Today on The Joseph Carlson Show, President Trump and Open
AI have unveiled a new ambitious project.
It's called Stargate. The goal of Stargate is pretty
simple. It's to put the United States at
the forefront of AI. And the amount being invested
here, at least the amount cited, is massive, $500 billion.
That's half a trillion invested over the next four years to
build AI infrastructure. Sam Altman says that we're
deploying $100 billion immediately, but how does this
work? Where are they getting the $500
billion and what is the return on this?
What does the ROI look like? With this big post on their blog
as well as on Twitter, this has launched a flurry of headlines.
We have the Wall Street Journal nonstop reporting on this.
More compute leads to better models.
Open AI hails their $500 billion Stargate plan.
It has a list of critics, Elon Musk being one of them.
He feels a little left out of the party.
Elon Musk has poured cold water on the project, saying that the
money doesn't exist. The announcement of this project
also changed the dynamics of some important relationships.
Opening the Eye has been moving away from Microsoft, and we have
details on why this is happening and the drama behind it.
And right now, as we have this flurry of questions going on
with this project, we are getting some of the details.
In this episode. We're going to try to piece all
this together. What is this Stargate project?
How will it impact all of the big tech companies involved in
it? And what are the biggest
problems facing this ambitious goal?
Now, we also have some other news to get to.
For example, Netflix just reported their earnings report.
This is one of the first ones of the earnings season.
We're going to get more into earnings season next week, but
Netflix had a great report. Now as a key holding, I want to
go over a few details of what we look for in reports like this.
And we also have news of more union strikes.
You're seeing this type of news pop up left and right with
different companies. In this case, a union was
fighting Amazon, and this is one of the biggest self-inflicted
wounds I've ever seen a union cause They truly shot themselves
in the foot. Here we'll be going over the sad
case of a union causing the job loss of 1700 Jobs.
And then finally, Apple stock is under more pressure.
The company continues to trade down in price.
Over the past month, I've sold out of the majority of my
position in Apple. Now I only have a $10,000
position, which is a very small weighting in My Portfolio.
We're going to take a look at the future of Apple and the
challenges this company's facing.
So we have a lot to get into in this episode.
Let's go ahead and jump in with the breaking news Project
Stargate. As President Trump has taken
office, this Project Stargate is one of the single biggest
investments that the US has announced in the past decade.
Announcing the formation of Stargate.
So put that name down in your books because I think you're
going to hear a lot about it in the future.
A new American company that will invest $500 billion at least in
AI infrastructure in the United States and very, very quickly
moving very rapidly, creating over 100,000 American jobs
almost immediately. These numbers are astronomical.
And why is there such focus from the presidency, from the United
States on this AI project? Well, before we jump into even
the details of this project, we have to rewind a little bit to
see how we got here. It was only about a year ago
that Open AI was at the forefront of artificial
intelligence, releasing models like GPT 4, revolutionary
breakthrough models that beat out anything that anyone had
released, even companies like Google, seemed years away.
Hey, catching PT Hi Mark, how are you?
Oh, Mark, I'm doing great. Thanks for asking.
How about you? Hey, so I'm on stage right now,
I'm doing a live demo and frankly I'm feeling a little bit
nervous. Can you help me calm my nerves a
little bit? Oh, you're doing a live demo
right now? That's awesome.
GBT four and four O were not only impressive, but they showed
the importance of having this technology.
Artificial intelligence is incredibly powerful.
Whoever wields the power of this technology, whoever develops it
and owns it has a major advantage culturally,
financially, and geographically, an imperative advantage for the
United States. While it seems like the United
States has been unbeatable and artificial intelligence with no
European models coming close to what that the United States has
created, there's another threat to America's dominance of
artificial intelligence, and it comes from China.
So here is the name that our audience may want to write down
deep seek. This is a new free open source
AI model that beats the latest open AI and meta models on key
benchmarks. And it was made for a fraction
of a fraction of the cost. Now it was trained by a Chinese
research lab that used NVIDIA H8 hundreds.
That's a lower performance version of the H100 chips that
are cheaper, more available, and tailored for restricted markets
like China. Now I've been testing it out
this morning and on the surface that looks and acts just like
Open AI's ChatGPT, and in fact it actually thinks that is
ChatGPT. When I asked what model are you,
it answered I'm an AI language model created by Open AI
specifically based on the GBT 4 architecture, suggesting that it
was trained on ChatGPT outputs. Which, leaving aside terms of
service violations, it means that entirely new
state-of-the-art models can be built on what is already out
there. The monumental lead the Open AI
and other US dominant LLMS had over foreign countries
evaporated overnight with the release of Deepseek, China's
model that not only mimicked Open AI, but it acted
identically to Open AI. Like she notes here, it says
that it was trained on Open AI's ChatGPT model.
Not only has China copied Open AI's model and their technology,
stealing much of the technology from the US, but they've
architected it and made it into a new LLM that is dramatically
cheaper. But saying it's cheaper may
leave you the impression that it's 20% cheaper or 30% cheaper.
That's not the case. Deep seek is up to 90% plus
cheaper than ChatGPT. It is literally a fraction of
the cost, making China on a value proposition basis the
leader in AI. In other words, open a eyes Moat
may be shrinking. If a model like Deepseek can
emerge with competitive performance, minimal cost, and
reliance on existing outputs, it signals a rapidly shrinking
barrier to entry in AI development, challenging the
current dominance of industry leaders like Open AI.
Based on technical tests designed to measure its coding
performance, Deepseek outperformed other models,
including Metas, LAMA 3.1 and Open A is GPT 4 O.
And by the way, those are the latest state-of-the-art models.
The models from China were so good that they literally
outperformed our latest and greatest models from our leading
tech companies, and they did it for a much cheaper price.
How did the Chinese accomplish this?
Well, there's a couple things we know about China.
First of all, they have a population of 1.4 billion
people. With that type of population,
there's going to be a few smart people.
In fact, there's going to be many smart people.
China has a major focus on teaching their people STEM,
mathematics, computation, things that help you excel at modeling
LLMS. China's government also works in
concerted effort to focus on key projects like generative AI.
These are state funded projects where they put huge emphasis and
capital into being the leaders in these categories.
So with a talent pool to work with and a concerted effort from
the government, you have major innovation and progress in these
fields, even surpassing the US. Now again, there are 1,000,000
headlines on Stargate with all the different political opinions
that you could imagine on it and the motivations behind this
project. Is it just to get a flashy
headline? Is it just for Trump to have one
more thing to talk about? All those seem like they could
be contributing factors. Maybe it is just for a flashy
headline or a fun thing for Trump to talk about.
But if I had a guess, I think there's one other motivating
factor, and that is the concern from U.S. officials of the
Chinese being the dominant leaders in artificial
intelligence. I believe U.S. intelligence
agencies view Chinas progress in artificial intelligence as a
real threat to the dominance of the US.
If China has LLM models that are already transcending and
eclipsing US models, they're already cheaper and more robust,
they may start to take serious market share in this important
market. A Chinese controlled AI victory
would mean greater censorship, greater influence and greater
control of data from China, which is something that the US
does not want. Enter the Stargate project.
This massive project is because the US wants the dominant lead
in artificial intelligence. You can think of it as a modern
day space race. This project will not only
support the reindustrialization of the United States, but it
will also provide a strategic capability to protect the
national security of America and its allies.
We're going back to the space race.
We're going back to reindustrialization.
We're going back to large scale infrastructure projects with
concerted efforts from the central government.
Now we know that the US doesn't have money to afford a Stargate
project. the US is heavily indebted and focused on paying
down debts and lowering its interest year by year.
With that being known, Trump has tapped many business leaders
that are extremely wealthy, some of the biggest big tech
companies in the world, and leaders of investment funds.
The initial equity founders in Stargate are SoftBank.
This is a massive investment fund, Open AI, Oracle and MGX.
SoftBank and Open Eye are the lead partners for Stargate, with
SoftBank having financial responsibility and Open Eye
having the operational responsibility.
There's other investors and technology partners as well that
have been listed, ARM, Microsoft, NVIDIA, Oracle, Open
AI. All of these companies are
contributing their technology to build out this massive project.
Now, anytime a project like this is announced, it's met with a
degree skepticism and criticism, and that was no different this
time. And the most vocal critic by
far, immediately pouring cold water on this project and it's
ambitious goals was Elon Musk. The same day that this project
was announced by Sam Altman and Open AI, Elon Musk replied
saying that SoftBank doesn't have the money, they don't even
have $10 billion. And this was a bit shocking.
Having someone so close to the president, someone that
campaigned for him, someone that has been next to him and by his
side the entire way is now actively undermining the
prospects of his biggest capital project as President Trump is
calling this tremendous and monumental.
Elon Musk is saying they don't actually have the money and this
is where a lot of drama ensued. When Elon Musk commented that
they don't have the money, Sam Altman decided to take the High
Road. He said I genuinely respect your
accomplishments and think you are the most inspiring
entrepreneur of our time. With Elon Musk not provoking the
response he wanted, he replied again saying that SoftBank has
well under $10 billion secured. I have that on good authority.
And this is where Sam Altman changed his tone saying wrong,
as you surely know. Want to come and visit the site
already underway? This is great for the country.
I realize what is great for the country isn't always optimal for
your companies, but in your new role, I hope you mostly put
America first. This is a comment that hits back
hard because he's directly pointing out that Elon Musk is
undermining one of the key goals of the president that he helped
elect. After this reply, Elon Musk
didn't engage in that threat anymore.
Instead, he took to Twitter to post attacks on Sam Altman
nonstop for the next three hours.
Posting what seems like every 5 minutes with different areas of
attack for Sam Altman, digging up old tweets, pointing out how
he changes support overtime once opposing Trump.
Now why is all of this important?
Because because large companies like Open AI are working with
the Trump administration, they have these projects like
Stargate, while President Trump is also a partner with Elon
Musk. And these relationship dynamics
seem to be causing some troubles, at least with Elon
Musk. So I'm told by a source that
Open AI CEO Sam Altman had a, quote, lengthy phone call with
President Trump on Friday and did focus on AI's potential.
They walked through what this technology is really capable of
and certain parts of the infrastructure plan that was
laid out yesterday. The source here asked not to be
named because these discussions were confidential, but they did
say it was productive. They described it as amicable.
And Trump publicly yesterday really calling Altman at the
White House the leading expert on AI.
Trump called Sam Altman the leading expert in AI and that
had to sting a little. One thing we know about Elon is
there's no shared victories. He doesn't share the limelight
and he likes total control over what he's doing.
It's how he's ran everyone of his companies.
There's no Co CEO. Elon Musk likes having that
limelight on himself and anytime that limelight shines on someone
else, especially given Sam Altman and their history, well,
that causes some issues. Now, while this drama is
unfolding, there's other things happening as well in the
background. And one of the most important,
especially if you're a Microsoft investor, is the separation from
Open AI and Microsoft. This isn't a complete
separation, but it's the end of their exclusive agreement.
One of the main things that's been revealed with the
announcement of Stargate is that Microsoft is ending their
exclusive agreement with Open AI.
Now, they're not completely detaching from the company.
They're still going to be partners with Open AI, but the
exclusivity was an important part for this relationship and
having it end open. Some questions.
Satya Nadella, the CEO of Microsoft, was asked
specifically about the ending of this relationship.
Yeah. First of all, anytime a company
that you've sponsored and were essentially a seed investor in
raises money from others, it's a good day, a good day for Open AI
and a good day for Microsoft and our investors.
Look, our partnership continues. We'll be a tech partner to
Stargate, but more importantly partnership with Open AI.
You talked about exclusivity. Open AIAPIS are exclusive to
Azure going forward. Even so nothing changes there.
IP access to Microsoft continues.
And in fact because of this, there will be more IP.
And so therefore we will benefit and we are grab share
arrangements that are great and also Open AI committed into a
significant, very significant way to Azure consumption.
And so we are very thrilled about that as well.
So all up, as far as I'm concerned, this accelerates Open
AI's model work, which accelerates Microsoft's ability
to go to market with those models and really grow our
business. Now, like a good CEO, he paints
this as a positive thing. Overall, he highlights the
benefits of them moving on and having different partners, but
behind the scenes, Microsoft has been less than enthused about
the ending of their exclusive agreement.
In the months leading up to the announcement, the two sides have
been haggling over what to do about Open AI seemingly
insatiable appetite for computing power and it's
contention that Microsoft couldn't fulfill it.
Even though their agreement didn't allow for Open AI to
easily switch to others, Open AI is almost entirely reliant on
Microsoft to provide it with data centers it needs to build
and operate. It's sophisticated AI software
that has been part of their agreement since Microsoft first
invested in 2019. Open a is need for computing
power has surged since 2019. Its executives have said that
ending the exclusive cloud contract could be crucial to
compete with rival AI developers that don't have the same
constraints. The talks have intensified in
recent months. Like other tech giants,
Microsoft has rapidly increased its investment in AI
infrastructure and recently said it would spend $80 billion on AI
data centers in its current fiscal year here.
But Microsoft also notes that they have other customers and
partners besides Open AI. Microsoft ending their exclusive
agreement with Open AI is a calculated decision that I think
investors shouldn't take too lightly.
Microsoft is saying that we're only going to spend $80 billion
and we're not going to push the envelope beyond that amount.
I. Don't know if you saw Elon Musk
took to Twitter and said they don't have the money.
The money doesn't exist as if this is not really going to
happen. What do you think of that?
Look, all I know is I'm good for my 80 billion.
I'm going to spend $80 billion building out Azure.
Customers can count on Microsoft with open AI models being there
everywhere in the world, serving open eye models and other
models. That's, I think, what I know.
I don't know about others, but put me down for 80 billion.
That's a line that I can confidently say has never been
said up until this time period in human civilization.
No one has ever once said, you know, I don't know about you
guys, but put me down for $80 billion.
Now, the unique thing about this situation is not only does he
say it, but he actually means it.
And Microsoft is good for $80 billion easily.
There's not many companies on planet Earth that generate this
consistent levels of free cash flow.
In the trailing 12 months, they generated $73 billion of free
cash flow. And this free cash flow is
generated after accounting for the massive CapEx they're
already spending on artificial intelligence.
Microsoft could spend upwards of 100 billion or 150 billion in
CapEx for artificial intelligence, but he's only
spending billion. And while that line that Satya
Nadella used is one of the most insane lines that a CEO has ever
said, it's also telling to some degree.
Some companies are showing continuous restraint on how much
money they're willing to spend on artificial intelligence, and
Microsoft is one of them. Satya Nadella is concerned about
spending too much on artificial intelligence, and I think with
good reason. And this is where I believe we
get into the area where the Stargate project has very real
challenges unique to the technology of this time.
We know that President Trump has been big on implementing large
industrial projects, ones like the ones we saw in the 1850s.
In many ways, Project Stargate is being compared to comparable
projects throughout history that changed and revolutionized the
United States. Ones like the rail
transportation industry. Class 1 railroads work as the
veins of the United States. They go across the entire
country and make it so that different goods can be delivered
from one place to another. There aren't enough trucks to
accomplish this. It has to be done by rail, and
rail is by far the most cost effective way to do it. the
United States is so reliant on the railroad industry that it
becomes illegal to strike in many cases because shutting it
down even for a few days could cause critical problems to
different states. Class 1 railroads are integral
to the success of the United States.
All the basic luxuries we have today are reliant on this system
running, and this was a system created over 100 years ago now.
The government in and of itself didn't pay for the railroads,
just like they're not paying for Harrogate.
It was mostly funded by private companies, but it also had huge
government incentives from state and local governments.
It was subsidized heavily. So you can see a lot of
similarities between what's happening now with government
subsidized and government concerted efforts into
artificial intelligence infrastructure and what happened
over 100 years ago with railroad development.
But even though there's many similarities you can make,
there's also some key differences that makes this
project of developing artificial intelligence more costly and
difficult than laying the foundation of railroads.
And the biggest problem with Stargate is the cost.
Not just the upfront cost, but the ongoing cost and the returns
that are implied from the money invested with every company that
we look at, it doesn't matter which one we look at.
For example, we can look at Costco.
If we look at Costco's return on capital employed, which is a
measurement of profitability for every dollar invested, we can
see that last year it was 27%, meaning that if Costco invests a
dollar back into its business, it gets $1.27 back.
That's really good. That's far above the cost of
capital, where their cost of capital is somewhere probably
close to 8 to 11%. So they earn back about double
what their cost of capital is. Every dollar that Costco puts
into their business, they're making a solid profit in the
next year, and they've done this for decades.
This is why Costco has been such a reliably good investment with
the cost of capital around here. They've always made more money
than the cost of borrowing money.
We can look at any other company, for example, we have
Booking Holdings and if we go down to that same metric, the
return on capital employed, assuming they have a cost of
capital around 10 into 11%, you can see that even in the bad
years of 2020 and 2021 when business went down because of
the pandemic, they still were just meeting their cost of
capital. They didn't generate much wealth
in these two years, but every other year they're generating
wealth far above the cost of the money.
This means it's a profitable business.
Booking Holdings is making a dollar thirty $1.50 for every
dollar invested back in their business.
This is a widely profitable company and we can see the same
thing with railroads. Railroads being the veins of the
US for the past 100 plus years, transporting that oxygen to
different states have been critical.
But more importantly with railroads, they run a very
successful and profitable business at the same time.
Union Pacific's return on capital employed is not as high
as Booking Holdings or Costco, but it's still pretty good up
into the range of 13 to 16%, assuming that their cost of
capitals anywhere from 8 to 11%. This is a profitable business
year after year and that's why these Class 1 railroads have
done well for investors for decade after decade.
It's why it attracted Warren Buffett to these stocks.
But the unique difference between railroads and AI
infrastructure is the valuable lifetime of every rail laid, the
valuable lifetime of the CapEx investment.
For example, if we look at the capital expenditures of the
company, which means the physical goods that you're
building out to the things like warehouses or in this case, rail
for the railroads, you can see that it's been relatively flat
year after year for the past two decades.
It's average around $3 billion per year.
This is simply maintenance for the rail that's already been
laid. It's different repairs and
buying different carts, but the benefit of railroads is that
when they lay rail, it lasts for a very long time.
If Union Pacific invests into building out 100 miles of new
rail, they can expect that rail to stay operational for 50 plus
years without any major significant CapEx investment
over the lifetime of those 50 years.
So they put up the money once and then they only have small
maintenance costs for decade after decade.
And this calculation of having one time significant upfront
cost to build out the rail but then minimal maintenance
afterwards is where you get these consistently high returns
on capital. If they had to rebuild the
entire rail infrastructure every five years, this not only would
it be profitable, but this would be one of the worst businesses
in existence. Union Pacific and every company
like it would go out of business.
There's no way that they could afford to put money back into
laying rail every single five years, redoing the work they
previously did. The useful lifetime of AI,
servers, and GPU's is significantly less than any
other infrastructure project we've done.
It's less than telecom, it's less than rail, and it's not
even close. The useful lifetime of a GPU is
around 4 to five years before it becomes completely obsolete.
There are numerous reports from people familiar with these
industries pointing out that data center and AIGPUS may have
extremely short life spans. This is from engineers at
Google, most of them pointing out that they last around three
years. While this seems good for
companies like NVIDIA in the short term as they have a
reoccurring demand and continually building out new
GPUs, this also brings into big questions of the returns these
type of companies will get with their significant AI
investments. The number being continually
quoted here by the Project Stargate is the $500 billion
number. And that number in and of itself
seems like this fixed amount. But the problem with this major
project is that investment is not a one time thing.
The useful life of most of the expensive part of this project
is not building out the warehouses or laying in the
cement. It's paying for the GPUs that
are constantly in use, training the data.
And those GPUs will need to be fixed and updated every three to
five years. So this $500 billion AI project
is not a one time expense, it's an ongoing reoccurring expense
and no company will continue to invest this amount without
seeing significant returns. Unlike companies like Union
Pacific, which can lay rail once and then wait a decade to get a
return on that investment, companies like Microsoft and
Oracle need to see much faster ROI's with their investment.
They need to see the returns quickly because the assets they
purchased are amortized and depreciate quickly.
So the calculation here is entirely different.
And one CEO seems to understand this, that is Satya Nadella.
Satya Nadella has noted that he's good for the $80 billion.
But if we look at how much money they spend on a trailing basis
on CapEx and artificial intelligence already, it's
around that amount. They're already spending $50
billion. So this isn't some dramatic
change. This is following along their
incremental increase in AI spending, which has doubled and
tripled over the past couple of years.
And This is why you see Microsoft being excluded from
many of the comments in the Stargate deal.
Microsoft needs to see a return on these investments.
With compute being so expensive and the cost of various LLMS
from China being so cheap. This could end U being a race to
the bottom. But ultimately, we'll have to
wait and see. Now, let's go ahead and move on
to some news. Now, obviously, we have the news
that Netflix reported earnings and their numbers blew out
expectations. Now, before even jumping into
this, I get comments from time to time from some viewers that
are sick of hearing about Netflix.
I realize that Netflix is not the most popular stock on the
interweb. I realize it's not the most
popular on YouTube. There's more popular companies
like Tesla. There's more popular companies
like Google that I could talk about and make more videos
about. But the reason that I talk about
Netflix, and I've been beating this drum for a long period of
time, talking glowingly about Netflix for years, is that I
believed it's a good investment. And part of the purpose of this
channel is highlighting my conclusions on what I think are
good investments. Netflix stock price was up 65%
in 2023. That's a pretty good year.
That beats out the major indices.
It double S and triples the return of the S&P 500.
That was 2023. Then in 2024 Netflix stock price
was up 85%. Now in 2025, the stock is up,
currently 9.8%. So the reason that I highlight
this company and I talk about it probably more than a lot of
people like, or at least interested, is because I think
it's a good investment. That's really what it comes down
to. And over the past couple of
years, the people that have taken a closer look at Netflix
stock, in part because of my videos, are very happy that
they've done so. I've had no upset viewers for
investing in Netflix, so that's part of the reason that I
highlight the company continually is because I think
it's a good investment. And at this point, I still
believe it's a good investment. Netflix is showing exactly the
story that I've been saying will play out for a long period of
time. It's flexing its muscles and
showing complete market dominance over one of the
fastest growing and most important industries to be
invested in. A lot of investors get
pigeonholed into viewing only one industry that's talked about
artificial intelligence. Artificial intelligence, but the
media and entertainment industry is massive.
It has global appeal, and there's one company that's
showing incredible dominance. The streaming giant added a
record 18.9 million new subscribers during the fourth
quarter. Now, to put this in perspective,
they were expected to add 8 million.
So that's what Wall Street had. I thought it was going to be
good, so I was leaning more towards 13 million, but I didn't
really imagine them adding 19,000,000.
That was a surprise even for me. After hearing the news, though,
I wasn't really shocked. The content slate last quarter
was incredibly strong, so it's important to know that Netflix
now has 302,000,000 subscribers, every one of these being paid.
Their ad care is growing incredibly fast.
It doubled in revenue in 2024 and Netflix is now forecasting
another doubling of their ad revenue in 2025.
This is the type of company that the more I research into it, the
more I dig into the earnings report, the more I listen to the
earnings call, the more excited I am about the company.
Typically when I'm doing analysis on a company, the more
I dive into it, the more concerned I become.
Their revenue on a quarterly basis hit a record high of 10.25
billion. That is 16% growth year over
year, but on a currency consistent basis, that's 19%
growth. The total subscriber jump was
monumental from 282 million up to 301 million.
This is what the subscriber chart looks like over time.
It grew nearly 16% last year. To look at the total subscribers
gain this quarter, it was the highest of any quarter in their
history, showing that Netflix's total addressable market
continues to be rather large. And one interesting thing about
this total subscriber metric is management believes that their
total addressable market, what they can eventually grow into is
now 750 million plus subscribers.
And this is based off of the broadband Internet connected
households outside of Russia and China.
There's 750 million. Another way of putting this is
that currently 300 million, they're not even halfway there.
Netflix's content budget is starting to trend back upwards
to a healthy level of around $17 billion.
This is where they like it to be.
The reason the content budget is going back up is because the
writer strikes have ended. Even though they've spent far
more on content over the past year, their free cash flow on a
trailing basis is still nearly $7 billion.
So organic free cash flow growth continues to grow on an earnings
per share basis. They grew 65% on a trailing
basis year over year. So even though this company
trades at an elevated PE ratio, the earnings per share growth
over the past five years has more than made-up for it.
This is operating leverage at play and share count continues
to decline as they're funneling a lot of money back into
buybacks. I currently hold Netflix in my
story fund. The gains on it are around
$56,000 and it's now moved up to my largest position.
I continue to hold every share as I still think the future is
bright. A company going through more
difficult challenges right now is Apple.
And this has been one of my key holdings for a long period of
time. And it's a company that I've
significantly reduced my exposure to because I believe
the upside and downside, the risk reward for this company has
flipped. The latest report is that Apple
is struggling to sell in China. It's market share of the iPhone
sales has taken a big hit there. So one of the big issues with
investing in Apple is you do have a lot of exposure to China,
which I believe we have less control over.
It's one thing that I look at with every company I invested
in. Is there amount of exposure to
China? There are analysts like Dan Ives
that believe that the problems in China will be overshadowed by
the growth across the rest of the world.
Fears that have driven the stock lower are overdone and a turn
around is just around the corner.
So some people remain very bullish on Apple, but I'm a bit
more hesitant. The current issue I see with
Apple is the same issue I've been highlighting over the past
year. This company's moved into a
different category based on the slowing of its revenue growth.
If we look at Apple's revenue growth over the past couple of
years, it's been stagnant. It's been completely flat.
In my opinion, Apple has moved from a fast grower into a slow
grower. This is one of the six
categories of stocks that Peter Lynch outlines.
Now, there's nothing inherently bad about slow growers.
They're not companies that will lose you dramatic amounts of
money. It's not something you should be
scared of. In many cases, these are
exceptional companies. They're really great.
Examples of slow growers include companies like Walmart,
Coca-Cola, or Colgate. This is why you see many people
that have these type of companies also owning Apple.
The problems with these companies is that they are low
risk in predictability and they are low reward.
The upside is just not as substantial as fast growing
companies. Even though My Portfolio value
has risen dramatically, I still consider myself a long ways from
retirement. I want to double this portfolio
value and double it again. I want to have constant speed of
growth with strong compounding from every individual stock.
The slower growth is what gives me pause.
So I'm putting my money into companies that I think will grow
that top line revenue at around double or triple the speed.
Now, finally, we get to another union story.
These are always exciting. In this case, it's Amazon
against a union in Canada, Quebec.
And this was a spectacular backfire by the union organizers
here. The union organizers wanted a
pay increase of $6 per hour. Now Amazon said that's too much,
we're not going to pay that. And just like an employee has
the ability to quit a company's job, a company also has the
ability to just shut down those locations to no longer offer the
job in and of itself. And Amazon exercised their right
to shut down all seven locations in Canada, completely
eliminating these fulfillment centers.
Amazon said that it made more economic sense for their
business to shift to 3rd party companies in these areas, third
party companies to deliver the same packages, reverting to the
business model in that area in 2020.
They say the decision wasn't made lightly and they're
offering the impacted employees a package that includes up to 14
weeks pay after the facilities close, which is a great
severance package. Now obviously the union
responsible for this is not happy that all of their jobs are
being transferred to 3rd party companies.
They say that it's a move that runs counter to the provisions
of the Labor Code and one that will be taking a firm stand
against. So now they're going to try to
take legal action against Amazon to force them to offer those
jobs once again. So to summarize this disastrous
fail of a negotiation, this union representing 1700 jobs
demanded much higher pay than they are currently getting.
Amazon decided to go with third party companies to deliver in
that same area and closed every one of these jobs.
So now instead of getting their $6.00 an hour pay raise, every
single one of these employees are losing their jobs and the
unions trying to sue Amazon to reinstate the jobs.
I've tried pointing this out many times that you can have a
stance where you're both pro worker, pro workers making more
money, pro workers having job protections and against the
actions of specific unions. And this is a key example of
one. This union harmed these members
jobs and put them in a much more difficult situation than they
had prior. And while looking at different
news stories of unions actions over the past couple of years,
I've received dozens of messages of different, different members
of unions, even people that are involved in them that wish they
weren't. But this new story is
unfortunately a striking example of how things can go wrong.
That's going to be it for this episode.
See you in the next.