WEBVTT - State-Approved Cannabis Will Become Permanent in 2019 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 Abramowitz. 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 --> 0:00:32.720 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. The 0:00:32.880 --> 0:00:37.200 topic now is investing in the cannabis industry. Adam Bierman 0:00:37.280 --> 0:00:40.320 is the co founder and the chief executive of Medmen, 0:00:40.479 --> 0:00:43.519 and he joins us from Los Angeles. Adam, thanks very 0:00:43.600 --> 0:00:46.760 much for being with us. Tell people about med Men 0:00:47.080 --> 0:00:52.800 and about your latest and largest acquisition. Hey, Pim, good morning. 0:00:53.200 --> 0:00:57.320 Always going to talk to you. Um. Yeah, So med 0:00:57.360 --> 0:01:00.400 Men is a is a cannabis company here based out 0:01:00.400 --> 0:01:05.600 of Los Angeles. Um. We are a retailer first and foremost. UM. 0:01:05.720 --> 0:01:07.880 But we also have factories in every market that we 0:01:07.920 --> 0:01:11.000 operate in, so we completely control the supply chain. UM. 0:01:11.080 --> 0:01:13.640 But you know, focus is really California and has been 0:01:13.680 --> 0:01:16.080 for a while. I think you're referencing the farmer Can 0:01:16.160 --> 0:01:19.360 transaction that took place a few weeks back. At that time, 0:01:19.360 --> 0:01:22.679 the largest transaction in the history of US cannabis about 0:01:22.720 --> 0:01:25.800 seven million dollars UM. But what farmer Can did was 0:01:25.840 --> 0:01:28.839 it really allowed us to leap frog this next phase 0:01:28.880 --> 0:01:31.559 of our growth UM and enter into this next set 0:01:31.560 --> 0:01:34.120 of markets that we were already targeting. Farmer cansa midway 0:01:34.319 --> 0:01:38.560 Midwest based cannabis company that had operations in six markets, 0:01:38.800 --> 0:01:41.080 all Midwest to East coast. So it was a great 0:01:41.080 --> 0:01:44.760 compliment to our footprint and UH we took action and 0:01:44.840 --> 0:01:48.280 brought him under our umbrella and we're now stronger for it. Now. 0:01:48.480 --> 0:01:50.600 For people that may not be familiar with how this 0:01:50.720 --> 0:01:53.680 industry works and it is a new business, can you 0:01:53.760 --> 0:01:59.440 explain the role that licenses play, how they differ in cost, 0:01:59.720 --> 0:02:04.360 and how those licenses then have to be translated into 0:02:04.440 --> 0:02:08.520 actual physical establishments. But there are a lot of processes 0:02:08.560 --> 0:02:14.320 in the in the in the how this comes together. Sure, UM, 0:02:14.480 --> 0:02:16.080 I could do an hour on it, but I'll do 0:02:16.120 --> 0:02:20.400 it in their seconds. So basically, basically there's no interstate commerce. 0:02:20.440 --> 0:02:23.200 First and foremost, so every state has its own program 0:02:23.240 --> 0:02:26.359 and that program is unique to that state UM and 0:02:26.400 --> 0:02:30.000 all of the state's been written into their program. UM. 0:02:30.000 --> 0:02:32.359 It is explicit that you must have a license to 0:02:32.400 --> 0:02:35.560 grow marijuana in that state in order to manufacture products 0:02:35.560 --> 0:02:38.240 distributed in retail at all within the state. So there 0:02:38.280 --> 0:02:40.560 are nuances to each of these programs, but they're all 0:02:40.919 --> 0:02:43.639 pretty similar. Um. And so you must have one of 0:02:43.680 --> 0:02:46.000 these licenses. Uh. You know, at the end of the day, 0:02:46.040 --> 0:02:49.880 this industry is a nimbie industry. UM. And I think 0:02:49.919 --> 0:02:52.480 what's really interesting is you have an industry that has 0:02:52.520 --> 0:02:56.640 such an overwhelming support by the public. However of the 0:02:56.639 --> 0:02:59.520 public believes medical marijuana should be legal now where you know, 0:02:59.639 --> 0:03:02.799 sixty plus percent believe recreational marijuana should be legal. We're 0:03:02.800 --> 0:03:04.600 in a Congress that just got a lot better for 0:03:04.680 --> 0:03:08.480 marijuana a week ago. Yet with all the support there 0:03:08.560 --> 0:03:11.760 is to legalize marijuana and prohibition, it's still a nimbia industry. 0:03:11.800 --> 0:03:13.959 So you know, this is not in my backyard, which 0:03:14.000 --> 0:03:16.160 you know, we're okay with. We embrace that's what the public. 0:03:16.200 --> 0:03:17.960 I think that's what the public wants now and we'll 0:03:18.000 --> 0:03:20.760 want for the investable future. So you have a really 0:03:20.800 --> 0:03:24.799 limited nature of these licenses. And again each state different, um. 0:03:24.840 --> 0:03:27.000 But I'm here in Los Angeles today and for example, 0:03:27.040 --> 0:03:29.520 in all of l A County, twelve million people plus 0:03:29.919 --> 0:03:32.480 a lot of tourists. Um, there are less than two 0:03:32.600 --> 0:03:38.200 hundred retail licenses, so you know, limited licenses, really arduous 0:03:38.200 --> 0:03:42.120 owning restrictions around those licenses. Um. But you know enough 0:03:42.200 --> 0:03:43.960 so that there's critical mass to be able to serve 0:03:44.000 --> 0:03:47.400 the public and make marijuana accessible. Okay, got it? And 0:03:47.560 --> 0:03:50.680 wondering if what you could describe you've learned from the 0:03:50.760 --> 0:03:55.040 experience in Canada where the country has made it legal 0:03:55.520 --> 0:03:58.880 for recreational use, has that informed or changed any of 0:03:58.920 --> 0:04:03.440 your thoughts? It's progress, right, I mean we've been doing 0:04:03.440 --> 0:04:05.560 this for almost ten years, and and these check in, 0:04:05.600 --> 0:04:08.280 these moments to check in on the progress that not 0:04:08.320 --> 0:04:10.560 only society and the public is making in regards to 0:04:10.600 --> 0:04:13.280 their viewpoint, but the commercial aspects of this industry and 0:04:13.280 --> 0:04:16.960 then the political realities. UM, this is a big check in, right. 0:04:17.000 --> 0:04:19.720 You have the first you know, nation of its size 0:04:19.800 --> 0:04:23.840 to legalize marijuana for recreational purposes a couple of weeks ago. 0:04:24.080 --> 0:04:25.720 And you know what we learned. We learned that the 0:04:26.040 --> 0:04:28.200 cities didn't burn down, right, And that's what we keep 0:04:28.279 --> 0:04:32.400 seeing as progress is made around the world. But you know, 0:04:32.520 --> 0:04:34.839 things are things are better, They're not worse, They get 0:04:34.920 --> 0:04:38.040 better progressively better. Um. As these laws change. You know, 0:04:38.240 --> 0:04:41.960 the probition against marijuana just doesn't work. It's a failed effort. 0:04:42.279 --> 0:04:45.040 Um and legalized marijuana and regulating and taxing it is 0:04:45.080 --> 0:04:47.440 the answer. And so what I really like about what 0:04:47.480 --> 0:04:50.400 we've seen in Canada, because it's been so successful without 0:04:50.440 --> 0:04:53.440 any hiccups, really is I really feel like it is 0:04:53.480 --> 0:04:55.880 the big finger wagging down here to us in the 0:04:55.960 --> 0:04:58.839 US saying, you know, you claim to be leaders, you 0:04:58.880 --> 0:05:02.159 know in business and industry. Um, you know, your stock market, 0:05:02.240 --> 0:05:05.600 your exchanges are you know, leaders in in what they do, 0:05:05.640 --> 0:05:07.840 and yet you can't list a US weed company on 0:05:07.880 --> 0:05:09.600 the New York Stock has changed or NAZDAC yet and 0:05:09.680 --> 0:05:13.040 yet it's still federally illegal while you know your neighbors 0:05:13.080 --> 0:05:15.719 Tier North here run with this thing. So um, it 0:05:15.760 --> 0:05:18.280 puts pressure on the US and and that's something that 0:05:18.320 --> 0:05:22.880 we're grateful for. What would be the most important change 0:05:23.680 --> 0:05:26.560 that would help the industry. Would it relate to banking 0:05:26.640 --> 0:05:31.400 rules and regulations? Not really? I mean, you know, we 0:05:31.400 --> 0:05:34.360 were fully banked, as are all of our counterparts and 0:05:34.720 --> 0:05:37.599 peers in this industry. From a depository perspective, you know, 0:05:37.640 --> 0:05:40.680 we don't have access to traditional banking services, but it 0:05:40.680 --> 0:05:43.160 all fits in the same bucket. It's banking services, it's 0:05:43.200 --> 0:05:46.919 merchant processing, it's proper tax treatment, UM, it's everything that 0:05:46.960 --> 0:05:50.640 comes along with, you know, being a lawful business, paying 0:05:50.640 --> 0:05:54.599 your taxes and receiving the protections UM, and the opportunities 0:05:54.600 --> 0:05:57.960 that paying your taxes and being upstanding provide you. And 0:05:57.960 --> 0:06:00.960 and so that that next big moment that you're asking 0:06:01.000 --> 0:06:03.160 about really has to do with Congress, and it really 0:06:03.160 --> 0:06:08.640 has to do with permanent protection of state sanctioned marijuana businesses. 0:06:08.680 --> 0:06:10.880 And I firmly believe we will see that here in 0:06:10.920 --> 0:06:13.520 our country. And f y nineteen, thanks very much for 0:06:13.600 --> 0:06:18.240 being with us. Adam Bierman, co founder, chief executive Medmen 0:06:18.920 --> 0:06:22.479 based in Los Angeles, giving us his view based on 0:06:22.600 --> 0:06:41.120 his experience in the cannabis industry. Everybody talks about the 0:06:41.200 --> 0:06:43.800 US dollar, but no one does anything about it. Well, 0:06:43.839 --> 0:06:46.360 we're going to change that. Here in the Bloomberg Interactor 0:06:46.400 --> 0:06:50.080 Broker's studio, I want to introduce Gary Shilling. He is 0:06:50.120 --> 0:06:53.760 the president of a Gary Shilling and Company. He is 0:06:53.880 --> 0:06:58.280 a Bloomberg opinion columnist. He is also the author of 0:06:58.320 --> 0:07:02.880 the Age of de Leverage, Investment strategies for a decade 0:07:03.040 --> 0:07:07.279 of slow growth and deflation a Gary Shilling. Thank you 0:07:07.360 --> 0:07:10.080 very much for being with us. Let's begin with the 0:07:10.160 --> 0:07:14.239 strength of the US dollar. Is it gaining in strength 0:07:14.320 --> 0:07:17.320 because people love the United States or is it they 0:07:17.440 --> 0:07:21.960 just don't want to own anything else. It's a combination, Tim, 0:07:22.000 --> 0:07:25.080 I mean, the US is clue to the safe haven. 0:07:25.120 --> 0:07:27.400 And you look at all the problems around the world 0:07:27.440 --> 0:07:32.280 of protectionism, and and the US is growing faster than 0:07:32.320 --> 0:07:36.040 other countries, and and it's it's traditional safe haven. One 0:07:36.040 --> 0:07:40.200 of the interesting things is even if haven of problems 0:07:40.240 --> 0:07:43.000 start in this country, and I think that's pretty clear 0:07:43.040 --> 0:07:46.840 with Trump's attitude on the trade wars with China, the 0:07:46.920 --> 0:07:50.800 dollar benefits. Uh. Show you you have a number of 0:07:51.240 --> 0:07:54.440 reasons that I think the dollar is going to continue 0:07:54.480 --> 0:07:57.000 to be strong and right there today as we speak, 0:07:57.000 --> 0:07:59.920 as fine as I'm sure you're aware, I am aware. 0:08:00.120 --> 0:08:03.080 And I'm aware also that you'd say that there are 0:08:03.280 --> 0:08:08.160 six long term criteria for the dominance of the US dollar. 0:08:08.360 --> 0:08:12.080 Go ahead, tell us quickly. Well, the first one is 0:08:12.160 --> 0:08:15.920 that and we've we've I've started this going back to 0:08:16.000 --> 0:08:20.480 ancient ancient times of Greek in Rome and and looked 0:08:20.520 --> 0:08:24.880 at what what are the characteristics of the world's leading currency. UM. 0:08:24.920 --> 0:08:27.560 The first one is rapid growth, and we grew growing 0:08:27.640 --> 0:08:32.200 much more rapidly than other developed countries. China, yeah, faster growth, 0:08:32.200 --> 0:08:34.679 but it's a developing country and it's slowing down. The 0:08:34.800 --> 0:08:39.120 second one is a huge economy UM. And the US 0:08:39.240 --> 0:08:42.199 is is still clearly the largest economy in the world, 0:08:42.200 --> 0:08:47.240 where about bigger than China, which is in second place. Uh. 0:08:47.480 --> 0:08:52.400 Third one is deep and broad financial markets and and 0:08:52.440 --> 0:08:55.160 we certainly have that. Uh In the US. You look 0:08:55.200 --> 0:08:58.640 for a stock market capitalization thirty two trillion dollars, euro 0:08:58.840 --> 0:09:04.000 Zone eleven trillion, China about nine trillion, Japan six trillion UM, 0:09:04.080 --> 0:09:06.920 and and our treasury market, you know, fifteen point three 0:09:07.000 --> 0:09:11.240 trillion compares to six point seven point six trillion in Japan, 0:09:11.360 --> 0:09:14.320 six point one and in China and one point six 0:09:14.440 --> 0:09:17.800 in Germany. So that's that's the third thing. The fourth 0:09:17.800 --> 0:09:21.080 one is free and open markets and economy, and we 0:09:21.200 --> 0:09:23.880 certainly we certainly have that. If you look at the 0:09:23.920 --> 0:09:27.840 World Bank ranking of of where it's easy to do business, 0:09:28.200 --> 0:09:30.680 the US is is close to the top, and you 0:09:30.720 --> 0:09:35.439 look at something like China, course it's it's it's very difficult. UM. 0:09:35.559 --> 0:09:39.200 Fifth reason is lack of substitutes. And you know, the 0:09:39.240 --> 0:09:43.680 dollars of all the world's transactions in in trade and 0:09:43.960 --> 0:09:47.480 capital folls of the dollars involved in seven percent of those, 0:09:48.040 --> 0:09:51.720 there really isn't any any option UM and and UH 0:09:52.200 --> 0:09:56.599 in terms of substitution. Most of the over fifty of 0:09:56.640 --> 0:10:01.480 the world's currency reserves in dollars six thing credibility. And 0:10:01.520 --> 0:10:05.360 I think we're seeing that clearly. And and I've added 0:10:05.760 --> 0:10:07.439 this is a list I've had for some time. I've 0:10:07.440 --> 0:10:11.120 had a seventh one, which is that Tump is really 0:10:11.160 --> 0:10:16.559 asserting the US UH power economic, military, financial power on 0:10:16.600 --> 0:10:20.240 the world stage. We've had that really since World War Two, 0:10:20.240 --> 0:10:22.560 but it has not been exercise extent that he does. 0:10:23.040 --> 0:10:25.600 And I think that is gaining a lot of credibility 0:10:25.679 --> 0:10:28.199 for the U S and the dollar UH foreigners, where 0:10:28.200 --> 0:10:30.680 they like it or not. He's really saying, hey, we 0:10:30.760 --> 0:10:32.679 got this, we got the upper hand, We're going to 0:10:32.720 --> 0:10:36.800 exercise it. Let's talk about the general economy. Is there 0:10:36.840 --> 0:10:41.120 a looming recession? Yeah, I think there probably is. Now, 0:10:41.360 --> 0:10:46.080 you know, to say that it's it's gonna unroll untold 0:10:46.080 --> 0:10:49.200 in the next month or two, that's always a dangerous 0:10:49.240 --> 0:10:52.800 pet one one very wise economist one said you should 0:10:52.840 --> 0:10:55.200 forecast what will happen or when it will happen, but 0:10:55.240 --> 0:10:57.960 not both. But there are a lot of signs and 0:10:58.000 --> 0:11:01.479 I've written that up in our latest of the UH newsletter, 0:11:01.559 --> 0:11:05.520 Insight UM. Certainly you have it that turned down in stocks, 0:11:05.520 --> 0:11:09.520 and that's a leading indicator. Housing housing very interest rates sensitive, 0:11:09.840 --> 0:11:12.880 and it is UH. It is responding to the Feds 0:11:13.000 --> 0:11:15.600 raising race. And the said raising race, you know, don't 0:11:15.600 --> 0:11:18.800 fight the Fed. UH. When the Fed starts to graze 0:11:18.880 --> 0:11:21.559 rates sooner or later. They killed the economy twelve or 0:11:21.600 --> 0:11:24.440 thirteen times the postwar period. They didn't get a soft 0:11:24.559 --> 0:11:27.160 landing only once in the mid nineties. And now they're 0:11:27.160 --> 0:11:29.800 not only raising interest rates, but they're selling off the portfolio. 0:11:29.920 --> 0:11:32.719 They've had a century of experience with interest rates and 0:11:32.760 --> 0:11:35.960 they still can't affect soft landing, so showing off the 0:11:36.000 --> 0:11:38.640 portfolio on on top of that, and then you look 0:11:38.679 --> 0:11:44.040 at the exuberance we've seen in consumers and the expansion 0:11:44.120 --> 0:11:48.400 of things like leverage loans and you know, people zealous 0:11:48.440 --> 0:11:53.120 for you rushing into UH, into hedge funds of hedge funds, 0:11:53.160 --> 0:11:55.360 private equity and so on. All of these things are 0:11:55.679 --> 0:12:00.240 are very similar similarly occur at the top. So I 0:12:00.240 --> 0:12:02.400 think there's a lot of reasons to believe we're at 0:12:02.400 --> 0:12:04.080 the top. Now, that doesn't mean it's going to turn 0:12:04.160 --> 0:12:07.280 down immediately, but um, I think that the odds of 0:12:07.400 --> 0:12:10.839 a recession are probably over fifty starting in the next 0:12:10.920 --> 0:12:13.520 year or so. Gary, If you happen to be an 0:12:13.600 --> 0:12:17.280 investor who is expecting higher interest rates, are you going 0:12:17.360 --> 0:12:21.640 to be disappointed? Uh? Yeah, I think you probably are 0:12:21.800 --> 0:12:24.240 because there are two There are two things working there 0:12:24.679 --> 0:12:27.200 and full disclosures him As you know, I in nine 0:12:28.000 --> 0:12:31.120 when they yield and the thirty year bond was sixteen 0:12:31.160 --> 0:12:34.040 point seven percent, I said, we're entering the run bond 0:12:34.120 --> 0:12:38.199 rally of lifetime. And since then wrong treasuries have outperformed 0:12:38.240 --> 0:12:40.679 the S and P since the early eighties by six times. 0:12:41.160 --> 0:12:43.840 So i'm i'm, I'm, I've got a bias there, clearly. 0:12:43.880 --> 0:12:46.840 But the point is you've got two forces there. The 0:12:46.880 --> 0:12:49.720 fetters tightening and there is a spillover. I mean, for 0:12:49.760 --> 0:12:52.400 every hundred basis point increasing the head funds on average 0:12:52.400 --> 0:12:54.920 in the post war period, you get a forty four 0:12:55.280 --> 0:12:58.800 uh basis points fill over the ten years treasuries, but 0:12:58.960 --> 0:13:02.160 only at twenty four still over to UH to a 0:13:02.240 --> 0:13:04.880 long term treasury thirty year. I know there's a further 0:13:04.920 --> 0:13:07.240 way you get from the Fed. The less the Fed 0:13:07.240 --> 0:13:09.199 matters and the more other things matter. In the long run, 0:13:09.240 --> 0:13:13.280 it's it's inflation. There's a sixty percent correlation between UH, 0:13:13.440 --> 0:13:15.800 the CPI you're over here in the post ar period 0:13:15.800 --> 0:13:18.960 and and and treasury bonds. UH. So you've got the 0:13:19.000 --> 0:13:21.120 Fed fighting, but there's some spill over. But on the 0:13:21.120 --> 0:13:24.560 other side, you've got a lot of deflationary forces here. 0:13:24.640 --> 0:13:28.880 You look at you look at protectionism, globalization moving all 0:13:28.920 --> 0:13:32.680 these high paid jobs to China and other developing countries. 0:13:32.720 --> 0:13:35.720 You look at the uberization of the world, the on demand, 0:13:35.760 --> 0:13:39.880 the gig economy, if you will. UH unions they're very 0:13:39.960 --> 0:13:44.000 high paid and they virtually disappeared, particularly the private sarcy. 0:13:44.000 --> 0:13:46.400 You go a lot of forces there that are telling 0:13:46.400 --> 0:13:50.440 you there's deflationary climate, and of course we get a recession. 0:13:50.440 --> 0:13:53.640 Even more so so, UM, I think that I think 0:13:53.679 --> 0:13:56.160 we could be getting close to the peak and in 0:13:56.320 --> 0:13:58.520 interest rates, particularly on the long end, even though the 0:13:58.559 --> 0:14:01.520 Fed is still raising. On the show, Gary Shilling is 0:14:01.559 --> 0:14:04.920 a Bloomberg View columnist. He's the president of a Gary 0:14:04.960 --> 0:14:08.239 Shilling and Company. It is a consultancy based in Springfield, 0:14:08.280 --> 0:14:10.880 New Jersey. He is the author of the Age of 0:14:10.960 --> 0:14:16.280 Deleveraging Investment Strategies for a decade of slow growth and deflation, 0:14:16.640 --> 0:14:19.520 and he is also the author of a Gary Shillings 0:14:19.680 --> 0:14:37.720 Inside Economic Research and Investment Strategy. Well, we turn our 0:14:37.760 --> 0:14:40.800 attention now to the world of crude oil here at 0:14:40.800 --> 0:14:44.120 the Bloomberg Interactive Brokers Studios and joining us as John 0:14:44.240 --> 0:14:47.960 killed Off. He is the founding partner of Again Capital, 0:14:48.160 --> 0:14:52.040 John Always a Pleasure. Brent crude higher by about one 0:14:52.080 --> 0:14:54.800 and a half percent at seventy one dollars a barrel, 0:14:55.440 --> 0:14:58.080 West Texas Intermediate on the NIMEX up one and a 0:14:58.160 --> 0:15:02.520 half percent at sixty one dollars a barrel. Have we 0:15:02.680 --> 0:15:05.760 hit the lows for this year when it comes to 0:15:05.920 --> 0:15:11.120 oil prices? I think potentially him and good morning to you. 0:15:11.320 --> 0:15:14.320 Great to be on uh. Friday's low is fifty nine 0:15:15.080 --> 0:15:17.840 six cents for w t I and it's sort of 0:15:17.880 --> 0:15:20.000 sticking out on the on the charts that we look 0:15:20.040 --> 0:15:23.200 at as a bit of a sore thumb low. So 0:15:23.600 --> 0:15:26.960 we're getting some recovery here, you know, partly because this 0:15:27.200 --> 0:15:31.160 um nearly seventeen dollar sell off over the course of 0:15:31.200 --> 0:15:35.240 a month. You know, got the expected reaction you would 0:15:35.600 --> 0:15:38.920 have thought would come from Saudi Arabia and and the 0:15:38.960 --> 0:15:42.640 rest of OPEC and Russia to a lesser degree. Well 0:15:42.760 --> 0:15:46.320 that reaction is what to cut production by how many 0:15:46.360 --> 0:15:51.080 barrels of oil a day? Well, it's it's a little sketchy, 0:15:51.120 --> 0:15:53.840 which is why the market isn't necessarily rounding war on 0:15:53.880 --> 0:15:57.280 the news. The Saudis came out pushing for a million 0:15:57.320 --> 0:16:01.400 barrel per day cut. Uh. The Russian oil minister not 0:16:01.480 --> 0:16:03.920 so enthusiastic about it, and it doesn't seem like the 0:16:03.960 --> 0:16:07.000 rest of Opec is either, although I'll point out to 0:16:07.000 --> 0:16:09.400 you that based upon some of the data that we 0:16:09.440 --> 0:16:11.720 look at that the Satties are already in the process 0:16:11.720 --> 0:16:15.800 of cutting output by about by thousand barrels for December. 0:16:16.400 --> 0:16:20.480 So they are reacting to this now. And it's also 0:16:20.560 --> 0:16:23.080 not unexpected given that the US elections in their rear 0:16:23.160 --> 0:16:26.000 view mirror, they probably feel more comfortable being able to 0:16:26.200 --> 0:16:28.440 reign in production, get prices up a bit, and not 0:16:28.520 --> 0:16:32.640 necessarily risk the wrath of their ally President Trump. Does 0:16:32.680 --> 0:16:35.840 it matter that at the same time that the Saudis 0:16:35.880 --> 0:16:38.760 are ratcheting back to production by half a million barrels 0:16:38.760 --> 0:16:42.920 a day, that Iran is now under greater sanction and 0:16:43.000 --> 0:16:45.240 making it more difficult for it to sell its oil 0:16:45.280 --> 0:16:49.800 abroad were interesting tim Part of the crush here in prices, 0:16:50.480 --> 0:16:54.520 um was the fact that the administration granted eight waivers 0:16:54.560 --> 0:16:58.200 to really Iran's the bulk of Iran's customers to continue 0:16:58.200 --> 0:17:00.840 to buy oil. There was a sense when November rolled 0:17:00.880 --> 0:17:03.280 around and the stantons were supposed to take effect that 0:17:03.320 --> 0:17:06.399 there would be a big impact on Iranian exports and 0:17:06.440 --> 0:17:09.640 supplies to the market, that a lot would be coming off. Um, 0:17:09.680 --> 0:17:12.000 there's still some coming off, don't get me wrong, but 0:17:12.720 --> 0:17:15.040 nowhere near the sort of feared levels that were in 0:17:15.160 --> 0:17:17.840 that got into this market and push prices up towards 0:17:17.920 --> 0:17:19.919 you know, eighty dollars a barrel for w t I 0:17:20.320 --> 0:17:24.679 back in October. It was it was the administration really 0:17:25.720 --> 0:17:28.679 uh cut the legs out from under Saudi Arabian Russia 0:17:28.720 --> 0:17:33.480 who rushed increased production and exports to the market ahead 0:17:33.520 --> 0:17:36.760 of the sanctions. So, um, I guess the expressions, you know, 0:17:36.800 --> 0:17:39.040 did they get played or not? It may be kind of, 0:17:39.160 --> 0:17:42.320 but the market certainly got played as well. In terms 0:17:42.359 --> 0:17:45.440 of this, this turnaround in policy at least for now 0:17:45.840 --> 0:17:48.800 by the administration on Iran. If this is the case, 0:17:48.920 --> 0:17:55.520 does that benefit US producers? The U S producers are 0:17:55.560 --> 0:17:58.280 a real thorn right now in the Saudia's and Opec 0:17:58.320 --> 0:18:01.800 and Russia's side, where we're exporting more oyal than ever before. 0:18:02.080 --> 0:18:05.080 We're averaging about two point five liim barrel per day, 0:18:05.080 --> 0:18:07.400 clipped him from zero just a couple of years ago. 0:18:07.440 --> 0:18:09.520 Just to put it in perspective, Um, it's only going 0:18:09.560 --> 0:18:12.080 to go up. There's there's this massive activity along the 0:18:12.119 --> 0:18:15.240 Gulf coast to outlet more and more US crude oil 0:18:15.840 --> 0:18:19.800 to the market. So um. The STATI response in terms 0:18:19.840 --> 0:18:22.159 of cutting back here, I think is justified if they 0:18:22.160 --> 0:18:26.080 want to get prices stabilized and back higher. But they 0:18:26.160 --> 0:18:29.040 might have to be shouldering a lot more of the 0:18:29.080 --> 0:18:31.480 cutback than they might have realized as we get into 0:18:32.280 --> 0:18:34.879 this is a very interesting setup now that the U 0:18:35.000 --> 0:18:37.920 S could actually become one of the dominant global suppliers 0:18:37.960 --> 0:18:41.120 here as we get into next year. Take that forward 0:18:41.480 --> 0:18:45.080 and explain what that would mean for the input costs 0:18:45.400 --> 0:18:49.480 for the chemical industry, the plastics business, or anything that 0:18:49.720 --> 0:18:53.560 uses fossil fuel. Well, it's going to keep it low 0:18:53.720 --> 0:18:56.399 for sure, I think on a global basis, so it 0:18:56.480 --> 0:18:59.960 should continue to be good times for that very sick 0:19:00.000 --> 0:19:03.600 local industry. The rub is going to be whether or 0:19:03.600 --> 0:19:06.240 not the the advantage that U. S A. Finders have 0:19:06.359 --> 0:19:09.920 had will persist. I mean, right w T I Texas 0:19:09.920 --> 0:19:13.359 crew continues to be about ten dollars under the international 0:19:13.400 --> 0:19:17.040 markers like Brent, which is seventy one today. Um to 0:19:17.080 --> 0:19:20.360 the extent that US supplies tightened here because of all 0:19:20.400 --> 0:19:23.880 this export activity like we're seeing with natural gas, uh, 0:19:24.000 --> 0:19:27.000 the the U. S R. Finders could actually find themselves 0:19:27.040 --> 0:19:30.440 in a disadvantage because of what the exploration and production 0:19:30.480 --> 0:19:32.719 companies are doing in terms of not selling to them 0:19:32.760 --> 0:19:34.960 at a discount, but selling at a higher price to 0:19:35.000 --> 0:19:38.040 the world market. Last question to you give you about 0:19:38.080 --> 0:19:42.160 twenty five seconds natural gas at three dollars and seventy 0:19:42.240 --> 0:19:44.960 eight cents per million b tou do we see four 0:19:45.000 --> 0:19:50.280 dollar permannium BTU not gas? Then the natural gas market 0:19:50.320 --> 0:19:54.320 could get really ugly here for consumers. We're starting off 0:19:54.320 --> 0:19:58.119 this winter heating season with supplies about fiftent below last 0:19:58.160 --> 0:20:00.720 year and the five year average. That sets up this 0:20:00.840 --> 0:20:03.840 market to be really tightly supplied. You get a couple 0:20:03.880 --> 0:20:06.480 of more of these early season call snaps, the price 0:20:06.520 --> 0:20:10.560 could double at this point as you get into January. Uh, 0:20:10.720 --> 0:20:13.800 in December and January, we're gonna keep watching that, that's 0:20:13.840 --> 0:20:17.400 for sure. John Killed, a founding partner of Again Capital, 0:20:17.800 --> 0:20:35.240 telling us about oil and natural gas. Our topic now 0:20:35.440 --> 0:20:39.959 is the hotel and hospitality industry. My guest is Jay Stein. 0:20:40.119 --> 0:20:43.840 He is the chief executive of Dream Hotel Group and 0:20:43.880 --> 0:20:47.040 he joins us here in studio. Jay, thanks very much 0:20:47.080 --> 0:20:49.800 for being here. Tell people a little bit about Dream 0:20:49.880 --> 0:20:53.720 Hotel Group and how it has transformed itself from being 0:20:53.760 --> 0:20:58.120 an operation that owned and managed the properties to one 0:20:58.160 --> 0:21:01.679 that is focused. Well, you held a story that's exactly it. 0:21:02.000 --> 0:21:04.000 So uh and and thanks for having me. Nice to 0:21:04.000 --> 0:21:07.560 be here. So we have transformed the company. We were 0:21:07.680 --> 0:21:11.320 more of a ownership and we built hotels and and 0:21:11.480 --> 0:21:15.640 manage those and they were cool, hip lifestyle hotels, generally 0:21:15.680 --> 0:21:19.080 one off properties. And then uh, we took some of 0:21:19.119 --> 0:21:21.840 those hotels that we're doing very well and the public 0:21:21.880 --> 0:21:25.080 seemed to enjoy them and converted them into brands. Uh. 0:21:25.119 --> 0:21:28.960 This started in earnest about five years ago. And UM, 0:21:29.000 --> 0:21:33.040 it's allowing us to grow much quicker because now we're 0:21:33.119 --> 0:21:36.520 using other developers as opposed to just our own money UM. 0:21:36.560 --> 0:21:39.000 And these are expensive assets, are about a hundred fifty 0:21:39.000 --> 0:21:42.760 million dollars plus a piece to build UM and they 0:21:42.800 --> 0:21:45.959 take three to five six seven years sometimes to develop. 0:21:46.000 --> 0:21:48.359 So on our own it was taking a long time 0:21:48.400 --> 0:21:50.520 to build up the number of properties. But now we're 0:21:50.720 --> 0:21:53.960 signing a deal about one every month, every month and 0:21:53.960 --> 0:21:56.520 a half. So so and you just why wouldn't say, 0:21:56.560 --> 0:21:59.800 just but you have opened your first hotel in Los 0:21:59.840 --> 0:22:03.520 ange Chelists we did about a year and four months ago. 0:22:03.560 --> 0:22:07.280 At this point, uh hundred and sixty eight room property 0:22:07.400 --> 0:22:11.000 with a tremendous amount of food and beverage, nightlife, entertainment. 0:22:11.400 --> 0:22:14.800 We have six different venues there and uh it's one 0:22:14.840 --> 0:22:18.399 of the most fun hotels certainly in the Explain why 0:22:18.920 --> 0:22:23.840 that aspect of the hospitality industry, the nightlife, the entertainment, 0:22:24.000 --> 0:22:27.560 the restaurants. Why is that so important in an era 0:22:27.680 --> 0:22:30.600 of air B two B. So that is what we do, 0:22:30.720 --> 0:22:34.480 That's what we're famous for. We create environments where uh, 0:22:34.600 --> 0:22:38.639 social activity will happen. A lot of hotels focus on 0:22:38.720 --> 0:22:41.639 their guest rooms and as we do as well, but 0:22:41.800 --> 0:22:44.520 we add in that element where people from the community 0:22:44.560 --> 0:22:47.960 want to come use the hotel for nightlife, food and beverage, 0:22:47.960 --> 0:22:52.160 health and wellness, uh and other uh social things that 0:22:52.160 --> 0:22:56.159 that we uh programmed for the hotel. And um you know, 0:22:56.240 --> 0:23:01.560 Airbnb doesn't have a restaurant in somebody's apartment, So what 0:23:01.600 --> 0:23:04.240 we do is very different, and uh it's always been 0:23:04.560 --> 0:23:07.240 something that we've been able to uh hang our hat 0:23:07.320 --> 0:23:10.280 on and and make us unique in the industry. Is 0:23:10.320 --> 0:23:17.119 that something that you encouraged and emphasized and accelerated because 0:23:17.240 --> 0:23:20.680 you see what is happening with the popularity of air 0:23:21.160 --> 0:23:23.880 b and B definitely not. We were doing this way 0:23:23.880 --> 0:23:30.040 before Airbnb had had come to into existence, and um, 0:23:30.119 --> 0:23:32.159 you know, I look back in the industry and so 0:23:32.400 --> 0:23:35.160 that's what hotels were back in the forties, fifties, sixties, 0:23:35.200 --> 0:23:39.200 great meeting places, great uh social hubs for the community, 0:23:39.400 --> 0:23:41.400 and then we got away from that in the seventies 0:23:41.400 --> 0:23:43.959