1 00:00:00,100 --> 00:00:01,100 Welcome back. Everyone. 2 00:00:01,100 --> 00:00:03,900 Today on the Joseph Carlson show on a TV interview. 3 00:00:03,900 --> 00:00:06,800 We have Seth klarman. This guy is a highly respected 4 00:00:06,800 --> 00:00:09,400 investor that's beat the market for a long period of time. 5 00:00:09,500 --> 00:00:13,500 He's considered a super investor he manages a portfolio of over 6 00:00:13,500 --> 00:00:16,100 five billion dollars. Well, he just did an interview 7 00:00:16,100 --> 00:00:18,900 today where he declared that we're in quote, an everything 8 00:00:18,900 --> 00:00:21,000 bubble. What isn't everything bubble? 9 00:00:21,000 --> 00:00:23,200 How does it impact us as investors? 10 00:00:23,500 --> 00:00:25,600 And what can we do about it? We're going to be discussing 11 00:00:25,600 --> 00:00:27,700 that in this episode. As we look through this 12 00:00:27,700 --> 00:00:29,800 interview, now we have another big headline. 13 00:00:30,000 --> 00:00:32,900 Here, there was an internal Court Document, which you can 14 00:00:32,900 --> 00:00:35,800 only get these through court documents and through lawsuits. 15 00:00:36,200 --> 00:00:39,600 But this one revealed an internal goal that the CEO of 16 00:00:39,600 --> 00:00:44,500 Microsoft, had Sachin Adele has set a goal of 500 billion 17 00:00:44,500 --> 00:00:47,800 dollars in revenue for Microsoft by 2030. 18 00:00:48,100 --> 00:00:50,900 That was their personal Insight goal for the company. 19 00:00:51,400 --> 00:00:56,700 Now, 2030 is about 7 years away and growing the revenue to that 20 00:00:56,700 --> 00:00:59,800 amount has certain implications on the free cash flow. 21 00:01:00,000 --> 00:01:03,300 The free cash flow per share the earnings growth, the yield of 22 00:01:03,300 --> 00:01:06,400 the company, the amount of BuyBacks, we can infer a lot of 23 00:01:06,408 --> 00:01:10,000 valuation based on that goal, if it became reality. 24 00:01:10,100 --> 00:01:11,500 So, I went through and did all the math. 25 00:01:11,500 --> 00:01:14,300 Assuming such an Adela is correct with his goal. 26 00:01:14,500 --> 00:01:17,200 What is Microsoft going to be worth in 2030? 27 00:01:17,200 --> 00:01:19,500 Now, we also have some news coming out of Vegas. 28 00:01:19,800 --> 00:01:23,800 One of the owners of one of the best properties in Vegas, which 29 00:01:23,800 --> 00:01:27,000 is the Bellagio. This is one of the few casinos 30 00:01:27,000 --> 00:01:29,800 that Vici does not own in Vegas. Well, there's a rumor going, 31 00:01:29,900 --> 00:01:32,500 Going around that Blackstone. The current owner of this 32 00:01:32,500 --> 00:01:36,400 property is Fielding offers to sell 50% of their stake. 33 00:01:36,700 --> 00:01:39,700 There's a chance that Vici could end up buying this and in 34 00:01:39,708 --> 00:01:42,400 typical Vegas fashion. I'm going to give the odds that 35 00:01:42,400 --> 00:01:45,600 Vici ends up with this property. And then in a surprising turn of 36 00:01:45,600 --> 00:01:48,200 events. We have a follow-up video. 37 00:01:48,500 --> 00:01:50,900 Remember our guy here that's in the pool. 38 00:01:50,900 --> 00:01:53,900 He has a nice watch, He's flashing all the AmEx cards and 39 00:01:53,900 --> 00:01:57,800 he's explaining how to do fraud, basically, organizing a business 40 00:01:57,800 --> 00:02:00,500 for the sole purpose of taking, Credit. 41 00:02:00,500 --> 00:02:03,100 And then using that credit to personally enrich himself at the 42 00:02:03,100 --> 00:02:05,500 expense of the bank's. Well, in a surprise turn of 43 00:02:05,500 --> 00:02:07,800 events are guy here, has a response. 44 00:02:07,800 --> 00:02:09,800 He actually listen to the criticism. 45 00:02:09,800 --> 00:02:13,400 He saw it, blow up a little bit on social media, and he has a 46 00:02:13,400 --> 00:02:15,800 follow-up video. So we're going to be looking up 47 00:02:15,800 --> 00:02:19,000 as follow-up response here and seeing what he has to say. 48 00:02:19,000 --> 00:02:22,000 So as always, we have a jam-packed episode, a lot to 49 00:02:22,000 --> 00:02:25,200 cover, a lot of news to go through as well as a portfolio 50 00:02:25,200 --> 00:02:26,700 update. So let's go ahead and get 51 00:02:26,700 --> 00:02:28,200 started. Now, the headline news of the 52 00:02:28,200 --> 00:02:31,500 day is that Seth klarman who is Is a highly respected investor a 53 00:02:31,500 --> 00:02:34,100 super investor. He has a track record of beating 54 00:02:34,100 --> 00:02:36,300 the market. So he's one of the few that's 55 00:02:36,300 --> 00:02:40,000 actually created Alpha for his shareholders, for his investors 56 00:02:40,000 --> 00:02:43,500 alongside of him. So he has a lot of clout what he 57 00:02:43,500 --> 00:02:48,700 says, has a lot of weight to it and he went on to CNBC today and 58 00:02:48,700 --> 00:02:51,000 said that he believes we're in and everything bubble. 59 00:02:51,600 --> 00:02:55,000 Now I must admit my first initial reaction when I hear the 60 00:02:55,000 --> 00:02:58,100 term everything bubble and when I hair very smart, super 61 00:02:58,100 --> 00:03:02,900 investors predicting Bubbles is two-tone out a little bit to 62 00:03:02,900 --> 00:03:05,900 kind of just zone out because everything. 63 00:03:05,900 --> 00:03:07,800 Bubbles are predicted all the time. 64 00:03:07,900 --> 00:03:11,000 The everything bubble is so common that it's now an entry in 65 00:03:11,000 --> 00:03:14,200 Wikipedia where it has an extensive definition going 66 00:03:14,200 --> 00:03:16,700 through the impact of how everything seems to be 67 00:03:16,700 --> 00:03:19,600 overvalued or inflated all at the same time. 68 00:03:19,700 --> 00:03:22,500 So that's my bias on this as soon as I hear this, I'm a 69 00:03:22,500 --> 00:03:25,400 little bit skeptical. I'm a little bit reluctant to 70 00:03:25,400 --> 00:03:29,000 believe it, but since Seth klarman has so much clout and 71 00:03:29,000 --> 00:03:31,200 such a strong History of outperformance. 72 00:03:31,500 --> 00:03:33,200 I want to give him the benefit of the doubt. 73 00:03:33,600 --> 00:03:35,900 So even though we have a formal definition of what the 74 00:03:35,900 --> 00:03:38,800 everything bubble is, I want to take a look at what he defines 75 00:03:38,800 --> 00:03:41,700 as the everything bubble and how we can escape it. 76 00:03:42,000 --> 00:03:44,600 The first thing is, we've been in an everything bubble. 77 00:03:44,600 --> 00:03:48,100 I think that a lot of money has flowed into virtually 78 00:03:48,100 --> 00:03:50,700 everything. Historically, low interest 79 00:03:50,700 --> 00:03:54,800 rates, even zero rates, have precipitated that bubble. 80 00:03:55,600 --> 00:03:58,900 You've also had a lot of changes in the business World technology 81 00:03:58,900 --> 00:04:03,500 has Accelerated, if anything and you seem disruption of all kinds 82 00:04:03,500 --> 00:04:06,600 of businesses which creates challenges and opportunities for 83 00:04:06,600 --> 00:04:09,200 investors. So that's another thing. 84 00:04:09,900 --> 00:04:13,500 Some asset classes have become increasingly popular, private 85 00:04:13,500 --> 00:04:17,000 credit has had it had a day in the sun. 86 00:04:17,700 --> 00:04:25,200 You've had speculation during that bubble in all kinds of 87 00:04:25,200 --> 00:04:29,500 things from crypto to meme, stocks to spax. 88 00:04:29,900 --> 00:04:32,500 In a way that I think and the book has some important 89 00:04:32,500 --> 00:04:36,400 reminders for people about the dangers of speculation and the 90 00:04:36,400 --> 00:04:38,900 importance of remembering what kind of environment you're in. 91 00:04:38,900 --> 00:04:40,700 Now he listed off a number of things. 92 00:04:40,700 --> 00:04:43,000 Of course we have the meme stocks we have the specs we have 93 00:04:43,008 --> 00:04:44,800 a lot of speculation in the market. 94 00:04:45,000 --> 00:04:48,200 He notes that we had record low interest rates for a long period 95 00:04:48,200 --> 00:04:49,700 of time. Over the past decade. 96 00:04:50,000 --> 00:04:54,400 We also have a lot of money flowing into everything as he 97 00:04:54,400 --> 00:04:57,800 says it investors are just buying everything everywhere, 98 00:04:57,900 --> 00:05:02,500 causing the everything bubble. So in Seth, klarman is mind the 99 00:05:02,500 --> 00:05:06,600 past decade of performance, in the stock market is more of a 100 00:05:06,608 --> 00:05:10,000 bubble than a deserved reward for investors carefully 101 00:05:10,000 --> 00:05:13,000 imprudently making Investments. He thinks it's a result of all 102 00:05:13,000 --> 00:05:16,100 this monetary policy. All this loose buying from 103 00:05:16,100 --> 00:05:19,300 investors and a lot of speculation at the same time. 104 00:05:19,300 --> 00:05:21,200 So that's Seth. Klarman is definition of what's 105 00:05:21,200 --> 00:05:24,300 happened over the past 12 years, the everything bubble has been 106 00:05:24,300 --> 00:05:27,800 fueled by all of these factors and he seems very reluctant to 107 00:05:27,800 --> 00:05:30,600 be bullish on the market. In fact, he seems just the 108 00:05:30,600 --> 00:05:33,100 opposite. Do you seems very concerned very 109 00:05:33,100 --> 00:05:36,700 conservative, almost defensive, with everything that he says. 110 00:05:36,900 --> 00:05:40,100 Now he does go on to share his input and advice for investors 111 00:05:40,100 --> 00:05:41,700 today. This won't be the permanent 112 00:05:41,700 --> 00:05:44,900 condition but we don't know what conditions we will experience. 113 00:05:45,200 --> 00:05:48,900 So I think every investor has that challenge that you have to 114 00:05:48,900 --> 00:05:52,300 look at the moment you're in and say, which part of this is real, 115 00:05:52,300 --> 00:05:55,100 which part of this may be enduring and which part of this 116 00:05:55,200 --> 00:05:57,500 may look completely different as soon as tomorrow. 117 00:05:57,800 --> 00:06:00,900 And how do I position myself? Cleaning somewhat of a 118 00:06:00,900 --> 00:06:04,300 longer-term perspective because I think trying to trade 119 00:06:04,300 --> 00:06:07,500 day-to-day is not a game. Anybody really is well equipped 120 00:06:07,500 --> 00:06:09,500 to win. Look at the world today and see 121 00:06:09,500 --> 00:06:12,300 what's real and not real, how things are going to be shaped 122 00:06:12,300 --> 00:06:16,500 over the next five to ten years and position our portfolios in a 123 00:06:16,500 --> 00:06:19,500 long term structure based on how we believe things will really 124 00:06:19,500 --> 00:06:23,800 turn out avoid the crazes, the memes the things that are short 125 00:06:23,800 --> 00:06:25,800 term in nature. Now next he goes on to give a 126 00:06:25,800 --> 00:06:28,500 definition I really love. They asked him about what a 127 00:06:28,500 --> 00:06:31,600 value investor. He is and he breaks down the 128 00:06:31,600 --> 00:06:34,400 false distinction between value and growth. 129 00:06:34,400 --> 00:06:38,300 Academic definition of value is by the stock that's cheapest by 130 00:06:38,300 --> 00:06:41,300 the numbers but I don't think that's what Graham and Dodd 131 00:06:41,300 --> 00:06:43,000 wanted. In fact, it's clear that they 132 00:06:43,000 --> 00:06:46,300 were talking about earnings power and the growth 133 00:06:46,300 --> 00:06:49,300 possibilities in a business even if they're hard to determine. 134 00:06:49,800 --> 00:06:53,900 And so, I think value has to be determined for every company. 135 00:06:54,200 --> 00:06:56,800 The way I think about the market is not that they were growth 136 00:06:56,800 --> 00:07:00,200 stocks and value stocks. But rather that all stock May 137 00:07:00,200 --> 00:07:03,700 hold value, but that all stocks also could potentially be 138 00:07:03,700 --> 00:07:06,300 overvalued. So you have to have a mechanism, 139 00:07:06,300 --> 00:07:09,400 a rubric for figuring out. The value of different kinds of 140 00:07:09,400 --> 00:07:12,000 assets, different, kinds of businesses, and then figure out 141 00:07:12,000 --> 00:07:14,900 which ones are trading particularly mispriced. 142 00:07:15,200 --> 00:07:17,500 So growth is encompassed in value. 143 00:07:17,500 --> 00:07:20,700 It's part of the scope of value, just like this starting yield or 144 00:07:20,700 --> 00:07:22,400 the starting multiple is part of value. 145 00:07:22,500 --> 00:07:25,600 Now, Seth continues on with the idea that value and growth 146 00:07:25,600 --> 00:07:29,100 should not be separated and you talk specifically about the type 147 00:07:29,100 --> 00:07:30,900 of company. These investors should be 148 00:07:30,900 --> 00:07:34,000 focused on in a world that's changing as fast as this one. 149 00:07:34,000 --> 00:07:37,300 It's really important to think about not just what are the 150 00:07:37,300 --> 00:07:39,300 earnings today. The earnings today may not be 151 00:07:39,300 --> 00:07:41,100 here tomorrow they may be disrupted. 152 00:07:41,100 --> 00:07:45,000 The business may be gone or they may be 50 or 100 percent more. 153 00:07:45,000 --> 00:07:48,000 So I think investors need to take into account. 154 00:07:48,000 --> 00:07:50,500 What are the longer term prospects for a business? 155 00:07:50,500 --> 00:07:54,000 I think investors have become vastly more sophisticated these 156 00:07:54,000 --> 00:07:57,800 days than in Graham and Dodd Sera in terms of thinking about 157 00:07:57,800 --> 00:08:01,200 what causes a business to be. Resilient to competitive 158 00:08:01,200 --> 00:08:03,100 threats. Also Warren Buffett. 159 00:08:03,100 --> 00:08:09,600 I showed all of us, the value of growth that he thinks hard about 160 00:08:09,600 --> 00:08:11,900 some of the highest quality businesses in the world, but 161 00:08:11,900 --> 00:08:14,000 only buys them when they're at attractive prices. 162 00:08:14,200 --> 00:08:15,600 So he also notes, Warren Buffett's. 163 00:08:15,600 --> 00:08:18,000 Advice of buying the best companies in the world. 164 00:08:18,000 --> 00:08:21,100 The highest quality ones, and trying to snag them for the best 165 00:08:21,100 --> 00:08:23,800 prices possible. Now, as this interview continues 166 00:08:23,800 --> 00:08:26,200 on, I noticed it. Seth klarman is far more 167 00:08:26,200 --> 00:08:29,500 cautious, less enthusiastic about the future than other. 168 00:08:29,800 --> 00:08:32,500 Stirs like Warren Buffett. He seems to always have this 169 00:08:32,500 --> 00:08:36,500 posture, giving warnings and giving doubt instead of giving 170 00:08:36,500 --> 00:08:39,500 optimism, but even as he's more cautious and reluctant to give a 171 00:08:39,508 --> 00:08:43,100 lot of optimism, he still has a lot of Hope for investors today. 172 00:08:43,400 --> 00:08:46,500 One of the questions that he's asked is if he thinks the market 173 00:08:46,500 --> 00:08:49,700 has become too efficient, this is something that a lot of 174 00:08:49,700 --> 00:08:53,100 Scholars would come up with its say that the market is so 175 00:08:53,100 --> 00:08:55,900 efficient now that you can't possibly Beat It. 176 00:08:56,000 --> 00:08:57,800 Here's what he has to say about the subject. 177 00:08:57,800 --> 00:08:59,700 There's a question in my mind about once a month. 178 00:08:59,800 --> 00:09:03,600 That becomes more efficient, whether it actually does have 179 00:09:03,600 --> 00:09:06,100 the likelihood of becoming less efficient afterwards. 180 00:09:06,600 --> 00:09:09,600 So for sure there's more money in public markets. 181 00:09:09,600 --> 00:09:13,000 Things have become somewhat more efficient, but I also see a 182 00:09:13,000 --> 00:09:16,000 short term orientation. That tells me that it's 183 00:09:16,000 --> 00:09:18,000 possible. Some pricing is actually become 184 00:09:18,000 --> 00:09:20,400 less efficient. I think when you look at meta, 185 00:09:20,900 --> 00:09:23,900 the stocks been all over the place in a reasonably short 186 00:09:23,900 --> 00:09:28,300 period of time, Trey it falling to under 100 then Rising back up 187 00:09:28,300 --> 00:09:32,300 to almost 300. Literally months apart for a 188 00:09:32,300 --> 00:09:34,900 large well-established company like think everybody can 189 00:09:34,900 --> 00:09:36,500 analyze. So I think that there are 190 00:09:36,500 --> 00:09:38,300 opportunities you know it's meta. 191 00:09:38,300 --> 00:09:41,100 As a prime example of a company that's not been efficiently 192 00:09:41,100 --> 00:09:43,500 traded. The stock price is literally all 193 00:09:43,500 --> 00:09:48,700 over the place going from $100 to $300 to $200 and this is a 194 00:09:48,700 --> 00:09:51,900 large cap well-established company with Legions of 195 00:09:51,900 --> 00:09:55,800 analysts, covering the stock and even a stock like that is not 196 00:09:55,800 --> 00:09:58,200 being efficiently traded on the stock market. 197 00:09:58,300 --> 00:10:01,700 So he does have hope for Today, he does believe that there still 198 00:10:01,700 --> 00:10:04,600 opportunities for investors to find excess value. 199 00:10:04,600 --> 00:10:07,500 But again, as I watch these interviews, I take some of the 200 00:10:07,500 --> 00:10:10,500 things with a grain of salt, even from great investors like 201 00:10:10,500 --> 00:10:13,700 Seth klarman the prediction that were in and everything bubble. 202 00:10:13,700 --> 00:10:18,200 For example is one, that's very, very difficult to get accurately 203 00:10:18,700 --> 00:10:21,300 and he's also made some predictions like this in the 204 00:10:21,300 --> 00:10:23,300 past. Here's an article from Business 205 00:10:23,300 --> 00:10:28,300 Insider May 19th. 2010 was the published date and the title of 206 00:10:28,300 --> 00:10:32,500 this article is Seth Carmen stocks will have zero returns 207 00:10:32,500 --> 00:10:35,700 for a decade. He was predicting at the time 208 00:10:35,700 --> 00:10:37,500 that companies really wouldn't do well. 209 00:10:37,500 --> 00:10:40,500 He said, quote, given the recent run-up in stocks, I'd be worried 210 00:10:40,500 --> 00:10:44,300 that we'd have another 10 years of zero returns again, this is 211 00:10:44,300 --> 00:10:47,400 in 2010. He says, quote, I am more 212 00:10:47,400 --> 00:10:50,100 worried about the world broadly than I've ever been in my whole 213 00:10:50,100 --> 00:10:52,500 career. He said that stocks have quote, 214 00:10:52,500 --> 00:10:55,800 rallied enormously and they're quite unattractive. 215 00:10:55,800 --> 00:10:59,400 These are all quotes as Seth klarman is from 2010 having the 216 00:10:59,400 --> 00:11:03,300 same Posture back then that he does today giving heed giving 217 00:11:03,300 --> 00:11:06,600 warning giving concerned about the market and macroeconomics, 218 00:11:06,900 --> 00:11:09,200 but it's prediction of a flat market for 10 years. 219 00:11:09,200 --> 00:11:12,200 Really didn't work out since he made those claims in 2010. 220 00:11:12,200 --> 00:11:14,800 The stock market is up over three hundred percent, including 221 00:11:14,800 --> 00:11:18,100 dividends the investor that sold out of the market or became 222 00:11:18,100 --> 00:11:22,000 overly concerned missed out on a huge opportunity cost with the 223 00:11:22,000 --> 00:11:23,800 equity markets Rising higher and higher. 224 00:11:23,900 --> 00:11:25,800 So maybe his called today is correct. 225 00:11:25,800 --> 00:11:28,600 Maybe this is all a big bubble but one thing I noticed about 226 00:11:28,600 --> 00:11:32,200 people, predicting Doom, Gloom is a typically predicted every 227 00:11:32,200 --> 00:11:35,100 ten years and the market typically continues to trudge 228 00:11:35,100 --> 00:11:38,800 forward going upwards year after year and between listening to 229 00:11:38,800 --> 00:11:42,100 Seth klarman or the thoughts of Warren Buffett on this subject. 230 00:11:42,100 --> 00:11:45,600 I'd rather follow Buffett who remains very positive on the US 231 00:11:45,600 --> 00:11:47,700 Stock Market. Now, I have some other big news 232 00:11:47,700 --> 00:11:49,900 here. There was a recent court, filing 233 00:11:49,900 --> 00:11:53,200 that revealed an internal goal that the CEO of Microsoft is 234 00:11:53,200 --> 00:11:55,900 Sachin. Adela has for the revenue growth 235 00:11:55,900 --> 00:11:59,700 of the company by 2030 500 billion. 236 00:11:59,800 --> 00:12:03,500 Four trillion dollars in 2030 and he says that that's a growth 237 00:12:03,500 --> 00:12:08,700 rate of at least 10% per year. Now from this goal, if Microsoft 238 00:12:08,700 --> 00:12:11,000 was able to meet it, we can draw some conclusions. 239 00:12:11,400 --> 00:12:14,400 What such an Adele I did here is he basically gave a little bit 240 00:12:14,400 --> 00:12:16,600 of evaluation framework to work off of. 241 00:12:16,800 --> 00:12:21,100 So what I wanted to do was add this to my list of valuations. 242 00:12:21,400 --> 00:12:23,600 In my last episode, I went through and did relative 243 00:12:23,600 --> 00:12:28,200 valuation from my portfolio to spy, and I added in such an 244 00:12:28,200 --> 00:12:31,500 Adele has valuation in So Soft. We have it right here. 245 00:12:31,500 --> 00:12:34,800 Starting yield of 1.9%, we're going to look at the growth rate 246 00:12:34,800 --> 00:12:37,400 and the implied share price in 2030. 247 00:12:37,500 --> 00:12:40,700 Now, the first thing that we can do is look at Microsoft's cash, 248 00:12:40,700 --> 00:12:42,700 flow conversion from their revenue. 249 00:12:43,000 --> 00:12:48,100 So, right now, Microsoft has revenue of around 198 billion 250 00:12:48,100 --> 00:12:51,700 dollars, that was 2022, and they successfully converted, 200 251 00:12:51,700 --> 00:12:55,800 billion dollars of Revenue and 265 billion dollars of free cash 252 00:12:55,800 --> 00:12:57,600 flow. We do a little math there and 253 00:12:57,600 --> 00:12:59,600 divide the number, by the number we come. 254 00:12:59,800 --> 00:13:04,000 With the percentage of 32%, that sounds correct. 65 is roughly, 255 00:13:04,000 --> 00:13:07,200 one-third of 200. So, we know that Microsoft right 256 00:13:07,200 --> 00:13:11,400 now has a free cash flow conversion of around 32%. 257 00:13:11,700 --> 00:13:14,800 In this is a company that already has very high margins, 258 00:13:15,000 --> 00:13:17,700 so I don't expect that this free cash flow conversion, will 259 00:13:17,700 --> 00:13:21,500 really go up all that much over. The next 10 years, it could 260 00:13:21,500 --> 00:13:24,700 there's a chance it could, if they cut back on capex. 261 00:13:25,000 --> 00:13:27,600 But just to be conservative, let's take this number. 262 00:13:27,700 --> 00:13:30,000 Now, at the end of twenty Thirty, the goal is to have five 263 00:13:30,000 --> 00:13:34,500 hundred billion dollars of Revenue. 32% of 500 billion is 264 00:13:34,500 --> 00:13:37,100 160 billion. So this is the total amount of 265 00:13:37,100 --> 00:13:40,600 free cash flow, that Microsoft would produce in 2030, if they 266 00:13:40,600 --> 00:13:43,200 meet this goal and if they keep the same free cash flow 267 00:13:43,200 --> 00:13:45,600 conversion. Now, when we take that 160 268 00:13:45,600 --> 00:13:48,400 billion and we look at the current market cap today that 269 00:13:48,400 --> 00:13:52,900 gives us a free cash flow. Yield on 2030s cash flows at 270 00:13:52,900 --> 00:13:56,500 around six point six percent that is the free cash flow yield 271 00:13:56,500 --> 00:14:00,800 on 2030s projected, cash flows. Now Microsoft Typically does not 272 00:14:00,800 --> 00:14:05,300 trade at a 6.6 percent free cash flow yield what cash flow yield 273 00:14:05,300 --> 00:14:08,500 it will trade at is Up For Debate but based on the quality 274 00:14:08,500 --> 00:14:11,600 of the company the Diversified product offering the reoccurring 275 00:14:11,600 --> 00:14:14,700 subscription, the high margin and the incredible credit 276 00:14:14,700 --> 00:14:16,800 worthiness. I believe that Microsoft will 277 00:14:16,800 --> 00:14:20,900 trade around two-and-a-half to three percent free cash flow 278 00:14:20,900 --> 00:14:23,500 yield. So let's just assume for a 279 00:14:23,508 --> 00:14:27,400 minute here that the company trades at roughly three point, 280 00:14:27,400 --> 00:14:30,300 three percent free cash flow yield just To make the math, 281 00:14:30,300 --> 00:14:32,800 very simple. That means that the stock price 282 00:14:32,800 --> 00:14:37,400 in 2030 would be $662. It would be a double from where 283 00:14:37,400 --> 00:14:40,400 it is today. A double 17 years is about a 10% 284 00:14:40,400 --> 00:14:42,500 return, so that seems very reasonable. 285 00:14:42,800 --> 00:14:45,800 But we also have to keep in mind that the free cash flow growing 286 00:14:45,800 --> 00:14:49,000 is not the only thing that gives shareholder returns. 287 00:14:49,200 --> 00:14:52,200 There's a couple more things that may help out shareholders, 288 00:14:52,200 --> 00:14:55,800 total returns, Microsoft pays, a growing dividend for the past 10 289 00:14:55,800 --> 00:14:57,700 years. It's grown at around 11 percent 290 00:14:57,700 --> 00:15:00,100 per year. This dividend should About a 291 00:15:00,108 --> 00:15:02,000 little bit with the total returns. 292 00:15:02,100 --> 00:15:04,600 Another thing that may help out with Microsoft is the shares 293 00:15:04,600 --> 00:15:07,200 outstanding going down over time, they do a round, one 294 00:15:07,200 --> 00:15:09,300 percent of share BuyBacks per year. 295 00:15:09,400 --> 00:15:12,400 So based on these assumptions, we could see around a 12 percent 296 00:15:12,400 --> 00:15:14,500 Total return for the next seven years. 297 00:15:14,700 --> 00:15:17,700 If we have the dividends being paid the share BuyBacks and the 298 00:15:17,700 --> 00:15:20,900 free cash flow generation. That's consistent with Sachin 299 00:15:20,900 --> 00:15:24,300 Adele's projections but also remember, this is an internal 300 00:15:24,300 --> 00:15:26,900 goal of Sachin Adela not a guarantee. 301 00:15:27,000 --> 00:15:29,700 Now moving on we have some big news here that I'm a little it 302 00:15:29,708 --> 00:15:33,100 excited about I have to admit even though we don't know 303 00:15:33,100 --> 00:15:36,200 exactly how this is going to turn out black stone which is 304 00:15:36,200 --> 00:15:39,800 Major investment. Firm is said to way offers for a 305 00:15:39,800 --> 00:15:43,200 stake in the Bellagio Casino in Las Vegas. 306 00:15:43,200 --> 00:15:46,700 Now if you're not too familiar with Vegas, you're familiar with 307 00:15:46,800 --> 00:15:50,200 Bellagio. It is the most iconic place in 308 00:15:50,200 --> 00:15:52,300 all of Vegas. It's one of the main 309 00:15:52,300 --> 00:15:56,500 centerpieces of the Las Vegas Strip and it has the iconic 310 00:15:56,500 --> 00:15:59,600 fountains there in literally dozens of TV show. 311 00:15:59,700 --> 00:16:03,800 Dozens of movies, anytime they do a shot of Vegas or a montage 312 00:16:03,800 --> 00:16:06,000 of Vegas. You're gonna see the Bellagio 313 00:16:06,000 --> 00:16:09,400 Fountains and they are pretty incredible in person. 314 00:16:09,600 --> 00:16:12,300 These things are like jets that shoot, hundreds of feet in the 315 00:16:12,300 --> 00:16:14,200 air and their choreographed with music. 316 00:16:14,200 --> 00:16:17,300 It's a pretty cool event, the Bellagio in and of itself, I 317 00:16:17,300 --> 00:16:19,800 think, is one of the best properties in Vegas because of 318 00:16:19,800 --> 00:16:23,700 the iconic nature of it, because of, where it's located, it's 319 00:16:23,700 --> 00:16:28,100 such a ritzy, high-end place in Vegas, an amazing property. 320 00:16:28,500 --> 00:16:31,300 But now we have black Tone looking to exit out half of 321 00:16:31,300 --> 00:16:33,600 their steak, which they just bought a couple years ago. 322 00:16:33,700 --> 00:16:35,700 Let's go ahead and take a look at the specifics of what we 323 00:16:35,700 --> 00:16:37,500 know. Now they say that Blackstone has 324 00:16:37,500 --> 00:16:40,600 Fielding offers for half of its interest in the real estate of 325 00:16:40,600 --> 00:16:44,800 the Bellagio Hotel in Las Vegas. A property purchased almost four 326 00:16:44,800 --> 00:16:48,900 years ago at a price of four point two five billion dollars. 327 00:16:49,300 --> 00:16:51,900 So they just bought the thing a couple of years ago for four 328 00:16:51,900 --> 00:16:55,000 point two five billion now they're looking to sell half of 329 00:16:55,000 --> 00:16:57,600 their Equity stake. Now, a lot of people might 330 00:16:57,600 --> 00:16:59,500 wonder right off the bat. What is black stone? 331 00:16:59,700 --> 00:17:01,900 Motivations. Why are they trying to dump 332 00:17:01,900 --> 00:17:03,900 their Equity? Stake in this property? 333 00:17:04,099 --> 00:17:06,900 That's a complicated question. Big firms. 334 00:17:06,900 --> 00:17:10,500 Like Blackstone are always looking to raise Equity to raise 335 00:17:10,500 --> 00:17:13,900 capital from different sources in any way that they can. 336 00:17:14,200 --> 00:17:15,700 They see different opportunities. 337 00:17:15,700 --> 00:17:17,800 They'll look for raising Capital to buy those different 338 00:17:17,800 --> 00:17:20,200 opportunities. If they have clients that are 339 00:17:20,200 --> 00:17:22,700 withdrawing money or big partners that are withdrawing 340 00:17:22,700 --> 00:17:25,700 money, they need to raise Capital to provide that that 341 00:17:25,700 --> 00:17:29,000 money to their Partners. There's a lot of reasons that 342 00:17:29,000 --> 00:17:31,200 investors. Has including large firms, like 343 00:17:31,200 --> 00:17:33,800 Blackstone cell. So, just the fact that they're 344 00:17:33,800 --> 00:17:36,500 selling the property is not a red flag. 345 00:17:36,500 --> 00:17:40,000 To me, this doesn't cause me any concern whatsoever. 346 00:17:40,300 --> 00:17:44,600 Bellagio is packed, the prices are high. 347 00:17:44,600 --> 00:17:48,100 The Bellagio is right front and center of the Formula One event 348 00:17:48,100 --> 00:17:50,900 happening soon. The tickets for this are 349 00:17:50,900 --> 00:17:57,700 astronomical, the four-day raise ticket is only 2827 per person 350 00:17:57,700 --> 00:17:59,500 for the better package, the one that includes. 351 00:17:59,700 --> 00:18:06,700 Hospitality access is 11,000 247 per person for three days. 352 00:18:07,000 --> 00:18:09,700 That is the prices. These things are going for. 353 00:18:09,800 --> 00:18:13,400 So the Blasio's doing just find the demand, is there the hotel 354 00:18:13,400 --> 00:18:16,000 selling out all of its rooms every single night? 355 00:18:16,000 --> 00:18:19,000 And especially for special events why is Blackstone selling 356 00:18:19,000 --> 00:18:20,700 this property? There could be a thousand 357 00:18:20,700 --> 00:18:24,100 different reasons, but we know for sure that the Bellagio being 358 00:18:24,100 --> 00:18:27,000 in trouble is not one of them. Another thing that Blackstone 359 00:18:27,000 --> 00:18:29,500 has done is they're selling real estate across there. 360 00:18:29,600 --> 00:18:33,300 Entire portfolio, exiting out of warehouses and Industrial 361 00:18:33,300 --> 00:18:35,100 properties. So this is more of a 362 00:18:35,100 --> 00:18:39,400 macroeconomic positioning of their portfolio than anything 363 00:18:39,400 --> 00:18:42,900 specific to the Bellagio. In my opinion, I think this is a 364 00:18:42,900 --> 00:18:46,900 mistake from Blackstone, even though the overall commercial 365 00:18:46,900 --> 00:18:49,100 real estate properties may be having trouble. 366 00:18:49,400 --> 00:18:52,500 The Bellagio and casinos are an entirely different breed with 367 00:18:52,500 --> 00:18:54,900 different tenants, with different demand. 368 00:18:55,100 --> 00:18:57,700 So this is not something that I'm concerned about in terms of 369 00:18:57,700 --> 00:19:00,400 the property itself. Now, they Here that the Bellagio 370 00:19:00,400 --> 00:19:02,900 is one of the top performing, resorts, in the city's famous 371 00:19:02,900 --> 00:19:06,000 strip, it's operated under a long-term lease by MGM. 372 00:19:06,000 --> 00:19:09,300 Resorts International traffic to Las Vegas hotels has remained 373 00:19:09,300 --> 00:19:12,600 strong even as other real estate sectors such as malls and 374 00:19:12,600 --> 00:19:16,800 office-based have weekend traffic in Vegas, continues to 375 00:19:16,800 --> 00:19:18,600 be strong. I'm projecting that. 376 00:19:18,600 --> 00:19:20,600 It will be strong over the next couple of years. 377 00:19:21,000 --> 00:19:24,900 The only thing that could really put a damper in that is a very 378 00:19:24,900 --> 00:19:27,600 bad recession and it doesn't look like we're getting that 379 00:19:27,600 --> 00:19:29,400 just now. So we know that the properties 380 00:19:29,400 --> 00:19:32,100 up Up for sale. And this is a good property who 381 00:19:32,100 --> 00:19:34,500 are the potential buyers of this property? 382 00:19:34,500 --> 00:19:38,500 While one of those is a large holding in my portfolio in the 383 00:19:38,500 --> 00:19:41,100 real estate category. I only have one holding, which 384 00:19:41,100 --> 00:19:45,100 remains Vici, one of my long-term compounding positions, 385 00:19:45,100 --> 00:19:48,700 a company that I think has phenomenal assets located across 386 00:19:48,700 --> 00:19:52,000 the u.s. and even some International like in Canada, 387 00:19:52,400 --> 00:19:56,900 but Vici owns a majority of iconic locations, iconic real 388 00:19:56,900 --> 00:20:01,400 estate in Vegas, those are their Jules owning the Venetian owning 389 00:20:01,400 --> 00:20:04,500 The Mirage owning. So many MGM properties Caesars 390 00:20:04,500 --> 00:20:08,200 and all of their properties Vici owns a ton of Vegas, real 391 00:20:08,200 --> 00:20:11,200 estate. And I know for a fact that this 392 00:20:11,200 --> 00:20:14,100 company is incredibly bullish, on Vegas. 393 00:20:14,300 --> 00:20:17,700 They would like to own the entire strip if they could and 394 00:20:17,700 --> 00:20:21,000 one of the properties that Ed Pitonyak, the CEO of Vici has 395 00:20:21,000 --> 00:20:24,900 specifically outlined as an incredible property in Vegas. 396 00:20:24,900 --> 00:20:27,800 That he would love to own is the Bellagio. 397 00:20:27,900 --> 00:20:31,000 He's pointed at that one. Quickly and he was saddened that 398 00:20:31,000 --> 00:20:33,400 blacks don't got to it before he could. 399 00:20:33,400 --> 00:20:36,400 So I think it's incredibly likely that Vici is on the 400 00:20:36,400 --> 00:20:39,700 phone, trying to work out a deal, that makes sense for the 401 00:20:39,700 --> 00:20:41,400 shareholder. And I believe that. 402 00:20:41,400 --> 00:20:44,500 If they can have it, make sense. If they can get it for a price 403 00:20:44,500 --> 00:20:47,600 where it's a creative to a ffo, I think the cheese going to buy 404 00:20:47,600 --> 00:20:49,600 this thing. I think there's a very high 405 00:20:49,600 --> 00:20:53,100 probability of it. I would give the odds right now 406 00:20:53,500 --> 00:20:57,300 around 60%. I think that's the chance that 407 00:20:57,300 --> 00:21:00,200 Vici ends up buying this, they're one of the few REITs 408 00:21:00,300 --> 00:21:04,000 with the scale with the balance sheet, with the credibility, to 409 00:21:04,000 --> 00:21:06,100 be able to own it. They're one of the few weeks 410 00:21:06,100 --> 00:21:08,700 that has the expertise, the management that has dealt with 411 00:21:08,700 --> 00:21:11,500 these type of properties, and they're one of the ones that has 412 00:21:11,500 --> 00:21:14,000 the willingness to take on this big of a purchase. 413 00:21:14,400 --> 00:21:17,200 So I think a lot of the stars have aligned for Vici to buy 414 00:21:17,200 --> 00:21:20,300 this property. Now, there are other contenders 415 00:21:20,400 --> 00:21:23,300 there's other companies that could own this one of them is 416 00:21:23,300 --> 00:21:26,700 realty income Corp realty. Income Corp is long known for 417 00:21:26,700 --> 00:21:30,000 being the monthly dividend pair. It's a company that It owns a 418 00:21:30,000 --> 00:21:34,300 lot of real estate that house is stuff like Home Depot Lowe's. 419 00:21:34,400 --> 00:21:37,000 They own a lot of investment grade real estate, but they've 420 00:21:37,000 --> 00:21:40,100 shown a willingness to even change their business model, and 421 00:21:40,100 --> 00:21:43,600 follow VG into these entertainment, Casino, and 422 00:21:43,600 --> 00:21:47,300 Resort properties realty. Income Corp recently, purchased 423 00:21:47,300 --> 00:21:50,900 with a leaseback sale. The Encore Boston Harbor from 424 00:21:50,900 --> 00:21:53,300 win. This is a massive property that 425 00:21:53,300 --> 00:21:57,600 they bought for 1.7 billion. So this shows a validation of 426 00:21:57,600 --> 00:22:01,200 what VG's doing and it also Rose and also shows that there's 427 00:22:01,200 --> 00:22:04,800 other companies wising up wanting to get in on these 428 00:22:04,800 --> 00:22:07,100 deals. So VG's a potential buyer. 429 00:22:07,100 --> 00:22:09,900 We also have realty income Corp which I could see making this 430 00:22:09,900 --> 00:22:12,000 deal as well. If they really fought for it. 431 00:22:12,000 --> 00:22:14,600 I think they could make the deal and then there's other 432 00:22:14,600 --> 00:22:17,300 investment firms that are large enough to be buying this steak. 433 00:22:17,400 --> 00:22:19,900 So there is a chance that Vici doesn't end up with this 434 00:22:19,900 --> 00:22:22,500 property. If they get outbid by someone, 435 00:22:22,500 --> 00:22:24,400 to the extent that they can't make money. 436 00:22:24,700 --> 00:22:27,800 Or if black stone is trying to get prices that Vici really 437 00:22:27,800 --> 00:22:30,600 doesn't want to pay that could Be one reason why? 438 00:22:30,900 --> 00:22:33,100 But I think there's a good chance they make a deal. 439 00:22:33,200 --> 00:22:34,800 They're in a good position to do so. 440 00:22:34,800 --> 00:22:36,900 And I believe, they'll really want this property. 441 00:22:37,300 --> 00:22:39,200 So we'll have to see how things turn out either way. 442 00:22:39,200 --> 00:22:41,400 It's an exciting time to be a Vici shareholder. 443 00:22:41,700 --> 00:22:44,700 Now, in a rare turn of events, we have a follow-up to one of 444 00:22:44,700 --> 00:22:46,600 the tick tocks that we goofed on. 445 00:22:46,600 --> 00:22:50,200 In our last episode, we just made a fun video reacting to it. 446 00:22:50,200 --> 00:22:55,600 Because sometimes people have a tendency in some rare cases to 447 00:22:55,600 --> 00:22:58,500 say, some goofy things on Tick, Tock and especially when it 448 00:22:58,500 --> 00:23:01,600 comes to Financial. Ice or business advice Tick-Tock 449 00:23:01,600 --> 00:23:05,000 has some of the best. The best looks at what people 450 00:23:05,000 --> 00:23:08,100 view as Financial advice. In this case, it was this 451 00:23:08,100 --> 00:23:10,400 individual. I don't know his name, but he's 452 00:23:10,600 --> 00:23:13,100 giving advice of basically how to spin up a business. 453 00:23:13,300 --> 00:23:16,000 Create a business license. Take out a bunch of credit cards 454 00:23:16,000 --> 00:23:19,100 and credit lines, use those credit cards to buy things like 455 00:23:19,100 --> 00:23:22,800 expensive watches, sell them to pawn shops and then declare 456 00:23:22,800 --> 00:23:26,100 bankruptcy with your business. And he acted as though this is 457 00:23:26,100 --> 00:23:28,300 something where you're not personally liable because you 458 00:23:28,300 --> 00:23:30,700 have a business license. It's not under your personal 459 00:23:30,700 --> 00:23:32,400 name. Obviously, there's numerous 460 00:23:32,400 --> 00:23:35,200 reasons of why this wouldn't work, why you would be 461 00:23:35,200 --> 00:23:39,300 prosecuted why this is basically fraud, so on, and so forth. 462 00:23:39,500 --> 00:23:42,600 Now, with this original Tick-Tock, I didn't know if he 463 00:23:42,600 --> 00:23:45,800 was being serious here or not, I couldn't quite tell, but he 464 00:23:45,808 --> 00:23:48,500 really gives no indication that he's joking. 465 00:23:48,800 --> 00:23:51,700 He is somewhat serious throughout the entire thing. 466 00:23:51,800 --> 00:23:53,700 Now, this Tick-Tock blew up online. 467 00:23:53,700 --> 00:23:56,300 He got a huge response and a lot of people concluded. 468 00:23:56,300 --> 00:23:59,100 As I did that, he's basically describing fraud hair. 469 00:23:59,600 --> 00:24:02,700 Telling people to follow him on instructions on how to commit 470 00:24:02,700 --> 00:24:05,400 this fraud. But here we have is response as 471 00:24:05,400 --> 00:24:07,300 a follow-up. But funniest part about this 472 00:24:07,300 --> 00:24:09,600 whole video is how many you guys thought I was being serious? 473 00:24:09,900 --> 00:24:14,500 You have to be stupid to believe that you can open a brand-new 474 00:24:14,500 --> 00:24:16,600 business, get American Express and be able to spend a hundred 475 00:24:16,600 --> 00:24:19,300 thousand dollars without any history in a business or any of 476 00:24:19,300 --> 00:24:21,300 that kind of, I was trolling another Tick. 477 00:24:21,300 --> 00:24:24,300 Tock, we do. I saw a y'all blew it up, like, 478 00:24:24,300 --> 00:24:28,000 I knew what happened, and I was confident for all this for other 479 00:24:28,000 --> 00:24:30,600 for all this, but there's no proof for me for anything 480 00:24:30,600 --> 00:24:31,800 because it was all complete bullshit. 481 00:24:32,700 --> 00:24:37,700 It was all a joke, all along after being told that this was 482 00:24:37,700 --> 00:24:40,600 fraud over and over again. He now has this follow-up video 483 00:24:40,600 --> 00:24:44,300 saying, this was this is all a joke is just a prank bro. 484 00:24:44,300 --> 00:24:47,700 I was just pretending this wasn't me being serious at all. 485 00:24:47,700 --> 00:24:50,600 Now it's impossible to tell if he really was joking in the 486 00:24:50,600 --> 00:24:54,300 first Tick-Tock or if this is an attempt to save himself and just 487 00:24:54,300 --> 00:24:57,200 explain that it was a joke because he got called a fraud, a 488 00:24:57,200 --> 00:25:00,400 lot of times. But either way, One thing I know 489 00:25:00,400 --> 00:25:03,400 from ample social media experience in doing YouTube for 490 00:25:03,400 --> 00:25:06,600 a while, is if you're joking about something, especially 491 00:25:06,600 --> 00:25:09,500 something is important is explaining how to commit fraud. 492 00:25:09,900 --> 00:25:13,000 You may want to explain clearly that it's a joke somewhere, 493 00:25:13,200 --> 00:25:16,800 maybe in a follow-up comment under the video, maybe make it a 494 00:25:16,808 --> 00:25:19,200 little bit more sarcastic. So people can clearly tell it's 495 00:25:19,200 --> 00:25:22,600 a joke because the first Tick Tock leaves a little bit to the 496 00:25:22,600 --> 00:25:25,700 imagination, and there's always some cases of being 497 00:25:25,700 --> 00:25:27,900 misinterpreted, but there we have it. 498 00:25:28,100 --> 00:25:30,900 It was just a prank. All of you are fools for 499 00:25:30,900 --> 00:25:34,100 believing him in the first one. Now, that's it for this episode. 500 00:25:34,100 --> 00:25:36,500 I hope you enjoyed. I'll have more content out this 501 00:25:36,500 --> 00:25:39,300 week, so make sure you subscribe to the channel turn on the Bell 502 00:25:39,300 --> 00:25:41,400 icon. So you get notifications and 503 00:25:41,400 --> 00:25:30,900 I'll see you in the next one. All of you are fools for 504 00:25:30,900 --> 00:25:34,100 believing him in the first one. Now, that's it for this episode. 505 00:25:34,100 --> 00:25:36,500 I hope you enjoyed. I'll have more content out this 506 00:25:36,500 --> 00:25:39,300 week, so make sure you subscribe to the channel turn on the Bell 507 00:25:39,300 --> 00:25:41,400 icon. So you get notifications and 508 00:25:41,400 --> 00:25:42,300 I'll see you in the next one.