Investing Unscripted Podcast 97: March 2024 Mailbag

Note: All transcripts are edited for clarity. This week’s pretty poorly as Jason has a cold. We may earn commissions from some (not all) links. Thanks for the scratch.

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Jason Hall: Hey everybody. Welcome back to Investing Unscripted, where we [00:01:00] ask and answer the hard questions about investing.

I'm Jason Hall. Apparently I'm the voice of the aristocracy according to some people, which is strange. But I'll go with it. Here's one that we all know. The voice of the people. That's Jeff Santoro. Hey buddy. 

Jeff Santoro: Hey. Kind of a low energy intro by you. You feeling alright? Should I start over? No. I, I think the people need to hear you at your best and at your worst.

Jason Hall: I have so much Diet Mountain Dew flowing through my veins right now, I'm mentally throttling myself and I may have backed down a little bit too much. 

Jeff Santoro: for the explanation. I'm doing well. Welcome. How's that? Is that better? Yeah. 

Jason Hall: Much better. All right, time for a mailbag. This is, I won't say it's an impromptu mailbag, but we got a lot of questions for the prior one that kind of trickled in after we'd already recorded, so we thought it would be a good time to catch up on that a little bit and talk about a few other things.

So we do our housekeeping first. What's our 

Jeff Santoro: housekeeping? Yeah, well, first of all, just speaking of what you just said, I want to encourage everyone to keep sending us questions show ideas. We actually have a handful of Good show ideas back built up to from, from listeners. So [00:02:00] we, um, are more than happy to take someone else's idea and make a show out of it.

So be in touch, find us on social media, email us. And as always sign up for our newsletter and tell people about the show. Either send them a link to it. Or if you would be so kind as to give us a rating and a review on the podcast apps, that would be spectacular. My recent calls for that have helped.

We've gotten some more. So thank you everybody. And, uh, if you haven't done that yet and you could do it, we'd appreciate it. All right. So we did get a handful of questions here. We're going to go through them, answer them to the best of our ability, maybe ask each other some follow up questions. Let's dive in here, Jason.

The first question we got is from Teijo, who is a, loyal listener he tunes into our live Friday, first Friday shows on the first Friday of every month. And he is a contributor to our portfolio contest as well. And I believe he won the February one, if I remember correctly. He did. 

Jason Hall: I'm glad you brought that up.

I made a, remember I, I was an impromptu thing because the first month was won by, A [00:03:00] listener, not one of our pro guest stock pickers. And I committed then to give 50 bucks any month that's won by a listener. I'm going to give it 50 bucks to their charity of choice and Teo's was Doctors Without Borders and 50 in Teo's name has gone to Doctors Without Borders.

So thank you for that. Participate. Give us some good charities and win people. I like supporting good charities. 

Jeff Santoro: Yeah. Yeah, it's very good. All right. So here he sent us a mailbag question and I'll read it and then we'll answer it. So Teijo says, do you guys ever hate watch some stocks? My biggest hate watch stock is Peloton. I just want to see it burn. 

Also Samuel Adams, S. A. M. So brutal. I know. Uh, also Samuel Adams the last couple of years because no beer stock should do well, pivoting to hard seltzers. Uh, Celsius Holdings. 

Jason Hall: Technically that's Boston, Boston Beer Company. 

Jeff Santoro: Boston Brew. Sorry. Yeah. I had that. Uh, and then he says, Celsius Holdings has been a disappointment on the hate watch list. So I'm assuming that's one he's also rooting against, but it has done well. [00:04:00] And then he says, maybe I'm just really hateful.

So, so first of all, probably the most entertaining question we've gotten in a while. Uh, that one made me laugh.

But it does bring up an interesting, there's a couple of different directions we could go. So I guess the first thing is, Let's answer the question directly. Jason, do you hate watch stocks? 

Jason Hall: Generally, I don't. And I promise I'm not trying to sound holier than thou. But I generally don't because I realize on the other end, and like the obvious ones that sometimes you want to do are like AMC, right. And all the nonsense that went on there. And then I see it with like these EV startups and other things. But the bottom line is usually on the other end is just some schmuck that just doesn't know what they're doing. Right? And they lose money, right? So I try not to like send that negative energy up.

Jesus, this sounds so new age and weirdo. But I just, I generally don't. Right. Cause I'm a pretty optimistic person. But I hate it when crappy businesses' stocks go up. I do hate it. Right. Right. But [00:05:00] I don't like Schadenfreude, want to see him go down. 

Jeff Santoro: I find myself, I don't know of hate. Hate watches to say is the right thing for me because I think I agree with you where like look there are people who invest In companies.

I don't like who do it full Well knowing what the company does and you know That's different than like just the person who's new and learning like and bought the wrong thing or didn't understand So yeah, there's always someone on the other end that's gonna get hurt and again not to be like holier than thou or anything But I've never thought of it as hate watching but there are companies.

I don't like . And, you know, just two real quick that I picked for the UN portfolio last year were Tesla and Meta. You know, I, I don't, I have reasons for not liking those two companies as an investment. I have issues with some of the things that they do, some of the things that some of their management does.

I don't necessarily know that I root for them to go down, although I did, when I picked them in the on portfolio , it did not go well for me. And record 

Jason Hall: low valuations. I must, I might add. 

Jeff Santoro: Yeah. Yeah. But I guess. There is a different, I think we're heading in this [00:06:00] direction, but I guess my question for you is, are there companies that, maybe you don't hate watch, but are there companies you want to not do well because of what the business is?

Not its performance, not its performance, but like what it, 

Jason Hall: what it does. No, no, I understand what you're saying. So, for example, like I'm, I definitely think when it comes to kids, and I encourage people, there was an episode of Hidden Brain that came out, I've talked about that podcast a lot, that talks about, like, the harm, and Jeff, you're in education, so I'm sure you've read studies and heard, if not direct data, but anecdotally, like, how awful social media is for kids.

Like, like, I mean, like the trends of, of self harm and suicide, if you look at like 2012, like when an adolescent kids and teenage kids, like where suicide rates and self harm and, uh, self reported depression rates just skyrocketed is when social media became mass success. So that's like a business model that I really struggle with because I also use [00:07:00] social media every single day.

You know, Joe Camel was marketed to kids for a long time. And maybe like, I love bourbon. Jeff, you and I talk a lot about bourbon lately, maybe more about bourbon than we do about stocks. If 

Jeff Santoro: I think it is the bourbon to stocks ratio has definitely shifted towards bourbon. It 

Jason Hall: has. And the point of the point is like, but also those, the, I don't think the distillers actively try to market their product to children.

Right. Even though there is clear evidence of societal, societal harm, increased healthcare costs from. Right. So, yes, sometimes, but really, and maybe this is, I'm going to kind of, this is maybe like a little bit of revisionist history of my prior, my initial response, there are companies out there that their business like plug power, I've done videos about plug power, Tom with Tyler, their business model is hyping something, raising capital, burning capital.

Hyping something, raising capital, burning capital. I mean, and, and that I, I, I do want to [00:08:00] root, I don't want to root against hydrogen because I think like the potential for green hydrogen is orders of magnitude improvement in the quality of humanity, right? Reducing pollutants and emissions and all that kind of stuff.

But I want to root against managements that hype things, destroy shareholder value and don't deliver products. Right. But again, I'm not rooting against the company. I'm rooting against the business. Operators who are hosing retail investors in their, in their pursuit of whatever they're pursuing. It's a slippery slope because I don't hate companies. I hate people. Is that a better way to put it?

Jeff Santoro: Yeah. I think that's where I land too. I mean, we've talked about this before. The whole idea of, you know, we talked about in previous episodes, investing in, in sin stocks or investing in businesses that you don't necessarily agree with. And there's the two sides of it, right?

Like some people just don't want to do that. Other people say, give me all those profits and I'll go donate to. a cause that reverses some of what this company is doing, right? It's like, it's like investing in tobacco stocks and then taking the dividends and, and making donations to like [00:09:00] the American Cancer Association or something like that.

Um, so I feel like this is a, this is a similar conversation and almost a slippery slope because I think if you dig deep enough into any company, you're going to find someone or something or, or some decision that you disagree with. And of course, some companies are very upfront and transparent about the way they view the world and other companies are very opaque and the opposite cause they don't want to make anyone angry.

But I have a. A good thought experiment for you, I think. So, here's, here's another way to think of this. Is there a company you own that you obviously want to do well because you own it, and you want your investment to go up, but you're not sure it's really a good thing for the world at large that it does do well?

And I 

Jason Hall: have an example. Oh, 100%. I own, I own multiple offshore companies, oil and gas drilling contractors. You know, these are companies that are capable of poking holes in the seafloor, five miles [00:10:00] underwater, and then drilling another 30,000 feet below the ground there. Including Transocean, the company. That participated in the, the Deepwater Horizon, disaster in the Gulf coast, but I'm also eyes wide open that we need energy. We're not fully there with the energy transition and I should, you know, be willing to participate with my capital.

And I kind of feel like even though it's a secondary market, we've talked about this before when Transocean, I'm not giving money to Transocean. But it does prop up the equity value and I prefer to prop up the equity value of the companies that I think are the good operators, at least, you know, and there's some potential net benefit there.

I'd be so happy if, if those businesses did need to exist though. Yeah, I've done a 

Jeff Santoro: pretty good job in the 40 or so companies that I own of just not buying ones where I don't want to root for the company. So that's the reason I don't own any oil or gas companies. And I get it, I'm [00:11:00] not. Naive to the fact that while I think transitioning off of fossil fuels is something we need to do for the life of the planet, it can't happen overnight, even if the entire world decided this is the most important thing, there would still be some sort of transition.

I'm not naive to that, but I don't, for me, it's like, I like being able to root for the companies I invest in and I would have a hard time rooting for an oil and gas company, just me personally. But here's one I do own that I actually thought about when I went through my portfolio to answer this question, and it's Celsius Holdings, right?

So I own it. It's done really well for me. I see it everywhere. I feel like I got in relative, you know, early to when it kind of blew up and I want it to do well because I invest in it. But I also don't know that any energy drink is really great for people. And I know that they tout, you know, peer reviewed research studies that say that they have all these, it's the healthy choice in the energy drink sector, whatever.

Maybe that's true. But I [00:12:00] also think part of that spin. So that's one that's probably the closest one in my portfolio to like, I don't know if it's great if everyone's drinking tons of energy drinks. But that's one that popped into my mind. 

Jason Hall: Yeah, that's, that's good. I, I appreciate like the, the concept of what Tao.

is talking about here. But yeah, it's, it's an interesting writing. When we had, um, Jim Gillies on the, the first time, this is one that came up and he's talked about it before. It's I think tobacco stocks might be one that he specifically brought up. That whole idea. And you mentioned it of the school of thought of.

Participate in the companies that are going to help you reach your financial goals the easiest. Right. And then use your wealth to make the world to influence the world in the way you want to. And I largely feel that way, but, you know, losing two grandfathers, I got her dad with emphysema. My mom developed cancer in her forties.

She was a smoker. I'll never buy a tobacco company, you know? Yeah. 

Jeff Santoro: There's no, [00:13:00] I mean, there's no right or wrong way to view it. It's just, it's an interesting place to go off of, off of Teo's question. I'll say this maybe to wrap up. I think another thing. Another reason I don't typically actively root against a company is you mentioned earlier that there's probably a ton of individual investors that own that and they might be naive or new, but a lot of these companies are also owned in big index funds and are owned by pensions and You know, so it's like you're kind of, if you want to really take this out to this, to his, you know, zoom out, you're potentially like hurting the pensions of like teachers and firefighters and stuff, you know, because like they're invested in these companies too.

So, 

Jason Hall: So you're saying to a Tao hates teachers and firefighter. That's, that's what I heard you 

Jeff Santoro: say. Well, he did. He did say in his question, maybe I am a hate, just really hateful. So we'll, we'll let the listeners judge. Maybe, maybe, maybe. Yeah, maybe tail. 

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All right, so let's move on. We got another question here. This one is from Colin. I've gotten to a point where starting a new position is mentally hard. When you have other stocks and ETFs with what I consider a significant amount of money in them and you put your biweekly dollar cost average into a new position, it feels pointless.

It will take a long period of time to get a full position built and the market can do a lot of funny things in that time that make you, that may make you pause your contribution. I have never been a cash guy as I like to be fully invested. I try to hold cash in the next red day. I just buy what I was planning to.

How do you, or folks you respect build a new position? I love this. I, this is one I think about probably more than I should. 

Jason Hall: Well, Jeff, this is something that's the first thing when, when I read it, the first thing that came to mind is this was exactly one of the struggles that you went through, right? [00:16:00] When you decided to kind of reevaluate how you were investing.

is having so many, uh, essentially meaningless positions and trying to, to create meaningful wealth and invest in your best ideas. Right. Right. And that is a challenge. 

Jeff Santoro: That is challenge. Yeah. So I think here's the first thing that I jumped out to me in Collins question. I think if you're keeping cash in your account, Until it reaches a certain dollar amount and then you're going to invest it.

I don't know that that makes you a cash guy necessarily. You know what I mean? I think that's like a mental thing to sort of get over or think through if you're in Collins position. I think if you hold cash because you want it, use it at an For an undetermined, yet to be determined reason at a yet to be determined time.

Right. I think that makes you someone who holds cash in their account. So, for example, if I wanted to just keep my bi weekly transfers into my brokerage account building up until I [00:17:00] had, uh, Two thirds of 1 percent of my portfolio to buy a stock. I wouldn't consider myself as someone who's now holding cash.

I'm just, you know, waiting until I have a certain dollar amount and then I plan to spend it on this thing in two months when I have that money saved up. So I don't know if that helps Colin, but maybe that's a way to think about it. I also, someone I've came across on the internet. I don't remember who, so I can't give it, give him credit.

I read something about, basically deciding what a full position is for you, splitting that up into as many parts as you're comfortable. So a lot of people like to buy in thirds or maybe you buy in quarters and then. Buy the first one and then schedule, like literally put a calendar appointment on whatever a month from now, a quarter from now, six months from now to buy the other pieces and then just commit to it.

Whether it's a red day or a green day or it's up or it's down, barring some. You know, enormous material news that would make you re evaluate your whole investing [00:18:00] thesis, as a way to sort of force yourself to build up to that full position. But I get it, you know, if, if you're not contributing a lot each week, that could take a really long time and then a big red day comes and there's something else that catches your eye.

So I don't have a good answer other than come up with a plan and stick to it. But I think a lot of people probably. A lot of process oriented people, which this sounds like Colin might be, probably struggle with this. That's the reason I struggle with it. I'm a process person. Do you like, do 

Jason Hall: you like Green Day?

Jeff Santoro: The band? Yeah, they're fine. 

Jason Hall: Okay. Well, you said Green Day. So, I've just been thinking about why you're talking 

Jeff Santoro: this whole time. Man, you are, is this the Mountain Dew talking? 

Jason Hall: Probably. Probably. Billy Joe Armstrong did have green hair for a long time. So. 

Jeff Santoro: All right. We're going to move on. So do you, uh, do you have any other thoughts about 

Jason Hall: this?

I do. I do. And it's interesting, right? Because I think one of the, one of the challenges is, and I think this is kind of like, this is, I don't want to say symptom, but maybe it's like a what's the [00:19:00] word I'm thinking about when it's like a micro, micro, micro, Help me out here. Jeff, my microcosm. Yeah, it's like a microcosm.

Thank you, Jeff. It's a microcosm of like the greater psychological challenge that we have with investing. When we think about what's really long term, you know, especially people that are listening to the show, Jeff and us and people that are in the industry, really passionate about it. It's so easy to be so, so head down.

And thinking about, we need to act and I can deploy this money. And I want to try and optimize my process and all that stuff. And it's like three months go by and it feels like it's 10 years and it's three damn months. Right. And when we need to be thinking in terms of decades as stock buyers, then years.

And when you start going from somebody that's in their mid thirties, mid forties, kind of getting into their peak earning period, it might seem like that monthly contribution is meaningless. But let's say you have 20 stocks or 30 stocks and you're investing a small amount of capital in those [00:20:00] 20 or 30 stocks over a decade, all of a sudden it's a lot of money, right?

And it might seem like. Each little tiny investment is a small amount of money, but you know, it's the saying, how do you deal with big problems? You treat it like an, you know, eating an elephant, right? One bite at a time. And it's kind of the same thing. And I think part of it is just slowing the process down and you talked about it kind of like zooming out a little bit.

And I think that can be really, really helpful and not being so caught up in making that full position as quickly as you can, and just being patient and accepting the fact that we're all starting with a limited amount of capital that we have and the limited amount of disposable income that we're able to invest on top of that.

And it, it kind of is what it is. Right. And sometimes I think we try so hard to do it perfectly that we miss out on just doing good enough. Yeah. Or even more importantly, avoiding doing it 

Jeff Santoro: wrong. Yeah. I think another, just maybe one more thing and then we can move on to the next question because I've [00:21:00] thought about this for myself.

So if this is helpful, Colin, take it. And if not, leave it. I've thought about, I have like five or six stocks on my website. Watchlist that I'd like to own and I haven't for various reasons. I either think they're too expensive or I don't, I have, I've, I have felt that when I have deployed cash, it's been into things I already own, but I've thought about taking a dollar amount that I have in my account.

And just buying those five or six stocks equal, what, let's just say it's 300, like divide that among the six stocks and just put a little bit into each one. So they're there. And then decide once I have that little kind of that little tiny piece, decide which one I want to build towards first or which two or which three.

And then I'm trying to discipline myself to save more than. Like I have the same issue, like once the money hits my account, I'm like, Oh, I want to, I want to go buy something. So I'm trying to condition myself to let it build up, you know, two or three different transfers worth of money and then build [00:22:00] towards a, what I considered to be a full position for me.

So I don't know, I don't have a great answer cause it's something I struggle with too, but I don't, I don't think, I guess the one thing I would say is just cause you hold cash to build towards a position I don't think changes your philosophy necessarily. 

Jason Hall: Yeah. No, I think, I think that's fair. But I think a little less focus on trying to make it perfect and just a little more focus on making sure it's deployed into businesses that you believe in because eventually that little bit of money, you do it enough times and it's going to turn into something 

Jeff Santoro: meaningful.

And that's what happens in your, if you're, if you are investing in like just a retirement account, you know, coming out of your paycheck straight into a 401k or something, that's what you're doing. You have no control over. You know, you're not holding cash every two weeks or whatever it is. You're buying that little piece for 40 years until you retire.

Whatever it is. All right. Next question comes from Ken. Ken starts out by saying. Yo question here and then in parentheses Italian accent and since I'm from New Jersey, and I'm half Italian I just figured I would read it with the accent. 

Jason Hall: You sounded like [00:23:00] Tony Danza. Just wanna say well done 

Jeff Santoro: So Ken goes on to say after his attack on Italian people How do you know you're good at this?

Open ended qualitative quantitative the good doesn't necessarily have to be beat the market good It can be about educating others or being good at writing about anything. I'm sorry or being writing You About or analyzing stocks, I asked because I am beating the market in a small sample size of only two years, but don't consider myself good at this yet.

Perhaps luck is on my side, or perhaps I've been good at the right skill, which is running towards fires at the right time, which is buying the dip. A buy the dip favorable market. I also don't know how much of my own work should be done to consider myself good at this or if it's just okay to be good at taking recommendations from others and filtering out the ones that don't fit my style or I strongly disagree with.

What do you think? How do you know if you're good at this? 

Jason Hall: I mean, I think to a certain extent you never know, right? All right. Next question. Yeah. There you [00:24:00] go. Thanks for writing, Ken. But no, seriously. It's, it's, it's. Thanks. Thanks. It's challenges. So I think at the end of the day, like, especially as retail investors who have the limited capital that I talked about, you know, your, your ability to effectively deploy it into the best ideas, luck is going to play a massive role in your results.

What type of investing style did you first get exposed to and gravitate to, whose advice are you taking or whose advice are you paying for? Like all of those things are going to play, a role, plus maybe the most important thing, the environment that you're investing in. I've talked about this before.

Jeff is that I, as much as I own and take full credit responsibility for the wonderful success that I've had as an investor, going back to when I really first started big time, really pushing it back in 2008, 2009, the S and P 500 for the bulk of [00:25:00] the bulk of my investing career generated about 14 and a half percent annualized.

Returns on average, right? That's like 40 percent better than the longterm. That's, that's huge. Like that is, that is the bulk of my success, right? It's just because I was investing in the, you know, the best market of my lifetime. And most people that are going to listen to his lifetime. So you have to, but I think that humility helps.

I think the benchmarking yourself against? Because. Yeah, I've done really well over that period. But I've underperformed the NASDAQ 100, right? So, you know, I didn't do as well as I could have buying easily available, really popular index products. So I think that's important too. You have to kind of benchmark yourself, benchmark yourself, failure.

Uh, well, I think the most important thing, Jeff, I would say, and then I'd love to hear your thoughts on this too, is what are you really trying to accomplish? What are your goals and are you [00:26:00] measuring your. Returns and results against what your goals are, or is it just some arbitrary that I beat some index?

Jeff Santoro: Yeah, that's exactly my answer to this question, which is you have to know what your goal is And I and you have not I think for people like Ken who we both know From being a listener of the show and interacting on social media Ken someone who? It's just like us, became, found investing, became obsessed with it, and is doing all this learning to learn everything he can about it.

So, you know, you and I and probably other listeners can absolutely relate to that. I find myself not struggling, but I think about because I spend so much time, I want to be good at this. Like, I want to be able to look back 20, 30, 40 years from now and say, with, you know, a healthy dose of arrogance, look at all these great stock picks I made and look at how much money I have now.

But I also have to sort of check myself, take a step [00:27:00] back and remind myself all the time that all of this is really just. That's one goal. I want to be able to retire comfortably at the time I want to do it, and then live a fun happy life doing the things I want to do. So if I get there through luck, if I get there through being kind of good at it, if I get there even though I'm bad at it, I don't really care and it doesn't really matter as long as I get there.

And that does get to your point about you never, I guess you don't ever really know. You know when you're old and have enough money or don't. Maybe that's how you know. And there's another thing that I think is health, uh, worth thinking about. When I first Started investing in stocks. It was very brand new and learning.

I had one bar to get over, which was I don't want to lose money overall. I want to have a return of greater than zero. And the reason was all the money I was investing in stocks. in my mind was savings account [00:28:00] money, right? Had I never found stock investing, I would have kept contributing to my four or three B, which is my retirement account.

But any other additional capital, I was either going to spend on stuff or just save. So in my mind, when I started, Anything above zero is a win because that would have just stayed in my account and gotten near zero interest in my savings account back then. So I don't know that that's probably not the right long term mindset.

You're like, you don't, you don't want to have a 0. 1 percent return and then hope to meet your retirement goals. I like that as a beginning philosophy because it didn't get me obsessed with, uh, Three, four, 500 percent or 10 baggers or six bag and all that stuff. I just was like, all right, I just need to like, not lose money here.

again, I could feel that way because I had this whole other. investing machine going in my retirement account that I was pretty confident was going to get me to my, to my longterm goal. I want to go ahead. [00:29:00] No, the only other thing I was going to say was to crib Charlie Munger a little bit. You know, one of the things I heard him say frequently in the last couple of years of his life was just basically learn, you know, learn a little bit every day, go to, go to bed each night smarter than when you woke up.

And I think those two things in tandem answer Ken's question, right? Have a clear goal. Don't lose sight of it, even though you want to have fun and try to beat the market and learn and teach and all the things. And also no more today than you did yesterday. And just do that forever. Yeah, 

Jason Hall: that's, that's so good.

And, and I think one of the things too, is you think about some of the most successful investors out there. I think at some, at some point, sure. They were like, they wanted to do better than the index. They wanted to do better because you, you can't do something like this without having a little bit of a competitive drive, right?

It's just, I think that's. How investors broadly are, are, are wired. But also I think the, like the understanding your own goals, I want to go back to it and it's interesting. You [00:30:00] quoted or you crib monger there at the end, because this is, I'm going to use a single stock as an example of understanding what you're trying to accomplish is more, more important than just having that arbitrary goal of trying to beat the market.

And I'm going to use Coca Cola. I made a video about this a few weeks, probably a month or so ago. And I have to say, I'm, I'm, I'm amongst those that at different times I've, I've kind of panned Coke and Buffett and how it's funny that it's like, it's, it's held up as like this gold standard, Buffett wrote about it last year in the, in his shareholder letter, how Berkshire earns basically every two years, less than two years, they earn their cost basis and dividends from Coke.

Here's the thing. Berkshire completed its Coke stock purchases in 1994. Since 1994 Coca Cola has underperformed the S and P 500 by about 700 percentage points, right? That's even with the dividend, it has done vastly worse than the S and P. Since Buffett bought the last share [00:31:00] of Coke that he bought.

But it keeps getting lifted up as this gold standard. But again, depending on what you're trying to accomplish, what you're trying to do with your, with your investing capital, here's the, so here's, here's a number, so the S and P since 94. He's earned about 10 percent Kager 10 to 10. 3 percent somewhere on their, uh, Coke's total returns are about 8.

6%, right? So roughly one and a half or 2 percent a year, which adds up over 30 years to hundreds and hundreds of percentage points of underperformance. But you know what? 8. 6 percent in total returns is better than. Just about everything else except for stocks over the past 30 years. It's better than cash.

It's better than long term treasuries. There haven't been a lot of assets have generated that good of a level of return. So there are tons of investors out there that just wanted income and dependable [00:32:00] yield and an expectation of modest growth of that payout over time that, you know, what Coke didn't, didn't beat the market, but it did everything that those investors wanted.

Jeff Santoro: Yeah. I mean, I, it makes me think of, I have, My grandmother who passed several years ago and a lot of other people her age that I know of you know Grandparents of friends of mine that didn't live off of dividends But certainly had a big chunk of their post work retirement, especially like later 80s 90s Income come from some dividend stock.

They bought a lot of in the 50s or 60s, and I don't think You You know, my grandmother who got her, whatever, a couple hundred bucks a month or whatever it was from the stock that was paying dividends probably didn't care or know what the return was or what the return was versus the S& P 500, but it served a specific purpose in her life.[00:33:00] 

This X amount of dollars a month that I get will help me, whatever, have fun, buy food, go to Atlantic City, whatever she wanted to do. Right. And. I, you know, on a much grander scale, obviously the Koch investment is serving a purpose in Berkshire Hathaway's portfolio, you know, and it may be, it's just the ton, the ton of dividends, and then they can use that cash to go buy.

You know, an investment like Apple, which has turned exactly much better 

Jason Hall: than Coke. So let's take it from, let's take it from the Buffett size, you know, 400 million shares down to you or me, uh, or just, just a regular person. Let's say you invest, say 400, 000 in your 401k over your 30 years. You know, that's a little less than 15, 000 a year.

So that's a reasonable amount of money. You know, if you go through your peak earnings where it's higher 

Jeff Santoro: and lower. That's like maxing out the contribution every 

Jason Hall: year. Yeah. Yeah. So let's say that you're maxing it out. Right. So you, [00:34:00] you've, you've invested 400, 000. That's your cost basis. If your portfolio was Coke, again, I'm just using it just as an example.

That's 200, 000 a year in income. I'm thinking a lot of people will be very, very happy with that as their, as their benchmark. So again, we're not in the aggregate 

Jeff Santoro: to be clear. We don't think your 401k should be one company. No, 

Jason Hall: no. And certainly not Coca Cola. But, but I think, I think directionally, I think you should get the idea, 

Jeff Santoro: right?

That's a really, that's a really good example of knowing your goal and what, Uh, what a, any company or any investing strategy can do for that goal. All right. We have one more question in this week's mailbag, and this comes from Al in New Jersey who has a question about Netflix. Uh, so Al writes, Netflix has purchased a 289 acre mega parcel at the former Fort Monmouth in central Jersey.

This is a 903 million [00:35:00] proposal to build film and television production facilities there, which will include 12 soundstages. It's a big theater, uh, office buildings, cafeteria, retails, he goes on and on, lists a whole bunch of stuff here I don't need to read. They promised the project would generate 3, 500 jobs during construction and 1, 400 people would be employed once the project is fully operational.

Should take about eight years to get the first two phases approved. With all this happening, is buying Netflix a good bet right now? So Jason, what do you think about that? 

Jason Hall: Yeah, I think this is an interesting question because you think about like some of these numbers, uh, throw everything out the window, but the 900 million Netflix is supposedly going to spend and what does that, what does that mean for Netflix?

Netflix usually spends, I don't know, 300 million, 400 million a year. On CapEx roughly, but then you don't see it in CapEx, but it's in cost of goods sold. It's the amount of money they spend for content, which is billions of dollars, right? It's [00:36:00] absolute billions of dollars. And I think that it kind of puts it in some perspective that that's kind of not a big number, but I think this is really useful because thought we do thought exercise a lot.

We've done one already with in the show, but I think we can do another shot at thought exercise. How do you figure out if something is really meaningful for a company? Or for its investing thesis signal or noise, right? 

Jeff Santoro: Yeah. And it's funny because one of the things that I remember coming to the realization of when I really started getting into investing and understanding the size of companies and the market caps of companies, I had no conception.

of how much money even smallish companies make, you know, like, and, and Netflix is an enormous company. Like I had no idea that like a company could have billions of dollars [00:37:00] in not just revenue earnings like that blew my mind. Well, 

Jason Hall: Netflix is good example. Netflix generated 14 billion in gross profit dollars last year, right?

That was the gross. That was the profit dollars leftover that it could pay all of its expenses and capital with. So 

Jeff Santoro: when you think of. When you think of that with, and that now, I, I think even if you find like small and mid cap companies, like making 20 million in revenue, like that's a lot of money. So I, I think to your earlier point, it's very easy from like the, the, the consumer.

I live near this. It's going to be this huge, cool thing for the local community. Wow. Netflix must be doing great. Well, I mean, it could 

Jason Hall: be just going to make, it was just going to make traffic 

Jeff Santoro: worse. No, I don't know. I don't know that much about it. I'm just going off of Al's email. But like, I'm trying to put myself in the position of like the person who like knows this is going up near their house and thinks, Oh wow, Netflix must be doing great because of this huge investment.

But when you [00:38:00] understand like the scope of Netflix business, this is, this is like, you know, I bought a new air freshener for my car. Yeah. Yeah. Yeah. You know, like kind 

Jason Hall: of, kind of, I mean, it'd be a very, very nice air freshener, 

Jeff Santoro: but you get my point. You got an air freshener 

Jason Hall: that had retail shops in it. 

Jeff Santoro: Yes, proportionally.

It doesn't necessarily mean it's true. It's true. Or I mean, I'll even go, I'll even go a little bit further. It's like I put a I landscaped my house, which might've cost thousands of dollars or maybe even tens of thousands of dollars. It doesn't necessarily mean I'm Jeff Bezos, right? It's like, I just invested in.

In my home and it's nice. So I don't know that it means that like all of a sudden someone should invest in me. Cause now I'm like this, you know, billionaire who can do whatever he wants. And I think that's kind of when you see a big project like this from a huge company, it could be more noise than signal because it's just not in the scheme of their business that much money.

Jason Hall: So Al's from New Jersey, I'm guessing that there's probably a big media push locally [00:39:00] for this sort of thing. Yeah, because it is going to be disruptive. Right. And here's my other guests too. Cause this is pretty common in the media and entertainment industry.

I would find out what recent legislation has been passed to create tax incentives. In your state for this sort of thing, because there's that's probably also I know Georgia, for example, has built up pretty big entertainment industry. Yeah, I 

Jeff Santoro: know New Jersey is trying to do that. It's been specifically to this, but I remember reading other things about it, 

Jason Hall: right?

These are, these are high paying jobs, that kind of thing. And it, you know, it can be definitely beneficial to the local community at some cost, right? In terms of tax revenues and that sort of thing that are being sacrificed, but I think the other part of it to Jeff is again, going back, kind of the business focus.

And is it meaningful? So we look at this and we say, yeah, this, you know, probably more noise than signal for Netflix. But I think we also have to think about valuation too, because usually with these sorts of things, by the time the news hits the press. It's already common [00:40:00] knowledge in the industry. It's already been priced in, generally.

And you have to think about, are there other factors at play that might be creating a value, like a good value point for a business like Netflix. So, this is one I've been dead wrong about, right? we've talked about that ad nauseum. 

Jeff Santoro: We did a, uh, uh, I think our very first rough cut. You'd be wrong about Netflix.

Jason Hall: So I think you have to be careful too, and not just buy the news on these sorts of things and think really meaningfully holistically about everything else that's going on with the business, the price of the stock, the opportunity, market opportunity, because they always want to make these things. We talked about this last week with Simon Erickson when he was on the show.

These companies always want to make it sound like they have 1 percent of this trillion dollar addressable market, right? They always want to make it sound bigger than it really is. So probably, probably what's happening here. 

Jeff Santoro: And there's, yeah, I, I like your point about the valuation because there's, by the time, you know, [00:41:00] a retail investor like Al in New Jersey finds out this news, It's, it is in the stock price.

So what if Al works for a hedge fund and he's just trolling us? Maybe if Al works for a hedge fund, he's listening to this podcast. He probably needs to, to find better things to do. 

Jason Hall: Maybe it might be the receptionist. Maybe, but 

Jeff Santoro: I also think too, with the, to the point about valuation, I don't know this for a fact, but, I wouldn't be surprised if this was just straight up mentioned in a, in a earnings call four quarters ago, not maybe specifically New Jersey, but just saying something like we, we plan to put X.

Oh, they would have dropped 

Jason Hall: the press release, but that's about it. But then some local, 

Jeff Santoro: local, I know that, but I'm saying like, even before that, sometimes companies will say like, Oh, in 2027, we plan to spend 2 billion on our production facility, you know? Like, so. Right. The other thing too, I, I, uh, one maybe last thing on this, I think this is interesting from the standpoint of like one of the things all these streaming companies struggle with is the cost of creating [00:42:00] content.

Right. And from a cash flow and profitability standpoint, it seems like Netflix has gotten over that hump a little bit. You know, that's part of the reason you bailed on them when you did. And part of the reason they've done better since then. I mean, not entirely, but They seem to have found the right balance of investing in what they put out and also not just burning cash like it's their job.

And you could make the argument that this is a step in the wrong direction. If you feel that Netflix spends too much money making its own product, you know what I mean? Right. 

Jason Hall: Cause I mean, nine, 900 million is not nothing. And there's going to be operating costs that come along with that too. That It's going to have to factor into its current span.

Jeff Santoro: So yeah, I think to answer the last part of the question with all this happening is buying Netflix a good bet. I think the two things have nothing to do with each other. I think whether or not you think Netflix is A good bet to buy [00:43:00] for the long term is a question you can answer 100 percent independent from this news.

Jason Hall: Yeah. I would say that a little nuance with that is that they are, they are, they are tied to get this, this one piece of news. No, but correct. That's what I'm saying. Taking this one piece of news with every other thing that Netflix has done to allocate capital over the past decade. And is this a continuation of the smart moves or something else?

And then maybe you can use that to factor in your decision. 

All right, Jeff. I think, I think we 

Jeff Santoro: did it. We did. We got to all the, uh, mailbyte questions. Thanks to everyone for sending them in. Keep them coming and we'll, we'll stockpile them and save them for the April episode.

Jason Hall: Good job, everybody. You did wonderful, wonderful work. I must say. All right.

As always, Jeff and I love to answer these hard questions about investing and personal finance. But even though they're your questions, we're not answering them for you. You still have to answer the questions for yourself. [00:44:00] Nobody's more qualified than you.

Well, a lot of people might be more qualified, but you still got to own the answer. I believe in you though. You can do it. All right, Jeff, we'll see you next time. 

Jeff Santoro: See you next time. 

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