And if you’ve got enough energy, please join us as we also talk about headsets, ocean cruises, and retirement.
In this podcast, Motley Fool analyst Jason Moser and host Ricky Mulvey discuss Apple‘s plans for its next headset, Starbucks‘ new offerings, and earnings from Carnival.
Then, Motley Fool retirement guru Robert Brokamp shares how he’s preparing for retirement, and what he’s learned from leading The Motley Fool’s Rule Your Retirement newsletter for two decades.
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 June 25, 2024.
Ricky Mulvey: What do you need to wear a headset? Apple really wants to know. You’re listening to Motley Fool Money. I’m Ricky Mulvey joined today by Jason Moser. Jason, how are we doing?
Jason Moser: Doing alright, Ricky. How about you?
Ricky Mulvey: I’m a little unwell, to be honest. For reasons that will become apparent in our second story, I want to start off with that honesty, though.
Jason Moser: I appreciate your transparency.
Ricky Mulvey: There you go. Let’s talk first. Before we get to Starbucks’ new energy drink, let’s talk first about the Apple Vision Pro. Apple has paused work on the next Vision Pro device they’re instead focusing on a cheaper device, maybe an Apple Vision Standard, according to a website called the Information. J. Mo, the Vision Pro has only been available for purchase since February. What’s going on? Is cost really the problem here for these headsets?
Jason Moser: Well, I would say for Apple, it’s certainly a big part of it, but that’s definitely not all of it. The cost side of things, that’s an Apple-specific problem, but I think, also, when you pan out, and you look at this headset market. The headset market at large, is dealing with the challenge ultimately of why do we need them. It’s a neat little want. Some people want them, but there is no need for them yet. I’ve been running the augmented reality beyond service here for the last five years. It’s been an interesting space to dig into because on the one hand, the technology is phenomenal, it’s like magic, it’s really impressive but on the other hand, there’s just no core use case for the consumer. We’re seeing a lot of applications on the industrial side. I look at markets like healthcare, for example, or look at a company like Axon and their taser weapons, they use VR for training purposes. There are plenty of industrial use cases where it makes sense, but finding the core consumer use case is still something that a lot of these companies are still trying to figure out. I think with Apple, they had to start somewhere. But again, I think this is a space that is still in its infancy, and I think it’s going to be a while before consumers feel like they need these things.
Ricky Mulvey: Apple bulls would say, Hey, it took a while for the iPhone to catch on, the Apple Watch to catch on. You needed that core use case or maybe that killer app. The thing that seems to be different in this case is you have that additional hurdle of a very visible headset that might be difficult and clunky to wear. Bloomberg’s Mark Gurman has been writing about what’s going on inside of Apple. To what you’re saying, he said, “Rather than being a Jack of all trades, the headset could concentrate on video watching Facetime and serving as a Mac external monitor, the company should abandon the idea that people are going to fall in love with third-party apps or that the Vision Pro needs to be a full-fledged computer.” Do you think Apple may have made a marketing mistake with the introduction of this Vision Pro? Do you think it needs that focus to say this is one thing that this device does really well?
Jason Moser: It’s possible. I think you’ve test-driven the Vision Pro. I did as well.
Ricky Mulvey: It’s sweet.
Jason Moser: It’s an amazing device. I can tell you that again, the technology is magic. The flip side of the coin there is after 30 minutes of wearing that thing, I wanted to take it off. My head was hurting. It’s like my eyes were burning after using it. Is it really a more enjoyable video-watching experience? I don’t think so. I’m quite happy just to turn on my TV or watch something on my phone. Throwing on that clunky headset, it is cumbersome. I think one of the observations I think a lot of us have made is just that at some point, they’re going to have to figure out the form factor here, that this thing needs to shrink down, needs to become much lighter and much more enjoyable to wear. Until they get to that point, is Facetime really a better experience using a headset? I don’t think so, it’s a phone call. They’re the use cases, but I’m not entirely convinced that they’re actually better experiences, at least at this stage of the game. Until we see that form factor come down, I think that’s going to be the case for most people.
Ricky Mulvey: For video, it’s a more intense experience. I don’t know if it’s necessarily a better experience.
Jason Moser: It can be. But again, I think gaming is the market that has always stood out to me as the real obvious beneficiary of these headsets. Even gaming, it’s been slow to catch on and until we get to that point, it just feels like this is such early days for these headsets. Again, cost is an Apple-specific thing. But when you look at the general market I think that the form factor in the use cases, that’s not just an apple thing. But what Apple is really good at doing is figuring out ways to convince us that we actually do need something, so I wouldn’t put anything past them.
Ricky Mulvey: What do you think success looks like then for the Vision Pro for Apple? Or is it just getting to the point where you can wear glasses with an augmented reality setup, which for Apple is at least a few years away?
Jason Moser: I think success ultimately, this is their first step in this new direction. Spatial computing paradigm. If they are able to whittle down the form factor on this thing, it helped weave the charge in that regard. Apple is extremely good at hardware. Having the resources that they do have, I feel like over the course of the next decade, I expect to see that form factor come down considerably, and what will happen too. The cost obviously will have to come down, because right now the Vision Pro, again, amazing technology, but probably the most expensive dust collector out there at this point.
Ricky Mulvey: Thirty-five hundred dollars. That’s what they’re working on with the next version. Some trade-offs they’re thinking about maybe it’s a less powerful chip, maybe it’s tethering it to a Mac or an iPhone, maybe it’s stripping out the display that allows people on the outside to see your eyes on the inside. But we’ll see if that makes it more appealing, even as it still probably costs about 1,500-2 grand. Let’s go to Starbucks. As I mentioned earlier, Jason, I said I’m a little unwell. I’m doing good, but I’m a little unwell. That’s because today, Starbucks launched an iced energy line, Melon Burst and Tropical Citrus, they range in caffeine for a venti 24 Oz, that’s the only size you can get them in. Ranging in caffeine from 180 milligrams to 205 milligrams, that’s similar to the amount of caffeine you get in a Celsius or a Grande cold brew. J. Mo, this hits different, I’m drinking one right now. I’m drinking the Melon Burst. I’ll get to the taste and the experience in a sec, but as I’m recovering from this beverage, do you like to see Starbucks getting into the energy drink space?
Jason Moser: I do. I think it makes a lot of sense. It’s right in their wheelhouse. They’ve never really nailed it on the food side of the equation, but beverages that’s their specialty. This is an easy bet for them to make. When you look at the actual opportunity there, there’s data from research markets that protects the energy drink market in the US alone is going to clock in at about $33 billion by 2030. That’s a big opportunity, and it’s very understandable why Starbucks would want to get their little slice of it. But it sounds to me, Ricky, maybe they need to go back to the drawing board based on what you’re saying.
Ricky Mulvey: I’ve got the Melon Burst right now, and it tastes like someone went to a fountain drink dispenser and mixed a couple of things and then presented it. To be honest, melon is a generous term for the taste of this thing. I wanted to try it before talking about it. I was really hoping that it would be a good refresher. It’s 100 degrees out here in Denver but right now I’m getting some chemicals, and I’m feeling a little buzzy.
Jason Moser: That sounds less than ideal. I don’t drink a lot of energy drinks every now and then, I’ll have a Celsius or maybe a Monster or something like that, if I’m in need. But even those, there are specific flavors that I’ll drink. I taste some of those flavors, they just taste like medicine or chemically, like you were saying there. Another thing I was wondering, too, because I don’t go to Starbucks as much anymore. I brew all my coffee at home, so I don’t have the need to actually go to Starbucks all that often. But they also have a line of beverages, you said refreshing or refreshers. They have the refresher beverages, which I think is something made from the coffee cherry, so it has caffeine in it. I will say I’ve found those drinks, and they’ve been around for a while. I find those drinks actually very good, they are refreshing. I wonder. It sounds to me maybe they need to go back to the drawing board on a flavor profile. But again, it’s an easy bet for them to make and get it out there, get consumer feedback, and they can tweak it as needed.
Ricky Mulvey: It’s ultimately $6 for a fountain drink. I think that’s going to leave some consumers wanting if they’re willing to try it again.
Jason Moser: Well, but you’re getting the brand, too, Ricky. You’re walking around with that Starbucks cup, that’s telling people something about you.
Ricky Mulvey: Walking around my house, showing everyone the Starbucks logo. No, but when I was in the Starbucks, though, it’s a fairly residential area, and there weren’t a ton of people in there working from home. The environment isn’t as warm as you think of old Starbucks locations. Right now you have Starbucks throwing a lot of ideas against the wall in terms of a product innovation perspective. But do you think that’s really the problem for Starbucks, or do you think it’s pay place problem, an environment problem? Would you rather see Starbucks reinvesting in its stores to make it a warmer, more inviting place?
Jason Moser: I think that’s certainly something they could do. It does seem like there’s a lack of consistency. You can go to one Starbucks location, and it’s perfectly fine, and you go to another one, and it’s really nasty. They really do need to focus up on making that a more consistent and hospitable environment because some of them are great. Every once in a while, I will go to a Starbucks, so I’m out running errands or whatever, and I’ll go do some work from there. It’s great if it’s clean and welcoming. I think that’s something they could certainly focus on doing. Now, they have the dynamic where not all of their stores are company-owned. They have some company-owned, and then they have some licenses as well. That’s a danger in franchising, so to speak. You don’t have that same level of control at times. One thing that really strikes me and I’m seeing this with my daughters and all of their friends, I think that if Starbucks is looking to roll out new beverages, they could go all in on that boba tea, the bubble tea, they could go all in on that. I think that would be something that probably would have a little bit more staying power and probably a broader appeal than the energy drinks. Just make an acquisition or something if they wanted to. They already do t pretty well. That boba tea, it is having a moment, and it is lasting for a while. [laughs]
Ricky Mulvey: Just get some tapioca in there. You mentioned the energy drink sales growth numbers. You’re not the only person to notice that. There’s some pretty lofty valuation targets for I’ll name Celsius, for example. In the US, sales of energy drinks surged to about $22 billion this past year, that’s a growth rate of 63% total. Total up 63% from 2019 numbers. A lot of people are investing into this trend, the growth of energy drink consumption. Is this something you’re buying into with your portfolio?
Jason Moser: I’m a Starbucks shareholder, so I guess I’ll just get that exposure if they continue with it. It does seem like these drinks skewed to younger demographics, which could indicate a longer-lasting opportunity. These younger kids and younger adults, they have a lot more years to live. If they maintain that behavior and continue drinking those energy drinks all throughout their life, then yeah, it certainly seems like an opportunity. I don’t own any of the energy drink companies, but I feel like I’ll get my exposure from Starbucks, and we’ll see where that takes us.
Ricky Mulvey: We’re getting some crumbs of earnings news in these weeks between the heavy amount of coverage. This morning Carnival Cruise Line reported. Some investors seemed to be pleased that the company raise guidance. Also made an operating income of 560 million for the quarter. Management trumpeting that that’s 5X, five times the level from the same time last year. Any big takeaways or headlines from the quarter for you?
Jason Moser: It’s just interesting to me to see that they’re benefiting from higher ticket prices. They’re flexing a little bit of pricing power on tickets. When you brought it up as we were talking about this earlier, you compare something like a Carnival Cruise to a Disney vacation. It is a compelling value when you consider. Disney trip is super expensive now. A Carnival Cruise, not so much. I see why folks are interested. It’s interesting to note that the demand for 2025, they say, is accelerating. People are planning, and the price point really does allow for that. There is a certain level of stability in transparency you can get with a business like this because people planned so far out, and the value was so compelling, those are likely going to be trips that people follow through with.
Ricky Mulvey: Carnival saying it’s no longer a pent-up demand story. The other big story with these Cruise lines has been the debt situation. They took on a lot of debt over the pandemic. CFO David Bernstein pointing out that Carnival has prepaid 6.6 billion over the last year in a quarter. There’s a lot of short-term liabilities coming up for Carnival, but that is in unearned revenue. The trips that people are booking that you mentioned earlier. Are you buying that the debt situation is under control now for Carnival Cruise Line?
Jason Moser: They can service it as of now. It’s good to see that operating income exceeds the net interest expense that they’re paying on the income statement. That was flipped the other way around, not all that long ago but that line is still razor-thin. It is a company with $27 billion in long-term debt and a lot of that debt is coming due over the next several years so it’s something they need to keep an eye on. You mentioned unearned revenue, they have about $8 billion in unearned revenue, so that will eventually flow through the income statement as revenue, so that’s good. But you also look at the share count for this company has basically doubled over the last five years, and it’s strictly by any measure. It’s just not been a good investment. It is one of those businesses. It’s subject to what may be going on in the environment at any given time. We understand what happened during COVID. That was something that was just completely out of anyone’s control. They have to deal with situations as they come up. I’d much rather see that debt load come down, but for now, it seems like they can handle it OK.
Ricky Mulvey: J. Mo thanks for your time and your insight, appreciate you coming up.
Jason Moser: Thank you.
Ricky Mulvey: Today’s show is sponsored by Public.com. That’s where you can earn a 5.1% APY with a high-yield cash account. While we can’t say for certain it’s the highest interest rate there is, we can say this. It’s a higher rate than SoFi, a higher rate than Marcus, a higher rate than Wealthfront, a higher rate than Betterment, frankly, a higher rate than Capital One, a higher rate than Ally, a higher rate than Barclays, a way higher rate than Bank of America and Chase, a higher rate than Citi, Wells Fargo, Discover, and it’s a higher rate than American Express, too. If you want to get started earning 5.1% APY on your cash, check out public.com. We can’t say it’s the highest interest rate for your cash, but it’s up there. This is a paid endorsement for public investing, 5.1% APY as of March 26th, 2024, and is subject to change, full disclosures and terms and conditions can be found in the podcast description, US Members only.
Up next, Robert Brokamp shares with me how he’s planning for retirement, even though he’s not done yet here at the Fool. Bro, retirement isn’t just something you’re ruling or studying or game planning, it’s something you’re actually preparing for and you’ve written rule your retirement for about 20 years now. Does all of this writing about it, does all of this thinking about it make it seem more or less real to you?
Robert Brokamp: Well, when I started, it didn’t feel very real. I was 34, I had three kids, and my wife and I adopted a fourth a year later, very young. It seemed a far way away. When I think of retirement planning, it’s really three key stages. There’s that accumulation stage where retirement is far away. But then there’s that 10 years before retirement. It’s your retirement runway, where you have to really prepare retirement, and then the third stage is actual retirement. Well, I’m very close to being in that retirement runway. I’m only a month away from being 55. If you think of 65 as a typical retirement age, I’m at that point. For everyone, once you reach that point, you have to do a lot of things. You have to make sure, have you saved enough because you’ve got only a decade left to build up your savings if you’re a little behind but you also have to think about your portfolio. How do you want it to change over the next decade? That’s why I’m on the verge of this. It’s really feeling more real because I’m in the fourth quarter of my career and retirement doesn’t seem so far away anymore.
Ricky Mulvey: We should have prefaced this. I could see a listener thinking that this is Bro’s retirement announcement. You’re not retiring right now. What’s your current situation?
Robert Brokamp: My retirement plan is on track. I’m very fortunate to be able to say that. I’ve contributed to my first IRA 30 years ago, and my wife and I have been fortunate to save 10-15% of our income in most years, and I’ll add that we put money generally in both Roth accounts and traditional accounts to have tax diversification, so we’re on track. I checked in with retirement calculators multiple times a year to make sure we’re OK. Neither my wife and I are really eager to retire, so I’m happy to keep working for at least another decade. I think it’s possible I’ll work even longer, maybe well into my 70s, but many people retire sooner than they thought they would. I’m planning on retiring at 65, though, I think it’s possible I’ll work longer.
Ricky Mulvey: You’re not in a position that’s physically demanding. You’re not an airline pilot or you don’t have a job with a mandatory retirement age. Why plan to retire at all? You can just keep on keeping on with the amount of planning you’ve done already?
Robert Brokamp: Well, it wouldn’t surprise me to be honest. Before I joined the Fool, I was a financial advisor with Prudential Securities I was hired by my high school English teacher’s husband. Nowadays, he’s in his mid-70s and still works full-time as a financial advisor, and has no desire to retire at all. I would not be surprised if that’s the case for me as well. But I want to be prepared for it in case I change my mind. It could be a decade from now. I don’t feel like, maybe I do want to cut back, maybe I want to do more things, I want to enjoy myself a little more. That’s what I’m preparing for. But who knows? We’ll see. Check-in with me in 10-20 years, we’ll see.
Ricky Mulvey: You’re further down the runway as you said earlier. How are you thinking about allocation? How’s that different from when you started your career, especially as the planned retirement age which may or may not happen, [inaudible]. How are you thinking about allocation now?
Robert Brokamp: Well, when you’re thinking about your allocation for retirement, you have to think, where do you want to be in the future? For me, the foundation of a retiree portfolio is the income cushion. That’s five years of income that you expect to take from your portfolio out of the stock market, something super safe, cash, CDs, I bonds, maybe a short-term bond fund, something like that. That’s the foundation, and then you have to think, what else beyond that, do I want to keep out of the stock market? I would say most studies indicate you should probably be around 55% to 60% stocks. I’m a little more aggressive, so I’m shooting for 65% stocks by the time I’m 65. I’m about 90% stocks now. In a year or a few, I will start ratcheting down my stock allocation by taking about 3-4% of my portfolio out of stocks and putting it into cash and bonds, and I’ll do that from things like not reinvesting my dividends, or every time my wife and I contribute to our 401K or in her case 403B, and IRAs, a portion of that will go into cash and bonds so that we gradually move from our current allocation to what I think will be our target allocation bond at time we are 65.
Ricky Mulvey: This may sound like a technical question, but I think it has practical implications. Should you even think about your allocation in terms of, this is the percent I want toward stocks, or is it an income cushion game, which is, I want 3-5 years of living expenses out of the market and then everything else can go back into stocks?
Robert Brokamp: I think part of that is determined by your risk tolerance. I know retirees who have almost all of their money in the stock market, and they’re very comfortable with that. For me, personally, I want a foundation of very safe money, very safe income so that no matter what happens to the economy, what happens to the stock market, my wife and I are going to be fine, so that’s the way I approach it. But I think many Motley Fool listeners will probably be very comfortable with having almost all their money in stocks and then just living off dividends and things like that.
Ricky Mulvey: Because you will get some income in the form of Social Security. You’re still far away from taking it but what are the considerations you’re thinking about going into your decision about when and how to take Social Security?
Robert Brokamp: As much as I love stocks, I personally think Social Security is one of the best, if not the best source of retirement income. A lot of things going for it. It keeps coming in every month, regardless of what happens, I know Social Security has issues. But once people start receiving it, I think they can rely on it. It adjusts for inflation every year, and it’s at least partially tax-free. I want to maximize that as much as possible. I’m going to try to delay till age 70. Even if I retire sooner, I’m going to delay my Social Security. According to the estimates that I get from Social Security, and everyone get their estimates just going by creating my Social Security account. If I delayed to 70, my benefit will be around 25% bigger than if I had claimed at 67 and almost 50% bigger at age 65, so I want that bigger benefit. But I’m not doing it just for me because if you’re in a situation like I am where I’m married, I have higher lifetime earnings than my wife, because for many years, she worked part-time or not at all while raising our kids, and then she became a professor. A good career, but it’s not a particularly lucrative career. My situation, I have to not only think about my benefit, but the survivor benefit she will get if I pass away. Chances are, I’ll die before she will because first of all, I’m a man, she’s a woman. Females live about 5-6 years longer. Longevity runs in her family, not in mine. I’m going to delay to age 70 so that she has the biggest survivor benefit possible.
Ricky Mulvey: Social Security in and of itself is a form of a government-guaranteed annuity. Are you going to be buying an additional annuity?
Robert Brokamp: It’s quite possible. I love the idea of guaranteed income in retirement as a replacement for what you would otherwise would allocate to bonds. The rule of thumb is this, you look at your must-pay expenses in retirement. You look at things like your mortgage, your groceries, your medical bills, your utilities. Add all that and try to have enough guaranteed income to at least cover that. Now, if I really do delay Social Security to age 70, then probably my Social Security will be enough to cover our must-pay expenses. But if not, I will get a single premium immediate annuity, again, around age 70 because annuity is the same principle, and that the longer you wait till you buy one, the bigger benefit you’ll get, then I might get an annuity just to top up, get a little bit more of that guaranteed income.
Ricky Mulvey: I’ve heard you say you’re going to meet with a fee-only planner, which you recommend about five to every 10 years for a Foolish listener. I know it makes sense for the Foolish listeners. You’ve been writing about retirement for 20 years now. I think you might have all of your bases covered, bro. What value could you possibly expect to get out of that professional relationship?
Robert Brokamp: Well, a couple of things. First of all, I have had the certified financial planner or designation since 2008. I was a financial advisor for a couple of years back in the 90s so ideally, I know more than the average bear. But I did just complete my master’s in personal financial planning, which you would think again, that means you know enough but in every class, I learned something new. I often go to conferences for financial advisors, and I learned something either from every presentation or just from at the lunches where you’re sitting around with other financial advisors. I know there are things out there that I don’t know and I want to make sure I just have everything covered. It’s like doctors going to other doctors for their medical advice or at least to get the second opinion. I just want to make sure it’s such an important life decision that I’m doing everything right. But the other aspect is, I am the main financial planner in our household. If something happens to me, I want to have a relationship established already with another financial planner who my wife can turn to if I’m unable to manage our finances, either because I’ve become incapacitated or I’ve joined that great tax shelter in this guy.
Ricky Mulvey: It’s almost a state planning/ an insurance policy to have someone on board. Then one of the most important things to plan for? Is your time in retirement, which you shouldn’t do when you leave work. How are you planning for your time in retirement and what are you doing now to get ready for that?
Robert Brokamp: I would say that on average, retirees are happy, but over the 20 years that I’ve been writing about retirement, I have met many retirees who said, I enjoyed the first few months, and then I got really bored. You definitely have to have a plan for how you’re going to spend your time, as well as your money in retirement. For me and my wife, it’s pretty typical stuff. There’s like the big ticket stuff, we do hope to get an RV and drive around the country. We do plan to visit the Christmas markets of Europe and things like that, but also regular stuff, like volunteer work and get in better shape and rekindled relationships with friends and family. But I would say one thing that I’ve really evolved on over the last few years really since the pandemic is, this idea that you should think about what you want to do in retirement but if you can, don’t save at all for retirement. We all know stories of people who didn’t quite make it to retirement, or when they did get to retirement age, they weren’t in great physical health. Many people probably know Jonathan Clements, who was a longtime writer for the Wall Street Journal, Personal Finance Writer and now writes the HumbleDollar website. He just announced a couple of weeks ago that at age 61, he’s been diagnosed with cancer, and he’s got about 12 months to live. I don’t want to be too dour about it, but I do think it’s important to think about what do you want to do with the rest of your life. If you can, move some of those things up before you retire, and that’s what my wife and I are now focusing. That’s what we’re now trying to do.
Ricky Mulvey: Bro, it sounds like you’ve got this thought out. Appreciate your time and your insight, and thanks for sharing it with the listeners.
Robert Brokamp: Sure Ricky. Thanks for having me.
Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don’t buy yourself anything based solely on what you hear. I’m Ricky Mulvey. Thanks for listening. We’ll be back tomorrow.
