Updated: Aug 16, 2022
Welcome to the Redfish, Healthy, Wealthy, and Wise podcast. Our focus is to deliver information that helps you become healthy, wealthy, and wise. This podcast is sponsored by Redfish Capital Management, the views and opinions expressed here and do not necessarily represent the views and opinions of SCF securities, Inc, or any SCF related entity. This material is for general information only and is not intended [00:00:30] to provide specific advice or recommendations for any individual securities offer through SCF securities, Inc. Member FINRA, S I P C investment advisory services offered through SCF investment advisories Inc office at 1 55 east Shaw in Fresno, California, SCF securities, Inc, and Redfish Capital Management are independently owned and operated. SCF is not associated with other podcasts. And the messages contained within. Brad [00:01:00] Murrill and Redfish Capital does not offer legal or tax advice. This material is not intended to replace the advice of a qualified tax advisor or attorney please consult legal or tax professionals for specific information regarding your individual situation now for your host, Brad Murrill.
Today I wanted to kind of hit on unemployment and the reason why I wanted to hit on unemployment as I'm doing an interview next week with the lady name I hope it's next week Tiffany Wallace and Tiffany is the president and the CEO of Dagen personnel and so I'm going to have her in here and we're going to kind of do a deep dive on employment numbers and what people are looking for in a jobs and why we think that there's this kind of extraordinary time that set up right now where there are literally more jobs than employees to fill them that's it's very different and so we're going to talk about that so a few things that I just kind of picked up on that just to kind of lead into the unemployment or the employment talk if you will is we reached a record high unemployment just not that long ago remember it was back in April of 2020 nearly 15% of the people who wanted to work were out of work 15 I mean it's a big number and we just reported at about a 5.9 unemployment rate so the record low all time is 2.5 so and that was in May of 1953 so if you think the record low is 2.5 word not too far off that at about a 6% so I think the economy is in really good shape.
The Federal Reserve is estimating that the unemployment rate by the end of 22 will be at a 3.8 so if it's tough for employers to find employees now just hold on and they think by the end of 2023 it'll be 3.5 now if businesses are hiring that many people that fast it must mean that business is good now where the employment has been coming from recently again going back to the last federal report fed reserve report in leisure and hospitality is leading the way which makes sense when you think about coming out of COVID we still have a lot of restaurants and uh hospitality jobs available leisure jobs available there they're all still out there trying to hire as many as they can.
There are some other factors that I think are keeping people out of that besides COVID we're going to get into that with Tiffany the education sector is the second fastest growing and then finally this where I am in professional business services it's tough to find people it's tough to find people so right now out of the total unemployed it's about 9.5 million people and out of that add at 9.5 million those who have been unemployed for more than 27 weeks is local it I'm going to round it up it's 4,000,000 so 4,000,000 have been looking for work for over 27 weeks there was one other factor I thought or one of her note that I thought was very interesting the term was discouraged workers so I had to kind of look into that and what does it discourage worker is someone who is looking not kind of actively not actively but just kind of sitting there they would take a job if it was given to him and I kind of thought about that I was like OK so they're not really looking for work but if a job was offered they might take it I think these are the people that are getting checks from the government but it's about 600,000 people were qualified under that particular scenario UM other thing I wanted to talk about a little bit today emerging markets over that same time period 7 they're up 7%.
So let's keep comparing apples to apples, Japan just so we'll kind of knows other in that in that region I looked at Japan so Japan over the last ten years is up 184% South Korea is up 130 Europe 37% so it's just barely outpaced China over the last 10 years and so we have to look at why is this because there has been so much growth in China and a lot of the analysts out there are guessing that one of the reasons may be that there is a natural bias that people have towards investing in their home markets and that made perfect sense to me so if you are a U.S. citizen you know U.S. companies it is more likely that you're going to have more U.S. companies in your allocation one of I happen to look over at Ireland and it's the same in I'll they have more Irish based companies in their own portfolios for citizens of Ireland then they do have other countries so it does make sense to where you would always have more of where you're domesticated those companies in those stocks in your portfolio.
But back to China a little bit China scares me a little bit to be frank and so when people ask me about investing in China it's just I get a little bit nervous and one of the reasons why I get nervous is something that we're seeing the government do now remember in China it is a communist country as much as they're trying to move more towards capitalism at the end of the day it is a it is a communist country and the party can decide at any time that we're going to no longer let this company trade public or we're going to shut this company down or whatever they want they are in charge not the companies we've seen this with a lot of the finance and banking companies in China right now and being the biggest example of that they were going to IPO and the government just you know what I don't think so this we're just going to shut it down uhm we think there's a problem blah blah blah blah blah they can do that and they can do that with the snap of the finger so that Spooks me up I'll give you a real life example of when I got spooked out of the out of a stock in a company and many of you end have been with him for a while.
We own shares of Starbucks for a long time and come as you know with my investment philosophy I really love big brand names that are growing globally and Starbucks is a great brand name it's I mean it's the little icon of the mermaid you see it you know you know who it is and you know what's going on uhm Howard Schultz was the brainchild behind Starbucks so that was that was you know he it was a small Seattle based company that was mostly into roasting beans and then he changed it into what it is today by the way he wrote a book called poor your heart into it strongly suggest you read it is an outstanding read not just on Starbucks in the history of Starbucks but on brand development and what they were looking for when they were developing that brand is it's a tremendous story, but in June of 2018 the he stepped down as the CEO and chairman of the board and Kevin Johnson took over so this was like a summer of 2018 the stock is around $54 and sometimes what tends to happen is when the visionary and CEO steps down CEO steps down the stocks underperform and because I think I'm smarter than the market I was like well this is the time to get out well what a brilliant mistake that was since then the stock is up only 120 part of exiting a fantastic company but to kind of bring that back to China and why we were talking about China to begin with as a whole Starbucks has about 15,000 about 20,000 stores total in their portfolio and this these are 2020 numbers by the way so they're not updated to 2021 they have about 20,000 stores in the portfolio with almost 5000 stores being in China and so those 5000 stores are going to produce a little over $3 billion a year for Starbucks so you think well that's great because a lot of people a lot of Chinese want to have Starbucks that ease the different things that they had the cold drinks you think it was great but here's what makes me nervous is right now between the two superpowers the US and China we make up 40% of global GDP so out of all the money and all the companies that are made 40% of it in the world is coming from us and from China so we are truly there's only two superpowers there used to be a you know obviously more I think people used to consider Russia.
Russia still wants to be considered superpower where they're not economically speaking it is just the China in in US so whenever there are issues between two countries in the past that a long time but all the way back to the beginning of time there was war but war is not always the best plan of action for companies to take and so now it over the last 50 years or more it's taking on more of a role of economic warfare or economic sanctions and so the tool that the United states in the tool that China has at their disposal their biggest weapon I should say probably not tool the biggest weapon at their disposal is the use of economic sanctions uh economic is to go into economic warfare so if we had issues with China and the president Biden decided to say look we don't Starbucks now that's a real possibility they could absolutely do something like that and all of a sudden you're looking at $3 billion coming off the balance sheet and $3 billion in revenues coming off the balance sheet for Starbucks but Starbucks in the long the largest U S presence of various different things that are sold is Kentucky fried chicken so KFC has almost 6000 stores in all of China it's extremely popular GM they're the top selling manufacturer automobiles in China Microsoft has no competition none in China Boeing Nike Coca Cola Procter and gamble UM apple think of all the apple products that are over there so if the Chinese government wanted to hurt the United states that's how they would do it and I think they could and it so that just makes me a little bit nervous now granted as our investors you own shares of Nike and Microsoft and Apple.
So we own a lot of these companies but it's still something that makes me a little nervous so I just don't want to overweight in that particular area so I just wanted to talk about that a little bit and why I think why I'm a little leery on China if you look at the fundamentals of the country the number of people that they have that have moved from agrarian rural society into urban society over the last 20 years and by the way that shift is still happening in India there's just a lot of business opportunities a lot of opportunities to sell goods and as long as they're economy stays decent that'll be money in people's pockets they want to buy American goods and I think they will continue to do so but as a result of everything that I've just kind of told you I've kind of stayed a little bit uhm light if you will on my allocations so when you look in your portfolios that you have with me you will see some international exposure but not near what you have to the domestic exposure I still think that EU S markets are primed for some fantastic growth moving ahead just fantastic growth one of the other little things and I'm not real big on the old farmer’s Almanac there was there's also an investor's Almanac that people can look up there's an old expression that many investors have been using for decades and it was a sell in may and go away and the reason why they have that are the best times to be invested in the market from a statistical standpoint have been October through may so in June July August September the markets tend to come off a little bit and I it wouldn't shock me if we did see for the months of July and August to have down months because typically if you if you look back throughout all of market history you'll see that those are negative months in the history of returns and so I am not a believer though of sell in May and go away in other words let's just go to cash.
I just I don't I don't play that way what I do like to do and what some of y'all are seeing is when we get volatility in the market I am taking the cash that we've accumulated from various dividends etc. and I am putting those back into the names that give us an opportunity to buy a few more shares so if XYZ is ticking down we lose maybe 5% of the course of a month instead of just getting out of it and then trying to time it and get back in I'm actually taking the cash that we have on the sidelines and trying to buy you a few more shares of these really good companies because I do believe that once October gets here I am of the of the belief that the markets could be really strong that also depends on covid and you know we're coming back with this new variant of Covid and we're also starting to see mask mandates out there again i know i think it was Los Angeles now has that in place and a few others have those clear up which I do think they will but once they clear up then I think the market takes off so it just happens to be hitting in this timeframe of summer lulls when the market tends not to do as well here we have the Covid stuff so I think it's going to give us some opportunities and kind of speaking staying with Covid if you will Pfizer this morning uh put out there put out a bunch of numbers and so kind of going through it on Pfizer just on the second quarter wrap your heads around this number they sold $7.8 billion in COVID shots that's just in the second quarter that's amazing 7.8 billion now they used to think that they were going to do $26 billion in revenues from COVID side that number is now up by the end of the year they think it'll be 33 and a half billion dollars and that's just the Pfizer I don't have anything on Moderna or Johnson and Johnson but I was just kind of blown away by that number a little bit but I do think that we will be getting a handle on it there's always if you watch the news there's always something to be fearful of I think that's what the news needs you to do in order to keep coming back and to keep listening one of the things that's also happened is we talked about interest rates and we talked about growth and how everybody was screaming Oh my gosh inflation here it comes and we got to get auntie and get down in the storm cellar and that just proved to be patently false uhm I think we kind of went through some different terms transitory inflation last time that I did one of these we've seen that to be the case numbers down 80% off it's high up so we're seeing as the country is opening up we're able to fill the supply chains and interest rates have gone down so the last week the 30 year fixed mortgage rate fell to its lowest level since February of last week and the 15 year rate is at a record low so interest rates came down obviously the Fed had rates and set where they said but then the mortgage rates are changing quicker but they have come down so applications to refinance a home loan jumped just last week 9% from the previous week that is a big number we're still 10% lower we were a year ago.
So we're not I mean except for at the 15th but as far as the applications are concerned but that is still a real big number the average rate on the 30 year mortgage is now at about 3% from 3.11 so that has fallen the average rate on the 15 is about a 2.36 so we've talked about the housing market and how everybody is selling houses quickly I don't see a change in that coming for a while I just I just don't as more and more people continue to move up we've seen just with jobs are also that are coming here to Texas on the Houston market it's just on fire I don't see anything to slow that down I just don't UM especially when you have the rates as low as they are they're staying low I'm not seeing inflation as a huge issue anymore I just think we need to kind of get through this summer and I think the best way that we should look at the markets for the rest of this summer is not too I get paid too so I'm going to but the rest of you don't go enjoy your summer go spend some time with families vacation if you want a vacation we talked about hospitality on the on the job people are dying to get out of the house and go do something and I think you should to you should go out and enjoy it because I think the summer is just going to be pretty boring from a market standpoint it'll be volatile but it'll be pretty boring but boy coming back in the fall I'm looking forward to it looking forward to some SEC football which is also making some major changes we're not going to get into that that's been all the sports talk looking forward to Astros possibly get into the World Series again we picked up another reliever we need a few more again I'm getting off into sports and I should and that's another thing I could talk for hours on but I won't but with the 411 I try to give you just a brief update I'm already at 23 minutes I promised myself I wouldn't go over 20 and yet I did it once again I want to thank everybody for listening thank you for all of you have continued to stick with us here at Redfish capital.