In this podcast, Motley Fool analyst Bill Mann and host Ricky Mulvey discuss:
- A growth problem for ASML.
- BMW's ability to make a profit on electric vehicle sales.
- Product problems for BYD Auto.
Plus, Motley Fool host Alison Southwick and personal finance expert Robert Brokamp talk to a couple about their real-life money questions, and one financial item that should be on every family's to-do list.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on March 12, 2024.
Ricky Mulvey: If you can't grow in your home country, how about France? You're listening to Motley Fool Money. I'm Ricky Mulvey, joined today by Bill Mann. Bill, good to see you.
Bill Mann: Hey Ricky, how you doing?
Ricky Mulvey: I'm doing pretty well. There is an odd international story that I want to get your take on in part because I think it's funny. This is the setup. ASML, which makes the machines, that makes the machines that make semiconductors, is threatening to not completely leave its home country of the Netherlands. According to Bloomberg, CEO Peter Wennink, set at a tech conference, "We have to come to the conclusion that we can grow responsibly.
In the Netherlands, we have not yet drawn that conclusion." Basically, the company says it needs more foreign talent. The Dutch government is led by a prime minister who's campaigned on reining in immigration. Now the company is sending out reports, reportedly, according to a Dutch newspaper, that maybe the labor situation is better for them in France and maybe they should move there. First question, Bill. Is this a bit? Are they do it a bit right now?
Bill Mann: I would've loved if you'd said first question, Bill, France. How France has become the potential landing spot for one of the largest technology companies in the world is somewhat fascinating. In the parlance of the movie Singles, ASML is the guy behind the guy, behind the guy, and it is the only company in Europe that's among the top 10 of global technology leaders. Yes, there is a rise of an ill liberal anti immigrant movement in the Netherlands. It has to do a little bit with the fact that tremendously successful companies like ASML and AdGen, which is also based in the Netherlands, have required so much housing and it is driven by immigration. They have been so successful that it's raised housing prices. It's a little bit of an immigrant crisis than you would see.
For example, in the US where it is low-skill immigration, these are highly skilled immigrants. Because they are raising the prices of everything around these markets, people are getting. This is something that goes back 100 years. It's called the Dutch disease. The Netherlands physically is pretty small and so ASML is looking at the environment in the Netherlands and they're using this to their advantage to say, we could move to France very easily where it's much bigger and we have plenty of more space to get skilled workers because the Netherlands does not produce enough.
Ricky Mulvey: This Saturday show is going to be a bit of a departure where Bill and I will be doing a 3-4-hour deep dive on Dutch immigration policies. I'm going to just step away from that first.
Bill Mann: Mark your calendar, it's going to be great.
Ricky Mulvey: We will talk until we get to the truth Bill. You touched on this, but Shell and Unilever have left the Netherlands and in the past few years relocated their global headquarters, but this time is a little different. It's a much bigger deal. If ASML relocates, the government has a cross-ministry plan. It's called Project Beethoven, which could give the title person arrays. Why is the Dutch government so worried about ASML moving?
Bill Mann: Why did they name it after a German guy?
Ricky Mulvey: That's a good question.
Bill Mann: We'll get back to the we can talk about that during our discussion over the weekends.
Ricky Mulvey: Was it the movie? Wasn't there a big Beethoven dog movie? We don't know, we can't get inside their brains.
Bill Mann: This is a bigger deal because ASML is such a landmark company. It is such an important company. It's 20% of the value of the Dutch stock market. It's 10% of the entire Eurozone blue-chip index. This is a landmark company and a source of pride for the Netherlands. It would be not even low-key. It would be high-key disastrous for the Netherlands if ASML moves.
Now, we see this in a lot of countries around the world. Including the United States of America, where we have technology companies that make a ratable portion of a country or some other geographic or political entity's revenue base. We've seen it in banking. We've seen Tesla move from California to Texas. This is another component of this same exact move where you have these very large companies and they do have some power to get governments to do things that they want them to do
Ricky Mulvey: I want to focus on the business for a sec of what it's doing right now. Because on the one hand, this has the classic economists talk on the one hand and the other hand. On the one hand, the market has awarded ASML a significantly higher earnings multiple, straight price-to-sales multiple over the past year. The forward P went up from 30-ish to 45. Straight-up price to sales went 8-13. For a manufacturing company, that seems to me a little frothy. You have the CEO saying, yo, friends, we are having a really difficult time growing and we have serious issues growing our company. What's going on with this disconnect in someone with exactly one ASML share, what should I do Bill Mann?
Bill Mann: I would hold onto that ASML share as tight as you can. This is a company that what's that old that old acronym tina, there is no alternative. There is no alternative to ASML at this point. They make machines that cost 1/3 of a billion dollars. They are absolutely, again, backing companies like Nvidia who will have a very hard time manufacturing and meeting their own goals if it is not for ASML.
This is a company for which when you talk about growth, you're really talking about rates of growth as opposed to the tenacity of that growth or the duration of the growth. ASML has a very long ramp in front of it and it will be very difficult to disrupt, so he's exactly right. I think that ASML is moving up for the same exact reasons, maybe at the vigor which Nvidia has done so and that is the move in almost every industry to artificial intelligence.
Ricky Mulvey: There's a market leader. In this spot that is going to be significantly different from the market leaders we're about to talk about next. Let's do some EVs around the world. BMW got a, I would say, just glowing profile in the New York Times about how the company has adopted a different strategy than a lot of other carmakers, which I will call the Kinder eggs strategy, where they have the same body for the car but the insides a little different.
You have gas, diesel, EVs, hybrids. Paraphrasing the article. "The company says that buyers should be able to choose a car's propulsion technology as easily as choosing its color." Beforehand, this would seem like a very difficult strategy, where you have to change the entire chassis and make them interchangeable. Seems like there'd be a lot of tech challenges there. But BMW figured it out and it should more carmakers follow this lead?
Bill Mann: I think we should call it. I loved the Kinder egg strategy. I think we should put it into its original German, so it'd be the Kinder eye strategy.
Ricky Mulvey: Thank you.
Bill Mann: I'm here to help. The thing about BMW is that it has been a manufacturing powerhouse. They've always been very good at it. That is, it's the German way, if you will. A lot of companies, as they've been trying to catch up with Tesla and the other leaders in the EV market have set aside facilities that are strictly electric vehicle manufacturing and heavy in some ways just moved away from the internal combustion engine in order to favor EVs. It may work, it may not.
I would suggest that BMW has gone very quickly from being a laggard to being a real success story in EVs. They sold nearly 400,000 of them in the last year, which is a huge 75% increase from the previous year. Now, maybe that doesn't sound like much because we are used to EVs being in the midst of a massive growth trajectory. 2023 was a pretty bad year for electric vehicle manufacturers in general. Not only did BMW do well, but they've done well going against the tide, and so there is something to be said.
Again, maybe this is the BMW way and maybe I am just creating a little bit or buying into the mystique, if you will, of BMW but they are such a good manufacturing company that this actually may be an area for them that is a differentiator. Like what would you like? You want a gas engine, we've got that. You want to hybrid, we've got that. You want fully electric, we can do that. It remains to be seen. Just letting the market determine what it wants on an individual basis, whether it will work but BMWs experienced this last year suggests they're on to something.
Ricky Mulvey: This article is also talking about how maybe Tesla is losing that technology edge against other carmakers. Maybe one other benefit is that I don't really know the name of BMW CEO, and that might be useful right now for selling cars. Do you think this article is onto something where maybe Tesla is losing that edge in technology?
Bill Mann: Well, the CEO's name is Oliver Zipse.
Ricky Mulvey: Thank you.
Bill Mann: It's just fun to say.
Ricky Mulvey: You are really on your helpful streets today.
Bill Mann: Say it with me now. Zipse.
Ricky Mulvey: Zipse.
Bill Mann: Very good. Actually, that was terrible.
Bill Mann: I think BMW has learned a tremendous amount from the American regulatory way of allowing winners to identify themselves. Do you remember back in the day when we first were getting into HDTVs and in Europe they made a designation for the type of technology that was going to be their chosen one. In the US, the regulators just said, "Well, let's just see what happens." We centered upon a certain technology and that's what ended up winning. It is a very powerful, if slightly risky way to go about allowing a winner to reveal itself.
I think BMW has taken that lesson to heart and that's what they're bringing to the table. They know, they know how to manufacture may be better than anybody else, and that is a dirty little secret about Tesla. They've had great technology. They were not a manufacturing leader. They did not bring much to the table there. They did append some things. They should be given an immense amount of credit for that, but ultimately, they are not a manufacturer. BMW is, and so, all of the companies that are out there that I think could really compete long-term with Tesla, BMW, Volkswagen are very much near the top of the list.
Ricky Mulvey: Is this worth a spot on investors Radar, this carmaker, BMW?
Bill Mann: I absolutely believe it is. Remember two years ago there was basically this thought process that all of the legacy car manufacturers were doomed, not just because of Tesla, but also because of the upstart Chinese, in particular EV manufacturers. They still do have a catch-up in that regard, but BMW is painting the way toward the future because I happen to believe that there is a future where internal combustion engines are going to have a place in the market, and BMW is saying, sure, let's just assume that that market continues to exist. Why would we not allow our buyers to determine what path they want to take? Choose your own adventure with your fuel of choice for your autos. That's absolutely fine with BMW because they manufacturer so well.
Ricky Mulvey: Yeah. The largest seller of electric vehicles right now is BYD, but it seems to have the tremendous caveat that most of those car sales are within China where it receives a tremendous amount of subsidies. It's having some problems shipping cars abroad and building new markets, particularly in Europe, in North America, and I guess it's like, does it even matter if you're the largest EV seller if you can't do it outside of your home country? I don't know.
Bill Mann: Ricky, I don't know if you've heard about this, but China is a pretty good market to start in.
Ricky Mulvey: It's a good market to start in. Yeah.
Bill Mann: Yeah. It's not like they're the number one EV manufacturer in Thailand. They are in a huge, very competitive market and they are winning. There was a Wall Street Journal story that came out about BYD struggles going abroad, and I think that there are a couple of things that are at issue here. They are following the path that Japanese companies and Korean companies with their auto-manufacturers did in the past, and I think because China does not have a reputation as making very good consumer electronics, and I'm pushing the definition calling a car a consumer electronic, but an EV is not not a consumer electronic, but the tendency is to discount the Chinese prowess in these regards. Would you say that's correct?
Ricky Mulvey: I think that's fair.
Bill Mann: Yeah. It's just fair. This is not making your designation, what I believe, I think that's just simply the case. Anytime there is a problem or a defect with a Chinese consumer electronics or an EV, it's really easy to say, well, China just doesn't have the quality there yet, where in actuality, they're going through the same exact curve that happened with Japan and happened with Korea. I am not so old that I don't remember when Hyundai first came into the US and they had a huge amount of difficulty gaining credibility as a car manufacturer and everything that was wrong with the first Hyundai cars that came into the United States, they were highlighted, they were amplified, so yes, this is a problem for BYD, but I think to the extent that you want them to succeed, I think a little bit of patience would help.
Ricky Mulvey: My point that I should have said, the car that they're selling for less than $20,000 goes for more than 40,000 in a country like Germany. They're playing a different game outside of their home court, if you will. We're at the end of earnings season, and it's been an interesting one. Any general reflections, thoughts, lessons learned as you look back on this past earning season.
Bill Mann: I think if there were anybody left too, was skeptical about how artificial intelligence was going to change commerce. The time is now to accept that it is. Now companies like Invitia are trading at tremendous multiples.
Ricky Mulvey: Thank you for your time and insight.
Bill Mann: Thanks Ricky.
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Is your house on the same financial page, Robert Brokamp and Alison Southwick caught up with my colleague, Emily Williamson, and her partner, Paul Ballasts, to ask some real life money questions and discuss one financial item that should be on every couple's to-do list.
Alison Southwick: If I remember correctly, you have accounts that are his, hers, and ours. How does that work in practical terms, Emily, such as paying for the mortgage or even just going out to eat?
Emily Williamson: What we have done for a long time, is we look at how much we make together and then how much each of our paychecks are our salaries, and we split our bills as a proportion of the total. We look at our bills first and then we split our income as a proportion of what we both make. That goes into our joint account. Out of our joint account, we pay all of our bills that are non-negotiable, so, mortgage, car, escrow, some health college that we have shared, and then as far as eating out, I don't know. Maybe where you let a camp of what most Americans do, but we share a credit card, and so, we have a budget, that we try to stick to. It's become very difficult with inflation, but that's why we've cut travel, fun things, restaurants, or eat in malls, any extra expenditures and then we split that 50-50 every month. Into our joint account because 50% of what our propellers budget should be for our credit card every month, and as we go into that, then we decide to make it up.
Paul Ballasts: Yeah. I really like our joint credit card because we accumulate so many points for things that we're going to spend, like we're going to buy gas, we're going to go out to eat, so, we might as well put it on the credit card, and the end of the year we have all these points and we think it is cash back or take a trip with it. Credit card points feel like you can use them for so many stuff.
Alison Southwick: Before we came on the show, you talked about how you wanted maybe help from Dr. Bro, again, not a real Dr. on how to get aligned on those intermediate goals, those ones that are maybe 10-15 years out or so. At this point, I'm going to see you into the Dr. The Dr. will see you now. Dr. Bro, take it away.
Robert Brokamp: Well, first of all, it sounds like you two are in great shape. I can just tell by the way, the two of you interact that I think you're mostly on the same page, but it's fine if you're not always on the same page. Most couples aren't. Let's talk a little bit about goals. First of all, there's always the goals that just about anyone with a certified financial planner designation like me, we'll say just about everyone should have, and we'll talk very briefly about those, but then there's the individual goals and the couple goals, but that's where there might be some more give-and-take or compromise and we'll get into those as well, and you have some ideas about what those would be. Let's start with the prerequisites. We'll just go through these real quickly. Do you have an emergency fund? That pile of cash that you can rely on if there's a big ticket expense, or as Paul pointed out, if you temporarily lose your job for a while?
Paul Ballasts: We do. I think I'd like it to be six months and it's probably like three-months.
Robert Brokamp: Good. Okay. Well, it will conclude, by the way, with a to-do list. That's one thing to the add to the to-do list. Do you generally pay off that credit card each month?
Paul Ballasts: Yeah.
Robert Brokamp: The good news is you don't have a revolving balance of credit card debt is not an issue. How about an estate plan? Will and a trust or something like that?
Emily Williamson: We do not. Recently really got one now.
Robert Brokamp: Another opportunity. So we'll add that to the to-do list. You can do a lot of it on your own just by updating your beneficiary designations on things like your IRAs and 401Ks. If I assume you would deem each other, but then you named secondaries in case something happens to both of you. You can change your bank accounts to payable on death accounts and your brokerage accounts to transfer on death accounts. You could do all that on your own, which makes your state planning a lot easier, but you probably should, in the end, get a will.
I know you have pets, don't have kids, but you have pets. You could put in your will who you want to take care of the pets. You can even create a trust so that would pay for the care of your pets. These are things you would talk with an attorney to get a truly solid estate plan. If one of you passed away, will the other be fine financially? Devastated emotionally, of course, but financially, would you be fine?
Emily Williamson: Yeah, I think they're going to be fine.
Paul Ballasts: Yeah. We both have life insurance on each other.
Robert Brokamp: You already had the life insurance, so no need to get more life insurance. And then finally, are you saving for retirement?
Emily Williamson: Yes.
Paul Ballasts: Just doing the company 401K. I think we each have a IRA, at least I think I do.
Emily Williamson: I do. No, you don't have an IRA but
Robert Brokamp: Have you sat down and calculated whether you're saving enough to retire around your mid '60s or so?
Paul Ballasts: No.
Emily Williamson: No. Let's use the little calculator on Schwab, like that lane and see if that looks OK.
Paul Ballasts: My company uses Schwab too.
Robert Brokamp: Got it. That's another opportunity, we'll add that to the to-do list. Now, let's get into the individual goals that you've told us about. Emily, you have an interesting one. You want to open a bed and breakfast and grow all the food that you would cook for the guests, for breakfast and dinner a couple times a week. Tell us about that.
Emily Williamson: Why? I love gardening and I love cooking, and a lot of those things. It just feels like I don't even know if I would call it a career AOI passion on islands that's calling to me. One day, probably not in Denver, but somewhere else. Paul and I talked about this, having a bed and breakfast. I think call it a hobby farm, actually, where we welcome guest then we'd have to buy the property, get the gardens. I'd love sitting in some learning buffering up there, maybe go onto my experiences in Europe and across the country. I think there's only a few places where this is actually how the bed and breakfast work in American, but I think this is the thing than other countries though.
Robert Brokamp: Do you have any experience doing this type of work.
Emily Williamson: I have experience gardening and cooking for others, but not hosting of BNB. We have a VRBO property, but we're not there like the folks that comps. So no experienced. We did actually, a long time ago, when we first bought our house, we Airbnb the bedroom, like wheel-end Garo and we Airbnb at the room. Actually that was soviet too. I'm a little bit of experience.
Paul Ballasts: I don't recommend that.
Robert Brokamp: I was going to say, let go.
Emily Williamson: Just $40 a night, so we only got college students and we got our dogs and that was also not OK with people. I mean, we're in Colorado, you can imagine what they wanted to do up here.
Paul Ballasts: The college, it would come over 02:00 A.M. Half drunk and like wake up the dogs, we're like, how boy?
Robert Brokamp: Paul, how do you feel about that goal?
Paul Ballasts: I think it's really cool. I'd love to be part of that. I love everything cycling, so where that's scrabbled bike riding, mountain bike riding. I see a big red eye care, but now mountain biking has taken over my life in Colorado. I'd love to lead people on biking tours at this Airbnb. My dad lives on a farm, so I know a little bit about what it's like to live on a hobby farm. Helping out there, it'd be cool.
And in general, I think my financial goal, I just want to have more freedom in 10 years. I don't want it to be so reliant on my job. I want to work because I like working and it gives me purpose. But if I were to take three months off because I want to go bike across the country, I want to be able to do that without such a huge financial hit. I think that freedom is related to Emily's BNB because it's like we would need a lot of financial freedom to come do something like that.
Robert Brokamp: Which gets to the individual goals that you expressed, which is to be financially independent in 10 years. It sounds to me like it's not necessarily being fully retired, but just having the freedom to do things you want while still moving in and out of the job for us?
Paul Ballasts: I will say like, I've been talking to some of my friends lately and they're starting to do more grown up investments. I guess I'd call them, like I was talking with one of my buddies the other day and he just invested in like a multi family real estate fund. I was like, that's pretty cool, and it got me thinking, should I be doing stuff like that? Or is that like maybe I shouldn't because I don't understand it? Just thinking a little bit more about other things rather than my job.
Robert Brokamp: The good news is when I saw your goals, someone wanting to run an Airbnb and another spouse may be completely opposed to it, but you don't seem to be in that situation, so that's very good. That was my Number 1 concern, but I'm glad to hear that not only are you on the same page, but you both have a little bit of experience doing this. One final question and then I'll give you the diagnosis, the to-do list. On a scale of 1-10, Paul, how important is it that you are financially independent a decade from now? Ten being like you absolutely positively want to be financially independent, and then lower numbers would be like, yeah I'm little flexible with that timeline.
Paul Ballasts: Just six.
Robert Brokamp: A six? Good. Here we go. Here's the diagnosis and your to-do list. The first thing, of course, is to get the estate plan. I think you could do a lot of this on your own, but you probably shouldn't see an attorney. Because you don't have kids, you possibly could get away with doing a will or something like that from an online, from a website, but generally, I think it's still good to hire an attorney to do that.and you may already have attorneys since you have a VRBO and things like that.
The BNB thing is a journey. There is, first of all, an exploration in terms of how much you really want to do it. I looked and there are plenty of classes, webinars, books about how to do it. There used to be a company called Vocation Vacations, in which you took time off to work another job to see if you liked it, and one of the options was to help run a BNB. Unfortunately, this company no longer exists, but you still might be able to find a BNB that will let you work there for a little while to see if you like it, because you may end up feeling OK.
This sounded like a good idea, but the day to day is actually a grind. But on the other hand, you may love it, and then that's a point where you have to start looking at the numbers. You have to figure out how much does it cost to buy the place? What are the finances? What can I project in terms of revenue and things like that? You'll learn that, I'm sure, if you'd start taking classes and books. Then decide the timeline and what it takes to get there? You do that just with a regular old calculator.
Then you'll decide whether, for example, you need to save up for that or do you sell the rental property you have, and then use that money to buy the BNB, especially if the rental property is not cash-flow positive. If it's cash-flow positive, you might want to keep it, but if it's not cash-flow positive, you might want to sell that to put it toward other goals.
Then just the terms that we talked previously about the retirement calculating, and it could also be related to the financial independence. If I were really your financial planner or your financial therapists, I could run those numbers for you, but instead, you can use the retirement calculator. My favorite retirement calculator is the CalcXML comprehensive retirement planning module, which if you do an online search for that, you'll find that. You just put in your number, it'll tell you basically, at what point will you retire given your current trajectory? How much you're saving? How much you have, things like that.
Then you just fiddle with the numbers to see like, I want to retire sooner, how much do I have to save? How much do I have to shave down by expenses too? That will give you a general idea of where you're going now and what you can do to change that. Since, Paul, you said you're a six on that financial independence that gives you a little wiggle room in terms of flying, if we do this, I'll be financially independent in the 13 years or so and maybe you're fine with that. How does that sound? It sounds good to you? Any questions?
Paul Ballasts: I would say what steps do we need to start taking now to be more financially independent in 10 years?
Robert Brokamp: It just depends on what you're doing now. You might look at your numbers given that you seemed to be generally financially responsible and you might already be in better shape than you think you are. You just have to crunch the numbers. But then apart from that, it really comes down to saving more. It is the VRBO that you have, is that cash-flow positive?
Paul Ballasts: We only had it for two years, so it's still new. But it pays for the mortgage every month, which is great.
Robert Brokamp: That's great.
Paul Ballasts: But we're not raking in the extra money.
Robert Brokamp: That's good to know. If you were saying that you are actually losing money every month on it, I'd be like, that may be a situation where you sell that, take whatever money you've made and I assume you've made money over the last couple of years, and then put it toward other goals. But if it's at least covering the cost, that might be a worthwhile investment. You talked about the private real estate. That is something you could explore. It's not really necessary. It usually takes a decent amount of money and they tend to be more illiquid. But you might look at the possibility and find it something worth doing, but you don't have to do that. Plenty of people become financially independent just by investing in the stock market.
Ricky Mulvey: As always, people on the program may own stocks mentioned, and the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Ricky Bobby. Thanks for listening. We'll be back tomorrow.
