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RIP the Movie Business? Amazon Makes a Bold Delivery Move

It’s a news-based show as we look at what the box office performance for Disney’s “Shang-Chi and the Legend of the Ten Rings. Is the film a hit just because it’s the biggest box office success in the post-lockdown era? It’s not an easy answer which shows you just how much the movie business has changed and why there are huge questions about whether it can recover. We’ll also take a look at a surprising change Amazon has made to one part of its delivery business and whether other companies may do something similar.

September 27, 2021

It’s a news-based show as we look at what the box office performance for Disney’s “Shang-Chi and the Legend of the Ten Rings. Is the film a hit just because it’s the biggest box office success in the post-lockdown era? It’s not an easy answer which shows you just how much the movie business has changed and why there are huge questions about whether it can recover. We’ll also take a look at a surprising change Amazon has made to one part of its delivery business and whether other companies may do something similar.


Sam Bailey  0:14 Welcome to 7Investing Now. A show that teaches you had to take a long term view on investing by better understanding what’s happening in the market now.

Dan Kline: Good afternoon seven investors and welcome to the Monday edition of 7Investing Now. My name of course is Daniel Brooks Kline and if I look a little more glum than I usually do, Red Sox swept by the Yankees this weekend. Saints beat the Patriots that cost me a mug to Simon. Tottenham got blown out by Arsenal and the Rangers lost in preseason hockey. This was an ugly sports weekend. Steve Symington did you spend it outside or did you spend it watching sports as I did, quite unsuccessfully.

Steve Symington  0:55  I was stomping grapes in sunshine at my family’s my sister-in-law’s winery down in Billings, so fantastic way to spend the weekend.

Dan Kline  1:04 I’m glad you said winery cuz stop and grapes laughs I was like, did you go beat someone up like well, what is? What does that mean? No, Steve’s family owns a winery or Steve, your in-laws on a winery which they then sold to your sister-in-law? Am I getting that correctly?

Steve Symington  1:18  Yeah.

Dan Kline  1:18  We are going to talk the mess that is the movie business. Then we are going to talk Amazon doing something really bold. Amazon is usually known for cutting prices. In this case, Amazon is raising prices and I’m going to argue that they may be starting a new trend. And lastly, we’re going to talk about a subject I’m sure you all talk about all the time around the dinner table. Probably with your friends, probably. It’s the big in the movies you watch that, of course would be treasury yields. No, I had to look up what Treasury yields were earlier. This story to me is silly. We’re not going to spend a lot of time on it.

But first, Steve, I want to talk about the movie business because you and I pre-pandemic, we’re both pretty big movie fans. A lot of times I’d hear you were taking the kids to the movies. I specifically lived to so I could walk to the movies and our previous place that we lived. So pre-pandemic, I really like the movies and I’m gonna say my behavior was changed, but we’re gonna get into that later. So Shang Chi, which is the latest Avengers movie, so Marvel Cinematic Universe. it’s top the box office for the fourth straight weekend. And it’s done about $196 million in the US and Canada. That makes it the top-grossing film for the year. It’s gonna make, it made another $166 million globally, so it’s gonna be at about 360 million at the end of this weekend, or when they finish tabulating last weekend. So Steve, arguably this film might get to 450. That would place it below pretty much every Marvel movie ever. Does that tell you everything you need to know that even the blockbuster is to blockbuster just isn’t going to matter anymore or am I reading this a little too seriously?

Steve Symington  3:00 Yeah, I don’t know you might be it’s it’s one of those things where this is sort of this is a group of heroes, right? In the Marvel Cinematic Universe that that, arguably, almost nobody had heard of, you know, before they launched this, you know, unless you’re like a big Marvel nerd, and you’re reading the comics, and you understand this. So I mean, I wouldn’t read too far into its performance. And I think they’re calling it a success, just because this is sort of one of those, like, third-tier characters that they don’t really, you know, didn’t have any huge expectations for but they’re obviously setting up a bigger stage. So

Dan Kline  3:34 Oh, yeah, Yes, Yes, it did. What pre-pandemic when this film was set up, it was supposed to be a billion dollar movie. That was the benchmark for the movie. Because look, you’re looking at the person who wrote a clinical analysis of like, Guardians of the Galaxy would only do like 400 million that I got lambasted for this something like 4000 tweets, telling me what an idiot I am. It’s been written up in multiple theme park publications about how badly I got this wrong. So yeah, they’re framing this as a hit. But Steve, do you think that’s largely because people don’t understand the economics of the movie business.

And let me break it down quickly. They don’t tell you what the budget is. But the budget for this is probably somewhere north of $250 million. Typical marketing is probably about the same, but I’m gonna say no, I’m gonna say that they, they probably spent half that so maybe 375 is your all in cost. If you get to 500 million, let’s say half that it’s a little less than that. But let’s say half that goes to the theaters. So you’re at 250. Let’s be generous and rounded up to 300 million. Steven, your theatrical release, you’ve lost money. So I understand there’s a longer reaching tail for this. But under what circumstances is a major blockbuster movie, losing money, at least in the the, the prime of its release, considered a hit?

Steve Symington  4:52 I don’t know. I think this is it’s also strange times right in the box office. So I think they can call this a hit given the circumstances and considering the fact that they can use this as if anything else a retention tool for Disney (NYSE: DIS) plus moving forward. And to be fair, I was actually on record about seven years ago calling Guardians of the Galaxy saying it would probably be at least 800 million globally the box office so that was one of my one of my calls. Thank you. But yeah, I didn’t have high hopes for this one anyway, given its you know, both its schedule and, and the subject matter. I’ll go see it. And I think Marvel fans will go see it. But I think I think a lot more people are going to wait for it to reach Disney plus too. So it’ll be interesting to see how it kind of plays out and how well you know whether it has legs at the box office in the coming weekends, that’ll be something to watch.

Dan Kline  5:50  Here’s the thing, it’s already down to topping the box office at $12 million. What a legs mean it does 8 million next week. Like I’m being very generous when I say 500 million globally, that that that assumes a China release, which doesn’t look like it’s going to happen. And again, we would love your questions. We’d love your comments. I’d love to hear if you’re willing to go to the movies. And here’s what I’ll say, Steve, my bar to go to the movies. And this is my biggest case, forget the meanness of AMC or any other theater company. My biggest case against these companies is I was a prime moviegoer. As I said, I literally moved someplace where walking to a movie theater would be possible. And I did that all the time. I’d go to movies like three in the afternoon because I’d finished working I go see something or see it again.

Now. I was gonna go see Shang Chi. And because our past couple of weekends, my son has been working and we haven’t been able to do it. I googled the other day, hey, when’s it coming out? And I went, wait a minute, it’s on Disney plus in like a month? Like or maybe even less than that. And I’m not going to do it. My bar has gone up. So let me ask you the question. Again, we would love you to weigh in. Let me ask you the question. What does it take to get people out of the house if a movie advertised as starring the next Avenger, that is tying it into the biggest box office series of all time, really is not a needle mover? I mean, this would be considered a mild hit under most circumstances, because a lot of mild hits actually lose money in their first run. But what’s gonna get people to the theater? What’s gonna get you to the theater?

Steve Symington  7:21  I would say, I wouldn’t say necessarily to the theater, but to the out-of-the-house period. I’d say things like sporting events and concerts, you know, these are things that we really miss things that offer a truly differentiated experience relative to their alternative streaming versions, you know, it’s not the same arguably watching the concert, you know, streaming or a sporting event. Yeah, you can watch, you know, football on TV, but college football, those sorts of things that are nearby. You might argue that for all, but the very biggest movies, most people are willing to just wait till they can stream it on their 80 inch TVs at home. That’s what I’m thinking.

Dan Kline  8:00  Yeah, I would actually argue that for not college football, and not pro football in like heavy tailgate markets. But in a lot of markets, like I don’t know, if I still lived in New York, when I want to get out to the Meadowlands or when I want to watch it, like in a bar in an apartment. I think there’s a really big barrier there. Now, let’s look at this from an investing point of view. I don’t think this hurts Disney. You can’t invest in the NFL, but I don’t think this hurts the NFL because they’ll make their money one way or another. And the reality is most teams are going to sell out whether people actually physically go to the games because you’re not going to give up those tickets. But Steve, is this a case of where sort of all the lesser players like if you’re a Disney, you are 123 in terms of IP, and the top five was right below you? Comcast (NASDAQ: CMCSA) is next and they’re a distant second. This is not Coke and Pepsi. This is coke and like RC cola. There’s a few franchises obviously, but Jurassic Park and Fast and the Furious – there’s a couple that Comcast owns. But if you’re Comcast and your streaming platform is Peacock and not Disney plus, are you in real trouble? Like do you have to like literally adjust how you’re making movies?

Steve Symington  9:06  Yeah, I think you do. You know, that’s it’s really a tough go for any any company not named Disney in my opinion going forward. And it’ll be really interesting to see how this unfolds. You know, kind of once we, once life sort of return returns to totally normal. You might argue that it’s it’s kind of normalized already, to some extent. But no, I think what happens is, is we see some of these kind of second and third tier movie producers take some, you know, a few big expensive shots at the big screen. Once the pandemic is basically really in the rearview mirror. And, you know, to that end, you’ve got Pfizer CEO over the weekend, saying that life is going to return to normal within a year and he basically echoed the sentiment of Moderna CEO, which is previous previously expressed, and he also said we might need COVID booster’s annually. But I think maybe once it returns to normal, we do this. But I’m not sure that those big expensive shots at the big screen will pay off. But I think they’ll still take them.

Dan Kline  10:12  I think the Disney’s of the world are going to take them. I think the big franchises are going to take them. I think we’re going to see a massive contraction in the number of screens. And I agree with you, I can’t wait to get to a concert. I don’t live in a great place for the bands I would like to see. So I’m very eager to travel to concerts and I’ve been to the movie theater. My son wanted to watch a wrestling pay per view. And we couldn’t go in person in Chicago to see it so we watched it in a movie theater. And it was a cool experience. It was five hours. So we got to eat. There were drinks. It was a very there weren’t a lot of people there. So I do think there’s uses for theaters.

Dan Kline  10:46  But Steve, do you think aside from the the known franchises, that we’re just going to see movie budgets go down because like Netflix has figured out, hey, I can make an Adam Sandler movie where I’m paying Adam Sandler 20 million, and I’m giving him another 20 million to make the movie like half of that goes to like his buddies. And then they make some piece of crap and people watch it. Sorry to insult you Adam Sandler fans I know he’s a really nice guy.

They filmed a couple of those movies in Swampscott Massachusetts and I’ve heard which is where I grew up, but I heard nothing but great things about them but these are not great movies. Is that just kind of the model where we’re seeing a lot of like Kissing Booth and like I don’t even know the titles are. Like Bright than one where Will Smith battled orcs or was an orc or I don’t even remember or the one where Sandra Bullock wears a blindfold? Like these are all kind of like pretty low rent movies if they were released in theaters that were all considered kind of hits in the in the streaming world, is that the new normal?

Steve Symington  11:37  Maybe I think like I said, I think we’ve got you know, coming to argument for some some pretty expensive like big box office hits and they’ve spent a fair bit of money on some of their series. You know, they’ve talked about how much money they want to spend, wanted to spend on like a Game of Thrones prequel, but I don’t even know if that one’s still on. But I think maybe they’re more they’re smarter about the way that they allocate those budgets. I think those budgets will still be there, they’ll just be used differently, they might you might see more, you know, like a docu-series kind of thing, not a docu-series but longer series where you have basically multiple short movies that make up a season of a new kind of epic adventure or something like that. So I think you’ll see more of that.

Dan Kline  12:23  So I agree with that more of more like HBO style programming where you’re spending significantly and then that hasn’t particularly worked for Apple (NASDAQ: AAPL). We talked a little bit in our Slack over the weekend about how Apple has spent all this money and they have shows people are talking about but nobody’s actually watching those shows and I know Ted Lasso fans would argue with me.

But you only have 20 million US subscribers so these are you know. It’s like Parks and Recreation or 30 rock these are shows that amongst your sort of semi intellectual friends feel like hits, but amongst the broader world, they’re not actually doing that good numbers. But I think Amazon’s Lord of the Rings sequel, or all the things HBO can do with the Game of Thrones world or George RR Martin’s Wildcards is out there being licensed. Like I think you’re gonna see some of those big tickets.

Dan Kline  13:11  I’m watching right now I’m watching Titans, which is a live-action version of the Teen Titans that is incredibly well done that was originally done for the DC Comics service. There’s like six people got and now it’s being repurposed. It’s on HBO, and it’s airing on TNT. So I think you’re gonna see a lot more of that with the theater becomes less important. And for Disney, I think the numbers are pretty easy. Now they’re not easy if you’re Scarlett Johansen, but like something like like Black Widow, maybe that tops out at $500 million, or 400, or whatever the number is. But maybe 5 million people directly signed up for Disney plus after the paid window to watch it. But maybe another 10 million looked at like the bunch of movies you’ll get on Disney plus. So as an artist and someone who’s suing them, how do you figure that out? It’s really, really difficult.

Steve, let’s wrap this up a little bit here. But let me close it out. Are you going to see even things like Marvel where the TV shows become more important? Where like I loved all those shows. But they were all sort of just like, sort of connective tissue and not so much like moving like big narrative things? Is it possible that like the big happenings in a Star Wars or Marvel are actually going to happen on the small screen?

Steve Symington  14:27  I think the model works and it has worked and people have talked for a long time about how about how you know, they’re afraid people are gonna have like superhero fatigue, right? But they’ve been talking about –

Dan Kline  14:41  Not me.

Steve Symington  14:42  Exactly. I mean, for the past 20 years, you could say the same thing like oh, people are gonna get tired of superheroes eventually. It’s like you could do they’ll still be saying that in 100 years, I think they’ll still have enough material to keep going but you know, I think there’s plenty of material where your small screen stuff plays a larger role. And they realize that’s kind of how you keep people and you kind of become more sticky you give them well-made productions like that.

Dan Kline  15:09  So to wrap this up, Steve, here’s what I would say, when you’re looking at this from an investing point of view, I would arguably look at the winners like, like Disney has a much better chance of being a long term success in streaming than Comcast does. And, you know, HBO and Time Warner and that whole mash up with Discovery, that could be interesting, but I’d be really careful about placing my bet, you know, and sorry, to our friend Alan Sokoloff, I’d say like Viacom. And I understand that there’s a lot of like advertising metrics, and Pluto and other things that sort of work there.

But your content isn’t good when, when the SpongeBob movie or like, you know, the fifth rank Star Trek series that really kind of nobody cares about compared to the Mandalorian. I worry about that. This is going to be a world where franchises matter. We’re even seeing it play out now on television, you know, where AMC was a powerhouse for a long time, and now you’re starting to see their shows get old and we saw this with HBO. When when you can’t replace your hits with hits, it becomes very, very difficult. Now, HBO is getting a lot more leeway than a cable network. Steve, I’ll give you the last word here. And then we’ll take a couple of questions.

Steve Symington  16:17  Yeah, I think this is kind of a hurry up and wait scenario just to see how it unfolds. And however it unfolds, I think it’ll be good for consumers. And you know, I think that’s maybe one of the things that a lot of people can take solace in unless you’re maybe an investor in these third-tier services. But I think you’re right you focus on the companies that kind of win in this space as an investor like Disney’s,

Dan Kline  16:41  And we’re in a we’re in a golden age of content and that’s going to lead to a question here from Max Lucas because he brings up something. I definitely want to watch the foundation show based on Isaac Asimov novels, but I I’m tired of getting stuck more streaming services and probably will keep me from watching it. I believe that one Steve is that one on Amazon or is that one on Apple? It’s on one of those two?

Steve Symington  17:02  I honestly don’t know there’s so much I’m so behind.

Dan Kline  17:05  What I would argue with both of those I know it’s on one of those that’s on Apple according to JT Street. There are so many free ways to get an Apple TV plus subscription that you know buy a new iPhone, buy it buy a new device I think Verizon gives a free Apple TV plus. You probably know someone who could let you watch that. There are some shows though where I’ve thought about maybe I’m just gonna wait until I could buy this like rented on Amazon because even though it’s technically cheaper to spend the like 9.99 a month or 5.99 a month to get it, I’m not gonna remember to cancel and I’m gonna end up spending much more money. Heels on Stars is what I’d like to watch that I might wait until either every episode is out and I could just watch it in like 10 days and then cancel right away.

So I do think there is fatigue here I think we’re gonna have models shifting. You know we’re going to see some things like well we have a big hit show and we’re Apple maybe the morning show needs to be on you know on network so more people get interested in it. We’ve seen this with some Canadian shows. Schitts Creek started this way that was a Canadian production that was eventually on Pop in the US. Even shows like How I Met Your Mother which was a mega-hit was not a mega-hit until it went into syndication and started getting. So I do think we’re gonna see you know, are we gonna see Netflix put Stranger Things on you know TBS? No, probably not. But we might see some of these well-regarded but low-watched shows. Like if Ted lasso aired on NBC, that would probably be really really smart in terms of getting people interested in a new season more people are gonna watch Titans because of that.

With that, Steve, we’re gonna move on we’re gonna switch chairs. I know I talked a little bit more here than I normally do. We kind of did a show a little more geared towards me, then towards you. We’re gonna talk about the new Amazon price hike in a moment. But before we do that, Steve, we are rocketing towards the first of October that is preposterous to me. My anniversary happens late September. My wife’s birthday is October 8, mine is October 16. You could send me presents if you want but please don’t. But that being said, it feels to me like it’s July but now it’s October. But what happens on October 1, because you and I that’s a very big day for the two of us.

Steve Symington  19:18  Yeah. New recommendations every single month. We released seven recs one from each of our lead advisors. We call those our best single stock ideas at that time. Every single month, first of the month they released and that’s that’s a fun time of the month so always ends up being pretty busy because we filled a lot of questions about those from our members in the inbox and we’re just excited to release our newest ideas.

Dan Kline  19:43  If you would like to become a member It is very simple. All you have to do is drive to Steve’s house. You got to bring Bitcoin. No. All you have to do is go to for $49 a month or $399 a year which is roughly four months free, you get access to all of those picks. You also get to learn more about us.

So you might go, hey, I’ve seen Dan on the show, I sort of know what he covers, you might be surprised at a couple of my picks that go outside the sort of conservative stocks I talk about all the time. You might be surprised, you know, at Steve’s depth of knowledge that you know, maybe there are companies we don’t talk about on 7Investing Now, because they were picks or because there may be, you know, sort of too small for a public-facing show. And of course, if you would like to save $10 off your first month or $10 off an annual subscription, use the code “Now.”

Dan Kline  20:38  We are not going to belabor that you have been quiet out there at 7Investing nation. So feel free to weigh in on the program. We’re gonna switch gears a little bit here. So here, Steve, here’s what’s happening. And this may be more relevant to me than you do have a Whole Foods anywhere near you. Is that a thing in Missoula, Montana?

Steve Symington  20:54  No yeah, lots of local organic grocery stores that are very Whole Foods-esque, but no Whole Foods nearby.

Dan Kline  21:01  So Amazon (NASDAQ: AMZN) as of October 25, is adding a $10 charge for Whole Foods delivery orders. Previously, if you were a Prime member, you got Whole Foods delivery for free. And Steve, this was something I took advantage of maybe twice a week because Amazon does a really good job and packaging it in these sort of like nice bags that keep the cold in.

So it’s like a show runs long or the order comes early. Like my fish or meat or whatever I ordered doesn’t go bad. And you only have to place a $35 order. And when I saw that this was happening, even though it’s not happing to the 25th. I needed some stuff for dinner tonight. And I just ordered through Instacart because they’re going to be charging $10 per order up from zero. And this is one of those things where we’re going to switch seats a little bit Steve’s going to take over as hosts and ask me some questions because this is a little bit more wheelhouse. And of course, we would love your questions as well.

Steve Symington  21:55  Yeah. So I guess the first thing that comes to mind is it raises the question is this good for rivals, you know that that’s what I’d really be interested to know.

Dan Kline  22:05  So I think it’s good for Instacart I think there’s a lot of people that have Instacart because it gets you your regular grocery store. Here it gets me Publix, it gets you CVS, if you really want it gets you Costco. But for me, I use it for the liquor store, it delivers from a couple delivers from one that sells the Keurig pods which are, it’s pretty far away. So if I need an order those it’s worth it.

But I know with Instacart that not only have I paid $99 a year, but then I’m paying more per item. That’s really obvious what you’re buying just like two bottles of liquor. It’s less obvious when you’re placing like a $60 grocery order. So I do think it will be good for rivals. I think it will be good for the grub hubs and the Uber Eats of the worlds that are moving into grocery. But I’m not entirely sure that Amazon is wrong. And I actually think this might open the window for this.

Dan Kline  22:56  Steve, you and I talked a little bit about before the show. But when you go into Grubhub forgetting all the problems of getting the right order, or your food showing up your order being cancelled, or you thought that you were placing it with the restaurant, and they’re not actually a Grubhub partner, and they’re basically calling the restaurant or forgetting all of that. When you see a delivery fee, does that make you less willing to order on Grubhub?

Steve Symington  23:18  Absolutely. You know, if they tack it on to the items itself, I’m less likely to notice but yeah, the delivery fee, that line gets people.

Dan Kline  23:24  I feel the same way. So for me, if it’s a 4.99 delivery fee, versus a zero delivery fee, it’s gonna really depend what I’m ordering. So like sure if it’s our anniversary, and my wife and I are getting like dinner from Morton’s and it’s already 150 bucks, what do I care if it’s 4.99? But if we’re going to Chili’s and Chili’s is 4.99 and I don’t know, Fridays is free, probably just can order from Fridays like it’s just not that you know. Where Wacky Wings is free, but Super Wings is it’s just not that different. But here’s the reality.

It costs money to deliver. And I actually think this is a case where whether it gets added on sort of clandestinely to the product cost, or it’s just a standard unless you pay an annual fee, every order is 4.99. And certain premium orders are even more, I actually think this is going to be the new normal for all delivery services, because at some point doesn’t and this is going to be true of Uber and Lyft, by the way, as well. At some point doesn’t the cost of delivery of like actually providing the service have to reflect what it costs to do that? It isn’t free to deliver me my dinner.

Steve Symington  24:32  Yeah, so um, but let’s shift a little bit so you think it’s going to help rivals, but maybe the bigger question is will it hurt Amazon?

Dan Kline  24:42  So I do think in the short term, it’s going to hurt Whole Food sales. Because until you start seeing other people do this –  now I don’t know what the overlap between people who pay for Instacart so have the impression of free delivery. Don’t think the average person sees that little disclaimer that prices might be higher. And they only might be higher. So you know, grocery stores, you may not notice that. So I do think anyone that has an option, not anyone, but maybe like 60, 70% of people that have the option might go elsewhere.

That being said, Whole Foods is a premium product. And Steve, if you could see how close I lived to Whole Foods, you would find this, I can almost see Whole Foods out my door. If there wasn’t a Target in between us, I’d absolutely be able to see Whole Foods. But we work a long day sometimes. And if I want to cook dinner, I can’t like today I have food in the slow cooker. But I don’t have rolls and I’m gonna make sandwiches tonight. So I placed a $35 order through Instacart. I got some iced coffee and some things I don’t need that I can always have in the house. So yeah, in the short term, I think this hurts Amazon.

But I’m not so sure and if it matters, if your sales go down, let’s say sales go down 5% at Whole Foods, but profitability goes up because they no longer lose money on every order. I also think some of us who are very lazy about this, and I would literally be like, Can I add one more iced coffee to get to $35? Some of us might be like, Okay, I’m paying 10 bucks, maybe I should order my groceries and just spend 150 bucks and get everything I need. So do I think it will hurt? Yes. Do I think it will hurt long term? Probably no. Steve, any thoughts on this? Because it can you deliver? Can you order from any grocery store again, you live in a much more rural area than I am.

Steve Symington  26:28  I can get all the way across town in 15 minutes at pretty much any time of the day. So I’m not too concerned about that. You know, I will order from Costco because the parking situation is not always ideal and it’s never fun to go across town that snag there. But you know, that’s I believe through Instacart anyway. But there’s a great comment from Max Lucas, I’d like to highlight that’s a perfect segue. He says are we finally starting to see an end to the race to the bottom and free delivery, especially with so many supply chain supply chain issues? I’m not sure how much supply chain has to do with it. But I’ve always personally been skeptical of the economics behind food and grocery delivery anyway, especially when they’re trying to call it free. So that raises the question. Maybe for you, Dan, I’d like to hear is this the beginning of a sort of cost correction for the delivery business?

Dan Kline  27:20  Yeah, I think it is. So I think there might be some very smart technology that helps the Ubers and the Doordashes and the Lyfts of the world where they get really, really smart with like, Steve can pay $1 less for his trip from the airport, if he’s willing to let the drivers stop and pick up Joe’s dry cleaning. Like, I think there’s going to be some of that that offsets cost. But the reality is, and I’ve talked about this a lot when it comes to the driver services.

If previously at the airport, I had to wait in line and spend $18 to get from the airport to my house, which is like two miles. If you are Uber or Lyft, you don’t have to undercut that buy at 3. You know, you don’t have to go to $6. And no waiting time, just no waiting time is good. So if you’re like $16 versus $18 and I don’t have to wait in a big long line. That would have been good enough. But because there’s two of them, we’ve had this sort of race to the bottom where they’ve made it about pricing.

Dan Kline  28:21  I fully expect that there’s going to be some major league baseball-style collusion in these industries where they basically say, hey, quietly, let’s just raise our prices 30% across the board. I think we’ve seen a lot of that, in the pandemic, especially when there aren’t enough drivers.

That’s been a real challenge. Not so much here in West Palm, where a lot of the trips are either really beneficial, like to airports, or just really local, and easy and the costs are relatively high. Up in Orlando, it’s been a big problem, because that’s such a big area that if you want to get picked up at your hotel, like where I am in Davenport, driven 20 minutes to Magic Kingdom. If there isn’t a fare waiting for you at Magic Kingdom, you could end up like two hours from home by the time you’re done with your shift. It can get really, really tricky. So yeah, technology will be important here.

But I do think we’re gonna see prices go up and I hate to say this as a consumer, but I think they should. I don’t want to see companies artificially keeping prices low. Now. Look, it’s one thing if you’re in the grocery space, if you’re Walmart and you say you know what, I don’t need to make money on grocery because maybe when you’re here you’ll buy some whatever, you’ll buy some sporting equipment or or you’ll buy some garden stuff which is high margin or whatever it might be or clothes or who knows what. That’s one strategy. But if your product is the is the loss leader, and I’m not selling you anything else, that is a really big problem.

We’re gonna move on to the next topic. This is way too much of me, Steve, I appreciate you, you indulging me here on this. There was it was a tough show to put together today because there was not a ton going on and we did a lot of sort of like market-related shows last week, so I didn’t want to do one. If you have a question on anything market-related you want to a question about Steve’s dog. My wife is fascinated with Steve’s dog, which doesn’t look real. But I’ve actually seen it move. So I know it is real. We would love your questions or comments.

But Steve, I was fascinated by this today. This actually came from JT Street, our producer here. Treasury yields are up to 1.5%. So nothing right, essentially, but 1.5%. And we’ve seen the ongoing narrative that pullbacks and growth tech stocks are caused by rising treasury yields. And I’ve seen this because my biggest holding is Microsoft and everything else is up in my portfolio today except a couple of biotechs.

And then I looked at like, I’m down for the day. And it’s because Microsoft has taken a big tumble. There is no reason heading into Windows 11 and an office price increase, unless you really, really hated the new surface, which is a pretty irrelevant part of their business that Microsoft should be down. Steve, why on earth would a 1.5% Treasury yield? be bad for stocks that have historically given pretty healthy returns? And in the case of Microsoft, I don’t know what the dividend yield is. But is it more than 1.5% a year? It might be?

Steve Symington  31:12  Yeah, it? I think it is. But so the general narrative is that as rates climb, and yields increase, and fixed income investments become more attractive than equities, or stocks, as we know them in general become less attractive. So the story goes, that money flows out of stocks, and into bonds and treasuries. But again, I think we need to keep in mind that this is just one of many variables when it comes to understanding how the stock market works. It’s a very narrow view of the markets to say that treasuries and Treasury yields increase so that’s why stocks are down. Like you’ll see a lot of headlines, I saw one headline this morning, blaming the pullback and make cap stocks on rising Treasury yields.

But part of that pullback can be due to the huge run-up in those mega-cap stocks relative to pretty much every other segment of the market. So far, in 2021, you’ll value stocks, mid and small-cap growth stocks, have all kind of underperformed relative to those mega caps. And you might argue that they were due for a correction anyway, that we have a little bit of reversion to the mean, right and allowing other asset categories, at least in the stock market to catch up. So you know, those you know, as those others, those small-cap growth, mid-cap growth, even value stocks have been sort of largely ignored. You know, there’s a lot more to it than just Treasury rates. But that’s, that’s something we really need to keep in mind one variable in in a very complicated market.

Dan Kline  32:42  So Steve, you and I are not income investors but let me ask the question, if we’re talking 1.5, even if we’re talking 3%.

Steve Symington  32:48  Right.

Dan Kline  32:49  Aren’t you better off buying Microsoft and Costco and, and other just very steady companies that have real value that are you know, Microsoft’s not going anywhere. Costco is not going anywhere. Like I’m not even saying like AT&T, a traditional, you know, high paying dividend, because there’s a lot of risks, there’s a lot of things that could go wrong there. But there are 10 companies, I can think of off the top of my head that pay a dividend, that are very, very steady. And if you don’t particularly care about where the value of the stock sits, because you’re not going to sell it at any point, isn’t that a better bet than buying a fixed interest, treasury bond or even know what that would look like because that’s, that hasn’t been a thing in my life.

Steve Symington  33:28  I know, in part of it is that Treasury yields are so low, it’s all relative, right? You know, when we look back to like, last summer, for example, I think the 10 year Treasury note, if you look at a chart, look at the chart of the 10 year Treasury rate, like historical rates, and I think this time last year was like .7%. So going from point seven to 1.5 it’s like, oh, my god rates, the yields have increased, they’ve doubled or whatever. But, you know, going into, you know, they were closer to 3% about three years ago, and go back to 2000 they were close to 5%. Back in the 80s. They were like 15% you know, so it’s to say, you know, a 1.5% Treasury yield Yeah, it’s it’s, it’s all relative and they were a lot lower. Once you know, kind of at the height of when the pandemic really first started to unfold last year, but you know –

Dan Kline  34:22  I’ll put this in terms that Maxx Chatsko will appreciate Maxx is probably not watching today. He’s doing a bit of a staycation this week. But that being said, let’s say the Pittsburgh Pirates double their win total from 20 to 40. Well, that’s good technically. But in 162 game baseball, I think they’re only playing 150 something this year, but in a traditional 162 game baseball season, that’s not that important. So I’ll give another sports example, Zach Wilson, cut his interceptions in half this week. He only threw two instead of four. Still bad he just threw another one even though the game Over that. I love needling Jets fans here.

Dan Kline  35:02   So I do think – I get that there’s a certain amount of people, my grandfather was big into bonds and the safety and I actually think there’s a lot of safety in the equities markets, depending what you’re buying that, you know, again, should you be buying shares of like the hot new tech stock, even if it’s a fairly, you know, even it’s a fairly stable one like, say, Zoom, which obviously has price volatility, but you don’t think the company’s going anywhere. Well, that’s way more risky.

But if you’re buying again, I’ll keep bringing up Microsoft (NASDAQ: MSFT) because that is that is my biggest holding. Microsoft might have a down year, it might go down 10%, it might, you know, I mean, it’s points it’s fallen by 30, or 40%, during the windows eight debacle. But your principle is largely going to be intact. So I don’t know, we’ve talked about this a lot. This was the entire theme of last week, is that headlines don’t matter. And a lot of times, just we’re looking for a reason to do what we’re going to do anyway. So I think we saw this last week, a lot of people kind of wanting to sell, they were a little nervous in certain stocks. So they were waiting for, you know, a reason. And then when those people sold in there was a downturn, there was a lot of money out there that went downturn, I get a buy and for all we talked last week with crazy volatility, Steve, what did the market do for the week? Do you know?

Steve Symington  36:17  I think it ended it actually ended up it had like two or three straight days.

Dan Kline  36:22  The market ended up so basically Monday, Tuesday, we were basically all building like fallout shelters and like hoarding, you know, Kind bars and bottles of water. And then by Friday, it was like Happy days are here again, tune it all out.

We’re gonna pivot a little bit, you’ve all been quiet out there. So you got another minute or two. If you want to ask us something or say hello, or whatever that might be. We see you watching and we appreciate that. But that being said, Steve, JT, why don’t we hit our finisher? What’s the biggest threat to Tesla’s (NASDAQ: TSLA) continued success? I think it’s worth pointing out that a lot of people online were offended at the notion that there was any possibility that there would be a threat to Tesla’s continued success. 28.4% of you said China, 16% of you said Elon Musk’s Twitter, 36.5% said legacy carmakers, 19.1% said a new player. And a meaningful amount of view in the comments talked about things like battery shortages, and the reality is battery shortages, what I think impact everyone and Tesla would be probably the best at engineering their way out of it. So I don’t want to dismiss your concerns, but I don’t think that’s a concern. But Steve, let’s get your thoughts on this one.

Steve Symington  37:38  Oh, man. I’m tempted to vote sarcastically Elon Musk’s Twitter but if I’m voting realistically i’d maybe say China which could be part of the reason he’s been so complimentary of China of late in the last couple of months talking about you know, I mean, they are crucial to to Tesla’s longer term plans and they plan to invest a fair bit of money there. So I would say there I’m not so convinced that legacy carmakers are a big threat to its success because you know, it’s not just a carmaker you know when we look at its renewable energy plans and battery storage and stuff but I’d say China.

Dan Kline  38:16  I’m trying to think of a way to say this without being political but it is enjoyable to watch Elon Musk praise the Chinese government. I don’t care where you fall politically in the in the US. Certainly we’re not China, no matter how no matter what you think of, of the government, but I get what you have to do to do operations there. We’ve seen it with Starbucks, we’ve seen it with other companies, you sort of do have to kiss the ring a little bit.

But Steve, I’m actually going to argue that it’s legacy carmakers because everyone talks about all this optionality and all these other things like sure, but they don’t make any money selling solar or batteries or. And I get it they have a big advantage. But their pricing is very expensive. If if Toyota let’s just pick one. Let’s say Toyota does team up with Apple which was rumored we did a show on it a few months back. And they come out with let’s call it the Icar. They won’t call it that but let’s pretend we do. What if it’s 18 grand and it’s got the same mileage as a model three and it’s kind of cool looking. Like doesn’t that seem to you like it could disrupt them like like, what am I missing on this like, Tesla to me is priced so far beyond what I’d ever spend on a car that I can’t see that I buy it.

Steve Symington  39:30  Yeah, I do though. You know, I think it comes down to kind of brand fanatics and loyalty and, and people kind of admiring the engineering and the vision and and I love him or hate him Elon Musk, it’s kind of interesting to see now that you know, the South African lead of this, this carmaker thinking globally. And I think people still buy Tesla’s and I think it also helps that they’re growing from such a small base, right? They don’t have the issues of trying to retire the existing line of vehicles and sack and basically cannibalizing their existing sales as they transition over to electric. I’m not too concerned about disruption from from vehicles like that, because I do think Tesla will respond. They’re very, very dynamic. And they’re very, very innovative and they work pretty quickly. And yeah, I think they’ll they’ll be just fine regardless.

Dan Kline  40:31  I’m not sure how big that potential basis and that’s we talked a lot about this with Peloton as well. And I’ve been looking at various expensive exercise equipment. And there’s so much out there that it’s almost like paralysis by analysis, because I don’t, I’m leaning towards one, but it’s the most expensive thing out there. And that, that seems crazy to me. But I do wonder if at some point, they’ve just hit the market. We will take the last comment that came in, if you want to pull that up. If you want to read that, Steve, you can probably see it better than I can.

Steve Symington  41:02  Yeah, Roman1980 2011 says I bought a model three in June and in many ways, it’s the best car I’ve ever owned. I don’t see myself ever going back to an ICE vehicle internal combustion engine vehicle. You hear that a lot. And you know, even from people who try out other electric vehicles, they buy Tesla’s and they’re so blown away by the experience that they don’t see themselves every

Dan Kline  41:27  It does seem like a lovely vehicle. And Steve, I don’t know what you drive. We’ve talked about that I drive a Prius, which is a lovely experience compared to driving my previous fully electric car though. My previous car was small. So it got very good mileage, but I don’t need gas very often. It’s silent when I’m when I’m going, you know, slowly it has a solar air conditioning has a lot of neat things. And I’m not sure there’s any way I can justify the cost difference.

We’ve talked about this so many times. But like, I don’t want to spend more than 15 grand for a car. There is no used Tesla out there that cost less than 30 grand. So aren’t they just pricing out? Do they need like their version of Mini? You know, Mini is BMW under sort of a different brand as a way to expand the base. Like isn’t most of the car market like 15 to $20,000? Or maybe 10 to $20,000?

Steve Symington  42:18  Yeah, I think they only continue to scale down. And that’s kind of what we’ve seen them do, you know, from their earliest versions of the Roadster to the Model S and on down to the model three currently. And more recently, earlier this month, we’ve seen kind of reiterations of their plans to release a $25,000 electric vehicle in 2023. A lot of people are calling that the Model Two. Yeah, tentatively, so we’ll see what happens I guess but but I think they just continue to lower the price and when you get a $25,000 brand new vehicle coming out presumably in 2023 is the the goal that should be really really interesting because the Model Three has already become a I believe the best-selling electric vehicle in history.

Dan Kline  43:04   So let’s also take that with a grain of salt though and again, I’m not negative Tesla, if I had the money I or something I don’t have the money. It’s just that I could use the money better in other places. I would drive a Tesla it looks really cool. My uncle has one, Anirban has one. Like I could see a lot of positives now that I live someplace where I where I could put in a charger, right get a Tesla. But for me when they said 35,000 on the Model Three, I didn’t know that that actually meant 45,000 there are no $35,000 Model Three. So if you truly hit 25 and there’s a $5,000 tax incentive or whatever it might be depending where you live and where they are with the credit. There’s all sorts of complicated measurements for that. I would definitely think they’re a player. But I feel like Toyota or Volkswagen is going to get there with just like a $16,000 one or an 18,000 or whatever. Again, I’ve never bought a new car we’ve never bought a car that that wasn’t you know at least a year old.

Max Lucas you’ve basically been a co-host will perhaps have you on we’re gonna have more of our network on in the coming weeks as we all get very busy with trade shows and travel and other things as that happened. But why don’t we let Max’s comment close out the day he says I think the biggest threat to Tesla, the stock is that it gets revalued as a car company not as an everything to everyone company. I’ll argue that it’s valued as a fantasy at the moment. It’s valued based on Elon Musk is famous and people think he’s especially brilliant and a lot of people also said in the in the comments like the biggest risk is like Elon dying. I actually feel like if Elon stepped aside and they moved into their Steve Cook phase, that actually might be a good thing for Tesla for the next like five or six years to just really focus on operations. And like you said, 2023 and in my head, I just went 2026 like, I don’t trust anything that they say they’re going to do. And again, don’t send me hate mail. I like the company. I probably will become a shareholder at some point I’m not but I have a fractional account through stock pile now so perhaps I will buy some shares so I don’t want to come off as negative but Steve your thoughts here?

Steve Symington  45:11  Yeah I would disagree that they’re valued as a quote unquote fantasy right and this is coming from you know I’m a Tesla shareholder for the past two and a half years I think about first bought my shares and June 2019 it was like a split-adjusted 40 bucks a share and I you know, I’m hanging on I think they’re arguably undervalued at this point and and you know, it could there could be a potential threat there revalued as a car company but I think they’re largely viewed as a tech innovator and for their battery technologies. And we’ve done you know, Tesla bull and bear case podcasts here at 7Investing before go look up our tests, the bull and bear case podcast. And you can have an idea of kind of both sides of the coin there but yeah. I respectfully disagree. I think they’re, they’re appropriately valued here.

Dan Kline  46:06 So we do a lot of deep dives for our members. Every stock we pick each month we do essentially a deep dive, which is a PowerPoint presentation, followed by Q&A. But we’ve done a number of public facing deep dives we did one on Netflix, we did one on Tesla. So if you’re not a member, and you’re curious as to sort of how 7Investing works, go to and and JT Street, maybe you want to tweet some of those out from the master account today. You get an idea of how our thought process works. The one that Anirban and I did on Netflix with that, of course the whole team along but we were the ones who prepped it. It really shows you how we approach our stock picks and what we’re doing and just sort of what you get as a member.

With that, Steve, this one about 10 minutes longer than I expected. We appreciate so many of you watching. We appreciate all of you who will be watching this or listening to it later. I will be back on Wednesday with Anirban. I think I’m also going to have our friends from Chit Chat money I recorded a really cool piece where they try to convince me that I’m wrong about Spotify. We didn’t frame it exactly that way. But I think we’re gonna air that on Wednesday’s show. And then I will be back Friday, I believe was Simon Erickson doing part two of the show on international investing. Part one out on last Friday. Please go watch that. If you haven’t.

If you’d like to get in touch with us. We are That is an email address that goes to Steve that has questions about your membership. Questions about joining the site. If you’re not a member, what it would look like. Maybe questions about our student membership. I didn’t even talk about that. But if you’re an active student, it is $84 a year to join that is only an annual option. Any questions about our service maybe you can’t find something on the site or you don’t know how something works or you want to subscribe to this this show or our podcast if you’re not sure how to do that. Those are the types of questions you could send there. If you want to interact with us. If you have questions about stocks now we’re not going to research the $20 million micro cap you just created yesterday. But if it’s a stock that’s in our wheelhouse, we are usually happy to talk on social media. That is @7Investing. So until Wednesday. I am Dan Kline, for JT Street, for Steve Symington. We’ll see you later.



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