1 00:00:00,040 --> 00:00:02,120 Over the weekend, the Wall Street Journal released a new 2 00:00:02,120 --> 00:00:03,920 detailed report regarding Google. 3 00:00:04,160 --> 00:00:07,840 They make the claim that Google is losing its ad market share, 4 00:00:08,080 --> 00:00:12,400 its dominance in advertising. Google is on the decline and 5 00:00:12,400 --> 00:00:15,440 from competitors like TikTok and AI startups. 6 00:00:15,840 --> 00:00:17,960 Now, I've gone ahead and read through this report. 7 00:00:18,280 --> 00:00:20,720 I have a few opinions on it as a Google shareholder. 8 00:00:21,040 --> 00:00:22,800 I don't think this tells the full story. 9 00:00:22,800 --> 00:00:25,080 And furthermore, this is the type of thing that I've been 10 00:00:25,080 --> 00:00:28,000 talking about for over a year. So we're going to be looking at 11 00:00:28,000 --> 00:00:30,160 this new report from the Wall Street Journal. 12 00:00:30,320 --> 00:00:32,439 We'll be going through some other graphics, and I'll give 13 00:00:32,439 --> 00:00:35,280 you a little bit of a detail to get further understanding and 14 00:00:35,280 --> 00:00:36,840 what's really going on with Google. 15 00:00:36,880 --> 00:00:38,520 Now, of course, we have some other news to get to. 16 00:00:38,560 --> 00:00:42,160 Amazon is down around 3% today after a Wells Fargo analyst 17 00:00:42,160 --> 00:00:44,760 downgraded the stock. We're going to listen to the 18 00:00:44,760 --> 00:00:47,880 video clip of the analyst explaining his reason for the 19 00:00:47,880 --> 00:00:51,680 downgrade, and that way we can both look at it together and see 20 00:00:51,680 --> 00:00:54,600 how ridiculous his reason for this downgrade really is. 21 00:00:54,600 --> 00:00:57,120 We have news that Apple's likely moving away from their yearly 22 00:00:57,120 --> 00:00:59,120 release cycle. That's right. 23 00:00:59,120 --> 00:01:02,400 With the iPhones and how similar they are every year, you may 24 00:01:02,400 --> 00:01:04,879 assume the Apple's going to be moving to a release cycle that's 25 00:01:04,879 --> 00:01:07,120 every two years. I'll be explaining why that's 26 00:01:07,120 --> 00:01:09,160 not the case. In fact, Apple is likely going 27 00:01:09,160 --> 00:01:12,920 to be releasing products more frequently than every year, so 28 00:01:12,920 --> 00:01:14,080 I'll be talking about that as well. 29 00:01:14,080 --> 00:01:16,280 And then there's a trend going on right now that needs to be 30 00:01:16,280 --> 00:01:19,320 addressed where a lot of wealthy people like Jamie Dimon, Jeff 31 00:01:19,320 --> 00:01:23,440 Bezos, Warren Buffett have been a net seller of stocks. 32 00:01:23,840 --> 00:01:25,720 They're dumping stocks. They're building up a lot of 33 00:01:25,720 --> 00:01:28,480 cash. Is this a warning sign for 34 00:01:28,480 --> 00:01:30,760 investors? Should we be concerned when 35 00:01:30,760 --> 00:01:34,520 people like Warren Buffett, Jeff Bezos, Jamie Dimon and many 36 00:01:34,520 --> 00:01:37,160 other wealthy people are loading up on cash? 37 00:01:37,160 --> 00:01:38,440 So we have a lot of news to get to. 38 00:01:38,440 --> 00:01:41,400 Let's go ahead and jump in. Just a shout out before we jump 39 00:01:41,400 --> 00:01:44,000 in. Qualtrim is under free trial. 40 00:01:44,000 --> 00:01:47,080 If you haven't already tried it. If you join a new account today, 41 00:01:47,080 --> 00:01:49,760 you'll have the rest of October to try out this software. 42 00:01:49,920 --> 00:01:51,680 The way it works is super simple. 43 00:01:51,680 --> 00:01:55,840 Join the Patreon at patreon.com Joseph Carlson Once you join the 44 00:01:55,840 --> 00:01:58,760 Patreon, you can create a Qualtrim account with the same 45 00:01:58,760 --> 00:02:01,000 e-mail and it should automatically validate. 46 00:02:01,400 --> 00:02:03,640 So once you have it validated, you have the entire month to try 47 00:02:03,640 --> 00:02:05,520 it out. Of course, it's cancel anytime. 48 00:02:05,800 --> 00:02:07,600 I think you're going to love it, Qualtrim. 49 00:02:08,039 --> 00:02:10,440 It's come a long ways. We're really building out some 50 00:02:10,440 --> 00:02:12,160 cool tools. We have a lot of KPIs and 51 00:02:12,160 --> 00:02:14,800 different things we're doing with it, so try that out if you 52 00:02:14,800 --> 00:02:17,640 haven't already. Now, of course, I want to start 53 00:02:17,640 --> 00:02:20,080 off with the headline news here. We've had a story come across 54 00:02:20,080 --> 00:02:23,160 that the Wall Street Journal detailed out where they're now 55 00:02:23,160 --> 00:02:27,240 saying that Google is losing its grip on the search market, on 56 00:02:27,240 --> 00:02:29,160 the ad market. Now, I think it's important to 57 00:02:29,160 --> 00:02:31,440 highlight that even as a shareholder of Google, I do not 58 00:02:31,440 --> 00:02:34,520 approach this from the perspective of needing to defend 59 00:02:34,520 --> 00:02:36,960 Google. I'm not a Google apologist. 60 00:02:36,960 --> 00:02:38,840 I'm not someone that needs to own the stock. 61 00:02:39,120 --> 00:02:43,520 In fact, I welcome valid bear cases and arguments and where 62 00:02:43,520 --> 00:02:46,520 people bring new information to light telling me that I should 63 00:02:46,520 --> 00:02:48,360 be concerned about one of my companies. 64 00:02:48,760 --> 00:02:52,000 If I believe the claim, if I think that there's some reality 65 00:02:52,000 --> 00:02:54,520 to the claim, I may sell out of Google and replace it for a 66 00:02:54,520 --> 00:02:56,560 company that has a brighter future. 67 00:02:56,960 --> 00:02:59,760 So I'm not looking at this from the perspective of just needing 68 00:02:59,760 --> 00:03:01,320 to defend Google. I just want to mention that 69 00:03:01,320 --> 00:03:03,840 before jumping in now, they start off with a big claim. 70 00:03:04,080 --> 00:03:07,280 Google's grip on the nearly 300 billion search advertising 71 00:03:07,280 --> 00:03:09,880 business is loosening. For years, the tech giant has 72 00:03:09,880 --> 00:03:13,800 seemed invincible in this corner of the ad market, which is the 73 00:03:13,800 --> 00:03:17,280 foundation of its business. Now rival are beginning to eat 74 00:03:17,320 --> 00:03:20,160 into its lead, and new offerings, fueled by the rise of 75 00:03:20,160 --> 00:03:22,520 artificial intelligence and social video, threatened to 76 00:03:22,520 --> 00:03:24,960 reshape the landscape. So we have the introduction 77 00:03:24,960 --> 00:03:27,400 there. Google's grip on the ad market, 78 00:03:27,400 --> 00:03:30,320 and the search market in particular, is loosening. 79 00:03:30,600 --> 00:03:34,040 The tech giant seemed invincible in the past, and now they're 80 00:03:34,040 --> 00:03:36,240 just losing it. They're losing control of the 81 00:03:36,240 --> 00:03:39,600 territory that they once had and then they go into the specific 82 00:03:39,600 --> 00:03:42,520 arguments of the competitors taking their market share and 83 00:03:42,520 --> 00:03:45,560 first of all we have TikTok. The wildly popular short form 84 00:03:45,560 --> 00:03:48,600 video platform has recently started allowing brands to 85 00:03:48,600 --> 00:03:52,480 target ads based on users search quarries, a direct challenge to 86 00:03:52,480 --> 00:03:55,960 Google score business. Next we have perplexity an AI 87 00:03:55,960 --> 00:03:58,880 search startup backed by Jeff Bezos plans to introduce ads 88 00:03:58,880 --> 00:04:01,800 later this month under its AI generated answers. 89 00:04:02,120 --> 00:04:05,200 Until now, it's made revenue mostly from the $20.00 a month 90 00:04:05,200 --> 00:04:08,240 subscription offering that grants access to more powerful 91 00:04:08,400 --> 00:04:10,840 AI technology. So they outlined 2 competitors, 92 00:04:10,840 --> 00:04:14,000 TikTok and Perplexity, both stealing market share from 93 00:04:14,000 --> 00:04:15,880 Google. But they don't stop there. 94 00:04:16,120 --> 00:04:18,959 The next one is Amazon. The new initiatives add to the 95 00:04:18,959 --> 00:04:22,720 pressure on Google from the rise of Amazon.com, which has taken a 96 00:04:22,720 --> 00:04:25,760 chunk of search ad spending. Many consumers begin their 97 00:04:25,760 --> 00:04:28,120 product searches on the e-commerce platform. 98 00:04:28,640 --> 00:04:32,280 Google share of the US search ad market is expected to drop below 99 00:04:32,280 --> 00:04:36,760 50% next year for the first time in over a decade, according to 100 00:04:36,760 --> 00:04:40,080 research firm E Marketer. And that's the punchline right 101 00:04:40,080 --> 00:04:42,320 there. Google's market share supposed 102 00:04:42,320 --> 00:04:45,720 to drop below 50% of ad search revenue. 103 00:04:45,800 --> 00:04:48,320 And we even have a visual hair showing the decline of Google 104 00:04:48,320 --> 00:04:51,440 overtime. Since 2018, Google has held 105 00:04:51,440 --> 00:04:56,000 roughly 60% market share of the US search advertising revenue 106 00:04:56,000 --> 00:04:58,560 market, and now it's going down to 48%. 107 00:04:58,840 --> 00:05:02,040 Meanwhile, at the same time, you can see Amazon's rising. 108 00:05:02,320 --> 00:05:07,240 Amazon is expected to go above 25%, closer and closer to 30%, 109 00:05:07,440 --> 00:05:10,160 while Google is expected to go below 50%. 110 00:05:10,160 --> 00:05:12,640 They note that Amazon is expected to have 22% of the 111 00:05:12,640 --> 00:05:16,880 market this year with 17% growth compared to Google's 50% share 112 00:05:16,880 --> 00:05:20,800 with 7.6% growth. So Amazon is growing its ad 113 00:05:20,800 --> 00:05:24,840 revenue around 2 1/2 times as fast as Google. 114 00:05:24,840 --> 00:05:28,960 So we have TikTok search, quarry ads, We have a perplexity and we 115 00:05:28,960 --> 00:05:31,960 have Amazon, of course, which has that big product search box 116 00:05:32,280 --> 00:05:34,640 all eating away at Google. And they go further into how 117 00:05:34,640 --> 00:05:37,800 these different companies introducing ads is taking away 118 00:05:37,800 --> 00:05:41,000 ad marketing spend from Google. Targeting search budgets is a 119 00:05:41,040 --> 00:05:43,680 logical step for TikTok. Up until now, the company has 120 00:05:43,680 --> 00:05:46,560 offered brands the option of displaying ads near the search 121 00:05:46,560 --> 00:05:49,640 results, but advertisers couldn't target their ads based 122 00:05:49,640 --> 00:05:52,880 on keywords in user search. So previously this was more 123 00:05:53,000 --> 00:05:55,400 limited technology and tick tock and they're advancing their 124 00:05:55,400 --> 00:05:58,080 advertising features. Advertisers are drawn to Tick 125 00:05:58,080 --> 00:06:00,680 Tock because of the platform strong appeal to young adults. 126 00:06:00,760 --> 00:06:03,880 The pitch to the advertisers is that search behaviors have 127 00:06:03,880 --> 00:06:07,040 evolved, and they added that the platform had global daily search 128 00:06:07,040 --> 00:06:10,280 volume of over 3 billion. So TikTok is correct in saying 129 00:06:10,280 --> 00:06:13,560 that the ad market is evolving and that is posing a different 130 00:06:13,560 --> 00:06:16,680 challenge to Google. And that overall summarizes the 131 00:06:16,680 --> 00:06:19,720 report from the Wall Street Journal that Google is losing 132 00:06:19,720 --> 00:06:22,160 its dominance. The ad market is evolving and 133 00:06:22,160 --> 00:06:24,640 Google's now in a tense situation between this challenge 134 00:06:24,960 --> 00:06:27,160 and of course, their legal challenges with the Department 135 00:06:27,160 --> 00:06:30,120 of Justice. But who could have seen this 136 00:06:30,120 --> 00:06:31,400 coming? Who could have really 137 00:06:31,400 --> 00:06:34,560 anticipated that the ad market would evolve, that there's more 138 00:06:34,560 --> 00:06:37,200 and more ways to search for information, and that Google 139 00:06:37,200 --> 00:06:39,560 really doesn't have the same dominance they once had? 140 00:06:40,160 --> 00:06:43,160 Well, of course, anyone paying attention, anyone paying 141 00:06:43,160 --> 00:06:45,920 attention should have anticipated this, especially if 142 00:06:45,920 --> 00:06:48,360 you're a Google shareholder. In fact, this is something that 143 00:06:48,360 --> 00:06:52,440 I tweeted about over a year ago. Here's a tweet that's still 144 00:06:52,440 --> 00:06:55,200 live. You can look it up, it's on X or 145 00:06:55,200 --> 00:06:58,000 Twitter. September 11, 2023. 146 00:06:58,280 --> 00:07:00,720 So this is over a year old. Let's go ahead and zoom in and 147 00:07:00,720 --> 00:07:03,040 let me just read this tweet here and see if it shows any 148 00:07:03,040 --> 00:07:06,040 resemblance. Google search does not have the 149 00:07:06,040 --> 00:07:08,480 market share that every analyst report shows. 150 00:07:08,720 --> 00:07:11,640 Those reports compare the search market of Google against 151 00:07:11,640 --> 00:07:13,760 competitors like Bing and DuckDuckGo. 152 00:07:14,160 --> 00:07:18,160 In reality, search is anywhere you go to type something into a 153 00:07:18,160 --> 00:07:21,200 box and get a result. Amazon is a massive search 154 00:07:21,200 --> 00:07:22,880 engine. You type in the products you 155 00:07:22,880 --> 00:07:25,760 want and get results with sponsored listings and products 156 00:07:25,760 --> 00:07:28,320 to buy. How is this any less of a search 157 00:07:28,360 --> 00:07:30,400 than Google? Because it's simply more 158 00:07:30,400 --> 00:07:33,440 segmented to shopping. What about Facebook and 159 00:07:33,440 --> 00:07:35,720 Instagram? People searching these everyday. 160 00:07:35,720 --> 00:07:38,000 They find content, communities and answers. 161 00:07:38,240 --> 00:07:41,000 What about Reddit search box to find communities and posts? 162 00:07:41,280 --> 00:07:43,600 Netflix search to find TV shows and movies. 163 00:07:43,920 --> 00:07:46,800 Tiktok search to find content and creators? 164 00:07:47,200 --> 00:07:49,520 Google search? Dominance is always nearly 165 00:07:49,520 --> 00:07:53,200 defined because investors like that they can control the huge 166 00:07:53,200 --> 00:07:56,120 market share fulfills the mote thesis. 167 00:07:56,120 --> 00:08:00,280 Google owns the search market and regulators like that because 168 00:08:00,280 --> 00:08:03,640 it paints them as a monopoly so they can attack Google's search 169 00:08:03,640 --> 00:08:06,160 business. In reality, if you define search 170 00:08:06,160 --> 00:08:09,280 accurately and include all competitors, Google's market 171 00:08:09,280 --> 00:08:11,920 share and dominance is to a far lesser extent. 172 00:08:11,960 --> 00:08:15,160 That was a tweet I made a year ago after reading article and 173 00:08:15,160 --> 00:08:18,080 article about how dominant Google search was. 174 00:08:18,320 --> 00:08:21,280 That it controlled 92% market share, That it controlled the 175 00:08:21,280 --> 00:08:23,800 world, That Google faced no competition. 176 00:08:24,280 --> 00:08:26,520 But even a year ago, I could identify that that wasn't the 177 00:08:26,520 --> 00:08:28,680 case. There's search boxes everywhere. 178 00:08:28,680 --> 00:08:30,200 There's advertisements everywhere. 179 00:08:30,520 --> 00:08:33,200 Google doesn't own search, and they never have. 180 00:08:33,559 --> 00:08:36,400 So this claim by the Wall Street Journal that Google's losing its 181 00:08:36,400 --> 00:08:38,919 grip on search like this is a recent occurrence. 182 00:08:39,039 --> 00:08:42,320 Google has never had a full grip on the search market. 183 00:08:42,520 --> 00:08:45,920 If you accurately define the search market, Google's never 184 00:08:45,920 --> 00:08:48,760 controlled Olive Reddit. They've never controlled 185 00:08:48,760 --> 00:08:51,440 Facebook and Instagram. They've never controlled all the 186 00:08:51,440 --> 00:08:53,880 different places you can shop like Amazon and eBay. 187 00:08:54,080 --> 00:08:56,400 All these different places outside of Google where you can 188 00:08:56,400 --> 00:08:59,560 search in a box and they can display your results alongside 189 00:08:59,560 --> 00:09:02,440 an ad have existed for years and years and years. 190 00:09:02,920 --> 00:09:06,480 So the Wall Street Journal and investors seemingly today are 191 00:09:06,480 --> 00:09:09,680 realizing that something exists and something is the case. 192 00:09:09,920 --> 00:09:12,040 That's already been the case for five years. 193 00:09:12,600 --> 00:09:15,160 Nothing has changed. There's no big meaningful 194 00:09:15,160 --> 00:09:19,400 changes to the search market. You might say, Joseph, the LLMS, 195 00:09:19,480 --> 00:09:22,880 the artificial intelligence searches, those are new, sure, 196 00:09:22,880 --> 00:09:24,520 but those are at least a year or two old. 197 00:09:24,680 --> 00:09:27,040 Remember, just a year or two ago, Google investors were 198 00:09:27,040 --> 00:09:28,920 supposed to be concerned about Bing search? 199 00:09:29,360 --> 00:09:32,640 Bing Search and Satya Nadella were making Google dance. 200 00:09:32,920 --> 00:09:36,480 Remember that whole fiasco? Bing's new AI powered search by 201 00:09:36,480 --> 00:09:39,120 Open AI was supposed to take it to Google. 202 00:09:39,400 --> 00:09:42,800 Everybody was downloading it. It had a spike of activity all 203 00:09:42,800 --> 00:09:45,680 across social media. It was talked about on CNBC and 204 00:09:45,680 --> 00:09:47,680 Twitter. And what happened since then? 205 00:09:48,040 --> 00:09:50,760 What happened to Bing search? What about perplexity? 206 00:09:50,840 --> 00:09:52,720 This isn't the first time we've heard about that one. 207 00:09:53,080 --> 00:09:55,960 Shouldn't it have already affected Google's business? 208 00:09:56,360 --> 00:09:59,920 If we see all these companies like TikTok, Perplexity, Bing, 209 00:10:00,160 --> 00:10:03,880 you name it, taking market share from Google, then shouldn't that 210 00:10:03,880 --> 00:10:07,240 impact Google's earnings and free cash flow and revenue? 211 00:10:07,240 --> 00:10:10,040 Well, we can take a look at the actual fundamentals here to see 212 00:10:10,040 --> 00:10:13,080 the big negative way that's impacted Google's business. 213 00:10:13,520 --> 00:10:16,560 If we look at Qualtrm and we go to the KPIs, which are key 214 00:10:16,560 --> 00:10:19,440 performance indicators of the company, we can look at Google's 215 00:10:19,440 --> 00:10:23,880 revenue by segment. Again, this is breaking down in 216 00:10:23,880 --> 00:10:28,160 specific the search business of Google over the past 3 1/2 217 00:10:28,160 --> 00:10:30,040 years. We look at the search business 218 00:10:30,040 --> 00:10:33,880 of Google by crossing out all the other lines of business. 219 00:10:34,440 --> 00:10:36,240 This is just the search business. 220 00:10:36,920 --> 00:10:39,520 Look at the devastation all these competitors have done to 221 00:10:39,520 --> 00:10:42,520 Google, the utter devastation to this company. 222 00:10:42,520 --> 00:10:47,240 The revenue in Q2 of 2021 was $35.85 billion. 223 00:10:47,680 --> 00:10:53,600 The revenue in Q2 of 2024 was $48.5 billion, a growth rate of 224 00:10:53,600 --> 00:10:56,120 around 10% year over year for the past three years. 225 00:10:56,200 --> 00:10:59,640 I will say Google is a company that as long as I followed it, 226 00:10:59,720 --> 00:11:02,240 there's always some boogeyman for this stock. 227 00:11:02,480 --> 00:11:05,000 I don't know what it is about Google, but there's just always 228 00:11:05,000 --> 00:11:07,840 something causing investors to be concerned about this company. 229 00:11:08,160 --> 00:11:11,240 It really never ends. I've never owned a stock that 230 00:11:11,240 --> 00:11:14,560 has such good fundamentals, where the numbers go up and to 231 00:11:14,560 --> 00:11:17,600 the right on such a consistent basis, where it has so many 232 00:11:17,600 --> 00:11:20,240 secular trends of growth, where every line of segment is 233 00:11:20,240 --> 00:11:23,760 growing, where they have this incredible business called this 234 00:11:24,240 --> 00:11:27,160 Google Cloud business that never gets a lot of mention, but it's 235 00:11:27,160 --> 00:11:30,560 growing 28% per year while growing it's margins. 236 00:11:30,840 --> 00:11:33,200 They're doing this while also growing their biggest core 237 00:11:33,200 --> 00:11:36,240 business, which is search. And even Despite that, the 238 00:11:36,240 --> 00:11:37,840 company really can't catch a break. 239 00:11:38,000 --> 00:11:41,720 It trades at a multiple that's lower than the S&P 500, a 19 240 00:11:41,720 --> 00:11:45,120 Ford PE ratio. Plus they have $100 billion in 241 00:11:45,120 --> 00:11:47,320 cash. The free cash will yield a nice 242 00:11:47,320 --> 00:11:49,480 3%. They're getting their stock 243 00:11:49,480 --> 00:11:52,200 based comp under control, they're third place in cloud, 244 00:11:52,200 --> 00:11:55,480 and they own YouTube, which most people consider to be a de facto 245 00:11:55,480 --> 00:11:58,160 monopoly on user generated content. 246 00:11:58,240 --> 00:12:00,320 But despite all that, we're still told to be worried about 247 00:12:00,320 --> 00:12:02,640 Google. We should always, always be 248 00:12:02,640 --> 00:12:05,880 worried about Google and the so-called competitors, even if 249 00:12:05,880 --> 00:12:08,760 it doesn't show up in any of the numbers over years of time. 250 00:12:09,480 --> 00:12:11,800 So you can decide whether or not you want to be worried about 251 00:12:11,800 --> 00:12:14,200 Google. As of right now, I'm not too 252 00:12:14,200 --> 00:12:16,240 concerned. Now moving on, we get to news 253 00:12:16,240 --> 00:12:18,720 that Amazon is being hit Today. If you looked at the stock 254 00:12:18,720 --> 00:12:22,000 price, it's down nearly 3%, which is quite a bit even for 255 00:12:22,000 --> 00:12:24,080 Amazon. It's more volatile company but 256 00:12:24,080 --> 00:12:28,680 dropping 2.7% is quite a drop. Qualtrum here notes that Amazon 257 00:12:28,680 --> 00:12:31,920 shares are trading lower after Wells Fargo downgraded the stock 258 00:12:31,920 --> 00:12:35,360 from Overweight to Equal weight and cut its price target from 259 00:12:35,720 --> 00:12:39,240 2:25 to 183. Now, anytime a stock of mine 260 00:12:39,240 --> 00:12:41,680 gets downgraded, I like to figure out the reason why. 261 00:12:41,880 --> 00:12:44,600 What is this Wells Fargo analyst know that I don't know? 262 00:12:44,600 --> 00:12:47,080 What has he figured out about Amazon that I don't know? 263 00:12:47,400 --> 00:12:50,000 Because I still believe Amazon's worth around 220. 264 00:12:50,200 --> 00:12:53,920 He's saying no longer is it worth 220, it's now worth 180. 265 00:12:54,000 --> 00:12:55,840 So what happened? What did he figure out? 266 00:12:56,000 --> 00:12:57,240 Let's go ahead and take a listen. 267 00:12:57,480 --> 00:13:00,720 This is the Wells Fargo analyst explaining his downgrade. 268 00:13:00,880 --> 00:13:03,920 So I think there's a couple elements here. 1, is there, 269 00:13:04,000 --> 00:13:06,320 there are some new investments they're making in this Project 270 00:13:06,320 --> 00:13:08,880 Kiper, which is a satellite in an Internet service. 271 00:13:09,320 --> 00:13:12,560 And there's some near term costs, There's some pretty heavy 272 00:13:12,560 --> 00:13:14,600 upfront costs that will pressure margins. 273 00:13:14,880 --> 00:13:16,920 So the first thing that he mentions is a reason to 274 00:13:16,920 --> 00:13:20,360 downgrade the stock and say it's worth 180 instead of 220 is 275 00:13:20,360 --> 00:13:23,760 Project Kiper. This is the Amazon Starlink 276 00:13:23,760 --> 00:13:26,960 competitor where they launch off the satellites and they give you 277 00:13:26,960 --> 00:13:30,600 a satellite Internet access. Amazon is a lot later to the 278 00:13:30,600 --> 00:13:33,760 game then then a Starlink, but they're going down the same 279 00:13:33,760 --> 00:13:34,720 route. And we've seen that this 280 00:13:34,720 --> 00:13:36,560 business model is proven by Starlink. 281 00:13:36,560 --> 00:13:39,600 Starlink is doing incredible. Amazon's basically just copying 282 00:13:39,600 --> 00:13:42,280 what they're doing. But he's he's saying the reason 283 00:13:42,280 --> 00:13:45,320 that Amazon is worth less today is because they're making 284 00:13:45,320 --> 00:13:48,880 investments into Project Hyper, which is going to push margins 285 00:13:48,880 --> 00:13:50,600 down. Beyond that, I think to what 286 00:13:50,600 --> 00:13:54,360 we're seeing is the cost of doing business for merchants has 287 00:13:54,360 --> 00:13:57,120 risen relatively significantly over the last several years. 288 00:13:57,440 --> 00:14:02,720 And we think that the that both in terms of advertising and fees 289 00:14:02,880 --> 00:14:06,320 paid by merchants, we'll see a slowing of that trend over the 290 00:14:06,320 --> 00:14:08,960 next several years. And can you talk about the 291 00:14:08,960 --> 00:14:11,880 degree to which either Walmart or even other rivals is playing 292 00:14:11,880 --> 00:14:14,680 a role in that dynamic? Sure, absolutely. 293 00:14:15,120 --> 00:14:18,720 And I think this, this gets to the point of there haven't been 294 00:14:18,720 --> 00:14:23,320 no scaled competitors in, in in North America market, the 295 00:14:23,320 --> 00:14:26,960 marketplace business in the fulfillment and logistics side 296 00:14:26,960 --> 00:14:29,800 of the of the business. Walmart is that scaled 297 00:14:29,800 --> 00:14:35,120 competitor and just recently launched a service allowing 298 00:14:35,560 --> 00:14:42,000 sellers and merchants on Amazon to be shipped via via Walmart. 299 00:14:42,240 --> 00:14:45,360 So it is absolutely a key part of this. 300 00:14:45,520 --> 00:14:48,880 And what we see here is that not that Walmart is going to take 301 00:14:48,880 --> 00:14:52,880 significant share of either merchants or consumer dollars 302 00:14:53,440 --> 00:14:56,920 away from Amazon, but it's going to limit Amazon's ability to 303 00:14:56,920 --> 00:15:00,600 raise fees to those merchants. And and then that's how we, 304 00:15:00,680 --> 00:15:03,120 that's what we we bake into our numbers going forward. 305 00:15:03,960 --> 00:15:06,280 So those are the two big reasons that he's down grading the stock 306 00:15:06,280 --> 00:15:09,520 Project Kiper and Walmart as a competitor to Amazon 307 00:15:09,640 --> 00:15:12,760 specifically for the sellers. When I look at analyst 308 00:15:12,840 --> 00:15:16,000 downgrades and upgrades like this, it just leaves me with the 309 00:15:16,000 --> 00:15:19,120 impression that they must just get bored. 310 00:15:19,240 --> 00:15:21,560 They must be at their job and get they get bored. 311 00:15:21,560 --> 00:15:24,160 They have to feel like they, they feel like they have to 312 00:15:24,160 --> 00:15:25,920 change something around once in a while. 313 00:15:25,920 --> 00:15:28,480 Maybe they haven't given an upgrade or downgrade in a while. 314 00:15:28,880 --> 00:15:31,880 They're looking at a company thinking how can I change around 315 00:15:31,920 --> 00:15:35,280 this one? Because I can't find any other 316 00:15:35,360 --> 00:15:39,960 reason, a reason to go from 2:20 down to 180 because of Project 317 00:15:39,960 --> 00:15:43,600 Kuiper, something that Amazon has been visibly working on with 318 00:15:43,600 --> 00:15:46,160 great transparency for a long period of time. 319 00:15:46,680 --> 00:15:48,800 Nothing about this is new. They didn't do any new 320 00:15:48,800 --> 00:15:51,200 developments with Project Hyper. This has always existed. 321 00:15:51,480 --> 00:15:54,240 It's been baked into the stock price for a long period of time. 322 00:15:54,720 --> 00:15:57,520 So a sudden out of left field downgrade because of that 323 00:15:57,520 --> 00:16:01,360 doesn't make sense. And then in terms of Walmart 324 00:16:01,640 --> 00:16:05,720 proving to be competitive to Amazon, like Walmart also came 325 00:16:05,720 --> 00:16:08,000 out of left field, They're doing something new. 326 00:16:08,240 --> 00:16:11,840 They're now a scaled competitor. Walmart has been competing 327 00:16:11,840 --> 00:16:15,600 fiercely with Amazon for years. Even online, even with sellers. 328 00:16:15,880 --> 00:16:17,600 You can ask any seller on Amazon. 329 00:16:17,800 --> 00:16:19,960 They've all tried Walmart. They're trying to sell on 330 00:16:19,960 --> 00:16:21,920 Walmart. Walmart doesn't have enough 331 00:16:21,920 --> 00:16:26,680 traffic to replace Amazon. Amazon's shopping place, their 332 00:16:26,680 --> 00:16:30,760 website is so valuable because of the amount of loyal customers 333 00:16:30,760 --> 00:16:33,480 willing to spend money. They have more loyal customers 334 00:16:33,480 --> 00:16:37,240 signed up browsing the website. They drive the traffic, they 335 00:16:37,240 --> 00:16:39,320 drive the demand. That's the reason it's so 336 00:16:39,320 --> 00:16:41,520 valuable. It's not because of the seller 337 00:16:41,520 --> 00:16:45,640 tools that helps out sellers. I I think it's a nice quality of 338 00:16:45,640 --> 00:16:49,280 life thing for the sellers, but if Walmart built all the best 339 00:16:49,280 --> 00:16:53,200 seller tools in the world, if Walmart charged no fees to sell 340 00:16:53,200 --> 00:16:56,360 on their platform, sellers would still sell on Amazon. 341 00:16:56,840 --> 00:16:59,760 The same reason that sellers sell on the Apple App Store, 342 00:17:00,080 --> 00:17:01,960 even though it charges a lot of money. 343 00:17:02,240 --> 00:17:04,240 They do so because that's where the people are, that's where the 344 00:17:04,240 --> 00:17:06,920 traffic is. So this is another case of an 345 00:17:06,920 --> 00:17:08,599 analyst giving a downgrade for a stock. 346 00:17:09,560 --> 00:17:11,560 It just strikes me as they don't know what to do. 347 00:17:11,560 --> 00:17:14,480 They're looking at different upgrades and downgrades to make 348 00:17:14,599 --> 00:17:16,319 both. The reasons behind this one I 349 00:17:16,319 --> 00:17:19,319 don't find compelling at all. In terms of my outlook on 350 00:17:19,319 --> 00:17:22,319 Amazon, my thoughts on the company, this doesn't change it 351 00:17:22,319 --> 00:17:24,319 at all. I still believe strongly today 352 00:17:24,319 --> 00:17:27,520 that Amazon is worth around 220. Now we move on to this rumored 353 00:17:27,520 --> 00:17:29,000 news. This is from Bloomberg that 354 00:17:29,000 --> 00:17:31,880 Apple is slowly moving away from its annual product release 355 00:17:31,880 --> 00:17:34,320 strategy. Now if you're like me, you read 356 00:17:34,320 --> 00:17:36,040 this headline and you got tricked by it. 357 00:17:36,320 --> 00:17:39,880 Most people are being tricked by this headline because if you 358 00:17:39,880 --> 00:17:42,720 read the news that Apple is moving away from its annual 359 00:17:42,720 --> 00:17:46,520 product release strategy, you probably believe they're they're 360 00:17:46,520 --> 00:17:50,720 moving to a more gradual release strategy, one that's less 361 00:17:50,720 --> 00:17:52,840 frequent. One like NVIDIA where they 362 00:17:52,840 --> 00:17:56,480 release the GPU every two years, instead of like Apple where they 363 00:17:56,480 --> 00:17:59,720 release the iPhone every year. Because after all, the iPhone is 364 00:17:59,720 --> 00:18:02,240 becoming less distinct every single year. 365 00:18:02,520 --> 00:18:05,400 We've all seen the photos of it. It looks virtually the same. 366 00:18:05,720 --> 00:18:07,960 They like rearrange some of the camera lenses. 367 00:18:08,240 --> 00:18:11,040 They might add a like button, but overall, the iPhone is the 368 00:18:11,040 --> 00:18:12,520 iPhone. It's looking the same every 369 00:18:12,520 --> 00:18:14,600 single year. So you read this and you think, 370 00:18:14,600 --> 00:18:16,840 oh, Apple's learning. They're adapting. 371 00:18:17,080 --> 00:18:20,160 Instead of releasing an iPhone every year, they're going to do 372 00:18:20,160 --> 00:18:22,600 so every two years or every three years. 373 00:18:23,280 --> 00:18:25,840 And that's where you're wrong. That's where everyone is getting 374 00:18:25,840 --> 00:18:28,400 the story wrong. Apple is inching away from its 375 00:18:28,400 --> 00:18:31,400 annual product upgrade cycle, a move that could lead to more 376 00:18:31,400 --> 00:18:34,920 frequent releases and fewer jarring delays. 377 00:18:35,840 --> 00:18:38,240 If that didn't catch you off guard, then I don't know what 378 00:18:38,240 --> 00:18:42,200 will, because when I read this I was a bit shocked the Apple 379 00:18:42,200 --> 00:18:45,840 would remove their annual to go to a more frequent release 380 00:18:45,840 --> 00:18:48,720 schedule. And of course my follow up 381 00:18:48,720 --> 00:18:51,240 question is how frequent do we need Apple products? 382 00:18:51,240 --> 00:18:53,640 What are they going to do? A release of an iPhone every six 383 00:18:53,640 --> 00:18:55,920 months? Obviously that can't be the 384 00:18:55,920 --> 00:18:57,640 case. There's not enough different in 385 00:18:57,640 --> 00:19:02,560 the iPhone every year to release on a more frequent basis, so 386 00:19:02,560 --> 00:19:06,200 this has to be revolving other products or different parts of 387 00:19:06,200 --> 00:19:08,360 Apple. For years, Apple has updated its 388 00:19:08,360 --> 00:19:10,200 biggest products on an annual basis. 389 00:19:10,440 --> 00:19:12,600 We all know the drill. The company gives a preview of 390 00:19:12,600 --> 00:19:15,440 its new software in June and then rolls out the company the 391 00:19:15,440 --> 00:19:19,560 accompanying devices, iPhones, iPads and Macs during September 392 00:19:19,560 --> 00:19:22,040 and October. That has been the tradition of 393 00:19:22,040 --> 00:19:24,880 Apple for a long period of time. They say that there's benefits 394 00:19:24,880 --> 00:19:27,040 to this approach. It helps motivate employees 395 00:19:27,040 --> 00:19:30,160 toward a unified goal. Analyst and investors know what 396 00:19:30,160 --> 00:19:33,160 to expect and Apple has an easier time planning its 397 00:19:33,160 --> 00:19:36,160 marketing and public relations of its big bonanza. 398 00:19:36,520 --> 00:19:38,920 So it's more of a big unified event. 399 00:19:38,920 --> 00:19:41,240 It feels like Apples month in September. 400 00:19:41,560 --> 00:19:44,120 A lot of focus on the company and a lot of companies have 401 00:19:44,120 --> 00:19:46,800 tried to mimic this same thing with the annual product 402 00:19:46,800 --> 00:19:49,080 releases. They say despite all of those 403 00:19:49,080 --> 00:19:51,560 advantages, they're beginning to be cracks in the strategy. 404 00:19:51,880 --> 00:19:54,520 For one, Apple has a wider range of products these days, 405 00:19:54,520 --> 00:19:57,320 including several iPhones, iPads, Macs, and Airpods. 406 00:19:57,600 --> 00:20:00,480 Updating all of those things on a yearly cadence isn't 407 00:20:00,480 --> 00:20:02,760 practical. Moreover, there are some 408 00:20:02,760 --> 00:20:06,120 products, such as the Apple Watch Ultra and iPhone SE, that 409 00:20:06,120 --> 00:20:07,720 don't need to be updated that often. 410 00:20:07,800 --> 00:20:10,000 Now, through the rest of this article, it details out the 411 00:20:10,000 --> 00:20:12,720 problems with trying to do this annual upgrade cycle. 412 00:20:13,000 --> 00:20:14,920 But if you were to boil it down to one reason. 413 00:20:15,400 --> 00:20:17,760 It's because Apple's a very large company with a lot of 414 00:20:17,760 --> 00:20:21,760 devices with a lot of OS's to update, and trying to make all 415 00:20:21,760 --> 00:20:25,480 of those updates happen in the same time period is just too 416 00:20:25,480 --> 00:20:27,520 difficult. It's too big, it's too complex. 417 00:20:27,800 --> 00:20:30,200 They need different iterative time periods for different 418 00:20:30,200 --> 00:20:34,120 devices, and they even mentioned that in some cases, good OS 419 00:20:34,120 --> 00:20:37,480 updates that are tested and ready to go have been delayed by 420 00:20:37,480 --> 00:20:40,120 two or three months because they need to wait for that big 421 00:20:40,120 --> 00:20:42,640 upgrade cycle. So even their customers are 422 00:20:42,640 --> 00:20:45,200 having to wait for things they shouldn't because of this 423 00:20:45,200 --> 00:20:48,080 artificial upgrade cycle every single year. 424 00:20:48,680 --> 00:20:51,600 So it makes sense that Apple is moving away from that. 425 00:20:51,920 --> 00:20:55,040 We're going from a different time period, one where just a 426 00:20:55,040 --> 00:20:57,720 couple years ago Apple seemed like an iPhone company. 427 00:20:58,000 --> 00:21:00,720 They had their one major product that had huge changes every 428 00:21:00,720 --> 00:21:02,960 year. And now Apple is a far more 429 00:21:02,960 --> 00:21:05,320 complex company. They're a device maker of so 430 00:21:05,320 --> 00:21:07,360 many different products, and it's clear they need to keep 431 00:21:07,360 --> 00:21:09,760 adapting their business. Now finally, we move on to a 432 00:21:09,760 --> 00:21:12,240 trend that's more concerning. This is something that I've 433 00:21:12,240 --> 00:21:15,280 noticed for some time now. Warren Buffett has not been 434 00:21:15,280 --> 00:21:18,040 doing a lot of buying. He's been selling companies. 435 00:21:18,440 --> 00:21:21,400 He sold off Paramount Global. He sold off a lot of Bank of 436 00:21:21,400 --> 00:21:24,000 America and Wells Fargo years ago. 437 00:21:24,000 --> 00:21:27,600 He's been selling banks on a net basis for months now. 438 00:21:27,920 --> 00:21:30,280 In fact, every month he seems to be selling more and more. 439 00:21:30,520 --> 00:21:33,120 He exited out of half of his Apple position. 440 00:21:33,440 --> 00:21:36,520 That was a bit of a shock even for Warren Buffett, and he 441 00:21:36,520 --> 00:21:39,600 hasn't really bought anything. Have we seen any notable buys 442 00:21:39,600 --> 00:21:41,040 from Buffett? We haven't. 443 00:21:41,360 --> 00:21:45,560 In fact, Berkshire Hathaway now has record cash position over 444 00:21:45,560 --> 00:21:48,200 1/4 of a trillion dollars. That's an incredible amount of 445 00:21:48,200 --> 00:21:50,640 cash. We also see notable insiders, 446 00:21:50,640 --> 00:21:53,920 people like Jamie Dimon, that's over JP Morgan, people like Jeff 447 00:21:53,920 --> 00:21:56,400 Bezos doing more and more selling. 448 00:21:56,480 --> 00:22:00,040 And this trend of building cash and not buying companies, but 449 00:22:00,040 --> 00:22:03,800 rather selling them is not exclusive to the top dogs like 450 00:22:03,800 --> 00:22:07,440 Warren Buffett and Jeff Bezos. Corporate insiders are net 451 00:22:07,440 --> 00:22:09,600 sellers, they say. Corporate insiders have been 452 00:22:09,600 --> 00:22:11,640 reluctant to snap up shares of their companies. 453 00:22:11,960 --> 00:22:15,200 Of all U.S. companies with transactions by an officer or 454 00:22:15,200 --> 00:22:19,280 director. In July, only 15.7% reported net 455 00:22:19,280 --> 00:22:21,600 buying of the company's shares, according to 456 00:22:21,600 --> 00:22:25,360 insidersentiment.com. That was the lowest level in any 457 00:22:25,360 --> 00:22:29,360 of the past 10 years. So this is notable. 458 00:22:29,640 --> 00:22:32,800 Insiders are selling out of their company on a net basis at 459 00:22:32,800 --> 00:22:36,760 levels that we haven't seen. The figure ticked up to 25.7% in 460 00:22:36,760 --> 00:22:42,120 August before falling to 21.9% in September, well below the 10 461 00:22:42,120 --> 00:22:45,720 year average of 26.3%. Now it is important to note that 462 00:22:45,720 --> 00:22:48,800 caveat that on average insiders do tend to sell. 463 00:22:49,000 --> 00:22:51,120 They're working at companies, they're building wealth and then 464 00:22:51,120 --> 00:22:53,080 they sell stock to afford their lifestyle. 465 00:22:53,400 --> 00:22:56,880 So there is on net selling. In fact, if we look at the long 466 00:22:56,880 --> 00:23:00,560 term averages, the percentage of insiders that regularly buy a 467 00:23:00,560 --> 00:23:03,360 stock their own stock is around 25%. 468 00:23:03,880 --> 00:23:07,360 So on average around 75% are selling stocks at any given 469 00:23:07,360 --> 00:23:09,200 time. Then there's some time periods 470 00:23:09,200 --> 00:23:13,520 where this changes like in 2020, March that spiked up to where 471 00:23:13,520 --> 00:23:16,240 most insiders were buying stock. They saw the value in it. 472 00:23:16,760 --> 00:23:21,320 But Even so, right now, insiders are selling at unprecedented 473 00:23:21,320 --> 00:23:23,080 levels. They're selling at levels that 474 00:23:23,080 --> 00:23:25,120 we haven't seen again in 10 years. 475 00:23:25,200 --> 00:23:28,080 So insiders have an extra negative sentiment right now. 476 00:23:28,240 --> 00:23:30,600 And based on history, insider trading does have some 477 00:23:30,600 --> 00:23:33,360 predictive power. Quote, insider trading is very 478 00:23:33,360 --> 00:23:35,880 strong predictor of aggregate future stock returns. 479 00:23:36,160 --> 00:23:38,720 The fact that they're below average suggests that the stock 480 00:23:38,720 --> 00:23:41,480 returns in the future will be below average as well. 481 00:23:41,600 --> 00:23:43,680 Now, of course, there's no guarantees to that statement. 482 00:23:43,880 --> 00:23:46,120 The stock market may race up the end of this year. 483 00:23:46,120 --> 00:23:47,680 Even though insiders are selling. 484 00:23:48,120 --> 00:23:50,840 And even great investors, ones like Warren Buffett, the best in 485 00:23:50,840 --> 00:23:54,520 the world, have been holding a lot of cash for a period of time 486 00:23:54,720 --> 00:23:57,800 where the market has raced up. Warren Buffett held a lot of 487 00:23:57,800 --> 00:24:02,160 cash during 2020, during 2022. He wasn't doing a lot of buying 488 00:24:02,160 --> 00:24:05,080 during those time periods when it was optimal to be buying. 489 00:24:05,440 --> 00:24:08,280 So in some cases, you have to look at the situation of these 490 00:24:08,280 --> 00:24:10,560 insiders. Warren Buffett has so much 491 00:24:10,560 --> 00:24:14,040 wealth, so much capital that he is extra conservative. 492 00:24:14,400 --> 00:24:16,680 And I don't believe investors just starting off their 493 00:24:16,680 --> 00:24:19,240 portfolios should mimic Warren Buffett. 494 00:24:19,480 --> 00:24:22,080 He is in a completely different situation than the average 495 00:24:22,080 --> 00:24:25,840 investor building up their 401K or their taxable account. 496 00:24:26,240 --> 00:24:30,320 They're not really relatable. And overall, it is true that 497 00:24:30,320 --> 00:24:33,080 many people have been bearish on this market for the past couple 498 00:24:33,080 --> 00:24:35,440 of years while it's raised up and up and up. 499 00:24:36,000 --> 00:24:39,360 But Even so, as I look at the market today, I do agree 500 00:24:39,360 --> 00:24:41,280 generally with this insider sentiment. 501 00:24:41,600 --> 00:24:43,760 Things overall are looking expensive. 502 00:24:44,080 --> 00:24:47,040 Most companies are up into that full and even overvalued 503 00:24:47,040 --> 00:24:49,480 territory. And the deals, the companies 504 00:24:49,480 --> 00:24:51,800 that are at a still are few and far between. 505 00:24:51,800 --> 00:24:54,320 So as we continue investing, it's important to maintain a 506 00:24:54,320 --> 00:24:57,440 discipline approach and focus on companies that still have 507 00:24:57,520 --> 00:25:00,280 reasonable valuations. That's all for this episode. 508 00:25:00,320 --> 00:25:02,160 Hope you enjoyed. See you in the next one.