1 00:00:00,120 --> 00:00:02,080 Welcome back, everyone. Today on the Joseph Carlson 2 00:00:02,080 --> 00:00:05,760 Show, we have a new price upgrade from Tom Lee, one of the 3 00:00:05,760 --> 00:00:07,840 notable bulls in the market today. 4 00:00:08,119 --> 00:00:10,720 He's upgrading the S&P 500, saying that it's going to rise 5 00:00:10,720 --> 00:00:15,400 around another 5% this year to end the year around 22%. 6 00:00:15,400 --> 00:00:18,360 And he gives his arguments here. So far, Tom Lee has been correct 7 00:00:18,360 --> 00:00:21,080 on basically every major call he's made over the past couple 8 00:00:21,080 --> 00:00:23,400 of years. He's become more popular, more 9 00:00:23,400 --> 00:00:25,240 notable. He's gotten more screen time. 10 00:00:25,560 --> 00:00:28,760 He's actually becoming a a bigger figure in media because 11 00:00:28,760 --> 00:00:30,280 of how correct his calls have been. 12 00:00:30,680 --> 00:00:32,360 On the other hand, we have the bears. 13 00:00:32,720 --> 00:00:34,600 The bears have been having a difficult time. 14 00:00:34,840 --> 00:00:37,400 One of the most notable bears, in fact, I think the most 15 00:00:37,400 --> 00:00:41,120 bearish bear is JP Morgan's Marco Colonovic. 16 00:00:41,560 --> 00:00:44,720 At least he was JP Morgan's as of this morning. 17 00:00:44,880 --> 00:00:48,480 He is stepping down. A nice euphemism for being let 18 00:00:48,480 --> 00:00:50,680 go. After a series of bad calls, 19 00:00:51,040 --> 00:00:53,640 we're going to be looking at this dichotomy of bulls getting 20 00:00:53,640 --> 00:00:57,760 more popular and bears getting let go or stepping down from 21 00:00:57,760 --> 00:01:00,200 their positions. Is this a sign of the top? 22 00:01:00,640 --> 00:01:02,920 Does this mean that the market is too bullish right now? 23 00:01:03,360 --> 00:01:06,400 Or are there some reasons why bulls are more often correct 24 00:01:06,480 --> 00:01:08,520 than bears? Now we also have some other 25 00:01:08,520 --> 00:01:11,240 news. We have news that Amazon, one of 26 00:01:11,240 --> 00:01:14,840 my largest investments, one of my most critical investments for 27 00:01:14,840 --> 00:01:17,720 a brief moment in time, surpassed $200.00 per share. 28 00:01:18,240 --> 00:01:20,280 Now, $200.00 is just a nice round Number. 29 00:01:20,280 --> 00:01:22,920 It doesn't really mean anything, but it's symbolic. 30 00:01:22,920 --> 00:01:25,960 It's like breaking a a big glass ceiling for Amazon. 31 00:01:26,360 --> 00:01:29,040 And they just surpassed it for a brief moment in time. 32 00:01:29,400 --> 00:01:31,920 And then we're hit with news that Jeff Bezos is selling $5 33 00:01:31,920 --> 00:01:35,720 billion of additional shares, $5 billion worth. 34 00:01:35,720 --> 00:01:37,280 And of course, Amazon traded down. 35 00:01:37,280 --> 00:01:40,080 After that. We'll be discussing the impact 36 00:01:40,320 --> 00:01:43,520 of Jeff Bezos selling on Amazon stock. 37 00:01:43,520 --> 00:01:46,400 We also have another important topic to get to in this episode. 38 00:01:46,600 --> 00:01:50,440 We know the controversy over Chipotle's bowl portion size. 39 00:01:50,440 --> 00:01:53,400 Their TikTok creators with millions of views saying that 40 00:01:53,400 --> 00:01:57,200 Chipotle needs to be boycotted because of how bad the portions 41 00:01:57,200 --> 00:01:59,600 are that they give in their burrito bowls. 42 00:02:00,120 --> 00:02:02,720 Well, Wells Fargo wanted to get to the bottom of this. 43 00:02:02,720 --> 00:02:06,920 One of their analysts visited Chipotle locations 75 times to 44 00:02:06,920 --> 00:02:10,880 measure whether or not they give consistent portion sizes. 45 00:02:11,280 --> 00:02:14,120 We have the data. We have the statistical analysis 46 00:02:14,440 --> 00:02:17,360 of Chipotle's bowl size. I'll be looking at it in today's 47 00:02:17,360 --> 00:02:18,920 episode. And then finally, we also have 48 00:02:18,920 --> 00:02:22,000 news that Sam's Club lowered their warehouse membership price 49 00:02:22,240 --> 00:02:25,960 to $20 per year. At this point, when a membership 50 00:02:25,960 --> 00:02:29,960 is $20 per year, can you really call it a membership warehouse? 51 00:02:30,360 --> 00:02:32,520 We'll be discussing. We have all of that to get into, 52 00:02:32,520 --> 00:02:34,640 plus much more. Let's go ahead and jump in now. 53 00:02:34,640 --> 00:02:37,200 We start off today's episode with the main story, which 54 00:02:37,200 --> 00:02:40,800 revolves around bears and bulls. The most notable bull in the 55 00:02:40,800 --> 00:02:44,840 market is Tom Lee, and he's becoming increasingly popular. 56 00:02:45,160 --> 00:02:47,920 If I was to measure the rise of Tom Lee and the popularity of 57 00:02:47,920 --> 00:02:51,440 Tom Lee, it is directly linked with the success of his calls. 58 00:02:51,720 --> 00:02:53,800 He is becoming more popular for good reason. 59 00:02:53,800 --> 00:02:56,280 He's correct, and he's consistently correct about 60 00:02:56,280 --> 00:02:59,960 things that many other people are wrong on, specifically price 61 00:02:59,960 --> 00:03:03,640 targets for the S&P 500. I've noticed the rise of Tom Lee 62 00:03:03,640 --> 00:03:07,600 over the past few years as he has made non consensus correct 63 00:03:07,600 --> 00:03:12,960 calls. Back in 2020-2021, 2022-2023, he 64 00:03:12,960 --> 00:03:16,880 has been calling for seemingly outlandish price targets of the 65 00:03:16,880 --> 00:03:21,720 S&P 500 surging upwards more and more, while other analysts in 66 00:03:21,720 --> 00:03:25,000 consensus were saying, no, the economy is going to go down. 67 00:03:25,000 --> 00:03:27,200 The stock market's going to enter into a recession. 68 00:03:27,360 --> 00:03:30,240 We're going to have stagflation. We're going to have all of these 69 00:03:30,240 --> 00:03:32,840 issues. Tom Lee has said no, no, no, 70 00:03:33,280 --> 00:03:35,400 these are going to resolve. The market's going up. 71 00:03:35,440 --> 00:03:37,920 We have ample liquidity. The economy's strong. 72 00:03:38,320 --> 00:03:41,160 And he's been correct. He's hit price targets that 73 00:03:41,160 --> 00:03:44,880 people thought were nearly impossible or at least silly. 74 00:03:45,200 --> 00:03:48,440 And since he's done it so well and so consistently, now, more 75 00:03:48,440 --> 00:03:50,000 and more people are paying attention to him. 76 00:03:50,000 --> 00:03:52,760 Let's go ahead and take a look at his most recent interview 77 00:03:52,760 --> 00:03:55,520 here. This is from CNBC and he goes 78 00:03:55,520 --> 00:03:59,760 over his case on the S&P 500 and why he believes it will rise yet 79 00:03:59,760 --> 00:04:03,280 again another 5% to round out this year. 80 00:04:03,440 --> 00:04:06,000 Unstacked global advisors managing partner and CNBC 81 00:04:06,000 --> 00:04:08,960 contributor, but close enough for government work. 82 00:04:08,960 --> 00:04:11,600 You're right again. And once again, your rationale 83 00:04:11,720 --> 00:04:15,200 was born out and it was that inflation would continue to 84 00:04:15,200 --> 00:04:19,480 cool. It's July 1st, you have a new 85 00:04:19,480 --> 00:04:22,040 target for the end of the year. Or or. 86 00:04:23,280 --> 00:04:25,880 I've already sort of foreshadowed some of the things 87 00:04:25,880 --> 00:04:28,200 you were talking about. The S&P earnings might even be 88 00:04:28,200 --> 00:04:31,400 above what you thought. Yes, I, I think that now that 89 00:04:31,400 --> 00:04:35,320 we're at the mid year 2025 earnings look a lot stronger 90 00:04:35,320 --> 00:04:37,160 than we thought at the start of the year. 91 00:04:37,160 --> 00:04:41,320 We thought maybe 260. It's probably closer to 275, 92 00:04:41,320 --> 00:04:45,640 maybe 280, even 285. So he just raised what he thinks 93 00:04:45,640 --> 00:04:50,640 the S&P 500 is going to earn this year from 2:50 to 270 or 94 00:04:50,640 --> 00:04:53,800 even up to 285. He thinks earnings per share of 95 00:04:53,800 --> 00:04:56,920 the S&P 500 is going up. And This is why he's raising his 96 00:04:56,920 --> 00:04:59,360 price target once again for the S&P 500. 97 00:05:00,040 --> 00:05:03,440 And I think the multiple, we thought originally could be 20 98 00:05:03,440 --> 00:05:07,800 times that number for next year. But given the Fed has more 99 00:05:07,800 --> 00:05:11,240 reasons to be dovish and I think maybe the employment picture is 100 00:05:11,240 --> 00:05:14,560 softening, PE multiples actually could be higher next year. 101 00:05:14,560 --> 00:05:19,520 So I'd say between now and your end, stocks should be higher. 102 00:05:19,520 --> 00:05:23,400 I mean, we've had a strong first half already and second-half 103 00:05:23,720 --> 00:05:26,320 won't be as strong as the first half, but we should build upon 104 00:05:26,320 --> 00:05:28,400 those gains. So yeah, it looks pretty good. 105 00:05:29,200 --> 00:05:33,840 You have numbers, I mean, so if if the S&P is 285 you, you 106 00:05:34,800 --> 00:05:41,040 possibly that's earnings 285 up from 270 because the economy 107 00:05:41,040 --> 00:05:43,680 doesn't cool multiples don't expand. 108 00:05:43,680 --> 00:05:46,240 In fact they might contract from 21 to 20. 109 00:05:46,240 --> 00:05:50,920 So if you multiply 20 * 285 you get to 5800. 110 00:05:51,240 --> 00:05:53,680 Yeah. So that that sounds like it'd be 111 00:05:53,920 --> 00:05:57,880 within reasonable as a reasonable base case that stocks 112 00:05:57,880 --> 00:05:59,720 don't have to have a prodigious second-half. 113 00:05:59,720 --> 00:06:02,360 They just have to follow what typically happens in the 114 00:06:02,360 --> 00:06:04,040 second-half, especially in an election year. 115 00:06:04,440 --> 00:06:07,680 So Tom Lee is doing simple analysis of combining the S&P 116 00:06:07,680 --> 00:06:12,040 500 earnings projection that he has, which is 285, and he's 117 00:06:12,040 --> 00:06:15,440 multiplying that by the multiple 20 times earnings. 118 00:06:15,680 --> 00:06:19,520 When those things combined, you get around 5700, which is 119 00:06:19,520 --> 00:06:22,120 another three or 4% gain from today. 120 00:06:22,240 --> 00:06:24,480 So he doesn't believe the market's going to rock it up 121 00:06:24,480 --> 00:06:27,720 another 15 or 20%, but he believes we'll have moderate 122 00:06:27,720 --> 00:06:29,640 gains from here to the end of the year. 123 00:06:29,960 --> 00:06:33,840 So 5800 for the year, what, what would that be the total return 124 00:06:33,840 --> 00:06:35,800 if it's 15 now, so. Yeah. 125 00:06:35,800 --> 00:06:39,160 So it's, you know, it's a little bit more than 20%. 126 00:06:40,000 --> 00:06:46,160 Which would be after last year's. 24. 24, that's a couple 127 00:06:46,160 --> 00:06:48,480 years no one really expected, I don't think. 128 00:06:48,600 --> 00:06:50,720 That that's right. I mean, that's painful for 129 00:06:50,720 --> 00:06:54,080 people who've been sitting in cash for two years earning 5% 130 00:06:54,080 --> 00:06:56,480 because they missed out on a 50% gain. 131 00:06:56,480 --> 00:06:58,920 And that's 10 years worth of sitting on cash. 132 00:06:58,920 --> 00:07:03,600 So I think the end of this year is a little bit of a day 133 00:07:03,600 --> 00:07:06,920 reckoning for those who said, oh, I'm I'm happy with my 6 134 00:07:06,920 --> 00:07:11,320 trillion in cash earning 5%. When in reality, unless the 135 00:07:11,320 --> 00:07:14,000 economy is rolling into recession, you know the 136 00:07:14,000 --> 00:07:15,760 expansion continue for some time. 137 00:07:15,800 --> 00:07:19,160 He's forecasting and so far correctly, that we'll have two 138 00:07:19,160 --> 00:07:22,240 years back-to-back of 20% plus gains. 139 00:07:22,680 --> 00:07:26,400 Now a lot of people think that that's super unusual or very 140 00:07:26,400 --> 00:07:29,680 unlikely, but as we've shown before on this channel, it is 141 00:07:29,680 --> 00:07:33,960 not unusual to have market gains back-to-back that exceed 10%. 142 00:07:34,000 --> 00:07:37,240 The stock market almost never has average returns and that's 143 00:07:37,240 --> 00:07:39,600 counter intuitive. You've been told that the stock 144 00:07:39,600 --> 00:07:43,400 market should go up between 7:00 to 10% on average over a long 145 00:07:43,400 --> 00:07:46,320 period of time. While that data is true, it 146 00:07:46,320 --> 00:07:49,800 leaves out the fact that the average is based on negative 147 00:07:49,800 --> 00:07:52,920 years and positive years. More often than not, the stock 148 00:07:52,920 --> 00:07:57,840 market either has a negative year going down 5% or 10% or it 149 00:07:57,840 --> 00:08:01,320 goes up 15 or 20%. It never really has those years 150 00:08:01,320 --> 00:08:05,200 of the nice seven to 10%. That is the average, not what 151 00:08:05,200 --> 00:08:08,400 really happens year by year. And Tom Lee knows this. 152 00:08:08,720 --> 00:08:11,160 He knows that the stock market has many years throughout 153 00:08:11,160 --> 00:08:14,160 history that go up 20% consecutively. 154 00:08:14,440 --> 00:08:18,640 That's not something unusual. So even though his call at first 155 00:08:18,880 --> 00:08:22,400 seems a little outlandish and it seems unusual, it actually fits 156 00:08:22,400 --> 00:08:25,720 well within history. Now, he also talks about how 157 00:08:26,000 --> 00:08:28,640 this is a day of reckoning for the Bears. 158 00:08:28,960 --> 00:08:30,720 Notice him say that towards the end here. 159 00:08:30,960 --> 00:08:34,000 Is a little bit of a day of reckoning for those who said oh 160 00:08:34,000 --> 00:08:37,360 I'm I'm happy with my 6 training cash earning 5%. 161 00:08:37,640 --> 00:08:40,039 He's correct here again. This has been a day of reckoning 162 00:08:40,039 --> 00:08:43,000 for the bears, and specifically one notable bear. 163 00:08:43,440 --> 00:08:46,840 This interview came one day before JP Morgan decided to let 164 00:08:46,840 --> 00:08:50,240 go of their most notable bear, who is Marco Kalonovic. 165 00:08:50,400 --> 00:08:52,960 Marco Kalonovic is one of the biggest bears on Wall Street. 166 00:08:52,960 --> 00:08:56,760 In fact, I believe he is the biggest bear, second only to 167 00:08:56,760 --> 00:08:59,760 Jeremy Grantham. He has had incredibly bearish 168 00:08:59,760 --> 00:09:02,760 calls over the past couple of years and he stuck by them. 169 00:09:02,760 --> 00:09:06,800 He's doubled down on his bearish calls and he's been incredibly, 170 00:09:06,880 --> 00:09:09,400 incredibly wrong over the past couple of years. 171 00:09:10,080 --> 00:09:13,840 So we have bears having a day of reckoning and the bulls having 172 00:09:13,840 --> 00:09:16,960 their time in the limelight, getting more and more popular, 173 00:09:17,080 --> 00:09:20,720 more and more esteem. A lot of people are suggesting 174 00:09:20,720 --> 00:09:24,360 that this is now a tipping point, a point where when all 175 00:09:24,360 --> 00:09:27,240 the bulls are celebrating and bears are getting let go or 176 00:09:27,240 --> 00:09:31,080 fired or exploring new opportunities, that is a tipping 177 00:09:31,080 --> 00:09:33,960 point that is a sign for rougher times ahead. 178 00:09:34,200 --> 00:09:36,360 Only a month ago, there were notable people on Bloomberg 179 00:09:36,360 --> 00:09:39,240 saying that we need these bearish takes, even if they're 180 00:09:39,240 --> 00:09:41,120 wrong. In a recent note, Klonovic, who 181 00:09:41,120 --> 00:09:45,600 was incorrectly bullish in 2022 and bearish in 2023, effectively 182 00:09:45,600 --> 00:09:49,000 doubled down on his latest out of consensus call, highlighting 183 00:09:49,000 --> 00:09:52,720 January data for consumers and producer price increases to warn 184 00:09:52,720 --> 00:09:55,800 that the market narrative is taking a turn for something like 185 00:09:55,800 --> 00:09:59,720 the 1970s stagflation. He said that this could lead to 186 00:09:59,720 --> 00:10:02,680 a period of sustained underperformance for stocks like 187 00:10:02,680 --> 00:10:06,040 the one that prevailed from 1967 to 1980. 188 00:10:06,120 --> 00:10:08,840 Although I'm more optimistic than Colonovic, it's a pleasure 189 00:10:08,840 --> 00:10:11,680 to see him still swinging for the fences even after two 190 00:10:11,680 --> 00:10:13,280 strikes. One of the most frustrating 191 00:10:13,280 --> 00:10:16,160 features of today's Wall Street is the surfeit and milquetoast 192 00:10:16,160 --> 00:10:18,920 homogeneous research that says a lot without saying very much at 193 00:10:18,920 --> 00:10:20,280 all. The majority of these sell side 194 00:10:20,280 --> 00:10:23,360 equity strategists tend to offer relatively predictable calls, 195 00:10:23,640 --> 00:10:27,320 typically within 5 to 10% of the median, and only change their 196 00:10:27,320 --> 00:10:31,200 views when the rest of the herd does as well, often when market 197 00:10:31,200 --> 00:10:34,360 moves leave little choice. This narrow range of predictions 198 00:10:34,360 --> 00:10:37,480 is hard to reconcile with a market that's as inherently 199 00:10:37,480 --> 00:10:40,560 volatile as this one is. And in fact, the consensus view 200 00:10:40,640 --> 00:10:44,920 are often frequently off by a mile, about 18% points too low 201 00:10:44,920 --> 00:10:49,800 in 202125 percentage points too high in 2022 and then 18 202 00:10:49,800 --> 00:10:52,480 percentage points too low again in 2023. 203 00:10:53,000 --> 00:10:58,680 So the consensus analyst or strategist predictions are very, 204 00:10:58,760 --> 00:11:01,920 very frequently off. They're just wrong. 205 00:11:02,280 --> 00:11:04,880 Some of them are more wrong than others, but the consensus 206 00:11:04,880 --> 00:11:07,120 altogether is wrong. They show a chart here 207 00:11:07,400 --> 00:11:10,280 illustrating how often consensus is wrong. 208 00:11:10,680 --> 00:11:13,600 This is why overall, it's very difficult to listen to market 209 00:11:13,600 --> 00:11:17,720 strategist, to listen to overall macro calls, because so many of 210 00:11:17,720 --> 00:11:21,280 them can't think for themselves. They want to stay in the herd of 211 00:11:21,280 --> 00:11:25,000 safety and just make predictions that everyone else is making. 212 00:11:25,240 --> 00:11:27,960 So if their predictions are wrong, they aren't uniquely 213 00:11:27,960 --> 00:11:30,080 wrong. You see, in the business of Wall 214 00:11:30,080 --> 00:11:33,400 Street, in the business of investing, people are OK being 215 00:11:33,400 --> 00:11:35,840 wrong. They're just not OK being 216 00:11:35,840 --> 00:11:38,840 uniquely wrong. For example, if I invest in 217 00:11:39,160 --> 00:11:42,520 Google and I'm wrong, investing in Google, and Google turns out 218 00:11:42,520 --> 00:11:45,760 to be a bad investment, that doesn't really make me look so 219 00:11:45,760 --> 00:11:47,800 bad. I'm not going to get uniquely 220 00:11:47,800 --> 00:11:50,480 blamed for investing in Google and being wrong. 221 00:11:50,920 --> 00:11:53,800 But if I invest in Texas Roadhouse and I'm wrong on Texas 222 00:11:53,800 --> 00:11:56,920 Roadhouse, I am uniquely wrong in Texas Roadhouse. 223 00:11:57,040 --> 00:12:00,680 There's a lot more reputation risk in taking non consensus 224 00:12:00,680 --> 00:12:03,800 bets and investing in things that most other people are not 225 00:12:03,800 --> 00:12:06,120 invested in. Because again, if you're wrong, 226 00:12:06,120 --> 00:12:08,920 you look uniquely wrong, uniquely silly. 227 00:12:09,320 --> 00:12:12,120 And in the case of market strategist, it's the same thing. 228 00:12:12,480 --> 00:12:16,200 You can afford with your job to be wrong if everyone else is 229 00:12:16,200 --> 00:12:18,640 wrong. Your job is safe in that case. 230 00:12:18,880 --> 00:12:21,960 But what you can't afford is to be uniquely wrong. 231 00:12:22,120 --> 00:12:25,240 Like Marco Kolonovic. He was uniquely wrong for the 232 00:12:25,240 --> 00:12:28,080 past couple of years, and now he's being dropped from JP 233 00:12:28,080 --> 00:12:29,760 Morgan. We've learned long ago as 234 00:12:29,760 --> 00:12:32,600 species, as humans, that staying with the pack means safety. 235 00:12:32,800 --> 00:12:35,560 It's safety in numbers. And it's the same thing here. 236 00:12:35,880 --> 00:12:38,720 The reason that all of these strategists have the same calls 237 00:12:38,720 --> 00:12:41,600 and the same takes all the time is because they want, 238 00:12:41,760 --> 00:12:44,520 ultimately, safety. They don't want a bad outcome 239 00:12:44,520 --> 00:12:47,480 for themselves. So you have the case of Marco 240 00:12:47,920 --> 00:12:51,800 diverging from the crowd, making his own calls and sticking by 241 00:12:51,800 --> 00:12:53,880 them. This time it didn't work out. 242 00:12:54,120 --> 00:12:57,120 And the argument is, even though it didn't work out for him this 243 00:12:57,120 --> 00:13:00,760 time, it's still good to have people in the arena that are 244 00:13:00,760 --> 00:13:04,080 making these unique, divergent calls, that are sticking with 245 00:13:04,080 --> 00:13:07,080 their own unique research. I do agree with the analysis 246 00:13:07,080 --> 00:13:09,560 that it's good to have people that give their own unique takes 247 00:13:09,560 --> 00:13:12,720 and they stand by them, that they don't always seek safety in 248 00:13:12,720 --> 00:13:15,320 the crowd. But I also think that reputation 249 00:13:15,320 --> 00:13:18,040 matters, that your record and your judgement matters. 250 00:13:18,240 --> 00:13:21,080 Marco has been incredibly wrong for two years. 251 00:13:21,320 --> 00:13:24,640 He has cost a lot of people a lot of money that have followed 252 00:13:24,640 --> 00:13:27,720 his fierish and doomerish takes, so he should have some 253 00:13:27,720 --> 00:13:29,960 consequences for his incorrect calls. 254 00:13:30,440 --> 00:13:33,440 If he can continually just call everything incorrect all the 255 00:13:33,440 --> 00:13:37,520 time and still remain gainfully employed and getting lots of 256 00:13:37,520 --> 00:13:40,840 compensation for it, then what is the price to pay for actually 257 00:13:40,840 --> 00:13:42,560 being wrong? There should be some 258 00:13:42,560 --> 00:13:45,440 consequence. Now, overall, with this debate 259 00:13:45,440 --> 00:13:48,080 of whether or not this is a tipping point, I don't believe 260 00:13:48,080 --> 00:13:49,520 so. I don't believe that this is 261 00:13:49,520 --> 00:13:53,440 some type of signal of a top. History shows that bears are 262 00:13:53,440 --> 00:13:55,680 usually rung and bulls are usually right. 263 00:13:55,960 --> 00:13:59,320 The stock market usually goes up. the US is full of incredibly 264 00:13:59,320 --> 00:14:02,080 talented, intelligent people from diverse backgrounds all 265 00:14:02,080 --> 00:14:05,400 over the world competing to create the most value possible. 266 00:14:05,720 --> 00:14:08,520 The stock market captures the best companies. 267 00:14:08,520 --> 00:14:12,200 In this incredible economy, the most talent is captured at the 268 00:14:12,200 --> 00:14:14,240 very top. The companies that are the most 269 00:14:14,240 --> 00:14:17,320 successful, the biggest compounders, they rise to the 270 00:14:17,320 --> 00:14:20,400 top of these indexes. They're built in such an 271 00:14:20,400 --> 00:14:23,680 incredible way where they capture and wait the best, 272 00:14:23,680 --> 00:14:26,960 smartest, most fruitful companies in the world. 273 00:14:27,360 --> 00:14:29,640 So it makes sense that the market typically goes up 274 00:14:29,640 --> 00:14:32,480 overtime. Bears will continually be rung 275 00:14:32,640 --> 00:14:35,120 on average, and bulls will continually be crept. 276 00:14:35,280 --> 00:14:39,480 So if I'm having to pick a team between Tom Lee or Marco, I'm 277 00:14:39,480 --> 00:14:41,040 going to continue to pick Tom Lee. 278 00:14:41,040 --> 00:14:43,880 I'll continue to align with the people that are overall bullish 279 00:14:43,880 --> 00:14:46,720 because as history has taught us, they're usually correct. 280 00:14:46,840 --> 00:14:48,640 Now we move on to the next news story here. 281 00:14:49,000 --> 00:14:53,320 Amazon, for a brief moment in time yesterday rose to above 282 00:14:53,320 --> 00:14:56,960 $200.00 per share. We finally broke through that, 283 00:14:57,280 --> 00:14:59,440 that mental barrier for this stock. 284 00:14:59,640 --> 00:15:02,920 Amazon has traded around this price point back and forth. 285 00:15:02,920 --> 00:15:05,040 For a few days. It seemed like it was flirting 286 00:15:05,040 --> 00:15:08,400 with it, and then finally, finally, it rose above $200.00 287 00:15:08,400 --> 00:15:10,920 per share. I was celebrating mentally for a 288 00:15:10,920 --> 00:15:14,080 little bit there, and then we got the news immediately the 289 00:15:14,080 --> 00:15:19,040 next day, just today, that Bezos is selling $5 billion of Amazon 290 00:15:19,040 --> 00:15:20,960 shares. So he waited. 291 00:15:21,440 --> 00:15:25,480 Bezos waited until Amazon broke $200.00 per share. 292 00:15:25,480 --> 00:15:27,880 And then he's like, hey, look, everyone, I'm going to disclose 293 00:15:27,880 --> 00:15:31,920 that I'm selling a huge amount of Amazon shares, $5 billion. 294 00:15:32,160 --> 00:15:35,360 Jeff Bezos, can you at least give us a little bit of slack, a 295 00:15:35,360 --> 00:15:37,960 little breathing room? Can you let the stock sit there 296 00:15:37,960 --> 00:15:41,560 for at least one day before you hit us with this huge headline 297 00:15:41,560 --> 00:15:44,840 of a huge sell order? Do you have to sell immediately 298 00:15:44,840 --> 00:15:47,960 whenever the stock goes up? Now, I understand here that 299 00:15:47,960 --> 00:15:51,240 Bezos is done with Amazon. He's mentally moved on. 300 00:15:51,560 --> 00:15:53,880 He's now trying to figure out what he's going to buy. 301 00:15:54,320 --> 00:15:57,160 But I have to question, what does he need this money for? 302 00:15:57,160 --> 00:15:59,800 I mean, he already has like $10 billion in cash. 303 00:16:00,240 --> 00:16:03,120 Does he need another yacht? He already has an entire fleet. 304 00:16:03,120 --> 00:16:06,560 It looks like AAUS Navy fleet. When he goes out with his yacht, 305 00:16:07,000 --> 00:16:09,920 what is he buying here? I can't even imagine what he's 306 00:16:09,920 --> 00:16:13,240 using this money for, so I I don't know whether what what 307 00:16:13,240 --> 00:16:15,280 he's doing with it what he needs it for. 308 00:16:15,520 --> 00:16:17,880 But what I know right now is that every time the stock goes 309 00:16:17,880 --> 00:16:22,200 up, Bezos sells and it causes the stock to just flatten to go 310 00:16:22,200 --> 00:16:24,880 down for a few days. I think this is going to be a 311 00:16:24,880 --> 00:16:28,400 continual headwind for Amazon for at least the next year or 312 00:16:28,400 --> 00:16:31,800 two, but eventually Bezos share count is going to be low enough 313 00:16:32,080 --> 00:16:34,160 that it won't have as big of an influence. 314 00:16:34,440 --> 00:16:39,760 Right now he still owns 8.8% of Amazon, so he is a massive 315 00:16:39,760 --> 00:16:42,600 shareholder and it's difficult for people to want to buy Amazon 316 00:16:42,600 --> 00:16:45,280 stock when every time they're doing it, they feel like their 317 00:16:45,280 --> 00:16:47,880 exit liquidity for Bezos selling his shares. 318 00:16:48,120 --> 00:16:49,560 That's what it feels like right now. 319 00:16:49,960 --> 00:16:52,880 Now, I don't believe this is any indication on the future value 320 00:16:52,880 --> 00:16:55,160 of Amazon. I don't believe Bezos is saying 321 00:16:55,160 --> 00:16:56,880 that Amazon is going to go down in price. 322 00:16:57,160 --> 00:16:59,400 I think he's just completely moved on with his life. 323 00:16:59,400 --> 00:17:02,640 He built the company, he's incredibly rich and he has other 324 00:17:02,640 --> 00:17:04,560 things that are drawing his attention. 325 00:17:04,960 --> 00:17:07,400 So overall, I don't think this is anything that is 326 00:17:07,400 --> 00:17:09,880 fundamentally bearish. It doesn't change my thesis at 327 00:17:09,880 --> 00:17:12,960 all, but it's it's a little bit of a bummer that every time the 328 00:17:12,960 --> 00:17:16,440 stock goes up, Bezos sells, causing the stock to go down for 329 00:17:16,440 --> 00:17:18,560 at least another few days. Now let's go ahead and move on 330 00:17:18,560 --> 00:17:20,960 to the real important news of the day, Chipotle's burrito 331 00:17:20,960 --> 00:17:22,680 size. This has been a point of 332 00:17:22,680 --> 00:17:27,040 controversy on TikTok. Many Tik Tokers mocking Chipotle 333 00:17:27,040 --> 00:17:30,120 and saying that they're giving too small of portions, many of 334 00:17:30,120 --> 00:17:33,880 them bailing out of the line halfway through, leaving the 335 00:17:33,880 --> 00:17:37,200 poor Chipotle burrito maker with the burrito there that they just 336 00:17:37,200 --> 00:17:39,840 have to throw away. And then some Tik Tokers are 337 00:17:39,840 --> 00:17:43,360 even calling for boycotts with Chipotle, saying that people 338 00:17:43,360 --> 00:17:45,400 need to rebel against this company because they're not 339 00:17:45,400 --> 00:17:47,240 giving the portions they deserve. 340 00:17:47,320 --> 00:17:50,520 This caused such a stir that even the CEO of Chipotle has 341 00:17:50,520 --> 00:17:53,040 responded multiple times to this controversy. 342 00:17:53,320 --> 00:17:56,360 Here he is on TikTok saying that there's not really a problem 343 00:17:56,440 --> 00:17:58,200 with the serving sizes. First I can. 344 00:17:58,200 --> 00:18:00,160 Tell you the portions have not gotten smaller. 345 00:18:00,160 --> 00:18:02,240 One of the things I think it's great about Chipotle is if you 346 00:18:02,240 --> 00:18:05,320 come into the restaurant and you want a little more rice or you 347 00:18:05,320 --> 00:18:07,720 want a little more people, all you got to do is kind of like 348 00:18:08,360 --> 00:18:12,280 and usually our guys and women give them a little more scoop. 349 00:18:12,320 --> 00:18:14,200 You know we always want. To give, that's the CEO of 350 00:18:14,200 --> 00:18:18,040 Chipotle suggesting how to get bigger portion sizes and it's 351 00:18:18,040 --> 00:18:20,160 giving the Chipotle workers the look. 352 00:18:20,560 --> 00:18:24,280 Now, this doesn't really work if you're ordering online. 353 00:18:24,640 --> 00:18:27,800 Maybe you can put like in the notes of the order I'm giving 354 00:18:27,800 --> 00:18:29,720 you the look to give me bigger portion sizes. 355 00:18:29,720 --> 00:18:31,280 Like you might be able to write that in. 356 00:18:31,760 --> 00:18:34,720 But a lot of people have pointed out that the portion sizes you 357 00:18:34,720 --> 00:18:38,000 receive when you're in person ordering and you can kind of be 358 00:18:38,000 --> 00:18:39,880 there to hold the employee accountable. 359 00:18:40,080 --> 00:18:42,400 You can look over it and make sure the order looks correct. 360 00:18:42,760 --> 00:18:44,800 The portion sizes are very different than when they make it 361 00:18:44,800 --> 00:18:47,520 in the back of the restaurant when they make it for the to go 362 00:18:47,520 --> 00:18:49,960 orders. So there's a lot of controversy 363 00:18:49,960 --> 00:18:53,360 over this and a lot of people are not agreeing with the CEO. 364 00:18:53,480 --> 00:18:57,120 Want to give people big portions that get them excited about the 365 00:18:57,120 --> 00:18:58,520 food. It's kind of who we are. 366 00:18:58,520 --> 00:19:00,640 I mean, these are big burritos. These are big bowls. 367 00:19:00,800 --> 00:19:03,680 Our goal is to give people great experiences. 368 00:19:04,240 --> 00:19:06,640 Now, if you want double the amount of meat, you got to pay 369 00:19:06,640 --> 00:19:10,520 for it. But yeah, you know, our goal is 370 00:19:10,520 --> 00:19:13,560 to give people really excited about what I believe is really 371 00:19:13,560 --> 00:19:15,640 delicious food. So there we have the response 372 00:19:15,640 --> 00:19:17,520 from the CEO. But of course that didn't 373 00:19:17,520 --> 00:19:20,560 satisfy people. That only caused more debate, 374 00:19:20,960 --> 00:19:24,760 more people on both sides of this great Chipotle burrito bowl 375 00:19:24,760 --> 00:19:26,840 war. Some people taking pictures of 376 00:19:26,840 --> 00:19:30,160 their burrito, suggesting that it's huge, it's a giant burrito, 377 00:19:30,160 --> 00:19:32,800 they can't even finish it. Chipotle gives so much food. 378 00:19:33,240 --> 00:19:35,600 And then a lot of other people pointing out that their burrito 379 00:19:35,600 --> 00:19:38,840 bowls are just too small. As the debate continues on, 380 00:19:38,960 --> 00:19:41,640 Wells Fargo decided to finally get to the bottom of it. 381 00:19:41,920 --> 00:19:45,480 Doing it through data. We can always rely on data and 382 00:19:45,480 --> 00:19:47,440 statistics to get to the bottom of things. 383 00:19:48,080 --> 00:19:53,480 We have a analyst from Wells Fargo that went to Chipotle 75 384 00:19:53,480 --> 00:19:56,520 different times and he went to multiple different Chipotle 385 00:19:56,520 --> 00:20:00,000 locations and ordered the exact same burrito bowl. 386 00:20:00,200 --> 00:20:02,640 That analyst weighed every single meal they bought from 387 00:20:02,640 --> 00:20:07,720 Chipotle, so we have the exact weight of every meal for all 75 388 00:20:07,720 --> 00:20:10,840 orders that were identical. And you can see these charted 389 00:20:10,840 --> 00:20:13,040 out over time. Now, before we even get into the 390 00:20:13,040 --> 00:20:15,280 analysis here, there's one thing that I want to point out that I 391 00:20:15,280 --> 00:20:17,800 think is incredibly important. When you look at charts like 392 00:20:17,800 --> 00:20:21,320 this, any type of visual chart, like a bar chart or line chart, 393 00:20:21,680 --> 00:20:26,600 and that is where the X axis starts, that sways the visual in 394 00:20:26,600 --> 00:20:30,440 a very dramatic way. For example, on Qualtrum, as you 395 00:20:30,440 --> 00:20:32,600 look through all of the financial charts, like we can 396 00:20:32,600 --> 00:20:35,280 look at the revenue, it starts at 0. 397 00:20:35,520 --> 00:20:38,680 We look at the AWS, this starts at 0. 398 00:20:39,080 --> 00:20:43,360 The X axis right there is 0. The EBITDA starts at 0. 399 00:20:43,680 --> 00:20:46,800 The free cash flow X axis starts at 0. 400 00:20:47,280 --> 00:20:50,880 I specifically make every chart start at 0 so that when you're 401 00:20:50,880 --> 00:20:53,920 viewing it, you're viewing everything relatively the same. 402 00:20:54,320 --> 00:20:57,400 You have a good grounding of where things start, and so the 403 00:20:57,400 --> 00:21:00,440 visuals actually make sense. That's something that's closely 404 00:21:00,440 --> 00:21:02,520 paid attention to. What a lot of people do when 405 00:21:02,520 --> 00:21:05,560 they want to dramatize a certain trend, when they want to create 406 00:21:05,560 --> 00:21:08,760 a certain narrative or make a certain point, is they start the 407 00:21:08,760 --> 00:21:12,480 X axis not at 0, but at a different number, making it so 408 00:21:12,480 --> 00:21:14,800 that the difference looks even more dramatic. 409 00:21:15,040 --> 00:21:17,800 And that's exactly what they did here with this analysis. 410 00:21:18,480 --> 00:21:20,720 This looks as though it starts at 0. 411 00:21:20,920 --> 00:21:24,000 So you have burritos right here that are tiny and ones that are 412 00:21:24,000 --> 00:21:27,200 right here that are huge, but this actually starts at 12 413 00:21:27,200 --> 00:21:29,760 ounces. So it's starting with a decent 414 00:21:29,760 --> 00:21:33,960 sized burrito and then it goes up to 27 oz right here. 415 00:21:34,400 --> 00:21:37,840 That is the range that you're looking at between 12 to 27. 416 00:21:37,960 --> 00:21:40,920 But in reality, these bars would continue to go down all the way 417 00:21:40,920 --> 00:21:44,600 to 0, making the difference here look less extreme. 418 00:21:44,640 --> 00:21:47,920 So even though the visual here looks very extreme, it looks 419 00:21:47,920 --> 00:21:50,480 like there's tiny burrito bowls and huge ones. 420 00:21:50,800 --> 00:21:54,400 When you factor in the starting location of the X axis, it's not 421 00:21:54,400 --> 00:21:56,520 quite as extreme as what's implied here. 422 00:21:56,920 --> 00:22:00,200 Now, even taking that into account, this does highlight an 423 00:22:00,200 --> 00:22:03,880 issue with Chipotle where when you have someone serving you 424 00:22:03,880 --> 00:22:07,760 food by like scooping it up, you just get different serving 425 00:22:07,760 --> 00:22:09,520 sizes. Like that's just the nature of 426 00:22:09,520 --> 00:22:11,520 the game. You get different serving sizes 427 00:22:11,520 --> 00:22:14,400 basically every time you come in, and the serving sizes can 428 00:22:14,400 --> 00:22:17,560 range between AA10 oz difference. 429 00:22:17,920 --> 00:22:21,920 That is a substantial difference in size. 10 ounces of food is a 430 00:22:21,920 --> 00:22:23,920 lot of food. So the difference between these 431 00:22:23,920 --> 00:22:27,840 huge burrito bowls up here and these smaller ones down here is 432 00:22:27,840 --> 00:22:30,960 still substantial, not quite as extreme as it looks, but it's 433 00:22:30,960 --> 00:22:33,840 still a substantial difference. And this shows, as they point 434 00:22:33,840 --> 00:22:37,440 out here, that this is an area that Chipotle can get better at. 435 00:22:37,680 --> 00:22:39,840 They can make more consistent sizes. 436 00:22:40,200 --> 00:22:42,560 There's different things they could implement to do this. 437 00:22:42,560 --> 00:22:45,880 Maybe better training on how to properly measure the scoop size, 438 00:22:46,080 --> 00:22:48,440 maybe weighing each scoop. There's a lot of different 439 00:22:48,440 --> 00:22:50,720 things they could do to make this more consistent. 440 00:22:50,960 --> 00:22:53,680 Because with restaurants, one of the most important thing when 441 00:22:53,680 --> 00:22:57,200 visiting a restaurant is having a consistently good experience. 442 00:22:57,480 --> 00:22:59,360 This is what Texas Roadhouse excels at. 443 00:22:59,880 --> 00:23:02,440 Every single time you go, they want you to have a good 444 00:23:02,440 --> 00:23:04,360 experience. They'll remake the food if you 445 00:23:04,360 --> 00:23:06,360 don't. Chipotle, if you go there and 446 00:23:06,360 --> 00:23:08,520 one time you have a great experience, one time not so 447 00:23:08,520 --> 00:23:10,920 good, you're going to think twice about going again. 448 00:23:11,120 --> 00:23:13,640 So even though this analysis is kind of funny, I think it's one 449 00:23:13,640 --> 00:23:15,720 of the biggest areas that Chipotle could improve. 450 00:23:15,840 --> 00:23:19,560 On a related note, this analyst is so smart for doing this type 451 00:23:19,560 --> 00:23:21,720 of analysis. He's going to different 452 00:23:21,720 --> 00:23:25,400 restaurants, billing the company Wells Fargo for his analysis, 453 00:23:25,680 --> 00:23:30,600 while he gets 75 free meals from Chipotle, and he's done the same 454 00:23:30,600 --> 00:23:33,080 thing with McDonald's and many other businesses. 455 00:23:33,440 --> 00:23:35,360 That's a pretty good gig to figure out. 456 00:23:35,480 --> 00:23:39,080 Now finally, we move on to the news that Sam's Club has once 457 00:23:39,080 --> 00:23:42,840 again dropped the prices of their warehouse, of their club 458 00:23:42,840 --> 00:23:47,520 membership, this time to $20. That's not $20.00 a month. 459 00:23:47,840 --> 00:23:51,760 That is $20 per year. By comparison, Costco's cheapest 460 00:23:51,760 --> 00:23:55,080 membership is $60.00 per year, and they have the executive 461 00:23:55,080 --> 00:23:57,080 membership. That's 120 per year. 462 00:23:57,600 --> 00:24:01,080 So Sam's Club is supposed to be the competitor to Costco, the 463 00:24:01,080 --> 00:24:03,360 one that's kind of going like neck and neck with Costco. 464 00:24:03,960 --> 00:24:07,600 And Sam's Club is continually lowering their prices to try to 465 00:24:07,600 --> 00:24:10,800 keep up with customers, to try to gain new customers. 466 00:24:11,080 --> 00:24:14,800 They can't even get them in the warehouse at $20 per year. 467 00:24:15,040 --> 00:24:18,160 Meanwhile, there's lots of debate of Costco raising prices. 468 00:24:18,480 --> 00:24:21,360 Costco's gaining so many new customers every single quarter. 469 00:24:21,520 --> 00:24:23,320 We can see the KPI is on Qualtrum. 470 00:24:23,600 --> 00:24:26,760 They're gaining card holders and customers every single quarter 471 00:24:26,760 --> 00:24:29,840 like clockwork, millions of them at the price point. 472 00:24:29,840 --> 00:24:31,960 That's three times the price of Sam's Club. 473 00:24:32,080 --> 00:24:35,760 This shows once again that Costco's competition really 474 00:24:35,760 --> 00:24:38,920 isn't competition. The so-called competitors cannot 475 00:24:38,920 --> 00:24:42,240 compete with Costco on price or the amount of members they have. 476 00:24:42,520 --> 00:24:45,800 So they're continually lowering prices in the hopes of 477 00:24:45,920 --> 00:24:47,520 encouraging new membership growth. 478 00:24:48,000 --> 00:24:49,240 But it's going to take more than that. 479 00:24:49,480 --> 00:24:52,720 The truth is people don't like shopping at Sam's Club as much 480 00:24:52,720 --> 00:24:56,080 as Costco and that's why Costco can charge three times as much 481 00:24:56,800 --> 00:25:01,120 at this point at $20 annually. When is Sam's Club really just 482 00:25:01,120 --> 00:25:05,440 give up and and say this isn't a warehouse membership, you can 483 00:25:05,440 --> 00:25:08,720 just shop here for free. They're almost to that point. 484 00:25:09,040 --> 00:25:12,920 This is like $2.00 per month. It's less than $2.00 per month 485 00:25:13,200 --> 00:25:16,040 is what they're charging the shop in their exclusive 486 00:25:16,040 --> 00:25:19,640 membership warehouse. At this point I I think you just 487 00:25:19,640 --> 00:25:21,360 give up the membership. Just give it up. 488 00:25:21,360 --> 00:25:22,920 Allow people to shop there for free. 489 00:25:23,280 --> 00:25:25,800 Change your business model because the whole membership 490 00:25:25,800 --> 00:25:28,160 thing is playing a lesser and lesser role. 491 00:25:28,360 --> 00:25:30,560 In the meantime, I'll continue to hold Costco stock. 492 00:25:30,880 --> 00:25:32,640 That's it for this episode. I hope you enjoyed. 493 00:25:32,640 --> 00:25:35,600 If you want to see exclusive episodes and more analysis, you 494 00:25:35,600 --> 00:25:38,400 can join the Patreon membership. Other than that, I'll see you in 495 00:25:38,400 --> 00:25:39,000 the next one.