Welcome everyone. Thanks for joining on today's
episode. We're going to be talking about,
of course the current sell off that's happening.
We have a little bit of a sell off.
We have the Dow Jones down 1.56% for today.
We have the S&P 500 down 1.7% and we have the NASDAQ down
2.14%. So all three major indexes are
heavily in the red today. And this is more than just a
September sell off. There's an actual catalyst,
There's an actual reason why the markets are concerned today and
that is of course the Ever grand company in China, Ever Grand is
this massive real estate developer and housing developer
in China and it can't pay back its debts.
And we know what that's like. We know what that's like in the
US when we have a big company that has a lot of debt, heavily
leveraged, that develops homes that can't repay its debt.
So this whole situation in China right now with this massive real
estate developer called Ever Grand not being able to repay
their debts is a little reminiscent of the 2008
financial crisis. What I want to do in today's
video is not only do I want to look at My Portfolio, I'll show
you what My Portfolio is doing today, what companies are
holding up and which ones are selling off.
But I also want to look at this ever grand situation and just
look over what's going on and see if it's comparable to what
happened in the US and see if this really poses A systemic
risk and something that we should actually be very
concerned about. So we'll be looking over this
situation as well. And then also on this episode I
want to do a reaction to Ellen Powell's oped in the New York
Times regarding the Elizabeth Holmes trial.
She said it is a wake up call for sexism in tech and she's
saying that part of the reason why Elizabeth Holmes is being
charged with these crimes and other men that have done similar
things aren't is because of sexism.
So as someone who has worked in tech for most of my adult life
as well as someone who has studied this case extensively,
I'd like to give my reaction to Ellen Powell's claim that
Elizabeth Holmes is the victim of sexism.
So we have a lot to jump into in this episode, a lot to cover.
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dividend tracking app, I think that we're building out the best
one in the market. Now let's go ahead and jump
right into My Portfolio. This is what it looks like on
the all time view. I'm up $56,000.
At one point I was up around $70,000.
So we've definitely had a big pullback.
A lot of my main companies have pulled back as well as the
market over the past two weeks has been on a big downtrend.
Now if we just look at today, if we zoom in and ignore the all
time view and I click on the one day view, this is what it looks
like. It's not pretty.
I'm down 4000 dollars, 1.31%. This isn't the worst.
There's a lot of tech portfolios that are down a lot more today.
For instance, the ARC innovation ETF is down 3.79% today.
So there's things that are struggling a little bit more,
but My Portfolio is down quite a bit nonetheless.
If I look at the actual companies that are down a lot, I
can go into the tech and cloud computing category.
This one's down more than the rest of My Portfolio.
The only other category that's down as much is the Fintech and
banking. So if I go to tech and cloud
computing, we have Apple down 2.29%, that's $1000.
We have Microsoft down 1.63%. That's $300.00 for me.
And then we have the I GV, which is the tech expanded software
ETF. So lots of red across the board
in the tech sector. Then we can go to the consumer
category. We have Disney down 2.33%.
That's not surprising. What is surprising is when
Costco goes down in price, you know when Costco goes down in
price at all or Home Depot that things are bad.
These companies typically go in One Direction and that's up.
Costco continues to go up, Home Depot continues to go up and it
takes a lot to pry these shares out of investors hands.
They don't want to sell these shares.
Some people are selling out of Costco or Home Depot.
I think it's typically the result of people just selling
out of ETF's that happen to hold these companies because I rarely
see individual investors selling their shares of Costco and Home
Depot and I would love for Costco to go down 10%.
That would be a very fortunate event because I've been looking
to buy more and more of this company, but it rarely goes on
sale. So I might take any little dip
that I get with Costco as an opportunity to buy more of this
company. Now regardless, we look outside
of Costco and Home Depot. We have Nike down 1%.
We have Comcast down 1%, Target down 1%.
Disney is the biggest loser today, down 2.3%.
We have the real estate category that doesn't seem to be having a
sell off. Let's take a look at it.
The malls are down a little bit. Sign, the property is down 1.3%,
but then we have Vici and MGM growth properties which is being
purchased by Vici in the green today, which is very interesting
to see as well as Realty income Corp in the green and store
capital just teetering in the red.
So overall real estate is doing OK today.
We can take a look at my income funds.
Jeppy's down 1% today, that's a little bit less than the S&P
500, so it is becoming less volatile than the S&P 500.
And then we have the Schwab US dividend, equity ETFSCHD that's
down 1.2%. So these are both down a decent
amount but nothing extreme. And then we have the Fintech and
banking category, JP Morgan's down 2.86%, that's a lot for one
day, almost down 3% and then T Rowe Price is down 3.52% that's
also a lot for a one day sell off.
In fact, T Rowe Price really got hit today.
Now T Rowe is a smaller holding for me, I've held this for a
very long time. I'm heavily in the green on it
overall, so 3.52% doesn't make too much of a difference.
That's only $76.00. But with JP Morgan this hurts a
little. Going down $750, that's a bit of
a hit. And one thing that I said
continually with JP Morgan, I said in video after video
recently that I don't consider JP Morgan to buy.
I think it ran up so much and was at lofty valuations for the
company. It's trading higher than it's
ever traded before. When I bought JP Morgan, I
bought it down in this area in the 90s in the one hundreds.
And then I even bought a little bit more right here in like the
one 20s. But I wasn't buying it up here.
And I continue to think that JP Morgan isn't a special deal
right now. In fact, I think it does have
some downside pressure because it's ran up so much and it's a
bank. And anytime people become
worried about anything with the economy, banks seem to be the
first thing to sell off. So I haven't added to JP Morgan
anytime recently. If I was to do anything right
now between buy and sell, I would be taking some gains with
JPMorgan and selling a little bit before buying it.
Now moving on, we can go to the healthcare category.
Abby's down .56% and Johnson and Johnson is completely flat
today. So it's really not moving a
whole lot because of any of this news.
Now the renewable and energy categories actually in the Green
Dominion energy is up 1.58% and next era energy is up .6%.
These are both smaller holdings, but it's interesting to see that
when there's trouble in the world and people are looking for
safety, they will start to shift money into these utility
companies. They consider them a safe haven
against trouble. And then we have the restaurant
and delivery category, which is just one company.
It's Texas Roadhouse, that's down 1% today.
I'm still very bullish on Texas Roadhouse.
I think this is a fantastic company, growing revenues
quickly, growing EBITDA quickly. It's buying back shares.
It has no debt. I just think overall everything
with the balance sheet and the growth prospects of this company
is very good. So I remain bullish on this one.
So this is how the portfolio looks overall today.
Lots of red. It's pretty ugly, but as bad as
this is, again, this is nowhere near as bad as a lot of tech
focus portfolios. Those are the ones that are
really getting hit today. Overall, I'm still in the green
by $56,000, but keep in mind we could go back in the red if the
market decided to go down another 15, twenty 30%, all of
these gains would quickly vanish and we'd be back in the red.
And that would be when I would try to buy as many great
opportunities as possible. So I'm not in a situation where
I'm necessarily concerned. If my gains go away and I go
back in the red, I want to accumulate as much ownership of
the best companies as possible and when prices go down, that's
an opportunity to do that. So when I have days like today,
it's not really A cause for concern.
Now, if we go over all the various reasons that investors
could be selling out of their shares today, we have a lot of
different things to choose from. Investors fear a contagion
sweeping financial markets from the troubled China property
market. We're going to be talking about
that more a little bit later. We also have the Fed beginning
their two day meeting Tuesday and investors are worried that
the central banks will signal that it's ready to start pulling
away monetary stimulus amid surging inflation and
improvement in the job market. So investors are concerned that
the feds going to stop propping up the market.
COVID cases, because of the delta variant remain at January
levels as colder weather approaches in North America.
And then also September is just not a good month for investing.
The average return in September for the stock market is .4%
decline. Investors are also concerned
about brinksmanship in DC Congress returned to Washington
from recess, rushing to pass funding bills to avoid a
government shutdown. So we also have some political
stuff going on in the background as well that may concern some
investors. Now to this big list of things
to worry about. I think the ones that investors
are the most concerned about right now is the China ever
grand situation. It's this large construction
development company that took on an enormous amount of debt and
now it's running into a lot of problems paying back its debt
and now they're believing the company is going to go
completely bankrupt. Now they describe what this
company actually is. They say in a risky race against
time that ran for two decades, China Ever Grand Group turned
billions of dollars in borrowed money into the dream of home
ownership for millions of Chinese citizens.
It launched project after project in every Chinese
provenance, selling apartments years before they were completed
and scratching together enough cash to stay just ahead of the
massive interest bills. That is not a business strategy
that I like selling apartments years before they were completed
and then scratching together enough cash to stay just ahead
of massive interest bills? That sounds incredibly risky.
This is the opposite of the type of company that you would want
to own. Well, the party has now ended.
Years of aggressive borrowing have collided with Beijing's
crackdown on debt, leaving the giant developer on the brink of
collapse. Construction and ever grants
projects in many cities has stopped.
The company has faced A litany of complaints and protests from
suppliers, small investors, home buyers who sink their savings
into properties the company promised to deliver.
So people actually bought these properties and now nothing's
being built. Now this story gets so sad, it's
almost comical, the efforts they're going to, to try to
repay this massive debt. They say cash is so short that
this summer the developer said it begin paying bills to
contractors and suppliers with unfinished apartments instead of
actual money. So they have no money to pay
these bills and they're saying, hey, do you want to take a half
finished apartment as payment, right?
That's got to be worth something, this half finished
apartment. Now, they also mentioned that
things like the free meals that they used to provide their
staffers are no longer a thing. They're saying that they're
laying off a lot of people and the situation is unfolding in a
really bad way. Now, the biggest problem with
the story is just the scale of it.
This company was a massive company in China.
The amount of debt they had, the amount of debt that they took
out was $109.56 billion and that doesn't account for the promises
that they made. That was well in excess of $200
billion. So they have people that have
paid for $200 billion worth of construction that they now can't
deliver. And part of what led to this
massive problem is the inefficiency of ever grants
business model. You can compare their growing
revenue to their growing net income.
Although the revenue went up multiples of where it was a few
years ago, the net income didn't follow.
It was mostly flat and it went up only slightly.
So this company was taking in a lot more money, but they weren't
profitable. And now, of course, because this
company's collapsing and they can't pay their debts, the stock
is down around 80% from its highs.
It used to be worth over $125 billion and now it's well below
25 billion. Now of course, with the collapse
being a big company with a lot of debt that might pose systemic
risk to the Chinese market, there's a lot of people making
the comparison to the 2008 financial crisis in the US.
Whether this will shake out similar to that is unknown.
Nobody can give you a firm answer on that and what the
Chinese government will do. But what I take away from this
is to always look at the balance sheet of companies that you're
investing in and consider the amount of debt they have.
Every time there's some huge collapse and huge problem with
the company, it's almost always accompanied by excessive debt.
Debt is almost always the primary culprit in every single
financial collapse. Every time this happens, it has
to do with excessive debt. So now every company that I
invest in, I heavily prefer that they have more cash than debt
and if they do have debt that it's not used in excess.
Now moving on, I want to jump into this oped from Ellen
Powell. She writes that the Elizabeth
Holmes trial is a wake up call for sexism in tech.
Now we're going to look at the specific case in the allegations
that Ellen Powell makes and how she connects it to sexism.
Before we jump into this, I just want to mention that I think if
you're just making a general commentary that sexism exists in
tech in general, I would agree with that.
I think there's still a level of sexism that exists.
But what I want to look at is specifically this case if
Elizabeth Holmes in particular is the victim of sexism.
Now this oped starts out with Ellen Powell doing a little
background saying that Theron else was founded in 2003 and
that there's a lot of hyperbole and and different talk about the
grand future. And Elizabeth Holmes raised a
lot of money, $400 million in financing and Theron else was
valued at one point in time at $9 billion.
And then she gets to the main issue here, she says.
But after it was revealed that Theronos was not transparent
when it's blood testing equipment failed, it became
clear that the company would be the exception.
That proves the rule that tech chief executives rarely face the
full consequences of the harm they cause.
Yet Miss Holmes is also exceptional for the basic fact
that she is a woman. Time and again we see that the
boys club that is the tech industry supports and protects
its own, even when the costs are huge and when the doors crack
open ever so slightly to let a woman in, the same rules don't
apply. Indeed, as Miss Holmes trial for
fraud continues in San Jose, CA, it's clear that two things can
be true. She should be held accountable
for her actions as CEO of Theranos, and it can be sexist
to hold her accountable for the alleged serious wrongdoing and
not hold an array of men accountable for reports of
wrongdoing or bad judgment. So Ellen Pal Hare is not arguing
that Elizabeth Holmes couldn't be held accountable.
What she's saying is that Elizabeth Holmes is being held
accountable by other guys that have done similar things, are
not held accountable. And so that's where the sexism
comes in, is that Elizabeth Holmes is the victim of
selective enforcement of these laws.
And then Ellen Powell highlights examples of male entrepreneurs
that weren't held accountable. Questionable, unethical, or even
dangerous behavior has run rampant in the male dominated
world of tech startups. Though never charged with
crimes, Weworks, Adam Newman, and Uber's Travis Kalanick hyped
their way into raising over $10 billion for their companies,
claiming they would disrupt their stagnant, tired
industries. And this is where I think Ellen
Powell gets it very wrong. Comparing Elizabeth Holmes to
Adam Newman or Travis Kalanick, she's saying that Elizabeth
Holmes is being prosecuted because she's a woman, and Adam
Newman and Travis Kalanick are not being prosecuted because
they're men. That's inaccurate.
The reason that Elizabeth Holmes is being prosecuted and Adam
Newman and Travis Kalanick aren't is because Adam and
Travis didn't lie about their current technology and their
existing business. They did hype their way into a
$10 billion valuation. But hyping your way to a big
valuation is not illegal. Saying that I'm going to become
a trillion dollar company and I have all these big ambitious
plans and I want to conquer the world is not illegal.
Even if I raise a lot of money to go forward with my ambitious
plan, and even if I lose money in the pursuit of this
ambitious, overly hyped plan. What is illegal is lying about
my current technology, Lying about my current business and
the capabilities of my products that is illegal.
Lying about the present and the past is illegal.
Hyping the future is not illegal and Elizabeth Holmes lied about
the present and the past. Another counterpoint I'd bring
up to what Ellen Powell is arguing here is the story of
Nicola and Trevor Milton. This is probably the most
comparable company and CEO to Elizabeth Holmes and Theranos.
What Trevor Milton did, like Elizabeth Holmes, was lie about
the current and previous technology of the company.
He didn't only boast a big vision about the grand future of
Nicola, but he lied about their current technology, which is
illegal. That is fraud.
So like Elizabeth Holmes, he lied about current technology
and like Elizabeth Holmes he's being charged with fraud, 3
counts of it, and he could face up to 60 years in prison with
these charges. So I don't see Trevor Milton
hair being treated any differently than Elizabeth
Holmes. Both of them lied about their
technology and both of them are getting charged with fraud.
And even more specific to Theranos itself, even at the
specific company, Elizabeth Holmes is not the only one being
charged. They also charged the former
president of Theranos, Sonny Balwani, who I'm fairly certain
he's a man. He identifies as a man and they
have raised charges against him as well for fraud.
So even at this company, Elizabeth Holmes is not being
singled out. They charged a man with similar
charges. And one more thing that I'd
point out in regards to Ellen Powell's arguments is one of the
points that she brings up is that Elizabeth Holmes was
singled out because of her weird mannerisms, her voice and her
eyes and the way that she dressed.
That she got all this attention that males don't get.
Well, that's not exactly accurate either.
Smirks, silence and nerves. A recap of the drug pricing
hearing with Martin Shkreli. Martin Shkreli is serving A7
year prison sentence for wire transfer fraud, but the big
focus of this trial was his behavior, his smirks and silence
and the way that he looked, the way that he acted.
His behavior and mannerisms got more media attention than the
actual crimes he committed. So again, if the overall message
here is that there's still some sexism in the technology
industry, a male dominated industry, I would agree with
that. I think there's a lot of
progress we can make and ruling out different instances of
sexism, but trying to say that Elizabeth Holmes is being
treated Biasly and other CEO's aren't being treated the same I
think is incorrect. I can find plenty of examples of
male CEO's being charged and going to jail for the very same
things that Elizabeth Holmes is being charged with.
So in my opinion, so far, I don't see any examples of
biasness or extra scrutiny on Elizabeth Holmes.
Now that is all for today. I hope you enjoyed the episode.
I'll do another update this week relatively soon to see how all
of this shakes out, because so far today we're down one. 69%
and the losses keep accumulating.
So I'll give you some more updates later on this week of
how this pans out, but that's all for now.
I'll see you next time.