WEBVTT - Why Carson Block's Short on Bank of Ozarks Has Failed 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.480 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. You know, Lisa, 0:00:32.560 --> 0:00:33.879 one of the things I like to do when we 0:00:33.920 --> 0:00:37.080 talk about interest rates, for example, is always think of context, right, 0:00:37.080 --> 0:00:39.760 because we're worried about whether the federal rates interest rates 0:00:39.760 --> 0:00:42.560 a quarter? You know, how many interest rate increases will 0:00:42.560 --> 0:00:44.239 we get this year? Do you know the back in 0:00:45.120 --> 0:00:49.960 seventy nine, um FED funds rate was eleven percent and 0:00:50.000 --> 0:00:54.000 it wasn't even done then because in nineteen one, I remember, 0:00:54.040 --> 0:00:56.680 I think it was in that summer, the June that summer, 0:00:57.480 --> 0:01:01.640 they were twenty percent believed. Do you think that would 0:01:01.640 --> 0:01:04.160 be a good time to buy a bank, Well, I 0:01:04.160 --> 0:01:06.800 think that it was. For George Gleeson, he's our next guest. 0:01:07.000 --> 0:01:09.600 She's a chief executive officer and chairman of the Bank 0:01:09.760 --> 0:01:13.920 of the Ozarks based in Little Rocks. We did that, 0:01:14.360 --> 0:01:18.440 thanks for us, You know it seems like a very 0:01:18.440 --> 0:01:20.720 different era from back then. Well, that's what I want 0:01:20.720 --> 0:01:23.320 to Maybe we could just start off. I'd like maybe 0:01:23.360 --> 0:01:25.160 just for you to tell a little bit of the 0:01:25.200 --> 0:01:28.440 story of the bank. And as I said, nineteen seventy 0:01:28.560 --> 0:01:32.720 nine eleven percent FED funds and we're worried about quarter 0:01:33.280 --> 0:01:35.959 in crease. Well, that's true, and of course Paul Volker 0:01:36.360 --> 0:01:40.200 was at the FED and was pursuing the quest to 0:01:40.319 --> 0:01:45.320 slay inflation by all possible means. So within my first 0:01:45.360 --> 0:01:49.360 two years as chairman, CEO and majority owner of Bank 0:01:49.400 --> 0:01:51.720 of the Ozarks, the FED funds, right, did go from 0:01:51.760 --> 0:01:56.280 ten to twenty percent. And the interesting thing about that 0:01:56.560 --> 0:01:59.640 was that we were in a state that had a 0:02:00.040 --> 0:02:03.880 institutional usery law then that limited our interest rate we 0:02:03.920 --> 0:02:07.240 could charge on loans to ten percent. Needless to say, 0:02:07.280 --> 0:02:09.280 we were doing a lot of investments and not much 0:02:09.360 --> 0:02:12.240 lending in those days and still managed to have record 0:02:12.280 --> 0:02:16.040 profits that year, both those years actually well, and partly 0:02:16.120 --> 0:02:18.359 probably because of net interest margin, right, I mean, you 0:02:18.360 --> 0:02:21.040 could just generate so much from your loans from just 0:02:21.120 --> 0:02:23.840 client activity, and I have to wonder how that contrasts 0:02:23.880 --> 0:02:28.760 with today when we're facing pretty low rates for the 0:02:28.840 --> 0:02:33.600 foreseeable future regardless of h to minimus interest rate tikes. Uh, 0:02:33.680 --> 0:02:38.279 you know how optimistic are you? Well, we're very optimistic 0:02:38.320 --> 0:02:41.680 about our situation. Of course, our net interest margin is 0:02:42.040 --> 0:02:44.680 close to five percent. The quarter just ended, our net 0:02:44.680 --> 0:02:49.760 interest margin was four point nine So we've very carefully 0:02:50.000 --> 0:02:53.600 built all of our lines of business over the thirty 0:02:53.639 --> 0:02:56.359 eight years that I've been chairman, chief executive officer to 0:02:57.040 --> 0:03:02.560 to generate really good return better than average returns, while 0:03:02.600 --> 0:03:06.040 we have much better than average industry credit quality. Well, 0:03:06.080 --> 0:03:08.520 I have to wonder how you're doing. And I do 0:03:08.720 --> 0:03:13.680 know that there was some controversy over your bank at 0:03:13.680 --> 0:03:17.359 this own conference when Carson Flock of Muddy Waters UH 0:03:17.520 --> 0:03:20.680 labeled your firm is the big short, They're big short, 0:03:20.720 --> 0:03:24.440 they're big idea, which failed spectacularly, I should say, with 0:03:24.480 --> 0:03:28.760 your firm gaining about thirty the shares in the following year. 0:03:28.880 --> 0:03:31.800 So people who followed that advice would have been badly 0:03:31.880 --> 0:03:34.760 burned if they had tried to go against the momentum 0:03:34.760 --> 0:03:38.040 in your shares. But but part of the rational was that, Uh, 0:03:38.080 --> 0:03:40.960 you were investing a lot in bigger cities and real estate, 0:03:41.080 --> 0:03:44.160 and that this could potentially be a problem. Are you 0:03:44.200 --> 0:03:47.200 still investing in that and what's your rational? Well, absolutely, 0:03:47.240 --> 0:03:51.720 we're commercial real estate lender first and foremost, and we've 0:03:51.760 --> 0:03:56.440 done that all of my career, and our clients include 0:03:56.720 --> 0:04:00.000 probably eighty five of the hundred largest real estate develop 0:04:00.000 --> 0:04:05.080 oppers in the country. Uh. We do very high quality 0:04:05.160 --> 0:04:09.240 projects with very sophisticated, high quality sponsors, but we do 0:04:09.320 --> 0:04:13.040 those transactions at very low leverage. The Real Estate Specialties 0:04:13.080 --> 0:04:17.400 Group which handles all of our large national commercial real 0:04:17.520 --> 0:04:20.680 estate leaning and accounts for about sixty eight percent of 0:04:20.760 --> 0:04:24.520 our non purchase loans loans other than those loans we've 0:04:24.520 --> 0:04:30.360 acquired in acquisitions, the weighted average loan to cost if 0:04:30.400 --> 0:04:32.839 we fully advance every one of those loans is forty 0:04:32.960 --> 0:04:36.559 nine percent, and the weighted average loan to appraise value 0:04:36.640 --> 0:04:40.760 is forty two percent. Obviously, a commercial real estate loan 0:04:40.839 --> 0:04:43.720 that you're at forty two percent loan to value and 0:04:43.800 --> 0:04:46.799 forty nine percent loan to cost has an incredibly different 0:04:46.880 --> 0:04:50.080 risk profile than a commercial real estate loan at eighty 0:04:50.160 --> 0:04:52.760 or eighty five percent loan to value and loan to cost. 0:04:52.839 --> 0:04:58.280 So we're very conservative. Um, and I think uh, when 0:04:58.520 --> 0:05:02.640 UM that the sis was introduced at the SOUND conference 0:05:02.640 --> 0:05:07.200 early in two six the guys had probably screened us 0:05:07.400 --> 0:05:10.800 and knew, wow, look at their commercial real estate concentration, 0:05:10.960 --> 0:05:13.880 look at their growth rates, they must be doing something 0:05:14.000 --> 0:05:17.640 very risky. But in fact, we've probably got the most 0:05:17.640 --> 0:05:22.440 conservative commercial real estate loan portfolio in the US banking industry. 0:05:22.760 --> 0:05:27.039 The way that you described how Carson Block may or 0:05:27.080 --> 0:05:31.760 may not have arrived at what this conclusion the very 0:05:31.880 --> 0:05:35.840 nature that's screening and the very nature of how markets 0:05:35.839 --> 0:05:39.359 have evolved. I'm wondering if you could just offer, as 0:05:39.640 --> 0:05:44.040 I think, you're the fourth largest shareholder in the bank. Uh, 0:05:44.279 --> 0:05:47.920 the bank makes no bones about your participation in its 0:05:47.960 --> 0:05:51.240 founding and running. I mean that's so there's a level 0:05:51.320 --> 0:05:55.480 of personal responsibility. And I'm wondering how that maybe even 0:05:55.520 --> 0:05:58.640 ties in with the map of where you locate. Well, 0:05:58.680 --> 0:06:02.920 there there is a great of personal responsibility. And and um, 0:06:03.279 --> 0:06:06.800 I see all of the loans in the company above 0:06:06.880 --> 0:06:10.600 ten million dollars. Of course, Dan Thomas, who runs our 0:06:10.600 --> 0:06:14.240 real estate specialties group for US, sees all of those loans, 0:06:14.240 --> 0:06:18.599 and all those loans are approved by committee. Um. But 0:06:19.920 --> 0:06:23.520 the culture that we've built over thirty eight years is 0:06:23.560 --> 0:06:28.840 far more important than individuals. We have created a culture 0:06:29.640 --> 0:06:34.680 um that is very conservative, very customer centric, and very 0:06:34.760 --> 0:06:38.719 focused on excellence in all we do. Uh for example, 0:06:39.480 --> 0:06:42.960 on asset quality. In the twenty years we just celebrated 0:06:43.000 --> 0:06:47.040 today at at NASDAC ringing the bell, they're celebrated our 0:06:47.120 --> 0:06:51.440 twentieth anniversary as a public company. And in that twenty years, 0:06:51.480 --> 0:06:55.040 there's not been a single year where our net charge 0:06:55.080 --> 0:06:59.160 offer ratio has equalled or exceeded the industry's average net 0:06:59.240 --> 0:07:02.440 charge offeration. We beat the industry every single year for 0:07:02.480 --> 0:07:06.160 twenty years and beat them on average by sixty So 0:07:06.200 --> 0:07:09.680 we're very conservative and and to do that, it's not 0:07:09.800 --> 0:07:12.680 one person or a loan committee or two or three people. 0:07:12.760 --> 0:07:16.840 It is a culture that invades and and pervades the 0:07:17.000 --> 0:07:19.960 entire company. So given the fact that you do have 0:07:20.200 --> 0:07:24.640 very high standards, you're expecting to increase your assets from 0:07:24.680 --> 0:07:27.760 about twenty billion dollars to fifty billion dollars of us 0:07:27.760 --> 0:07:31.920 it's probably over the next three years, well, I would 0:07:31.960 --> 0:07:35.240 I would say that's an overstatement. And of course we've 0:07:35.280 --> 0:07:39.000 made fifteen acquisitions in the last eight years, so the 0:07:39.040 --> 0:07:42.520 pace of acquisitions one can never predict. You don't know 0:07:42.560 --> 0:07:44.920 whether you're going to do an acquisition or not, because 0:07:44.960 --> 0:07:47.120 you have to find a transaction that makes sense and 0:07:47.840 --> 0:07:50.440 reach agreement between a willing buyer and a willing seller. 0:07:51.120 --> 0:07:54.320 So if you exclude acquisitions, I would say it's more 0:07:54.440 --> 0:07:57.360 realistic to assume that we would grow from twenty bill 0:07:57.400 --> 0:07:59.840 and to fifty b and over a five, six or 0:08:00.040 --> 0:08:03.600 seven year time frame apart from acquisitions. All right, So 0:08:03.680 --> 0:08:05.840 I imagine it's it's an interesting time right now, and 0:08:05.880 --> 0:08:08.960 I wish we could speak for the next hour because frankly, 0:08:09.000 --> 0:08:11.760 I have so many questions about running a bank in 0:08:11.760 --> 0:08:13.600 this current environment. And we didn't even get into the 0:08:13.600 --> 0:08:16.120 regulatory rollbacks and what that might do. I mean, there's 0:08:16.160 --> 0:08:19.680 so much. Unfortunately we have to leave it there, but 0:08:19.760 --> 0:08:22.520 I promise back he'll give you the phone number, please do. 0:08:22.760 --> 0:08:25.080 George Gleeson, thank you so much for joining us. Truly 0:08:25.480 --> 0:08:29.840 fascinating uh story and a fascinating bank. Really, Chief executive 0:08:29.840 --> 0:08:32.439 Officer and Chairman of the Bank of the Ozarks in 0:08:32.520 --> 0:08:35.960 Little Rock, Arkansas. Since that zone meeting, the shares gained 0:08:36.040 --> 0:08:51.360 more than thirty percent in the following year. Well, there 0:08:51.520 --> 0:08:54.839 is a new sub prime boom, and here to tell 0:08:54.880 --> 0:08:59.000 us about it is Gabrielle Coppola and Gabrielle, you know 0:08:59.040 --> 0:09:01.160 you are I always I didn't think of you necessarily 0:09:01.200 --> 0:09:03.679 just as someone who's interested in the credit but also 0:09:03.720 --> 0:09:07.600 in the underlying manufacture of vehicles autumn, you know, around 0:09:07.600 --> 0:09:10.120 the world. Can you just describe what you're trying to 0:09:10.120 --> 0:09:12.160 get at here in terms of the US and the 0:09:12.200 --> 0:09:15.360 way we buy cars and what's happened, because a lot 0:09:15.440 --> 0:09:18.960 of this has to do with the way people finance 0:09:19.000 --> 0:09:22.839 their automobiles. Yeah, um, I think that. You know, after 0:09:22.920 --> 0:09:26.679 the mortgage crisis, Um, the housing sector wasn't a very 0:09:26.679 --> 0:09:29.400 healthy place for banks to play. But then there was 0:09:29.440 --> 0:09:32.720 also the rebound, the revival of the auto industry, helped 0:09:32.760 --> 0:09:35.280 in course by the you know, bailout by the US government. 0:09:35.679 --> 0:09:39.480 Car sales came booming back, and um, people needed banks 0:09:39.520 --> 0:09:42.360 to finance that, and that created a huge opportunity. There 0:09:42.400 --> 0:09:45.280 was a huge credit expansion, and we saw a huge 0:09:45.760 --> 0:09:50.240 credit expansion for people with lower credit scores buying cars. Right. 0:09:50.280 --> 0:09:51.960 And we've heard a lot about has some of the 0:09:52.520 --> 0:09:55.400 subprime auto loans that have been originated since the crisis 0:09:55.440 --> 0:09:59.320 have been souring at a faster pace than many have expected. 0:09:59.440 --> 0:10:02.640 That it's kind have created this spiraling effect where you 0:10:02.679 --> 0:10:05.400 had a lot of not only subprime auto loans, but 0:10:05.440 --> 0:10:07.240 you also had a lot of auto leases. So then 0:10:07.280 --> 0:10:10.080 the resale values are going down as the leases come up, 0:10:10.120 --> 0:10:12.560 and you know, there's been a big issue here. But 0:10:12.640 --> 0:10:14.680 I really want to home in on two companies in 0:10:14.720 --> 0:10:19.359 particular Santander, which is the leading subprime auto loan originator, 0:10:19.480 --> 0:10:21.640 as well as Fiat Chrysler, which is thought of as 0:10:21.640 --> 0:10:26.520 sort of the third in the triumvirate of vehicle manufacturers 0:10:26.520 --> 0:10:28.959 in the US, And how do they come to kind 0:10:29.000 --> 0:10:33.000 of join forces and how it significantly it has their 0:10:33.000 --> 0:10:35.640 partnership kind of created a lot of the subprime auto 0:10:35.679 --> 0:10:39.200 loans that weren't looking at right now. Well again, when 0:10:39.280 --> 0:10:41.360 Chrysler was sort of coming back from the dead, you know, 0:10:41.400 --> 0:10:43.960 in the wake of the financial crisis, they needed they 0:10:43.960 --> 0:10:47.160 didn't have a captive finance arm anymore, and they needed one, 0:10:47.200 --> 0:10:49.520 just like you have Foreign Motor Credit or GM financial. 0:10:49.640 --> 0:10:53.240 Chrysler needed a partner to finance its car sales instead 0:10:53.280 --> 0:10:55.000 of I think they didn't have the money to buy one, 0:10:55.000 --> 0:10:57.880 so they made this partnership with Sintender, And I think 0:10:57.960 --> 0:10:59.959 one of the reasons the head of sales for cry 0:11:00.000 --> 0:11:02.040 sort of at the time said he chose Santanair because 0:11:02.200 --> 0:11:06.000 their expertise in automated decision NG and big data. So 0:11:06.040 --> 0:11:08.440 the idea that they could really um use big data 0:11:08.440 --> 0:11:10.840 to kind of harness get it on this boom um 0:11:11.080 --> 0:11:13.520 speed up the process of buying cars, like big data 0:11:13.559 --> 0:11:17.040 meaning that they could they could use less information from 0:11:17.040 --> 0:11:20.800 each borrower to more quickly originate loans, or big data 0:11:20.840 --> 0:11:23.679 to basically identify the credit quality. I think that more 0:11:23.800 --> 0:11:26.400 that's the idea that analytics data mining being able to 0:11:26.520 --> 0:11:30.520 kind of assess people's credit quality in a more efficient way. 0:11:31.000 --> 0:11:33.520 And by the reason why Ascess in particular is because 0:11:33.520 --> 0:11:37.200 Santandair in particular has been pinpointed is not verifying the 0:11:37.240 --> 0:11:40.880 incomes of a lot of the uh people who uh 0:11:41.000 --> 0:11:43.680 it lends to right, yes, And that is actually in 0:11:43.720 --> 0:11:45.760 my story I talked about this settlement they had with 0:11:45.800 --> 0:11:49.160 attorneys general in Massachusetts and and and Delaware where they 0:11:49.160 --> 0:11:51.720 paid twenty six million dollars. They you know, they didn't 0:11:52.160 --> 0:11:54.240 neither admit nor deny any wrongdoing, but if you read 0:11:54.280 --> 0:11:56.720 that settlement, it talks about what they're basically, what they're 0:11:56.760 --> 0:11:58.880 accused of by the prosecutors is kind of looking the 0:11:58.920 --> 0:12:02.240 other way when there's very obvious signs of fraud, you know, 0:12:02.360 --> 0:12:04.640 when when you get there's They had a group they 0:12:04.679 --> 0:12:07.280 called them the fraud dealers, their internal audit system. There 0:12:07.280 --> 0:12:10.440 were dealers who were um sending applications where someone would 0:12:10.559 --> 0:12:13.240 um default you know on the very first payment or 0:12:13.600 --> 0:12:15.520 you find out that the car they said the certain 0:12:15.520 --> 0:12:18.080 trim levels were a certain level that made the collateral 0:12:18.120 --> 0:12:20.480 bigger so that they could justify getting a bigger loan 0:12:20.520 --> 0:12:22.240 and put that person in that car. And turned out 0:12:22.280 --> 0:12:25.839 that those were not true. So that's happening at the 0:12:25.920 --> 0:12:28.480 at the real originator is the car dealer who's getting 0:12:28.480 --> 0:12:30.760 you in that car, right, But they're saying, Santander, you 0:12:30.760 --> 0:12:33.040 did not do your job in terms of having your 0:12:33.080 --> 0:12:35.560 due diligence to check that and that issue came up again. 0:12:35.640 --> 0:12:37.839 This is separate, but when you know, Moody's did a 0:12:37.880 --> 0:12:40.040 report early this year looking at the A B S 0:12:40.120 --> 0:12:45.520 that Santender originates. They said they only chat securities and 0:12:45.600 --> 0:12:48.320 thank you. Um they said, oh we did. We had 0:12:48.360 --> 0:12:50.360 this new data that came out under some new rule, 0:12:50.480 --> 0:12:52.080 you know, they were able to see more data and said, uh, 0:12:52.120 --> 0:12:55.160 Santenda only checks eight percent of the incomes in this 0:12:55.400 --> 0:12:59.439 subprime this's a billion dollars of of subprime auto auto loans. 0:13:00.040 --> 0:13:02.320 Santandera will say that they have other criteria that they're 0:13:02.440 --> 0:13:04.560 using to check and it's not just that that's basically 0:13:04.559 --> 0:13:07.240 one of the things that they say. But that's the issue, 0:13:07.240 --> 0:13:09.960 and I think that's what people are uh scrutinizing. What's 0:13:10.000 --> 0:13:14.199 regulators are looking at eight percent and that compares with ally, 0:13:14.240 --> 0:13:19.720 which is another big old GM. Yes, now they're quite 0:13:19.720 --> 0:13:22.199 separate from GM, but they said, hey, you know, by 0:13:22.200 --> 0:13:24.520 the way, we check sixty five percent of our incomes, 0:13:24.880 --> 0:13:28.160 and GM Financial also said we check about sixty So 0:13:28.200 --> 0:13:30.480 how many vehicles do you have any sense of how 0:13:30.520 --> 0:13:33.960 many or the proportion of Chrysler vehicles sold that relied 0:13:34.160 --> 0:13:38.480 on santan Dair for financing. Well, that's actually so the 0:13:38.480 --> 0:13:40.760 actual it's kind of so they have this partnership and 0:13:40.840 --> 0:13:43.280 it's been very hard for them to meet the pennant. 0:13:43.320 --> 0:13:45.920 They wanted Santender to be doing like sixty of their 0:13:46.400 --> 0:13:49.480 you know, Chrysler capital, that's the brand of it. They 0:13:49.480 --> 0:13:51.120 wanted it by this time, but this year it should 0:13:51.160 --> 0:13:54.800 have been sixty. It's so it's actually very low. So 0:13:54.840 --> 0:13:58.079 even though Sintenda is a very low proportion of Chrysler financing, 0:13:58.480 --> 0:14:01.200 christ would makes up a very more than half of 0:14:01.240 --> 0:14:06.319 the auto financing that Santander does. Well. That goes back 0:14:06.360 --> 0:14:09.320 to that agreement that you described earlier, saying that maybe 0:14:09.400 --> 0:14:13.160 Fiat was not large enough to buy or uh, Fiat 0:14:13.240 --> 0:14:16.160 Chrysler was not large enough to buy its own credit company, 0:14:16.240 --> 0:14:18.160 so they had to make where they did make this 0:14:18.200 --> 0:14:20.760 alliance with Santander, right, and this is supposed to be 0:14:20.800 --> 0:14:23.000 and it still is. I think Santander still wants it 0:14:23.040 --> 0:14:26.240 to be a big avenue for expansion. Growth is Chrysler, 0:14:26.560 --> 0:14:28.280 and they're actually doing a lot of things. You know, 0:14:28.320 --> 0:14:31.320 they have a program to clean up, They're trying the 0:14:31.320 --> 0:14:34.360 new CEO, Scott Powell. They've actually fired eight hundred dealers 0:14:34.400 --> 0:14:37.880 across their network to clean They're trying, they are doing things, 0:14:37.920 --> 0:14:40.360 but this is still out there. Gabrielle Coppola, thank you 0:14:40.440 --> 0:14:42.760 so much for joining us, and uh, congratulations on an 0:14:42.760 --> 0:14:45.400 awesome story. It definitely takes a look at a deeper 0:14:45.480 --> 0:14:47.320 look at an issue that a lot of people have 0:14:47.440 --> 0:14:51.040 been homing in on as a possible problem. Gabrielle Coppola 0:14:51.080 --> 0:15:05.880 is an autos writer for Bloomberg US. Well, to learn 0:15:05.880 --> 0:15:08.120 more about what's going on with Blue Apron, we have 0:15:08.200 --> 0:15:11.600 an expert, Selena Wang is joining us now she is 0:15:11.600 --> 0:15:15.440 are Bloomberg. I gotta say, you're like the meal You 0:15:15.520 --> 0:15:20.000 cover meal companies and uh delivery companies, but they're really 0:15:20.040 --> 0:15:23.240 tech companies. Right, this is Blue Apron. What is going on? 0:15:23.280 --> 0:15:25.800 The stock was down as much as twelve right. I 0:15:25.800 --> 0:15:27.320 think you just hit on something that a lot of 0:15:27.320 --> 0:15:30.120 people say. You know, just because they sell orders digitally 0:15:30.160 --> 0:15:32.480 doesn't make it a tech company necessarily. This is a 0:15:32.520 --> 0:15:35.680 super cost intensive business. They have to source all the ingredients, 0:15:35.920 --> 0:15:37.840 they have to put it all together. These are really 0:15:37.880 --> 0:15:41.240 expensive ingredients, put them to fulfillment centers, delivered to people. 0:15:41.760 --> 0:15:46.520 And this Amazon trademark filing is just another kind of 0:15:46.600 --> 0:15:48.960 nail on the coffin for Blue Apron, as some investors 0:15:48.960 --> 0:15:51.240 would see it. I mean, Blue Apron already has all 0:15:51.240 --> 0:15:53.960 of these financial issues, and now you have a behemoth 0:15:54.040 --> 0:15:56.800 that may be getting into the same business that it's in. Okay, 0:15:56.840 --> 0:15:59.240 so that maybe getting into the same business, right, I 0:15:59.280 --> 0:16:03.280 mean they file a trademark Apple hard food kits. This 0:16:03.360 --> 0:16:07.160 is Amazon dot Com? How soon? How quickly could they 0:16:07.160 --> 0:16:11.680 develop an actual business based on this filing? And second 0:16:11.680 --> 0:16:13.400 of all, do we have a sense of whether it 0:16:13.680 --> 0:16:16.080 really does directly overlap with bluavor? I mean it does. 0:16:16.120 --> 0:16:18.240 It definitely sounds like right right. So, in the world 0:16:18.320 --> 0:16:21.200 of these types of applications, there's kind of two categories. 0:16:21.200 --> 0:16:24.000 So there's one which is, we're already using this trademark 0:16:24.040 --> 0:16:26.920 for products, so you should consider application. And the second 0:16:26.960 --> 0:16:29.240 one is we're planning to use this trademark for products, 0:16:29.280 --> 0:16:32.840 so you should uh is we're planning to use this 0:16:32.880 --> 0:16:36.400 trademark for products, so you should consider application. Amazon filed 0:16:36.520 --> 0:16:38.840 under the ladder, which means they're planning to use it, 0:16:38.840 --> 0:16:41.160 doesn't necessarily mean this is all going to go through 0:16:41.280 --> 0:16:44.000 that is going to get approved. So that means that 0:16:44.040 --> 0:16:48.160 they're definitely looking at the business and they're considering it. Uh. 0:16:48.240 --> 0:16:51.160 No idea when they would actually start doing this. Why 0:16:51.240 --> 0:16:53.360 why would they get into it? It's a crowded business 0:16:53.440 --> 0:16:56.400 that is of dubious lucrative nous. Well, if we look 0:16:56.440 --> 0:16:59.400 at this Amazon Whole Foods deal, they were willing to 0:16:59.440 --> 0:17:02.680 put in PLoP down billions of dollars to buy a 0:17:02.800 --> 0:17:06.800 grocery store business. Now, uh, food is incredibly important. It's 0:17:06.840 --> 0:17:10.000 a huge, huge market. Amazon clearly wants to get into it. 0:17:10.119 --> 0:17:12.520 They have the brand now, they have the distribution, they 0:17:12.600 --> 0:17:15.639 have the fulfillment centers with the Whole Food's acquisition. So 0:17:15.680 --> 0:17:18.400 you can think of all sorts of integrations to make 0:17:18.480 --> 0:17:23.959 something like meal delivery actually pretty efficient for somebody like 0:17:24.040 --> 0:17:27.480 Amazon when they have so much backing and support on 0:17:27.520 --> 0:17:29.959 the back end and in terms of the physical locations. 0:17:30.880 --> 0:17:34.840 Have you heard anybody saying that, uh, Blue Apron is 0:17:34.880 --> 0:17:38.040 now a buy at six? I mean, if you're talking 0:17:38.040 --> 0:17:41.479 about it right, because nothing the deal was done right 0:17:41.560 --> 0:17:46.240 June Stockho's public at ten. They sold thirty million shares 0:17:47.040 --> 0:17:53.160 and stock is what trading at six and change what 0:17:53.280 --> 0:17:55.760 That doesn't necessarily mean they're, you know, throwing away all 0:17:55.760 --> 0:17:58.600 their strategic plans. They already had the money, They've got 0:17:58.760 --> 0:18:02.960 big cash flow. Um, they have a brand name. I'm 0:18:03.000 --> 0:18:08.120 just wondering, they've built infrastructure that is theirs, and I'm wondering, 0:18:08.200 --> 0:18:10.720 you know, you hear anybody saying anything like, well, no, 0:18:10.880 --> 0:18:13.920 they're a player. Remember what happened to Facebook. It came 0:18:13.920 --> 0:18:15.840 out I think at thirty five, and was that whole 0:18:15.840 --> 0:18:19.320 thing with the Nastac and you know, people were furious, 0:18:19.359 --> 0:18:21.320 but the turn out that if you had held on 0:18:21.359 --> 0:18:23.000 it was a good bed, right. I mean, I don't 0:18:23.040 --> 0:18:25.400 think we can say for sure right now whether it's 0:18:25.440 --> 0:18:27.200 going to be a total flop or if it's going 0:18:27.200 --> 0:18:29.919 to succeed and get to facebooks. I mean, it's not 0:18:29.960 --> 0:18:32.359 like Amazon was buying, you know, the sharpest hack in 0:18:32.400 --> 0:18:34.879 the box in the sense that the Whole Foods was 0:18:34.920 --> 0:18:37.560 facing competition, when I mean in a way, this was 0:18:37.880 --> 0:18:40.560 great for Whole Foods to get. Asking whether Amazon would 0:18:40.560 --> 0:18:44.439 consider buying Blue Apron, I don't think it would make 0:18:44.480 --> 0:18:46.040 a lot of sense for them at this point. I mean, 0:18:46.080 --> 0:18:48.480 they have Whole Foods, they could build their own Blue 0:18:48.480 --> 0:18:51.240 Apron esque sort of business. But like as you did say, 0:18:51.280 --> 0:18:53.840 it is quite cheap right now. I mean Blue Apron 0:18:53.960 --> 0:18:56.760 does have the brand, that's true, they have you know, 0:18:56.800 --> 0:18:59.399 people know that it's a quality product they're getting when 0:18:59.400 --> 0:19:00.840 they go to Blue Brint. But this is not a 0:19:00.920 --> 0:19:03.359 cheap product. And the type of customer that's going to 0:19:03.440 --> 0:19:05.720 Whole Foods is a very similar demographic as a type 0:19:05.720 --> 0:19:07.960 of customer that is going to Blue Apron. Kind of 0:19:07.960 --> 0:19:11.359 this top ten percent of income in households, it's not cheap. 0:19:11.840 --> 0:19:14.160 At what point does Amazon just have so much momentum 0:19:14.200 --> 0:19:16.960 because they already have the brand name, They're already associated 0:19:17.000 --> 0:19:20.679 with something that many people view as quality and reliable 0:19:20.800 --> 0:19:22.840 and consistent, so they don't have to spend all this 0:19:22.920 --> 0:19:26.360 money on advertising like Blue Apron has, which has been 0:19:26.480 --> 0:19:30.440 the bulk of their revenue right exactly, I mean marketing 0:19:30.520 --> 0:19:33.640 and fulfillment centers had has been a huge reason why 0:19:33.640 --> 0:19:36.640 they've had net losses even as revenue has been growing. 0:19:37.080 --> 0:19:39.919 And you're right, I mean Amazon with Amazon Prime, they 0:19:39.920 --> 0:19:42.240 already have kind of like an existing customer base and 0:19:42.280 --> 0:19:44.000 you can think of all sorts of ways where you know, 0:19:44.040 --> 0:19:46.920 you order you know, Amazon sort of meal delivery kit 0:19:47.040 --> 0:19:49.200 and shop at Whole Foods and you get extra Prime 0:19:49.240 --> 0:19:52.080 points and this all kind of works together. An ecosystem 0:19:52.119 --> 0:19:54.680 makes it very easy to sign up and and get 0:19:54.680 --> 0:19:56.960 people to use whatever service they may come up with 0:19:57.000 --> 0:20:00.720 in the future. Zappos, that was what was thinking of. 0:20:00.800 --> 0:20:04.480 Zap Posts was the shoe business, and they've let it 0:20:04.640 --> 0:20:07.040 have its own brand name, and everyone knows it's owned 0:20:07.040 --> 0:20:09.520 by Amazon, but it's let you know, it's doing its 0:20:09.560 --> 0:20:13.440 own thing. Who news I wouldn't put anything past Amazon, right, Well, 0:20:13.520 --> 0:20:17.000 I'm clearly a strategic vision that is not just confined 0:20:17.080 --> 0:20:20.840 to uh, you know what has happened, more like making 0:20:20.840 --> 0:20:23.000 it up into the future. I have to wonder how 0:20:23.080 --> 0:20:26.560 much this is related to the Whole Foods purchase. Well, 0:20:26.760 --> 0:20:29.960 you know this did come around the same time, this 0:20:30.040 --> 0:20:32.920 patent application, this trademark application as a Whole Foods purchase. 0:20:32.960 --> 0:20:35.080 And I think that now that they have Whole Foods, 0:20:35.600 --> 0:20:38.800 they have so many a whole world of opportunities in 0:20:38.840 --> 0:20:40.919 the space of food um to go forth with now 0:20:40.960 --> 0:20:43.320 that they have these physical locations in this brand. So 0:20:43.359 --> 0:20:46.000 retailers of all types are just cowering in the corners 0:20:46.040 --> 0:20:49.240 hoping that Amazon won't come after them. Selena Wayne, thank 0:20:49.240 --> 0:20:51.440 you so much for joining us and for illuminating what's 0:20:51.440 --> 0:20:53.719 going on today with Blue Apron shares, which have dropped 0:20:53.880 --> 0:20:57.840 as much as twelve percent following this trademark application for 0:20:58.280 --> 0:21:02.359 something that Amazon just consider at some point in the future. 0:21:02.480 --> 0:21:05.640 Selena Wayan is a Bloomberg Tech reporter and she joins 0:21:05.720 --> 0:21:20.160 us here at our Bloomberg eleven three oh studios. Well 0:21:20.200 --> 0:21:23.320 here to help us define the polls about President Donald 0:21:23.359 --> 0:21:26.400 Trump is and Selzer, the president of Selzer and Company 0:21:26.400 --> 0:21:30.560 are based in the Mourne Right Public opinion Research firm. 0:21:30.680 --> 0:21:34.879 And uh, and thank you very much for being with us. Um, 0:21:34.920 --> 0:21:39.320 just according to the new poll, just of Americans approve 0:21:39.440 --> 0:21:43.000 of the job that President Donald Trump is doing. Now 0:21:43.280 --> 0:21:46.400 you are this is the polling number that you've been 0:21:46.440 --> 0:21:49.719 able to put together and analyze. Correct, you're doing this 0:21:49.760 --> 0:21:52.360 for for Bloomberg, for us, that's right? Where the proposter 0:21:52.440 --> 0:21:55.480 for Bloomberg nots right? And maybe just explain how do 0:21:55.560 --> 0:21:59.000 you actually go about this polling and how does it 0:21:59.160 --> 0:22:03.600 vary so much between polls. Well, if what we do 0:22:03.640 --> 0:22:07.359 is do a scientific survey of a randomly selected sample 0:22:07.400 --> 0:22:10.320 of a thousand people across the country, uh, and make 0:22:10.359 --> 0:22:13.159 sure that that's a good cross section of residents of 0:22:13.160 --> 0:22:16.360 the United States. And we asked them a battery of questions. 0:22:16.359 --> 0:22:19.520 Some of these questions we've been asking since the inception 0:22:19.600 --> 0:22:22.920 of the poll in two thousand nine. And UM, that 0:22:23.000 --> 0:22:25.480