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AI Market Meltdown; MercadoLibre + Coupang Earnings; Celebrating 200 Power Hour Episodes! $XYZ $CPNG $MELI $AXP $DASH
01:06:16
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- [00:00]
A
This episode is presented by Interactive brokers. Will the U.S. consumer Confidence Index be above 101 in March 2026? Turn your view into a trade with IBKR forecast trader and earn a dollar per contract. If you're right@ibkr.com forecast, last trading day is March 22nd. More on this later in the episode. Welcome to Chit Chat Stocks, the podcast that helps you discover your next great investment. I'm one of your hosts, Ryan Henderson, and I'm joined as always by the one and only Brett Schaefer. Today 200th investing power hour episode. We do these live every Thursday at 5pm Eastern Time and we have plenty to talk about. A little celebratory drink for our 200th episode. Also a little behind the scenes for any listeners. We've now tried to start this episode four times and had technical difficulties. So we're finally going to. Brett and I have got our celebratory drinks. We've got plenty of news. We've got AI related layoffs. We've got a doomsday report that shook markets. We have earnings reports from Coupang, Mercado Libre, Hims and hers. Actually, plenty more block Autodesk Intuit today as well. Nvidia. I guess we should probably talk about them, but I'm going to leave it there. Brett, where do you want to kick things off? Should we crack open our celebratory 200th episode beer now or what do you want to do?
- [01:30]
B
Yeah, I was, I was all relaxed going into this episode. Hopefully everything's all working for the listeners and everything. The live audience, I guess will let us know, but the Friday listeners won't really know what happened. The video's working now, but I am excited to talk about all this. Sorry for the delay. About 20 minutes here. I think we should crack these open. Ryan has for his Constellation Brands episode, a little Corona. And I have a local specialty, a Patagonian beer called and I'll probably butcher the accent. Mendocina nueva resetta. It's Ruby. It's blonde. It's a blonde beer. Fits. Fits for me, I guess. Matches my hair.
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A
Nice. All right. Well, as we. Yes, I.
- [02:14]
B
For those that don't open it, don't open it. Too close to the mic. I guess we get started here. That's proof. That's proof right there. Every 100 episodes we could cheers to 100 power hours. Done. I think we did this on number 100 as well. We had some listener questions, actually. We asked how shall we celebrate 200, another 100 in the books doing this once every week. I think we've done it every week. No, we take one week off in between Christmas and New Year's usually. Unless I, unless I'm forgetting that people wanted to talk about what was the favorite stock pitch you've ever done? What's the favorite stock that you've ever had by a guest? What would you want to do over the next hundred episodes on the Power Hour? What's the best call you've had? What's the worst call you've had? I had some introspection there. So, Ryan, what were your initial thoughts on the last 100 episodes or the last five years in general of the Investing Power Hour?
- [03:10]
A
Well, the Investing Power Hour is nice. It's a format that works every week because there's news every week. We'll get into some of the big news from this week here in a sec. But yeah, it's also something that kind of forced me to. It forces me to actually sift through financial headlines and present something more than the headline itself. So it's kind of a nice forcing function for me as an investor to if I'm going to speak about something on the podcast to listeners, people that listen tune in every week, I don't want to come off as like truly naive and just talk about the headline. So it forces me to do a little research, which is nice. But let's talk through some of these questions that we got from listeners. I'll start with this one. What is your, the, your favorite stock pitch that you have done, maybe over the whole app, whole chit chat, stocks career, if we want to call it that.
- [04:14]
B
I don't know. There's a lot back then that I have probably chosen to forgotten about and want to forget about it as well. But the one that comes to mind, and it's more fresh because it's a little more recent, is Kraken Robotics. I thought that was a very fun company to study. It's kind of up my wheelhouse a little more scientific, something smaller cap in the defense space. It's growing really quickly. And I thought, frankly, I did a good job with that report and it was a really fun one to cover. I think it's a fascinating business today. You know, the stock has ripped, I think, 10x from the lows a year or two ago. It's very, very expensive today. But it's a very exciting company. I have it on the watch list. It's one I want to follow for a long time and keep studying for the years to come and for the People that want the hyped up stuff, it's the best way in public markets today. You can play Palantir or Sorry, sorry, that company. Yeah.
- [05:12]
A
My favorite stock pitch that this wasn't really a stock pitch in the sense like that I was buying it. But my sort of favorite individual company research episode that we've ever done, I think it was Visa. Not necessarily because it ended up having the best returns, but A, I think we did a good job on the episode, but B, learning Visa's actual business model and kind of how it got started and where it actually sits today. Like the value, it serves as sort of a communication layer between banks all over the world. It helped me shape. It helped shape my understanding of the rest of the payments landscape because you, I feel like you often hear like this is going to disrupt the card networks. And also I think there's a lot of misnomers about the card networks in general and the take rate and what's actually layered in there. But it's very hard to disrupt Visa and MasterCard since they are basically a way for banks to communicate with one another. And to replicate the network of banks would require being accepted by all banks around the world. So the when you read, I guess, some of the headlines, which one of them came out this week saying that AI agents were going to disintermediate the card networks, it kind of helps to actual actually have some context on it and the value that they provide to merchants everywhere.
- [06:50]
B
Hey, are you going to give the full research report right now? We got to keep moving on. But I do agree there was actually I had a back and forth with a recurrent guest, Travis Hoyam. He's very, I'd say, bearish on the card network's bullish on the stablecoin thesis. There was some data out there about how extra fees are getting charged by United States retailers, but at the same time the card network volume is growing. So despite that, people like their cards. All right, let's talk maybe favorite guest pitch, favorite interview pitch. I don't know if I want to single anyone out, but I will say when they come on, they're coming on. They've come on recently, specifically Leandro from Best Anchors Dogs and Drew Cohen from Speedwell Research, among others. But these are ones that come to mind lately. They've come on many times, maybe five or six times, if not more, over the last five years. And each time they are well prepared. They just make sure they do a good job and they, they have everything prepared to do a great episode for Us and they showcase themselves, I think, in a fantastic life.
- [07:53]
A
Yeah, it's hard to give any one individual guest credit for because it makes. It kind of feels like it diminishes the, the value of other guests. But I will give a huge thank you to all the guests we've had over multiple years because when we started, honestly, we would just go for whatever guests we wanted. And now we're very selective.
- [08:17]
B
Whatever guests we could get.
- [08:18]
A
Yeah, exactly. Now we're very selective about who we invite on the show. And people do a really good job prepping. Sean Emery did a great job. One stock pitch that I did want to call out because I thought it was. It was not only turned out to be a great investment, but it was a great investment for the right reasons. And this one's old now, since we can look back and say it was a good investment. When Luis Sanchez, friend of the show, came on and pitched Interactive Brokers, I thought that turned out to be a real, a really good timing, but also just, well, well researched episode.
- [08:57]
B
I listened to them a little too late, but still, you know, a couple years later, it's worked out quite well. That's a great business. I like those as well. That's okay. People wanted to talk about our best and worst calls. And then we'll get into the episode I actually had using and maybe this will lead into. After this, we'll talk about the AI report from Citrini Research. I had Gemini Pro. I, I basically asked it. I said, hey, my name is Brett. I host the Chit Chat stocks podcast, which you probably could see on the Internet because it's. We have, it said hundreds of episodes. What are, what are your best and worst calls that I have made on the show? And it did its little thing. It kind of sputtered its wheels for 30 seconds and it said that my worst call, and I remember this now, but it's been a few years, is having high conviction on Match Group. I'd say another bad call was being worried about a potential AI bubble in mid 2023, when I should have been less worried about it forming and more excited about it forming. Maybe now you can be worried about it getting too big, but at that time it was not nearly large enough. And I remember being thinking, wow, there's just so much growth here. I don't know what the return is going to be. Turns out a couple years later it's quite larger. I'd say the best call I've had from a podcast, Take Perspective, was definitely pounding the table and kind of calling the bottom on American express in late 2023. What about you Ryan?
- [10:30]
A
Best call for me was probably Google. It just ended up a. The timing ended up working out really well but it also gave me good returns in quick succession. And then the worst call shortly after Google was money.com that that was. I said it a few episodes ago. I think that was the quickest I've ever lost 50% of an investment.
- [10:57]
B
Granted it was a small table outside of the roulette table.
- [11:01]
A
Yeah. But yeah, I'd say Alphabet was probably the best call I've had plenty of. I was banging the drum on Match Group as well. That one didn't turn out so hot. Probably. Probably some valuable lessons to take away from that actually in terms of like good companies use the product.
- [11:21]
B
It doesn't mean that. Doesn't mean that's going to be a good investment. Yeah, that's a good take though. Money.com it might be trading at net cash now. Getting darn close.
- [11:33]
A
I don't know if it's quite there yet. It could be I guess I haven't double checked but I mean it has been destroyed by the AI narrative. So let's get into this because maybe we can start with the Citrini report which shook markets literally. Like and for anyone that didn't read this, I will say it's an entertaining read and I think it's free. At least as far as I made it, it was free. The basically he writes or they write this article as if they're living two years in the future and it's essentially this AI doomsday scenario where the image is this unemployment's at 10%, AI took a bunch of jobs. Software companies couldn't compete with AI anymore and they had to cut back on their workforce which then became a self reinforcing cycle. This is kind of the situation that he. They describe happening but looking backwards from two years from now. However they lay out a couple of companies specifically like American Express for example and the stock got cut I think by like 8% the day that the Citrini report came out. So it's not like this was just some random report, it actually impacted markets. But there's a few companies specifically that they talk about where they're saying agents are going to disintermediate them or disrupt them. And I kind of fundamentally disagree with a number of them, but I'll go ahead and give some quotes. It says coding agents had collapsed the barriers to entry for launching a delivery app. A competent developer could deploy a functional competitor in weeks and dozens did, enticing drivers away from DoorDash and Uber Eats by passing 90 to 95% of the delivery fee through to the driver. Multi app dashboards let gig workers track incoming jobs from 20 or 30 platforms at once, eliminating the lock in that the incumbents depended on the market fragmented overnight and margins compressed to nearly nothing. Habitual app loyalty, the entire basis of the business model simply didn't exist for a machine.
- [13:48]
B
So yeah, it's interesting. I mean, what are you going to just tell your agent, hey, pick me up that food from the place I like and then it's going to get someone to do it for you and then there's just going to be a bunch there, a bunch, dozens of platforms out there. I, I, it's, it's logical, but I don't think it's plausible. If you get kind of what I'm
- [14:10]
A
saying, that's why all the stock sold off is all of this stuff sounds logical, like it, like it could make sense. You've got an agent that just, it doesn't go through Booking holdings, it doesn't go through DoorDash, it goes through whatever the cheapest route is. But the two things are sort of fundamentally wrong with this in my opinion. First, the habitual app loyalty, he says, is the entire basis of the business model. I would argue the entire basis of the business model is the network that they've accumulated on both the drivers and the restaurant side. Drivers, restaurants and consumer side.
- [14:46]
B
Right, right. You know that when you use one of the platforms that have a lot of drivers, you're going to have a lot of supply of restaurants and it's going to get to you in a reasonable time when you have like a local, maybe startup. I remember there was a story of, we've talked about, I think before the extra fees in our hometown of Seattle that were put on the gig workers to increase their wages. But then that kind of backfired and some guy who lost all of his business that was a driver, he decided to make his own little local platform. But if you're going to go with that, there's a huge risk because you don't know how long it's going to take. You have no trust and reliability and you're going to tell your agent, hey, get it to me as fast as possible. Use who I liked before. Use who I have a loyalty program with. Yeah, there's much more to it than just, hey, spin up the demand side. Will the US consumer confidence index be above 101 in March 2026 at IBKR forecast trader. The yes recently priced at 40% and the no at 58%. But markets move fast. Forecast contracts let you turn your views into trades on future events like the economy, climate change and politics with simple yes or no prediction style contracts. Explore trending data and spot the trends. And if you get your prediction right, you earn $1 per contract at settlement plus you'll earn 3.14% APY on your investment with an interest like incentive coupon. And you'll get USD $3 for signing up which you can use for any purpose or to start trading. Forecast contracts are not suitable for all investors. Go to ibkr.com forecast and turn your views into IBKR Forecast Trader contracts today. Last trading day for this contract is March 22nd.
- [16:31]
A
Yeah, yeah. And the hard part here, like he says, a competent developer could deploy a functional competitor in weeks. And I saw a lot of people talk about this. The difficulty of building an Uber is not building an interface. It's going out and getting drivers, getting millions of them and doing that in every city across the country. Doordash. It's getting all the restaurants and convenience stores onto your platform willing to put in their inventory, put in their menu items, allow drivers to come pick up. So once again sounds logical. I think highly, highly, highly unlikely. The next one here and we will. We've got some comments in here asking us to get to Mercado Libre earnings. We'll talk about that as well. He says once agents controlled the transaction, they went looking for bigger paperclips. There was only so much price matching and aggregating to do. The biggest way to repeatedly save the user money, especially when agents started transacting among themselves, was to eliminate fees in machine to machine commerce. The 2 to 3% card interchange rate became an obvious target. A Gentex Commerce routing around interchange posed a far greater risk to card focused banks and monoline issuers who collected the majority of that 2 to 3% fee. American Express was hit the hardest. A combined headwind from white collar workforce reductions gutting its customer base and agents routing around Interchange gutting its revenue model.
- [18:03]
B
I understand the white collar part. There's been a huge growth in the spending among the top consumer spending among the top percentage of the US economy which has benefited American Express. I think that would be the biggest risk playing them today. And if a bunch of these software engineers that are more in the American Express demographic get laid off. Yeah, 100%. I mean you're about to talk about the block layoffs that could affect them. But when I Look at their membership model. I had a. I think it was a quote tweet a little bit in jest on with the guy that I believe wrote this. I'm not exactly sure is following all these stories is very, very difficult. I said Claude, please replicate the Amex partner network encompassing hotels, airlines, Uber, Centurion lounge, global lounges, travel insurance and restauran as well as the 150 million cards in distribution. Make no mistakes. The I could have added. I only had. Since I don't pay for Twitter premium anymore. I could have added the 100 million plus merchant acceptance, the Resi partnership, the. The restaurant reservation stuff. Plenty of other things. Relationship now with Lululemon. A lot, a lot of stuff. But in general, like how are you going to replicate the long standing relationship with Hilton and Marriott? How are you going to replicate that relationship with Delta? That is much, much easier said than done. How are you going to get like how. I mean think about it.
- [19:31]
A
Agent lounges at the airport.
- [19:33]
B
Yeah. What is there going to be a hundred airport lounges that just copy sent? The Centurion lounges? No, that's impossible. It's very, very difficult to build one of those. It takes a long time because of the airport regulations. And that is a big part of their moat. It's a membership model and if people attack the spending, which it could happen. I think the stablecoin stuff and the fees that these restaurants charge or retailers charge, if you use credit cards, it could come back to bite them. Definitely. But that's a much more legitimate risk than this AI stuff.
- [20:11]
A
Yeah. And I kind of cut this part out. But basically he said the easiest way around this will be stablecoins. And again, What's the off ramp? I feel like people, for some reason no one ever talks about the off ramps. And it's a question that just has never. Literally no one's given me a good answer to. Let's say you. Okay. Remittance is kind of the easiest analogy to use. Let's say instead of sending money through Western Union, you want to send money through stablecoins. Okay. The recipient gets the stablecoins. Now what do they do with it? How do they.
- [20:51]
B
They got to spend it in their local economy. Yeah.
- [20:53]
A
So you have now have all those merchants randomly decided we're going to accept stable coins? Like right?
- [20:59]
B
Yeah.
- [21:01]
A
You either have to replace the entire economy, local economy or country wide economy with stablecoins or it doesn't work because most of them would rather just send it back to their bank account which you're going to Take the fee. So, again, whatever. It's a different debate. But this sent markets, and especially marketplace businesses like Booking Holdings, I think even Airbnb dropped American Express. I think Visa and MasterCard dropped on this. It's a entertaining doomsday read, but I would not go selling your stocks because some of this stuff might sound logical.
- [21:48]
B
Yeah, we have a comment here that says, well, one first from one, Tyler says all of these think pieces insanely underestimate how much time it takes to maintain any complex system. Of course people will lose their jobs. Yeah, people always lose their jobs. You're going to talk about the layoffs that block, that's just because of company bloat. And then another person here says, I can see agents skipping the platform, but giving away my credit card. That is way harder. And what I also think investors are maybe misunderstanding is when I talk to an AI agent today, specifically, I think it's very, very helpful for planning logistics for travel. Like, hey, I have this question about this specific thing. Instead of reading 20 blog posts about this complicated travel route, you can help me with that. And I can also ask it, hey, I'm going to use this blank airline or a hotel. I have these credit cards. Tell me how to maximize points. At this day, it's much, much easier than calculating yourself. But if I told an AI agent to do that, I would tell it, one, what's the cheapest way to get this? And then two, when I'm buying at checkout, how do I maximize my points for either American Express, whatever membership program you're under. And that's what I'm going to be explicitly telling my agent. It's not going to. At least that's, that's my point of view. And I don't see consumers globally doing it any other way.
- [23:13]
A
Yeah, I'm seeing a lot of investors out there basically saying, like, it's getting rid of the in between man, like doordash, or getting rid of the booking holdings, like the booking platform, because it's just an in between.
- [23:32]
B
Easiest one is Airbnb. How do you replicate that?
- [23:35]
A
Yeah, is every single host going to have their own site and the agents are going to scan it?
- [23:40]
B
No, an agent's going to recruit them. You're going to say, hey, Claude, go to the 9 million hosts on Airbnb, convince them all to come to my platform, make no mistakes. I mean, it's a joke. Like, it's a complete joke.
- [23:54]
A
And if the idea is that every one of these is now isolated, independent, and there's no aggregator of it, and that everyone has built their own vibe coded website. Every single host. Like, you know, my grandpa was a host for two years, so apparently Claude Code's going to build him a website.
- [24:09]
B
No, he's going to build a website.
- [24:12]
A
Which is so unbelievably unrealistic.
- [24:15]
B
Yeah, no, I covered this on my WIX piece that I did a research report on recently. It's like saying, is your local Chinese restaurant gonna start vibe coding their own website to save 300 bucks a year? What? Yeah.
- [24:31]
A
And there are. The value of the platforms is the supply that like, it's not being like they didn't just fall into this place in the value chain. And they're the lucky ones because they're like a habit driven app. Like they have the supply. Airbnb has the supply, Booking has the supply. DoorDash has the restaurant supply. Uber has the driver supply. That's the hard part. It's like, okay to give a shout out to one of our sponsors, Fiscal AI. It's like imagine every cell on Fiscal AI was blank. Like you can replicate the interface. That doesn't mean like the data is where you know what's on the platform is the value. So unless it's like commoditized supply, which I don't think in any of the cases like American Express or that's kind of a different piece. Doordash, Uber Booking, Airbnb, those are not commoditized supply. I think kind of you could sort of ignore this piece, but I know we've gone long on this.
- [25:35]
B
So do you want to talk block laying off 50% of their workers or do you want to talk about Prado Libre first? Give. Give you a break.
- [25:42]
A
Yeah, right after I said how AI is not this doomsday scenario is unrealistic. Why don't we talk about how blocks laying off 50% of their staff because of AI?
- [25:52]
B
The, the layoffs part is, I think, legitimate. It's just going to make a lot of these businesses much more profitable. For example, I think DoorDash is going to be way more profitable. I think Airbnb is going to be way more profitable. If they want to be. I think Uber is going to be way more profitable because your overhead is just that much more efficient. Now think about Airbnb. Airbnb is already a third. This is just an example because I bought them closely and own the stock. They've already fully automated a third of customer support queries. Eventually they're going to have that at 100% and it's going to turn that from 10% of revenue to like 2. That's where the benefit's gonna come from in my opinion.
- [26:33]
A
I think this Block situation is probably a little different. My honest thought here is that Jack Dorsey read the Citrini piece and felt way too inspiring. I honestly believe it could be.
- [26:45]
B
It could be true for him.
- [26:45]
A
Yeah, maybe it was too close to the Block earnings report, but I could have seen him reading the report and been like, we gotta lay off half our staff. We gotta be the first ones.
- [26:54]
B
What did he. What did he say? What did he do?
- [26:57]
A
Yeah. So Block reported earnings just over an hour ago and they announced that they are laying off 4,000 of their roughly 10,000 employees. Here's what Jack Dorsey had to say in a letter. So why are we changing how we operate going forward? The core thesis is simple. Intelligence tools have changed what it means to build and run a company.
- [27:18]
B
We've all.
- [27:19]
A
We are already seeing it internally. A significantly smaller team using the tools we are building can do more and do it better. And intelligence tools Cap. Intelligence tool capabilities are compounding faster every week. I don't think we are early to this realization. I just think most companies are late within the next year. Which. Come on, whatever.
- [27:38]
B
Oh, yeah, always. Always six months. Remember the la. Every three years or sorry, for the last three years. Altman and Dario can never pronounce his last name. Amadi. Dario the anthropic. I've said within six months most software is going to be. Engineers are going to be obsolete. They've said that the last three years, every interview they've done.
- [27:56]
A
So yeah, the part. This just kind of irks me. The. I don't think we're early to this realization. I just think most companies are late. Like, okay, all right. Whatever. Dorsey. It says within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes. I'd rather get there honestly and on our own terms than be forced into it reactively. He's literally describing what C. Trinity wrote. Which makes me. That's the part where I thought he read this and actually did it. He says, and this isn't just about efficiency. Block serves millions of customers. Sellers and consumers are going to feel the economic effects of this same shift. Small businesses that rely on us to get paid to manage their money to access capital. So here's. Okay, here's the part that. Where I honestly believe Dorsey might have just read the Saturnity Report. For the longest time, everyone talked about AI as like an enabler. And the. It wasn't really until this that someone posed it as a doomsday report. Like a doomsday situation where everyone's going to be unemployed. And now Dorsey's kind of acting like that's the case. There's kind of this negative tone to it. I guess there should be when it comes to layoffs, but yeah, it's somber.
- [29:11]
B
I mean, when people get laid off, look, it's always sad. And think about. I get nervous about the Motley Fool's viability because of the AI chatbots and. Yeah, I mean, it's tough, I guess.
- [29:22]
A
Here's my question. Do you think. Do you think that Dorsey truly witnessed the last year and thought AI can do half these jobs? Or do you think he need. He knew he had to made like, yeah, he had to make layoffs. And he's using this as the scapegoat.
- [29:41]
B
He's half of. They have 10,000 employees. First off, did you know Salesforce has 70,000 employees? Which I think for both those companies, half of the employees are at adult daycare. That's, that's probably what's happening here. Look, I would love to go to adult daycare and get paid $200,000, but if you're in that situation, just know it's a risky proposition. We have a comment here from Tyler that says, is Dorsey still taking his three month safari vacations? Yeah, maybe he came back from being off the Internet for a while. He was in Africa doing some nonsense with bitcoin. And he comes back, reads the Citrini piece and goes, hey, all right, board, we're cutting half of the employees tomorrow.
- [30:27]
A
Yeah, you know what's hilarious? I'm pretty sure. So I think like two quarters ago, I think it was two quarters ago, block had a $76 million unexpected. I think it was like $70 million unexpected charge. And they said like if you adjust. And it was related to a one time off site corporate event. So he threw a 70. He threw like a 70 million corporate. $70 million party for 10,000 people. I mean, and then laid them all off.
- [30:57]
B
Hey, that's some weird stuff right there. The. What's the Salesforce Dreamforce. I know that's a big expensive one. I remember watching the Autodesk event once. It was in New Orleans and they were in the Superdome or something and they had like the, the marching bands coming in. And I was just watching this going, oh my God, the margins are never going up. But 70 million, that's out of this world. Maybe Block, hey, maybe they get fit if they, if they give up the crypto. Nonsense. Which you know, stablecoins is fine, but like the. His little taco mining machine thing, if he gives that up, maybe, maybe I'd be interested. But no, no, no.
- [31:43]
A
Sorry Brett. No, the, the biggest, the best. Like I think the best investing advice I followed over the last few years is don't get involved with anything Jack Dorsey touches.
- [31:55]
B
Honestly. All right, now let's talk about a company that when I listened to the conference call or read the conference call this morning, I got confidence in the business and the company and the management team. It's Mercado Libre. Another earnings report. This is what I would say Ryan's Fiscal AI Twitter account and just Fiscal AIs in general. I don't want to use the dirty word here. It's their dream because you have so many KPIs. It's probably the most KPIs of all the business out there. And the charts look phenomenal. They always go viral. I should mention now we're going to maybe share some fiscal A charts here. If anyone is interested, use our link in the show notes. You can get 15% off any paid plan. You get all these KPIs that are updated with their latest update for the platform pretty much instantly for the largest companies in the world. So right after for example when Mercado Libre reports yesterday or in Coupang reports an hour before our recording, a lot of the data is updated for you. That's part of the AA part right there. Let's go through the Mercado Libre numbers. Because the stock fell after hours is a bit shocking I guess. If you look at the figures, net revenue was up 47% FX neutral, 10% operating margin. They intentionally compressed this to accelerate growth and push commerce. For example, they lowered the amount in Brazil of like a purchase the. The dollar amount well in the Brazilian reals of what you could get for free shipping. They're also offering more value for their. Gosh, all the terms are confusing, Melly. Plus I think essentially their Amazon prime like stuff and that's compressing margin in the short term as well as they're accelerating credit card adoption where more people are joining the credit card networks. I think you probably pay maybe a little boost there when they join. I'm not sure exactly how the unit economics work but that's accelerating which is going to impact margins in the short run. But if you look at the overall numbers, they're fintech MAUs are up to 78 million. They keep growing. Ryan's showing a lot of this data right now. For anyone watching the video, they're at 121 million unique buyers in 2025 and they're at $65 billion in gross marketplace value. You look at that, that's a large number and it keeps compounding. But compared to an Amazon whose GMV which they don't report is probably in the 7, 6, 7 $800 billion range given their third, they don't, they just report revenue, they, for the third party stuff, I mean combined across other countries, Mexico, Brazil, Argentina, Chile and others, Peru, Colombia, bring back Venezuela maybe within the next five years I would hope there's, there's a gigantic Runway and they talk about, they mentioned this in many of their letters. The E commerce penetration within Latin America is about half of the level of the United States, United Kingdom and East Asia. And over time you should see this change and it's really simply because the infrastructure is not there yet. But that just means they have a long Runway to reinvest and build that infrastructure. And just what I would say, copy Amazon's infrastructure. Let's get within all the apartment buildings, those little lockers, let's get the delivery straight to places. Because for example, in, in the United States most of the time when you get a delivery to your place you don't have to be there. But with Mercado Libre a lot of times you have to be there to pick it up in person, right? So that just creates friction. Now over time they can probably reduce that, you know, decrease delivery times, decrease prices, increase selection. They're getting more from, what should I say, international buyers from China. They're also increasing their first party selection to give more supply onto the marketplace. There's a lot of stuff there. And then on top of the other fintech stuff, they're acquiring total payment volume which is essentially the, you know, the competitor to like a square or a clover or what have you, a lot of that. And it's just, I should mention in Argentina, extremely popular as well as Brazil that's up to $188 billion. I think it's 3x over a short period of time. Other thing is they're at over a billion dollars in annual capex. I think the question is shouldn't we see that keep ris because eventually you'd want that to, I, I think you just want that to keep growing and growing and growing because Amazon's just at a much, much higher level and you, you can see that in the delivery speeds. If you look at all their geographies that are key for them, they're growing the healthy Double digits. And my question is, you look at some of these charts. I have the MercadoLibre gross profit chart here from Fiscal AI. It's grown from just basically nothing in 2005 at a 37% rate. Compound annual growth rate for the last 20 years to 12 point something billion dollars. I can't see the whole thing. The growth just keeps compounding. And our investors just really worried about temporary margin compression because you look at the stock here, it's trading at 20 something times earnings, depressed earnings and revenue is growing at a really rapid rate.
- [37:06]
A
Yeah. When I see their decision to reduce the take rate within Brazil, I think it was Brazil was the market they called that out in. And it had a clear like if you look at gross merchandise volume on fiscal AI, you see a massive jump. Yeah, an extra. What is that $3.5 billion jump compared to last quarter. $5 billion jump compared to a year ago. It feels to me reminiscent of sort of Amazon where it's sacrificing margins in the short term to win customers and market share in the long run. So yeah, it feels like they're taking the right steps. And Capex might seem relatively small when you look at it versus an Amazon, but you probably would think the same thing for gmv. Like GMV looks small compared to Amazon. Part of it is just the countries they're operating in that they're going to be spending less. They don't have to spend as much nominally on Capex to. Yeah.
- [38:17]
B
And the customer proposition, as someone who's lived in the United States in these countries, I haven't used Mercado Libre. Maybe one thing they should fix is you have to, you have to be a citizen to use it. Maybe that's some local regulation, but I'm not able to use the platform and I would. And maybe that also tells to their value proposition in the country. But compared to Amazon, the value proposition is not equaled. You can't go. You can't look up anything and then have it delivered within 24 hours. It's not happening yet. But glass half full, it can get there. There's no reason it can't.
- [38:57]
A
It strikes me as one of the businesses that maybe has the largest reinvestment Runway in the world. And I mean they're growing like gangbusters in Mexico. Like if you look at the Mexico revenue growth, I think it's around 70% over the last six years. Maybe I can pull this up real quick.
- [39:21]
B
Yeah. And on top of it you have the Argentina recovery. It's doing well in Chile. Brazil is a. Brazil is the largest country in the region. You have Colombia, that I guess that's not as important. You have Venezuela, that might open up again. There's. There's just a lot going for them. And on top of it, they have the consumer fintech that we barely have discussed. We have a comment here says super important to the Meli thesis. People don't talk about as much advertisements. Currently less than 2% of GNV, while Amazon's is around 8% and ads are estimated at 70 to 80% margins. You still have that Runway. They're doing all the right things for sponsored listings. They said they're building their own AI chatbot for the application and customer support. I think they're doing all the right things. When you talk to management, they go, look, we're investing for the long term. Seems they have that culture. That's good. And did you know, Ryan, I don't know if you saw this because the fiscal AI account gets a lot of notifications on Twitter, but the founder quote tweeted you this week. Did you see this?
- [40:22]
A
I honestly did not see that.
- [40:24]
B
That's Galperin. Marcus Galperin gave you a quote tweet? Yeah.
- [40:28]
A
Interesting.
- [40:29]
B
I should probably engage out to him. Maybe he wants a fiscal AI subscription.
- [40:34]
A
Yeah, I'll say. Hey, I know you get 10 people reporting these to you every quarter, but how about all these KPIs?
- [40:42]
B
We'll get it faster. Yeah, I'll find it and send it to you later. I guess it's not important for the listeners, but I've been talking a lot. What was your thoughts on the court? Close your eyes. Exhale. Feel your body relax and let go of whatever you're carrying today.
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C
Well, I'm letting go of the worry that I wouldn't get my new contacts in time for this class. I got them delivered free from 1-800-contacts. Oh my gosh, they're so fast.
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B
And breathe.
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A
Oh, sorry.
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C
I almost couldn't breathe when I saw the discount they gave me on my first order. Oh, sorry. Namaste.
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A
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I'm freaking out.
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B
Paying American.
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A
Not anymore. Save up to 40% your first year. Visit lifelock.com podcast terms apply no, I thought the quarter looked really good. It's, it's one of those where it's very easy to like especially when the stock kind of crashes not being in the market. It's kind of easy to get shaken out of any sort of conviction because you don't necessarily have boots on the ground to say oh the customer value proposition is still intact but well Brett might but from everyone else I've spoken to, it's what you what what investors think Mercado Libre is is pretty much what it, what it actually is. Talking to Brian Stofel about this was pretty eye opening how the infrastructure is very different obviously in some of these countries. So it's not, you're not going to have the exact same shipping times, the same efficiency that you have in Amazon
- [42:43]
B
but GDP per capita 13,000 versus 80. Yeah.
- [42:48]
A
It also allows I think for larger competitive advantages like relative like if you've now been the vertically integrated or the I guess e commerce provider where you're actually doing some of the shipping yourself. That's a huge advantage over 10 years where you can optimize and optimize and optimize. Especially when that self reinforcing cycle gets going and you have more customers because you have the best times, more customers creates more efficiency, creates higher profitable routes. Higher profitable routes, more money to reinvest back in to the business. And this kind of leads into coupang which we're going to talk about in a second. Yeah, I love, I just love these business models. There's so much optionality and they have such a self reinforcing advantage.
- [43:39]
B
That's a true Seattleite. Speaking there in the, in the spirit of the old school Amazon, should we talk coupang? I guess.
- [43:47]
A
Yeah, yeah. The most controversial Korean company. Not even Korean I guess there was
- [43:53]
B
some very interesting stuff about the data breach. Let's see where they're trading after hours down 3%.
- [43:59]
A
Give context on what has happened over the last quarter.
- [44:03]
B
Okay, let me try to do what I've done on a Motley fool article like 20 times in the last three months. They essentially in November, either November or October there was and I'm saying their country of origin because it's important for the political relationship to the country. As a Chinese national working for a coupang it turned out he got access to 33 million accounts informations. They shut it down, but it turned into a whole political scandal. At first they kind of downplayed it a bit and then it just became a thing. Oh, people's personal information are getting taken from this Chinese national that of course, you know, Korea, South Korea and China don't have the greatest country relationship politically. So that added fuel to the fire. And then after that, the company kind of downplayed even more where executives weren't going to these hearings. And then they turn to the United States government to say, look, we are listed in the United States. We're technically headquartered in the United States. So we're a United States company. We're getting mistreated by the South Korean government. So when you're doing these tariff and trade deals, we want a piece of the action, or maybe that's the wrong way to put it. They kind of turned to the US Government to use them as leverage because they felt they were getting mistreated. And when you look at some of the data and some of the anecdotes they give out from this earnings, and I'll mention this first, before we get into the numbers, it does seem like they've been targeted by the South Korean government. Here's the quote on the data breach. Again, this is a political scandal that brought the stock down 40% and had people starting a coupang boycott for a month. Quote, building lobby codes were accessed for 2,600. Again, I'm not, that's not 260,000. That's 2,600 of the tens of millions accounts. 2,600 Korean user accounts. No financial or payment card data, no login credentials or passwords, and no government issued IDs were accessed. To date, there have been no confirmed instances of any of this customer data being exploited or of any secondary harm to customers related to this accident. The data incident is estimated to have adversely impacted Q4 2025 revenue growth as well as profitability beginning in December. But recent results indicate that the impacts on growth rates have subsequently stabilized and are beginning to recover in Q1 2026. Look, 20002500 accounts, not really any important data. That's, that's nothing. That wouldn't even be news in the United States, let alone really any other country. I feel like this is a giant nothing burger and they got targeted a little bit and things are going to be fine. I mean, they're getting fined for this. I can't. Seems like they did their job. Yes.
- [46:54]
A
And those 2,600 Korean people that had building codes, lobby codes stolen, you can change them like, you can, you can contact those people, tell them they were compromised, you can change them. It's.
- [47:13]
B
I think if everyone coupons. Coupons for, for coupon. Like for the marketplace. Yeah, I felt like they did a good job.
- [47:22]
A
And it's. This is. I mean, they're like they said, they said they're already seeing stabilize, stabilization in Q1. This is one of those things that just blows over. Like, think about the data breach Meta had. And Meta costs nothing to use. There's no monetary benefit for consumers to using Meta or Facebook. Back in the day, they had to basically change their name because their brand was so terrible. After this data breach, when customers get free shipping and are spending hundreds of dollars on their groceries to have it delivered in overnight, like hour.
- [48:09]
B
Well, hours.
- [48:10]
A
Less in hours. Yeah.
- [48:11]
B
For, for, for grocery.
- [48:13]
A
It's like people are not going to say no. Two years ago, I remember those lobby codes that you gave out or that like got compromised. I'm done taking all these financial savings and benefits that help my family and help my life. It's not, it's just totally unrealistic. So obviously, if the government continues to, like, not favor them, that's not great. But I think the consumers are going to vote with their wallets over time. And my guess is that in a year or two, it's going to be a blip. Like, three years ago, Coupang had a big fire at a fulfillment center that, that hurt their gross profits for a quarter. No one talks about that anymore. Like, these things blow over.
- [48:54]
B
Yeah. If we look at the numbers, revenue is up 14% year over year in constant currency. Gross Profit only grew 5%, but it would have been 10% if not for asset impairment and the administrative fine they had to pay. If you look at Q4 developing offerings, which is stuff like Taiwan and food delivery and other things, that was up 31% year over year and is at $1.44 billion. I think the company's doing well. Their free cash flow is going down because they're reinvesting in Taiwan and other things. But like Mercado Libre, they have a long way to reinvest if they can target these new markets. Now, they're in a little bit different of a position because unlike Mercado Libre, which has this dominant market position in so many other countries, Coupang's in a little earlier story of they need to enter new markets and then build that flywheel from scratch. That's a harder nut to crack. But if you look at their Korean business, I think it's rock solid.
- [49:49]
A
Yeah, that would be my only real concern about all this is that the negative coupang headlines impact the brand in Taiwan where they don't have as great of a consumer value proposition as they already have in Korea.
- [50:07]
B
But I doubt that though. I doubt that. And what's interesting is they're able, similar to Mercado Libre, to cross country supply now. So as they add more countries in East Asia, you can sell, Korean peoples can sell. And they've been bragging about, I think for political reasons in the United States about how US brands like local brands, like a mom and pop seller of something health stuff been added to the coupon marketplace and are making, you know, six figures in revenue from that. So yeah, it's a good business. I trust the founder.
- [50:41]
A
Yeah, yeah, all right.
- [50:43]
B
We were another solid quarter.
- [50:46]
A
Yeah, I'm content with it. So far from the numbers I've seen. We were requested to look at a small cap this week called Badger Meter. I put down some notes. Do we want to tackle this?
- [51:01]
B
Yes, we do. Many, many and many. I mean like three or four listeners have been asking about this for a couple of weeks and I told them we would do it as a small cap of the week. So we need to fulfill this. And I think recurring guest Ian Bizek has also covered them, though I can't confirm that. I think someone mentioned that, but yeah. What do they do here? Ryan? It's the name screams who's our friend? That online firm that does companies that no one knows about. Lawrence Hamtel. Just stuff that businesses that you've never heard about. The name just screams nothing.
- [51:38]
A
Yeah.
- [51:38]
B
And yet it seems like a compounder.
- [51:40]
A
Talk about one of the most boring names of any company we've studied. Badger Meter. Their core product offering consists of water meters and related hardware as well as software sold in the United States. And I'm by no means an expert on this business because I've, you know, Small cap of the week. We were asked to look at it. I've looked at it a bit. Here's a quote from Morningstar, analyst on Badger Meter. It says for the vast majority of Badger Meter's 100 year plus history. Hey, green flag, 100 year history, sure. The company sold primarily one product, water meters. This product offering has expanded in recent years as the company has expanded beyond the meter to include sewer monitoring, water quality monitoring and pressure monitoring. In 2024, the company unveiled Blue Edge, encompassing its full suite of products, software and solutions to address water challenges. Almost all of their sales go to public water utilities, so keep in mind that that customer is not. It's probably a low churn business. They tend to stick with, I think governments tend to stick with customers. So another quote here, Badger's moat is also supported by switching costs due to the risk averse nature of water utilities. Based on our discussion with water utilities, these entities tend to be reluctant to switch from a given meter brand. This dynamic is particularly true for small and mid sized water utilities. While larger utilities are willing to buy meters from multiple different providers, many utilities actually refer to themselves as a quote Badger or Census or Neptune utility which those are the competitors to Badger. And it's not unusual for these relationships to span decades. So I tend to like sort of hardware and software tied ecosystems and Badger meter kind of meets that. They've got this beacon software which is had to Google this. It's an analytics suite designed for water utilities to manage their infrastructure and consumer engagement in real time. So basically it's monitoring software to tie in with their meter hardware. Revenue has basically exploded over the last five years. So from 2012 to 2020 revenue grew I think like 30% and it's doubled over the last five.
- [54:07]
B
So we've seen why did you, did you figure out why?
- [54:12]
A
So they've made some acquisitions in recent years to broaden their capabilities. So some of this is acquisition driven and I kind of mentioned it earlier, but basically the capabilities that they've acquired expand them across the water cycle. So like the sewage monitoring, the water pressure monitoring, all that stuff, stormwater wastewater monitoring, that some of that has been inorganic growth but I think it's also helped them win customers. So my question for financial context, just under a billion dollars in revenue and $183 million in operating income. They've got an enterprise value of 4.3 billion today, so about 26 times earnings. My question would be how much benefit? Like if I'm going to keep researching this, how much benefit is there to expanding across the water cycle? Like are there cost synergies? Can they win more customers by having sort of the full product stack? Are they able to charge more? Like because you're paying 26 times. And I cannot imagine that this is a rapidly growing end market. Like water utilities are not. It's not the data center business right now, you know, it's, it's, it's a different space. So there's some earnings growth.
- [55:38]
B
Yeah, for sure.
- [55:39]
A
Like how has their competitive positioning changed over the last five years? That's kind of what I would be focusing on over the, for my research.
- [55:48]
B
Total return over the last 10 years, 418% and they're in a little drawdown so maybe it's cheaper. It could be a story of margin expansion. I think that'd be another question I would look at you have here what $917 million in revenue, $183 million in operating profit. The margins are still they're pretty strong, but maybe it can get even higher with more efficiencies. I'd like to know what their capital returns program is. Yeah, it feels interesting but if I look at and maybe we can pull up quickly again on fiscal AI use our link in any 15 off any paid plan. Let's pull up maybe what do you think gross profit multiple is good for a little top line number. That's probably not the worst one to use. Let's see, it's loading the hamster wheels. Running it is at 11.9 times but back in kind of the 2017 era, 2016 it was down 6 to 10. So it's not back there. But it did go up to 20 so we've had quite a correction there. So maybe there maybe there's opportunity. We'll see. But 12 times gross profit's not cheap by any stretch.
- [57:08]
A
Yeah, my first instinct is this episode
- [57:12]
C
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B
I don't have time to shop, so I buy all my clothes where I buy my seafood.
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A
I just want someone to tell me what shirt goes with what pants.
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B
I just want jeans that fit.
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C
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A
Man, that was easy.
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B
That look good.
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C
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- [58:11]
B
Slow
- [58:11]
A
moving industry, probably very predictable income and revenue but. Or contracts, I should say. But it's not really exciting me at a time when there are a lot of stocks that are exciting me. So probably, probably going to not be taking a deeper look. Do we want to talk the Mexican cartel?
- [58:38]
B
Yeah, someone said this is a lizard question. Maybe we can, I don't know, serious this one Thoughts on the drug cartel stuff in Mexico. It's, it's already over. Like I, I was looking up the cost of going to Puerto Vallarta. I mean it's. Has an American died? There's like 3 million of them in the country. Not a single one has died.
- [59:03]
A
Yeah, I wrote this down or maybe you did on our notes to talk about for this week because on Monday it was like D News Monday. Maybe. I can't remember which day it was. It almost feels not even relevant to talk about now. And it's three days later. I guess maybe we should give a little context for anyone that. And we'll try to give a sober view here of what has happened. People may have seen. I would guess most people saw some sensational headlines. Mexican government captured and apparently killed the head of the second largest cartel drug cartel in Mexico.
- [59:49]
B
New generation. Yeah, yeah.
- [59:52]
A
And the.
- [59:53]
B
They have a name like a boy band. It's funny.
- [59:55]
A
Yeah, it's. It is covered. It's funny to read about them. The second highest up ordered a day of violence in like response to the government killing El Mencho. And there were some people that died
- [60:17]
B
like 10 cars in Puerto Vallarta. And then there was smoke in the sky.
- [60:21]
A
Yeah, that was kind of what cut the news. There were a lot of fake AI related videos about like the airports being compromised. And that's one of the big reasons I care about this is aside from the humanitarian side of things, we, we both own Mexican airport stocks. So the concern was basically this was going to continue and that the cartels had like taken over and were responding. And it's not to downplay. There were some people that died and I think like there were some casualties.
- [60:55]
B
Sure, sure. Yes, yes.
- [60:56]
A
But it, I would be surprised if it really curtailed travel demand. The. Maybe it does in the short term for like a month or so. But we're already kind of bored of talking about this. We haven't really seen any follow on violence or activities. And I'm shocked by the amount of bad backlash the Mexican president gets about the cartel. And maybe I'm just uninformed on the topic, but people are like, so they took out one of the leaders of the leading cartels and then everyone, the cartel reacted and everyone's like, the president's not doing anything. It's like, well, why did this all start in the first place?
- [61:47]
B
I think, yeah, you can understand the frustration. Many years of just this nonsense that I, I would be frustrated if I was someone like 50 years old. And ever since I was 20, there's just been this nonsense going on in my country. I looked up while you were talking Google flights from. I guess we're not. Neither of us are in this city but Google flights in March and April you can go to Puerto Vallarta direct from Seattle on a main Alaska airlines flight for $360 round trip. That sounds kind of nice. That's. That's value. I be greedy when others are feel fearful. Right.
- [62:27]
A
Yeah. I say and you know what? Been to Puerto Vallarta. It's very nice.
- [62:32]
B
Yeah, it's a great area.
- [62:34]
A
The not bad. I think the concern from a lot of people was that basically it's not for a long time the cartel activity has been stuck to very rural areas like the desert and not in big tourist cities. And then it felt like all of a sudden all these tourist cities were getting hit and tourists were potentially getting targeted. Was a bunch of the sensational headlines they had.
- [63:01]
B
They had to do the shelter in place for a day. Right?
- [63:04]
A
Yeah. And so you saw big. Well not even big, but you saw a bit of a drawdown in the airport prices, airport stock prices, the airports.
- [63:15]
B
Okay. Group of Omab went down more on earnings. That happened the next day. Went down like 7% on earnings. And the day before I had eight stocks in my portfolio down more. So that's just a sign that like
- [63:30]
A
not the best thing to brag about. But yeah, no, I.
- [63:33]
B
Well the stock group Omad was down like 1%. It was the day of the software Citrini apocalypse. So it was nothing out of the ordinary.
- [63:45]
A
Yeah. It again. I think a year from now volume will be higher. Travel volume to most of the Mexican airports will be higher.
- [63:58]
B
Sure. Especially Monterey and Guadalajara because they have the World Cup. There's people talking about how Guadalajara is like a war zone. They're going to play World cup games there. That's not what's going on whatsoever. The shells are in place for one day.
- [64:13]
A
I. Yeah, it's. There's a famous quote about how like traveling just destroys your any bad preconceived notions you have about a lot of places. I can't remember what it is but spend time in those cities, you'll. I think you'll get a different perspective.
- [64:34]
B
I think that's exactly right. Yeah. Mexico City, same thing. Do we want to close out with a little stat for bubble watch? Sure. Okay. So according to estimates and I guess we're Both in the 0.5% here, only 0.5% of the global population pays for an advanced premium AI subscription such as Gemini Pro. OpenAI. Whatever the Pro plan is, Claude, you don't pay.
- [65:07]
A
I don't pay.
- [65:09]
B
I pay. I pay Gemini Pro for the. Well, what, what's the. Whatever the Google want bundle is. You get a lot of free stuff, but Gemini Pro is a part of it. I think it's 20 bucks a month. There are, are also a billion free users. So only 0.5% of the global population and there's a billion free users. And I think using this as context. Yeah, no, like they're giving away for free. It's not even ad. There's no. Not even ads. Like, yeah, okay, you're giving away something valuable for free. No, of course there's going to be a bunch of users. Like you're giving something away. That is, you're losing 10 bucks a user or whatever it is on. Like you're trying to get what I'm. You understand what I'm getting at here? Like they're selling a dollar for 10 cents. Yeah. All right. Yeah. OpenAI has a billion customers. None of them are paying.
- [66:07]
A
Yeah, maybe there's. Maybe they can kind of increase that monetization funnel, but you can't force people to pay. I mean, it is fairly competitive. Gemini. It feels like a waiting game at this point. And Google's probably got the biggest
- [66:31]
B
or
- [66:32]
A
the longest ability to wait.
- [66:34]
B
Well, apparently OpenAI is about to raise $100 billion, although they haven't closed that yet. Anthropic close 30 billion. Did you also see that AWS pulled a Silicon Valley TV show moment and they had their AI tool. Let me just read the quote. Amazon Web services experienced a 13 hour interruption to one system used by its customers in mid December after engineers allowed its Cairo AI coding tool to make certain changes, according to people familiar with matter. The people said the agentic tool, which can take autonomous actions on behalf of users, determined that the best course of action was to, quote, delete and recreate the environment. Do you remember this from the final scene of Silicon Valley when they had. What is it? Anton deleted everything. Yeah, that show was well ahead of its time, I'll say.
- [67:26]
A
Yeah, they got to re up that show.
- [67:30]
B
Nah, reality is better at this point. It's crazier.
- [67:34]
A
Yeah, it might be. All right, I think that's going to do it. Thank you to everyone for tuning in. Thank you to our sponsors, Fiscal AI Interactive Brokers Portcito, for helping power the show. We want to remind everyone that Brett and I are not financial advisors. Anything we say or discuss here on this podcast is not formal advice or recommendation. We may buy, sell, or hold any securities discussed in this podcast. Thank you everyone for tuning in. We'll see you next. Sam.