1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 2 00:00:04,040 --> 00:00:05,160 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day, we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,600 Speaker 2: and Bloomberg experts, along with essential market moving news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever 6 00:00:17,360 --> 00:00:20,520 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. 7 00:00:20,880 --> 00:00:22,560 Speaker 1: I get to break to our next guest, Dan if 8 00:00:22,600 --> 00:00:25,520 Speaker 1: she covers Dan, it's Tritty's birthday. He's a tech Yeah, 9 00:00:25,560 --> 00:00:29,240 Speaker 1: he's a kick geek, so it's not a geek. What's 10 00:00:29,560 --> 00:00:32,640 Speaker 1: nerds and geeks? Totally? Totally he's into the tech stuff. 11 00:00:32,800 --> 00:00:35,280 Speaker 1: And we got to start with what he's wearing today. 12 00:00:35,280 --> 00:00:38,159 Speaker 1: This is, in a word, disturbing. We've got powder blue 13 00:00:38,600 --> 00:00:41,120 Speaker 1: kind of pants and sport jack and then a late 14 00:00:41,200 --> 00:00:44,199 Speaker 1: green shirt. It's very eighties. Prom I love it. I 15 00:00:44,440 --> 00:00:46,360 Speaker 1: to be warm outside today. It looks good to me. 16 00:00:46,960 --> 00:00:50,400 Speaker 1: It's spring. It's it's all mindset exactly. It's all my 17 00:00:50,600 --> 00:00:53,120 Speaker 1: set exactly. So what was your mindset? 18 00:00:53,159 --> 00:00:53,360 Speaker 3: Dan? 19 00:00:53,400 --> 00:00:55,959 Speaker 1: I have some web bush on the Tesla numbers here 20 00:00:55,960 --> 00:00:57,240 Speaker 1: the stocks off about seven percent. 21 00:00:57,320 --> 00:01:00,160 Speaker 4: Yeah, I mean the outfit's at more positive than my 22 00:01:00,240 --> 00:01:02,960 Speaker 4: view of what happened with earnings because it was all 23 00:01:02,960 --> 00:01:06,880 Speaker 4: about margins. I mean, demand has been pretty robust since 24 00:01:06,880 --> 00:01:10,640 Speaker 4: the price cuts, but margins twenty percent was the magical threshold. 25 00:01:11,040 --> 00:01:13,880 Speaker 4: Came in below that, and they sort of kept things 26 00:01:13,920 --> 00:01:16,160 Speaker 4: sort of close to the chest in terms of what 27 00:01:16,200 --> 00:01:19,160 Speaker 4: they were really talking about margins going forward. That's why 28 00:01:19,200 --> 00:01:22,160 Speaker 4: the stocks off because the worry here is that if 29 00:01:22,200 --> 00:01:25,480 Speaker 4: they continue to cut prices, margins continue to go down. 30 00:01:25,480 --> 00:01:26,600 Speaker 4: That's key to the multiple. 31 00:01:27,200 --> 00:01:29,039 Speaker 1: But they can is the big deal? 32 00:01:29,160 --> 00:01:29,360 Speaker 5: Right? 33 00:01:30,880 --> 00:01:33,200 Speaker 2: Do they have to or is it that they can? 34 00:01:33,680 --> 00:01:35,880 Speaker 2: Are they doing this because they have to drive demand 35 00:01:36,200 --> 00:01:39,199 Speaker 2: or is it because they can inflict pain on general 36 00:01:39,200 --> 00:01:40,640 Speaker 2: motors in Volkswagen. 37 00:01:40,120 --> 00:01:43,200 Speaker 4: I think it's eighty percent because they can twenty percent 38 00:01:43,800 --> 00:01:47,160 Speaker 4: to ultimately catalyze demand a soft macro because I think 39 00:01:47,200 --> 00:01:49,680 Speaker 4: the way Musk and Tessa are looking at it, this 40 00:01:49,720 --> 00:01:52,280 Speaker 4: is a flex to Muscles moment. It's essentially game of 41 00:01:52,320 --> 00:01:55,760 Speaker 4: thrones and electric vehicles and Tasso recognizes you got be 42 00:01:55,800 --> 00:01:59,360 Speaker 4: an iron fence around that install based protect continue to 43 00:01:59,400 --> 00:02:02,800 Speaker 4: go after marks. But with that said, the margins, they 44 00:02:02,840 --> 00:02:06,760 Speaker 4: have massive margin flexibility over traditional auto but also testa 45 00:02:06,800 --> 00:02:08,400 Speaker 4: is held do a higher stand. That's why it tradees 46 00:02:08,440 --> 00:02:11,600 Speaker 4: like a tech stock. That's why twenty percent margins going 47 00:02:11,720 --> 00:02:14,960 Speaker 4: below that it's gonna I'll call it tenuous in terms 48 00:02:14,960 --> 00:02:17,360 Speaker 4: of the next few quarters. In terms of that margin 49 00:02:17,560 --> 00:02:18,720 Speaker 4: called tuggle. 50 00:02:18,480 --> 00:02:21,359 Speaker 2: War, I would I wonder if it's not more they 51 00:02:21,400 --> 00:02:25,160 Speaker 2: have to because I would argue if they hadn't been 52 00:02:25,280 --> 00:02:29,440 Speaker 2: lazy about design, they really need to bring out new products, 53 00:02:29,800 --> 00:02:32,400 Speaker 2: and if they were better in terms of quality control 54 00:02:32,480 --> 00:02:35,960 Speaker 2: they have infamously bad build quality, then they wouldn't have 55 00:02:36,000 --> 00:02:38,280 Speaker 2: to cut prices this much. I mean, the Model Y 56 00:02:38,520 --> 00:02:40,920 Speaker 2: was going for sixty five grand and now you can 57 00:02:40,960 --> 00:02:42,200 Speaker 2: get one for under fifty. 58 00:02:42,600 --> 00:02:44,000 Speaker 1: That's a big, big chunk. 59 00:02:44,480 --> 00:02:47,280 Speaker 4: We can make great points, and especially in China because 60 00:02:47,400 --> 00:02:50,440 Speaker 4: China is really where the price wars happened between Neo 61 00:02:50,520 --> 00:02:53,239 Speaker 4: bid x Ping and others. And that's the hearts and 62 00:02:53,280 --> 00:02:55,919 Speaker 4: alongs of the Testa story. So I think right now 63 00:02:55,960 --> 00:02:58,280 Speaker 4: in terms of the game of poker, like for many 64 00:02:58,320 --> 00:03:02,160 Speaker 4: many years Musk has played, others have played checkers, but 65 00:03:02,280 --> 00:03:04,400 Speaker 4: now in terms of competition grown in terms of what 66 00:03:04,400 --> 00:03:06,800 Speaker 4: we see three wine three area code four GM as 67 00:03:06,840 --> 00:03:09,640 Speaker 4: well as out of Europe. Now this is a time 68 00:03:09,720 --> 00:03:12,480 Speaker 4: to gain market shop, but at what price, and that's 69 00:03:12,520 --> 00:03:16,680 Speaker 4: why I most investors the frustration showed that margin story 70 00:03:17,040 --> 00:03:18,720 Speaker 4: doesn't get into that mid teens. 71 00:03:18,800 --> 00:03:21,840 Speaker 2: Are you worried that he's spent too much time? I mean, 72 00:03:22,080 --> 00:03:25,200 Speaker 2: clearly he's spent spends way too much time tweeting and 73 00:03:25,240 --> 00:03:27,120 Speaker 2: doing stupid childish. 74 00:03:26,680 --> 00:03:30,000 Speaker 1: Wait, he's got another tweet out today congratulating SpaceX. Okay, 75 00:03:30,080 --> 00:03:31,239 Speaker 1: but that's actually cool. 76 00:03:31,360 --> 00:03:35,680 Speaker 2: So that's something where he's making progress for mankind. I mean, 77 00:03:35,680 --> 00:03:38,680 Speaker 2: that's what Elon Musk should be doing. He's just launched 78 00:03:39,320 --> 00:03:43,240 Speaker 2: the most powerful rocket that has ever come off the 79 00:03:43,320 --> 00:03:47,440 Speaker 2: surface of this planet, and it's so cool. But maybe 80 00:03:47,440 --> 00:03:50,720 Speaker 2: he should be paying more attention to, you know, uh, 81 00:03:50,840 --> 00:03:55,120 Speaker 2: furthering great causes for humanity than doing stupid stuff on Twitter. 82 00:03:55,360 --> 00:03:57,760 Speaker 4: Wee Twitter, We talked about me. It's gonna be the 83 00:03:57,760 --> 00:04:02,920 Speaker 4: most overpaid tech acquisition the history of deals, and forty 84 00:04:02,920 --> 00:04:05,200 Speaker 4: four billion for someone that's probably worth twelve to fifteen 85 00:04:05,200 --> 00:04:07,240 Speaker 4: billion today. It's also with a time sucker, and I 86 00:04:07,240 --> 00:04:09,680 Speaker 4: think that's the issue, is that at a time where 87 00:04:09,800 --> 00:04:13,320 Speaker 4: Tesla and SpaceX need Musk more than ever, you don't 88 00:04:13,440 --> 00:04:16,080 Speaker 4: just want to see him sitting there third floor of 89 00:04:16,080 --> 00:04:18,760 Speaker 4: Twitter headquarters just tweeting So. 90 00:04:19,520 --> 00:04:22,040 Speaker 1: When did the Tesla story become a margin story as 91 00:04:22,080 --> 00:04:24,000 Speaker 1: opposed to just a great cool growth. 92 00:04:23,760 --> 00:04:27,600 Speaker 4: Story starting this year once they started cut prices. I mean, 93 00:04:27,640 --> 00:04:30,479 Speaker 4: you've got six price cuts, and I think that that's 94 00:04:30,520 --> 00:04:33,280 Speaker 4: where margins ultimately company. 95 00:04:33,000 --> 00:04:34,479 Speaker 1: Want it to be there or they don't even care, 96 00:04:34,560 --> 00:04:38,599 Speaker 1: do they, because I mean, like for example, Facebook slash Meta, 97 00:04:38,800 --> 00:04:41,360 Speaker 1: they've kind of tried to transition people from getting away 98 00:04:41,360 --> 00:04:43,760 Speaker 1: from subscriber growth numbers and all that kind of stuff 99 00:04:43,760 --> 00:04:45,560 Speaker 1: and focus on the profitability and a free cash love 100 00:04:45,560 --> 00:04:47,800 Speaker 1: of our business. I mean, that's they're trying to drive 101 00:04:47,880 --> 00:04:50,400 Speaker 1: the investment narrative. Tesla doesn't really care about. 102 00:04:50,200 --> 00:04:52,920 Speaker 4: Looking twenty two billion of cash right and I think 103 00:04:53,040 --> 00:04:55,960 Speaker 4: they're viewing it is like, we don't care what you 104 00:04:56,120 --> 00:04:59,000 Speaker 4: think for now. You gotta trust us in terms of 105 00:04:59,040 --> 00:05:02,120 Speaker 4: the last decade and right now we are looking to 106 00:05:02,200 --> 00:05:05,839 Speaker 4: go on the offensive, not defensive in terms of margins 107 00:05:05,920 --> 00:05:08,520 Speaker 4: and cutting prices. That's sort of their strategy. Look, and 108 00:05:08,560 --> 00:05:11,320 Speaker 4: some investors love it, some investors won't. That's what you 109 00:05:11,360 --> 00:05:14,600 Speaker 4: see right now. In terms of Bulbear debate, we. 110 00:05:14,560 --> 00:05:17,840 Speaker 2: Have a question, the Question of the Day, which has 111 00:05:17,880 --> 00:05:22,240 Speaker 2: been up on the Bloomberg television screen has Tesla started 112 00:05:22,279 --> 00:05:22,960 Speaker 2: a price war. 113 00:05:23,520 --> 00:05:26,000 Speaker 4: What do you think, Oh, I think the price war 114 00:05:26,040 --> 00:05:29,159 Speaker 4: has begun, and I think in China it's already started. 115 00:05:29,200 --> 00:05:32,760 Speaker 4: And ultimately it's here in the footsteps of gm Ford. 116 00:05:33,240 --> 00:05:35,360 Speaker 4: You have Mercedes, you have others that are coming because 117 00:05:35,360 --> 00:05:37,920 Speaker 4: they're Look, they're no longer the only game in town. 118 00:05:37,960 --> 00:05:41,000 Speaker 4: Now clearly it's their world. Everyone else pays rent in 119 00:05:41,080 --> 00:05:44,920 Speaker 4: terms of electric vehicles. But now with competition increasing, they 120 00:05:44,960 --> 00:05:47,680 Speaker 4: can't just sit there on their high horse. They need 121 00:05:47,720 --> 00:05:50,640 Speaker 4: to cut prices and that's that's really what's happening here. 122 00:05:50,839 --> 00:05:53,800 Speaker 4: But again it comes down to the managing team, the guidance. 123 00:05:54,279 --> 00:05:57,000 Speaker 4: You know, I think there's more questions and answers, which 124 00:05:57,040 --> 00:05:58,440 Speaker 4: is why the stocks reacting the way. 125 00:05:58,520 --> 00:06:00,160 Speaker 2: And now, if you want to buy an electric are 126 00:06:00,200 --> 00:06:02,520 Speaker 2: there's so many other choices you could get. If you 127 00:06:02,560 --> 00:06:04,680 Speaker 2: want to get something cheap, you could pick up a 128 00:06:04,839 --> 00:06:08,080 Speaker 2: Chevy Bolt. If you want to get something cool, you 129 00:06:08,080 --> 00:06:11,080 Speaker 2: could get a Kia EV six GT. If you want 130 00:06:11,080 --> 00:06:14,120 Speaker 2: to get something expensive, you could go with a BMW 131 00:06:14,320 --> 00:06:18,400 Speaker 2: I X and on that that's built with hand laid 132 00:06:18,520 --> 00:06:20,280 Speaker 2: carbon fiber and Washington tament. 133 00:06:20,320 --> 00:06:21,480 Speaker 1: That's awesome stuff. 134 00:06:21,920 --> 00:06:25,400 Speaker 2: So Tesla, you know, they had these ten year old products. 135 00:06:25,680 --> 00:06:27,640 Speaker 2: Is the cyber truck gonna come out this year? Are 136 00:06:27,640 --> 00:06:29,520 Speaker 2: they gonna do anything that's awesome and new? 137 00:06:29,680 --> 00:06:32,120 Speaker 4: Yeah, I think by Howween we should have the cyber 138 00:06:32,160 --> 00:06:35,360 Speaker 4: truck announcement. And that's important because as you've talked about 139 00:06:35,400 --> 00:06:38,880 Speaker 4: for a long time in terms of new automobile, new models, 140 00:06:38,920 --> 00:06:41,320 Speaker 4: I think the sub thirty k comes out next year. 141 00:06:41,640 --> 00:06:42,800 Speaker 1: But look for Tesla right now. 142 00:06:42,839 --> 00:06:46,360 Speaker 4: It's that supercharger network. It's the Musk DNA, I mean 143 00:06:46,400 --> 00:06:49,720 Speaker 4: supercharger network. It's the Musk DNA, and it's the cachet 144 00:06:49,760 --> 00:06:52,479 Speaker 4: of owning a Tesla. And I think that continues to 145 00:06:52,520 --> 00:06:55,640 Speaker 4: be there. But no doubt you gotta cut prices in 146 00:06:55,680 --> 00:06:56,839 Speaker 4: that's sense of what they're doing. 147 00:06:57,240 --> 00:07:00,719 Speaker 1: So, but Kevin Tynan and our auto ational supple more intelligence, 148 00:07:00,839 --> 00:07:03,600 Speaker 1: he says, the Choice does have come out with a 149 00:07:03,640 --> 00:07:05,360 Speaker 1: ton of cars if they're not making money on them. 150 00:07:05,680 --> 00:07:08,360 Speaker 1: You know, they've even paired back the four pairback the 151 00:07:08,440 --> 00:07:12,120 Speaker 1: Mustang mock e because a certain prece just won't just 152 00:07:12,120 --> 00:07:15,400 Speaker 1: saw mock e hearse. Yeah, you see that. Somebody made it. 153 00:07:15,480 --> 00:07:16,480 Speaker 1: Mock e hearse. 154 00:07:17,280 --> 00:07:19,280 Speaker 2: They're coming out with new cars, dude, that's the only 155 00:07:19,360 --> 00:07:21,720 Speaker 2: thing they're gonna make from now on his electric cars. 156 00:07:21,760 --> 00:07:24,280 Speaker 2: You can argue that that's a horrible strategy, a big mistake. 157 00:07:24,560 --> 00:07:26,920 Speaker 2: They're putting all their eggs in one basket. Pretty much 158 00:07:26,920 --> 00:07:29,480 Speaker 2: all car makers are, but they're all gonna come out 159 00:07:29,520 --> 00:07:32,800 Speaker 2: with new electric cars. It's gonna be from twenty thirty 160 00:07:33,560 --> 00:07:37,640 Speaker 2: either electric, all electric, or hybrid. Really, that's the only 161 00:07:37,920 --> 00:07:40,640 Speaker 2: that's the only choice. Almost every single car maker has 162 00:07:41,080 --> 00:07:44,920 Speaker 2: has vowed that they will no longer make solely internal 163 00:07:44,920 --> 00:07:46,880 Speaker 2: combustion engines after twenty thirty. 164 00:07:47,000 --> 00:07:50,000 Speaker 4: And to your point, must knows that bulls eye in 165 00:07:50,040 --> 00:07:53,080 Speaker 4: their back and that's why they, Okay, guess what, We're 166 00:07:53,120 --> 00:07:56,280 Speaker 4: just gonna keep cutting prices in flipting the pen. And 167 00:07:56,320 --> 00:07:59,360 Speaker 4: that's a say it's dreve demand. But from an investor 168 00:07:59,440 --> 00:08:02,320 Speaker 4: perspective out it's like, okay, at what point? And that's 169 00:08:02,360 --> 00:08:03,280 Speaker 4: really what the stocks are? 170 00:08:03,400 --> 00:08:06,680 Speaker 1: So can I buy Tesla here? I mean because if 171 00:08:07,520 --> 00:08:10,320 Speaker 1: typically I don't want to own a company who's in 172 00:08:10,360 --> 00:08:13,200 Speaker 1: a price war, much less initiating one. 173 00:08:13,280 --> 00:08:15,480 Speaker 4: Sure I view it if this was something that was 174 00:08:15,520 --> 00:08:18,240 Speaker 4: going to continue to go on, then obviously that's the 175 00:08:18,320 --> 00:08:20,840 Speaker 4: concern I view a more transitory in terms of this 176 00:08:20,920 --> 00:08:25,720 Speaker 4: price war dangerous word. And ultimately, you know it's really 177 00:08:25,720 --> 00:08:28,360 Speaker 4: the next two to three quarters you see this price war, 178 00:08:28,920 --> 00:08:31,600 Speaker 4: then you really start to see I think stabilization. That's 179 00:08:31,600 --> 00:08:34,680 Speaker 4: really the story for tests. In terms of the bull case, 180 00:08:34,960 --> 00:08:37,120 Speaker 4: I continue view this in Apple as the two most 181 00:08:37,160 --> 00:08:39,280 Speaker 4: transformational names in the market. 182 00:08:39,840 --> 00:08:40,959 Speaker 1: What is the Apple call today? 183 00:08:41,480 --> 00:08:43,880 Speaker 4: I mean, look Apple Call today, it's rocket Gibralter and 184 00:08:43,920 --> 00:08:45,960 Speaker 4: that I mean if you look units holding up just 185 00:08:46,040 --> 00:08:49,280 Speaker 4: by many yelling fire and a crowd theater. Cook's a tactician. 186 00:08:49,400 --> 00:08:51,880 Speaker 4: That's why a Hall of Famers CEO. And that's the 187 00:08:51,880 --> 00:08:54,640 Speaker 4: stock that continues to sort of rerate even in this 188 00:08:54,760 --> 00:08:57,080 Speaker 4: environment because they have something that no one else does 189 00:08:57,280 --> 00:09:01,160 Speaker 4: install Base, that's the golden two billion Eyess devices. And 190 00:09:01,240 --> 00:09:03,960 Speaker 4: even in India, I mean they just decided, hey, we'll 191 00:09:03,960 --> 00:09:06,520 Speaker 4: try to penetrate that market. That could be an incremental 192 00:09:06,559 --> 00:09:08,319 Speaker 4: fifteen to twenty billion next few years. 193 00:09:08,400 --> 00:09:08,800 Speaker 3: All right. 194 00:09:09,080 --> 00:09:11,480 Speaker 2: They have three hundred and like three hundred and sixty 195 00:09:11,559 --> 00:09:14,559 Speaker 2: million people in the Indian middle class. Yeah, three hundred 196 00:09:14,559 --> 00:09:17,120 Speaker 2: and sixty million people that can afford the product right 197 00:09:17,280 --> 00:09:19,240 Speaker 2: out of one point five billion in total. 198 00:09:19,280 --> 00:09:20,920 Speaker 1: Yeah, and they really stepped it up. All right, Dan, 199 00:09:20,960 --> 00:09:22,480 Speaker 1: thanks so much. For coming out. I really appreciate you 200 00:09:22,520 --> 00:09:25,600 Speaker 1: coming into the studio here despite the wardrobe. So good 201 00:09:25,640 --> 00:09:28,120 Speaker 1: luck walking down the street with that before twenty yeah, 202 00:09:28,400 --> 00:09:30,959 Speaker 1: before twenty There you go. Dan Ice, he's a senior 203 00:09:30,960 --> 00:09:32,880 Speaker 1: equity analyst, So what Bush Security is one of our 204 00:09:33,240 --> 00:09:35,040 Speaker 1: real top go to names. And we want to talk 205 00:09:35,280 --> 00:09:38,480 Speaker 1: technology when we want to talk Apple, Tesla. He's all 206 00:09:38,559 --> 00:09:40,160 Speaker 1: over that stuff, so we appreciate getting a few minutes 207 00:09:40,160 --> 00:09:40,720 Speaker 1: of his time. 208 00:09:41,960 --> 00:09:45,360 Speaker 3: You're listening to the team Ken's are Live program Bloomberg 209 00:09:45,440 --> 00:09:48,800 Speaker 3: Markets weekdays at ten am Eastern on Bloomberg dot Com, 210 00:09:48,880 --> 00:09:52,000 Speaker 3: the iHeartRadio app, and the Bloomberg Business App, or listen 211 00:09:52,080 --> 00:09:55,800 Speaker 3: on demand wherever you get your podcasts. 212 00:09:56,120 --> 00:09:58,120 Speaker 1: I want to talk real estate. I think we need 213 00:09:58,120 --> 00:10:00,440 Speaker 1: to talk real estate investment trust and you want to 214 00:10:00,480 --> 00:10:02,840 Speaker 1: go there. You got to do a couple of things. One, 215 00:10:03,240 --> 00:10:05,960 Speaker 1: you got to get somebody who worked at Green Street Advisors. 216 00:10:05,960 --> 00:10:08,440 Speaker 1: Those are the big folks in the reed business. We 217 00:10:08,480 --> 00:10:10,640 Speaker 1: take that box with David Auerback. He's a managing director 218 00:10:10,600 --> 00:10:12,960 Speaker 1: at Armada ETF so he did a stint to Green Street. 219 00:10:13,320 --> 00:10:15,240 Speaker 1: And the second place you got to go is Jeff Langbaum. 220 00:10:15,280 --> 00:10:17,559 Speaker 1: He covers the reats for Bloomberg Intelligence, and we've got 221 00:10:17,559 --> 00:10:21,439 Speaker 1: both of these gentlemen in our Bloomberg Interactive Brokers studio. 222 00:10:22,440 --> 00:10:25,560 Speaker 1: Here's my thing. I'm walking around Midtown. I'll walk to 223 00:10:25,600 --> 00:10:28,679 Speaker 1: Penn Station today. I'll walk by these gleaming office towers. 224 00:10:29,440 --> 00:10:31,360 Speaker 1: Now they'll be kind of full today because it's a Thursday. 225 00:10:31,400 --> 00:10:33,199 Speaker 1: But let's face it, nobody's coming back to work here 226 00:10:33,200 --> 00:10:34,160 Speaker 1: in this You mean in terms. 227 00:10:33,960 --> 00:10:36,800 Speaker 2: Of people, people, but they're not full in terms of stores, right, 228 00:10:36,800 --> 00:10:37,480 Speaker 2: there's no lot. 229 00:10:37,559 --> 00:10:40,319 Speaker 1: Well, there's no people, there's no stores. There's nobody going 230 00:10:40,360 --> 00:10:43,880 Speaker 1: to the deli's. It's a Thursday. It'll be better. David auerback, 231 00:10:44,800 --> 00:10:46,680 Speaker 1: what do you do from a real estate perspective? What's 232 00:10:46,720 --> 00:10:49,320 Speaker 1: the call here from a real estate perspective when you 233 00:10:49,320 --> 00:10:51,600 Speaker 1: look at office reads and just office space. 234 00:10:51,960 --> 00:10:54,160 Speaker 6: Well, Paul Matt, it's great to be with you guys today. 235 00:10:54,440 --> 00:10:56,960 Speaker 6: I just came from the NYU Shack Reads and Posium 236 00:10:57,000 --> 00:10:59,120 Speaker 6: conference yesterday, and this is a big topic that came 237 00:10:59,200 --> 00:11:01,680 Speaker 6: up in conversation. And what you're noticing from some of 238 00:11:01,679 --> 00:11:04,360 Speaker 6: the big reed institutional buyers that are out there is, 239 00:11:04,400 --> 00:11:07,400 Speaker 6: after being opportunistic, they are starting to tiptoe back into 240 00:11:07,440 --> 00:11:10,600 Speaker 6: some of these really distressed sectors here and realizing that, 241 00:11:10,800 --> 00:11:12,640 Speaker 6: you know, we might be in for more short term pain, 242 00:11:12,679 --> 00:11:14,240 Speaker 6: maybe over the next year or two years. But on 243 00:11:14,280 --> 00:11:17,240 Speaker 6: the other side, they do feel like there are compelling opportunities. 244 00:11:17,400 --> 00:11:19,040 Speaker 6: I was walking over here with Jeff and we just 245 00:11:19,080 --> 00:11:21,840 Speaker 6: noticed like seventy five thousand square feet of vacant retail 246 00:11:21,880 --> 00:11:25,400 Speaker 6: space right here at this intersection in Roenberg headquarters. And 247 00:11:25,440 --> 00:11:27,040 Speaker 6: you know, I asked them, like, hey, what tenants were here. Oh, 248 00:11:27,080 --> 00:11:30,320 Speaker 6: this was Container Store, and here was this you know, innovation. 249 00:11:30,240 --> 00:11:33,880 Speaker 2: M We had a Victoria's Secret, We had like a 250 00:11:33,960 --> 00:11:35,720 Speaker 2: J Crew or a J Crew. 251 00:11:35,600 --> 00:11:37,959 Speaker 1: Brand I think Banana Republic maybe. 252 00:11:37,800 --> 00:11:39,680 Speaker 7: But yeah, there were a ton of stores here that 253 00:11:39,760 --> 00:11:40,560 Speaker 7: are just gone. 254 00:11:40,679 --> 00:11:43,120 Speaker 6: And I fall back on my you know comment I 255 00:11:43,120 --> 00:11:44,640 Speaker 6: always like to say is that, you know, there's only 256 00:11:44,679 --> 00:11:47,280 Speaker 6: one New York City. Eventually, it may take some time, 257 00:11:47,320 --> 00:11:49,160 Speaker 6: but it is going to bounce back. I think the 258 00:11:49,280 --> 00:11:51,280 Speaker 6: landlords are you know, some of these guys are I 259 00:11:51,280 --> 00:11:53,920 Speaker 6: think rolling to maybe kind of lower the rental rate 260 00:11:54,000 --> 00:11:55,920 Speaker 6: just to be able to bring some people in. Instead 261 00:11:55,960 --> 00:11:58,440 Speaker 6: maybe saying to have let's say thirty thousand square feet available, 262 00:11:58,440 --> 00:12:00,560 Speaker 6: will put a wall in, have two fifteen thousand foot 263 00:12:00,600 --> 00:12:02,640 Speaker 6: spots in and so hopefully they'll be able to target 264 00:12:02,720 --> 00:12:05,559 Speaker 6: that next generation of retailer tenants or the next generation 265 00:12:05,600 --> 00:12:07,200 Speaker 6: of office tenants to come in. I mean, we'll talk 266 00:12:07,240 --> 00:12:10,120 Speaker 6: about sau Green's earnings yesterday, and they had a massive, 267 00:12:10,240 --> 00:12:13,120 Speaker 6: great first quarter of leasing, like well above what analysts 268 00:12:13,160 --> 00:12:15,360 Speaker 6: were expecting as far as how much they were looking 269 00:12:15,360 --> 00:12:17,200 Speaker 6: to get back in the office. And so I think 270 00:12:17,200 --> 00:12:20,200 Speaker 6: we're starting to see some pockets of strength that's out there, 271 00:12:20,200 --> 00:12:22,720 Speaker 6: but overall on the bigger picture, yes, they're still weakness. 272 00:12:22,920 --> 00:12:25,480 Speaker 7: It's really the return to office thing that's the problem. 273 00:12:25,600 --> 00:12:28,200 Speaker 2: Right, And Jeff, you know, I'll ask you because David 274 00:12:28,200 --> 00:12:30,599 Speaker 2: mentioned NYU for this conference. 275 00:12:31,040 --> 00:12:33,560 Speaker 7: If you're in student housing, you're golden, right. 276 00:12:33,640 --> 00:12:38,160 Speaker 2: If you're in a medical office buildings, no problem. The 277 00:12:38,240 --> 00:12:41,520 Speaker 2: problem is, you know, workers like us, me and Paul 278 00:12:41,559 --> 00:12:44,280 Speaker 2: are the only people who come to this building. And 279 00:12:44,320 --> 00:12:47,640 Speaker 2: that's why you know, we don't do enough shopping at 280 00:12:47,720 --> 00:12:50,800 Speaker 2: Victoria's Secret and the Container's Store to keep those stores afloat. 281 00:12:50,880 --> 00:12:51,040 Speaker 3: Right. 282 00:12:51,120 --> 00:12:53,360 Speaker 7: So, but office is really the only problem. 283 00:12:53,360 --> 00:12:56,760 Speaker 2: Are the other parts of the real estate market in 284 00:12:56,840 --> 00:12:58,160 Speaker 2: the US still going strong? 285 00:12:58,240 --> 00:13:01,320 Speaker 7: Every other one, I don't want to say every other one. 286 00:13:01,320 --> 00:13:04,000 Speaker 8: I'm sure, there are pockets of weakness, and certainly within 287 00:13:04,080 --> 00:13:06,720 Speaker 8: segments there are going to be individual circumstances. But yeah, 288 00:13:06,800 --> 00:13:11,040 Speaker 8: I mean, multifamily is strong, Warehouses are strong. Certain aspects 289 00:13:11,080 --> 00:13:15,080 Speaker 8: of the healthcare real estate are very strong. Office is 290 00:13:15,080 --> 00:13:18,040 Speaker 8: the problem child. And and you know, Paul, you talk 291 00:13:18,080 --> 00:13:20,480 Speaker 8: about how many people are in the building, that's not 292 00:13:20,559 --> 00:13:24,880 Speaker 8: the entire focus for a company making the decision to 293 00:13:24,880 --> 00:13:27,440 Speaker 8: sign a lease for office space. Right, you still need 294 00:13:27,559 --> 00:13:30,920 Speaker 8: space even if you only have fifty or sixty percent 295 00:13:30,960 --> 00:13:33,720 Speaker 8: of your people in at any given time. And today's 296 00:13:33,760 --> 00:13:35,720 Speaker 8: point es still Green announced yesterday at least over five 297 00:13:35,760 --> 00:13:37,840 Speaker 8: hundred thousand square feet of space in New York office. 298 00:13:37,600 --> 00:13:39,160 Speaker 1: Building really in the first quarter. 299 00:13:39,280 --> 00:13:45,679 Speaker 8: Okay, so it's not it's not dead, it's certainly challenged. 300 00:13:47,480 --> 00:13:47,760 Speaker 1: Rents. 301 00:13:48,240 --> 00:13:50,439 Speaker 8: The rents on the five hundred thousand square feet that 302 00:13:50,520 --> 00:13:54,200 Speaker 8: they least, we're five percent higher than the expiring rents 303 00:13:54,480 --> 00:13:59,679 Speaker 8: on those leads. Now, granted those quality buildings, these are 304 00:13:59,840 --> 00:14:04,280 Speaker 8: the are you know, top of the going to It's 305 00:14:04,320 --> 00:14:06,480 Speaker 8: not Third Avenue, Midtown US in yards will sell. 306 00:14:06,600 --> 00:14:07,679 Speaker 1: Third Avenue is not going to sell? 307 00:14:07,720 --> 00:14:08,040 Speaker 3: Is that right? 308 00:14:08,280 --> 00:14:09,800 Speaker 1: I mean kind of is that kind of what we're seeing? 309 00:14:09,840 --> 00:14:11,679 Speaker 8: Well, the other thing to remember also is you know 310 00:14:12,200 --> 00:14:15,400 Speaker 8: these are you you're re signing leases that were last 311 00:14:15,440 --> 00:14:17,240 Speaker 8: signed ten years ago. So even if we're kind of 312 00:14:17,240 --> 00:14:20,040 Speaker 8: falling off to the peak, your mark to market is elevated, 313 00:14:20,080 --> 00:14:24,400 Speaker 8: and so you know, it's it's it's there's still activity happening. 314 00:14:24,800 --> 00:14:27,400 Speaker 8: You know, their portfolio is about ninety percent occupied. So 315 00:14:27,440 --> 00:14:31,440 Speaker 8: you hear stories of you know, occupancies tanking. It's not. 316 00:14:32,920 --> 00:14:35,200 Speaker 7: Like I said, it's not dead, it's just a struggle. 317 00:14:35,680 --> 00:14:38,880 Speaker 2: I got a viewer, a listener writing in here. 318 00:14:38,960 --> 00:14:40,440 Speaker 1: He's maybe he's also a viewer. 319 00:14:40,680 --> 00:14:43,440 Speaker 2: Maybe he's just looking at his radio right now and 320 00:14:43,480 --> 00:14:45,760 Speaker 2: he wants to know, David, how worried are you about 321 00:14:45,760 --> 00:14:48,520 Speaker 2: the CRI maturity wall of five hundred billion a year 322 00:14:48,880 --> 00:14:50,160 Speaker 2: for the next couple of years. 323 00:14:50,480 --> 00:14:51,240 Speaker 7: Is it? 324 00:14:51,280 --> 00:14:53,560 Speaker 1: Is it a huge headwind? 325 00:14:53,760 --> 00:14:55,960 Speaker 6: It's definitely something to take note of. I think you 326 00:14:56,000 --> 00:14:57,400 Speaker 6: need to take a look at it on a case 327 00:14:57,400 --> 00:14:59,760 Speaker 6: by case, company by company basis, because a lot of 328 00:14:59,760 --> 00:15:02,200 Speaker 6: our you know, especially the publicly traded reads, they're working 329 00:15:02,240 --> 00:15:04,160 Speaker 6: with some of the largest banks in the world, the Goldman's, 330 00:15:04,200 --> 00:15:06,040 Speaker 6: the JP Morgan's, and so you know, one of the 331 00:15:06,040 --> 00:15:08,040 Speaker 6: biggest conversations is how we how are we going to 332 00:15:08,120 --> 00:15:10,680 Speaker 6: refinance our debt stack? Looking out in the future, you know, 333 00:15:10,760 --> 00:15:12,560 Speaker 6: we're past COVID, We're not in a one and a 334 00:15:12,600 --> 00:15:16,120 Speaker 6: half percent operating environment. The blended extent is kind of gone. 335 00:15:16,400 --> 00:15:18,520 Speaker 6: But in that same breadth, if we're able to you know, 336 00:15:18,640 --> 00:15:21,600 Speaker 6: piecemeal our stacks over the next couple of years of 337 00:15:22,280 --> 00:15:24,720 Speaker 6: restructuring it, I think we'll be able to weather the storm. 338 00:15:24,760 --> 00:15:27,080 Speaker 6: Now again, if you're some of these other trouble companies 339 00:15:27,080 --> 00:15:29,680 Speaker 6: that are out there, you might have a longer runway 340 00:15:29,760 --> 00:15:32,040 Speaker 6: than you know, somebody that's a class A you know, 341 00:15:32,120 --> 00:15:34,480 Speaker 6: retail operator or apartment guy where it's not really you know, 342 00:15:34,560 --> 00:15:36,200 Speaker 6: Freddie Fanny is always there to refine. 343 00:15:36,200 --> 00:15:37,120 Speaker 7: It's not a problem. 344 00:15:37,120 --> 00:15:38,720 Speaker 2: But there are going to be people who do have 345 00:15:38,760 --> 00:15:42,000 Speaker 2: problems refinancing. There is going to be a storm to weather. 346 00:15:42,280 --> 00:15:44,240 Speaker 2: Is there going to be real consolidation you. 347 00:15:44,240 --> 00:15:46,320 Speaker 6: Think, I think we're going to see some consolidation. I mean, 348 00:15:46,400 --> 00:15:48,480 Speaker 6: we talked about yesterday. You're not really seeing much public 349 00:15:48,520 --> 00:15:50,920 Speaker 6: to public MNA transaction based off the discounts of a 350 00:15:50,960 --> 00:15:53,080 Speaker 6: lot of these guys are trading. But you know, one 351 00:15:53,360 --> 00:15:55,080 Speaker 6: key thing, and Jeff and I are talking about it earlier. 352 00:15:55,400 --> 00:15:57,120 Speaker 6: You know, there's sovereign wealth funds that are out there. 353 00:15:57,160 --> 00:15:59,680 Speaker 6: You got Government of Singapore, You've got QYA, you got 354 00:15:59,680 --> 00:16:02,120 Speaker 6: Candidate Pension. A lot of these big sovereign wealth funds 355 00:16:02,160 --> 00:16:05,040 Speaker 6: are out there and they've got capital, and they're looking 356 00:16:05,080 --> 00:16:07,720 Speaker 6: at that long term opportunity. Not just five years. We're 357 00:16:07,760 --> 00:16:10,120 Speaker 6: talking twenty five fifty years out. Like you know, are 358 00:16:10,120 --> 00:16:12,600 Speaker 6: we gonna tear down the GM building anytime soon? No, 359 00:16:12,720 --> 00:16:14,400 Speaker 6: that's just going to continue to you know, the met 360 00:16:14,400 --> 00:16:17,040 Speaker 6: Life building another good example. They're ready to come right, 361 00:16:17,080 --> 00:16:18,960 Speaker 6: sit down, write a check, and you know, focus on 362 00:16:19,000 --> 00:16:21,200 Speaker 6: this long term investment. So I think that there are 363 00:16:21,240 --> 00:16:22,760 Speaker 6: good capital partners that are out there. 364 00:16:23,120 --> 00:16:24,680 Speaker 8: I actually think that's going to be the key. 365 00:16:24,760 --> 00:16:24,960 Speaker 3: Right. 366 00:16:25,000 --> 00:16:30,680 Speaker 8: So you ask about refinancing and that maturity wall. There 367 00:16:30,720 --> 00:16:33,160 Speaker 8: are going to be properties that have a problem refinancing, 368 00:16:33,160 --> 00:16:35,040 Speaker 8: and it's probably going to be mostly concentrated in the 369 00:16:35,040 --> 00:16:39,200 Speaker 8: office space. Who is willing to step up and put 370 00:16:39,240 --> 00:16:42,240 Speaker 8: a loan on these properties? What kind of additional equity 371 00:16:42,400 --> 00:16:46,320 Speaker 8: is required to fill any gap if loan to value, 372 00:16:46,320 --> 00:16:48,040 Speaker 8: if values come down and loan to values have to 373 00:16:48,080 --> 00:16:52,000 Speaker 8: have to kind of shrink accordingly, and if there is distress, 374 00:16:52,040 --> 00:16:53,520 Speaker 8: who's willing to step up and write a check to 375 00:16:53,520 --> 00:16:54,320 Speaker 8: buy these properties. 376 00:16:54,400 --> 00:16:56,160 Speaker 1: When do you think we'll get to that point? Is 377 00:16:56,160 --> 00:16:57,720 Speaker 1: that something that's just gonna roll over the next couple 378 00:16:57,720 --> 00:17:00,480 Speaker 1: of years. It's going to be an extended time frame. 379 00:17:00,560 --> 00:17:03,400 Speaker 8: And right now we are in a massive information void 380 00:17:03,480 --> 00:17:06,840 Speaker 8: because there are no data points on assets trading. Nobody's 381 00:17:06,880 --> 00:17:09,200 Speaker 8: nobody's willing to step up and buy because sellers aren't 382 00:17:09,440 --> 00:17:12,840 Speaker 8: yet forced to lower their asking price. You've got, you've 383 00:17:12,920 --> 00:17:14,760 Speaker 8: you've got the only data points that you're seeing. Our 384 00:17:14,800 --> 00:17:18,600 Speaker 8: people are companies that are defaulting on loans, and so 385 00:17:18,720 --> 00:17:21,560 Speaker 8: it's you've got plenty of bad news into this information void. 386 00:17:21,600 --> 00:17:23,600 Speaker 8: But but you need we need to start seeing data 387 00:17:23,640 --> 00:17:27,200 Speaker 8: points on properties trading and loans getting under rid. 388 00:17:27,160 --> 00:17:28,920 Speaker 7: By the way, it's not all about New York, even 389 00:17:28,920 --> 00:17:30,320 Speaker 7: though we think. 390 00:17:30,440 --> 00:17:31,760 Speaker 1: Yeah, I need to think, I need to get on 391 00:17:31,800 --> 00:17:33,280 Speaker 1: the road a little more. Is it all about New York? 392 00:17:33,359 --> 00:17:36,720 Speaker 2: No, you're from Austin, right, so Dallas, you're from Dallas. Sorry, 393 00:17:36,720 --> 00:17:38,920 Speaker 2: but you went to ut I did. I was just 394 00:17:38,960 --> 00:17:40,680 Speaker 2: down in Austin and it was sick and there were 395 00:17:40,720 --> 00:17:43,960 Speaker 2: cranes everywhere. Right, they're just putting up buildings left and right. 396 00:17:43,960 --> 00:17:47,200 Speaker 2: They can't build them fast enough. So I'm not saying 397 00:17:47,240 --> 00:17:50,080 Speaker 2: specifically there, but there are places around the country where 398 00:17:50,080 --> 00:17:53,040 Speaker 2: it's still very busy, very popular, and people may even 399 00:17:53,040 --> 00:17:53,960 Speaker 2: want to go to an office. 400 00:17:54,040 --> 00:17:56,240 Speaker 6: So mass we've discussed. You know, we run the Residential 401 00:17:56,280 --> 00:17:59,080 Speaker 6: ret Income UTF Ticker's House ha US and one of 402 00:17:59,080 --> 00:18:02,000 Speaker 6: our focuses is look yet where the migration trends are happening. 403 00:18:02,160 --> 00:18:04,560 Speaker 6: And as a result, you've got Redfin, Solo, Coast Star, 404 00:18:04,600 --> 00:18:07,000 Speaker 6: all these data sources that are telling you here's where 405 00:18:07,040 --> 00:18:10,959 Speaker 6: the demand is Nashville, Charlotte, Austin, Tampa, Jacksonville. And as 406 00:18:11,000 --> 00:18:12,960 Speaker 6: a result, look at the city skylines and you see 407 00:18:12,960 --> 00:18:14,960 Speaker 6: all the cranes and the question is where are all 408 00:18:14,960 --> 00:18:17,159 Speaker 6: these people going to live? And so it's these residential 409 00:18:17,200 --> 00:18:19,760 Speaker 6: riek guys because of how crazy the home ownership market 410 00:18:19,800 --> 00:18:21,399 Speaker 6: is right now, they're the ones that are in the 411 00:18:21,440 --> 00:18:24,240 Speaker 6: driver's seat to inherit all that potential office worker demand 412 00:18:24,320 --> 00:18:25,640 Speaker 6: in those aftermarkets. 413 00:18:25,920 --> 00:18:29,000 Speaker 1: Jeffany, you talk to institutional investors, where in the reach 414 00:18:29,000 --> 00:18:30,600 Speaker 1: space do they really want to be these days? 415 00:18:30,760 --> 00:18:35,000 Speaker 7: Not office other than house h a U S. 416 00:18:35,520 --> 00:18:39,080 Speaker 8: Honestly, you know, there there has been a kind of 417 00:18:39,600 --> 00:18:42,879 Speaker 8: sector wide push down on prices, and I think that 418 00:18:42,880 --> 00:18:46,119 Speaker 8: that's just you know, rising rates have have impacted across 419 00:18:46,160 --> 00:18:50,040 Speaker 8: the board, fear of you know, that maturity wall that 420 00:18:50,040 --> 00:18:54,600 Speaker 8: that you know, this kind of cre fear. But some 421 00:18:54,640 --> 00:18:58,400 Speaker 8: of the sectors that I mentioned up front are kind 422 00:18:58,440 --> 00:19:03,920 Speaker 8: of still going strong. Warehouse is a multifamily, medical office, 423 00:19:04,440 --> 00:19:05,400 Speaker 8: life science. 424 00:19:05,160 --> 00:19:09,720 Speaker 6: Necessity based retail, grocery, the grocery anchor shopping center, the Starbucks, 425 00:19:09,720 --> 00:19:13,879 Speaker 6: the CBS, Dwayne Reed, Walgreens. People are out there spending 426 00:19:14,000 --> 00:19:16,720 Speaker 6: Madison Square Garden, Madison Square Garden for Fish concert. 427 00:19:17,000 --> 00:19:19,600 Speaker 1: Fish is coming back to town. There's where you're going. 428 00:19:19,640 --> 00:19:21,240 Speaker 1: Are you going, Jeff? This is where I drop out 429 00:19:21,240 --> 00:19:23,440 Speaker 1: of it. He drops out of the conversation. All right, guys, 430 00:19:23,560 --> 00:19:25,320 Speaker 1: thanks so much for coming in. We had a cool, 431 00:19:25,400 --> 00:19:28,080 Speaker 1: cool roundtable talking about all things real estate. Here we 432 00:19:28,080 --> 00:19:30,560 Speaker 1: did with Jeff Langbaum, he is the senior read analyst 433 00:19:30,600 --> 00:19:34,440 Speaker 1: a Bloomberg Intelligence and David auerback managing director, are Maadi 434 00:19:34,520 --> 00:19:37,960 Speaker 1: ETF Advisors talking about the real estate biz, and yeah, 435 00:19:38,359 --> 00:19:40,600 Speaker 1: office real estate a little tough, particularly in some of 436 00:19:40,600 --> 00:19:43,359 Speaker 1: those coastal cities like New York and San Francisco, but 437 00:19:43,440 --> 00:19:44,480 Speaker 1: other areas doing well. 438 00:19:44,680 --> 00:19:47,800 Speaker 3: You're listening to the tape cans are live program Bloomberg 439 00:19:47,840 --> 00:19:51,439 Speaker 3: Markets weekdays at ten am Eastern on Bloomberg Radio, the 440 00:19:51,480 --> 00:19:54,720 Speaker 3: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 441 00:19:54,760 --> 00:19:57,600 Speaker 3: You can also listen live on Amazon Alexa from our 442 00:19:57,600 --> 00:20:01,600 Speaker 3: flagship New York station. Just say Alex, it's play Bloomberg eleven. 443 00:20:04,080 --> 00:20:07,199 Speaker 1: Let's talk the legal weed business. Cannabis. It continues to 444 00:20:07,240 --> 00:20:10,159 Speaker 1: roll out across the country on a state by state basis, 445 00:20:10,160 --> 00:20:11,520 Speaker 1: and it's rolled out here in New York City. But 446 00:20:11,560 --> 00:20:13,760 Speaker 1: it's kind of been I don't get. I mean, there's 447 00:20:13,800 --> 00:20:15,720 Speaker 1: only a handful of stores that are approved, yet they're 448 00:20:15,720 --> 00:20:18,320 Speaker 1: on every street corner. I don't know, Matt how this 449 00:20:18,359 --> 00:20:21,840 Speaker 1: whole thing it is an absolute mess. 450 00:20:22,480 --> 00:20:28,000 Speaker 2: But on a day like today, four twenty, that is, 451 00:20:28,280 --> 00:20:30,760 Speaker 2: I think, you know a lot of consumers are going 452 00:20:30,840 --> 00:20:31,280 Speaker 2: to be like. 453 00:20:32,160 --> 00:20:35,320 Speaker 1: Blessed this mess. Bless this mess. George Arcos he joins 454 00:20:35,359 --> 00:20:38,160 Speaker 1: and he's the CEO, chairman, and co founder of cannabis 455 00:20:38,200 --> 00:20:41,679 Speaker 1: company Verano. George, give us an overview. You've been in 456 00:20:41,720 --> 00:20:45,160 Speaker 1: this business since you co found a Verano in twenty seventeen. 457 00:20:45,640 --> 00:20:49,240 Speaker 1: Just give us an overview of where the legalized cannabis 458 00:20:49,400 --> 00:20:52,800 Speaker 1: business is today in US. 459 00:20:53,560 --> 00:20:56,680 Speaker 5: Hey, good morning, pleasure to be here today. Legal cannabis 460 00:20:56,720 --> 00:21:00,720 Speaker 5: business is thriving, doing well, you know, despite a little 461 00:21:00,800 --> 00:21:03,920 Speaker 5: negative sentiment at the moment to safe banking and didn't 462 00:21:03,920 --> 00:21:06,440 Speaker 5: happen last year, and there hasn't been much subtle reforms. 463 00:21:06,600 --> 00:21:08,439 Speaker 5: You know, we've built our business to be able to 464 00:21:08,440 --> 00:21:11,800 Speaker 5: sustain and survivee in times like this, and you know, 465 00:21:11,840 --> 00:21:14,080 Speaker 5: today's the super Bowl of cannabis in an exciting date 466 00:21:14,119 --> 00:21:16,199 Speaker 5: for all of our consumers, our employees, and all of 467 00:21:16,200 --> 00:21:17,040 Speaker 5: our shareholders. 468 00:21:17,240 --> 00:21:19,760 Speaker 7: Yeah, it's I mean, I think it's very exciting. 469 00:21:20,480 --> 00:21:25,320 Speaker 2: You have a billion dollar market cap, but it has 470 00:21:25,440 --> 00:21:27,120 Speaker 2: been much higher? 471 00:21:27,280 --> 00:21:27,439 Speaker 1: Is it? 472 00:21:27,520 --> 00:21:30,520 Speaker 2: You think the disappointment in safe banking or the lack 473 00:21:30,600 --> 00:21:35,760 Speaker 2: of the Safe Banking Act that has had shareholders kind 474 00:21:35,760 --> 00:21:36,800 Speaker 2: of running for the exits? 475 00:21:39,359 --> 00:21:39,720 Speaker 3: I do. 476 00:21:39,760 --> 00:21:42,680 Speaker 5: I mean the biggest issue is the type of shareholders 477 00:21:42,720 --> 00:21:45,440 Speaker 5: to be attractorally, not being able to you know, bring 478 00:21:45,480 --> 00:21:49,480 Speaker 5: in institutional shareholders has affected our industry. We'll mostly case 479 00:21:49,560 --> 00:21:51,960 Speaker 5: on the detail and you know, trade the stock exchange 480 00:21:51,960 --> 00:21:54,760 Speaker 5: and company like ours, with the revenue the profitability that 481 00:21:54,800 --> 00:21:56,480 Speaker 5: we have, we should be in a smater change and 482 00:21:56,520 --> 00:21:58,679 Speaker 5: we should have a legal business that doesn't is the 483 00:21:58,680 --> 00:22:01,520 Speaker 5: subject to to ade and all these onerous laws that 484 00:22:02,080 --> 00:22:03,920 Speaker 5: hinder our capability. 485 00:22:03,440 --> 00:22:07,879 Speaker 2: Will george any any any expectation. Yeah, in terms of 486 00:22:07,920 --> 00:22:12,040 Speaker 2: fighting the fight, I mean, are you guys lobbying? Are 487 00:22:12,080 --> 00:22:16,440 Speaker 2: you banding together with other cannabis businesses to send people 488 00:22:16,480 --> 00:22:19,440 Speaker 2: to Congress to send money, let's face it, to send 489 00:22:19,480 --> 00:22:22,480 Speaker 2: money to congressmen and congresswomen to get them to vote 490 00:22:22,480 --> 00:22:23,280 Speaker 2: the way you want them to. 491 00:22:25,440 --> 00:22:28,479 Speaker 5: You know, we're doing everything we can. Unfortunately we're not 492 00:22:28,720 --> 00:22:31,520 Speaker 5: you know, we're not as put together as pharma and 493 00:22:31,800 --> 00:22:35,280 Speaker 5: big alcohol, so the lobbying dollars aren't as substantial as 494 00:22:35,280 --> 00:22:37,760 Speaker 5: some of those larger industries. But we're doing the best 495 00:22:37,840 --> 00:22:40,000 Speaker 5: we can. You know, there's a lot of new interests 496 00:22:40,040 --> 00:22:42,880 Speaker 5: to the space, coachal equity applicants, et cetera. So we 497 00:22:42,960 --> 00:22:45,640 Speaker 5: have to fight the fights for so many then there's 498 00:22:45,640 --> 00:22:47,439 Speaker 5: only a handful of us that have the capability to 499 00:22:47,520 --> 00:22:49,879 Speaker 5: do so. But we're doing the best we can, and 500 00:22:49,920 --> 00:22:51,840 Speaker 5: the more we speak and the more we talk about it, 501 00:22:53,000 --> 00:22:54,760 Speaker 5: hopefully it gets some change here soon. 502 00:22:55,440 --> 00:22:58,760 Speaker 1: So in the interim, how do companies like yours finance 503 00:22:58,800 --> 00:23:01,520 Speaker 1: themselves on a day to day basis, on a longer 504 00:23:01,600 --> 00:23:05,360 Speaker 1: term basis, how is how have you and your your 505 00:23:05,400 --> 00:23:10,520 Speaker 1: peers kind of evolved in terms of capitalization and financing, so. 506 00:23:10,520 --> 00:23:13,359 Speaker 5: We've all taken different paths. For us, profitability has always 507 00:23:13,359 --> 00:23:17,000 Speaker 5: been a key point of our business, so we've continued 508 00:23:17,000 --> 00:23:19,520 Speaker 5: to grow through our cash flow. This year, we'll have 509 00:23:19,560 --> 00:23:21,439 Speaker 5: a substantial amount of cash flow from our business as 510 00:23:21,440 --> 00:23:24,000 Speaker 5: our capex is doing those the majority of our projects 511 00:23:24,000 --> 00:23:26,359 Speaker 5: are done, so we're excited about that. A lot of 512 00:23:26,400 --> 00:23:29,320 Speaker 5: our acquisition liabilities are done, so we'll have very strong 513 00:23:29,359 --> 00:23:31,200 Speaker 5: cashrow this year to be able to continue to grow 514 00:23:31,200 --> 00:23:33,159 Speaker 5: the business paid on debt, and it gives us a 515 00:23:33,200 --> 00:23:36,920 Speaker 5: lot of optionality. Some others might not be so fortunate. 516 00:23:37,080 --> 00:23:39,399 Speaker 5: You know, they were building their business and hoping for 517 00:23:39,480 --> 00:23:42,560 Speaker 5: safe banking to pass, to be able to access the 518 00:23:42,560 --> 00:23:45,760 Speaker 5: public markets and additional banks, and you know, there might 519 00:23:45,760 --> 00:23:49,000 Speaker 5: be some turbulence ahead for some operators. But for Verano, 520 00:23:49,160 --> 00:23:51,640 Speaker 5: we were built four times like this, like I said earlier, 521 00:23:51,720 --> 00:23:53,840 Speaker 5: and we're going to continue to thrive and hope well, 522 00:23:54,119 --> 00:23:58,520 Speaker 5: we foresee some opportunistic m and A opportunities and we're 523 00:23:58,520 --> 00:24:02,080 Speaker 5: going to continue to go down the road and be successful. 524 00:24:02,280 --> 00:24:04,879 Speaker 5: And we have a great team, great people, great product, 525 00:24:05,000 --> 00:24:06,359 Speaker 5: and we're excited about the future. 526 00:24:06,880 --> 00:24:12,240 Speaker 2: What do you think about the way Americans feel about 527 00:24:12,240 --> 00:24:12,800 Speaker 2: the product? 528 00:24:12,800 --> 00:24:13,400 Speaker 1: I mean, is it. 529 00:24:13,280 --> 00:24:15,359 Speaker 7: Becoming more mainstream stream? 530 00:24:15,480 --> 00:24:17,720 Speaker 1: Is something I guess I can talk about on the 531 00:24:17,800 --> 00:24:19,359 Speaker 1: radio sure days. 532 00:24:19,600 --> 00:24:22,359 Speaker 2: You know, is it becoming more accepted? Are we going 533 00:24:22,440 --> 00:24:24,359 Speaker 2: to see many more states legalize it? 534 00:24:26,920 --> 00:24:30,440 Speaker 5: You will? I mean Connecticut converted over January this year. 535 00:24:30,600 --> 00:24:33,040 Speaker 5: Maryland should convert over hopefully in July of this year. 536 00:24:33,720 --> 00:24:36,040 Speaker 5: I think Florida, Pennsylvania, and Ohio will be coming up 537 00:24:36,040 --> 00:24:38,200 Speaker 5: the next couple of years. You see multiple more markets 538 00:24:39,000 --> 00:24:43,200 Speaker 5: converting over to medical use. You see Alabama and North 539 00:24:43,240 --> 00:24:47,040 Speaker 5: Carolina's got some things moving Texas. So the polling that 540 00:24:47,119 --> 00:24:50,280 Speaker 5: you look state by state has been trending very strongly 541 00:24:50,359 --> 00:24:52,800 Speaker 5: for positive, you know, on the positive side of cannabis. 542 00:24:52,800 --> 00:24:55,280 Speaker 5: So it's something you can't ignore and it's something the 543 00:24:55,320 --> 00:24:58,359 Speaker 5: politicians can't be. So as long as we continue to 544 00:24:58,400 --> 00:25:01,000 Speaker 5: do a great job provide a consistent and state products 545 00:25:01,359 --> 00:25:04,280 Speaker 5: for both our medical and ALUs, consumers will continue to 546 00:25:04,320 --> 00:25:07,040 Speaker 5: grow and positive things will happen for our company and 547 00:25:07,520 --> 00:25:08,159 Speaker 5: others like us. 548 00:25:08,400 --> 00:25:12,640 Speaker 2: What about innovation on the product side, You know, there 549 00:25:12,800 --> 00:25:15,800 Speaker 2: are people out there who say Matt. You know, I 550 00:25:15,840 --> 00:25:18,840 Speaker 2: love weed, but it just makes me eat like a 551 00:25:18,880 --> 00:25:22,320 Speaker 2: pint of hogandas every time I consume it. 552 00:25:22,359 --> 00:25:24,800 Speaker 1: Is there any possibility of altering. 553 00:25:24,280 --> 00:25:27,080 Speaker 2: The product so that you can do it in a 554 00:25:27,200 --> 00:25:32,760 Speaker 2: more nutritious way. 555 00:25:30,600 --> 00:25:33,240 Speaker 5: There are? You know, there's multiple cannabinoids in the plant 556 00:25:33,280 --> 00:25:36,600 Speaker 5: and they all do different things. So there's ongoing research 557 00:25:37,119 --> 00:25:39,160 Speaker 5: not only in our own companies, with other companies as well, 558 00:25:39,200 --> 00:25:42,119 Speaker 5: and we're continuing to fight find cannabinoids that affect the 559 00:25:42,119 --> 00:25:44,760 Speaker 5: body in different ways. And there's even appetites of pressments 560 00:25:44,880 --> 00:25:48,400 Speaker 5: in certain cannabinoids. So the con formulations will continue to change, 561 00:25:48,440 --> 00:25:52,240 Speaker 5: products will continue to develop, and will continue to roll 562 00:25:52,280 --> 00:25:52,640 Speaker 5: them up. 563 00:25:53,000 --> 00:25:55,400 Speaker 1: George, What's what's the growth drivers for your company? I'm 564 00:25:55,400 --> 00:25:57,600 Speaker 1: looking at some of the analysts consensus and they've got 565 00:25:57,640 --> 00:25:59,800 Speaker 1: double digit top line growth for you guys. Is that 566 00:26:00,119 --> 00:26:02,159 Speaker 1: How much is that as just the market growing versus 567 00:26:02,200 --> 00:26:05,399 Speaker 1: you guys doing company specific things to drive the top line. 568 00:26:07,440 --> 00:26:09,520 Speaker 5: It's both. I mean, the biggest driver of our business 569 00:26:09,560 --> 00:26:12,560 Speaker 5: is to flip from medical to adult use. I mean 570 00:26:12,560 --> 00:26:14,680 Speaker 5: we had a pretty big driver last year from New Jersey. 571 00:26:15,280 --> 00:26:17,840 Speaker 5: Illinois was a big, big jump for ours big lifts. 572 00:26:18,280 --> 00:26:20,600 Speaker 5: This year we had Connecticut. We'll also have Maryland here 573 00:26:20,640 --> 00:26:24,080 Speaker 5: hopefully the summer fall. So those are the biggest drivers 574 00:26:24,080 --> 00:26:27,439 Speaker 5: by far. And then you know the medical markets, although 575 00:26:27,480 --> 00:26:30,040 Speaker 5: this year that's declined a bit because of the economy. 576 00:26:30,520 --> 00:26:34,240 Speaker 5: Normally have nice continuous growth, right, So it's a combination. 577 00:26:34,320 --> 00:26:36,080 Speaker 5: They're up. And obviously you have to do a great 578 00:26:36,160 --> 00:26:38,359 Speaker 5: job and you have to provide great products, rate service, 579 00:26:39,000 --> 00:26:42,040 Speaker 5: and state reliable products. So those those all things for 580 00:26:42,160 --> 00:26:44,320 Speaker 5: mine will continue to drive our company forward. There are 581 00:26:44,440 --> 00:26:46,639 Speaker 5: multiple states are out the US that don't have medical 582 00:26:46,640 --> 00:26:49,880 Speaker 5: and ORLT use programs, so there's growth for many years 583 00:26:49,920 --> 00:26:50,280 Speaker 5: I had. 584 00:26:50,400 --> 00:26:52,320 Speaker 1: All right, it is for twenty the Super Bowls. You 585 00:26:52,359 --> 00:26:54,600 Speaker 1: said of cannabis. What are you guys doing at your stores, 586 00:26:54,880 --> 00:26:55,960 Speaker 1: your retail us today? 587 00:26:57,760 --> 00:27:00,720 Speaker 5: You know, today's almost like a massive customerreciation day. We 588 00:27:00,760 --> 00:27:03,960 Speaker 5: have all types of promotions. We do food trucks, music 589 00:27:04,080 --> 00:27:06,800 Speaker 5: events throughout the country and all of our different locations, 590 00:27:07,000 --> 00:27:09,520 Speaker 5: our wholesale partners. You tried them with promotions, et cetera 591 00:27:09,640 --> 00:27:11,840 Speaker 5: for the consumers. So it's a fun day for all 592 00:27:12,880 --> 00:27:14,440 Speaker 5: not only our consumers, but it's a fun day for 593 00:27:14,480 --> 00:27:17,480 Speaker 5: our employees as well, right, the day for them to 594 00:27:17,520 --> 00:27:19,439 Speaker 5: be thankful for what we have and what they've been 595 00:27:19,480 --> 00:27:22,760 Speaker 5: given and what we've been given. And it's just a good, 596 00:27:23,080 --> 00:27:24,600 Speaker 5: good vibe day for us. 597 00:27:24,800 --> 00:27:27,399 Speaker 1: Good vibes. What it's all about. What it's all about, 598 00:27:27,480 --> 00:27:32,280 Speaker 1: Man George Arco's CEO, chairman, co founder of Verano. Verano 599 00:27:32,320 --> 00:27:34,840 Speaker 1: is a public trade of cannabis company trades over the 600 00:27:34,880 --> 00:27:39,240 Speaker 1: counter tickers v r n F. It's kind of market 601 00:27:39,280 --> 00:27:41,480 Speaker 1: cap just under one billion dollars over. 602 00:27:41,880 --> 00:27:42,239 Speaker 3: That was it? 603 00:27:42,280 --> 00:27:44,160 Speaker 1: Just over okay? Just over one non is very good. 604 00:27:44,640 --> 00:27:47,479 Speaker 1: Talking about the legalized cannabis market, it is a growing 605 00:27:47,520 --> 00:27:49,480 Speaker 1: market and again also looking at some of the analysts 606 00:27:49,480 --> 00:27:52,160 Speaker 1: forecasted revenue growth a double digit ten eleven, twelve percent, 607 00:27:52,200 --> 00:27:55,080 Speaker 1: so pretty interesting growth story there, but still lots of 608 00:27:55,680 --> 00:27:59,720 Speaker 1: legalities to be negotiated, including safe banking is probably the 609 00:27:59,800 --> 00:28:01,879 Speaker 1: key one for the growth of that business. 610 00:28:02,720 --> 00:28:06,159 Speaker 3: You're listening to the team Ken's are Live program Bloomberg 611 00:28:06,200 --> 00:28:09,600 Speaker 3: Markets weekdays at ten am eastering on Bloomberg dot com, 612 00:28:09,640 --> 00:28:12,800 Speaker 3: the iHeartRadio app and the Bloomberg Business app, or listen 613 00:28:12,880 --> 00:28:15,000 Speaker 3: on demand wherever you get your podcasts. 614 00:28:16,920 --> 00:28:19,200 Speaker 1: And let's turn to those banks. It's been a busy 615 00:28:19,280 --> 00:28:22,760 Speaker 1: day for earnings and a busy day for the regional banks. 616 00:28:22,760 --> 00:28:24,960 Speaker 1: And this is important because it's been a busy month 617 00:28:25,000 --> 00:28:27,480 Speaker 1: for Herman. It has been a herbin Chen who covers 618 00:28:27,520 --> 00:28:29,440 Speaker 1: the regional banks. I mean, you know, you couldn't pick 619 00:28:29,440 --> 00:28:31,480 Speaker 1: this guy out of a lineup a month ago. Now 620 00:28:31,480 --> 00:28:34,000 Speaker 1: he's like star, stage and screen and radio. 621 00:28:34,920 --> 00:28:37,480 Speaker 2: I actually, I actually the other day I was in 622 00:28:37,520 --> 00:28:40,440 Speaker 2: the car switched on Bloomberg Radio mid sentence and I 623 00:28:40,480 --> 00:28:41,240 Speaker 2: was like, oh, that's Herman. 624 00:28:41,680 --> 00:28:44,160 Speaker 1: But now I recognize his voice on the fly. That's 625 00:28:44,200 --> 00:28:46,600 Speaker 1: how bad it's gotten. So Herman, thanks so much for 626 00:28:46,680 --> 00:28:48,960 Speaker 1: joining us yet again here in studio. Talk to us 627 00:28:48,960 --> 00:28:50,720 Speaker 1: about some of the banks that reported today. What do 628 00:28:50,760 --> 00:28:51,840 Speaker 1: we kind of take away here? 629 00:28:51,960 --> 00:28:52,720 Speaker 9: Yeah, mixed trends. 630 00:28:52,720 --> 00:28:53,080 Speaker 10: Over all. 631 00:28:53,640 --> 00:28:57,560 Speaker 9: I would say that the issues that are facing banks 632 00:28:57,640 --> 00:28:59,800 Speaker 9: is not a liquidator or solvency issue. It's more of 633 00:28:59,840 --> 00:29:04,320 Speaker 9: an earnings issue, with deposits starting to continue to face 634 00:29:04,360 --> 00:29:08,480 Speaker 9: some attrition and higher banks are having to raise their 635 00:29:08,520 --> 00:29:12,479 Speaker 9: deposit pricing. So all that means that netedgor's margins are 636 00:29:12,480 --> 00:29:16,240 Speaker 9: going to be narrower and banks will sort of muddle through. 637 00:29:16,360 --> 00:29:21,120 Speaker 9: But the valuations for these companies has already reflected with 638 00:29:21,880 --> 00:29:25,520 Speaker 9: banks are trading at around tangible book value. So everything's 639 00:29:25,560 --> 00:29:29,360 Speaker 9: been priced in, but the stocks continue to So when I. 640 00:29:29,280 --> 00:29:31,080 Speaker 1: Look at valuation for a regional bank, give me the 641 00:29:31,440 --> 00:29:33,360 Speaker 1: where it trades at the bottom and where it trades 642 00:29:33,440 --> 00:29:35,000 Speaker 1: kind of at the top of kind of where are we? 643 00:29:35,120 --> 00:29:35,320 Speaker 3: Yeah? 644 00:29:35,360 --> 00:29:38,200 Speaker 9: Sure, so during the financial crisis, banks are trading below 645 00:29:38,240 --> 00:29:40,960 Speaker 9: tangible book value because there was a lot of concerns 646 00:29:40,960 --> 00:29:44,640 Speaker 9: that if banks would survive, they. 647 00:29:44,640 --> 00:29:45,800 Speaker 1: Ran European books. 648 00:29:45,960 --> 00:29:49,719 Speaker 2: European banks, by the way, sat at below book value 649 00:29:49,760 --> 00:29:51,200 Speaker 2: for a decade. 650 00:29:50,880 --> 00:29:54,440 Speaker 9: Right exactly, So that was an elongated issue there. And 651 00:29:54,880 --> 00:29:56,800 Speaker 9: on the top range, you know, you're you're talking about 652 00:29:56,800 --> 00:29:59,680 Speaker 9: something like around two times, so it's. 653 00:29:59,520 --> 00:30:01,840 Speaker 1: Okay, and right now we're just about tangible book fag. 654 00:30:02,280 --> 00:30:05,440 Speaker 1: So one could argue, as if you're a value investor, 655 00:30:05,680 --> 00:30:07,000 Speaker 1: I'm gonna go buy some banks here. 656 00:30:07,240 --> 00:30:10,440 Speaker 9: You could argue, if you're a long term investor, some 657 00:30:10,480 --> 00:30:12,880 Speaker 9: of these issues will will go away, and but you're 658 00:30:12,880 --> 00:30:14,680 Speaker 9: gonna have to wait a while because we're not even 659 00:30:14,800 --> 00:30:21,080 Speaker 9: at the recessionary type scenario where banks are facing higher 660 00:30:21,280 --> 00:30:24,080 Speaker 9: net charge off some bad debts, so that part of 661 00:30:24,120 --> 00:30:25,520 Speaker 9: the story hasn't played out yet. 662 00:30:25,520 --> 00:30:27,239 Speaker 1: But well, they pay me dividends. I'm looking at your 663 00:30:27,280 --> 00:30:29,600 Speaker 1: old employer, M and T Bank, I got a four 664 00:30:29,600 --> 00:30:31,840 Speaker 1: percent dividend, Yet I'm getting paid Wait a little bit here, 665 00:30:31,960 --> 00:30:33,960 Speaker 1: get paid the way point? 666 00:30:33,960 --> 00:30:36,800 Speaker 9: Maybe, Yeah, that's right, You're you're getting paid a weight. 667 00:30:36,920 --> 00:30:40,320 Speaker 9: You have to face some volatility, Buy it and forget 668 00:30:40,320 --> 00:30:41,840 Speaker 9: it for a few years and you should be fine. 669 00:30:41,880 --> 00:30:44,400 Speaker 1: Has anybody ever have we seen some of these hedge 670 00:30:44,400 --> 00:30:46,960 Speaker 1: fund managers come out and say I'm buying the banks. 671 00:30:47,040 --> 00:30:48,880 Speaker 1: Have we seen any of that? Not quite yet. 672 00:30:49,560 --> 00:30:52,600 Speaker 9: We're still in a bit of uncertainty mode. But but 673 00:30:52,680 --> 00:30:57,040 Speaker 9: I think what the one Q earnings has has demonstrated 674 00:30:57,040 --> 00:31:00,680 Speaker 9: is that the contagion fears are off the table, where 675 00:31:00,800 --> 00:31:02,720 Speaker 9: the banks are just going to mouddle through and face 676 00:31:02,760 --> 00:31:03,840 Speaker 9: some weaker earnings. 677 00:31:03,960 --> 00:31:06,239 Speaker 2: But yeah, that's the key, right, because we don't know 678 00:31:06,240 --> 00:31:09,040 Speaker 2: how weak they're gonna be. Right, you said they haven't 679 00:31:09,240 --> 00:31:15,920 Speaker 2: repriced deposit rates, so you're still looking at minuscule rates 680 00:31:16,360 --> 00:31:19,120 Speaker 2: on the money you put in the banks. Competition could 681 00:31:19,200 --> 00:31:22,200 Speaker 2: flare up, right, and they could have to start trying 682 00:31:22,240 --> 00:31:27,040 Speaker 2: to out outprice each other, and then you know, next 683 00:31:27,200 --> 00:31:30,400 Speaker 2: quarter's earnings could be worse, the third quarter earnings could. 684 00:31:30,240 --> 00:31:33,280 Speaker 1: Be even worse. And how bad does it get. 685 00:31:33,120 --> 00:31:36,240 Speaker 9: Yeah, the hope is things that are starting to stabilize, 686 00:31:36,280 --> 00:31:39,320 Speaker 9: and the banks are talking about that. There's been about 687 00:31:39,360 --> 00:31:43,520 Speaker 9: two three percent at the average to climb in deposits 688 00:31:43,280 --> 00:31:46,720 Speaker 9: for the regional banks, and they're talking about things stabilizing 689 00:31:46,760 --> 00:31:48,800 Speaker 9: in the third court in the second quarter and beyond. 690 00:31:48,960 --> 00:31:53,400 Speaker 9: So that's helpful. And then the issue is that you're 691 00:31:53,400 --> 00:31:57,360 Speaker 9: gonna as you mentioned, the posit costs are arising. It's 692 00:31:57,400 --> 00:31:59,160 Speaker 9: going to be a case where the banks need to 693 00:31:59,160 --> 00:32:02,320 Speaker 9: pay up to retain the deposit relationships. So it is aheadwind. 694 00:32:02,440 --> 00:32:04,720 Speaker 1: And what are they saying about loan growth, because again 695 00:32:04,760 --> 00:32:07,160 Speaker 1: my concern about the macroeconomy is if I want to 696 00:32:07,160 --> 00:32:08,920 Speaker 1: go if I see a vacant store in some of 697 00:32:08,960 --> 00:32:10,880 Speaker 1: New Jersey and I've got a great idea for a 698 00:32:10,960 --> 00:32:12,160 Speaker 1: store to put in there, and I go to my 699 00:32:12,160 --> 00:32:15,480 Speaker 1: local bank, I either can't get the loan or they're 700 00:32:15,600 --> 00:32:19,840 Speaker 1: they're it's too expensive, and that slows down the economy overall. Yeah, 701 00:32:19,840 --> 00:32:20,320 Speaker 1: that's right. 702 00:32:20,840 --> 00:32:23,080 Speaker 9: The overall take away from a lot of the management 703 00:32:23,120 --> 00:32:28,480 Speaker 9: commentary is that the things are tightening in terms of 704 00:32:28,680 --> 00:32:31,640 Speaker 9: credit availability and the banks are being a bit more 705 00:32:31,640 --> 00:32:35,120 Speaker 9: cautious with who they're lending to. And second, they've also 706 00:32:35,480 --> 00:32:38,760 Speaker 9: mentioned there's caution from the borrowers as well, so business 707 00:32:38,840 --> 00:32:43,640 Speaker 9: borrowers in particular. Huntington just mentioned that their business customers 708 00:32:43,680 --> 00:32:45,480 Speaker 9: are being a bit more cautious and not doing as 709 00:32:45,600 --> 00:32:47,440 Speaker 9: much M and A as they probably would have been 710 00:32:47,680 --> 00:32:50,080 Speaker 9: without some of the disruption that's happened so far. 711 00:32:50,440 --> 00:32:54,880 Speaker 1: That's how Ohioans are. Ohioans. We're a cautious bunch. Cautious bunch. Yeah, 712 00:32:54,920 --> 00:32:57,840 Speaker 1: well you're also a hearty bunch, right, we are hardy, 713 00:32:58,040 --> 00:33:01,200 Speaker 1: big football players, all right. Are what do we look 714 00:33:01,200 --> 00:33:04,560 Speaker 1: at going forward? Herman? I mean we are we still 715 00:33:04,600 --> 00:33:08,280 Speaker 1: focusing on deposits? Are we still focusing on loan growth? 716 00:33:08,880 --> 00:33:10,680 Speaker 1: Are those still the metrics I need to pay attention. 717 00:33:10,760 --> 00:33:13,760 Speaker 9: Yeah, that's right. Deposit growth, loan growth, and what's happening 718 00:33:13,800 --> 00:33:16,880 Speaker 9: with deposit repricing and what are the effects to the 719 00:33:16,880 --> 00:33:20,000 Speaker 9: men ander's margin. Those are the things we're talking about. 720 00:33:20,040 --> 00:33:23,240 Speaker 9: We're not talking about borrowing from the Federal Reserve discount 721 00:33:23,280 --> 00:33:25,080 Speaker 9: window and that's the sort of thing anymore, because that's 722 00:33:25,200 --> 00:33:26,920 Speaker 9: that's not an issue across the region. 723 00:33:26,920 --> 00:33:30,680 Speaker 1: And I'm looking at crisis over crisis averted, Yes, exactly, 724 00:33:30,760 --> 00:33:32,520 Speaker 1: I'm looking at just the earnings for M and T 725 00:33:32,920 --> 00:33:35,000 Speaker 1: Bank again kind of my little poster child for a 726 00:33:35,040 --> 00:33:37,560 Speaker 1: high quality regional bank. And I'm just looking at the 727 00:33:37,560 --> 00:33:40,440 Speaker 1: street consensus and it's kind of got, you know, earnings 728 00:33:40,560 --> 00:33:43,320 Speaker 1: flat year of a year twenty four to twenty three, right, right, 729 00:33:43,520 --> 00:33:45,280 Speaker 1: So and then maybe some growth kicking in. 730 00:33:45,320 --> 00:33:47,760 Speaker 2: Then twenty billion dollar bank trading at one point four 731 00:33:47,800 --> 00:33:49,920 Speaker 2: times tangible book value. 732 00:33:50,160 --> 00:33:50,360 Speaker 1: Right. 733 00:33:50,840 --> 00:33:55,200 Speaker 9: The benefits from interest rates really happened last year, and 734 00:33:55,280 --> 00:33:57,960 Speaker 9: so they're giving back some of the benefits with higher 735 00:33:57,960 --> 00:34:02,120 Speaker 9: deposit repricing. But overall things still look pretty decent for 736 00:34:02,400 --> 00:34:02,720 Speaker 9: a bank. 737 00:34:02,720 --> 00:34:04,800 Speaker 2: Like we had a great story on the Bloomberg terminal 738 00:34:05,280 --> 00:34:10,600 Speaker 2: overnight about corporate debt, you know, investment grade corporate debt. 739 00:34:10,719 --> 00:34:14,600 Speaker 2: The spreads are so tight to treasuries, and when you 740 00:34:14,640 --> 00:34:18,480 Speaker 2: factor in the cost of funding for banks, they're just 741 00:34:18,520 --> 00:34:20,479 Speaker 2: not getting the kind of risk premium that they need, 742 00:34:20,560 --> 00:34:22,200 Speaker 2: and so they're no longer going to be able to 743 00:34:22,200 --> 00:34:24,640 Speaker 2: buy that debt. Now it's only I think banks make 744 00:34:24,719 --> 00:34:29,360 Speaker 2: up about seven percent of the ownership, but how much 745 00:34:29,520 --> 00:34:31,680 Speaker 2: is their cost of funding and what are they going 746 00:34:31,719 --> 00:34:34,840 Speaker 2: to put their money in now that we're also freaked 747 00:34:34,840 --> 00:34:38,320 Speaker 2: out about the whole the maturity portfolios and commercial real estate. 748 00:34:38,440 --> 00:34:42,200 Speaker 9: That's right. The bank securities portfolio will start to shrink 749 00:34:42,239 --> 00:34:46,440 Speaker 9: because they need to balance the balance sheet with the 750 00:34:46,480 --> 00:34:50,319 Speaker 9: decline and deposits, and they'd rather park their assets into 751 00:34:50,400 --> 00:34:52,759 Speaker 9: any sort of lending that's still available to them. So 752 00:34:54,239 --> 00:34:56,480 Speaker 9: that's one of the things that it's critical with what's 753 00:34:56,480 --> 00:34:58,960 Speaker 9: going to happen with how the BRAKE leaders come in 754 00:34:58,960 --> 00:35:01,880 Speaker 9: in and sort of push some of new regulations in 755 00:35:01,920 --> 00:35:04,080 Speaker 9: terms of how they manage the balance sheet with with 756 00:35:04,160 --> 00:35:07,680 Speaker 9: the issues with the unrealized losses. So overall, I think 757 00:35:07,680 --> 00:35:10,840 Speaker 9: going forward for the next few quarters, we'd expect securities 758 00:35:10,880 --> 00:35:12,920 Speaker 9: portfolios to decline. 759 00:35:12,640 --> 00:35:15,000 Speaker 1: All right, And the next big issue to watch for 760 00:35:15,080 --> 00:35:19,040 Speaker 1: the regional banks will be First Republic Bank the report 761 00:35:19,200 --> 00:35:21,280 Speaker 1: their earnings Monday after the close. Look at this stock, 762 00:35:21,320 --> 00:35:24,520 Speaker 1: brutal man. I know down eighty year two. 763 00:35:24,520 --> 00:35:26,279 Speaker 2: You should have got a mortgage from them because they 764 00:35:26,280 --> 00:35:31,640 Speaker 2: were giving interest only at zero rates for like where 765 00:35:31,719 --> 00:35:34,600 Speaker 2: was it years and then it finally kicks in, yeah, 766 00:35:34,719 --> 00:35:35,440 Speaker 2: at three percent. 767 00:35:36,000 --> 00:35:39,439 Speaker 1: About finance. My love that story. Finance my mortgage. Don't 768 00:35:39,440 --> 00:35:41,319 Speaker 1: you worry. I'm going to get a four handle on 769 00:35:41,360 --> 00:35:43,279 Speaker 1: it when I refinanced in twelve to eighteen months time. 770 00:35:43,320 --> 00:35:46,120 Speaker 1: How about that. Herman Chan, he's the regional banks analyst 771 00:35:46,200 --> 00:35:49,200 Speaker 1: for Bloomberg Intelligence. He's been doing Yeoman's work really over 772 00:35:49,239 --> 00:35:51,920 Speaker 1: the last month or so. Get it keeping us up 773 00:35:51,960 --> 00:35:54,240 Speaker 1: to date on what is going on with the bankside 774 00:35:54,239 --> 00:35:57,320 Speaker 1: automaph I know exactly. He's a player. We're gonna have 775 00:35:57,360 --> 00:35:59,360 Speaker 1: more coming up. This is Bloomberg. 776 00:36:00,800 --> 00:36:03,920 Speaker 3: You're listening to the tape kens our live program, Bloomberg 777 00:36:04,000 --> 00:36:07,600 Speaker 3: Markets weekdays at ten am Eastern on Bloomberg Radio, the 778 00:36:07,640 --> 00:36:10,879 Speaker 3: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 779 00:36:10,920 --> 00:36:13,719 Speaker 3: You can also listen live on Amazon Alexa from our 780 00:36:13,760 --> 00:36:18,800 Speaker 3: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 781 00:36:19,600 --> 00:36:22,160 Speaker 1: Well, there are a lot of cross current score investors 782 00:36:22,160 --> 00:36:25,040 Speaker 1: to negotiate these days. What with the Federal Reserve, is 783 00:36:25,040 --> 00:36:27,520 Speaker 1: it going to stop hiking? How when will stop hiking? 784 00:36:27,560 --> 00:36:31,440 Speaker 1: Will start the cut rates? We've got, certainly geopolitical issues, 785 00:36:31,520 --> 00:36:35,000 Speaker 1: We've got economic issues as it relates to recession, How deep, 786 00:36:35,040 --> 00:36:37,560 Speaker 1: how shallow, how long, all those types of things. And 787 00:36:37,560 --> 00:36:40,759 Speaker 1: then oh yeah, we're negotiating earnings as we speak. So 788 00:36:41,239 --> 00:36:43,360 Speaker 1: it really helps if an investor can take a long 789 00:36:43,640 --> 00:36:46,479 Speaker 1: term focus that might make things a little bit easier. 790 00:36:46,480 --> 00:36:47,920 Speaker 1: I think that's what our next guest is going to 791 00:36:47,920 --> 00:36:51,279 Speaker 1: focus on. Heather Brilliant, she's the CEO and president of 792 00:36:51,400 --> 00:36:53,919 Speaker 1: Diamond Hill joining us on the phone, and Hender, thanks 793 00:36:53,920 --> 00:36:56,400 Speaker 1: so much for joining us here. How do you guys 794 00:36:57,040 --> 00:37:00,560 Speaker 1: approach investing given all the cross current out there that 795 00:37:00,640 --> 00:37:01,760 Speaker 1: investors have to navigate? 796 00:37:03,000 --> 00:37:05,120 Speaker 10: Thanks for having me. Yeah, I mean at Diamond Hill, 797 00:37:05,160 --> 00:37:08,080 Speaker 10: we're really trying to take a multi year perspective. We 798 00:37:08,160 --> 00:37:11,120 Speaker 10: try to look out really the next five years into 799 00:37:11,200 --> 00:37:14,319 Speaker 10: the earnings power of the businesses that we own, and 800 00:37:14,400 --> 00:37:17,520 Speaker 10: it really helps navigate environments like this where we see 801 00:37:17,560 --> 00:37:19,960 Speaker 10: a lot of volatility. There's certainly a tremendous amount of 802 00:37:20,000 --> 00:37:23,120 Speaker 10: economic uncertainty, as you were just mentioning on that news 803 00:37:23,120 --> 00:37:26,240 Speaker 10: flash with the data of today even but that matters 804 00:37:26,239 --> 00:37:28,440 Speaker 10: a lot less when you're looking for businesses that you 805 00:37:28,480 --> 00:37:31,840 Speaker 10: think can generate cash flow well into the future and 806 00:37:32,320 --> 00:37:34,520 Speaker 10: return capital to shareholders. 807 00:37:36,520 --> 00:37:39,400 Speaker 1: So what types of sectors does that lead you to? 808 00:37:39,719 --> 00:37:42,879 Speaker 1: I mean, it's a lot of folks, you know, look 809 00:37:42,880 --> 00:37:45,319 Speaker 1: at some of these, whether it's semiconductors for example, there 810 00:37:45,360 --> 00:37:47,520 Speaker 1: are such long cycles and you get a little bit 811 00:37:47,760 --> 00:37:50,000 Speaker 1: spooked by it. But what sectors do you guys tend 812 00:37:50,040 --> 00:37:51,160 Speaker 1: to focus on feel scary? 813 00:37:53,040 --> 00:37:54,520 Speaker 10: I mean, I think we tend to really look for 814 00:37:54,560 --> 00:37:59,640 Speaker 10: businesses that in any sector can compound returns over time. 815 00:38:00,000 --> 00:38:02,520 Speaker 10: So one example of that would be even in the 816 00:38:02,600 --> 00:38:05,480 Speaker 10: property and casualty insurance market, we look at all State 817 00:38:05,640 --> 00:38:09,360 Speaker 10: as a company that is likely to benefit from a 818 00:38:09,360 --> 00:38:11,520 Speaker 10: lot of the changes going on in property casualty. We're 819 00:38:11,520 --> 00:38:14,759 Speaker 10: seeing a lot of changes in pricing there as that's 820 00:38:14,800 --> 00:38:18,200 Speaker 10: become a more challenging market with more claims. But with 821 00:38:18,320 --> 00:38:20,560 Speaker 10: all of the companies really taking a fresh look at pricing, 822 00:38:20,600 --> 00:38:23,279 Speaker 10: it really gives a tailwind to this industry. And All 823 00:38:23,320 --> 00:38:26,480 Speaker 10: State has been valued as a business that historically had 824 00:38:26,600 --> 00:38:30,560 Speaker 10: life and annuity as well as property casualty, and they 825 00:38:30,600 --> 00:38:32,640 Speaker 10: sold their life an annuity business a couple of years ago, 826 00:38:32,680 --> 00:38:34,880 Speaker 10: and we don't really think that's reflected in the valuation. 827 00:38:35,120 --> 00:38:37,279 Speaker 10: As well as some of these business improvements that will 828 00:38:37,280 --> 00:38:39,240 Speaker 10: really start to come through in the next couple of years. 829 00:38:39,280 --> 00:38:41,000 Speaker 2: What are some of the other business improvements talk to 830 00:38:41,080 --> 00:38:43,320 Speaker 2: us about. The company ticker is al L. 831 00:38:44,840 --> 00:38:48,920 Speaker 10: Yeah, So essentially their focus is on being as omni 832 00:38:49,000 --> 00:38:51,759 Speaker 10: channel as possible within property casualty. So they're looking to 833 00:38:51,800 --> 00:38:55,239 Speaker 10: add some more ancillary lines of insurance and things like 834 00:38:55,880 --> 00:38:59,239 Speaker 10: roadside assistants, which are more voluntary. Right generally property and 835 00:38:59,280 --> 00:39:02,200 Speaker 10: casualty is required, and so that's one of the reasons 836 00:39:02,239 --> 00:39:04,479 Speaker 10: why we think it's such a good fundamental business even 837 00:39:04,480 --> 00:39:07,919 Speaker 10: in an economic environment like this. But over the next 838 00:39:07,920 --> 00:39:09,879 Speaker 10: couple of years, they're really looking to focus on some 839 00:39:09,960 --> 00:39:12,840 Speaker 10: of those new areas that I think will be a 840 00:39:12,880 --> 00:39:15,399 Speaker 10: little bit more discretionary and could benefit on the other 841 00:39:15,480 --> 00:39:18,560 Speaker 10: side of you know, coming out of a recession. Also, 842 00:39:18,760 --> 00:39:22,160 Speaker 10: they are essentially you know, across the US and also 843 00:39:22,480 --> 00:39:26,080 Speaker 10: distributing Canada as well, which gives them a scale benefit 844 00:39:26,200 --> 00:39:28,359 Speaker 10: because you know, when they're doing marketing, they can really 845 00:39:28,400 --> 00:39:31,040 Speaker 10: think about how they reach people across the country instead 846 00:39:31,080 --> 00:39:33,760 Speaker 10: of having to think nit more narrowly about their market. 847 00:39:34,800 --> 00:39:37,319 Speaker 1: So, Hea, do you also have Lear Corporation on there? 848 00:39:37,320 --> 00:39:38,799 Speaker 1: When I think of Lear, I think of just kind 849 00:39:38,800 --> 00:39:42,640 Speaker 1: of you know, they work with the automobile industry, and 850 00:39:42,920 --> 00:39:47,399 Speaker 1: there's an industry that's undergoing tremendous amounts of change as 851 00:39:47,560 --> 00:39:50,839 Speaker 1: of airplanes, I think, but that's Learjet. I think this 852 00:39:50,880 --> 00:39:53,400 Speaker 1: is Lear Corporation. So if they make seats. I don't know. 853 00:39:53,520 --> 00:39:56,320 Speaker 1: Let's ask why do you own Lear? L Ea. 854 00:39:57,200 --> 00:40:01,759 Speaker 10: Yeah, so Lear is essentially a automotive seating business. That's 855 00:40:01,800 --> 00:40:05,000 Speaker 10: about seventy five percent of their revenue today, and we 856 00:40:05,040 --> 00:40:07,239 Speaker 10: think it's interesting for a couple of reasons. First of all, 857 00:40:07,440 --> 00:40:10,160 Speaker 10: their focus has been on the luxury side of the 858 00:40:10,320 --> 00:40:12,960 Speaker 10: automotive market, and that means that they're really at the 859 00:40:12,960 --> 00:40:15,200 Speaker 10: cutting edge of technology when it comes to seats. And 860 00:40:15,600 --> 00:40:17,480 Speaker 10: you know, you might laugh about the thought of, you know, 861 00:40:17,520 --> 00:40:19,719 Speaker 10: how innovative can a seat really be, but we all 862 00:40:19,760 --> 00:40:23,239 Speaker 10: know from you know, driving our cars that we want 863 00:40:23,280 --> 00:40:25,600 Speaker 10: them to heat up and be able to be cooled, 864 00:40:25,680 --> 00:40:28,840 Speaker 10: and have all electric mechanisms for moving them around. And 865 00:40:28,920 --> 00:40:30,360 Speaker 10: these days you can even get massages. 866 00:40:30,440 --> 00:40:32,880 Speaker 1: I want them to massage exactly. No, I want to 867 00:40:32,880 --> 00:40:34,359 Speaker 1: be I don't. I don't laugh. 868 00:40:34,440 --> 00:40:36,640 Speaker 2: By the way, I once trecked all the way out 869 00:40:36,680 --> 00:40:41,760 Speaker 2: to Detroit to make an entire package about the kid 870 00:40:41,760 --> 00:40:43,960 Speaker 2: who designed the seats for the Corvette. 871 00:40:44,040 --> 00:40:48,400 Speaker 1: Yeah, and what'd you find? He was awesome, Sean Mauger. 872 00:40:48,480 --> 00:40:52,280 Speaker 2: He designs like everything, but and the seats were amazing 873 00:40:52,760 --> 00:40:55,680 Speaker 2: and it's an incredibly important part of the automobile now. 874 00:40:56,040 --> 00:40:58,319 Speaker 1: So you have to be able to drive a German car. 875 00:40:58,400 --> 00:41:02,160 Speaker 1: There's no heat, no no whatsoever because it's Germans. The 876 00:41:02,239 --> 00:41:03,520 Speaker 1: Germans don't care about that. 877 00:41:04,480 --> 00:41:07,960 Speaker 10: So no, Lear does work with Audi and BMW, so 878 00:41:08,000 --> 00:41:11,160 Speaker 10: they've got some German clients. So eventually maybe some more 879 00:41:11,239 --> 00:41:12,520 Speaker 10: luxuries coming to your seat. 880 00:41:12,680 --> 00:41:15,759 Speaker 1: Do you, guys at your firm, how do you think 881 00:41:15,760 --> 00:41:18,799 Speaker 1: about valuation? Is that a big, big driver of what 882 00:41:18,920 --> 00:41:21,080 Speaker 1: you own? Or are you just looking for a good 883 00:41:21,120 --> 00:41:24,239 Speaker 1: story and you know you can make the valuation work 884 00:41:24,320 --> 00:41:26,080 Speaker 1: or do you have a how do you think about that? 885 00:41:27,120 --> 00:41:30,080 Speaker 10: I really appreciate that question because valuation is critical to 886 00:41:30,120 --> 00:41:33,360 Speaker 10: the way we think about investing. Every business can be 887 00:41:33,520 --> 00:41:35,799 Speaker 10: attractive at the right price and can be unattractive at 888 00:41:35,800 --> 00:41:38,760 Speaker 10: the wrong price. And so we really start by looking 889 00:41:38,840 --> 00:41:41,000 Speaker 10: at what we believe to be the intrinsic value of 890 00:41:41,000 --> 00:41:43,120 Speaker 10: the business, and we do that by building a discounting 891 00:41:43,120 --> 00:41:44,920 Speaker 10: cash flow model and really taking a look at the 892 00:41:45,000 --> 00:41:47,960 Speaker 10: underlying drivers of the business. Not only does that help you, 893 00:41:48,000 --> 00:41:50,800 Speaker 10: I think, really fundamentally understand what the future cash flows 894 00:41:50,800 --> 00:41:53,279 Speaker 10: of the business are worth, but it also gives you 895 00:41:53,400 --> 00:41:56,120 Speaker 10: a good grounding to be able to look beyond, you know, 896 00:41:56,160 --> 00:41:58,160 Speaker 10: the near term when it could be a weaker economic 897 00:41:58,280 --> 00:42:01,360 Speaker 10: environment to the real earning's power of the business. 898 00:42:01,840 --> 00:42:04,040 Speaker 2: By the way, I look at a lot of these 899 00:42:04,120 --> 00:42:07,120 Speaker 2: charts are choppy, leer and all state. 900 00:42:07,239 --> 00:42:11,799 Speaker 7: But I look at HDFC Bank, which you also like. 901 00:42:11,880 --> 00:42:15,640 Speaker 2: The ticker is HDB, and not only does the chart 902 00:42:15,760 --> 00:42:18,399 Speaker 2: just go up into the right like it's amazing, it's 903 00:42:18,440 --> 00:42:22,560 Speaker 2: also a one hundred and thirty billion dollar company that I've. 904 00:42:22,360 --> 00:42:26,120 Speaker 1: Never heard of in India. Where how do you pick this? 905 00:42:26,160 --> 00:42:27,960 Speaker 1: How do you screen for these kind of stocks? 906 00:42:28,719 --> 00:42:31,239 Speaker 10: Well, we do have an international team and strategy that 907 00:42:31,280 --> 00:42:34,719 Speaker 10: are really looking at ideas outside the US, and they 908 00:42:34,800 --> 00:42:39,680 Speaker 10: identified HDFC Bank as an opportunity for a couple of reasons. 909 00:42:39,920 --> 00:42:42,200 Speaker 10: First of all, it is in India, as you point out, 910 00:42:42,280 --> 00:42:45,160 Speaker 10: and it's a private bank in India, which means it 911 00:42:45,239 --> 00:42:48,879 Speaker 10: is privately held as opposed to public you know, owned 912 00:42:48,880 --> 00:42:51,480 Speaker 10: by the government, which is different than of course how 913 00:42:51,520 --> 00:42:53,800 Speaker 10: we define private banking here in the US. So important 914 00:42:53,800 --> 00:42:56,959 Speaker 10: to note that. But by being private, they've been able 915 00:42:57,000 --> 00:43:00,040 Speaker 10: to invest in their business and really be able to 916 00:43:00,040 --> 00:43:02,520 Speaker 10: to be at the forefront of technology, and that is 917 00:43:02,640 --> 00:43:05,520 Speaker 10: really critical for a couple of reasons. First, obviously there's 918 00:43:05,520 --> 00:43:08,080 Speaker 10: a lot of growth in the middle class in India, 919 00:43:08,320 --> 00:43:11,000 Speaker 10: which is a huge tailwind for this business. But second, 920 00:43:11,040 --> 00:43:14,920 Speaker 10: because digital transactions were literally less than twenty percent of 921 00:43:15,000 --> 00:43:17,680 Speaker 10: the market a mere five years ago and are now 922 00:43:17,719 --> 00:43:20,600 Speaker 10: over eighty percent of the market in India. So they've 923 00:43:20,680 --> 00:43:23,520 Speaker 10: really been able to benefit from the customer base in 924 00:43:23,520 --> 00:43:26,120 Speaker 10: India moving more and more to digital while they're at 925 00:43:26,120 --> 00:43:29,760 Speaker 10: the forefront of the technological revolution going on within banking. 926 00:43:29,800 --> 00:43:30,040 Speaker 3: There. 927 00:43:30,280 --> 00:43:32,920 Speaker 1: All right, interesting story there, Heather, thanks so much for 928 00:43:33,000 --> 00:43:33,400 Speaker 1: joining us. 929 00:43:33,400 --> 00:43:33,560 Speaker 3: There. 930 00:43:33,560 --> 00:43:36,239 Speaker 1: Heather Brilliant, CEO and president of Diamond Hill. She is 931 00:43:36,320 --> 00:43:38,719 Speaker 1: all in Chicago. By that, I mean she got her 932 00:43:38,760 --> 00:43:42,080 Speaker 1: undergraduate degree in economics from Northwestern then she figured, hey, 933 00:43:42,080 --> 00:43:43,799 Speaker 1: this is good town. I'll stick around. She gets her 934 00:43:43,960 --> 00:43:47,040 Speaker 1: MBA from the University of Chicago, and I know a 935 00:43:47,040 --> 00:43:49,600 Speaker 1: lot of Chicago Booth graduates, and they're all comfortable with 936 00:43:49,680 --> 00:43:52,279 Speaker 1: the math. I sense that Heather grew up around. I 937 00:43:52,280 --> 00:43:55,520 Speaker 1: can hear the Chicago. You ken in here, boys, the Illinois. 938 00:43:55,560 --> 00:43:57,960 Speaker 1: I hear it, the Illinois. Yeah, okay, all right, interesting, 939 00:43:58,000 --> 00:44:01,239 Speaker 1: but yeah, all in in Chicago again, Universe Chicago NBA. 940 00:44:01,280 --> 00:44:03,480 Speaker 1: I'm a huge fan of the Graduate School of Business 941 00:44:03,480 --> 00:44:06,200 Speaker 1: now called the Booth School at Chicago. A lot of 942 00:44:06,200 --> 00:44:09,400 Speaker 1: the great professors at Duke came from University of Chicago. 943 00:44:09,880 --> 00:44:13,000 Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can 944 00:44:13,040 --> 00:44:16,800 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 945 00:44:16,880 --> 00:44:20,600 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 946 00:44:20,800 --> 00:44:22,759 Speaker 2: at Matt Miller nineteen seventy three. 947 00:44:23,200 --> 00:44:25,560 Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. 948 00:44:25,680 --> 00:44:28,359 Speaker 1: Before the podcast, you can always catch us worldwide at 949 00:44:28,360 --> 00:44:30,120 Speaker 1: Bloomberg Radio.