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Value Portfolio Update February 2024

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Value Portfolio Update February 2024

Value Portfolio Update February 2024 + deep dive into MercadoLibreValue Portfolio Update February 2024

It has been almost one month since I created my Value Portfolio. This post is my first Value Portfolio Update on a long journey of monthly updates. Since it is only one month old, I do not expect a lot of movement.

Every month, I will take some time to talk about the portfolio and the companies in it. This month, I would like to talk about MercadoLibre. You’ve come to the right place to learn why MercadoLibre is also called the Amazon of Latin America.

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I created the charts in this post using FinChat, a new research platform supercharged with AI. If you want to try it out on your own, sign up on finchat.io for a 25% discount.

Portfolio Recap

  • Inception: Feb. 6th, 2024
  • Duration: 1 month
  • Portfolio: V, SNPS, LRCX, MELI, NDVA, ASML, INTU, ISRG, COST
  • Dividends: always reinvested

In the first month, my portfolio produced a gain of 4.74%. At the same time, the S&P 500 achieved a gain of 2.85%.
Of course, 1 month is not a lot of time, so don’t give too much meaning to any of that.

Value Portfolio vs. S&P 500 chartValue Portfolio vs. S&P 500 chart

The individual performance of the 9 companies can be seen here:

Value Portfolio individual companies vs. S&P 500 chartValue Portfolio individual companies vs. S&P 500 chart

Since I haven’t yet given that insight, here is my portfolio’s Sector/Industry breakdown.

Value Portfolio Sector and Industry allocationValue Portfolio Sector and Industry allocation
Source: finchat.io

A Closer Look At MercadoLibre

I would like to use the monthly update posts to discuss the different companies in this basket. In this month’s Value Portfolio Update, we are talking about MercadoLibre.

MercadoLibre is an e-commerce and fintech company operating in Latin America. Both segments are growing rapidly and have a lot of growth potential in the years to come. MercadoLibre has a proven track record of operating successfully and navigating in countries with a high inflationary environment.

In the e-commerce sector, it has demonstrated a strong performance with significant growth. Its Gross Merchandise Volume (GMV) showed substantial growth, reflecting its dominant position in the market. In Q4 2023, MercadoLibre reported a GMV of $13.5 billion, up 39.9% year-over-year (adjusted for currency exchange effects).

The second sector that MercadoLibre operates in is the fintech sector. MercadoLibre offers a product called Mercado Pago. It offers various financial services, including digital payments, credit card issuance, and other financial products. Mercado Pago is integral to MercadoLibre’s ecosystem, providing a seamless payment solution for both online purchases and broader financial transactions. In Q4 2023, MercadoLibre reported a total payment volume of $56.5 billion, up 57.2% year-over-year (adjusted for currency exchange effects).

To put those numbers into perspective, let’s look at the quarterly GMV and TPV numbers:

Source: finchat.io

Additionally, take a look at the annual revenue composition of MercadoLibre. You can see that both of their segments are really growing in a big way.

Source: finchat.io

MELI comes out of a multi-year margin expansion period.

Source: finchat.io

In the last 5 years, its operating margin has improved from -6.7% to 15%, while its profit margin increased from -7.5% to 6.8%. During the same time, the gross profit margin remained relatively stable. While R&D investments remained stable, SG&A expenses declined from 45% to just 15% of revenue during that timeframe. In other words, MercadoLibre used the last 5 years to optimize its operational cost structure while still remaining competitive through innovation.

During that period, it has built a strong cash position compared to its debt. That strong balance sheet has allowed MercadoLibre to hire people at times when almost all companies have fired workers.

Some First-Hand Insights

Unfortunately, I can’t really try out the services of MercadoLibre myself. But I still wanted to get some first-hand experiences for the sake of this post. That’s why I asked 2 of my professional coworkers – I’m really grateful to have the opportunity to ask them about their experiences!
They are currently living in Uruguay and Brazil. One of them even originally comes from Argentina, so I’m getting some good insights on what real people think about MercadoLibre.

Here is what my coworker from Uruguay/Argentina had to say:

Argentina is a very socialist country. But with the recent government change, MercadoLibre seems more aligned to succeed in the long run. But navigating the economy in Argentina is never an easy endeavor. However, being a company that already has dealings around South and Central America, I think it has outgrown all risky Argentina politics.
Their reputation for customer experience is excellent. I use it once or twice a month and even recently bought something.
Mercado Page is pretty much used everywhere in Argentina and Uruguay. I don’t use it much, but I know many others do. However, there are things that one buys from Amazon or AliExpress when they are imported more easily. Keep in mind that I might be a bit biased here. I know more about e-commerce options than your average Joe.

And here is what my other coworker from Brazil had to say:

Well, at the beginning, they were very “suspicious,” but nowadays, I would say people use it every time. They expanded a lot, and the worst part was mailing stuff; our one and only postal system has problems.. but that is a different subject. Mercado livre (as it is called here) has a very nice reputation. Of course, not sure if you know, but there’s always the “Brazilian way,” and someone will try to scam and make money out of it, but we can trust the “Mercado livre warranty” seal and get our products or our money back. How often do we use it? Maybe once in two months, usually on electronics or something I wouldn’t find very easy. And on sales, of course. My sister, for instance, uses it far more than we do. MercadoPago is something we mostly use as insurance to ensure that something is safe to buy when we are not very sure about the seller. We also use it when we sell something on the platform. My mother use the credit card machine from MercadoPago at her hair salon. As for competitors, there’s OLX which is for selling used stuff, but Amazon marketplace is the biggest (MagazineLuiza as well). Those are big websites with a marketplace inside, and they operate the same way as MercadoLibre.

MercadoLibre Is Down After Earnings, Why?

Why did MercadoLibre take a hit after they reported stellar earnings? That is due to two one-off expenses. Here is what they had to say about this in their Shareholder Letter:

The first one-off expense of $320mn relates to ongoing legal proceedings initiated in 2014 that dispute the Brazilian federal tax authority’s ability to charge withholding income tax over payments remitted by our Brazilian subsidiaries to our Argentine subsidiary for the provision of IT support and other services on the grounds that it would violate a convention signed by the two countries to avoid double taxation. Based on recent developments, our legal advisor’s view is the risk of losing the case is now probable. We booked $58mn of the provision in cost of revenue and $261mn in product development expenses. The total operating expense related to this one-off and incurred in 2023 was approximately $70mn.

The second one-off expense of $31mn – booked in cost of revenue – relates to a recent ruling from Brazil’s highest court that the DIFAL sales tax must be paid for the period April to December 2022, while the legality of the tax was being questioned. The tax was legally reinstated in January 2023 and has been booked in our P&L and paid as an ongoing expense since then; the one-off expense booked in Q4’23 relates solely to the 9-month period in 2022 mentioned above.

My Take On What Happened

These expenses aren’t very pleasant, but it is encouraging that only around 1% of the expenses result from this last quarter itself. They are definitely one-off expenses, from what I can see. If you exclude these expenses, it is another stellar quarter in the books. I’m not too worried about them. Actually, I bought more shares of MELI on the news.

The only negative effect highlighted by the management team is the contraction of their credit portfolio in Argentina due to the devaluation of the Argentine Peso. But in totality, the credit portfolio came in at $3.8 billion, up 33% year-over-year. It’s something to watch, but nothing to worry about now.

Mercado Libre Q4 2023 Results – Earnings Call

Valuation Of MercadoLibre

How can we value MercadoLibre the best? I always refer to a great framework I learned from Brian Feroldi to answer that question. It starts by determining in which growth stage MercadoLibre is:

Company lifecycle stagesCompany lifecycle stages

For MercadoLibre, I determined that it is somewhere between stages 3 and 4.

Getting a reasonable valuation for a company does depend on its stage. For each stage, we have a few different tools at our disposal that we can use to get a valuation.

Valuation Methods by company lifecycle stageValuation Methods by company lifecycle stage

We can see that the price-to-earnings power is a good way to get a first valuation for MercadoLibre. I assume that a Profit Margin of 25% is a reasonable value for a fully profit-optimized MercadoLibre.

Price-To-Earnings-Power Model for MercadoLibrePrice-To-Earnings-Power Model for MercadoLibre

This gives us an Earnings Power P/E Ratio between 17.3 and 32.2, which is in the Normal Range.

The second tool we can use is a Reverse Discounted Cash Flow Model. Without going into too much detail about how to do it (you can get more information and a tutorial for it directly from Brian Feroldi here), here is my result:

Discounted Cash Flow Model for MercadoLibreDiscounted Cash Flow Model for MercadoLibre

The question you need to ask for the above DCF is, “Is a growth rate of 5.4% over 10 years for MercadoLibre too high, too low, or about right?“. I certainly think that 5.4% is on the low end of what MercadoLibre can do. This implies that MELI is currently undervalued according to this DCF model.

What Risks Are Associated With MercadoLibre?

Investing in MercadoLibre for the long term comes with certain risks that investors should consider. Some of these risks include intense competition in the e-commerce and Internet space in Latin America.
Potential challenges include:

  • expanding operations and adapting to evolving technologies
  • regulatory impacts on the business
  • credit risks related to lending activities
  • security breaches
  • legal liabilities

Additionally, factors like system interruptions, talent retention, consumer trends, reliance on third-party service providers, and political and economic conditions in Latin America can pose risks to the company’s long-term performance. Moreover, MercadoLibre faces risks related to market volatility, indebtedness, potential impairment of digital assets, and the unpredictability of factors like seasonal fluctuations.

The company’s ability to achieve its long-term sustainability goals may also be influenced by various external factors beyond its control. It’s essential for investors to carefully assess these risks alongside the company’s growth prospects, financial performance, and strategic initiatives when considering MercadoLibre as a long-term investment.

Final Thoughts On This Value Portfolio Update

It has only been one single month since the inception of my portfolio. That, of course, doesn’t mean much in the grand scheme of things. But I can use the Value Portfolio Update post to share some of my thoughts on the portfolio itself.

In this update, I’ve provided many details on MercadoLibre as the first company in the portfolio. In the next few updates, I will do the same for every other company contained. So stay tuned for more updates on this portfolio.

MercadoLibre is a stellar company with multiple growth opportunities. However, it is not without competition in the market. No other than Amazon itself is competing with MercadoLibre in the region. The economic uncertainty of the market in Latin America is something that has kept competitors at bay for the most part, but this competition is something to watch. I think MercadoLibre is a brilliant, well-run company with a lot of growth ahead of it.

Do you have any questions about the portfolio, MercadoLibre, or any other company? Share your thoughts in the comments below.

Disclaimer: The information in this blog post should not be considered investment advice or a replacement thereof. They are solely provided for informational purposes. Please consult with a financial advisor for any specific questions on your financial situation. Remember that past performance is not a good indicator of future returns. Also, none of the mentioned stocks are to be understood as recommendations. Don’t buy yourself something solely based on what you read here.

Talk Your Book: Yield at What Cost?

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Talk Your Book: Yield at What Cost?

Posted by Ben Carlson

Today’s Talk Your Book is sponsored by STF Management

See here for more information on their tactical and tactical income ETFs

On today’s show, we discuss:

  • Who STF Management is and what their products aim to do
  • How the STF tactical rules work
  • The biggest risk to passive call option strategies
  • What risk off and risk on mean within the tactical model
  • What a fair period of time is to judge trend following performance
  • Differences between TUG and TUGN

Listen here:

Charts:

Talk Your Book: Yield at What Cost?

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Nothing in this blog constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security.  Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Ritholtz Wealth Management or its employees. 

The Compound Media, Inc, an affiliate of Ritholtz Wealth Management, received compensation from the sponsor of this advertisement. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investing in speculative securities involves the risk of loss. Nothing on this website should be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product.

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$1bn US battery plant plan shows race to reduce reliance on China

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bn US battery plant plan shows race to reduce reliance on China

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US battery start-up Lyten is committing more than $1bn to build the world’s first large-scale factory to produce lithium sulphur batteries, an emerging technology that could help break US dependence on China for metals crucial for the energy transition.

The factory, located in Reno, Nevada, is expected to start production by 2027, the first target set for the commercialisation of a type of battery that could challenge the incumbent lithium ion. The battery does not rely on graphite, nickel, manganese, or cobalt — metals in which the vast majority of the world’s supply is controlled by Beijing. 

Celina Mikolajczak, Lyten’s chief technology officer, told the Financial Times its battery chemistry offers the US the opportunity to reduce China’s monopoly. The company plans to reach 10 gigawatt hours of production by about 2032 at its Reno plant, producing batteries for drones, satellites and eventually, electric vehicles that can be powered for longer durations than their lithium-ion counterparts.

“The biggest leverage China has on the EV industry, on all the [battery] cell makers, is their graphite supply,” Mikolajczak said, adding the company would source sulphur domestically and lithium from US suppliers and countries outside of China. “If we’re going to do a new cell chemistry, we don’t just sign up for more . . . You’ve got to step away from that.” 

The move from Lyten arrives as US battery start-ups race to invent the next dominant battery technology to compete with China, promising materials that are easier and cheaper to procure and greater energy densities that could give vehicles wider driving range and faster charging times. 

While President Joe Biden’s landmark Inflation Reduction Act included lucrative manufacturing tax credits for battery makers, stiff competition from Chinese imports, slowing demand for electric vehicles and tough macroeconomic conditions have forced several companies, including LG Energy Solution, Freyr and GM’s Ultium Cells, to pause or delay their projects. 

European manufacturers have also struggled. Last week, its top battery maker, Northvolt, filed for bankruptcy in a big setback to the continent’s hope to compete with the dominant players in Asia.

Milo McBride, fellow at the Carnegie Endowment for International Peace, called the commercialisation of lithium sulphur batteries a “golden goose” for US battery competitiveness.

“The west is not scaling its alternative critical mineral supply chains to the extent that is needed,” McBride said. “What this technology offers geopolitically is a really interesting opportunity for the US to basically put forth a battery that renders some of these minerals and subsequent chemicals less important in the long-term picture.”

Lyten’s technology replaces the graphite traditionally found in anodes of lithium-ion batteries with lithium metal and substitutes the nickel, manganese, cobalt and lithium commonly found in cathodes with sulphur.

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bn US battery plant plan shows race to reduce reliance on China

Backed by Stellantis and FedEx, Lyten has raised $425mn in financing and secured a $4mn Department of Energy grant in January. The company estimates it will be eligible for $1.5bn in manufacturing tax credits and is in talks with the state of Nevada for incentives that will cover a “double digit” share of its capital expenditure. 

The Republican-led state has emerged as a top destination for electric vehicle and battery investment, securing nearly $7bn in supply chain commitments since the IRA’s enactment, according to the Clean Economy Tracker, despite no support for the law from Republicans in Congress and repeated threats from former president Donald Trump to undo spending if re-elected in November.

The main bottleneck facing lithium sulphur batteries is in its chemistry. While lithium sulphur can offer energy densities that are multitudes higher than their traditional lithium-ion counterparts, they rapidly degrade due to a chemical reaction known as the polysulfide shuttle. 

“That’s the Gordian knot,” Mikolajczak said, referring to the effort to use carbon structures to control the movement of sulphur in the battery and boost its longevity. The company plans to enter defence applications such as drones and satellites over the next year and improve its lifecycle to reach electric vehicle applications “over the next few years”.

But even some lithium sulphur battery developers are sceptical that their technology will be able to outdo lithium ion batteries in the electric vehicle market. High interest rates and slowing demand for EVs have also forced investors to tighten financing for capital-intensive battery projects. 

“Lithium ion batteries are doing a pretty good job in the EV space and the Chinese are driving battery prices down to below $50 a kilowatt hour,” said Lee Finniear, chief executive of Li-S Energy, a company based in Brisbane, Australia.

How have two hurricanes impacted housing inventory?

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How have two hurricanes impacted housing inventory?

Here are new listings for last week over the past several years:

  • 2024: 62,876
  • 2023: 57,229
  • 2022: 59,458
How have two hurricanes impacted housing inventory?

Price-cut percentage

In an average year, one-third of all homes take a price cut — this is standard housing activity. Rising mortgage rates last year and this year have created a growing level of price cuts, especially when inventory rises. When mortgage rates fell recently, the price-cut percentage cooled down a tad; now that mortgage rates are rising again, we will see how this impacts this data line. Seasonality will soon kick in for this data line, which traditionally falls late in the year. As you can see below in the chart when our active inventory levels was at 240,000, the price cut % was historically low, not a healthy thing.

A few months ago, on the HousingWire Daily podcast, I discussed that the price-growth data would cool down in the year’s second half. However, I am unsure if the price-growth cooling will match my 2024 forecast, which has prices rising at 2.33% for the year. It does look like I might be too low.

The price-cut percentage data is below 2022 levels and risks an earlier seasonal curve lower than 2022 and 2023. However, mortgage rates have risen recently so we will see if that changes the data in a meaningful way the last 10 weeks of the year.

Here are the price-cut percentages for last week over the previous few years:

  • 2024: 39.62%
  • 2023: 38%
  • 2022: 42%
chart visualization

10-year yield and mortgage rates

My 2024 forecast included:

  • A range for mortgage rates between 7.25%-5.75%
  • A range for the 10-year yield between 4.25%-3.21%

I forecast channel ranges with mortgage rates and the 10-year yield because we can all follow the economic data that matters together and look for crucial inflection points with rates. This is the slow dance with the 10-year yield and 30-year mortgage rates I often discuss. 

I have a crucial line in the sand around 3.80% on the 10-year yield, and for 2024, with a better mortgage spread, that equates to mortgage rates around 6.25%. For mortgage rates to go below this, stay below or head much lower, you need weaker economic data. We recently had a series of economic and labor data that beat expectations. This podcast goes into that and explains what happened on the day the Fed cut rates and after jobs Friday.

We track all data, but the key is always labor over inflation. If the jobs data came in as a big miss, we would have a different conversation today, but that didn’t happen.

chart visualization

Mortgage spreads

The mortgage spread story has been positive in 2024, whereas it was negative in 2023. We have seen a big move already this year; mortgage rates would have been much higher today without spreads improving. So, as rough as some people in the mortgage community feel, it could have been worse. We aren’t back to normal with the spreads, but it’s a good sign that the spreads started improving before the Fed cut rates, and over time, this has room to head lower. 

chart visualization

Purchase application data

Mortgage rates went up again last week. While that increase didn’t have too much impact on last week’s data because the push higher happened two Fridays ago, we should see some of the impact of rising rates in the data pool next week.

Let’s take a look at what the data did when mortgage rates rose from 6.75% to 7.50% early in the year. This is what weekly purchase application data looked like with rising rates starting from the latter part of January:

  • 14 negative prints
  • 2 flat prints
  • 2 positive prints

Even though the purchase application data didn’t show much downside on volumes earlier in the year, the weekly data was very negative. Before late January, when rates started to rise, we had about eight weeks of positive trending purchase apps. Then, as has been typical lately, mortgage rates headed higher, and demand faded.

This is what weekly purchase application data looks like since mortgage rates started to fall in mid-June:

  • 12 positive prints 
  • 5 negative prints
  • 6 straight weeks of positives, and last week’s data was flat, which makes it easily the best 7-week period of the year.
  • 3 straight weeks of positive year-over-year data last week came in at 8% positive year-over-year growth

For the rest of the year we will be keeping an eye on how higher rates are impacting the data. Recently it has been minimal but history says that doesn’t last, especially if rates go higher. 

chart visualization

Weekly pending sales

Below is the Altos Research weekly pending contract data to show real-time demand. Now, this data line is very seasonal, as we can see in the chart below, and we all know that mortgage rates were heading toward 8% a year ago, so we need to be mindful of the positive year-over-year data. The weekly data firmed up when rates were heading lower, but now we need to see how this data looks with rising rates. Although it’s lost a bit of steam, there’s nothing too harmful yet in the data.

This is the weekly pending sales for last week over the last few years: 

  • 2024: 350,455
  • 2023: 325,584
  • 2022: 351,527
chart visualization

The week ahead: Fed speeches, retail sales and housing starts 

We will have several Fed presidents talking this week, including Kashkari and Waller; watch out for that. We also have bond auctions and retail sales this week. The housing data will be interesting — purchase apps data should show some sting from rates rising. The builder’s confidence won’t show that sting yet, but we will be able to see their mindset with rates near 6%. Finally, with some bond auctions in the mix, we will have housing starts on Friday — the data line that beat expectations last month and started to send the 10-year yield higher. 

Valor Vest (valor-vest.com) program details. Reviews, Scam or Paying

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Valor Vest (valor-vest.com) program details. Reviews, Scam or Paying

About Valor Vest (valor-vest.com)

Valor Vest (valor-vest.com) is a high-yield investment program (HYIP) that offers an opportunity to earn lucrative returns on your investment.

With a minimum deposit of just $10, you can start participating in this platform. Valor Vest (valor-vest.com) promises a yield 3% daily for 30 days , 4% daily for 30 days , 180% after 10 days , 250% after 5 days, providing a chance to grow your funds significantly.

The website, valor-vest.com, is user-friendly and offers a seamless investment experience. As an added benefit, Valor Vest (valor-vest.com) offers a referral bonus program, allowing you to earn additional income by inviting others to join.

The minimum payout is set at $10 BTC/ETH, $7 USDT TRC20/BEEP20/ERC20/LTC/SOL/TRX/BNB/USDC ERC20/ETH BEP20/BUSD BEP20, $5 DOGE/BCH/DASH/USDC TRC20/BEP20, ensuring you can easily access your earnings. Currently, Valor Vest (valor-vest.com) is a paying project, which may be an encouraging factor for potential investors.

Valor Vest (valor-vest.com) is a high-yield investment program (HYIP) that offers an opportunity to earn lucrative returns on your investment. With a minimum deposit of just 50, you can start participating in this platform.

Valor Vest (valor-vest.com) promises a 3% daily for 30 days , 4% daily for 30 days , 180% after 10 days , 250% after 5 days, providing a chance to grow your funds significantly.

The website, valor-vest.com, is user-friendly and offers a seamless investment experience. As an added benefit, Valor Vest (valor-vest.com) offers a referral bonus program, allowing you to earn additional income by inviting others to join.

The minimum payout is set at $10 BTC/ETH, $7 USDT TRC20/BEEP20/ERC20/LTC/SOL/TRX/BNB/USDC ERC20/ETH BEP20/BUSD BEP20, $5 DOGE/BCH/DASH/USDC TRC20/BEP20, ensuring you can easily access your earnings. Currently, Valor Vest (valor-vest.com) is a paying project, which may be an encouraging factor for potential investors.

Valor Vest (valor-vest.com) program details. Reviews, Scam or Paying
ValorVest is a forward-thinking real estate investment company that specializes in offering dynamic, high-return investment opportunities in the burgeoning markets of Batumi and Tbilisi, Georgia. Founded by Oliver Sterling, an expert with a robust background in international real estate markets, ValorVest Innovations has quickly established itself as a leader in leveraging cutting-edge technology to democratize access to real estate investments. The company’s mission is to provide a platform where both novice and experienced investors can maximize their investment potential through innovative financial strategies and transparent operations.

Located in UK, a country renowned for its strategic location and rapidly developing economy, ValorVest has tapped into Georgian real estate markets that promise high growth and lucrative returns. The company’s unique investment approach is distinguished by its integration of digital technologies, including blockchain and tokenization, which enable fractional ownership and a higher degree of liquidity for investors. This modern approach to real estate investment allows individuals to invest in properties with smaller capital outlays while enjoying the security and potential returns of traditional real estate investments.

A Masterclass in Annual Planning: Budgeting for Hypergrowth

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A Masterclass in Annual Planning: Budgeting for Hypergrowth

A Masterclass in Annual Planning: Budgeting for Hypergrowth

In this solo episode, CJ provides a comprehensive guide on annual planning and delves into the complexities of budgeting for hypergrowth companies. He covers topics such as building sales capacity, modeling out rep time, over-assignment, designing marketing budgets, and costing out the full P&L. He discusses the role of various departments in the annual planning process, including R&D (Research & Development), marketing, sales, customer success, and customer support. The podcast highlights the significance of headcount in budgeting, the intricacies of sales capacity modeling, and the necessity of interdepartmental collaboration. CJ offers practical tips for managing expenses, planning for future growth, and ensuring that sales teams are adequately supported to meet their targets. The episode is a deep dive into the strategic and operational aspects of financial planning in high-growth environments.

If you’re looking for an ERP head to NetSuite: https://netsuite.com/metrics and get a customized KPI checklist.

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SPONSORS:

Leapfin is accounting automation software that automatically prepares and posts reliable journal entries. High-growth businesses like Reddit, Canva, and Seat Geek choose Leapfin to eliminate manual tasks, accelerate month-end close, and enable accounting leaders to provide faster insights to help their companies grow. To automatically standardize your revenue data with measurable business impact, check out leapfin.com today.

Mercury is the fintech ambitious companies use for banking and all their financial workflows. With a powerful bank account at the center of their operations, companies can make better financial decisions and ensure that every dollar spent aligns with company priorities. That’s why over 100K startups choose Mercury to confidently run all their financial operations with the precision, control, and focus they need to operate at their best. Learn more at mercury.com.

Mercury is a financial technology company, not a bank. Banking services provided by Choice Financial Group and Evolve Bank & Trust®; Members FDIC.

NetSuite provides financial software for all your business needs. More than 38,000 thousand companies have already upgraded to NetSuite, gaining visibility and control over their financials, inventory, HR, eCommerce, and more. If you’re looking for an ERP platform ✅ NetSuite: https://netsuite.com/metrics and get a customized KPI checklist.

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FOLLOW ME ON X:

@cjgustafson222 (CJ)

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TIMESTAMPS:
(00:00) Preview and Intro
(01:20) Sponsor – Leapfin | Mercury
(03:54) Key Stakeholders in the Annual Planning Process
(06:02) Bottoms Up Versus Tops down Budgets
(09:00) Creating a Budget Envelope
(12:53) Sponsor – NetSuite | Maxio
(14:50) Building Sales Capacity
(17:00) Quota to OTE Ratio
(18:07) Ramping
(21:00) Over Assignment
(23:08) Seasonality
(24:56) The Sales Pod and Surrounding Resources
(26:45) Sales Capacity Planning Mistakes
(32:25) Marketing: Generating Pipeline Coverage
(33:23) Over-Assignment in Marketing
(35:01) The Marketing Funnel
(38:34) Setting the Pace of the Marketing Pipeline
(39:30) Tracking Marketing Costs
(41:05) Common Mistakes with the Marketing Budget
(43:42) Expenses: Follow the Headcount
(45:53) A List of Possible Expense Types
(49:05) The Three Buckets of Cost of Goods Sold
(50:16) Cost Benchmarks at Department Level
(53:47) Laptops
(54:22) Annual Bonuses
(56:14) Tips for Budgeting for Hypergrowth
(1:02:08) Wrap

Business Spotlight – Lanning’s Restaurant

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Business Spotlight – Lanning’s Restaurant

 

The Insurance Centre Agency is highlighting area businesses, which help to make up the fabric of our great community. Featured today is Lanning’s Restaurant, 826 N. Cleveland Massillon Rd., Akron.

Comment, like or share to help promote Lanning’s and one lucky person will win a $100 gift card.

If you haven’t been to Lanning’s Restaurant or it’s been a while, it’s well worth your time to make a visit.

If you’ve been to Lanning’s recently, then you know: new owners Dean and Bethany Martin have done great things since purchasing the iconic Summit County restaurant in 2020.

Lanning’s Restaurant is located at 826 N. Cleveland Massillon Rd. in Bath, Ohio, less than a mile from Interstate 77. It’s a fine dining steak and seafood restaurant, which has provided superior tuxedo service for more than 50 years.

The Martins have taken a classic and given it modern updates, making it even better.

This isn’t your grandma’s Lanning’s anymore.

Lanning’s Restaurant is a refreshed, sexy, stylish, and updated fine dining experience with the classic service standards that customers have grown to lovespanning several generations.

Lanning’s offers a variety of premium steaks and seafood, an award-winning wine menu, craft cocktails, and a vibe that is not found anywhere else in the Northeast Ohio area.

“We’ve done a complete refresh of the restaurant, bringing a cool downtown Vegas vibe to Lanning’s, complete with live music four nights a week and an award-winning wine menu,” said the Martins, when asked what makes Lanning’s unique.

With far too many chain restaurants dotting the landscape in Northeast, Ohio, it’s truly refreshing to spend an evening at a true original like Lanning’s.

The waiters wear tuxedos and they provide great service. They serve classic dinners Lanning’s is known for, such as steaks, rack of lamb, Oysters Rockefeller, scampi and more.

Many reviewers have called their steaks “the best in the Cleveland area.”

Next time you’re ready for a night out, consider the fine dining and atmosphere at Lanning’s.

Lanning’s Restaurant Quick Facts
Address: 826 N. Cleveland Mass Rd., Akron, OH 44333
Website: lannings-restaurant.com
Hours: 5-10 p.m. main dining; 4-10 p.m. Deano’s Lounge at Lanning’s.
Phone: 330-669-1159
Service options: Dine-in, takeout, delivery
Reservations: opentable.com
Follow Lanning’s on Facebook

Business Spotlight – Lanning’s Restaurant

Here’s What Happens When You Put Too Much Money Into a CD

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Here’s What Happens When You Put Too Much Money Into a CD

CDs have been a popular choice for savers this year due to their impressive rates. For much of 2024, it was easy enough to lock in a CD at 5%. 

At this point, it’s harder to find 5% CDs. But CD rates are still pretty impressive, with many paying well over 4%. It’s not too late to jump on the CD bandwagon if you didn’t do so earlier in the year. 

At the same time, you don’t want to make the mistake of putting too much money into a CD. Going overboard could actually cause you to miss better returns elsewhere.

Be careful with CDs

A CD is a great place to grow your money on a short-term basis. If you’re saving for a home and are aiming to buy one in 2027, now’s a good time to open a 12- or even 24-month CD. 

Our Picks for the Best High-Yield Savings Accounts of 2024

APY

4.10%



Rate info

Circle with letter I in it.


4.10% annual percentage yield as of October 15, 2024

Min. to earn

$0

APY

4.10%



Rate info

Circle with letter I in it.


See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening.

Min. to earn

$0

APY

4.70% APY for balances of $5,000 or more



Rate info

Circle with letter I in it.


4.70% APY for balances of $5,000 or more; otherwise, 0.25% APY

Min. to earn

$100 to open account, $5,000 for max APY

But you should limit the amount of money you put into a CD to funds you expect to need in a few years. If you expect to hang onto the money for many years or even decades, you should probably invest it instead.

While you might still get close to 5% out of a CD today, you should know that over the past 50 years, the S&P 500 has rewarded investors with an average annual return of 10%. That 10% accounts for years when the market soared, but also, years when it clocked in losses. 

This tells us that if you invest in a broad market index like the S&P 500 over a long period, you could make a good amount of money. If you put too much money into a CD, you might limit your returns. 

Investing long-term money can make a big difference

Let’s say you’re planning to put $40,000 down on a home you’re planning to buy in 2027 because you’re in grad school until that point. And you have $45,000 in savings right now on top of what you need for emergency fund purposes. You might assume it makes sense to put that entire sum into a CD. But you’re better off limiting your CD to $40,000 and putting the remaining $5,000 into a stock portfolio.

If you earn a 10% yearly return on your $5,000, then in 25 years, it will be worth about $54,000. If you wait two years to invest your $5,000, it will only be worth about $45,000.

And yes, you’ll earn something on that $5,000 if you put it into a 24-month CD. But at 4.5%, you’re looking at $460. That doesn’t make up for the $9,000 difference between investing your $5,000 now vs. in two years from now.

Don’t go overboard

CDs are a good way to earn a little extra on your money in the near term. But when you put too much money into a CD, you limit the amount you can earn on your cash. Be careful when opening a CD today, because even though rates are still pretty high, they pale in comparison to the return you might get out of the stock market.

If you’re new to investing, click here for a list of the best stock brokers. You may want to try out a few different platforms to find the one you’re most comfortable with.

What the Fed’s Rate Cut Means for the Housing Market and Inflation

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What the Fed’s Rate Cut Means for the Housing Market and Inflation

What the Fed’s Rate Cut Means for the Housing Market and InflationWhat the Fed’s Rate Cut Means for the Housing Market and Inflation

October 3, 2024
by Mark Ferguson

The Federal Reserve recently cut interest rates more than expected. This is the first rate cut in four years, and it could significantly impact the housing market, inflation, and the broader economy. Let’s dive into what this means for real estate, inflation, and more.

Video: Will the Fed Interest Rate Cut Increase Housing Prices?

High Interest Rates and Inflation: A Misconception?

For years, I’ve advocated for cutting interest rates and argued against raising them. While many believe high interest rates help control inflation, I think they might do the opposite—and definitely don’t help with housing affordability. Studies suggest that high rates raise mortgage payments, making housing more expensive, not less.

A common belief is that high rates will force housing prices down, but I argue that high rates might actually make the situation worse by reducing supply. Fewer homes are built when borrowing costs are high, and existing homeowners are reluctant to sell, waiting for lower rates. This supply shortage pushes prices up, not down.

What is the Best Investment in a High Inflation Environment?

What the Fed Rate Cut Means for Mortgage Rates

The Fed’s interest rate decisions don’t directly affect mortgage rates, but they are closely related. The Fed sets the federal funds rate, which is what banks pay to borrow from each other. Mortgage rates, on the other hand, are determined by the bond market and overall economic conditions.

Typically, when the Fed cuts rates, mortgage rates also drop. But the relationship isn’t always linear. As we’ve seen recently, mortgage rates have been all over the place. Earlier this year, they were above 7%, but now they’ve dropped to around 5.7% for a 30-year mortgage, according to NerdWallet. That’s a significant drop, which makes homes more affordable by lowering borrowing costs.

Rental Property Cash Flow Calculator

Could Lower Rates Boost Housing Demand?

Lower rates could trigger a surge in homebuying. Many renters and homeowners have been sitting on the sidelines, waiting for rates to drop. When they do, these buyers may jump back into the market, driving prices up. We could see a short-term price increase due to a spike in demand.

However, lower rates also make it easier to build new homes. Increased construction would boost supply, potentially stabilizing prices over time. Currently, there’s a significant housing shortage, and more building is necessary to meet demand. So while prices may rise in the short term, more construction will help create a more balanced housing market in the long run.

Future Value Inflation Calculator

The Argument for Lower Rates Stabilizing the Market

Some people argue that lowering rates will bring more homes onto the market, as current homeowners who have been holding off on selling will finally list their properties. This could increase supply, but those same sellers are also buyers. So, while more homes might come on the market, there will still be buyers ready to snatch them up, including renters who have been waiting for a better deal.

In fact, with more buyers than sellers, we could see even higher demand than supply, leading to an imbalance favoring buyers. Lower rates, combined with strong demand from immigrants and other demographics, could lead to a more pronounced housing boom.

What is the Best Way to Invest in Real Estate?

Job Growth, Immigration, and Housing Demand

Another factor driving housing demand is immigration. Recently, there’s been significant job growth, but most of it has been among foreign-born workers. Data from the Census and the Social Security Administration shows a substantial increase in employment for foreign-born individuals, while employment for native-born workers has decreased. With more immigrants entering the workforce, housing demand is likely to rise, adding pressure to the housing market.

Many predict that population declines will lead to a housing crash, especially as baby boomers age. However, immigration is offsetting those declines. The U.S. population is still growing, which means more demand for housing, both for homeownership and rentals. Coupled with lower interest rates, this could result in continued upward pressure on home prices.

Why High Rates Don’t Necessarily Lower Prices

There’s a misconception that raising interest rates automatically leads to lower prices, whether for housing or goods. While higher rates can reduce demand, they also reduce supply, which can keep prices elevated. Fewer homes are built, fewer people sell their homes, and businesses cut back on production. In the housing market, this stagnation leads to a supply-demand mismatch, propping up prices rather than reducing them.

Studies from the 1970s and 1980s, when interest rates were at their highest, show that housing prices still rose dramatically. In fact, during the 1970s, prices tripled, and in the 1980s, they doubled. High rates simply don’t curb housing prices as much as people think.

Do Higher Rates Actually Cause Inflation?

Another controversial idea is that high rates can lead to inflation. Many people think raising rates controls inflation by reducing demand, but it doesn’t consider the supply side. When borrowing costs are high, businesses slow down production, which reduces supply. This supply contraction can lead to higher prices for goods and services, as companies are forced to raise prices to cover their costs.

For example, I own a small business. If my costs increase due to higher interest rates, I can’t just lower my prices to compensate for reduced demand. I still need to cover my fixed costs, so I might raise prices instead. This is how high interest rates can cause prices to rise, counterintuitively contributing to inflation rather than reducing it.

Conclusion: Why Lower Rates Are Good for the Economy

In summary, I believe lower interest rates are better for the economy and the housing market. Lower rates encourage building, make borrowing cheaper, and can help stabilize housing prices in the long run. While some fear that lowering rates will cause prices to surge, the alternative—keeping rates high—only prolongs the problem by restricting supply.

Additionally, the data shows that high rates don’t automatically lead to lower prices and, in some cases, can even cause inflation. As we move forward, it will be interesting to see how the Fed’s rate cuts impact the economy and the housing market in the months to come.

What do you think? Let me know in the comments below!

Understanding buyers’ needs in today’s M&A market

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Understanding buyers’ needs in today’s M&A market

Understanding buyers’ needs in today’s M&A market

With buyers seeking greater assurance on a business’s quality and growth potential, preparation is everything for company owners looking to sell, says James Goold, partner at global law firm Taylor Wessing.

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