1 00:00:00,000 --> 00:00:02,400 Welcome back everyone. We have so much to get into in 2 00:00:02,400 --> 00:00:06,000 this episode of the Joseph Carlson show as you know I made 3 00:00:06,000 --> 00:00:09,200 some changes to the portfolio, the beginning of this year. 4 00:00:09,600 --> 00:00:13,000 I'm basically trying to up the quality of my companies. 5 00:00:13,100 --> 00:00:16,000 I'm trying to trim down on some of the fat and make it so that 6 00:00:16,000 --> 00:00:19,500 every company, my portfolio are really top performers. 7 00:00:19,800 --> 00:00:22,600 Now, what I want to do is actually just do an update, see 8 00:00:22,600 --> 00:00:25,600 what's going on. Year-to-date we're up five point 9 00:00:25,600 --> 00:00:29,500 nine, six percent so far year today, that's 22,000 and we're 10 00:00:29,500 --> 00:00:33,000 going to go By sector by sector and category by category and 11 00:00:33,000 --> 00:00:35,600 just see how these companies are doing and why they're performing 12 00:00:35,600 --> 00:00:37,500 the way they are this year. Then of course, we have some 13 00:00:37,500 --> 00:00:40,400 economic news u.s. GDP came out at two point nine 14 00:00:40,400 --> 00:00:43,200 percent growth is moderating in the US. 15 00:00:43,400 --> 00:00:47,100 Corporate layoffs are spreading Beyond just big Tech into the 16 00:00:47,100 --> 00:00:50,100 entire corporate world and we have some earnings reports 17 00:00:50,100 --> 00:00:52,200 Union. Pacific released their earnings. 18 00:00:52,200 --> 00:00:55,200 Microsoft released their earnings MasterCard released 19 00:00:55,200 --> 00:00:57,900 their earnings. These are all large Holdings in 20 00:00:57,900 --> 00:01:00,200 my portfolio and we're going to be going through all These 21 00:01:00,200 --> 00:01:02,500 earnings reports and see how these companies are doing. 22 00:01:02,500 --> 00:01:05,500 And then finally, we have an update on all of those 23 00:01:05,500 --> 00:01:08,900 tick-tocks of a day in the life of a LinkedIn employee or a 24 00:01:08,900 --> 00:01:12,500 Google employee. Now, employees or rather X 25 00:01:12,500 --> 00:01:16,900 employees are making videos of a day in the life of being laid 26 00:01:16,900 --> 00:01:19,300 off from Google. I kid, you not. 27 00:01:19,300 --> 00:01:22,300 This is the new trend, they're making videos about their story 28 00:01:22,300 --> 00:01:24,600 of being laid off. So as always, we have a lot to 29 00:01:24,600 --> 00:01:26,600 get to in this episode. Let's go ahead and start off 30 00:01:26,600 --> 00:01:29,600 with a portfolio update. We gained thousands of new 31 00:01:29,600 --> 00:01:31,700 subscribers. Scribers in the Joseph Carlson 32 00:01:31,700 --> 00:01:34,800 show every single month so if you're one of the new ones here, 33 00:01:34,800 --> 00:01:37,600 welcome we do something a little bit different here. 34 00:01:37,600 --> 00:01:40,800 The most channels we show our actual money, we show it. 35 00:01:40,800 --> 00:01:43,800 Invested we show it transparently with every single 36 00:01:43,800 --> 00:01:45,800 thing that we're buying. Every single thing that we're 37 00:01:45,800 --> 00:01:47,900 selling. I not only show what I'm buying 38 00:01:47,900 --> 00:01:50,900 and selling but I also show what I make mistakes when I have 39 00:01:50,900 --> 00:01:53,700 Investments that don't turn out. Well, one of my worst 40 00:01:53,700 --> 00:01:57,000 Investments right now is Disney. I'm losing money on this 41 00:01:57,000 --> 00:01:58,400 company. So there's a level of 42 00:01:58,400 --> 00:02:01,700 transparency here that you don't get Any other places, but what I 43 00:02:01,700 --> 00:02:04,400 want to do in this video is give an update on the performance of 44 00:02:04,400 --> 00:02:06,800 my portfolio. Year-to-date, we're looking at 45 00:02:06,800 --> 00:02:10,300 the passive income account and what I'll say is this 393 46 00:02:10,300 --> 00:02:13,900 thousand dollars that is real money and that makes up my 47 00:02:13,900 --> 00:02:16,800 largest investment vehicle by far. 48 00:02:17,100 --> 00:02:20,700 I have another smaller Tech portfolio but that one is much 49 00:02:20,700 --> 00:02:24,200 smaller than this portfolio. Four hundred thousand dollars is 50 00:02:24,200 --> 00:02:26,900 a ton of money to me. The only thing that even comes 51 00:02:26,900 --> 00:02:29,800 close is my equity in my house where I live. 52 00:02:29,900 --> 00:02:32,700 Live and I don't really consider that an investment in the same 53 00:02:32,700 --> 00:02:35,600 way I do the passive income portfolio so this is a 54 00:02:35,608 --> 00:02:38,300 meaningful amount of money. And the goal here is to compound 55 00:02:38,300 --> 00:02:40,200 my portfolio as much as possible. 56 00:02:40,500 --> 00:02:43,700 Frankly, I want to beat the S&P 500 and I want to Beat It by a 57 00:02:43,708 --> 00:02:47,000 large degree over the next ten years in terms of keeping track 58 00:02:47,000 --> 00:02:48,900 of progress. I really started paying 59 00:02:48,900 --> 00:02:51,800 attention to it in 2022 and 2022. 60 00:02:51,800 --> 00:02:56,000 The passive income account was down 16, .22 percent and that's 61 00:02:56,000 --> 00:02:59,600 with dividends being included. So with dividends reinvested, we 62 00:02:59,600 --> 00:03:02,800 were Sixteen point two, two percent time-weighted Returns 63 00:03:03,000 --> 00:03:08,300 the S&P 500 went down. 18.1 4% the same year with dividends 64 00:03:08,300 --> 00:03:13,200 reinvested so we barely out performed it in 2022. 65 00:03:13,300 --> 00:03:15,600 And that's partially because of how well, Texas Roadhouse and 66 00:03:15,600 --> 00:03:18,000 view cheated. So a couple Holdings held it up 67 00:03:18,000 --> 00:03:21,600 last year, but this isn't the type of outperformance that I'm 68 00:03:21,600 --> 00:03:23,800 wanting. I don't want to beat the S&P 500 69 00:03:23,800 --> 00:03:27,000 by just a couple percentage. I'd like to make the Gap much 70 00:03:27,000 --> 00:03:30,000 wider over the coming years. And so, what I want to do is Go 71 00:03:30,000 --> 00:03:33,400 over my plan for doing that. If I flip over to a year to date 72 00:03:33,400 --> 00:03:36,400 so far were up, six point two, one percent. 73 00:03:36,500 --> 00:03:39,300 The S&P 500 is up. Five point seven, seven percent. 74 00:03:39,300 --> 00:03:41,800 So we're basically matching it right now and some of my 75 00:03:41,800 --> 00:03:44,300 companies are performing a little bit better than others. 76 00:03:44,400 --> 00:03:46,900 If we stay on the year-to-date metric here, we can go 77 00:03:46,900 --> 00:03:50,400 sector-by-sector, we go into the tech category, I have two 78 00:03:50,400 --> 00:03:55,200 companies in this category apple and Microsoft Apples Up 14% 79 00:03:55,300 --> 00:03:57,700 Microsoft is lagging. The market up only two and a 80 00:03:57,700 --> 00:04:00,000 half percent. I think that Microsoft or Right 81 00:04:00,008 --> 00:04:04,100 now is heavily undervalued based off the quality of the company 82 00:04:04,300 --> 00:04:07,900 and its future growth prospects. And I say that, after seeing 83 00:04:08,000 --> 00:04:11,200 their last earnings, that were a bit disappointing to investors. 84 00:04:11,200 --> 00:04:14,100 If we look at Microsoft's latest numbers, they are a little bit 85 00:04:14,100 --> 00:04:17,700 lower than last year, the earnings were down 11% 86 00:04:17,700 --> 00:04:19,600 year-over-year. The ibadah was a little bit 87 00:04:19,600 --> 00:04:22,200 lower, that's a little bit concerning, even the top line, 88 00:04:22,200 --> 00:04:24,400 revenue had an incredible deceleration. 89 00:04:24,400 --> 00:04:28,100 It only grew at two percent two percent year over year. 90 00:04:28,200 --> 00:04:31,600 But most of all I think the Most concerning thing is, in the cash 91 00:04:31,600 --> 00:04:34,500 flow of the company, the cash flows plummeted. 92 00:04:34,700 --> 00:04:37,600 Look at this last quarter. Doesn't that put it in 93 00:04:37,600 --> 00:04:40,000 perspective? There the cash flows, like a 94 00:04:40,000 --> 00:04:42,000 third of what it was the prior quarters. 95 00:04:42,400 --> 00:04:45,800 Now, over the full year, it was a pretty good year for Microsoft 96 00:04:45,800 --> 00:04:49,900 in 2022 but the fourth-quarter shows a strong deceleration. 97 00:04:50,000 --> 00:04:52,300 Then in addition to all these slowing Trends with this 98 00:04:52,300 --> 00:04:56,000 quarter, we have the CEO of the company Sachin, Adela he goes on 99 00:04:56,000 --> 00:04:59,100 the earnings call and he basically does everything in his 100 00:04:59,100 --> 00:05:01,800 power. To torpedo the company's stock 101 00:05:01,800 --> 00:05:04,600 price. He talks about how everything 102 00:05:04,600 --> 00:05:07,700 slowing down and the company's going to basically take a break 103 00:05:07,700 --> 00:05:10,100 for the next two years that Tech spending. 104 00:05:10,100 --> 00:05:13,400 Slowing down the economy, slowing down, every time someone 105 00:05:13,400 --> 00:05:15,400 talks to him about something exciting. 106 00:05:15,500 --> 00:05:17,400 He basically pores cold water on it. 107 00:05:17,400 --> 00:05:20,100 So he was not enthusiastic in this earnings report. 108 00:05:20,200 --> 00:05:22,400 Now there's something that I want to mention that I think is 109 00:05:22,400 --> 00:05:26,000 an often missed point, but I think it's very important in 110 00:05:26,000 --> 00:05:31,200 regards to CEOs like Sachin Adela talking negatively about 111 00:05:31,200 --> 00:05:34,600 his own company saying that that growth is slowing. 112 00:05:34,600 --> 00:05:38,100 That competition is coming that they're struggling through the 113 00:05:38,100 --> 00:05:40,800 times. Let me put it this way, once 114 00:05:40,800 --> 00:05:45,500 you're the CEO of a company that is monopolistic and Incredibly 115 00:05:45,500 --> 00:05:48,400 powerful. It's as if you get invited to a 116 00:05:48,400 --> 00:05:53,600 secret Club, a secret Club of CEOs of monopolistic companies 117 00:05:54,000 --> 00:05:56,600 and they highlight the rules, right? 118 00:05:56,600 --> 00:05:59,400 When you enter in the club they say, rule one. 119 00:06:00,000 --> 00:06:05,200 Being part of a monopolistic company is you do not talk about 120 00:06:05,200 --> 00:06:07,500 the monopolistic nature of your company. 121 00:06:08,000 --> 00:06:12,700 Rule, two is to not break. Rule 1, do not talk about the 122 00:06:12,700 --> 00:06:15,200 monopolistic nature of your company. 123 00:06:15,600 --> 00:06:18,500 You have to tell the public that you're a company, that faces 124 00:06:18,500 --> 00:06:20,800 lots of competition. You don't have a Stranglehold on 125 00:06:20,800 --> 00:06:23,000 the market. You are struggling. 126 00:06:23,000 --> 00:06:26,900 You're just hanging in there. That's what you do as the CEO of 127 00:06:26,900 --> 00:06:29,700 a monopolistic company. So with that in mind, you're 128 00:06:29,800 --> 00:06:32,600 We're going to hear a CEO like such an adult, come out and say, 129 00:06:32,900 --> 00:06:35,800 Microsoft, basically, controls everything in the corporate 130 00:06:35,800 --> 00:06:37,300 world. We have all of the most 131 00:06:37,300 --> 00:06:40,800 important applications, we Face minimal competition that we can. 132 00:06:40,800 --> 00:06:44,300 Frankly, just by, if they ever actually threatened us and all 133 00:06:44,300 --> 00:06:47,200 things are running as normal, we basically don't have to do much 134 00:06:47,200 --> 00:06:49,600 to maintain our Monopoly. He's never going to come out and 135 00:06:49,600 --> 00:06:52,100 say that you have to read that between the lines. 136 00:06:52,400 --> 00:06:56,200 Tim Cook will never come out and say that iOS is a monopoly, 137 00:06:56,500 --> 00:06:59,700 he'll never come out and say that even though it kind of is 138 00:06:59,900 --> 00:07:03,100 Is you're never going to have the CEO of MasterCard which is 139 00:07:03,100 --> 00:07:06,200 clearly monopolistic and they own a duopoly with Visa. 140 00:07:06,300 --> 00:07:09,400 The CEO of MasterCard is never going to come out and say look 141 00:07:09,700 --> 00:07:12,700 we control the payment rails. Everything flows through us, we 142 00:07:12,700 --> 00:07:15,500 have a natural monopoly. People, use our products, we 143 00:07:15,500 --> 00:07:18,300 have incredibly little competition and anyone that 144 00:07:18,300 --> 00:07:22,300 tries to go around us, instead of through US does to their own 145 00:07:22,300 --> 00:07:24,600 detriment. He will never say that. 146 00:07:24,600 --> 00:07:27,400 The CEOs of monopolistic companies are often the ones 147 00:07:27,400 --> 00:07:29,700 that talk mostly about all the challenges. 148 00:07:29,800 --> 00:07:31,900 Changes. They face they talk about all 149 00:07:31,900 --> 00:07:35,900 the problems of company has all the competition they face and 150 00:07:35,900 --> 00:07:38,200 they do so because they know publicly that's what's best to 151 00:07:38,200 --> 00:07:40,700 highlight. Because in many cases the main 152 00:07:40,700 --> 00:07:44,400 challenge these companies face is legislation the government 153 00:07:44,400 --> 00:07:47,200 coming in and breaking up their natural monopolies. 154 00:07:47,200 --> 00:07:50,400 Now on the contrary many cases the CEO's that talked about 155 00:07:50,500 --> 00:07:54,200 their company being a monopoly and facing no competition and 156 00:07:54,200 --> 00:07:57,100 they can't even see competition with a telescope are in many 157 00:07:57,100 --> 00:08:00,800 cases, the companies that faced the most Competition. 158 00:08:01,300 --> 00:08:04,200 So a lot of this is completely in verse to what you would 159 00:08:04,200 --> 00:08:07,600 suspect as an investor, when you're listening to earnings 160 00:08:07,600 --> 00:08:10,100 calls and you're listening to companies, talk about their own 161 00:08:10,100 --> 00:08:13,900 company, the ones that are the most confident in their Market 162 00:08:13,900 --> 00:08:16,400 position are the ones that need to speak. 163 00:08:16,400 --> 00:08:19,200 The least amount about how powerful their business model. 164 00:08:19,200 --> 00:08:22,900 Is the companies that have the least powerful Market positions 165 00:08:23,100 --> 00:08:25,600 are the ones that have to convince investors. 166 00:08:25,800 --> 00:08:28,800 They have to talk openly about how powerful of a company they 167 00:08:28,800 --> 00:08:30,700 are. So, Keep that in mind when 168 00:08:30,700 --> 00:08:33,100 you're listening to earnings reports either way. 169 00:08:33,100 --> 00:08:36,600 A lot of investors, don't get this subject and what such a 170 00:08:36,608 --> 00:08:40,200 Nadella did speaking down about Microsoft had the effect of 171 00:08:40,200 --> 00:08:42,600 throwing cold water on the earnings report. 172 00:08:42,600 --> 00:08:44,900 And I don't think that that paints an accurate picture for a 173 00:08:44,908 --> 00:08:47,300 company of this quality. The main thing that I'll mention 174 00:08:47,300 --> 00:08:50,500 about Microsoft's report is even though things are decelerate in 175 00:08:50,500 --> 00:08:53,600 a little bit, they're slowing down the core products. 176 00:08:53,600 --> 00:08:56,600 The most profitable products in the most meaningful ones are 177 00:08:56,600 --> 00:09:00,000 still going really well. The server products, and Cloud 178 00:09:00,000 --> 00:09:03,400 services, they increased Revenue by 20%. 179 00:09:03,700 --> 00:09:07,400 All of their server products. Still grew at a 20% rate, the 180 00:09:07,400 --> 00:09:10,000 Azure business, their primary cloud service. 181 00:09:10,000 --> 00:09:14,600 Revenue growth was 31% and that's with currency being 182 00:09:14,600 --> 00:09:17,300 adjusted. If you held constant currency, 183 00:09:17,300 --> 00:09:20,200 which basically means if you took out foreign exchange rates, 184 00:09:20,400 --> 00:09:24,200 it grew at 38%, that's an astounding level of growth for 185 00:09:24,200 --> 00:09:26,200 Azure. So, their core products are not 186 00:09:26,200 --> 00:09:29,600 decelerate in that much, that is still very strong growth. 187 00:09:29,800 --> 00:09:32,000 'The so my opinion, even though this is a slow down this 188 00:09:32,000 --> 00:09:35,200 quarter, I think we can exercise a little patience here because I 189 00:09:35,200 --> 00:09:37,300 don't think this slowdown is going to last forever. 190 00:09:37,500 --> 00:09:40,500 The core businesses of Microsoft are still doing really well. 191 00:09:40,700 --> 00:09:43,700 A lot of the things that slow down where their Hardware Sales 192 00:09:43,900 --> 00:09:46,700 things that I don't think are as critical for the core business 193 00:09:46,700 --> 00:09:48,700 for Microsoft. Now, moving on, we're still 194 00:09:48,700 --> 00:09:50,600 looking at the year-to-date performance here. 195 00:09:50,600 --> 00:09:52,400 I want to go into the financial category. 196 00:09:52,600 --> 00:09:56,200 This is another one that I've built up heavily this year, SP 197 00:09:56,200 --> 00:09:59,200 Global and MasterCard. If you haven't studied these 198 00:09:59,200 --> 00:10:02,700 businesses, Is I recommend doing so because the more that I look 199 00:10:02,700 --> 00:10:06,900 into them the deeper, I dive the more I like these companies they 200 00:10:06,900 --> 00:10:09,300 fit basically. Every characteristic I look for 201 00:10:09,300 --> 00:10:13,200 in a compounder they have pricing power real pricing power 202 00:10:13,200 --> 00:10:16,600 where they raise prices for 10 years straight and they don't 203 00:10:16,600 --> 00:10:19,100 lose customers. As a consequence, they have 204 00:10:19,100 --> 00:10:22,300 almost no capex requirements. So these companies are 205 00:10:22,308 --> 00:10:25,200 incredibly Capital efficient. They have pricing power their 206 00:10:25,200 --> 00:10:26,900 monopolistic. They're highly entrenched 207 00:10:26,900 --> 00:10:29,600 businesses that I think, will grow their earnings per share. 208 00:10:29,800 --> 00:10:32,900 R & free cash flow per share at a rate far exceeding. 209 00:10:32,900 --> 00:10:35,300 The S&P 500 over the next 10 years. 210 00:10:35,600 --> 00:10:39,600 I truly believe these companies will trounce the S&P 500 over 211 00:10:39,600 --> 00:10:42,100 the next 10 years. MasterCard, just reported their 212 00:10:42,100 --> 00:10:45,600 earnings and it was basically in line with expectations, which is 213 00:10:45,600 --> 00:10:48,700 exactly what I'm looking for. The CEO had commentary, that's a 214 00:10:48,708 --> 00:10:51,100 little bit different than what we're seeing in the economic 215 00:10:51,100 --> 00:10:53,500 reports. He says that the economy overall 216 00:10:53,500 --> 00:10:56,000 is pretty resilient that consumers are holding up and he 217 00:10:56,008 --> 00:10:58,900 speaks about travel. He said, quote as we look at the 218 00:10:58,900 --> 00:11:01,700 broader economy, We see the continued recovery of 219 00:11:01,700 --> 00:11:05,800 cross-border travel with volumes up 59 percent versus a year ago, 220 00:11:06,100 --> 00:11:09,800 and we're encouraged by Asia opening up further, while macro 221 00:11:09,800 --> 00:11:12,500 economic and geopolitical uncertainty persists, consumer 222 00:11:12,500 --> 00:11:15,300 spending has been remarkably resilient. 223 00:11:15,400 --> 00:11:18,400 We are well prepared to adjust our investment profile quickly 224 00:11:18,400 --> 00:11:20,900 if needed. That's another thing that being 225 00:11:20,900 --> 00:11:23,300 Capital, light allows you the company has a ton of 226 00:11:23,300 --> 00:11:25,000 flexibility. One more thing that I'd 227 00:11:25,000 --> 00:11:27,900 highlight from this earnings report is their return of 228 00:11:27,900 --> 00:11:30,800 capital to shareholders because MasterCard is such an 229 00:11:30,800 --> 00:11:33,600 efficiently ran business. What they're essentially able to 230 00:11:33,600 --> 00:11:37,600 do is reinvest very little back into their business and return 231 00:11:37,600 --> 00:11:40,900 all of their massive amounts of profits back to the investors, 232 00:11:40,900 --> 00:11:46,100 MasterCard, repurchased, 7.4 million shares at a cost of two 233 00:11:46,100 --> 00:11:49,600 point, four billion dollars and paid four hundred and seventy 234 00:11:49,600 --> 00:11:52,400 three million dollars in dividends if the stock price 235 00:11:52,400 --> 00:11:55,900 ever dips for a company like this, you know, that they're 236 00:11:55,900 --> 00:11:58,800 buying back, the shares aggressively, they will work on 237 00:11:58,800 --> 00:12:00,900 getting that stock. Back up through share 238 00:12:00,900 --> 00:12:04,400 repurchases, MasterCard, is such an efficiently ran business that 239 00:12:04,600 --> 00:12:07,600 aside from some type of horrible disruption to their core 240 00:12:07,600 --> 00:12:09,700 business model. I think the company will 241 00:12:09,700 --> 00:12:13,700 continue to compound, it's free cash flow per share at 15 242 00:12:13,700 --> 00:12:16,500 percent over the next 10 years. And in terms of core risks to 243 00:12:16,500 --> 00:12:19,400 the business model, I believe the biggest one is government 244 00:12:19,400 --> 00:12:21,200 intervention. Now again, we're still looking 245 00:12:21,200 --> 00:12:23,600 at year-to-date here and we're going on to the next category 246 00:12:23,800 --> 00:12:26,600 which is consumer. This is a category that I have 247 00:12:26,600 --> 00:12:29,900 not been adding to this year. In fact, all I've done in in 248 00:12:29,900 --> 00:12:33,400 this category so far is trim different positions. 249 00:12:33,700 --> 00:12:37,400 I've trimmed my Nike position by a pretty substantial amount. 250 00:12:37,400 --> 00:12:40,700 I really like Nike as a stock and a company, I think it's 251 00:12:40,700 --> 00:12:42,700 phenomenally. Well ran the metrics are 252 00:12:42,700 --> 00:12:44,900 incredible. The profitability ratios are 253 00:12:44,900 --> 00:12:47,100 incredible. The balance sheet is solid, 254 00:12:47,200 --> 00:12:49,400 there is nothing wrong with this business. 255 00:12:49,900 --> 00:12:52,700 But this stock price is just hard for me to wrap my head 256 00:12:52,700 --> 00:12:54,800 around no matter which way I looked at it. 257 00:12:54,900 --> 00:12:59,200 This stock is just expensive it trades at a 36 Ford PE ratio the 258 00:12:59,200 --> 00:13:02,200 free cash. Those that like 1% right now. 259 00:13:02,400 --> 00:13:04,700 I've even ran through different discounted cash flow metrics 260 00:13:04,700 --> 00:13:07,000 based on different assumptions. Oh, no matter what way I look at 261 00:13:07,000 --> 00:13:09,900 the company, I keep coming to the conclusion that it's just a 262 00:13:09,908 --> 00:13:12,000 bit expensive. I thought it was time to take 263 00:13:12,000 --> 00:13:14,700 some gains and move the money to other companies that I think, 264 00:13:14,700 --> 00:13:18,000 present, a better risk reward in the restaurant category. 265 00:13:18,100 --> 00:13:20,500 Again, this is just year to date on these companies. 266 00:13:20,500 --> 00:13:25,200 I'm up in total over 6,000 on Texas, Roadhouse and 3,000 on 267 00:13:25,200 --> 00:13:27,000 Starbucks. And I have not been buying or 268 00:13:27,000 --> 00:13:28,400 selling either of these companies. 269 00:13:28,400 --> 00:13:31,400 I've simply been holding them I'm very bullish on Texas 270 00:13:31,400 --> 00:13:33,300 Roadhouse. I still think this company is 271 00:13:33,300 --> 00:13:36,400 going to widely outperform the market, over the next couple of 272 00:13:36,400 --> 00:13:40,400 years, especially if demand stays relatively strong for 273 00:13:40,400 --> 00:13:42,300 restaurant spending. So we'll see how this one does 274 00:13:42,300 --> 00:13:44,400 the earnings reports. Next month, I'll give an update 275 00:13:44,400 --> 00:13:48,000 on it, but my assumption is it's going to be out growing a lot of 276 00:13:48,000 --> 00:13:50,200 growth companies. I think Texas Roadhouse will be 277 00:13:50,200 --> 00:13:53,800 outgrowing the majority of big Tech once again after the 278 00:13:53,800 --> 00:13:55,800 restaurant category we have my real estate holdings. 279 00:13:55,800 --> 00:13:59,200 These are real estate investment trusts I only hold one company 280 00:13:59,200 --> 00:14:02,900 right now which is Vici so far up, 6.8% year-to-date. 281 00:14:03,100 --> 00:14:06,500 This is a very large holding of mine and I have not bought any 282 00:14:06,500 --> 00:14:09,500 or sold any this year and I don't plan on trimming. 283 00:14:09,500 --> 00:14:12,800 This holding any time soon. I'm still incredibly bullish on 284 00:14:12,800 --> 00:14:15,900 beachy, although the company employs leverage because it's a 285 00:14:15,908 --> 00:14:19,900 real estate company, it has baked in pricing power, every 286 00:14:19,900 --> 00:14:22,900 single year they have contractual agreements to raise 287 00:14:22,900 --> 00:14:25,200 prices above the rate of inflation. 288 00:14:25,500 --> 00:14:28,800 So right there, we have the pricing power question solved 289 00:14:28,900 --> 00:14:31,400 and we also have a Oh, that aspect, because they continue to 290 00:14:31,400 --> 00:14:34,100 buy new properties. So, overall, I still like the 291 00:14:34,100 --> 00:14:36,400 valuation of the company, I still like the dividend 292 00:14:36,400 --> 00:14:38,500 payments, I like the growth prospects. 293 00:14:38,600 --> 00:14:41,700 And then last but not least the category, that's performed. 294 00:14:41,700 --> 00:14:45,200 The worst this year is the Industrials, which are actually 295 00:14:45,200 --> 00:14:48,700 in the red this year down 1.5 percent year-to-date. 296 00:14:48,800 --> 00:14:52,200 I don't normally love industrial Investments and the reason that 297 00:14:52,200 --> 00:14:55,600 I don't love them is because of their incredibly high amounts of 298 00:14:55,600 --> 00:14:59,100 capex. They require a ton of capital to 299 00:14:59,100 --> 00:15:02,400 run these This is lots of reinvestment back into the 300 00:15:02,400 --> 00:15:06,200 business year over year over year, for example, Union 301 00:15:06,200 --> 00:15:10,500 Pacific, and Canadian Pacific. The average capex that they have 302 00:15:10,500 --> 00:15:14,700 to spend proportionate to their revenue is around 15% per year. 303 00:15:14,700 --> 00:15:18,900 When you look at a company like Mastercard, or VISA or SP 304 00:15:18,900 --> 00:15:21,200 Global, it's less than a percent per year. 305 00:15:21,200 --> 00:15:25,300 So, these companies, spend a fortune in capex, they have lots 306 00:15:25,300 --> 00:15:27,300 of heavy Investments, they have to make back under their 307 00:15:27,300 --> 00:15:29,200 business. The reason why I still invest in 308 00:15:29,208 --> 00:15:31,600 these companies Knees. Despite them having high capex 309 00:15:31,700 --> 00:15:34,200 is because of their monopolistic Market structure. 310 00:15:34,400 --> 00:15:37,000 The fact that they're highly entrenched and I think they face 311 00:15:37,000 --> 00:15:39,800 very little competition and chance of disruption. 312 00:15:39,800 --> 00:15:42,100 I thought the earnings report was fine, it was nothing, 313 00:15:42,100 --> 00:15:45,000 amazing, the market, didn't seem to like it that much. 314 00:15:45,000 --> 00:15:48,000 The stock was down a couple percentage afterwards, but for 315 00:15:48,000 --> 00:15:51,800 the full year of 2020 to the company grew Revenue by 8%, 316 00:15:51,800 --> 00:15:54,800 which I think is good for Union Pacific because they struggle 317 00:15:54,800 --> 00:15:57,400 with that top line revenue growth and their operating 318 00:15:57,400 --> 00:15:59,900 income was up six percent. Now, what I actually thought, At 319 00:15:59,900 --> 00:16:03,900 the market didn't like, the most was comments, that the CEO made 320 00:16:03,900 --> 00:16:06,800 soon after the earnings release. He went on to CNBC and he spoke 321 00:16:06,800 --> 00:16:11,300 about the overall economy. Yeah, so unlike say, the past 322 00:16:11,300 --> 00:16:14,600 three or four years, you've got this Dynamic of the FED raising 323 00:16:14,600 --> 00:16:18,700 interest rates very rapidly, which ultimately will destroy 324 00:16:18,700 --> 00:16:23,900 demand across markets and you've got consumers that have been 325 00:16:23,900 --> 00:16:26,500 telling us for quite some time that they're concerned. 326 00:16:26,700 --> 00:16:29,000 But they've been flush with cash. 327 00:16:29,700 --> 00:16:32,200 Mostly about transfer payments from the government, but also 328 00:16:32,300 --> 00:16:36,100 from a very hot jobs market. So you put those two together 329 00:16:36,500 --> 00:16:39,000 and it does appear, that consumers are starting to pull 330 00:16:39,000 --> 00:16:40,900 in their horns. On Goods, consumption. 331 00:16:41,100 --> 00:16:44,400 They're still consuming at a high rate on experiences and 332 00:16:44,400 --> 00:16:49,600 travel and entertainment and and it's just not clear yet exactly 333 00:16:49,600 --> 00:16:52,800 what the impact is going to be of the FED interest rate 334 00:16:52,800 --> 00:16:55,300 increases. Although clearly, you can see 335 00:16:55,300 --> 00:16:58,000 early Innings, it's having an impact on things like housing. 336 00:16:58,100 --> 00:17:00,700 You see the commonality here another You have a company 337 00:17:00,700 --> 00:17:04,000 that's widely considered an oligopoly and has entrenched 338 00:17:04,000 --> 00:17:08,200 Market position is not talking glowingly about the future. 339 00:17:08,400 --> 00:17:11,200 He's saying that things are a little bit less predictable. 340 00:17:11,800 --> 00:17:15,000 We have some employment issues and he's highlighting all the 341 00:17:15,000 --> 00:17:18,099 challenges but he can't highlight the strengths of his 342 00:17:18,099 --> 00:17:20,300 company. The CEO is not going to come out 343 00:17:20,300 --> 00:17:23,000 and say we Face very little competition. 344 00:17:23,099 --> 00:17:25,200 So we can continue to employ pricing power. 345 00:17:25,200 --> 00:17:28,600 We can raise prices because our customers unfortunately can't 346 00:17:28,600 --> 00:17:30,900 really go to anyone else. Else, you simply not going to 347 00:17:30,908 --> 00:17:32,300 say that. Now, if I go back to the 348 00:17:32,300 --> 00:17:34,800 earnings release, I want to jump to what I actually consider to 349 00:17:34,800 --> 00:17:36,600 be the most important thing to me. 350 00:17:36,700 --> 00:17:37,900 This is what I'm looking for here. 351 00:17:38,000 --> 00:17:41,200 The 2023 guidance, what they outline here is full. 352 00:17:41,200 --> 00:17:43,900 You're operating ratio Improvement, so they're saying 353 00:17:43,900 --> 00:17:46,000 that margins are going to go up there. 354 00:17:46,000 --> 00:17:50,300 Operating efficiency is going to go up and that is the story of 355 00:17:50,300 --> 00:17:53,500 the railroads becoming more and more efficient every single day. 356 00:17:53,900 --> 00:17:57,300 Then we have that next, very difficult thing that I look for 357 00:17:57,300 --> 00:18:01,400 in companies pricing power. The ability to raise the price 358 00:18:01,400 --> 00:18:05,300 of your product, above the rate of inflation for 10 years, 359 00:18:05,300 --> 00:18:09,200 straight without losing customers to competition, they 360 00:18:09,200 --> 00:18:13,100 outline that they're expecting to price dollars in excess of 361 00:18:13,100 --> 00:18:16,000 inflation dollars. So they're raising their prices 362 00:18:16,000 --> 00:18:19,900 in excess of inflation and they state that openly why are they 363 00:18:19,900 --> 00:18:21,800 able to do that? Because their railroads and 364 00:18:21,800 --> 00:18:25,100 their customers frankly don't have many other options and then 365 00:18:25,100 --> 00:18:27,700 in terms of capital allocation like I outlined they spent a 366 00:18:27,708 --> 00:18:29,300 significant amount of their revenue. 367 00:18:29,700 --> 00:18:32,000 On capex. And this case they're aiming for 368 00:18:32,000 --> 00:18:34,900 less than 15%. That's a lot of money spent on 369 00:18:34,900 --> 00:18:36,900 capex. This is a downside of the 370 00:18:36,900 --> 00:18:40,100 company but overall I really liked the fact that they pay a 371 00:18:40,108 --> 00:18:43,900 dividend with a low payout ratio and then everything else goes 372 00:18:43,900 --> 00:18:47,500 back to share repurchases, which they repurchased over four 373 00:18:47,500 --> 00:18:51,100 percent of the shares outstanding over the past year. 374 00:18:51,200 --> 00:18:53,500 So even though the railroads haven't surged like the rest of 375 00:18:53,508 --> 00:18:57,000 the market this year so far, I'm still very bullish on them and 376 00:18:57,000 --> 00:18:58,400 I'm still buying these companies. 377 00:18:58,400 --> 00:18:59,600 I'll be adding to these positions. 378 00:18:59,700 --> 00:19:02,500 And as long as they lack the rest of the market. 379 00:19:02,500 --> 00:19:04,100 So this is what the portfolio looks like. 380 00:19:04,100 --> 00:19:06,400 Year-to-date you can let me know what you think of it. 381 00:19:06,500 --> 00:19:09,200 If you agree with my byes, if you disagree, I'd be interested 382 00:19:09,200 --> 00:19:12,300 to know and I'm happy with the performance year to date as well 383 00:19:12,300 --> 00:19:13,700 as all time. I think we're headed in the 384 00:19:13,708 --> 00:19:15,600 right direction. Now let's go ahead and move on 385 00:19:15,600 --> 00:19:18,300 to some news. We have the headline news that 386 00:19:18,300 --> 00:19:21,400 u.s. GDP Rose 2.9 percent in the 387 00:19:21,400 --> 00:19:25,700 fourth quarter and there's a lot of different takes on this news 388 00:19:26,000 --> 00:19:29,100 like most economic data, you can look at it positively or 389 00:19:29,100 --> 00:19:31,100 negatively. Lee, I'll give you the basic 390 00:19:31,100 --> 00:19:33,300 argument for each side. The argument that the Wall 391 00:19:33,300 --> 00:19:36,200 Street Journal makes and what most economists are making right 392 00:19:36,200 --> 00:19:38,600 now, is that this news really isn't as good as it. 393 00:19:38,600 --> 00:19:41,800 Seems the overall economy slowing down and we're coming 394 00:19:41,800 --> 00:19:44,800 out of an environment. That was really easy going into 395 00:19:44,800 --> 00:19:46,600 environment. That's really difficult. 396 00:19:46,700 --> 00:19:49,400 They say the fourth quarter, capped a year of economic 397 00:19:49,400 --> 00:19:52,900 slowdown in part reflecting a return to a more normal pace of 398 00:19:52,900 --> 00:19:55,300 growth after output surged amid business. 399 00:19:55,300 --> 00:19:59,100 Re-openings fiscal stimulus and waning pandemic in 2021. 400 00:19:59,100 --> 00:20:02,400 All right, so Just got done with our pockets, being filled with 401 00:20:02,400 --> 00:20:04,800 money and being locked up in our homes. 402 00:20:04,800 --> 00:20:07,200 And finally, we are able to spend that money. 403 00:20:07,400 --> 00:20:10,200 We're able to travel. So naturally, the economy is 404 00:20:10,200 --> 00:20:13,400 rebounding a little bit but then they go on to highlight that the 405 00:20:13,400 --> 00:20:17,100 economic output grew one percent in the fourth quarter of 2022 406 00:20:17,400 --> 00:20:20,200 compared with a year earlier down from five point seven, 407 00:20:20,200 --> 00:20:25,100 percent growth in 2021 and 2.6 percent growth in 2019. 408 00:20:25,500 --> 00:20:29,900 So overall the longer-term trends are that the economy is 409 00:20:29,900 --> 00:20:31,800 slowing. It's actually moderating and 410 00:20:31,800 --> 00:20:33,600 Pace. Whether you look at that as a 411 00:20:33,608 --> 00:20:37,600 good or bad thing is up to you, in my opinion, I actually think 412 00:20:37,600 --> 00:20:40,400 that this is a good thing. If we have a overheating 413 00:20:40,400 --> 00:20:43,500 economy, that would be basically an invitation to the FED to 414 00:20:43,500 --> 00:20:45,600 raise interest rates dramatically more. 415 00:20:45,700 --> 00:20:48,400 So, I think the economic growth actually, moderating is a good 416 00:20:48,400 --> 00:20:51,100 thing in terms of the feds interactions, and then the other 417 00:20:51,100 --> 00:20:54,700 bit of news is the layoffs, this is the more sad news. 418 00:20:54,700 --> 00:20:57,700 I really don't enjoy, seeing people get laid off from work 419 00:20:58,000 --> 00:21:00,800 even when it's Justified from, Company even when it's 420 00:21:00,800 --> 00:21:04,100 responsible move by the employer, it's still not a fun 421 00:21:04,100 --> 00:21:07,600 thing to see people losing their livelihood, losing their income 422 00:21:07,600 --> 00:21:10,000 stream. That's basically like a worst 423 00:21:10,000 --> 00:21:12,300 nightmare for anybody. That depends on that income 424 00:21:12,300 --> 00:21:15,700 stream and that's part of the reason building this channel is 425 00:21:15,700 --> 00:21:18,600 trying to help people find a different way to find passive 426 00:21:18,600 --> 00:21:21,300 income. The ability to at least survive 427 00:21:21,300 --> 00:21:24,500 without your primary job with enough effort and time we can 428 00:21:24,500 --> 00:21:28,300 get to a point or not totally reliant on our primary income, 429 00:21:28,300 --> 00:21:29,500 but layoffs have been picking up. 430 00:21:29,600 --> 00:21:32,300 Up and they started off with the biggest companies that are the 431 00:21:32,300 --> 00:21:36,900 trendsetters once big Tech does anything, everyone else follows. 432 00:21:37,100 --> 00:21:38,400 That's the way these things work. 433 00:21:38,400 --> 00:21:41,700 A lot of companies simply modeled their covid policies. 434 00:21:41,700 --> 00:21:45,500 After big Tech if big Tech was working for home, all the other 435 00:21:45,500 --> 00:21:47,900 companies would work from home. If big Tech required wearing 436 00:21:47,900 --> 00:21:50,600 masks in the office, other company said, you had to wear 437 00:21:50,600 --> 00:21:53,800 masks in the office other companies, basically copied 438 00:21:53,800 --> 00:21:57,600 their HR policies and their corporate policies and now other 439 00:21:57,600 --> 00:21:59,500 companies have the leeway to do layoffs. 440 00:21:59,700 --> 00:22:01,700 Because big Tech has done layoffs. 441 00:22:01,800 --> 00:22:04,400 So this is a concerning trend of rising layoffs. 442 00:22:04,400 --> 00:22:06,900 In, in my opinion I think this is going to continue. 443 00:22:06,900 --> 00:22:09,500 I think a lot of these companies that did a big round of layoffs 444 00:22:09,500 --> 00:22:11,400 are going to be doing another round of layoffs. 445 00:22:11,700 --> 00:22:13,900 When you look at the fundamentals of them, many of 446 00:22:13,900 --> 00:22:16,300 them hired. So many more employees than the 447 00:22:16,300 --> 00:22:18,400 fundamentals of the companies justify. 448 00:22:18,700 --> 00:22:21,300 And I think we're going to see a pretty big reversion over the 449 00:22:21,300 --> 00:22:23,600 next year. Now on the subject of layoffs 450 00:22:23,600 --> 00:22:25,700 with these companies like Google, one of the things that 451 00:22:25,700 --> 00:22:28,900 I've been highlighting over the past year are these videos of a 452 00:22:28,900 --> 00:22:31,700 day in the life. Life of a Google employee. 453 00:22:32,100 --> 00:22:33,800 And the reason I've been highlighting this is because I 454 00:22:33,808 --> 00:22:37,400 think they're so incredibly revealing of the problems with 455 00:22:37,400 --> 00:22:41,100 the culture of these companies, you can even see from watching 456 00:22:41,100 --> 00:22:43,900 any of these videos basically all they're doing or at least 457 00:22:43,900 --> 00:22:47,400 all they're showing here is eating tons of good food hanging 458 00:22:47,400 --> 00:22:50,000 around and doing minimal. Work it to the office at around 459 00:22:50,000 --> 00:22:52,600 6, a.m. to beat the traffic and just get a nice workout and 460 00:22:52,600 --> 00:22:53,400 around 7:00. A.m. 461 00:22:53,400 --> 00:22:54,600 I'm getting ready to the locker room. 462 00:22:54,700 --> 00:22:55,800 Getting breakfast at this really cute. 463 00:22:55,800 --> 00:22:58,900 Cafe at ADM. Got some Crepes iced Americano, 464 00:22:58,900 --> 00:23:01,000 which is so. And at around eight, Twenty 465 00:23:01,100 --> 00:23:03,100 Eight got to work. I usually get a snack at around 466 00:23:03,100 --> 00:23:05,100 10 a.m. and today I forgot to charging cable. 467 00:23:05,100 --> 00:23:07,800 So I went to the vending machine to get one and 11:30 is usually, 468 00:23:07,800 --> 00:23:10,000 when I eat lunch, I got a whole hodgepodge of things including 469 00:23:10,000 --> 00:23:12,700 pizza and this is the view that I like to eat with our 12:00. 470 00:23:12,700 --> 00:23:14,700 I get some more caffeine and just spend the afternoon doing 471 00:23:14,700 --> 00:23:16,300 some more work. I like to do stress at the end 472 00:23:16,300 --> 00:23:18,200 of the day and today, I booked a massage appointment. 473 00:23:18,200 --> 00:23:20,600 So I have that for an hour and then go home at 5:30. 474 00:23:20,600 --> 00:23:22,800 These are the type of videos that we've looked at. 475 00:23:22,800 --> 00:23:25,500 And I've repeatedly said, I don't think these videos are a 476 00:23:25,508 --> 00:23:27,700 good idea. I think they represent the 477 00:23:27,700 --> 00:23:31,200 company poorly. It's bad PR for the company 478 00:23:31,200 --> 00:23:32,900 because it makes it look like the employees. 479 00:23:32,900 --> 00:23:35,000 There are wasting money and resources. 480 00:23:35,000 --> 00:23:37,200 I think if employees are going to make these videos, they 481 00:23:37,200 --> 00:23:39,400 should focus more on the work that they do. 482 00:23:39,400 --> 00:23:40,600 What do they actually do at work? 483 00:23:40,600 --> 00:23:43,000 I think that'd be very interesting to see, I'm sure 484 00:23:43,000 --> 00:23:44,900 they do. Lots of high-level things things 485 00:23:44,900 --> 00:23:46,600 that are very important highlight. 486 00:23:46,600 --> 00:23:49,700 Some of that stuff, it would look a lot better to people that 487 00:23:49,700 --> 00:23:51,400 are watching this on the sidelines. 488 00:23:51,400 --> 00:23:54,100 Now, this employee hair gets to the end of this day in the life 489 00:23:54,100 --> 00:23:55,900 of video. And then she has an important 490 00:23:55,900 --> 00:23:59,400 update for us at 5:30 Big Life Update. 491 00:23:59,600 --> 00:24:04,000 Got laid off yesterday. So, that's the end of that. 492 00:24:04,000 --> 00:24:06,200 And now we're seeing more and more of these videos pop up of 493 00:24:06,200 --> 00:24:08,600 people getting laid off from companies like Google. 494 00:24:08,600 --> 00:24:11,200 So I woke up to this really ominous checks for my boss and I 495 00:24:11,200 --> 00:24:13,100 honestly had no idea what it was going to be about. 496 00:24:13,100 --> 00:24:15,600 So I called her the minute, I woke up and saw this and she 497 00:24:15,600 --> 00:24:17,700 told me to check the news and my email. 498 00:24:17,700 --> 00:24:20,600 So I rushed downstairs to find out that I had lost access to 499 00:24:20,600 --> 00:24:23,300 basically everything. I couldn't log into my email or 500 00:24:23,300 --> 00:24:26,000 even check my calendar. I called my boss back and we 501 00:24:26,000 --> 00:24:28,700 just sobbed over the phone because she was also finding out 502 00:24:28,700 --> 00:24:31,200 about by layoffs for the first time today to started getting 503 00:24:31,200 --> 00:24:33,900 calls from a bunch of my Coworkers and started finding 504 00:24:33,900 --> 00:24:35,700 out. Who else was let go on my team 505 00:24:35,700 --> 00:24:38,600 and some neighboring teams as well, but I think the worst part 506 00:24:38,600 --> 00:24:42,000 is that it seems like no one was consulted on this decision and 507 00:24:42,000 --> 00:24:44,200 everyone was just finding out about the layoffs at the same 508 00:24:44,200 --> 00:24:46,100 time. It just felt like a really bad 509 00:24:46,100 --> 00:24:48,700 game of Russian Roulette. And there was no consistency 510 00:24:48,700 --> 00:24:51,000 around who was let go. It was also not 511 00:24:51,000 --> 00:24:53,800 performance-based, so it just felt really random. 512 00:24:53,800 --> 00:24:56,200 I opened up LinkedIn, which honestly was not great for my 513 00:24:56,200 --> 00:24:58,300 mental health. There were so many people who 514 00:24:58,300 --> 00:25:01,200 were in the same boat that were both equally as shocked and 515 00:25:01,200 --> 00:25:04,200 blindsided, by It said help me feel a little less alone. 516 00:25:04,200 --> 00:25:06,500 Honestly, I spent so much of the day crying that. 517 00:25:06,500 --> 00:25:10,400 I just felt so tired from being sad and wanted to do something 518 00:25:10,400 --> 00:25:11,800 that would just make me feel better. 519 00:25:11,800 --> 00:25:14,900 Luckily I have an annual pass. So I headed over to Disneyland 520 00:25:14,900 --> 00:25:16,900 because I wanted to go eat my feelings. 521 00:25:16,900 --> 00:25:20,400 So I started off with a cinnamon Galaxy churro and so she gets 522 00:25:20,400 --> 00:25:22,800 laid off from Google and heads to Disneyland for the day. 523 00:25:22,800 --> 00:25:25,500 Now, what she said here was correct as far as I can tell, 524 00:25:25,500 --> 00:25:29,600 there was no performance-based layoffs at Google, lots of 525 00:25:29,600 --> 00:25:32,100 people that had very high marks got laid off. 526 00:25:32,200 --> 00:25:34,700 Lots of people that were tenured that worked at Google for a long 527 00:25:34,700 --> 00:25:37,900 period of time, got laid off and the CEO of Google. 528 00:25:37,900 --> 00:25:40,800 Sundar pichai is taking a lot of heat right now. 529 00:25:40,800 --> 00:25:43,700 For the way that this happened. In fact, Google just recently 530 00:25:43,700 --> 00:25:46,600 held a town hall where they described it as animated because 531 00:25:46,600 --> 00:25:49,500 there's a lot of very frustrated employees. 532 00:25:49,500 --> 00:25:52,300 And in this case, I actually agree with many of the employees 533 00:25:52,300 --> 00:25:55,200 complaints in the town hall. Sundar pichai, is taking a lot 534 00:25:55,200 --> 00:25:58,200 of heat and a lot of different accusations and questions and he 535 00:25:58,200 --> 00:26:02,500 tries to justify the reason that they over hired and he tries To 536 00:26:02,500 --> 00:26:06,600 explain why Google over hired and this is an explanation that 537 00:26:06,600 --> 00:26:10,700 I just don't understand. But Chie said that 2021 marked 538 00:26:10,700 --> 00:26:14,800 quote one of the strongest years we've ever had in the history of 539 00:26:14,800 --> 00:26:17,900 the company. With 41 percent Revenue growth 540 00:26:18,100 --> 00:26:22,200 Google increased headcount to match that expansion and pichai 541 00:26:22,200 --> 00:26:26,100 said that the company was assuming growth would persist. 542 00:26:26,500 --> 00:26:31,000 Now, first of all, did Sundar, pichai really believe that 543 00:26:31,000 --> 00:26:35,700 growth would You at a rate of 41 percent for a company, the size 544 00:26:35,700 --> 00:26:38,900 of Google because I have a very difficult time believing that. 545 00:26:38,900 --> 00:26:41,800 Any reasonable person would believe that growth would 546 00:26:41,800 --> 00:26:45,200 persist at anywhere close to this level that there would be 547 00:26:45,200 --> 00:26:48,700 no reversion to the mean, I'm not Sundar pichai. 548 00:26:48,700 --> 00:26:51,700 I'm not as knowledgeable as him, I'm not as smart as him but I've 549 00:26:51,700 --> 00:26:54,900 highlighted many times on my channel, the anomaly of growth 550 00:26:54,900 --> 00:26:58,900 they had in 2021 and how that was likely not going to continue 551 00:26:59,000 --> 00:27:01,400 when things like that happen. There's almost always a 552 00:27:01,408 --> 00:27:04,000 reversion. So surely Sundar pichai knew 553 00:27:04,000 --> 00:27:06,900 that this growth was not going to persist and him saying that 554 00:27:06,900 --> 00:27:10,000 he hired thirty thousand extra employees on the assumptions 555 00:27:10,000 --> 00:27:13,600 growth would just continue in perpetuity I think is a little 556 00:27:13,600 --> 00:27:16,800 bit upsetting I don't buy that excuse at all but that was the 557 00:27:16,800 --> 00:27:19,000 decision that was made in that context. 558 00:27:19,000 --> 00:27:21,600 We made a set of decisions that might have been right? 559 00:27:21,700 --> 00:27:26,500 If the trends continued again if the trends continued if Google 560 00:27:26,500 --> 00:27:31,700 kept growing at 40%, if YouTube Revenue kept growing at 40% per 561 00:27:31,700 --> 00:27:34,600 year There's no way these Trends were continuing at that rate of 562 00:27:34,600 --> 00:27:37,700 speed aside from that. There's another problem I have 563 00:27:37,700 --> 00:27:39,400 with Sundar pichai, is assumptions here. 564 00:27:39,700 --> 00:27:43,200 He says, you have to remember that if the trends had continued 565 00:27:43,400 --> 00:27:46,500 and we had not hired to keep Pace, we would have fallen 566 00:27:46,500 --> 00:27:48,700 behind in many areas of the company. 567 00:27:49,300 --> 00:27:52,200 Now this part I'm a little bit baffled as well. 568 00:27:52,200 --> 00:27:55,400 I don't understand it. Google is a highly scalable 569 00:27:55,400 --> 00:27:58,900 business with a ton of operating leverage with an extremely 570 00:27:58,900 --> 00:28:01,900 efficient Core Business in Search and YouTube. 571 00:28:02,200 --> 00:28:05,800 Properties that they own are not like Amazon's they don't have to 572 00:28:05,800 --> 00:28:08,900 hire warehouse workers. They're not like Union Pacific. 573 00:28:08,900 --> 00:28:11,700 They don't have to lay Railway to grow their business. 574 00:28:11,700 --> 00:28:15,600 Their company, that is incredibly efficient, Google 575 00:28:15,600 --> 00:28:18,500 searches one of the best highest margins most efficient 576 00:28:18,500 --> 00:28:20,900 businesses on Earth. So I have a difficult time 577 00:28:20,900 --> 00:28:24,200 understanding, why they would have fallen behind if they 578 00:28:24,200 --> 00:28:27,500 didn't hire, as many employees. So I think a lot of this is the 579 00:28:27,500 --> 00:28:29,800 fault of a management. And I think it's something that 580 00:28:29,800 --> 00:28:32,900 a lot of the bigger tech companies did a Has on over 581 00:28:32,900 --> 00:28:36,100 hired as well, Microsoft probably over hired in parts of 582 00:28:36,108 --> 00:28:39,200 their company, but Google, I think was the one that did this 583 00:28:39,200 --> 00:28:41,200 to the most extreme. Now, for those of you that might 584 00:28:41,200 --> 00:28:44,000 accuse me of having hindsight bias and saying everything's 585 00:28:44,000 --> 00:28:47,100 20/20 in hindsight, I wasn't just saying this. 586 00:28:47,100 --> 00:28:51,500 In hindsight, I have videos mid last year, over six months ago, 587 00:28:51,700 --> 00:28:53,900 questioning why the company was still hiring. 588 00:28:53,900 --> 00:28:57,300 So many employees, this has been an ongoing problem that I've 589 00:28:57,300 --> 00:29:00,200 highlighted time and time again with Google and they say, in 590 00:29:00,200 --> 00:29:01,800 terms of the employees that was laid off. 591 00:29:01,800 --> 00:29:04,700 There was A lot of things considered their skillset, how 592 00:29:04,700 --> 00:29:08,200 crucial their role was their experience, their relationships, 593 00:29:08,200 --> 00:29:10,300 their performance, so on, and so forth. 594 00:29:10,400 --> 00:29:13,700 So, there is no one thing that determined it, I think a lot of 595 00:29:13,708 --> 00:29:16,300 it just came down to where they could cut costs the most. 596 00:29:16,400 --> 00:29:18,500 Now, the last thing that I want to mention is a note from 597 00:29:18,500 --> 00:29:21,800 Morningstar, and I want to give Morningstar an award hair for 598 00:29:21,800 --> 00:29:25,400 this note, the award that I'll give them is being latest to the 599 00:29:25,400 --> 00:29:27,500 game. The latest one to figure 600 00:29:27,500 --> 00:29:30,600 something out that the last person to actually figure out 601 00:29:30,600 --> 00:29:33,400 the obvious. They Have apple here, which they 602 00:29:33,400 --> 00:29:35,500 currently give a three star rating. 603 00:29:35,600 --> 00:29:39,000 And then just recently, they decided to upgrade Apple from a 604 00:29:39,000 --> 00:29:43,100 narrow economic moat to a wide economic mode and they've raised 605 00:29:43,100 --> 00:29:46,300 the fair value to $150. So, there you have it from 606 00:29:46,300 --> 00:29:49,200 Morningstar. They finally acknowledge the 607 00:29:49,200 --> 00:29:51,700 obvious and I thought we should take some time and appreciate 608 00:29:51,700 --> 00:29:53,500 them for doing that. Now, that's all for this 609 00:29:53,500 --> 00:29:55,300 episode. I hope you enjoyed and I'll see 610 00:29:55,300 --> 00:29:33,400 you in the next one. Have apple here, which they 611 00:29:33,400 --> 00:29:35,500 currently give a three star rating. 612 00:29:35,600 --> 00:29:39,000 And then just recently, they decided to upgrade Apple from a 613 00:29:39,000 --> 00:29:43,100 narrow economic moat to a wide economic mode and they've raised 614 00:29:43,100 --> 00:29:46,300 the fair value to $150. So, there you have it from 615 00:29:46,300 --> 00:29:49,200 Morningstar. They finally acknowledge the 616 00:29:49,200 --> 00:29:51,700 obvious and I thought we should take some time and appreciate 617 00:29:51,700 --> 00:29:53,500 them for doing that. Now, that's all for this 618 00:29:53,500 --> 00:29:55,300 episode. I hope you enjoyed and I'll see 619 00:29:55,300 --> 00:29:56,000 you in the next one.