JACK: AFTER 10 YEARS OF CHEAP
MONEY AND SURGING STOCK PRICES
RATES ARE RISING AND TECH
STOCKS CRASHED.
WHAT STOCKS SHOULD YOU BUY FOR
THE NEXT 10 YEARS?
JOINING ME IS THE AUTHOR OF
WHERE THE MONEY IS, ADAM CECIL.
THANKS FOR COMING IN.
CONGRATULATIONS ON THE BOOK.
LET’S START BIG PICTURE.
THE NASDAQ DOWN 30%, THE S&P
CAME THAT CLOSE TO BEAR MARKET.
HOW SHOULD INVESTORS THINK
ABOUT THE MARKET?
AL: INVESTORS SHOULD BE HAPPY.
THE STOCK MARKET IS A MARKET,
PLACED BY GREAT BUSINESSES.
MANY ARE ON SALE NOW.
PEOPLE GET UPSET WHEN THINGS GO
DOWN.
YOU ARE HAPPY WHEN THE PRICE
GOES DOWN, YOU SHOULD FEEL THIS
WAY ABOUT STOCKS.
A LOT OF FROTH WITH EASY MONEY
POLICIES, YOU HAVE TO BE
DISCRIMINATING, THE QUESTION OF
SEPARATING THE BABIES AND THE
BATHWATER.
JACK: HOW DO YOU PLUCK THOSE
BABIES OUT OF THE BATHWATER.
AL: THE QUESTION EVERY INVESTOR
SHOULD ASK THEMSELVES, VERY
SIMPLE, IS THIS BUSINESS IN
VULNERABLE TO COMPETITION?
HAVE DEEP-POCKETED COMPETITORS
TAKEN RUN OF THIS BUSINESS AND
FAILED?
THIS IS THE CONCEPT OF WHAT
WARREN BUFFETT HAS GIVEN US.
AS I SAY IN THE BOOK IN THE
DIGITAL AGE WHAT CONSTITUTES A
MODE OR SUPERIOR BUSINESS IS
QUITE DIFFERENT THAN IN THE
LATE 20TH CENTURY.
JACK: YOU WRITE ABOUT THROWING
ALLIGATORS AND SHARKS IN THE
MOAT SO NOBODY CAN CROSS.
GIVE US SOME EXAMPLES OF 21ST-CENTURY MODES, COCA-COLA
21ST-CENTURY MODES, COCA-COLA
AND AMEX.
AL: AT THESE LEVELS THE FIRST
IS ALPHABETS, GOOGLE HAS A 95%
SHARE, ONLINE SEARCH.
BEING MICROSOFT SPEND, COULDN’T
DO IT.
AMAZON MADE A RUN AT GOOGLE,
COULDN’T BUILD SEARCH.
BEZOS TOLD PEOPLE TO CLIMB IT
BUT YOU CAN’T MOVE IT.
THAT IS THE BUSINESS YOU WANT. THE OTHER ONE IS AMAZON, THEY
THE OTHER ONE IS AMAZON, THEY
HAVE ALMOST 50% SHARE OF
E-COMMERCE, LONG TANKED MARGINS
HAVE 10% MARGIN SHARE.
THOSE ARE TWO PROVEN
BATTLESHIPS FOR THE 20 FIRST
CENTURY.
JACK: I WANT TO ASK ABOUT
AMAZON.
A BIG QUESTION, AS WONDERFUL AS
THESE COMPANIES ARE, THE
VALUATIONS ARE PRETTY STEEP BY
HISTORICAL STANDARDS.
BOND RATES HAVE COME DOWN FOR
40 YEARS.
RATES ARE RISING FOR THE NEXT
40 YEARS, COULD VALUATIONS GO
BACK TO THE LEVELS THEY WERE IN
THE 80s SO EVEN IF YOU BUY
GREAT COMPANIES THE VALUATIONS
SHOULD SHRINK?
AL: IT IS A GREAT POINT.
INTEREST RATES ARE A HEAD WENT
AT LEAST IN THE SHORT TERM BUT
I WOULD TURN IT AROUND AND ASK
YOU A QUESTION.
WIRE INTEREST RATES AND
INFLATION RISING NOW?
WE HAD EASY MONEY SINCE
2,008-9, WE HAD IT FOR 10 OR 15
YEARS.
THE ANSWER IS CLEAR, WE HAD TO
MADDEST DEMAND STIMULUS, YOU
ALSO HAD THE FED AND A SUPPLY
SLOW DOWN BECAUSE OF ALL OF THE
SUPPLY CONSTRAINTS.
MORE DEMAND AND LESS SUPPLY,
YOU HAVE INFLATION.
IT IS NOT STRUCTURAL IN MY
OPINION.
IT IS CYCLICAL.
THE STRUCTURAL PIECES FOR
INFLATION IN MY OPINION ARE
QUITE BENIGN.
ASK YOURSELF WHY HAVE WE HAD 40
YEARS OF LOW RATES AND LOW
INFLATION IN A TIME OF EASY
MONEY?
IT IS BECAUSE GLOBALIZATION IS
TEETERING A LITTLE BIT WITH
RUSSIA AND CHINA BUT BECAME A
FACT.
AND AS I WRITE IN THE BOOK,
TECH IS HUGELY
DIS-INFLATIONARY.
BEFORE GOOGLE, WE HAD TO BUY
MAPS, WE HAD TO BUY
ENCYCLOPEDIAS.
YOU RUN EXAMPLES LIKE THAT
THROUGHOUT THE ECONOMY.
THAT’S NOT GOING AWAY.
GOOGLE IS FREE FOR EVERYBODY.
JACK: A FEW SECONDS LEFT, ABOUT
AMAZON, AMAZON’S CLOSING
WAREHOUSE SPACE, CLOSING
STORES, THAT SHOULD BE
CONCERNING TO INVESTORS.
AL: NOT AT ALL.
THE JOB OF LONG-TERM INVESTORS
TO ARBITRAGE BETWEEN SHORT-TERM
HEADLINES AND LONG-TERM
SUBSTANCE OF WHAT IS GOING ON.
AMAZON SPENT 25 YEARS BUILDING
THEIR INFRASTRUCTURE WHICH NO
ONE WILL EVER MATCH.
IN THE LAST 24 MONTHS DURING
COVID THEY DOUBLED THEIR
INFRASTRUCTURE AGAIN.
SALES GREW ONLY 65% SO THEY
OVERBILLED A LITTLE BIT.
WE CAN FORGIVE AMAZON FOR
MISSING THE MARK IN THE WORST
HEALTH CRISIS IN 100 YEARS.
THEY ARE GOING TO SOAK UP THAT
DEMAND, THAT EXCESS SPACE,
PRETTY QUICKLY AND PAIRING BACK
A LITTLE BIT BUT THAT IS THE
HEADLINE.
THE SUBSTANCE IS NO ONE IS
GOING TO CATCH AMAZON.
AMAZON IS GOING TO KEEP GROWING