Ray Dalio's Debt Crisis Warning: Is the US Heading for a Fiscal Breaking Point?

**SPEAKER_1** (0:01)
This is InvestTalk from KPP Financial, helping investors make sense of the markets one day at a time. And now, here are Justin Klein and Luke Guerrero.

**Justin Klein** (0:16)
Good afternoon, fellow investors, and welcome back to InvestTalk. This is our Tuesday, August 5th, August 25th, 26th, 2026 edition of InvestTalk.

**Luke Guerrero** (0:27)
We're time travelers.

**Justin Klein** (0:29)
I wish, and that is the voice of Luke Guerrero. So we have a special Tuesday edition. Have we ever done a Tuesday together?

**Luke Guerrero** (0:37)
I'm sure at some point, right?

**Justin Klein** (0:39)
Maybe at some point. But it's definitely the first Tuesday of 2026 that we're doing the show together. So we're excited for this hour with you. You get both of us double trouble today.

**Luke Guerrero** (0:50)
Whether you want it or not.

**Justin Klein** (0:52)
Whether you want it or not, yep. And we're ready for your questions. So if you're going to ask a question at any given show, this is the time to do it.
You get two for one special here. So we're excited for this hour to help you become a better investor, answer your finance and investment questions, bring you data and perspective. Developed over 25 years of investment experience. Now in just a bit, we'll talk about today's Mark Performance and run down the show topics. But as usual, we'll tackle this first caller question now.

**SPEAKER_5** (1:20)
Yes, this is Brett Caller from California. I wanted to get your insight on a company called, well, actually, you know, this company, Costco. I'm just trying to get in a high value company and has good strong fundamentals. I know the share price is kind of high. I just wanted to see if you think it's a good long-term investment and just dollar cost to average it. Thank you.

**Justin Klein** (1:40)
Well, for all the days to have both of us, but most importantly, Luke on the show, it's to have a question about Costco. Luke, why don't you tell the audience about your love for Costco before we even get into the actual business or investment pieces, et cetera.

**Luke Guerrero** (2:03)
This is only an hour long show.

**Justin Klein** (2:05)
It's true.

**Luke Guerrero** (2:05)
And so I don't think we have the time to go over all of it. Though I will say, I did used to deliver five rotisserie chickens to my house every Costco order.

**SPEAKER_5** (2:15)
He is a huge Costco chicken.

**Luke Guerrero** (2:17)
And now you stopped? No, I don't eat rotisserie chicken anymore. A lot of sodium, not that sodium is bad for you if you drink enough water. Again, this is not a nutrition show. This is about Costco, the stock. Of course, the big box wholesale retailer, probably one of the most successful membership models, I would say. I think that's really what separates Costco from a lot of these other businesses is that a lot of their revenue is kind of baked in already. That's why they have the ability to offer the volume that they do at such discount pricing. It's one of the reasons why we held Costco for years, although we sold it middle of last year. Frankly, since the end of 2024, it's kind of just been sideways.
What are your thoughts on this name?

**Justin Klein** (3:05)
Well, like you said, we've owned the company in the past, so we certainly like it. Luke loves the company. How often you go to Costco? Once a week?

**Luke Guerrero** (3:14)
No, no, no.
Again, we're talking about shopping habits again. But I have shrunk it down to, I get everything I need once a month.

**Justin Klein** (3:22)
Got it. Okay. Efficiency. Got it. Efficiency. So it produces about $8.8 billion in free cash flow, which is still near an all-time high. I would say close to half of that probably comes from Luke himself. But then, return on equity is 29 percent. So it's a very quality business and it has about $6 billion in net cash in its balance sheet.
So debt-free. But when you look at things like enterprise value, even though you're at about 30 times, which is pretty expensive for a company this large, that is growing high single digits on the revenue side and earning side, around 10 percent range. So you're going to pay a premium for this name, absolutely. But that's one of the reasons why we sold it. The valuation got a little stretched and then the momentum started to wane as well, and that's why we, going back to what I talked about yesterday, opportunity costs. We found, we said, okay, if it's just going to try to chop sideways, then we much rather put this money in something that's actually going to start to advance. It's a better chance to advance at a much better valuation, and that's been certainly a correct call. Valuations can correct in multiple ways. It can decline in price, that's the most common, but often, the performance can just be substandard for a long period of time, while the business continues to produce profits, cash flow for shareholders. That's the case here with Costco, because the enterprise value to EBITDA peaks back in 2025 at about 36 times. Now, we're at about 29 times. It's getting better, it's becoming more attractive, but is it cheap yet?