Leading into Black Friday, we saw a lot of videos like this
one, guys. Check this out.
Where is everybody? Like, there's nobody here.
Dude, what the Is this Black Friday for real?
Guys, the line at Starbucks is longer than.
Any other line. Apparently coffee is the hot
ticket item this Black Friday. I'm just absolutely mind blown.
Guys, there's nobody here. Look at the.
Line Starbucks, Starbucks is is busy.
The rest of Target dead. Nothing was selling Black
Friday. It was going to be a failure.
Shopping mall centers are entirely empty on Black Friday,
even the day after Black Friday. We have companies like Best Buy
with too many TV's. They've gone unsold.
They couldn't clear up their inventory.
They literally have stacks of TV's, entire aisles of TV's that
have gone unsold. Now, I saw a lot of these videos
highlighting how slow Black Friday was, how nobody was
excited about the shopping holiday, and how your companies,
your stocks, and the economy are going to be doing poorly.
The consumer is exhausted. They've extinguished all of
their spending power. But what if I told you there's a
different answer here, a different part of the story not
being shared. Here's Amazon, for example,
explaining how their Black Friday went.
We. Had a huge Black Friday last
week and in fact it was our highest sales.
Most items sold Black Friday in Amazon's entire history.
So very excited about that as you said.
On average, customers ordered more than 1000 items per second
throughout the day, she says. This was their biggest Black
Friday ever, and they sold, quote, 1000 items per second,
not per minute, but per second all of Black Friday.
Shopify also has something to say about Black Friday.
We saw peak sales per minute globally on Black Friday was 4.2
million per minute. That was right around noon on
Friday, 12 O1 Eastern Time. And last, just to compare, last
year peak sales permitted globally on Black Friday was
about 3.5 million around the same time.
But in total, in aggregate we saw but $4.1 billion sold on
Black Friday. That's a 22% increase since the
last year's Black Friday, which is about 3.36.
They also hit record high Black Friday sales, and in aggregate,
it does seem like Black Friday shopping was a success.
It was up 7.5% over last year, according to Adobe Analytics.
Now we also have the frustrating news for the bears that the
market is not dropping. It continues to surge upwards
and there's reason to believe that this may be sustained.
Investors today are holding record high cash balances.
And then finally Elizabeth Warren took to X, formerly
Twitter to post that there is now a sandwich shop monopoly.
You heard that right. We're talking about Subway
sandwich and Jimmy John's. They have formed a sandwich shop
monopoly and they need to be stopped by the government.
So as always, we have a lot to get to.
Let's go ahead and jump in. Now I want to start off by
taking a look at the Black Friday predictions.
We had a lot of videos like the Surface over the weekend.
If you're online, a lot of these type of videos were trending
where. Is everybody like, there's
nobody here? Dude, what the Is this Black
Friday for real? Guys, the line at Starbucks is
longer than. Any other live these videos show
an empty Target at 6:00 AM. This is Black Friday morning and
traditionally this type of holiday brings a lot of
shoppers. They surge in they look for
deals. In fact, I remember back in
2014, 2015, that Black Friday resulted in people literally
struggling for deals. They were reaching over each
other. They're trying to grab packages
from each other. We've all seen them before.
The video and images of people fighting over saving a few
dollars on a smart TV, well, now we're seeing videos of empty
stores and overstocked merchandise.
So what's going on here? Watching these type of videos is
very misleading and it doesn't paint an accurate picture of
what's going on with the economy.
There's a couple key things that have affected Black Friday
shopping this year. The first thing impacting lower
store traffic this year, especially in retail locations,
is the deals have been extended outside of a single day.
A lot of these retailers are offering their deals ahead of
Black Friday. They started on Thursday or they
start Black Friday sales earlier in the week.
This, of course is going to affect in store traffic because
the deals are being extended out of a single day.
It makes it so there's less of a rush in that single day to get
an item. And on top of that, many
retailers like Best Buy and Target are offering price
protection through most of the holiday shopping season as well.
So even if you bought the item earlier at a higher price
outside of the deal, you can retroactively get the deal.
So obviously when Target's offering buyers protection and
expanding the holiday outside of Black Friday, it doesn't create
as much shopping urgency on the day itself.
So in terms of Best Buy and Target, these companies aren't
seeing a rush of shoppers racing for deals because they've
expanded those deals all throughout the holiday season.
Now, I don't invest in Target or Best Buy.
The only physical retailer that I own is Costco.
That's my pick. I think it's the best physical
retailer now. I went to Costco on Saturday
following Black Friday and it was packed, but that was no
surprise because it's packed every weekend.
So I'm not sure if Black Friday impacted Costco at all.
But outside of the fact that sales have now been expanded to
multiple days, they're not just on Black Friday.
I think there's another big factor leading to lower traffic
in store, and this is the biggest factor overall.
People are not buying as much stuff in stores as they were two
years ago or five years ago or 10 years ago.
Online sales is taking market share.
We can take a look at Amazon, for example.
If we look at just the revenue incremental gain from 2020 to
2022, the revenue went from almost $400 billion to over $500
billion. So they gained roughly $100
billion in these two years, $100 billion is about the same amount
of revenue that Target does per year.
So they gained an incremental target in a two year period.
Now a portion of this of course is AWS, another portion is
advertising, but most of this revenue comes from online
retail. Online retailers like Amazon and
Shopify continue to gain market share every single year against
their physical retailer counterparts.
That's why these companies are up two and 5% today, and the
statistics that Amazon shares this year are incredible.
Here's one of the spokesperson from Amazon's warehouse.
On average, customers ordered more than 1000 items per second
throughout the day and our top selling categories included
home, kitchen, toys and beauty. I'm going to share a few of our
top selling items as well. Those were Amazon Fire TV
sticks. Those are always popular.
This next one I'm really excited about because it's from a small
business seller. It's a really fun game called.
Taco Cat, Goat, Cheese, pizza. Check it out.
And on Prime Video. Our top selling movies were
Barbie, Oppenheimer, and the latest Mission Impossible.
Now Amazon didn't give a lot of stats here.
They said that they sold 1000 items per second on Black
Friday, which is a stat that I have a difficulty wrapping my
mind around. But they didn't share how this
compares to last year. What does the percentage change
from year over year? But just to put it in
perspective, I mean, when we hear online shopping numbers
from Adobe, they suggest. Sales were up 7 1/2%.
MasterCard says online sales were up 8 1/2%, and Salesforce
says they were up 9%. So how much did Amazon see an
increase over a year ago from Black Friday?
Again, it was our biggest Black Friday ever.
We were all about saving, you said.
That what what percentage increase?
I don't have those numbers handy, but we're just excited
that we had a great season. We're we're geared up for Cyber
Monday. You can tell that Amazons being
careful about what they share and what they don't share.
She'll not answer the question yet about what the percentage
gain was year over year. We just know it was the biggest
year ever. Now either way, whether Amazon
slightly beat their last year's record or whether they crushed
it with a year over year gain, we don't know that for now.
But we know that the stores were not empty.
It was not what the videos showed online, the anecdotal
footage of people walking through empty locations.
And Amazon isn't the only outlier here.
We can also look at Shopify, which Amazon and Shopify are
similar but different. In a lot of ways, Amazon is the
centralized place for sellers to all sell under the Amazon.com
URL. Shopify everyone sells on their
own unique URLs, their own shopping experience.
They can make the website look and feel how they want.
Both of them have millions of third party sellers selling on
their platform and Shopify, along with Amazon had an
incredible, record-breaking weekend.
We saw merchants crossed the $1 billion mark before midnight EST
on Black Friday, which was a couple hours earlier than last
year. And so you know while it's still
early on Cyber Monday, I think the the, the, the, the thing
we're seeing is that shoppers are voting with their wallets to
buy from brands they love both online and in store.
We can talk about in store too and and those brands are on
Shopify. Shopify is partnered with Amazon
and a lot of social media companies to make what they call
a retail shopping operating system.
And I do think this company has a very good corner of the
Internet. They have really carved out a
terrific business for themselves.
We're creating a retail operating system which means
whatever you want to do from Shopify you can do that.
But but you know the success of this Black Friday is is owned by
our, our merchants and and they're doing really well.
You know something that I just a new stat that I just got is over
30,000 of our merchants. For them, Black Friday was their
best sales day ever on Shopify. Now I'll be getting more data
from Amazon and Shopify after Cyber Monday to see how this
entire weekend panned out. So we have Amazon and Shopify.
And overall, the report from Adobe Analytics is that Black
Friday shopping had a 7.5% increase in online sales year
over year, a total of $9.8 billion, a further indication
that price conscious consumers want to spend on the best deals
and they are looking for those deals online.
It's actually incredible to look at the revenue by day, every
single day. Adobe's tracking the revenue
online with what they can see. And keep in mind these numbers
aren't exactly correct. They are estimates.
MasterCard and Visa will have their own analysis as well.
They show the same trends, but they're not perfectly matched.
On a normal given day, we have anywhere from 2 to $4 billion in
revenue, and then on Black Friday it spikes up to 9.8
billion. So this is almost like a week's
worth of sale in a single 24 hour period.
Another interesting thing to look at is the actual deals on
Black Friday. There's some people that suggest
that there's not really any good deals.
The companies aren't marking down their products and that is
not accurate, at least judging by Adobe Analytics.
They track the price of each item and we can see the
electronic toys and apparel typically have anywhere from a
zero to 5% discount leading up to Black Friday.
Then going into the week, we have toys discounted around 9%.
And then on Black Friday itself, the prices plummet.
Electronics on average are 26% cheaper, toys are 28% cheaper
and apparel's 24% cheaper. So customers are actually
getting good deals on Black Friday.
Now, after seeing all the objective data of how successful
Black Friday was both in physical retail and online
retail, what do we make of these type of anecdotal videos
illustrating how empty all these retail locations are?
And many people, hundreds of comments saying that the economy
is going down the tubes, that nobody has money to spend, that
nobody's buying anything this weekend.
I think this is a clear illustration of being careful
with the anecdotal evidence you're receiving online, because
in many cases it lacks full context.
Target, for example, expanded their Black Friday sales prior
in the week, so there's multiple days of it as well as most of
these companies do a lot of the selling online, they price
match, they fight aggressively for your sales.
So if you're just looking at some pieces of evidence, like an
opening of a company at 6:00 AM and concluding that the
economy's in trouble, I think you're going to be mistaken.
I don't have any problem with anecdotal research and looking
at things on the ground in person for yourself.
In fact, I think that's an important part of doing
research. Part of the reason that I first
looked at Texas Roadhouse was because I've gone to the company
over the years, for the past decade, and I've just seen how
busy this company is every single weekend.
Without fail, it's packed. And I noticed that trend over
time. So that got me my initial
research on the company. That was anecdotal evidence that
was taken from first hand account.
But the research can't end there.
You can't buy and sell just based off of your own anecdotal
experience. What if the Texas roadhouses
around my home are unusually busy and they're not as busy
other places? That's why I look at the actual
fundamentals of the company and see if my experience aligns with
the overall fundamentals of the company, the direction it's
going, see if what I'm seeing is an outlier or the norm.
So I not only look at how busy it is in my current locations
around my home, but I also check different area codes and see
what the wait time is over in Texas, over in California, all
across the US Anecdotal experience can lead us into
great investments. It can initiate our start into
doing research on a company, but we should have formed final
conclusions about a subject based on five second clips
posted online. And unfortunately, that's what a
lot of people did. In order to spread fear and doom
and gloom about the economy, they took a couple of video
shots of empty stores and concluded that that's how the
entire U.S. economy is doing, and obviously that's not the
case. So even though people love to be
pessimistic, it sounds smarter to be pessimistic.
You sound like you're more educated and you're looking at
things with this nice skeptical bent.
I'll continue to have my optimistic approach because I
think it's correct. Overall, right now, people are
spending money, they're employed, they're making money,
people have extra money to spend.
And I believe investors that continue to buy good companies
that offer great products and are very competitive, they'll do
better over time than the investors that continue to be
skeptical, pessimistic and dumish.
Now, during all of this news and chaos over the weekend, we also
heard that Amazon has officially passed up both UPS and FedEx to
be the biggest delivery business in the US.
A decade ago, Amazon was a major customer of UPS and FedEx, and
some executives from the incumbents and analysts mocked
the notion mock the Amazon could someday supplant them.
And if we put up the growth here over time, it's actually
incredible to see how fast Amazon has caught up to UPSU.
PS: went up a little bit from 2019 to 2020, then it basically
had a flat year from 20 to 21. While UPS was having that flat
year, Amazon delivered over a billion extra parcels year over
year. So Amazon made substantial
gains. And then from 2021 to 2022, UPS
actually had a down year, while again Amazon made substantial
gains. Now I can't say that I'm shocked
by this trend. I've said for a while that
Amazon will engulf UPS and FedEx.
Right now, I think there's going to be a strategic shift.
UPS and FedEx are going to move away from delivering standard
packages and items that Amazon delivers.
I think they'll still focus on delivering furniture and home
appliances, big and bulky things that Amazon isn't focusing on.
But I predict over time UPS and FedEx will have their growth
halted and be stagnant over the next five years as Amazon
continues to grow. Now moving on from all the Black
Friday news, we also have news of the overall economy and stock
market. For example, the stock market
this year is up around 18%. It's been a great year to be an
investor. My Portfolio for reference is
around 22% time weighted return this year and 23% money
weighted. So it's had a great performance
year to date. That's $93,000 in the green now.
Anytime the stock market races up in a year like this,
investors can become apprehensive about buying.
Now they can become a little bit more restrictive, but in some
cases, that's not the best decision.
There's a lot of people that predicted that 2023 would be a
bad year to be an investor, that the stock market was going to go
down, the bear market was going to continue, the valuations were
far too high and there would not be a rebound.
And they've all been proven incredibly wrong on this topic.
But despite being objectively proven wrong for 2023, they
don't admit they're wrong. They just say that it's going to
happen next year. That's when the big stock market
crash is going to happen. Bears are never wrong.
They're always just a bit early and they always push back their
claims The next year. We're seeing that happen yet
again. Right now, we actually have
evidence that investors can continue spending more.
This year, investors are plowing cash into stocks and bond funds.
Invesco's QQQ exchange traded fund, which tracks the tech
heavy NASDAQ 100 index, reported its largest weekly inflow in
history the week of November 13th.
Funds that track the high yield bond indexes, the higher risk
portion of the corporate bond market, reported two highest
weekly inflow records in the middle of November.
So we know right now a lot of investors are buying stocks.
That's why prices are going up and a lot of investors have huge
cash balances and money market funds earning A yield there.
They say for the first time in a long time, cash is a competitor
quote. But I think as soon as short
term rates start to tick down, you're going to see large
inflows to other assets. So people are parking their
money in cash right now, but they're not going to want to sit
it there forever. I think there's multiple ways to
view this data, but I think it's ultimately bullish for stocks
that people have a lot of cash. That means that there's more
money sitting on the sidelines for if a dip happens in the
future. If we do have some type of 5% or
10% pull back, a lot of people have a cash balance to buy up
that pullback, making a long sustained bear market less
likely. So even though right now cash is
a competitor, I still see it as a positive thing that so many
people have cash. Now moving on, we have to
address this post from our favorite senator, Elizabeth
Warren. Elizabeth Warren has become a
bad take machine. Most recently, she's gone on a
campaign against buybacks, illustrating that she doesn't
understand how they function in the capital markets or the
consequences of them. But out of all the bad takes
she's given, I think this one might finally take the cake.
Let me go ahead and read this, and this is a direct quote.
We don't need another private equity deal that could lead to
higher food prices for consumers.
The FTC is right to investigate whether the purchase of Subway
by the same firm that owns Jimmy John's and McAllister Deli
creates a sandwich shop monopoly.
Yes, you heard that right. That is the exact words.
She's concerned that a company that owns both Subway and Jimmy
John's is going to create a sandwich shop monopoly.
So no longer is Congress concerned about the industrial
military complex. No longer are they concerned
about abusive billing practices from pharmaceutical companies
that hold products that are available nowhere else.
But they're concerned about one of the most commoditized items
in the world, a sandwich. A deli sandwich, which is
available at every retail location, available at every
deli, the most purchased food item in the world being a
monopoly because two chains are owned by the same owner.
Now you know me, I'm a big fan of monopolies.
In fact, I try to invest in monopolies when I can.
A lot of the companies that I own, like S&P Global and
MasterCard and Intuit, have very monopolistic characteristics.
They have dominant market share. They have very concentrated
industries. They're at the very top of the
food chain. Their companies have incredibly
high barriers to entry, and you can't really get their products
many other places. That's the characteristic of a
monopoly. Out of all the companies that I
own, most of them are monopolistic.
But there's a couple that are not monopolistic at all.
Food joints are not monopolies, and I've never referred to Texas
Roadhouse as a monopolistic company, or Chipotle for that
matter. They have brand value, they have
name brand recognition. They offer a good product at a
good price, so people are willing to pay for it.
They do have rapid store expansion, but they also have a
characteristic that many monopolies do not have, which is
intense, fierce competition every single day at every single
location. There are many alternatives to
Chipotle and Texas Roadhouse, just like there's many
alternatives to Subway and Jimmy John's.
Even in the sandwich category alone, there's many
alternatives. But outside of the sandwich
category, there's literally thousands of food joints to go
to. But there you have in 2023, the
big concern for Elizabeth Warren is the quote sandwich shop
Monopoly. That's all for this time.
See you in the next one.