of active sports a lot of football a lot of stuff going on and they surprise people actually increasing a sequential increase so fubo is growing and more importantly the fubo bullish argument is look deeper than just the numbers because when live TV streaming services, it's easy to knock it as a commodity. And fair enough, if you just replace YouTube TV with Sling TV, with Hulu Plus Live TV, with Fubo TV, they're pretty much forgettable. They have a lot of the same channels. Fubo TV has more than three dozen sports channels,

but a lot of them are obscure soccer channels and stuff like that that you may not necessarily be interested in. And their prices for these services, it was $35 for most of them about two years ago. Now it's $65, $70 because they've had to pass on these increases. They are the new cable companies. which is not a good look. But not only is FuboTV gaining market share in this market, it's also generating a ridiculous amount of ad revenue on top of that. And I think ad revenue is the one thing that people always take for granted with Fubo. So Fubo, they're at $61, $62 average revenue just on, they're getting from monthly subscription fees, but they're generating another $7, $8 a month per user just on ad revenue on top of that. Because you have

people engage 120 hours is the average that the person spends a month. So we're talking again, about four hours a month, more than someone spending on Roku. And that's Roku through all the channels. People are just spending on Fubo. That's a very dedicated, hardcore market of people that are there to consume ads. And it's that market, the sports-loving market that marketers love. It's why people pay so much for Super Bowl ads. That's Fubo TV's audience. And the other final ingredient, I mean, basically, it's all these things on the Sunday. And then the cherry on top is that in December and January of just this past December and earlier this year in January, they made two acquisitions that I think are going to be really important, even though a

lot of people are saying it's just a bad move by Fubo. And that is they bought a company that will help them launch a fantasy sports platform this summer. And that's still on track. It's going to happen this summer. Sort of like just our fantasy sports league and stuff like that. While you're watching games, you can start competing real time with other Fubo TV subscribers and stuff like that. But they also launched a sports book. I mean, they also bought a company to give them the ability to launch a sports book before the end of the year. So you have sports fans that are spending a bunch of time in front of the TV, you have the ability to not only play fantasy sports to make it more engaging. By the end of the year, you're going to make it easier on their phone. I mean, you won't

be able to do it through the Roku remote and stuff like that because there's probably restrictions with Roku and stuff like that. They're doing stuff that YouTube TV is not, I mean, Google is not going to become a gambling company right now when regulators are looking at it. Disney, even though I know they own ESPN, they're not going to do it. And they can obviously partner with DraftKings or FanDuel to do pretty much what FuboTV is doing. FuboTV is doing like a homegrown solution to all But I think it's a very important, bullish argument for Fubo that, yeah, this is a commodity business. They found a way to get $7, $8 a month extra in ad revenue. And now we get on top of that later this year, we're going to get whatever gaming revenue they make off that. I think it's going to be a very interesting and underrated company that I know a lot of people love to knock, but I think I love it when people knock it. what uh i guess the when i'm thinking through it it sounds like they have if it's sports driven i imagine it costs a lot of money to get access to those uh streaming rights

um so is it basically just like a threshold of users where do they have to meet like whatever it is a million and a half to become profitable or do you have like a number in mind i'm just how are they going to improve their gross margins yeah yeah i mean is that and they are improving their gross margins, I mean, obviously when they market and stuff like that, I mean, they are profitable on a contribution margin basis. So, I mean, they are now making more money than they're paying out for content and for all this stuff, which is, this didn't happen, it happened over the past year. And they're obviously, it's not profitable on the bottom line and that will take some time. And again, it may take some time. I mean, we don't know if Hulu plus live TV is

profitable with 4 million subscribers. We don't know if Sling TV or YouTube TV is profitable, But we know that they're important components to keep people close and keep them engaged with other things to come. And I think that's where, as far as sports rights, whether you're a small person like Fubo or a large person like, let's say, YouTube TV with three, four million people, you're paying per subscriber. So it's not so much that it's, you know, it's not a bidding war. It's not for exclusivity, even though sometimes you see exclusive deals for stuff. I don't think that's going to be the driver for Fubo because with a small service, they're not going to land these exclusive deals. I think their thing is to, this is our audience. And if you, I mean, every Hulu commercial I see is basically with a sports celebrity, with Baker Mayfield or anybody promoting that,

hey, we are live sports, Barkley, Saquon Barkley, sports spots saying Hulu is live sports. They want that to be the case. Fubo has it pretty much ingrained in their ecosystem and that's what they're known for. So I think that helps. And I think that it will help them establish the fact that you don't need as many people as you think to become a profitable company if the persons you are are basically magnets for advertisers and are going to be heavy users of fantasy sports and eventual actual wagering, which I think falls right into the lap of their audience right now. So I think it's going to be an interesting dynamic where FuboTV's business a year from now may look dramatically different than it is right now. And it's a risk. I mean, it could backfire,

which the stock is very risky. Of all the stocks we've talked about today, it is the most risky. but it's also the one I think that has the most upside if it's able to hit all these things. And do you think, I guess, maybe my last question on Fubo is, so I guess just personally, it seems like the sports leagues and the people that, you know, host the TV rights or whatever it is, even around the globe, they're really the ones that have fumbled the transition to streaming the

most. Like I can't even watch my local baseball team. It takes, So it's really, really hard to like start watching these things. Do you think that is one of the opportunities that football has? Because a lot of these leagues, I mean, some of them do well with the NBA, but that a lot of these leagues are really struggling to get their stuff onto the streaming services. Yeah. Yeah. I think a lot of them either, they overplayed their hand. It's sports specific in particular, especially,

and this is a problem with all streaming services, but one it's, it's Sinclair, which owns a lot of the regional sports, which is now Bali sports in most markets. So only AT&T TV is, which is, I mean, the worst interface of the four services that live TV streaming services that I've had actually carry the Sinclair, at least locally down in South Florida. So if I want to watch Marlins games or the Miami Heat games, every single in-market game, I have to get Sinclair or I have to go back to my, you know, my cable provider because

even the NBA pass doesn't do it when you're in the city that these teams are in. So, and it's a ridiculous thing that you would think, well, why doesn't Fubo have it? Well, why doesn't YouTube have it? They all gave them up last year. So obviously they saw something that we didn't. So yeah, it's always going to be this thing where, and you have deals like, let's say like Amazon, they have the deal now with Sunday Night Football, I believe. Thursday Night, yeah. Thursday Night, yeah. So you have these deals where they're striking deals, which may take things away from the NFL networks and the other platforms that would stream through these channels. So I don't think sports leagues

are doing the right thing by that. But at the end of the day, I think FuboTV is going to get the right balance of have enough sports to be able to build its advertising and its gaming revenue. And that's going to be the gravy. If it breaks even,

if it just charges as much enough on subscriptions to cover its cost on programming, FuboTV is going to be a very successful company and everything it can do on top of that. Right, that makes sense. That makes sense. All right, wrap up questions. Yeah, I can hit the first one.

So yeah, we asked this for everyone. What's one financial saying that you disagree with? I mean, I think maybe, I mean, and again, buy and hold is something that I think a lot of people believe in, especially in The Motley Fool. It's part of our mantra. I mean, our best stocks are the Amazons of the world, the Netflixes of the world that if I would have bought and held would have been a game changer for me personally. But I think it's, I'm buy and hold, but I consider myself more buy and scold because I am not very forgiving if a stock right out of the gate disappoints me. So I don't mind buying an IPO that's basically run up. I don't

mind buying a company that I think is dynamic. But when I see it, basically, it's on our second or third date. I think we're not compatible. I don't mind cutting a stock loose. I will not sell a stock because it's gone too high. I will not sell a stock because it's done really well because I don't want to punish those names, at least not entirely. I mean, I may trim some of my position, which unfortunately I did with Netflix just to diversify over the years. But I think buy and hold, just a blind buy and hold, like just buy these stocks and just shut off your computer. Don't look at any quotes for another 10 years and then wake up and see what happens. I don't think that's necessarily always the best approach, at least not for me. So I think buy and hold is

something that I believe in if the stock is doing everything right. But I, you know, buy, but with a very, you know, with a very, you know, short leash early on in my ownership of stocks. Right. And that's like with Fubo, I mean, I don't know, you know, you might have a different mindset, but maybe like, you know, three, four quarters kind of coming down the line. They're not really showing that they're executing. That's something where maybe, you know, you're starting out with them. All right. They're not doing what I thought they were going to do. You can't be afraid of tough bait. Yeah. And Fubo is a great example. I mean, I've owned it since last year, shortly after it basically went public in September, October, whenever it was.

And this was a company that the stock, it was traded as high as 60 in December, like right before the holidays, $60. And then at night it's down, down to 20 and change. And because the stock is down, that's not a reason for me to sell. I look back at every report and this is a company that four times, it's only been public for maybe seven, eight, nine months, four or five times, it's actually raised its guidance for either initially 2020 outlook and then 2021 subscriber outlook. So if I see the numbers moving forward, if I see that this is a company that kind of like a beat and raise kind of company that every three months comes out and says, oh

yeah, we told you this was it, but hey, look, we're actually better and we're raising that. You can't go wrong with those kinds of stocks. even if the stock itself is going the wrong way. So yeah, it's the kind of stuff, I look for things that are wrong. And I don't look for stock prices that are wrong. I look for the fundamentals when they start to fall apart. And I haven't seen that happen at Fubo. If anything, I've seen Fubo defy the odds. It's just the market doesn't see it that way, unfortunately, right now. All right. That makes sense. That makes total sense. Last question then, what is one piece of advice you have for anyone that's considering a career

in finance or investing? Wow. Yeah. So, I mean, again, it's start a music band, let it fail miserably, go for an MBA while you buy yourself time, and then find that platform that you can actually make yourself move for. But actually, I mean, more to the point, yeah, so actual advice for finances, find yourself, find the thing that you can do that you think you have an edge on over anybody else. If it's actual money making, like actual investing and stuff like that, find yourself that I have this perspective. I know this industry really well, and I could tell. If you ask me what the next hot biotech is, I couldn't even begin to fake an answer for you. In the Rule Breaker side, we have a great biotech guy. We have a great cloud computing guy. I'm not either of those people.

But I can tell you, I can spot the next Roku. I can spot the next Peloton. I can see something that's happening early on, you know, consumer trends happening, like something like that is an advantage. And especially if you want to do, if it's a finance, as far as financial writing, which is really where I've, you know, made my bones over the years, have a unique voice. uh it's very important to when you come in uh that it's especially and i know the motley fool was just inviting to me because i i was a journalism major for my first year until i realized i was i was in this room and it's like there was no other journalism major at the um university of miami hurricane newspaper and my my editor said don't be a journalism major be something else uh so but i never forgot my love of writing and then i was there basically like

dan lebitard who's like a big espn now on his own he was a sports editor when i was there Michelle Kaufman, who wound up marrying Dave Barry. She was another sports editor while I was just a couple of years at the Hurricane at the University of Miami newspaper. JC Cotto, who was my editor, he's a writer for like the new Mary Tyler Morshawn, a show 9-1-1 that's doing pretty well now. So everybody went on to do these really neat things, but it was not necessarily journalism related.

They just knew that that was a good base, but they bounced off something. So have that, but always, you know, early on during the Motley Fool, I knew I could write, which is something that a lot of people that knew about finance wasn't. So I was able to distinguish myself early on in my Motley Fool tenure by being able to give copy editors smooth copy that they didn't have to come back with me like five, six, seven different times for edits. But it also was, again, it's, you know, a lighthearted approach also helps to stand out in the Motley Fool because I'm not afraid to throw a joke, not a very obscure joke. I'm not just something that would at least make the story light and more accessible to a broader audience. Helped me out in the Motley Fool in the early days and beyond. All right.

That was perfect. I think that's all the questions we have. Thank you for joining us, Rick. Thank you for taking the time for the redo. I guess, where can listeners find you? I know you're on Twitter. Do you have a handle? Do you know it?

Yeah, I know my handle. It's pretty easy. It's at market. So basically, M-A-R-K-E-T, at market. I was early on Twitter. Yeah, it's a great handle, but it's also a terrible handle because there's like an at market, which is like a food hall in the Philippines. So it's always someone just saying, oh, I'm at market.

And hey, at market. I don't know. I don't know what's going on. And every once in a while I'll get like a request. Hey, can you sell it to me? Or is a hacker trying to take it from me? So it's you know, it's a luxury that's not as great as it sounds. But I'm just glad I was early enough to be in Twitter to have the at market handle. And yeah, that's where I am. You know, I'm trying to be more active on Twitter. So, yeah, do find me there. I think I can be interesting sometimes. We'll see. That's a valuable asset, that Twitter handle. Could be one of your best investments.

Yes, I won't sell 98% of it. That's for sure. Okay, perfect. All right. Thank you. Thanks for taking the time. Thank you, Brett. Thank you, Ryan.

All right. Welcome back in. Thanks again to Rick for coming on the show. We appreciate it. But we're going to kick things off with our stories. I'm going first. It's the convertible debt takeover. So there was an article in the Wall Street Journal this week.

By the way, I'm loving my subscription. It's great. I get the hand-me-downs. I'll probably be reading this later this week. Yeah, but I found it pretty interesting. So the gist of the story is that public companies are selling bonds that could be converted into stock at a record rate. I think we've kind of seen this with a lot of our portfolio companies. But so far in 2021, 97 U.S. listed companies have issued $54.3 billion of convertible bonds.

28 of those companies are paying no interest at all on those. Fascinating. And that's a record rate, by the way. So I think that's the most in this time. And it's set to eclipse the full year numbers pretty fast here for last year was a record. And, yeah, for anyone that doesn't know, do you want to just explain quick how a convertible bond works? Because it won't make sense, you know, if you want to just give a quick explainer. Yeah, so they issue debt, and it's typically banks that are funding that.

And sometimes they have a coupon, so an interest rate that's payable over however many years. But if the stock gets up to a certain price, instead of paying that debt, it's just converted into stock. So it kind of dilutes as opposed to having to pay those borrowings off. Yeah, and it's at a certain strike price basically where it converts to an equal amount of shares. Pretty simple, but yeah. Sorry, continue. you. And then apparently the average interest coupon is 1.41% across all those 97 companies that have issued these convertible bonds. That's the lowest ever. On average, the companies that are issuing these bonds will only need their share prices to rise 39% within the next five years.

A conversion premium that's pretty low for how low these interest rates are. The article also went on to mention that the companies are willing to pay $10 million in the derivative contracts as well to protect against dilution. Do you mean $10 million or is that $10 billion? No, it's $10 million. So you're paying... Per? Yeah. So it's like, let's say you did half a billion on these convertible notes that you've raised, then you do $10 million in derivative contracts just to ensure that you're not getting severe dilution. In case your stock 5Xs for some random reason, something like that yeah kind of just a little hedge there uh but some of the companies that were mentioned in the article include airbnb who issued two billion dollars in february with a zero percent

coupon uh and a 60 premium well that premium is probably a little higher now that smart move by that team they really called the top on their own stock yeah smart you know yeah and then expedia was another one they got a good uh i think it was about a billion in there spotify was mentioned coinbase obviously lots of others is there any reason that companies shouldn't be doing this right now well if they're if it's available to them yeah i mean it's it's added it's definitely still leveraged i wouldn't pretend like it's not so you got to think of it like or this is how i think of it you're basically buying low and selling high on yourself there's two reasons you'd want to raise these convertible notes one is to reinvest into the business and hopefully generate more

profits in the future where yeah you're like your stock will likely rise something like that and you'll be able to convert into equity it'll all be worth it to shareholders because of the profits you're generating increasing free cash flow per share or whatever that's probably at what you know airbnb is thinking spotify coinbase etc but another reason you want to do it and it's a lot more simple is to buy back your stock for example someone like dropbox has done that and that's literally just buying low theoretically and hoping in the future to sell high and convert some of that equity or convert some of that debt back to equity in the future so hopefully along with your investors you're adding a little bit of leverage if you succeed in your business

plans getting a little you kind of understand what i mean there where yeah you're it's still leverage and the big risk is that if you're not profitable currently you're gonna have to pay that back in cash if your business isn't doing that well. So it's definitely not risk-free, but it's an interesting strategy. If you're a business and you think your return on invested capital can be in excess of whatever the interest rate is on these convertibles, which in some cases is zero, as long as you can get above your cost of capital with the money that you're investing, I mean, obviously that's not a sure bet that you'll be able to do it but there's no reason theoretically not to do

it the diluted stuff can be interesting as well i mean that can really hurt on my one company we covered and i can't remember the exact numbers that farfetched did a bunch of convertible notes their stock went up like 500 over the last two years or so that's really going to bite them in the butt so i wonder if they used any derivatives uh i'm not exactly sure i don't think that's going to mitigate all the risk if your stock does phenomenally but uh for the shareholders that are you know along the ride i don't think they're going to be complaining too much it it really it masks though like some of the i don't know it it's different risk it's not like the risk of just defaulting there's smaller risks at play you know with the dilutive stuff stuff like that you know

it's just different i i if you're confident in your business i don't and you have a lot of runway to reinvest or you think your share price is really depressed and you want to buy back stock this can be a great way to do it but again it's it's not it's still adding leverage for sure at least in my mind that's how i look at it does this make the whole uh low interest rates validates these premium valuations argument seem more valid because everyone talks about having this low cost of capital with interest rates, but then you start to see a record number of companies actually using that to their advantage. Yeah, I'm happy with if companies we own take out debt, either standard like bonds that are, I don't know, you can get like 3% interest at a bond that

is due in 2030, 2035. I mean, by all means do that if you're confident in the business and I'm happy with it. I, this could be true. This stuff's very complicated though. And it seems like the answer, I don't know that I come back to is, I don't know. And it's not something I would really worry about yeah the thing that doesn't make sense for me is a lot of people are saying well the cost of capital is so low that it warrants uh sales multiple but there's only there's only so much value that that companies can provide to that's true there's so many things people need and other businesses need yeah i guess that's just like i don't know what is everyone going to be buying 10 phones i don't know you gotta yeah well if they have

enough leverage yes yes exactly exactly all right what's your story okay here's a fun one the dow jones industrial average turned 125 years old this week blue chip index was first published on may 26th so i guess last week when you're listening to this in 1896 it's been basically it's been the number one index for a long time even though you know the s&p is kind of a lot of people argue that's a better gauge since it's more than just 30 companies. And it's market cap weighted instead of the Dow, which is price weighted. Interestingly, you would think like, oh, it's price weighted. It might just be trading randomly. It's so weird how it tracks really well with the broad market. It's kind of, I don't know, you wouldn't think it would, but that's kind of a side tangent.

And the Dow was founded in, or sorry, created by Charles Dow, who I guess wanted to put his own name on there who's also the founder of the wall street journal and one of the inventors of technical analysis one of the goats yeah one of the unsung or not unsung i guess um a lot of people don't know who he is but stuff he created has a lasting impact to this day some of the companies that were originally on the list general electric who was on it till like 2018 and then they got taken off so they had been on for over 100 years there's american tobacco which i guess in today is within a bunch of other companies and then tennessee iron and coal they were all part of the original list it was really the industrial average which now it's more you know you got

some industrial companies on there but you got like you know apple and microsoft's on there yeah microsoft's on there coca-cola services companies i think uh i don't have the list in front of me i think like walgreens is on there salesforce got put in salesforce yeah i think i remember that i didn't want to i kind of remembered i didn't want to say for sure um Average return over the 125 years, 7.69%. Pretty good. Would have turned $1,000 into $10.5 million based on the simple compound interest – or not. The compound interest calculator I used online.

If that number is wrong, let me know. But that is if you put in $1,000 and invest it at a 7.69% interest rate over 125 years, $1,000 would grow into $10.5 million. So pretty good. But I don't know how people haven't but just – they should have just put it in 125 years ago. Yeah, 125 years. They're sitting pretty. Just sat on it. My great-great-grandma is kicking herself right now.

But also I think that shows the power. So 1,000 to 10.5 million is amazing. But I think it shows the power of inching up to like 10 percent or even 12 percent. And if you're Buffett or someone like that, 20 percent over a long period of time because Buffett and a lot of other people have crushed that number over a way shorter period of time. time frame i believe yeah the numbers haven't been yeah the numbers aren't they're a little hard to do because it's been over such a long time period but buffett uh since like the 50s the late 50s when he had his partnership if you invested a thousand dollars it would probably be worth it just kind of running some mental math from what the update wasn't like snowball i think

it would be like a hundred million dollars today depending on the price so just upping that from half 7.8 percent to like 18 or 20 percent whatever he's had is quite impressive um yeah any thoughts on this this is kind of not really a news story just you know a little highlight it is interesting because you get so many of those figures of like if you invested if you just invest dollar cost average you're going to get blah blah blah percent yeah uh but it's gotten pretty close even the dow versus the sap it's just eight percent over 125 years compounded annually yeah pretty impressive seven yeah 7.7 i think that isn't including dividends so it's not even total return i think total return would be higher but there are some big drawdowns i mean yeah obviously the great

depression yeah did you see the chart 68 to 82 you see the chart that what or the whatever video that came out this week that was like tracking the dow in real time yeah yeah yeah the depression would have been demoralizing oh yeah yeah and it's 10 years and you're right back to where you were such a different time period i mean it's a whole complicated thing gosh yeah i mean the depression what was it 30 something years 1929 1952 something like that no no that'd be 25 years around it was 25 years 20 uh a little more than 20 i mean you're also going 68 to 82 you're flat with a ton of inflation i don't know the last 40 years have been the best yeah but you also could just pick treasuries at 16 yeah you would have done pretty well there too uh although

you would have had to lever up probably but treasuries i guess everyone levers up with that All right. Well, news story this week. Acorns is SPACing. The official name of the company is Acorns Grow Incorporated. Wow, great name. But they've announced plans to go public via a SPAC. The merger values the company at $2.2 billion,

and it's combining with Pioneer Merger Corp., whose shares jumped 2% on the news. If you don't know how the platform works, I'm sure you've maybe seen those YouTube ads. Yeah, they used to advertise a lot. They're always on CNBC, too. It rounds up users' payments to the nearest dollar and invests the proceeds into various different funds. I think the user kind of gets to pick or choose.

So basically if you go out and buy a sandwich for $7.55, $0.45 would immediately get deposited and invested into your Acorns account. And it's like index funds, right? I think so, but then there's also bonds and then there's like bond funds. And I'm pretty sure you get a wide variety. but users have to subscribe to the service so it's a dollar a month okay uh and then it can be more i think it can be three dollars or five dollars for premium accounts but there's also an expense ratio on the funds which kind of frustrates me like why do you need both why can't you just do like a sharing agreement with the expense ratio well whatever shows the moat

of vanguard and schwab and uh and i shares blackrock i think right i suppose uh they They reportedly have 4 million subscribers with about $4.7 billion in AUM, or assets under management. Let me run that number quick, see what the average deposit is. Sorry, keep going. Then in the merger, the CEO is planning to give 10% of his personal stake in the company away in a program that grants shares to its customers, which sounds troubling. So Acorns is giving away Acorns stock to Acorns users. I always have a problem with that. Yeah, it's tough.

Especially when it's the CEO giving it away. Maybe giving it away means it's like a lottery thing where you get it for free, whatever. Yeah, all right. If we're running those numbers quick, it's barely over – it's $1,175 per account. That's very, very low. I think that's probably what Robinhood's at too. I mean, if you think about it – Robinhood's probably better.

You can go ahead and you can put extra money in there, but if you're just amassing money through like 20 cent inclusions, you know what I mean? Like you round up or whatever. A dollar a month is a pretty hefty price to pay. Like let's say you get $100 a year in there and then you pay $12 a year in subscriptions. Yeah, versus the amount of people that, you know, the average account value. Yeah, that seems like really steep. Anyway, but notable investors include Jennifer Lawrence, The Rock, Ashton Kutcher. So all-star team there.

And Ashton Kutcher was – Huge red flag. I mean, I'm sorry. Like, the guy is fine. A-Rod is in there too. Actors and stuff. Yeah, I think Kevin Durant is in there too, whatever. Like, these people are obviously going to do well with this investment.

But I'm sorry. When I see this, it's just a red flag. Ashton Kutcher, I mean, he was all in on WeWork. ah yeah and it's honestly like when he's on there ripple or whatever which provides essentially no value yeah it's like the it's like the opposite of a sequoia and altos or um anderson horowitz or whatever peter teal's fund is and when you see that you're like okay this is interesting when you see the this list you're like and the same thing was with oatly i'm like yeah and you dig i don't know i don't know here at first you see like oh ashton kutcher vc that's cool and then

If you dig into some of the companies, and they're honestly ripping off a lot of customers, this seems, maybe it's a net positive, but the users are paying a lot of hidden fees. I'd love to see the numbers. I want to see some audited financials. I mean, this valuation seems steep. Yeah. At this AUM to market cap valuation, Schwab would be the largest company in the world. Yeah, so AUM is $4.7, $2.2 billion, so yeah, Schwab. I think Schwab has like $5 or $6 trillion.

Yeah, Schwab, BlackRock, and Vanguard. Yeah, and I get it's different. You know, Robinhood is different too. Obviously, Acorns charges. Stuff like that, but they should have $3, $3, $4 trillion out of all those in market cap. I mean, it makes no sense. Do you think this is a net positive for the investment world, getting people in and having, I mean, it encourages a little more diversification? Yeah, I think it's fine.

It's fine. I mean, I don't know. There's so many fees out there. I mean, I'm not going to recommend this to anyone. Literally, what I had to do. No, I wouldn't either. Just recommend, I don't know, take your pick, Schwab, Vanguard, Fidelity, whatever. Start buying some index funds.

See how that works. That's how you should start out. If they just taught, like if there was just a class in the sixth grade that set everyone up with an IRA or something or some Vanguard or Schwab account, it would alleviate, like an entire industry would be wiped out of these pointless apps. Yeah. I know life's too short to index. Some of your money. Some of your money. I mean, you know, it depends what your strategy is and it depends if you love it, but it's a complicated issue because it's like, all right, this is good.

You're getting people to invest, but it's almost like those mutual funds back in the day. I know someone that pays, paid a lot of money to like one of these, you know, like a monthly subscription, but they're, you know, they're wealthier. So it was like a little higher per month and it just seemed like, all right, you're getting less of a return. you get an index fund unless you're going with some active manager that has a strategy that is a little differentiated it's not just closet indexing which i guess is talking around book a bit but yeah it's just so tough i don't know the fees it's just tough i don't know maybe they'll make it work but you know can't be skeptical yeah i would say i don't know i guess if they got rid of the subscription thing and they just did sort of an expense ratio

sharing agreement or something like that, I would say this is a total net positive. Oh, huge, for sure. Love it, yeah. I just don't think they need the subscription, especially considering the average account size. But that's the only way they make money, though. It's no way it's worth, like, $100 million. I mean, just look at the expense ratios out there.

If you're doing, what, 10 basis points? I mean... Yeah, all right. What's your story? Okay, Amazon Unbound is a new book, so I'm going to do some stories from that. A lot of stories coming out from people on Twitter, stuff like that just stuff in the news i mean it's the new bradstone book follow-up on the everything store um i'm like 75 done so i thought there was some interesting things to share i got

three stories first one i'm going to do a funny one so in the 20 and this chronicles amazon from like 2011 to now and it basically centers around bezos who is you know the founder ceo of the company so from 2013 to 2014 this is when amazon was trying to invest heavily into a voice technology Alexa to get it really good enough to work reliably because at that point you know Siri was really bad they were trying to perfect the technology a lot of companies were doing it it was kind of a race to first and you know Amazon I guess eventually won so they were doing tons of testing recording transcribing and then Bezos was taking it on as one of his projects too he was kind of you know I want updates on this all the time and a funny anecdote that he got from a

source uh the author one time engineer engineers read a transcript from basis's home where he was so frustrated at alexa's ineptitude that he told it to quote shoot yourself in the head and they said they were very stressed that they were going to lose their jobs that would be tough to see the ceo doing that um second story uh we have a lot of strong proof from this that amazon's and i guess this is kind of a personal takeaway it's a little subjective but you know a lot of amazon's announcements that guard the headlines are a lot of the fluff that we kind of imagine um all those theories that people have like oh amazon announces something yeah but they're not they're actually you know you know i mean like a product isn't actually

there so one story was around 2013 when they were just starting to invest in prime air kind of getting into logistics stuff like that so on 60 minutes Bezos said within logistics they were working on the aerial drones to deliver packages you know the whole how the hype cycle around that that still seems to be there people like oh they're going to start delivering drones and obviously we all know that hasn't happened yet but operation executives told the author that at the time that was like completely bs wasn't even on their radar so the question I have is knowing this in the past is it safe to say always take a grain of salt with these amazon announcements and i guess a lot of big tech announcements in general except apple they're always secretive

until they tell they release stuff yeah i'd say pay more attention to what they're not talking about uh they weren't vocal about aws and look what that turned into they were actually purposely masking it they were they hated how they had to in 2015 they had to um break it out because it became 10 of revenue on the balance sheet and that was kind of like they didn't want to tell people how you know they wanted that head start for some microsoft and all those people so yeah i mean a lot of their announcements uh we like that amazon announcement arbitrage i guess you could say where stocks get tanked because of uh some announcement in their category they're investing heavily into anything and it's just like all right everything else drops yeah it's there

was a time period in like 2015 2017 when amazon would announce something and people would just basically price in like they were going to take over the entire industry yeah and i mean amazon's known to like try stuff and then cut it if it doesn't work out they cut it pretty fast so i mean it's kind of how they built their entire business so it uh it's not surprising that they try all these things but yeah i take it with a grain of salt and they're way more uh eager to announce things typically than like other companies who might wait till they actually have a product stuff like that i think they do it just because they want to see stocks tank well i mean that gives them an advantage it gives them an advantage if if this you know when they i don't know buy

whole foods and the stock goes up that gives them technically you know they bought whole foods for free theoretically if you're looking at the share price um but yeah all right the last story here is an interesting one about how profitable the business is so ads yeah as we all know play a crucial role for retail. And it's also an example, I guess, of how Bezos, like a lot of the complaints people had were that he had a tendency to micromanage and exert a ton of pressure on his managers. So the anecdote is at a big meeting to go over the retail business in 2017, so I think there's a few dozen people in this room, Bezos asked what unit profitability would be in retail if you X'd out advertising. This wasn't available. They didn't really have that calculation for them.

But instead of waiting until the meeting ended, unit finance VP for retail, Dave Stephenson, had to go through his documents and calculate the number on his smartphone while everyone just sat in silence for five minutes. And then when he finished, Bezos asked him to do 2016, 2015, and 2014 right after how that's one of the most i would be sweating bullets i mean think about that pressure yeah bezos sounds uh stressful to work for amazon sounds like the most stressful company to work for i would i i mean i know people get a lot of money to work there and it's probably you know pretty uh engaging but it sounds incredibly stressful i'm surprised they don't have their hair still it seems like everyone should go bald from stress yeah i want to do it and i'm sure you

you get especially if they're taking options packages maybe amazon's a good investment but i feel like they get a lot of employee and we've talked about this before they get a lot of employees who are eager to be in the business because they want the stock options yeah which is but they're looking at it retrospectively where it's like these are the returns other employees have got from their stock options whereas now you're investing in the largest business in the world yeah and it's just the culture you know it's kind of i don't like people are like oh you know that's how you get to an empire you have to you know you have to be so aggressive you got to be working seven days a week but then you look at google and they give

people like 20 of their time to go into free free projects basically do your own thing come up with stuff that is super laid back they're basically giving everyone a ton of perks fine you know first class all that stuff and they're right up there with amazon so i think two different strategies can work kind of depends what you like yeah agreed all right uh is that everything for your amazon that is yeah i would recommend getting it honestly it's really great to like see how they evolved the the backstory of everything and it kind of can paint a picture of what their competitive positioning are today because it really you know we joke about them entering every industry they are important as like a competitor to a lot of companies i'm assuming

everyone owns yeah all right uh my next story my last story is the bullshit job boom uh and so this is it kind of resurfaced on twitter this week thanks to nick seipel who kind of uh our editor yeah he posted it it's a new york article but it's from like 2018 and it was covering a story or a book called i'm blanking on the name here uh bullshit jobs and so there yeah it's the premise of it and now i don't necessarily agree with this and i'm sorry if you have one of these occupations that we're talking about is that there's a whole bunch of jobs that are basically useless, and they're creating more and more of them. So some firm, not sure who, surveyed a group of British people

asking if they thought their jobs made a meaningful contribution to the world. 37% said no. I think like 14% or something like that was undecided. And think about it. You're not really inclined to say no. So I guess there's a fair amount of people that don't really feel fulfilled by their job. The author of the book, David Grable, also interviewed someone, and here was a quote from him. He said, I do digital consultancy for global pharmaceutical companies' marketing departments.

I often work with global PR agencies on this and write reports with titles like How to Improve Engagement Among Key Digital Healthcare Stakeholders. It is pure, unadulterated BS and serves no purpose beyond ticking boxes for marketing departments. There was a lot more quotes kind of like that. The point wasn't that these people are meaningless, but they are getting compensated so well for something that doesn't really provide a ton of value. And they themselves find meaningless. Yeah, I mean, McKinsey exists. I don't know.

I question that. Graber identifies five different types of careers that could be categorized as these BS jobs. One is flunkies, people assigned to hang around to make their superiors feel more important. Ooh, they have those at Amazon. Bezos has like six of those. Dormant, assistant, stuff like that. Yeah, if you're thinking about big corporate bureaucracy, all these are going to get classified in there. Goons, which is arms race muscle, is basically what he says.

it's using like he uses the example of oxford pr staff whose jobs are to convince people that oxford is a good school oh it's like how facebook has like a thousand person pr team i think like scott galloway likes to make that comparison right and then there's duck tapers which is people meant to patch or bridge a process their bosses don't want to do so like an airline employee uh that that sole job is to console people who lost their bags uh so and these are examples that were kind of mentioned in that article box tickers was number four employees who are going through the motions that are basically just building reports often using paperwork to give the appearance that things are happening oh yeah i mean that one's the big one that that is the

elephant in the room i would say this fifth one task master task masters okay this one too it's unnecessary superiors so people that are designed to manage people who don't need managing or people that are put in place to create random assignments or pointless tasks for others. And this was referenced in response to a tweet that was highlighting the Canadian pension plan. Yeah, it was like Terminal Value on Twitter, right? Well, it was someone else, but Terminal Value retweeted it. The report basically talked about all the bloat that exists at the Canadian pension plan. So the role of the program is basically just to invest money.

And they've seen pretty mediocre performance, and it was plagued mostly by excessive cost and management fees. So since 2000, total costs for the Canadian pension plan have gone from $4 million to $4.4 billion. A year, maybe? I don't know. I don't have a figure. I mean, those are all— Either way, that's excessive. I don't know.

Six people? you know like even if you're going well okay go ahead okay the payroll employees when they started were five there were five people at the canadian pension plan now there's 1936 what the hell could all those people be doing yeah i know it's it's ridiculous financial services is one of the lowest overhead businesses uh that's why look at berkshire yeah how many people do have a headquarters and it's a 500 billion dollar business yeah i mean and some of those are like they're just you know the assistant part is just to make give buffett less medial tasks during his day i mean and munger is you know what i mean like munger is there and but he really doesn't

do much he's just kind of the the wisdom guy as they like to describe he's not even there he's not there on phone calls yeah the i mean if you look at and we're not experts on i don't know asset management pension plans and things like that but it seems to me that you need like an accountant or two because it's a very simple process and even if you're not just going to index you only need two to three people to find active managers i mean what are you going to do interview every hedge fund in the world like come on how many you know you don't need an analyst for every corner of the world like just either in either like index and have like two people or add a few people and index a lot of it you know what i mean like what are we doing it's such

yeah and it i i guess do you agree with this idea that there's a lot of corporate bloat oh for sure i mean we all know it it's all like uh it's all like uh it's all like a game we know You know what I mean? If you've been an intern over the last decade, you know it's all – I mean if you ever had an internship over the last decade and it's not like whatever, blue collar or something like that, I mean it's – okay, first off, what you do with the internship, like granted it's great. I had an internship. It's fantastic. You don't do much and then you realize that a lot of people aren't actually doing anything. They're working like two hours a day.

And this is on every single person. And what makes me realize, and which I love in having the freedom of not really having a boss, is that you only need to work three, four hours a day and you can make a living. Yeah, it makes me ascribe kind of to the Netflix model of, all right, we're going to get rid of 75% of our employees and just pay the really high performers exceptionally well. Yeah, or just tell, you know, like, yeah, I mean, that makes sense. It's tough, though. I think, honestly, people, you don't need to work that many hours a day. So many things are automated these days. Yeah.

Well, everyone thought digitization would kind of kill this, but it's only grown in the last few years. So it's like there's roles now to take care of different digital processes that probably didn't exist five years ago. That's true. I would also, but what's the alternative? Like a higher unemployment rate with really good benefits? Like, I don't think that's that great of an alternative. Wouldn't you rather have these people at least in the workforce? Oh, dude, that's a tough question.

That is way over my pay grade. I mean, I think it's pretty easy to identify that there's a lot of bullshit jobs out there. But is it fine? Yeah. I mean, everything's going fine, you know? We're all good. I mean, that's a way harder question about what to do with it. Yeah.

I don't know. All right. What's your next story? Okay. Yeah. We're going to have a lot of Fang stuff today. So I guess there was a blog post on what Apple is apparently doing. I think it's important, even if you don't invest in FANG and you get kind of bored of talking about Apple, Facebook, Amazon, stuff like that.

It's always important to see what they're thinking of doing because, you know, stuff they invest in kind of builds on and other companies can get created on top of that or at least how that's been in the past or they can disrupt other businesses. So according to an independent blogger, and this isn't the Wall Street Journal or Bloomberg, and it's really just, I don't know, it's not like a big report. so take it with a grain of salt, but it is someone who is connected within the tech industry. They said that Apple has the next step computing ambitions that are drastically beyond what any of us are imagining. So for context, it is reported Apple has contributed $40 billion in R&D to these new computing projects over the past decade. First iterations you probably think about are the watch and airpods and the blogger calls this the fourth paradigm shift for apple after the personal computer gui um and the phone iphone obviously you know the big one over the last decade so

the core prediction he has after talking with any i think he says it's hundreds but whatever he talked to a lot of people within the company is that apple's ambitions are not just for ar and vr but for a big push to build a 3d map of the entire world which sounds audacious but and it's also tough to discuss but what if if they build this stuff and they create you know ar vr glasses they do this 3d map that basically you can have on at all times with in conjunction with your ar glasses and if they bring that mainstream how could that like who could that benefit and who would it hurt do you have any thoughts i can kind of go first i think it would hurt slightly google although they probably would have you know they'd still have to lock in with

the android ecosystem and stuff like that i think it would hurt facebook and their ar and vr ambitions and i think would help yeah i think it would hurt oculus probably maybe the most i think it would help yeah yeah i agree i think it would help the gaming industry the video game industry as a whole i think the entertainment part of that would just continue to grow and grow yeah i agree and it's Okay, like AR and glasses sound like a really novel concept, and we've kind of been saying this for probably two years now. But I just... Yeah, and he said it's not going to come out for a while.

Yeah, I hesitate to think it's going to be introduced soon, and then I also hesitate to think it's going to have a useful iteration. Is it going to be like the iPhone and become everyone uses it? Yeah, it's great theoretically, but I just – I'm resistant to the idea that it's going to be like everyone's going to be wearing them within five years. Well, here – yes, I think that's a good point because here's what I always think about when these bloggers and stuff – and it's fun to think about and read about, but whenever they predict the new paradigms and stuff like that. if you remember in 2017 it seemed like the consensus was was that voice technology was going to be the new platform and take over the world would you agree on that yeah yeah i mean obviously amazon sold a lot of alexa devices but has it really changed the world i don't think so

the smart home stuff you know people are like i don't really need it you know it's fine you know Yeah, it's a lot of friction to problems that don't even exist. For example, Alexa, for me, the only time you use Alexa is when you're using it for the novelty of using it, not to serve a function. Oh, maybe play some music. Maybe that is the most useful feature. It's just like, oh, it can turn on your TV?

Well, so can your remote. like i don't if you're doing it you're doing it just like prove a point like oh look how connected my home is yeah that's an interesting point i think we anchor i guess if that's the proper term maybe not um i always know what those kahneman and whatever the behavioral terms i always say one but i just end up describing it because i'm not really sure which ones fit which category uh but i think anchoring to what the success of the iphone and how much and smartphones or whatever and how much that changed you know people's lives and thinking the next big tech thing or whatever comes out even if it's not from fang it's from another company thinking that is

going to have the same monumental effect as smartphones is probably too optimistic or maybe too aggressive something like that that's kind of where i sit on it but you know it'd be interesting to see what they do stuff like that great all right uh that's your last story right yeah okay well i think that's gonna do it thanks again to rick munar is for coming on uh am i missing anything we should have some good interviews coming up we have a ceo of a company uh based in europe hopefully coming up we got some good um i think we have a journalist coming on and some good investors so sneak peek on that all right uh we are not financial advisors anything we say or discuss here on chit chat money is not formal advice or recommendation we are however

general partners at arch capital so investors may have uh positions in the securities discussed on this podcast thanks again for listening we'll see you next time We'll see you next time.