Investing Unscripted Podcast 126: October 2024 Mailbag

In partnership with

Invest Wisely with The Daily Upside

In this current market landscape, we all face a common challenge.

Many conventional financial news sources are driven by the pursuit of maximum clicks. Consequently, they resort to disingenuous headlines and fear-based tactics to meet their bottom line.

Luckily, we have The Daily Upside. Created by Wall Street insiders and bankers, this fresh, insightful newsletter delivers valuable market insights that go beyond the headlines. And the best part? It’s completely free.

Join 1M+ readers and subscribe today.

Note: All transcripts are edited for clarity. We may earn commissions from some (not all) links. Thanks for the scratch.

Jeff Santoro: [00:00:00] Listen up folks, time could be running out to lock in a historic yield at Public.com. You can lock in a 6% or higher yield with a bond account. Here's the thing, the federal reserve just announced a big rate cut, and the plan is for more rate cuts this year and in 2025 as well. That's good news if you're looking to buy a home, but it might not be so good for the interest you earn on your cash.

So, if you want to lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade bonds, you might want to act fast. The good news. It only takes a couple of minutes to sign up at Public.com. And once you lock in your yield, you can earn regular interest payments, even as rates decline, lock in a 6% or higher yield with a bond account at Public.com/InvestingUnscripted, but hurry. Your yield is not locked in until you invest brought to you by Public Investing. Member FINRA and SIPC. As of 9/26/24, the average annualized yield to worst across the bond account is greater than 6%. [00:01:00] Yield to worse is not guaranteed. Not investment recommendation.

All investing involves risk. Visit public.com/disclosures/bond-account for more info.

​

Jason Hall: Hey everybody. Welcome back to Investing Unscripted where we ask and answer the hard questions about investing. I'm Jason Hall and coming in hot, the voice of the people, Jeff Santoro. Hey, Jeff. 

Jeff Santoro: I don't know if I'm coming in hot. I'm coming in rushed.

Jason Hall: Fair enough. That's okay. But you know what? 

Jeff Santoro: I don't have any like hot takes. I'm not angry about anything. I'm just rushed. Busy. I'm a busy guy. 

Jason Hall: Okay. It's okay to be busy. It's okay to be busy. We are excited about a mailbag episode. 

Jeff Santoro: Yeah. We, I gotta say, our loyal listeners and some new listeners who are also loyal, some of our regulars and some new folks sent us a lot of questions.

In fact, we got so many questions and comments. For this episode that we're actually going to take the last few that received in the last couple of days, and we're actually going to punt them until November because we had too many to answer in one [00:02:00] episode. So this is the, this is the world we want to live in, Jason.

Jason Hall: Yeah, that's exactly right. Our, listeners are definitely, answering the bell about sending us questions throughout the month. It's really useful and it really helpful for us to be able to have plenty of things to talk about. So I'm excited and I think we just have to get right to it because I really want to try to answer as many as we can.

Any housekeeping you want to do before we get going? 

Jeff Santoro: No, I mean, if, people keep sending us questions like they did this month and they can be at any point, you know, if you listen to any episode, you got a question or a comment, some of the ones we're going to go over are actually more comments than questions, but I think they're going to spark some interesting conversation.

So keep doing that, check out the YouTube channel, sign up for the newsletter, give us ratings on the podcast apps. That's it. 

Jason Hall: I'm going to pitch the Savvy Trader real quick, Jeff. We don't talk about that a lot on here. It's doing well. We're beating the market in a bull market. I think I want to really highlight that.

We're going to be picking our next stock that we're adding to the portfolio next week. So check it out. You find it on SavvyTrader. There'll be a link in the [00:03:00] podcast description here, find it on the transcript, a lot of places you can find it, but check it out. I think there's some good stuff happening right there that you might want to actually give us money for.

Jeff Santoro: All right. First question. All right. First question comes from Ryan on Twitter. And actually it's a comment, not a question. I've always liked the idea of having. Cash set aside as dry powder for market downturns, but so far I have not been disciplined enough to not spend it the second it hits my account about three months ago, I decided it was time to stop being I'll, edit this for our family members a moron that bought into companies based solely on borrowed conviction and actually did some research on my own using the ideas as a starting point. I will allow myself to buy another stock. I will not allow myself to buy another stock until a, I've come up with a more formal process for evaluating companies before I buy and be actually follow through with the entire process without skipping steps due to FOMO.

The result. I now have a 1. 4% cash position, the largest I've ever had, and I still haven't finished with part a from above. [00:04:00] However, I am researching ideas for my process, such as taking pieces from David Gardner's risk assessment and traits of a rule breaker and figuring out how to actually do a DCF, which is a discounted cash flow, because I'm a math spreadsheet nerd and it sounds exciting.

I just want to stop right there and just give a shout out to my spreadsheet friends. Yeah, I'm not a math guy, but I do love my spreadsheets. 

Jason Hall: Yeah, no, I want to give a shout out to our friend and listener Ryan here for evolving. I think that's great. One thing you're going to find Ryan and everybody else, this is going to evolve to what you're trying to do, because you're going to figure out what are the things that you decided that you really want to do that turn out to be arbitrary and don't actually help your process and you'll lose them and you'll find other things that do help you.

So keep evolving and you'll keep getting better. I think it's great. 

Jeff Santoro: Yeah, no, I agree with that. I, I totally. This email resonated with me because I've gone through various versions of myself [00:05:00] in terms of investing. And I certainly understand the, not so much skipping the steps due to FOMO.

But the thing that hit me was like the, I spend the money the second it hits my account, because I've often said to myself, let me, Let me let the cash grow for a couple of months, you know, especially right now, where I do feel like I texted you the other day, I look through all my investments, all my stocks, and I couldn't, there was nothing I felt super compelled to add to.

And a lot of that was valuation based. And there was something on my watch list I wanted to buy. And that was mostly valuation based as well. So I said to myself, self, this seems like the perfect time. To maybe skip a month and keep that cash as cash so that when, and if we have a downturn, you have a little more to buy it.

Stocks at a better price. What did I do? I came back the next day and I bought a new stock, right? So I get it. I get it. But if, the last thing I'll say about this one, look, if this [00:06:00] podcast and our conversations and writing into us can help anyone. You know, at least have someone to talk to about the process and the way that they're changing.

Then we've done our job here. So 

Jason Hall: yeah, no, I agree with that. 

Jeff Santoro: Okay. Next. All right. This one comes from at alien investor on Twitter question for Jason. I understand that most, if not all of your invested wealth is in individual stocks. How did you achieve that? When most 401k plans do not allow investing in, into individual stocks?

Okay. 

Jason Hall: Well, there's a key word in your question. Most, most, not all, not, not all. Right. So first of all, I'll talk about this 

Jeff Santoro: cause I, this is something that I, get frustrated with in my side of the world. 

Jason Hall: it's definitely very common, to not be able to buy individual stocks in a, in a 401k through your employer.

I'm self employed, right? So because of the fact that I'm self employed, I have a solo 401k. I can buy whatever I want. Fidelity, is, is the brokerage that I use [00:07:00] and my experience, I haven't looked around, I haven't shopped around in a few years, but the last time that I looked fidelity still had the best solo 401ks, there's no fees.

It's, I mean, it's, it works just like a regular brokerage accounts only with the rules around a 401k, right? So, that's great. I've also been fortunate. For my wife that she has worked for large employers and it's the industry that she works in. I think it's pretty typical that they have really good benefits in their retirement plans.

And so she's had access to what's called a self directed account. So you can pick individual stocks, inside the 401k. So some are really restrictive. company in the industry that I know of that they're self directed 401k. You can only buy mutual funds, right? You can't buy ETFs.

You can't buy individual stocks. You can only buy mutual funds.

Jeff Santoro: So you can choose which expensive fund you invest. 

Jason Hall: Right, exactly. So, and there's [00:08:00] reasons they do it, right? Because the reality is when it comes to individual investing, humans are the problem, right? Where our own nature gets in the way and mutual funds, you have to buy larger dollar amounts.

You can't just buy individual, Shares like you can with an ETF, you have to hold them for longer periods of time. You can't day trade them. The prices are set at the end of each market day and you're buying it from the fund directly. So mutual funds are, are more restrictive. But again, the point is just a lot of good luck, you know, more, more evidence of, good luck helping Mr.

Jason do do well, so. 

Jeff Santoro: Yeah, I, I agree. I just want to pause on this and add, you know, it's worth looking into and asking questions of whoever is in charge of benefits for wherever you work to, to really find out what the options are that are available to you. Because I know. So I, I have a 403b. That's what educators have.

My wife has a 401k [00:09:00] and if it wasn't for me logging into her benefits stuff or her logging in for me and me clicking around, like I wouldn't have known what the options were available. I don't believe that she has the self directed option, although. It could be something that I just have missed. But regardless, she has no interest in buying individual stocks in her 401k anyway.

So it's a moot point, but just, and this is a very niche example, but by virtue of me asking a lot of questions to a lot of people several years ago, I was able to find a self directed thing that I could invest in, in my 403b that apparently is only offered in To people in New Jersey with this one company and all of the other options I have are not great.

They're like super high fee vendors in bad 401ks. So I found like the, the purple unicorn in the sea of bad investing options. And I wouldn't have done that had I not asked a lot of questions. Right. So I think that's, that's the takeaway for me is [00:10:00] ask, find out, make sure you're not missing anything, talk to a benefits manager, and, you know, If, if there are no great options and you want to buy stocks, max out your IRA and, and, you know, and, and buy some stuff in a brokerage, like those are ways to still get that exposure, even if you're dollar cost averaging into a mutual fund in a 401k.

Jason Hall: I want to add one thing. The last thing I want to say about this, I think it's really important. We've talked about it before, but definitely talk to the benefits people at your company, especially if you work for a small or medium sized business, they probably don't really have experts. Usually it's like the HR people.

Who generally don't know finance and investing, right? But they handle benefits and that kind of stuff. So it gets thrown on top of them. And there's a lot of small and medium sized businesses that need employees that have specialized knowledge in this sort of thing to be involved in to help the company do better by their employees.

So it may be an opportunity for you to leverage those skills in a way that benefits the company that you work for in a way that you didn't even think about. And also you get something better, you get a better 401k as a result. [00:11:00] And also don't. So many people, like, especially if you talk to a financial advisor, the it's commission based and they're not a fiduciary, I've heard financial advisors tell people to not put money in 401ks because the advisor, they just want you to give them the money.

Right. And, and you, and they, and you walk away from the tax benefits, you walk away from the employer match, like real dollar amounts of benefit that even in crappy funds. Generally mean better total returns, right? So, so be really mindful about making that mistake and thinking you're the next Peter Lynch and you can just outperform by buying stocks yourself.

You probably can't don't, don't miss the free money. 

Jeff Santoro: Yeah. And, and our, our former guest and colleague at the Molly fool, Robert Brokamp, who's an expert in retirement, all things retirement. says that a lot. I've heard him say that a lot, that you should just go talk to your benefits people and say, Hey, we should have better options.

And a lot of times you can affect that change. So right. It's good to, good to remember. All right. Our next [00:12:00] question comes from adventureswithroobs. 

Jason Hall: By the way we learned thank, you for clarifying this. Roobs, Ruby is adventureswithroobs's dog. 

Jeff Santoro: Yes. 

Jason Hall: So, 

Jeff Santoro: yeah, because we did question this username a couple, a couple of months ago on the, on the, on the mailbag.

Yeah. It's also fun to see we're getting a decent amount of questions from our Instagram account. So if you guys are on Instagram and you want to follow us there, do that. Yeah. We're on all the 

Jason Hall: socials too. If you mess around on TikTok, 

Jeff Santoro: we put stuff there too. So maybe we'll pop up in your, in your TikTok algorithm one day.

All right, adventureswithroobs asks, how do you value a company that is not yet profitable? There are a lot of high growth companies that are not yet profitable, especially in the tech industry. Just curious how you go about investing in these companies. 

Jason Hall: So, I'm going to say this just to trigger our friend, Tyler price to sales.

Yeah. Yeah. No, not, not on its own, but price to sales can, can be directionally useful. [00:13:00] When you're comparing a company to maybe it's profitable peers. It can give you some idea from, from that, like just a quick and dirty starting point. I think it can be useful. But typically what I do is use cash flows, cash from operations as a starting point and free cash flow as well.

And look at the trends Jeff, because what you should see is. growth rates of those cashflow metrics improving, even if they're burning cash, generally, they're going to get to positive cashflow before they get to gap profitability and free cashflow will catch up with operating cashflow and move positive.

So it's a good thing to follow again, looking for the trends, looking at the growth rates. You can look at the multiples. Like you might look, you see a stock that trades for 70 or 80 times a free cashflow. And it's like, wow, that's crazy expensive. It is, but if they're growing free cashflow 30% a year and there's a realistic possibility that can grow it, you know, a [00:14:00] 20 to 30 percent rate for the next four or five years, plus before that rate starts to drop into the twenties or teens, it's actually probably not crazy expensive because it's growing it so fast.

So those are usually the metrics that I'm looking at. 

Jeff Santoro: Yeah. I. When I look at companies that are not profitable and sometimes even not yet cashflow positive, right? Cause then it, then it becomes harder to look at, you know, price for cashflow or something like that. It, to me, then it is, it's about two things and one that I actually do a lot and one that I want to hear your thoughts on.

So one that I do is just, it's looking for those trends. So if I'm looking back over the past, let's say two, three years, and I'm seeing those losses getting smaller and smaller and in both cashflow and, or. Profit, just, you know, bottom line profitability and that income. That's kind of what I look at more than valuation.

Like I don't want to say I ignore valuation, but I think I worry less about it if, you know, and that's where like the relative comparisons for like price to sales can help. So like [00:15:00] for, I'll just, if you're trending in the right direction, but you're trading for 70 times sales, that means that the market's pricing in eventual growth and a lot, a lot of growth.

and if the other. Not profitable companies that you want to compare them to are way less than that. Then you could say, okay, so this is probably on the higher. And now they might grow into that valuation and be fine. But those are the kinds, it's not an art. It's a science. Sorry. It's an art, not a science at that point.

The other thing that I think, I wonder if I've never really used this, but I, I was thinking about it recently. I typically ignore. Analyst estimates because they, they have different incentives for those are short term targets in, in, is, is my understanding. They have to come up with a price that that's going to be within a year because that's what their job is.

Right. But I do wonder for some of these companies that are. At the early stages and high growth, if it is worth just seeing what the analysts think that company is going to do in the next year or so, because that could give you an indication [00:16:00] of how much the price is based on hype versus maybe something that actually could come true.

I don't know. What do you think about that? 

Jason Hall: Yeah, I mean, I generally, if I'm looking at anything from an analyst, I'm looking at the words more than their numbers. Most of the time what are they saying? What are the catalysts? What are the headwinds? You know, that sort of thing. Why is the price target?

Yeah. No, exactly. Because here's the thing, you know, they don't know where the price is going to go any more than the rest of us do. And broadly analysts, you know, you could flip a coin and get this similar accuracy to those of analyst estimates and the guidance that they put out. But what they do know is the industries that these companies operate in.

And it's a great way for you to become a little more knowledgeable about the spaces that the companies that you're interested in operate in and the competitors and the competitive landscape and all of those things. So I think that's where analysts notes and things like that can be really useful.

Yeah. 

Jeff Santoro: Okay. That makes sense.

Hey everybody, we'll be right back, but first a word from our sponsors. [00:17:00] FinChat.io is the complete stock research platform for fundamental investors. They have all the standard financial data on more than 100,000 stocks globally. But beyond that, they have company specific segment end KPI data on around 1, 800 stocks.

So for example, do you want to see Nvidia's data center revenue growth? They've got it. Do you like to track Apple's iPhone sales? They've got that too. Or how about nights and experiences booked for Airbnb? You guessed it. They've got it. And they just added around 8,000 ETFs and mutual funds to the platform.

The breadth of FinChat's data is truly one of a kind. I use FinChat every single day as I'm researching the stocks in my portfolio, specifically when I want to see how they're doing on KPIs that FinChat is famous for. So to get 15% off any paid plan, go to FinChat.io/Unscripted. That's FinChat.io/Unscripted to get 15% off any paid plan today. The [00:18:00] link will be in the show notes.

Hey, Investing Unscripted listeners. This episode is brought to you by our friends at Yellowbrick Investing. Yellowbrick is an aggregator of the best stock pitches across the internet. By tracking thousands of blogs, newsletters, fund letters, podcasts, and more, they're able to collect and summarize the best stock pitches from all over and bring them to you in one single place.

Think of it like a modern value investors club. I have to say, this is pretty cool. I can just type in the company I'm interested in and get a bunch of different stock pages from across the internet. It helps me think through new ideas and find opposing points of view on the stocks I'm interested in.

And the best part is access to Yellowbrick is completely free. Try it for yourself. Simply go to joinyellowbrick.com and search a company or ticker you're interested in. You're bound to find a great report on just about any company. That's joinyellowbrick.com.

All right. Let's move on here. We had a question from Simon via email. Two questions actually. Okay. First, how much do ethical considerations like environmental, human rights, et cetera, play a role in your [00:19:00] stock buying decisions? And secondly, do you ever listen to your gut more than your head when making a decision?

I know I should have done so on a couple occasions, a couple of occasions. I think each of these could actually be its own episode, Jason. We could go on and on with these, but let's, let's take them one at a time. In your investing, where do you fall on the ethical considerations spectrum? 

Jason Hall: I don't want to say it doesn't matter because it does but just my personal, my personal experience.

I won't buy tobacco companies because I've lost a lot of family members from the impacts of, of that industry. That's just about the only industry that I have circled that I say I won't buy. For ethical reasons, I own companies that, I mean, I, I've owned shares of Transocean, right? One of the companies that was in the middle of one of the worst, offshore oil disasters in history.

Jeff Santoro: Why do you hate the ocean, Jason? 

Jason Hall: Yeah. I don't hate the ocean as much as I love money. [00:20:00] I'm, I'm, I know that sounds terrible, but no, I'm kidding. Everybody listens. You should know. I'm just kidding around. But I think about of economic necessity with businesses. I don't want to crib, our friend, Jim Gillies too much here. Who's talked about, you're not buying stock from these, these companies. You know, you're not giving your money to the companies.

Yeah. Buying stock from another investor, right? Use your investments to make the world as you want to see with the money that you then put back into the world, right? He talks about that and I kind of bind to that a little bit. So not, not much, not much. I don't really want to say much more about this cause I'm probably just going to piss some people off.

Jeff Santoro: So I've. I've sort of evolved on this when I was brand new and just learning about all this. I was very much like, I'm only going to buy companies that I believe in and do a good thing. And I've largely stuck with that. But what you learn over time is no company does everything you want them to do, you know, and you'll find a company that you think does good in the world.

Then you'll find out their CEO donates to the political [00:21:00] party. You don't agree with, or, you know, whatever that is. Right. So you'll always find someone. Some reason, or they made one decision here that you question or, you know, so there's no perfect company. So I, I had to get, I had to let go some of that just in order to be an investor in anything.

Yeah. I. Great. I actually kind of do like that way of thinking, which is make money any way that you can, and then use that money to make the world better. Because you could think of that in any different way. Like I could have 10 million sitting in an account when I'm 90, and I could decide to donate that to a charity I really care about, or it could just be the financial freedom I get from my investment, allowing me to retire early, then I'm able to volunteer at the hospital, right?

Or whatever. You're also, you're opening, 

Jason Hall: you're opening up a good professional career path for a younger person that'll be replacing you. So. Retiring early makes the world a little better too, stimulating the economy. I never thought of that. I'm 

Jeff Santoro: [00:22:00] going to retire right now. 

Jason Hall: There you go. There you go. I'm doing it for the youth.

Here's, so I love, I do, I do love David Gardner's quote, you know, invest in the future you want to be. Make your portfolio 

Jeff Santoro: reflect the future you want, yeah. 

Jason Hall: Right. I love that. But I think there's a little bit of this just, I think part of the beauty of that is just if you invest in the future, you're investing in disruptors and innovators, right?

Which can be a pretty great way to be successful. But here's like this sentence, I think sums it up for me. Investing is already really damn hard. If you start applying arbitrary rules, that further limit the pool of investments. You're making it even harder to succeed. 

Jeff Santoro: Yeah. Well, so here's where I landed with it.

Ultimately, like nothing's on my never list really, but I just, now that I'm at a point where I pass on more things than I. Don't pass on in terms of just how my process has evolved. And if you want to hear more about how my process has evolved, we just did an episode on that a week or two ago. [00:23:00] But I, I find myself because I'm passing on most things I just pass on the things that I don't want to root for. So for me, it's not so much an ethical thing anymore. It's just I want to be able to root for the companies in my portfolio. I want to be happy when they do well. And if I owned, I don't know. Let's just use tobacco as an example. If I owned a tobacco company and I'm listening to an earnings call and they're like, revenues are up 30% because more people bought cigarettes.

 I guess it's great. Cause I'm going to make more money, but it's kind of a bummer. I don't really want more people smoking. So. That's where I landed. It's less of an ethical thing and just more, I want to be able to root for the company in some way. And I don't want to root for the things I don't believe in.

And I don't like smokers. So, 

Jason Hall: ethics often come in, when I'm really looking at a company, I do, because it's part of how I'm wired, right? It's part of how you're wired, but it's definitely not like part of my primary framework. 

Jeff Santoro: All right. So this is almost a good segue into the second part of his question.

Where do you fall on the spectrum of using your gut or not using your [00:24:00] gut when you're making a decision? 

Jason Hall: I can't remember which episode we talked about this on but one of the things that I've come to learn and I, and I've used, this is another turn of phrase that I've used before. People, people don't rise to the occasion.

They fall to the level of their training. And I think it's the same way with investing and what I found is that when you're inexperienced at something like this, your gut is just your biases firing, right? You're just the way that you're wired to react to stimulus that's telling you what to do, not.

Years of experience and knowledge about a thing and acting based on seeing a clear opportunity to move. For example, I'll, I'll go back to the bank crash that we had last year, I guess it was. 

Jeff Santoro: Last March. 

Jason Hall: Yeah. Because I follow the banking industry for as long as I have. I mean, I cut my teeth as an investor coming out of the financial crisis, right?

So I've spent years and years. Studying banks and bank crises and what they look like and seeing opportunities. [00:25:00] It was the most clear time since the financial crisis that I can remember. Seeing what was going on in the banking industry and saying there is massive opportunity to aggressively buy high quality banks right now, right now.

bank stocks were crashing because there are a lot of investors who were going the other way because they saw risk when there was really opportunity. So, you have to be really careful about reacting to your gut because you know what guts are full of. 

Jeff Santoro: Go ahead and say it.

Jason Hall: Poop. They're full of poop. 

Jeff Santoro: I like that framing of the degree to which you trust your gut should be correlated to your experience level. 

Jason Hall: Yeah. 

Jeff Santoro: And, because I think you're right. I, when I think about the things I, I made gut decisions on when I was new, it was based on nothing. It was just based on vibes. And now if I feel like I have a gut decision on something, I'd like to think it's based on some experience and, and, and pattern recognition, I think a good way to think of it as this, if [00:26:00] you're listening to this and you've been in.

Your line of work, whatever that is for, let's just say a decade or more, there are probably decisions you make every single day that are gut decisions. You know, whether you're in construction or education or in science, you know, you, you see things and your brain's going, I've seen this a hundred times before it's it's X, or I've seen this a thousand times before it's Y.

And you just don't have that perspective. The first day you're at a job. And I think That's, that's the connection I'm making to what you're saying. You know, I, I see things in the world of education now, and I just recognize them immediately because I've been doing it for 24 years and I did not, I wasn't able to do that when I was 21.

So I I'll say the last thing I'll say about this one, then we'll move on for me where I am right now. I tend to trust my gut when it's a don't do it decision. And I tend to question my gut when it's a do it decision 

Jason Hall: [00:27:00] because 

Jeff Santoro: I feel like as I become a little pickier and skewed towards that, you don't have to swing at every pitch way of investing.

If I get the ick. Or I'm just not sure. It's just easier for me to just pass and go back to something I have high conviction in or go turn over another rock. And if I get something where I'm very, very excited, that might drive me to make a. Starter position or something where that's, it's a low stakes way of learning.

And, but if I'm very excited, like if I ever feel like I should 5% of my portfolio in this one thing, I, I will stop myself and not do that because I feel like I don't, that's where I don't trust my gut yet. And I'll probably feel differently about it five years from now and then 10 years from now and so on.

So 

Jason Hall: I don't know if you will, because I think that's really smart because it's, it reminds me of the. The, the idea of forced airs versus unforced airs, right? And the difference between professional tennis players and really highly skilled amateur players [00:28:00] is almost never their physical abilities. It's their ability to avoid those unforced errors.

And I think that's a transition that you've made where the error of commission, your guts telling you to do something and you're like, eh, I'm just going to not do it. And yeah, you know what, not doing it might be a mistake in terms of opportunity, but you also didn't make the mistake that could cost you money.

And you also, again, not doing, there's not doing it. There's not doing it yet. 

Jeff Santoro: Yeah. I mean, I'd much rather make, I mean, the classic example I I'm thinking of is when we did the portfolio contest two years ago and I, I picked meta cause I was, my gut was telling me they were going to really head in the wrong direction because of all the spending on the metaverse.

And I think the stock's up 300% since then. So that was an instance of my gut being wrong, but I'd rather make that mistake. And then buying, you know, whatever, 10,000 worth of a stock that goes to zero, 

Jason Hall: right? Well, I mean, the, the, the corollary there [00:29:00] actually is the unportfolio was essentially shorting, right?

Was what we were doing, because if it went down, technically it was going up based on what we were trying to do with the contest. So technically you shorted a stock that went up 4X. 

Yeah, well 

Jeff Santoro: in a fake on paper. I paper shorted at the exact wrong time. All right. This next question comes from one, a Canadian listener, a little bit of a long one.

So I'll try to get through it quick. We are going through the age old question in my house right now. Invest. Or pay off the house more quickly. Let me give you the details. In Canada, we have something called a tax free savings account. We can own investments in it. No taxes when it's pulled out. The current max contribution is $95,000.

It grows every year. Next year, you can add another $7,000. I can take it out at any time. And if you own Canadian companies, there's no withholding taxes on dividends. And I love dividends. Our accounts just grew past what we owe on our house. We have two years left till [00:30:00] we have to renegotiate our mortgage in Canada.

It's a five year contract, not a 30 year fixed loan, like the land of the free. And our interest rate is 2.09%. Our TFSA generates 7, 800 a year in dividends. Our mortgage costs, costs us $3,000 a year in interest. The math says invest and just pay down the house as fast as you can. What I'm thinking, grow and invest for two more years with the, when the mortgage is due.

So we don't liquidate the entire thing and pay down the house. And for context, I'm 35 and my wife is 37. So Jason, long email, a lot of details about Canada, but the basic question is, does the math make sense for them and their particular situation to pay off the mortgage? Keep investing. How do you see this?

Jason Hall: So this, this particular, listener we exchanged a little bit of back and forth to get a little more context and some more insights here, but I do want to be a little more general here on the show. So, Number one, this is always a kind of squishy one when it comes around. Pay off the house or not pay off the [00:31:00] house.

Jeff Santoro: It's a personal decision. 

Jason Hall: It is. And often it's, and often it comes down to like the sleep better at night sort of arguments. And the way I think about it is a couple of ways. Number one, I think, you know, it makes me sleep really well at night is having a pretty sizable nest egg investments in cash.

That means that I would be able to afford to pay my mortgage and other expenses. And other expenses in the case of a catastrophic event where lost employment, long term illness, severe accident, you know, the sorts of things where you need to have money. I think the money can be more valuable than having a paid off house.

I also want to point out that using debt for a mortgage is one of the smartest ways to use debt. You're, you're, you're using debt to buy an appreciating asset. You, you can have as long as you're alive, right? So I think that's, that's an [00:32:00] important thing to remember. Obviously in this case, they still have a couple of years at a 2% rate.

There is no reason in the world besides I want to pay off my mortgage. Okay. That it would be the smart thing to do to pay off the mortgage in the next couple of years. But, but Jeff, two years is short term when you're talking about stocks. So if you're thinking your mortgage rate's going to go up to five, six, seven percent in two years, and maybe in two years you do want to pay it off.

Time to start rolling some of that's that's equities, those stocks into CDs or cash savings or bond ETFs. There I go bringing up that, that again, but I know wake up, Jeff. Sorry. I didn't mean to, 

Jeff Santoro: what are we saying? 

Jason Hall: But the point, the point is it's two years and all it takes is one bad downturn and that $95,000 [00:33:00] is pretty much $70,000. 

Jeff Santoro: Yeah. it's a personal decision. I mean, you know, the, the famous person who has talked about this and we've probably mentioned it on the podcast is bestselling author, Morgan Housel, who used to work for the Motley Fool. And now he's just writes books and makes, you know, sells millions of copies.

He has said, even though he absolutely acknowledges that it was not the right financial decision, him and his wife decided to pay off their mortgage, whatever years ago. Yeah. Yeah. And because for them. That was the right move, the flexibility it gave them to not feel like they were locked into a certain place and all that kind of stuff.

And that's someone who really understands money, you know, 

Jason Hall: so would it be, would it be in bad taste for me to point out that Morgan Housel is also very wealthy. 

Jeff Santoro: Fair matters. I think it does matter. But I, the way I was going to go with that next though is like, so for me, for example, I'm not quite as wealthy as Morgan Housel and you're one, you're one number one best seller.

Hey. And a follow [00:34:00] up. Bestseller. Between Morgan Housel and I, we've written two best selling books. I hope we have them on the podcast one day and then I can make that joke to him. so I don't really, I hate debt just personally. Like I, I would not be comfortable if I had multiple types of debt in my life, but for some reason I've, I know it is debt.

I'm not an idiot. I don't ever think of mortgage debt as debt. It's like to me in my brain, and I'm not saying this is the correct thing. I've also been led a very privileged life. I just think of my mortgage payment is I have to pay to live, you know? Right. And, and it's, you know, I was smart in my buying of the house and it's not.

An amount of money that is an oversized burden on our finances and that kind of a thing. So for me, I think even if I had a higher interest rate, I mean, I locked in during the low time, so I'm okay. I don't know that I'd be in a rush to pay it off unless I was really feeling like it was [00:35:00] bothering me or I don't know.

So again, my point is, it is personal. Everyone has to kind of make that decision 

Jason Hall: for 

Jeff Santoro: themselves. 

Jason Hall: I want to offer an exercise that maybe people can do that are going through the same thought process to decide what makes sense for them. And this is what I've done to kind of work through going through some of the same thing.

I don't have pay off the money mortgage, just set aside. In investments but one of the things that we did when we bought our house three years ago now is we made a smaller down payment from the proceeds of the house that we sold in California. So we kept some of the proceeds from that sale actively to invest in, in stocks.

largely dividend stocks, dividend growth stocks, simply because the thought that that's going to outpace, we're going to be able to grow that money faster than it would reduce our interest expense. Like the compounding power of that. So just, I think a good exercise is just to kind of sit down and make a list of that, the, the, [00:36:00] the, that, that in this case, just under a hundred thousand dollars that this listener has however much money you have.

Make a list of things that you would do with that money down the road in the future, right? What would you do with it? What could you do with it? What would you love to be able to do with it? And then think about what could it be worth just over 5, 10, 20 years of appreciating at, say, 8%. So let's say we have a weak period, the market doesn't do as well as it has historically.

So that's something like low threshold, 5%, whatever. And do the math and figure out how big that number would be. How much money would you have then? And think about the value of that money or that future, that future wealth in making your life better versus paying off your mortgage now, starting back at zero and trying to reaccumulate.

every month or instead of making the mortgage payment, you're putting that money into, you know, in your investing account. So dream a little bit about, you know, how [00:37:00] that money, you could use that money in your life. That, that future wealth in your life. And, and sometimes I think that can actually help people deal with like kind of that little bit of fear of having the mortgage and start dreaming a little bit and being thinking about, you know, the, the power of compounding and, and creating wealth that can make your life better. 

Jeff Santoro: Yep. Smart. 

Hey everybody. We'll be right back. But first a word from our sponsors. Heads up folks, interest rates are falling, but you can still lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds on Public.com. You might want to act fast because your yield isn't locked in until the time of purchase.

Lock in a 6% or higher yield with a bond account only at Public.com/InvestingUnscripted. Brought to you by Public Investing. Member FINRA and SIPC. As of nine 26, 24, the average annualized yield to worst across the bond account is greater than 6%. Yield to worst is not guaranteed, [00:38:00] not an investment recommendation.

All investing involves risk. Visit public.com/disclosures/bond-account for more info.

Hey, Investing Unscripted listeners. My name is Brett, one of the hosts of the chitchat stocks podcast. If you love Investing Unscripted, we think you will love listening to chitchat stocks. On our show, we research individual stocks, interview investing experts, and well chitchat about investing every single week from hot stocks, such as Nvidia and Celsius, the hidden small cap gems.

We have something for every type of investor. Follow the chitchat stocks podcast on YouTube, Spotify, or Apple podcasts, and start discovering new investments today.

Jeff Santoro: All right. Next question comes from Colin. Bond prices crashed hard when stocks sold off in 2022. Are they still risky? Answer this one quickly because it is about bonds and we don't want to lose our audience. 

Jason Hall: Yeah. Fair enough. Fair enough. Number one yes bonds are risky, but it's, it's an investment.

Every, every [00:39:00] investment comes with some level of risk with bonds. If they're treasuries, obviously they're very, very, very safe. corporate bonds companies. Go out of business and file for bankruptcy and struggle all the time. And, you know, sometimes bond owners get a haircut, you know, don't, don't get all their money back.

That happens. What happened in 2022 was really unique. Interest rates skyrocketed. And when that happened, the value of existing bonds got crushed because why would I buy a bond from 2019 or 2020? That's pretty much gone. Paying a 3% yield when I could buy a bond that was issued in 2022, that's paying a 6% yield.

So to sell those bonds on the secondary market, they had to be discounted sharply. So, that's why bonds got crushed because interest rates skyrocketed. We're in a interest rate holding steady and declining environment, which is bullish for bond prices. Because again, you've got that bond that's paying [00:40:00] 4%.

If interest rates get lowered, new bonds are going to pay a lower interest rate, right? So, you can sell your existing bond for a premium to its face value to match the current yield of bonds that would be maturing at a similar period. So, now I think is a much safer period to be owning bonds because of the direction that interest rates are going to go.

So one of the reasons I reached the decision to start buying bonds now, specifically bond funds where the risk lives for retail investors, because if you bought a bond and you held a bond and you still hold the bond, you didn't lose money when the bond market crashed. You you're still going to get your full value, 

Jeff Santoro: right?

You're just getting a lower 

Jason Hall: yield. What's that? It's not getting repriced. It exactly. It only gets repriced when you sell the bond, right? So if you held it, you're just still getting a lower yield on the, the old, those older bonds. 

Jeff Santoro: All right. Not, not too bad. I mostly stayed awake. Would you say it's fair to say that the, the way bond prices, bond funds got crushed over the past several years was not [00:41:00] likely to be repeated?

I mean, anything's possible, but it was sort of a perfect storm of, of bad things that led to that. I mean, inflation went up and the pandemic and all that stuff. 

Jason Hall: Yeah, no, it was definitely a very unique circumstance. You could, you could say it was a black, a black swan event. Yeah, I think, I think that's fair.

Jeff Santoro: next question comes from Cunning Project on Instagram. You, you are doing some solid work on your podcast. Thank you, Cunning Project. Appreciate that. You're doing some 

Jason Hall: solid work. As a listener. 

Jeff Santoro: Yes. But Cunning Project asks, with Boeing in turmoil, who benefits the most? Airbus? FTAI? Heico? What do you think?

Jason Hall: So, definitely the the Heicos and the companies out there that are doing maintenance, doing service, like the third party companies, the third party parts companies, they're doing They're doing well because there's a lot of Boeing, 

Jeff Santoro: the fleet's going to stay older for long. 

Jason Hall: Yeah, right. So it's definitely good for them.

I don't think it really benefits Airbus because one thing we know about Boeing and Airbus both [00:42:00] is they have massive backlogs. They're not just throwing out, you know, buy, buy on Tuesday. You know, they don't have, they don't have a happy hour pricing. When volume is down, they're, they're Their lines are full, their order books are full, right?

You order a plane now, it's going to be years before you can get it. So I don't even think Airbus really benefits right now because they don't have spare capacity to take advantage of 

Jeff Santoro: it. 

Jason Hall: I 

Jeff Santoro: think in the long run, I wouldn't be surprised if we look back on this, you know, if someone writes a book on airlines 30 years from now and Airbus is in a better financial position or a better market share position in 30 years than it is now, I wouldn't be surprised if you could track that back to this.

Boeing period as the reason why, but in the short term, if you're just looking for where to invest some money to take advantage of this, I don't, I agree with you. I don't think it's going to be, 

Jason Hall: I'm going to, I'm going to throw another name out there. I haven't looked at the stock and I'm sure the market's already figured this out.

And the valuation probably reflects it. But [00:43:00] Aercap another one. Because they own most of the planes that you, like, you see a big announcement from an airline that's buying, agreed to buy a bunch of planes there's a good chance that Aercap or one of a few other companies actually is buying them and then they're leasing it to the airline.

So, they own all the used stuff, right? So when the leases come up, they're going to be able to re release it. Their market's going to be a little bit bigger until Boeing can get their house in order and actually start. manufacturing planes at any sort of capacity that's more than zero. 

Jeff Santoro: Yeah, I, this is, we don't have to go down this road, but I do wonder if they have some sort of government bailout coming their way.

Jason Hall: it's not gonna be a bailout. If anything, it's gonna be government taking over. I mean, they're just, they're such a mess. They're not gonna bail anybody out. 

Jeff Santoro: Well, yeah, maybe I, it just feels like one of those companies that's important enough to the country in terms of we, you know, we need, oh, they're gonna keep, keep operating savings.

But, but they don't, they don't need free money from the government to keep up. I'm not, to be fair, I'm not. Or to be clear, I'm not [00:44:00] advocating for that. Yeah. I just wonder if that's where this ends up. If they can't get their act together sooner rather than later, but different different podcasts for a different day.

Jason Hall: Yeah. So next we got a couple of questions. I think we still got one or two, a few, a couple more that we're going to answer, but I just want to acknowledge some that we got.

elcmsf on Instagram, asked us a good question about financial education and public schools. If this is such a big question, we're going to sit on it. I think this could be something that might be good for a show down the road. We've talked about it before no promises, but it's just, it's a big question.

We also got one from Firm Returns on Twitter. I just got a DM just in the past few days. I think this one was in reference to the show that we did talking about how much time you should spend researching a company. We actually had a couple of listeners give us their thoughts on this. And the thing that was really interesting about this one to me is how their process has changed.

And how [00:45:00] they take typically more time and also kind of sit on an investment or sit on an idea too. So I think that's really, really valuable. And the thing that stood out the most, and I love this, they talked about how half the time they spend is researching the industry, not necessarily the specific company.

I don't think most investors do anywhere near enough time studying industries. They just cherry pick companies. Or they hear about a company and they study that company and they don't really know the industry that it operates in really well. And that's a big disadvantage. it's like trying to hit go up against a really good pitcher and you've only studied fastballs.

And this pitcher has a really good curve ball. And you don't know what curve balls look like. You need to know the industries. 

Jeff Santoro: So I'm guilty of that. I don't do nearly as much research on industries of companies I'm interested in, but I think tied to that too, is sometimes in doing that, you find out that a competitor to the stock you're looking at is actually the better. Yeah. Investment. 

Jason Hall: [00:46:00] No, that's 

Jeff Santoro: exactly right. So we did get one from Lance on Twitter that I, I think we should answer today. Cause I thought this was a good one. So Lance says Howard Marks says that for a portfolio to be successful, a level of risk should be both targeted toward a goal and well compensated the best relationship between return and risk, but with targeted outcome, my risk capacity is higher than the risk I take.

I pick the best stocks I know of. My method is to rely almost all at it. My method is to rely on almost all stocks, making money over 10 years and keeping in mind that David Gardner would have done better if he never sold anything, I hold 120 stocks that have been recommended several times and mostly have had strong 10 year charts.

And at least half of them issue dividends to guarantee returns. I try not to look back and buy the best ideas after I compare a list of them. That ideally seems To keep me from having to worry about selling, but I have traded up a couple of times this year. What do you think about that? 

Jason Hall: Yeah, it's a process, right?

And it's a process that Lance is comfortable [00:47:00] with has become familiar with how it helps him, how somebody who's super successful like David Gardner has pointed out. Even he has missed opportunity by doing things like selling. So I think it's great. I really do. The fact that there's a process and there's some frameworks again, we've talked about it that help Lance go through his process of thinking about the actions and the steps he's going to take.

I think it's great. I really do. 

Jeff Santoro: I want to ask you a question, Jason, about a piece of that. The idea that someone like David Gardner has said, like he would have made more money had he never sold anything. Do you think that's a lesson the average individual retail investor should actually take or do you think that's a unique?

That's a something that's unique to David Gardner who's, a, just a successful good investor himself, but also has a team around him and, you know, he works at a company that picks stock So he's got advantages that like the average listener to this podcast doesn't have but I guess what I'm saying is I worry that people hang on to [00:48:00] obvious losers for way too long because they just say like well, you know Gardner says never sell. Yeah what do you think about that?

Jason Hall: Yeah, no, I think that's good. I think that context really matters. And I think particularly when thinking about the Gardner, Dave Gardner's examples, and I can back this up with my own experience. It's almost always selling winners too soon, not sitting on losers that then magically turn into winners.

That's a good 

Jeff Santoro: distinction to make. 

Jason Hall: Yeah. And I think that's the most important thing to remember. And again, it's the famous quote. Peter Lynch has said a version of this. David has said a version of this, but it's essentially comes down to picking your flowers and watering your weeds, Where you, you know, you want to do the opposite, But I think you do have to do some of both. And for me, I think the really important distinction I want to make is. Sometimes selling a winner still makes sense when you have to invert. And at some point, I've talked about a lot in recent [00:49:00] episodes, I'm getting to the point 50s, not far away. We've benefited from high income, the tailwinds of a really strong market for the better part of 15 years, where we are a lot closer to our financial goals.

And we wanted to, I have to start looking at the downside too. And not just the upside, sometimes taking some upside off the table, reducing exposure to a big winner and increasing exposure to higher floor stuff like fixed income investments, high quality dividend stocks, and not just the best growth ideas because of the downside risks that can sometimes come along with that is still the right, is still the right move because it's not always just about, you know, Growing your wealth.

Sometimes it's just about preserving some of it too. 

Jeff Santoro: Good points. All right, let's do one more that I think you can answer quickly. And then I have the, spam comment or question of the, of the month for you. So this one, our last real question comes from P H X mafia 13 on Twitter, who says, hi, I [00:50:00] wanted to reach out to you regarding SolarEdge.

The stock has absolutely cratered this year and is trading at 850 million valuation. I'm assuming he means market cap. Is this still a buy? 

Jason Hall: Yeah, I don't think SolarEdge is a buy right now. Stay tuned. We're going to do some videos on our, on our YouTube channel. Taking a look at it. Enphase just reported. That's it's sister company in the kind of duopoly for the panel level electronics, the micro inverters and inverters and that kind of thing. And Enphase has kind of threaded the needle with still being cashflow positive as they've kind of brought their operations down as demand and residential has just collapsed.

There was a little bit of a turn in the quarter they just reported, but it looks like it was just seasonality for the quarter because they're, or for the summer, because their fourth quarter guidance is for units to fall again. Units were down like 75%. Last year's fourth quarter. And they're saying this year's fourth quarter is going to be below even that.

So the cycle hasn't turned a SolarEdge just has not managed their [00:51:00] operations and their manufacturing capacity. Anything near as well as Enphase has, they're burning cash. They're losing money on a gap basis. I'm not touching SolarEdge until they show that they can get their discipline a little bit better to meet the size of demand.

Cause they're, they're going to have a lot harder way to go if they don't kind of get things clear. So I want to see some signs of better discipline from their operations before, before I would buy SolarEdge. 

Jeff Santoro: Can I ask you a larger question about the industry that we don't have to spend a lot of time on, but something I've been thinking about, cause I've had Enphase on my watch list for a while.

 It seems to me that one of the things holding me back, I think from investing in either those companies is getting solar panels still feels like a. Small amount of people, niche, mostly wealthy thing that people are going to do because it's just so expensive. I mean, even if you, even if you get a really low interest rate and finance it, it's, it can be the price of a car, you know, or more.[00:52:00] 

So is there any chance or theories or predictions that down the road it becomes substantially cheaper to put. solar panels on your roof to the point where, you know, the average Joe can do it. And if not, what, what's the 20, 30, 40 year growth story for this industry? 

Jason Hall: To try to give a short version of a somewhat long and complex answer, Yeah, a solar system for a house might cost $30,000 or $40,000, but what we're talking about really is offsetting the entire energy demands of an entire house for 25 years, right?

So if you contextualize what it really is, it's not crazy expensive. And It's almost always cheaper than just continuing to pay the utility grid for, for electricity [00:53:00] in almost every case. 

Jeff Santoro: So that I wonder, is it a marketing issue then? Is it, is there, is there a better way to introduce it to people?

I'm even wondering if the power companies should start to say things like, we'll put this on your roof for free. And then you, you know, I don't know. So we don't have to get into it. I'm just, it's that's the thing that holds me back. Maybe we can do a whole episode on this solar panel industry, but I just, I don't know, I don't, I don't know that I trust the longterm growth, like the TAM, I guess is the way I'm thinking of it.

Jason Hall: Yeah, no, I mean, it's still a massive market. And I mean, but the bigger question really, with. Because residential has different puts and takes than the utility scale. Yeah. Yeah. Utility scale is still like 60 or 70 percent bigger than that. I think bigger than that now, because we haven't seen anything like as big of a pullback in utility scale as, as we have in residential. 

Jeff Santoro: Yeah. I mean, I know the money makes sense in the long run, cause that's why you see. Every school in my area has solar panels on the roof, you know, but they're getting massive and they're, my [00:54:00] understanding is there's massive incentives available to do that. 

Jason Hall: I mean, there, there are, they're not, honestly, they're not substantially different than the residential stuff.

What's different. 

Jeff Santoro: Right. But a company or a business or a school district has the money to put out up front to do. Well, it's, but it's cheaper. 

Jason Hall: What it really comes down to Jeff is, is it's cheaper to put solar panels on top of, Commercial building and I'm going to include schools in that than it is to put them on a house because of scale, right?

If you're putting five times the number of panels up, your installation costs are just cheaper because you're doing more. So on a cost per watt basis that's, that's where you, you know, that's where you start. Saving money and the end of the utility scale, it's an order of magnitude cheaper for them.

Not the panels, but the installation costs and the wiring and all of those sorts of things. That's where the real marginal savings happen for commercial and utility. Where you still see more of that kind of stuff happening because it is truly It's cheaper. 

Jeff Santoro: Yeah, that makes sense. Okay. 

Jason Hall: Yeah, more later.

We'll do, we'll definitely do something more about that. [00:55:00] 

Jeff Santoro: Now, we didn't get any spam questions, so I had to find a spam comment. Now this one actually was in Korean, came to us on Twitter in a DM, and I had to stick it into the Google machine and translate it. So the comment, Jason, when you translate it from Korean into English is, contact me, I will give you a surprise gift.

And I just, you don't have to answer, you don't have to respond, I just want you to know that this offer exists. 

Jason Hall: It's good. It's good. 

Jeff Santoro: And we can reach out. And with that, we should wrap up the show. 

Jason Hall: I will comment. I will comment. I, I love gifts, but I don't really like surprises. 

Jeff Santoro: Yeah. No, I'm the same way. Yeah.

I'm sorry. It is. 

Jason Hall: Yeah. I'm sorry, random spammy Korean Twitter bot. Love you, but I don't like you. That's it right? We're done? 

Jeff Santoro: That's it. Well, we will, we did have more questions. As we said earlier, we will answer them on the next mailbag and keep them coming. We'd rather have too many than too little. [00:56:00] 

Jason Hall: Lots by email to Joe via email, Andrew via email. Alex via email. 

Thank you for your questions. Yes, we have them. They will be on our outline for our November mailbag. So thank you for those questions. Be patient. This is a long term game. You can wait another month, but we will definitely answer your questions. Thank you so much for that. Okay. Jeff, as we say on every show, not just the mailbags, these are our answers. They're great answers, except when they're not. Sometimes they're terrible answers. 

Either way, they're our answers. You can try them on, see how they fit, but you do need to find your own answers. You can do it. I believe in you. So does Jeff. All right, Jeff, we'll see you next time. 

Jeff Santoro: See you next time.