That's right. I'm done buying stocks, at least
for now, at least for a short time, because I'm trying out a
new cash management strategy. It's nothing too complex, but in
this episode I'll be going over my thoughts on accumulating and
holding cash. Now we have a lot of news today
starting off the day. We have Lulu up 4% on the day
because of their earnings report.
We have the earnings report. We're going to go through it and
see how this company's doing so well when other companies are
struggling. Now as Lulu's doing well, we
have Disney on the other end, which is struggling.
Disney's had such a rough time this year and they seem to be
running into more trouble. They're down nearly 3% on the
day because they're having a big Tossel with Charter
Communication. Charter is a cable Internet
provider and cable TV provider. And right now, Charter has
literally taken off ABC and ESPN off of their cable network
because of this spat with Disney.
And Charter, for lack of a better term, is talking a lot of
crap about Disney. They're basically saying that
they don't need Disney. They in fact, could be better
off without Disney. So this has become a bitter spat
between the two companies. We're going to be looking at the
details here now. I also have an announcement that
I finally opened up a retirement account, a Roth IRA, and I want
to go through the details of how I open this up, what brokerage I
used, what a Roth IRA even is, and what investment I hold
inside this Roth IRA. So we'll be going over all the
details of my retirement account.
And then as we know, it's Friday, which means we looked at
TikTok to get our best financial advice and life advice in
general. And this individual on TikTok
has explained how we can cover one of our most expensive costs,
which is food for free. So as always, we have a lot to
get into. Let's go ahead and jump right
in. Before we get into why I'm done
buying stocks, I want to first do a quick shout out for the
sponsor of this video. The sponsor is qualtrum.com, the
stock analysis tool I've built from the ground up with
developers that I used to work with at my day job.
This is a project I've been working on for years and it's
part of the Patreon membership. When you type in a ticker symbol
to Qualtrum Insights, it gives you all the fundamentals of a
company. You have the valuations, the
cash flow, the margins of the company, the balance sheet and
the dividends, all in a summary at the very top.
So it's very easy to see. And then we have every financial
statement of the company portrayed in a visual way, so
you can see it over time and study the history of how these
companies look. This helps you gauge the
cyclicality. We have a longterm history of
the dividends of a company and the earnings per share.
Most websites only go back to a maximum of 10 years.
Qualterm goes back 25 years plus.
So in longer term companies, ones like Apple, you can see
revenues going way back to 1985. We also have a list of other
features we're continually building out.
We have a watch list here where you can add as many watch lists
as you want. You can see something called the
dip Finder, which is a technical term to show you which of your
companies are in a dip or a price surge.
The watch list shows you all the upcoming earnings in order and
the relevant news for just those companies that you've selected.
And then we also have a portfolio management tool that
shows you all different stats about your portfolio, the sector
breakdown, your dividend income over time, your upcoming
dividends with different charts tracking all different things
and of course your holdings table showing you how things are
trading. And I have big future plans for
this as well. The next thing that we're
building I think is going to be a pretty significant tool.
Now the way that you can join Qualtrum and try this out for
free with a month long free trial is by going to
patreon.com/joseph Carlson and hitting Become a patron.
It's a simple $10 a month and you get a one month free trial.
I've taken the route that being like Costco having a
satisfaction guarantee. If you end up not liking
Qualtrim and you're not fully satisfied with it, you get your
money back. You don't pay a dime.
So try it out Now you have nothing to lose.
I'll throw a link to it in the comments below.
Now let's first start off jumping into the reasons that
I'm not buying stocks right now. I'm trying to adapt my cash
management strategy. Right now I only have $4000 in
cash, which don't get me wrong, $4000 is a lot of money.
You can do a lot with that money.
So I'm not trying to downplay the amount that $4000 is.
But in comparison to my overall portfolio value, which has
reached a high of 508 thousand, $4000 is less than 1%.
So I'm basically 99% plus invested with this portfolio.
Almost 100% invested means I have very little wiggle room of
anything I can do if any of my companies have substantial sell
offs. For example, on Qualtrim, I'm
always looking at the dip Finder, which is a technical
analysis way of looking at what companies in a dip or which
company is in a price surge. Right now with the rest of the
market, My Portfolio overwhelmingly is in a price
surge. All of these companies are going
up dramatically into it being the biggest leader right now.
This company's really, really taken off and right now it's 25%
above it's 200 day moving average.
That simply means that Intuit is just going to the moon.
This company is making substantial gains.
I only put $35,000 into this company and I'm already up
$9200. I've almost surpassed my gains
in Microsoft with Intuit in a single year, and I've owned
Microsoft for years. So this company is in a price
surge that is reflected by this big green bar hair showing how
much it's going up. And you can see the same thing
with the rest of my holdings. Most of my companies are going
up like crazy following the market.
Even the ones that are doing poorly this year, Texas
Roadhouse and Vici, they're really not doing all that bad.
Texas Roadhouse is down 1% below the 200 day moving average,
which basically means it's just flat this year.
It has no momentum really going upwards or downwards.
Vici's the only one that's in a slight dip.
The company's gone down. But keep in mind the dip Finder
tracks price movement. It doesn't track the dividend.
So if you factor in the dividend, Vici's actually flat
this year too. In fact, it's given almost 0%
gains or losses this year, entirely flat overall.
The picture that this paints is that My Portfolio is going up.
Every single holding is either flat or going up.
Now that seems great and it's fun to look back on all the
gains and see all the wealth being created And we can sit
back here and feel great about what we've accomplished, but
that's not really what we should be doing as investors.
When I look back and see all these companies making record
highs and making gains, what I think is that I need to be a
little bit more cautious. Anytime the market gets a little
bit exuberant and it starts to ignore realistic concerns like
the economy slowing down, student loan repayments
resuming, companies having lots of debt and so on and so forth,
It becomes a time where I get a little bit more concerned, a bit
more cautious. I don't like to celebrate when
other investors are celebrating. I'm trying to remain cold and
calculated. When I look at the situation
right now, I think it's a situation that requires prudence
and caution. So I've been revisiting my
capital deployment strategy and my cash balance strategy right
now being 99% invested is incredibly bullish positioning.
I basically have every bit of free capital that I have
invested in this portfolio. And I think that as the markets
going up, I should become slightly more conservative.
When I look at the strategies that other great investors do,
most of them do hold a little bit of cash.
Warren Buffett, for example, says that he's a believer in
cash. He likes cash.
In fact, Berkshire had a record cash pile.
When we look at the amount of cash that Berkshire had, it was
somewhere in the range of $130 billion.
It ebbs and flows overtime, but if you position that cash pile
against their actual assets, that is a 14% cash pile.
Now to put that in context, if I carried the same amount of cash
that Warren Buffett does 14%, that means that I would have
roughly $71,000 in cash right now.
So that is the cash positioning of Berkshire compared to My
Portfolio 4000 compared to 71,000.
We are worlds apart in our cash management.
Now Berkshire does have extra reasons to hold cash.
They have a much bigger complex company.
They have a lot more liabilities with potential insurance
payouts, but still other great investors have cash balances as
well. One of the things that we notice
is that on the 13 F filings, it does not say their cash
position, but most investors like Bill Ackman with Pershing
Square Capital, he holds a bit of cash, usually 5 to 10% at
least. Other great investors like
Valley Forge Capital typically hold at a minimum 5% cash
balance. So it's not uncommon at all for
great investors throughout all periods of growing their fund to
hold a cash balance in case opportunity arises.
And it's especially not uncommon for them to hold greater amounts
of cash as the market races upwards like it's doing this
year. So what I plan to do is not to
hold 14% cash. I think that that's really high.
That would be me saving up $71,000 in cash and I think
that's a bit aggressive. Where I want to be is around 5%
cash, which is around $25,000. So I need to save up an
additional $21,000 in cash either through the accumulation
of dividends and deposits. It's going to take a while to
get there, but that's the goal. And I'll be holding on to this
cash until I see something that's incredibly attractively
valued within My Portfolio or on my watch list.
If I find something that I think is so good that I can't pass it
up, I will spring and use that cash balance just like I did
with Intuit. But that's the plan.
As of now, I've been trying to find ways to improve my
investing strategy throughout all different parts of it.
And I think improving my cash management and capital
deployment strategy is another way that I can improve and
hopefully this will help improve returns over time.
Now moving on, I quickly want to look at Lululemon's earnings
report because there was a couple of things I thought were
really exceptional about what this company's doing.
First of all, the company is doing really well, while a lot
of others are struggling. We've seen Nike sell off like
crazy and Lululemon's really not having that issue.
Let's go ahead and take a look at how their performance was
this most recent quarter and this report was just released
today. So we have right here the first
thing is that the net revenue, which is just the overall
revenue, increased by 18% or 20% on a constant dollar basis. 20%
revenue gain is substantial. So Lululemon is growing quickly.
Here's what this looks like. Visualized, very consistent,
steady revenue growth. The only time that it's dipped
in recent history is from COVID. Comparable seam store sales were
up 9% on a constant currency basis.
Direct to consumer which is the online was up 17% on a constant
dollar basis. Lulu's a company that right now
is doing great. They're growing their revenue,
they're growing their cash flows.
Overtime, we see very strong growth across every segment of
their business. Right now.
Lululemon's growing substantially faster than Nike,
but it's priced at a lower valuation.
So as long as this company continues with this level of
growth, lululemon will substantially outperform Nike.
But the biggest reason that investors price companies like
Lululemon at a lower multiple than Nike, despite it having
faster growth and faster fundamental growth, is because
Nike has the longterm proven brand value that is the big
distinction. When I look at the problem with
clothing companies like this, in my opinion, they're very
unpredictable. Most of them have their day in
the sun where everything seems to be going as good as possible
for these companies. And we're seeing this happen
right now with lululemon. It's firing on all cylinders.
Everything's going as good as possible.
But we've seen this type of thing before.
Remember the company called VF Corporation?
You probably don't know the parent company, but you might
recognize some of the brands they have, brands like Vans, The
North Face, Timberland, Dickies. You see all of these brands in
malls all the time. You have Jansport, Supreme,
Smart World, Kipling. This company's a conglomerate of
once incredibly attractive brands that seem to have the
Lulu type of growth. But now we look at it.
The company's down 27% year to date.
We zoom out in the past year, it's down 50%.
The past five years it's down 78%.
So the majority of the market cap has completely evaporated
for this company that owns all of these great brands.
And in the past ten years, it's given -57% returns.
Sure, if you time the company correctly, buying it before its
rise and then selling it when it's at the top, you made a lot
of money. So maybe investors in Lululemon
will be able to accurately time this company, but history has
proven that that's very difficult to do.
In most cases, investors buy at inopportune times and they end
up doing poorly. Another company that once had
premium brand value and clothing category was Under Armour.
Under Armour is in constant competition with Nike as being
one of the premium athletic wear brands.
They try to sponsor athletes and half their stores have the same
level of pricing power as Nike. And the company had a very
similar story. It's down 22% year to date, down
5.8% over the past year. In the past five years, it's
down 62% with a tremendous amount of volatility.
And in the past decade, Under Armour has given returns of
-57%. And this is a clothing company
that once had great brand value. So even though a company like
Lulu has everything going well for it right now, it makes me a
little concerned when I view the history of other similar
companies. For that reason, this is going
to be one that I don't own. Now moving on, we have some
breaking news that Charter is having a dispute with Disney.
Now that's the euphemism. A dispute or the other
euphemism, which is negotiation. But the true way of describing
this is they're having a bitter disagreement.
And I'm not going to sit back and pretend like I don't enjoy
seeing two giant companies go after each other.
I think it's just nice to see two companies battle to the
bitter end. And that's what we're seeing
with Charter Communication and Disney.
Let's look at some of the details here.
NFL season is kicking off this Sunday.
So right now NFL season is starting and as that's starting
we have ABC and ESPN and FX, all Disney owned content being
booted off of Charter. So right now these channels are
gone. They're not accessible on
Charter. ABC, ESPN, FX, all gone.
The most important one is probably ESPN.
Having this channel booted off right as football season is
starting is really something that puts pressure on Disney.
Now Charter Spectrum TV service has roughly 14.7 million
customers across 41 states with some of its top TV markets being
New York, Los Angeles, Dallas, Fort Worth, TX and Atlanta.
So they're dealing with 14 and a half million customers that have
lost access to Disney content. This Friday, the Charter
executives called the pay TV ecosystem quote broken.
They said that they push for a revamp deal with Disney that
would see Charter cable customers receive access to
Disney's ad supported streaming services like Disney Plus and
ESPN Plus at no additional cost. So basically Charters trying to
rewrite the deal and what they believe is updating it for
modern times. Disney's trying to stick to the
old times of charging high fees for having their content on
cable TV. Basically Disney's wanting to
preserve the old cable economics and Charter saying no you're
not, this isn't going to fly anymore.
Charter believes that Disney has offered a traditional longterm
deal and has not seriously engaged on charters
transformational partnership proposal insisting on high
penetration payment minimums despite its own a la carte
offerings. Forcing Disney channels into
packages where they are not included today against customers
will. So basically Charter saying that
Disney wants Charter to force their content on every customer
and charge every customer more for their content even the ones
that have no interest in the ESPN or ABC or FX.
They want to force them to have that content anyway.
A lot of people complain that streaming is expensive, but All
in all, at least you get to choose and pick what you pay
for. You can pay for Netflix and you
can pay for Max. You can pay for Amazon Prime
Video or Apple TV Plus, or you can mix and match any of them.
That is the streaming way, where you can segment and pay for the
specific streaming services you want.
With cable TV, you have to buy everything all at once, all the
time. There's no picking and choosing
what you want. Charters trying to update their
offering to make it so you can pick and choose what you want.
Disney does not want them to do that.
They say Disney's traditional approach would result in a
dramatic increase in cost to customers, many of whom don't
view, want or even subscribe to Disney and ESPN content.
Charter has also offered a shorter extension of the current
contract to further discuss the benefits of Charter's proposal,
which Disney declined. Now, that last one's surprising.
Basically, Charter just said that they want to extend the
contract temporarily while they're in negotiations so they
don't disrupt their customers. And then the big take away here
is that Charter seems done with Disney, they say.
In summary, while we believe content is valuable and Disney
is an excellent content creator, we have already reached the
point of economic indifference. With the current model, Disney
and Charter will either create value for the video consumer or
we will pivot to an alternative video solutions.
Charter is done with Disney's tactics.
Disney's trying to strong arm Charter and Charter saying that
they don't care. Now you might ask who's going to
win and who's going to lose in this situation, and the truth
is, is that both of them are losing.
That's why both of their stock prices are lower.
Disney's down 2.2%, Charter's down 2.8%, and when it comes
down to it, what they're trying to do is fight over the
economics of an ever shrinking pie.
Less and less people watching cable TV every single year,
Charter knows that, so they're not too concerned about it.
They provide Internet as well. But Disney seems to be set in
the past. They want to have the same type
of relationship, the same type of distribution, and the same
type of arrangements and agreements that they had ten
years ago. And it doesn't seem like that's
going to work now. Moving on, I've had a lot of
requests of people wanting to know about my retirement account
and I've recently just started a retirement account this year, so
I want to go over all the details right now.
First of all, I decided to start what's called a Roth IRAA.
Roth IRA is an individual retirement account where the
contributions, what you put in, that's from taxable income.
But when you pull the money out later in retirement, you can
pull that money out and any of the gains taxfree.
So it is a tax advantage account, and it's an individual
account that's not linked to your employer.
Now, it does have all sorts of limitations and cash
contribution limitations based on your income and your marriage
status and all of that stuff. In my case, I was above the
income contribution limit, which means that I had to do something
extra. I had to do what's called a
backdoor Roth IRA, which means that I had to create two
accounts, a Traditional IRA and a Roth IRA.
And then I had to 1st put the money in the Traditional IRA and
then I had to do an account transfer where I move the assets
from the traditional into the Roth.
That is a backdoor Roth IRA. Now, why does the government
force you to do this extra step if you're above a certain level
of income? There's really no rhyme or
reason to it. The end is the exact same, but
it's just one additional step you have to do if you make a
certain amount of money. Now as you can see, this isn't
on M1 Finance. It looks a little bit different.
That's because this is on a brokerage called Schwab, one of
the big ones, along with Fidelity and Vanguard.
The reason that I chose to do this on Schwab instead of M1
Finance was simply because I have almost all of my finances
on M1 Finance. I currently have over $650,000
in value on M1 Finance, and I thought it might be good just to
have a bit of diversification and have one retirement account
on a different brokerage. So I'm not really concerned
about M1 Finance. I have no reason to be concerned
about it, but I thought it's good practice to have more than
one brokerage. Now as you may also notice, I
only have one position in this portfolio.
I made it very simple. I just purchased an ETF called
SCHG. That's it.
I put $6500 into the account. That's the most I can do This
year I bought 87 shares of SCHG. It's gone up to $150.00 already.
So it's around $6750 so far, which is less than 1% of my
total investments if you added up all of my portfolios.
So this still is a very small amount of money compared to what
I have going into my other portfolios, but I've decided to
put all of that money into SCHG and I want to go over that ETF
for a second. First of all, the age at which
you can start withdrawing money from your Roth RA is 59 1/2,
meaning that as a 33 year old, I have 26.5 years until I'll be
able to touch this money. 26 1/2 years of time for this, the
compound before I even start to do a single cell, a single
withdraw. So that's a lot of time.
Now when I was thinking about that amount of time and the
amount of compounding that can happen over that amount of time,
I wanted to focus on companies that I think will move a great
distance between now and then growth companies.
So I looked over a lot of different funds.
There are ones like QQQ, which has done phenomenally well, but
there's things that I didn't like about the QQQ.
The thing that I really didn't like about the QQQ is it's based
upon the NASDAQ. Meaning every company that the
QQQ holds has to be listed on the NASDAQ.
Otherwise it simply doesn't hold that company.
For example, we can look at MasterCard.
MasterCard is not listed on the NASDAQ, it's listed on the New
York Stock Exchange. So MasterCard, despite being an
incredibly powerful company, one that's growing tremendously
fast, it's not listed on the QQQ.
QQQ doesn't hold MasterCard. The QQQ doesn't hold visas well
because it's listed on the New York Stock Exchange.
So both of these companies are in the SP500, but they're not on
the QQQ simply because the QQQ is biased towards its own
exchange, which is the NASDAQ. That's its selection criteria.
And I believe that that artificial boundary of only
picking between an exchange is not good portfolio construction.
Now schg is different. It is Schwab's US Large Cap
Growth ETF and its selection criteria is far less biased than
the QQQ and it's far more logical.
Here's a description from FactSet of how SCHG works.
SCHG is a diverse ETF for large cap growth exposure.
It selects growth companies from the 750 largest companies by
capitalization based on 6 fundamental factors, which
include projected earnings growth as well as trailing
revenue and earnings growth. Because it's drawing from a
larger selection universe than our benchmark, SCHG has a
significant mid cap tilt. Nevertheless, it provides
similar exposure across broader set of holdings.
The index rebalances quarterly and undergoes an annual
reconstitution in September. So when we look at the amount of
holdings in SCG, it's around 240 holdings and the names in this
portfolio are really fast growing names.
We have Apple, Microsoft, Amazon, NVIDIA, Google, Tesla,
Meta, United Health Group, which is also not in the QQQ, but
that's a fast growing company. We have Eli, Lilly.
We have Visa, Broadcom, MasterCard, Adobe, Costco,
Salesforce, Thermo, Fisher, Scientific, Netflix, so on and
so forth. As you go down this list, you
have many recognizable growth companies.
So what I plan on doing with this Roth RA is pretty simple.
Every year I'm going to put $6500 in it, I'm going to buy
more schg and that's it. There's going to be nothing else
I do with this portfolio, and if I do things correctly, I'll
literally never concern myself or look at this account.
I want it to silently be building in the background.
So even though I have my primary investment portfolios, I think
it's good to have a retirement account working in the
background as well. The way that I think about it is
I'm trying my best with this portfolio.
I'm putting my best behind the research with these companies,
trying to find the best investments possible, and I do
think I'll have really good performance.
But if I screw things up or things don't go well with this
portfolio, then I have my retirement account working in
the background. So even if things go
dramatically wrong with my individual investments, I'll
still have a retirement with my Roth IRA.
Now moving on, you know what day it is?
It's Friday. Every Friday we look to TikTok
to get the best financial advice.
And this individual has some input on how to save money on
food. Let's go ahead and hear his
strategy. Your biggest expense in New York
City is going to be food, and I got away.
You could eat for free the best food.
You got love it what you do, you stand in front of a nice
building, people that work at nice buildings eat food, they
order delivery guys and you act like you're on your phone.
You, you know, hey, you save a bunch of big numbers.
You know, I want the compound interest, dividends.
And when you see these delivery guys pull up, you give them that
sign and interest on it. Now that's brilliant.
You just stand in front of a building, pretend like you're
one of the workers there, and then you flag down one of the
delivery people. They hand you the food.
Now, I might be critical of this and you might think that this is
a joke, but this type of thing has actually been happening a
lot. In fact, when I was doing my
research on Chipotle and looking into that company before making
the purchase, one of the things I came across was a lot of
people mentioning that the mobile pickup shelves that they
have in every store, well, a lot of people are just going in and
grabbing random meals and leaving ones that they that
weren't theirs and ones that they didn't pay for.
They weren't even pretending like it was theirs.
But people walking away with other people's orders is so
commonplace now among Chipotle pickup that a lot of the
locations are putting the meals behind the counter and you have
to give them your name to confirm you're the one who paid
for it. So this tip seems accurate.
If you want some free food, stand in front of a building
like this and pretend that you order DoorDash.
That's all for this episode. I'll see you in the next one.