Podcast’s Essential Bites:
[6:23] EE: "For the first time, the commission-free online stock trading company, Robinhood, is offering retirement accounts. The company will offer IRAs and Roth IRAs, and also said it would pay a 1% match on all contributions made through the program. In other words, for every $100 you deposit, Robinhood will add an extra dollar."
[6:48] SG: "Robinhood [...] [was] getting about two thirds of the revenue from commissions on options and cryptocurrency. [...] They built a shitty business that wasn't sustainable. And as a result, the stock is off 90%. My prediction is it goes down another 90%. So they need to actually find something that's enduring. And retirement accounts are sticky capital. [...] If you can set yourself up as the retirement account for young people [...] that are about to come into their prime income earning years, it's probably a good idea. The problem with this is there's nothing differentiated here. [...] I think what they're trying to do is take advantage of the fact that they have several million accounts and offer a new product."
On Apple's Valuation:
[15:02] AD: "I own Apple, because I think it is the most valuable franchise in the world in the iPhone, but the terrifying thing for me in Apple is I'm buying a smartphone company. [...] It lives or dies with a smartphone. It has the most valuable franchise, but it's also the most concentrated in one product. [...] The thing I find most impressive about Apple is the fact that they've had the discipline not to invest $200 billion in cash. [...] They can buy Netflix, they can buy Disney. [...] I think that discipline is what Tim Cook has brought to the company that I think has made Apple, the most valuable company in the world."
On Amazon's Valuation:
[17:56] AD: "I've looked at how [Amazon] has changed over the last 25 years. They used to lose money. They've at least started to make money on Amazon Prime. [...] So I think they're moving in the right direction. They're not moving at the speed I'd like them to. So I think Amazon is cheap at their $800 to $900 billion market cap. They're a company that knows how to load up bad earnings reports with all the bad news. [...] Maybe I'm attributing too much power to them, but they're masterful at bringing expectations down and then beating them in future periods."
On Big Tech:
[20:31] AD: "I think there's a lot of potential in tech, especially that has been marked down a lot over the last year.US stocks have held up surprisingly well, given how much risk premiums and risk free rates have gone up this year. [...] I think that now my implicit cost of equity for US stocks has increased by the most I've ever computed in a single year in the 40 years that I've been tracking that number. It's gone up from about 5.5% percent to almost 9% during the course of this year. And if you told me at the start of this year that your required return on equities is going to go from 5.5% to 9%, what do you think will happen to stocks? My answer would have been about a 30% drop in stock prices. And we haven't seen that. So in many ways, I think stocks have been resilient, given what's been happening in the macro environment."
[24:11] SG: "My prediction is that Disney is going to make a big acquisition in the first half of 2023. [...] I think the ad supported media ecosystem is under attack and [Iger] needs to do something big and bold and also he has the license and credibility to do it. [...] I think if they were to acquire Roblox which has seen its stock [...] get hammered pretty severely, [...] they could push Disney parks to Roblox. They could create the Disneyverse. [...] More than half of kids in the US under the age of 18 are on Roblox. And I think the idea of taking the parks and some of that imagination and joy and characters [and] disperse it out to the Roblox community, if you will, would be an interesting idea."