WEBVTT - Tesla, REITs, Regionals, and Markets 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:05.160 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day, we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.360 --> 0:00:20.520 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:20.880 --> 0:00:22.560 I get to break to our next guest, Dan if 0:00:22.600 --> 0:00:25.520 she covers Dan, it's Tritty's birthday. He's a tech Yeah, 0:00:25.560 --> 0:00:29.240 he's a kick geek, so it's not a geek. What's 0:00:29.560 --> 0:00:32.640 nerds and geeks? Totally? Totally he's into the tech stuff. 0:00:32.800 --> 0:00:35.280 And we got to start with what he's wearing today. 0:00:35.280 --> 0:00:38.159 This is, in a word, disturbing. We've got powder blue 0:00:38.600 --> 0:00:41.120 kind of pants and sport jack and then a late 0:00:41.200 --> 0:00:44.199 green shirt. It's very eighties. Prom I love it. I 0:00:44.440 --> 0:00:46.360 to be warm outside today. It looks good to me. 0:00:46.960 --> 0:00:50.400 It's spring. It's it's all mindset exactly. It's all my 0:00:50.600 --> 0:00:53.120 set exactly. So what was your mindset? 0:00:53.159 --> 0:00:53.360 Dan? 0:00:53.400 --> 0:00:55.959 I have some web bush on the Tesla numbers here 0:00:55.960 --> 0:00:57.240 the stocks off about seven percent. 0:00:57.320 --> 0:01:00.160 Yeah, I mean the outfit's at more positive than my 0:01:00.240 --> 0:01:02.960 view of what happened with earnings because it was all 0:01:02.960 --> 0:01:06.880 about margins. I mean, demand has been pretty robust since 0:01:06.880 --> 0:01:10.640 the price cuts, but margins twenty percent was the magical threshold. 0:01:11.040 --> 0:01:13.880 Came in below that, and they sort of kept things 0:01:13.920 --> 0:01:16.160 sort of close to the chest in terms of what 0:01:16.200 --> 0:01:19.160 they were really talking about margins going forward. That's why 0:01:19.200 --> 0:01:22.160 the stocks off because the worry here is that if 0:01:22.200 --> 0:01:25.480 they continue to cut prices, margins continue to go down. 0:01:25.480 --> 0:01:26.600 That's key to the multiple. 0:01:27.200 --> 0:01:29.039 But they can is the big deal? 0:01:29.160 --> 0:01:29.360 Right? 0:01:30.880 --> 0:01:33.200 Do they have to or is it that they can? 0:01:33.680 --> 0:01:35.880 Are they doing this because they have to drive demand 0:01:36.200 --> 0:01:39.199 or is it because they can inflict pain on general 0:01:39.200 --> 0:01:40.640 motors in Volkswagen. 0:01:40.120 --> 0:01:43.200 I think it's eighty percent because they can twenty percent 0:01:43.800 --> 0:01:47.160 to ultimately catalyze demand a soft macro because I think 0:01:47.200 --> 0:01:49.680 the way Musk and Tessa are looking at it, this 0:01:49.720 --> 0:01:52.280 is a flex to Muscles moment. It's essentially game of 0:01:52.320 --> 0:01:55.760 thrones and electric vehicles and Tasso recognizes you got be 0:01:55.800 --> 0:01:59.360 an iron fence around that install based protect continue to 0:01:59.400 --> 0:02:02.800 go after marks. But with that said, the margins, they 0:02:02.840 --> 0:02:06.760 have massive margin flexibility over traditional auto but also testa 0:02:06.800 --> 0:02:08.400 is held do a higher stand. That's why it tradees 0:02:08.440 --> 0:02:11.600 like a tech stock. That's why twenty percent margins going 0:02:11.720 --> 0:02:14.960 below that it's gonna I'll call it tenuous in terms 0:02:14.960 --> 0:02:17.360 of the next few quarters. In terms of that margin 0:02:17.560 --> 0:02:18.720 called tuggle. 0:02:18.480 --> 0:02:21.359 War, I would I wonder if it's not more they 0:02:21.400 --> 0:02:25.160 have to because I would argue if they hadn't been 0:02:25.280 --> 0:02:29.440 lazy about design, they really need to bring out new products, 0:02:29.800 --> 0:02:32.400 and if they were better in terms of quality control 0:02:32.480 --> 0:02:35.960 they have infamously bad build quality, then they wouldn't have 0:02:36.000 --> 0:02:38.280 to cut prices this much. I mean, the Model Y 0:02:38.520 --> 0:02:40.920 was going for sixty five grand and now you can 0:02:40.960 --> 0:02:42.200 get one for under fifty. 0:02:42.600 --> 0:02:44.000 That's a big, big chunk. 0:02:44.480 --> 0:02:47.280 We can make great points, and especially in China because 0:02:47.400 --> 0:02:50.440 China is really where the price wars happened between Neo 0:02:50.520 --> 0:02:53.239 bid x Ping and others. And that's the hearts and 0:02:53.280 --> 0:02:55.919 alongs of the Testa story. So I think right now 0:02:55.960 --> 0:02:58.280 in terms of the game of poker, like for many 0:02:58.320 --> 0:03:02.160 many years Musk has played, others have played checkers, but 0:03:02.280 --> 0:03:04.400 now in terms of competition grown in terms of what 0:03:04.400 --> 0:03:06.800 we see three wine three area code four GM as 0:03:06.840 --> 0:03:09.640 well as out of Europe. Now this is a time 0:03:09.720 --> 0:03:12.480 to gain market shop, but at what price, and that's 0:03:12.520 --> 0:03:16.680 why I most investors the frustration showed that margin story 0:03:17.040 --> 0:03:18.720 doesn't get into that mid teens. 0:03:18.800 --> 0:03:21.840 Are you worried that he's spent too much time? I mean, 0:03:22.080 --> 0:03:25.200 clearly he's spent spends way too much time tweeting and 0:03:25.240 --> 0:03:27.120 doing stupid childish. 0:03:26.680 --> 0:03:30.000 Wait, he's got another tweet out today congratulating SpaceX. Okay, 0:03:30.080 --> 0:03:31.239 but that's actually cool. 0:03:31.360 --> 0:03:35.680 So that's something where he's making progress for mankind. I mean, 0:03:35.680 --> 0:03:38.680 that's what Elon Musk should be doing. He's just launched 0:03:39.320 --> 0:03:43.240 the most powerful rocket that has ever come off the 0:03:43.320 --> 0:03:47.440 surface of this planet, and it's so cool. But maybe 0:03:47.440 --> 0:03:50.720 he should be paying more attention to, you know, uh, 0:03:50.840 --> 0:03:55.120 furthering great causes for humanity than doing stupid stuff on Twitter. 0:03:55.360 --> 0:03:57.760 Wee Twitter, We talked about me. It's gonna be the 0:03:57.760 --> 0:04:02.920 most overpaid tech acquisition the history of deals, and forty 0:04:02.920 --> 0:04:05.200 four billion for someone that's probably worth twelve to fifteen 0:04:05.200 --> 0:04:07.240 billion today. It's also with a time sucker, and I 0:04:07.240 --> 0:04:09.680 think that's the issue, is that at a time where 0:04:09.800 --> 0:04:13.320 Tesla and SpaceX need Musk more than ever, you don't 0:04:13.440 --> 0:04:16.080 just want to see him sitting there third floor of 0:04:16.080 --> 0:04:18.760 Twitter headquarters just tweeting So. 0:04:19.520 --> 0:04:22.040 When did the Tesla story become a margin story as 0:04:22.080 --> 0:04:24.000 opposed to just a great cool growth. 0:04:23.760 --> 0:04:27.600 Story starting this year once they started cut prices. I mean, 0:04:27.640 --> 0:04:30.479 you've got six price cuts, and I think that that's 0:04:30.520 --> 0:04:33.280 where margins ultimately company. 0:04:33.000 --> 0:04:34.479 Want it to be there or they don't even care, 0:04:34.560 --> 0:04:38.599 do they, because I mean, like for example, Facebook slash Meta, 0:04:38.800 --> 0:04:41.360 they've kind of tried to transition people from getting away 0:04:41.360 --> 0:04:43.760 from subscriber growth numbers and all that kind of stuff 0:04:43.760 --> 0:04:45.560 and focus on the profitability and a free cash love 0:04:45.560 --> 0:04:47.800 of our business. I mean, that's they're trying to drive 0:04:47.880 --> 0:04:50.400 the investment narrative. Tesla doesn't really care about. 0:04:50.200 --> 0:04:52.920 Looking twenty two billion of cash right and I think 0:04:53.040 --> 0:04:55.960 they're viewing it is like, we don't care what you 0:04:56.120 --> 0:04:59.000 think for now. You gotta trust us in terms of 0:04:59.040 --> 0:05:02.120 the last decade and right now we are looking to 0:05:02.200 --> 0:05:05.839 go on the offensive, not defensive in terms of margins 0:05:05.920 --> 0:05:08.520 and cutting prices. That's sort of their strategy. Look, and 0:05:08.560 --> 0:05:11.320 some investors love it, some investors won't. That's what you 0:05:11.360 --> 0:05:14.600 see right now. In terms of Bulbear debate, we. 0:05:14.560 --> 0:05:17.840 Have a question, the Question of the Day, which has 0:05:17.880 --> 0:05:22.240 been up on the Bloomberg television screen has Tesla started 0:05:22.279 --> 0:05:22.960 a price war. 0:05:23.520 --> 0:05:26.000 What do you think, Oh, I think the price war 0:05:26.040 --> 0:05:29.159 has begun, and I think in China it's already started. 0:05:29.200 --> 0:05:32.760 And ultimately it's here in the footsteps of gm Ford. 0:05:33.240 --> 0:05:35.360 You have Mercedes, you have others that are coming because 0:05:35.360 --> 0:05:37.920 they're Look, they're no longer the only game in town. 0:05:37.960 --> 0:05:41.000 Now clearly it's their world. Everyone else pays rent in 0:05:41.080 --> 0:05:44.920 terms of electric vehicles. But now with competition increasing, they 0:05:44.960 --> 0:05:47.680 can't just sit there on their high horse. They need 0:05:47.720 --> 0:05:50.640 to cut prices and that's that's really what's happening here. 0:05:50.839 --> 0:05:53.800 But again it comes down to the managing team, the guidance. 0:05:54.279 --> 0:05:57.000 You know, I think there's more questions and answers, which 0:05:57.040 --> 0:05:58.440 is why the stocks reacting the way. 0:05:58.520 --> 0:06:00.160 And now, if you want to buy an electric are 0:06:00.200 --> 0:06:02.520 there's so many other choices you could get. If you 0:06:02.560 --> 0:06:04.680 want to get something cheap, you could pick up a 0:06:04.839 --> 0:06:08.080 Chevy Bolt. If you want to get something cool, you 0:06:08.080 --> 0:06:11.080 could get a Kia EV six GT. If you want 0:06:11.080 --> 0:06:14.120 to get something expensive, you could go with a BMW 0:06:14.320 --> 0:06:18.400 I X and on that that's built with hand laid 0:06:18.520 --> 0:06:20.280 carbon fiber and Washington tament. 0:06:20.320 --> 0:06:21.480 That's awesome stuff. 0:06:21.920 --> 0:06:25.400 So Tesla, you know, they had these ten year old products. 0:06:25.680 --> 0:06:27.640 Is the cyber truck gonna come out this year? Are 0:06:27.640 --> 0:06:29.520 they gonna do anything that's awesome and new? 0:06:29.680 --> 0:06:32.120 Yeah, I think by Howween we should have the cyber 0:06:32.160 --> 0:06:35.360 truck announcement. And that's important because as you've talked about 0:06:35.400 --> 0:06:38.880 for a long time in terms of new automobile, new models, 0:06:38.920 --> 0:06:41.320 I think the sub thirty k comes out next year. 0:06:41.640 --> 0:06:42.800 But look for Tesla right now. 0:06:42.839 --> 0:06:46.360 It's that supercharger network. It's the Musk DNA, I mean 0:06:46.400 --> 0:06:49.720 supercharger network. It's the Musk DNA, and it's the cachet 0:06:49.760 --> 0:06:52.479 of owning a Tesla. And I think that continues to 0:06:52.520 --> 0:06:55.640 be there. But no doubt you gotta cut prices in 0:06:55.680 --> 0:06:56.839 that's sense of what they're doing. 0:06:57.240 --> 0:07:00.719 So, but Kevin Tynan and our auto ational supple more intelligence, 0:07:00.839 --> 0:07:03.600 he says, the Choice does have come out with a 0:07:03.640 --> 0:07:05.360 ton of cars if they're not making money on them. 0:07:05.680 --> 0:07:08.360 You know, they've even paired back the four pairback the 0:07:08.440 --> 0:07:12.120 Mustang mock e because a certain prece just won't just 0:07:12.120 --> 0:07:15.400 saw mock e hearse. Yeah, you see that. Somebody made it. 0:07:15.480 --> 0:07:16.480 Mock e hearse. 0:07:17.280 --> 0:07:19.280 They're coming out with new cars, dude, that's the only 0:07:19.360 --> 0:07:21.720 thing they're gonna make from now on his electric cars. 0:07:21.760 --> 0:07:24.280 You can argue that that's a horrible strategy, a big mistake. 0:07:24.560 --> 0:07:26.920 They're putting all their eggs in one basket. Pretty much 0:07:26.920 --> 0:07:29.480 all car makers are, but they're all gonna come out 0:07:29.520 --> 0:07:32.800 with new electric cars. It's gonna be from twenty thirty 0:07:33.560 --> 0:07:37.640 either electric, all electric, or hybrid. Really, that's the only 0:07:37.920 --> 0:07:40.640 that's the only choice. Almost every single car maker has 0:07:41.080 --> 0:07:44.920 has vowed that they will no longer make solely internal 0:07:44.920 --> 0:07:46.880 combustion engines after twenty thirty. 0:07:47.000 --> 0:07:50.000 And to your point, must knows that bulls eye in 0:07:50.040 --> 0:07:53.080 their back and that's why they, Okay, guess what, We're 0:07:53.120 --> 0:07:56.280 just gonna keep cutting prices in flipting the pen. And 0:07:56.320 --> 0:07:59.360 that's a say it's dreve demand. But from an investor 0:07:59.440 --> 0:08:02.320 perspective out it's like, okay, at what point? And that's 0:08:02.360 --> 0:08:03.280 really what the stocks are? 0:08:03.400 --> 0:08:06.680 So can I buy Tesla here? I mean because if 0:08:07.520 --> 0:08:10.320 typically I don't want to own a company who's in 0:08:10.360 --> 0:08:13.200 a price war, much less initiating one. 0:08:13.280 --> 0:08:15.480 Sure I view it if this was something that was 0:08:15.520 --> 0:08:18.240 going to continue to go on, then obviously that's the 0:08:18.320 --> 0:08:20.840 concern I view a more transitory in terms of this 0:08:20.920 --> 0:08:25.720 price war dangerous word. And ultimately, you know it's really 0:08:25.720 --> 0:08:28.360 the next two to three quarters you see this price war, 0:08:28.920 --> 0:08:31.600 then you really start to see I think stabilization. That's 0:08:31.600 --> 0:08:34.680 really the story for tests. In terms of the bull case, 0:08:34.960 --> 0:08:37.120 I continue view this in Apple as the two most 0:08:37.160 --> 0:08:39.280 transformational names in the market. 0:08:39.840 --> 0:08:40.959 What is the Apple call today? 0:08:41.480 --> 0:08:43.880 I mean, look Apple Call today, it's rocket Gibralter and 0:08:43.920 --> 0:08:45.960 that I mean if you look units holding up just 0:08:46.040 --> 0:08:49.280 by many yelling fire and a crowd theater. Cook's a tactician. 0:08:49.400 --> 0:08:51.880 That's why a Hall of Famers CEO. And that's the 0:08:51.880 --> 0:08:54.640 stock that continues to sort of rerate even in this 0:08:54.760 --> 0:08:57.080 environment because they have something that no one else does 0:08:57.280 --> 0:09:01.160 install Base, that's the golden two billion Eyess devices. And 0:09:01.240 --> 0:09:03.960 even in India, I mean they just decided, hey, we'll 0:09:03.960 --> 0:09:06.520 try to penetrate that market. That could be an incremental 0:09:06.559 --> 0:09:08.319 fifteen to twenty billion next few years. 0:09:08.400 --> 0:09:08.800 All right. 0:09:09.080 --> 0:09:11.480 They have three hundred and like three hundred and sixty 0:09:11.559 --> 0:09:14.559 million people in the Indian middle class. Yeah, three hundred 0:09:14.559 --> 0:09:17.120 and sixty million people that can afford the product right 0:09:17.280 --> 0:09:19.240 out of one point five billion in total. 0:09:19.280 --> 0:09:20.920 Yeah, and they really stepped it up. All right, Dan, 0:09:20.960 --> 0:09:22.480 thanks so much. For coming out. I really appreciate you 0:09:22.520 --> 0:09:25.600 coming into the studio here despite the wardrobe. So good 0:09:25.640 --> 0:09:28.120 luck walking down the street with that before twenty yeah, 0:09:28.400 --> 0:09:30.959 before twenty There you go. Dan Ice, he's a senior 0:09:30.960 --> 0:09:32.880 equity analyst, So what Bush Security is one of our 0:09:33.240 --> 0:09:35.040 real top go to names. And we want to talk 0:09:35.280 --> 0:09:38.480 technology when we want to talk Apple, Tesla. He's all 0:09:38.559 --> 0:09:40.160 over that stuff, so we appreciate getting a few minutes 0:09:40.160 --> 0:09:40.720 of his time. 0:09:41.960 --> 0:09:45.360 You're listening to the team Ken's are Live program Bloomberg 0:09:45.440 --> 0:09:48.800 Markets weekdays at ten am Eastern on Bloomberg dot Com, 0:09:48.880 --> 0:09:52.000 the iHeartRadio app, and the Bloomberg Business App, or listen 0:09:52.080 --> 0:09:55.800 on demand wherever you get your podcasts. 0:09:56.120 --> 0:09:58.120 I want to talk real estate. I think we need 0:09:58.120 --> 0:10:00.440 to talk real estate investment trust and you want to 0:10:00.480 --> 0:10:02.840 go there. You got to do a couple of things. One, 0:10:03.240 --> 0:10:05.960 you got to get somebody who worked at Green Street Advisors. 0:10:05.960 --> 0:10:08.440 Those are the big folks in the reed business. We 0:10:08.480 --> 0:10:10.640 take that box with David Auerback. He's a managing director 0:10:10.600 --> 0:10:12.960 at Armada ETF so he did a stint to Green Street. 0:10:13.320 --> 0:10:15.240 And the second place you got to go is Jeff Langbaum. 0:10:15.280 --> 0:10:17.559 He covers the reats for Bloomberg Intelligence, and we've got 0:10:17.559 --> 0:10:21.439 both of these gentlemen in our Bloomberg Interactive Brokers studio. 0:10:22.440 --> 0:10:25.560 Here's my thing. I'm walking around Midtown. I'll walk to 0:10:25.600 --> 0:10:28.679 Penn Station today. I'll walk by these gleaming office towers. 0:10:29.440 --> 0:10:31.360 Now they'll be kind of full today because it's a Thursday. 0:10:31.400 --> 0:10:33.199 But let's face it, nobody's coming back to work here 0:10:33.200 --> 0:10:34.160 in this You mean in terms. 0:10:33.960 --> 0:10:36.800 Of people, people, but they're not full in terms of stores, right, 0:10:36.800 --> 0:10:37.480 there's no lot. 0:10:37.559 --> 0:10:40.319 Well, there's no people, there's no stores. There's nobody going 0:10:40.360 --> 0:10:43.880 to the deli's. It's a Thursday. It'll be better. David auerback, 0:10:44.800 --> 0:10:46.680 what do you do from a real estate perspective? What's 0:10:46.720 --> 0:10:49.320 the call here from a real estate perspective when you 0:10:49.320 --> 0:10:51.600 look at office reads and just office space. 0:10:51.960 --> 0:10:54.160 Well, Paul Matt, it's great to be with you guys today. 0:10:54.440 --> 0:10:56.960 I just came from the NYU Shack Reads and Posium 0:10:57.000 --> 0:10:59.120 conference yesterday, and this is a big topic that came 0:10:59.200 --> 0:11:01.680 up in conversation. And what you're noticing from some of 0:11:01.679 --> 0:11:04.360 the big reed institutional buyers that are out there is, 0:11:04.400 --> 0:11:07.400 after being opportunistic, they are starting to tiptoe back into 0:11:07.440 --> 0:11:10.600 some of these really distressed sectors here and realizing that, 0:11:10.800 --> 0:11:12.640 you know, we might be in for more short term pain, 0:11:12.679 --> 0:11:14.240 maybe over the next year or two years. But on 0:11:14.280 --> 0:11:17.240 the other side, they do feel like there are compelling opportunities. 0:11:17.400 --> 0:11:19.040 I was walking over here with Jeff and we just 0:11:19.080 --> 0:11:21.840 noticed like seventy five thousand square feet of vacant retail 0:11:21.880 --> 0:11:25.400 space right here at this intersection in Roenberg headquarters. And 0:11:25.440 --> 0:11:27.040 you know, I asked them, like, hey, what tenants were here. Oh, 0:11:27.080 --> 0:11:30.320 this was Container Store, and here was this you know, innovation. 0:11:30.240 --> 0:11:33.880 M We had a Victoria's Secret, We had like a 0:11:33.960 --> 0:11:35.720 J Crew or a J Crew. 0:11:35.600 --> 0:11:37.959 Brand I think Banana Republic maybe. 0:11:37.800 --> 0:11:39.680 But yeah, there were a ton of stores here that 0:11:39.760 --> 0:11:40.560 are just gone. 0:11:40.679 --> 0:11:43.120 And I fall back on my you know comment I 0:11:43.120 --> 0:11:44.640 always like to say is that, you know, there's only 0:11:44.679 --> 0:11:47.280 one New York City. Eventually, it may take some time, 0:11:47.320 --> 0:11:49.160 but it is going to bounce back. I think the 0:11:49.280 --> 0:11:51.280 landlords are you know, some of these guys are I 0:11:51.280 --> 0:11:53.920 think rolling to maybe kind of lower the rental rate 0:11:54.000 --> 0:11:55.920 just to be able to bring some people in. Instead 0:11:55.960 --> 0:11:58.440 maybe saying to have let's say thirty thousand square feet available, 0:11:58.440 --> 0:12:00.560 will put a wall in, have two fifteen thousand foot 0:12:00.600 --> 0:12:02.640 spots in and so hopefully they'll be able to target 0:12:02.720 --> 0:12:05.559 that next generation of retailer tenants or the next generation 0:12:05.600 --> 0:12:07.200 of office tenants to come in. I mean, we'll talk 0:12:07.240 --> 0:12:10.120 about sau Green's earnings yesterday, and they had a massive, 0:12:10.240 --> 0:12:13.120 great first quarter of leasing, like well above what analysts 0:12:13.160 --> 0:12:15.360 were expecting as far as how much they were looking 0:12:15.360 --> 0:12:17.200 to get back in the office. And so I think 0:12:17.200 --> 0:12:20.200 we're starting to see some pockets of strength that's out there, 0:12:20.200 --> 0:12:22.720 but overall on the bigger picture, yes, they're still weakness. 0:12:22.920 --> 0:12:25.480 It's really the return to office thing that's the problem. 0:12:25.600 --> 0:12:28.200 Right, And Jeff, you know, I'll ask you because David 0:12:28.200 --> 0:12:30.599 mentioned NYU for this conference. 0:12:31.040 --> 0:12:33.560 If you're in student housing, you're golden, right. 0:12:33.640 --> 0:12:38.160 If you're in a medical office buildings, no problem. The 0:12:38.240 --> 0:12:41.520 problem is, you know, workers like us, me and Paul 0:12:41.559 --> 0:12:44.280 are the only people who come to this building. And 0:12:44.320 --> 0:12:47.640 that's why you know, we don't do enough shopping at 0:12:47.720 --> 0:12:50.800 Victoria's Secret and the Container's Store to keep those stores afloat. 0:12:50.880 --> 0:12:51.040 Right. 0:12:51.120 --> 0:12:53.360 So, but office is really the only problem. 0:12:53.360 --> 0:12:56.760 Are the other parts of the real estate market in 0:12:56.840 --> 0:12:58.160 the US still going strong? 0:12:58.240 --> 0:13:01.320 Every other one, I don't want to say every other one. 0:13:01.320 --> 0:13:04.000 I'm sure, there are pockets of weakness, and certainly within 0:13:04.080 --> 0:13:06.720 segments there are going to be individual circumstances. But yeah, 0:13:06.800 --> 0:13:11.040 I mean, multifamily is strong, Warehouses are strong. Certain aspects 0:13:11.080 --> 0:13:15.080 of the healthcare real estate are very strong. Office is 0:13:15.080 --> 0:13:18.040 the problem child. And and you know, Paul, you talk 0:13:18.080 --> 0:13:20.480 about how many people are in the building, that's not 0:13:20.559 --> 0:13:24.880 the entire focus for a company making the decision to 0:13:24.880 --> 0:13:27.440 sign a lease for office space. Right, you still need 0:13:27.559 --> 0:13:30.920 space even if you only have fifty or sixty percent 0:13:30.960 --> 0:13:33.720 of your people in at any given time. And today's 0:13:33.760 --> 0:13:35.720 point es still Green announced yesterday at least over five 0:13:35.760 --> 0:13:37.840 hundred thousand square feet of space in New York office. 0:13:37.600 --> 0:13:39.160 Building really in the first quarter. 0:13:39.280 --> 0:13:45.679 Okay, so it's not it's not dead, it's certainly challenged. 0:13:47.480 --> 0:13:47.760 Rents. 0:13:48.240 --> 0:13:50.439 The rents on the five hundred thousand square feet that 0:13:50.520 --> 0:13:54.200 they least, we're five percent higher than the expiring rents 0:13:54.480 --> 0:13:59.679 on those leads. Now, granted those quality buildings, these are 0:13:59.840 --> 0:14:04.280 the are you know, top of the going to It's 0:14:04.320 --> 0:14:06.480 not Third Avenue, Midtown US in yards will sell. 0:14:06.600 --> 0:14:07.679 Third Avenue is not going to sell? 0:14:07.720 --> 0:14:08.040 Is that right? 0:14:08.280 --> 0:14:09.800 I mean kind of is that kind of what we're seeing? 0:14:09.840 --> 0:14:11.679 Well, the other thing to remember also is you know 0:14:12.200 --> 0:14:15.400 these are you you're re signing leases that were last 0:14:15.440 --> 0:14:17.240 signed ten years ago. So even if we're kind of 0:14:17.240 --> 0:14:20.040 falling off to the peak, your mark to market is elevated, 0:14:20.080 --> 0:14:24.400 and so you know, it's it's it's there's still activity happening. 0:14:24.800 --> 0:14:27.400 You know, their portfolio is about ninety percent occupied. So 0:14:27.440 --> 0:14:31.440 you hear stories of you know, occupancies tanking. It's not. 0:14:32.920 --> 0:14:35.200 Like I said, it's not dead, it's just a struggle. 0:14:35.680 --> 0:14:38.880 I got a viewer, a listener writing in here. 0:14:38.960 --> 0:14:40.440 He's maybe he's also a viewer. 0:14:40.680 --> 0:14:43.440 Maybe he's just looking at his radio right now and 0:14:43.480 --> 0:14:45.760 he wants to know, David, how worried are you about 0:14:45.760 --> 0:14:48.520 the CRI maturity wall of five hundred billion a year 0:14:48.880 --> 0:14:50.160 for the next couple of years. 0:14:50.480 --> 0:14:51.240 Is it? 0:14:51.280 --> 0:14:53.560 Is it a huge headwind? 0:14:53.760 --> 0:14:55.960 It's definitely something to take note of. I think you 0:14:56.000 --> 0:14:57.400 need to take a look at it on a case 0:14:57.400 --> 0:14:59.760 by case, company by company basis, because a lot of 0:14:59.760 --> 0:15:02.200 our you know, especially the publicly traded reads, they're working 0:15:02.240 --> 0:15:04.160 with some of the largest banks in the world, the Goldman's, 0:15:04.200 --> 0:15:06.040 the JP Morgan's, and so you know, one of the 0:15:06.040 --> 0:15:08.040 biggest conversations is how we how are we going to 0:15:08.120 --> 0:15:10.680 refinance our debt stack? Looking out in the future, you know, 0:15:10.760 --> 0:15:12.560 we're past COVID, We're not in a one and a 0:15:12.600 --> 0:15:16.120 half percent operating environment. The blended extent is kind of gone. 0:15:16.400 --> 0:15:18.520 But in that same breadth, if we're able to you know, 0:15:18.640 --> 0:15:21.600 piecemeal our stacks over the next couple of years of 0:15:22.280 --> 0:15:24.720 restructuring it, I think we'll be able to weather the storm. 0:15:24.760 --> 0:15:27.080 Now again, if you're some of these other trouble companies 0:15:27.080 --> 0:15:29.680 that are out there, you might have a longer runway 0:15:29.760 --> 0:15:32.040 than you know, somebody that's a class A you know, 0:15:32.120 --> 0:15:34.480 retail operator or apartment guy where it's not really you know, 0:15:34.560 --> 0:15:36.200 Freddie Fanny is always there to refine. 0:15:36.200 --> 0:15:37.120 It's not a problem. 0:15:37.120 --> 0:15:38.720 But there are going to be people who do have 0:15:38.760 --> 0:15:42.000 problems refinancing. There is going to be a storm to weather. 0:15:42.280 --> 0:15:44.240 Is there going to be real consolidation you. 0:15:44.240 --> 0:15:46.320 Think, I think we're going to see some consolidation. I mean, 0:15:46.400 --> 0:15:48.480 we talked about yesterday. You're not really seeing much public 0:15:48.520 --> 0:15:50.920 to public MNA transaction based off the discounts of a 0:15:50.960 --> 0:15:53.080 lot of these guys are trading. But you know, one 0:15:53.360 --> 0:15:55.080 key thing, and Jeff and I are talking about it earlier. 0:15:55.400 --> 0:15:57.120 You know, there's sovereign wealth funds that are out there. 0:15:57.160 --> 0:15:59.680 You got Government of Singapore, You've got QYA, you got 0:15:59.680 --> 0:16:02.120 Candidate Pension. A lot of these big sovereign wealth funds 0:16:02.160 --> 0:16:05.040 are out there and they've got capital, and they're looking 0:16:05.080 --> 0:16:07.720 at that long term opportunity. Not just five years. We're 0:16:07.760 --> 0:16:10.120 talking twenty five fifty years out. Like you know, are 0:16:10.120 --> 0:16:12.600 we gonna tear down the GM building anytime soon? No, 0:16:12.720 --> 0:16:14.400 that's just going to continue to you know, the met 0:16:14.400 --> 0:16:17.040 Life building another good example. They're ready to come right, 0:16:17.080 --> 0:16:18.960 sit down, write a check, and you know, focus on 0:16:19.000 --> 0:16:21.200 this long term investment. So I think that there are 0:16:21.240 --> 0:16:22.760 good capital partners that are out there. 0:16:23.120 --> 0:16:24.680 I actually think that's going to be the key. 0:16:24.760 --> 0:16:24.960 Right. 0:16:25.000 --> 0:16:30.680 So you ask about refinancing and that maturity wall. There 0:16:30.720 --> 0:16:33.160 are going to be properties that have a problem refinancing, 0:16:33.160 --> 0:16:35.040 and it's probably going to be mostly concentrated in the 0:16:35.040 --> 0:16:39.200 office space. Who is willing to step up and put 0:16:39.240 --> 0:16:42.240 a loan on these properties? What kind of additional equity 0:16:42.400 --> 0:16:46.320 is required to fill any gap if loan to value, 0:16:46.320 --> 0:16:48.040 if values come down and loan to values have to 0:16:48.080 --> 0:16:52.000 have to kind of shrink accordingly, and if there is distress, 0:16:52.040 --> 0:16:53.520 who's willing to step up and write a check to 0:16:53.520 --> 0:16:54.320 buy these properties. 0:16:54.400 --> 0:16:56.160 When do you think we'll get to that point? Is 0:16:56.160 --> 0:16:57.720 that something that's just gonna roll over the next couple 0:16:57.720 --> 0:17:00.480 of years. It's going to be an extended time frame. 0:17:00.560 --> 0:17:03.400 And right now we are in a massive information void 0:17:03.480 --> 0:17:06.840 because there are no data points on assets trading. Nobody's 0:17:06.880 --> 0:17:09.200 nobody's willing to step up and buy because sellers aren't 0:17:09.440 --> 0:17:12.840 yet forced to lower their asking price. You've got, you've 0:17:12.920 --> 0:17:14.760 you've got the only data points that you're seeing. Our 0:17:14.800 --> 0:17:18.600 people are companies that are defaulting on loans, and so 0:17:18.720 --> 0:17:21.560 it's you've got plenty of bad news into this information void. 0:17:21.600 --> 0:17:23.600 But but you need we need to start seeing data 0:17:23.640 --> 0:17:27.200 points on properties trading and loans getting under rid. 0:17:27.160 --> 0:17:28.920 By the way, it's not all about New York, even 0:17:28.920 --> 0:17:30.320 though we think. 0:17:30.440 --> 0:17:31.760 Yeah, I need to think, I need to get on 0:17:31.800 --> 0:17:33.280 the road a little more. Is it all about New York? 0:17:33.359 --> 0:17:36.720 No, you're from Austin, right, so Dallas, you're from Dallas. Sorry, 0:17:36.720 --> 0:17:38.920 but you went to ut I did. I was just 0:17:38.960 --> 0:17:40.680 down in Austin and it was sick and there were 0:17:40.720 --> 0:17:43.960 cranes everywhere. Right, they're just putting up buildings left and right. 0:17:43.960 --> 0:17:47.200 They can't build them fast enough. So I'm not saying 0:17:47.240 --> 0:17:50.080 specifically there, but there are places around the country where 0:17:50.080 --> 0:17:53.040 it's still very busy, very popular, and people may even 0:17:53.040 --> 0:17:53.960 want to go to an office. 0:17:54.040 --> 0:17:56.240 So mass we've discussed. You know, we run the Residential 0:17:56.280 --> 0:17:59.080 ret Income UTF Ticker's House ha US and one of 0:17:59.080 --> 0:18:02.000 our focuses is look yet where the migration trends are happening. 0:18:02.160 --> 0:18:04.560 And as a result, you've got Redfin, Solo, Coast Star, 0:18:04.600 --> 0:18:07.000 all these data sources that are telling you here's where 0:18:07.040 --> 0:18:10.959 the demand is Nashville, Charlotte, Austin, Tampa, Jacksonville. And as 0:18:11.000 --> 0:18:12.960 a result, look at the city skylines and you see 0:18:12.960 --> 0:18:14.960 all the cranes and the question is where are all 0:18:14.960 --> 0:18:17.159 these people going to live? And so it's these residential 0:18:17.200 --> 0:18:19.760 riek guys because of how crazy the home ownership market 0:18:19.800 --> 0:18:21.399 is right now, they're the ones that are in the 0:18:21.440 --> 0:18:24.240 driver's seat to inherit all that potential office worker demand 0:18:24.320 --> 0:18:25.640 in those aftermarkets. 0:18:25.920 --> 0:18:29.000 Jeffany, you talk to institutional investors, where in the reach 0:18:29.000 --> 0:18:30.600 space do they really want to be these days? 0:18:30.760 --> 0:18:35.000 Not office other than house h a U S. 0:18:35.520 --> 0:18:39.080 Honestly, you know, there there has been a kind of 0:18:39.600 --> 0:18:42.879 sector wide push down on prices, and I think that 0:18:42.880 --> 0:18:46.119 that's just you know, rising rates have have impacted across 0:18:46.160 --> 0:18:50.040 the board, fear of you know, that maturity wall that 0:18:50.040 --> 0:18:54.600 that you know, this kind of cre fear. But some 0:18:54.640 --> 0:18:58.400 of the sectors that I mentioned up front are kind 0:18:58.440 --> 0:19:03.920 of still going strong. Warehouse is a multifamily, medical office, 0:19:04.440 --> 0:19:05.400 life science. 0:19:05.160 --> 0:19:09.720 Necessity based retail, grocery, the grocery anchor shopping center, the Starbucks, 0:19:09.720 --> 0:19:13.879 the CBS, Dwayne Reed, Walgreens. People are out there spending 0:19:14.000 --> 0:19:16.720 Madison Square Garden, Madison Square Garden for Fish concert. 0:19:17.000 --> 0:19:19.600 Fish is coming back to town. There's where you're going. 0:19:19.640 --> 0:19:21.240 Are you going, Jeff? This is where I drop out 0:19:21.240 --> 0:19:23.440 of it. He drops out of the conversation. All right, guys, 0:19:23.560 --> 0:19:25.320 thanks so much for coming in. We had a cool, 0:19:25.400 --> 0:19:28.080 cool roundtable talking about all things real estate. Here we 0:19:28.080 --> 0:19:30.560 did with Jeff Langbaum, he is the senior read analyst 0:19:30.600 --> 0:19:34.440 a Bloomberg Intelligence and David auerback managing director, are Maadi 0:19:34.520 --> 0:19:37.960 ETF Advisors talking about the real estate biz, and yeah, 0:19:38.359 --> 0:19:40.600 office real estate a little tough, particularly in some of 0:19:40.600 --> 0:19:43.359 those coastal cities like New York and San Francisco, but 0:19:43.440 --> 0:19:44.480 other areas doing well. 0:19:44.680 --> 0:19:47.800 You're listening to the tape cans are live program Bloomberg 0:19:47.840 --> 0:19:51.439 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:19:51.480 --> 0:19:54.720 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:19:54.760 --> 0:19:57.600 You can also listen live on Amazon Alexa from our 0:19:57.600 --> 0:20:01.600 flagship New York station. Just say Alex, it's play Bloomberg eleven. 0:20:04.080 --> 0:20:07.199 Let's talk the legal weed business. Cannabis. It continues to 0:20:07.240 --> 0:20:10.159 roll out across the country on a state by state basis, 0:20:10.160 --> 0:20:11.520 and it's rolled out here in New York City. But 0:20:11.560 --> 0:20:13.760 it's kind of been I don't get. I mean, there's 0:20:13.800 --> 0:20:15.720 only a handful of stores that are approved, yet they're 0:20:15.720 --> 0:20:18.320 on every street corner. I don't know, Matt how this 0:20:18.359 --> 0:20:21.840 whole thing it is an absolute mess. 0:20:22.480 --> 0:20:28.000 But on a day like today, four twenty, that is, 0:20:28.280 --> 0:20:30.760 I think, you know a lot of consumers are going 0:20:30.840 --> 0:20:31.280 to be like. 0:20:32.160 --> 0:20:35.320 Blessed this mess. Bless this mess. George Arcos he joins 0:20:35.359 --> 0:20:38.160 and he's the CEO, chairman, and co founder of cannabis 0:20:38.200 --> 0:20:41.679 company Verano. George, give us an overview. You've been in 0:20:41.720 --> 0:20:45.160 this business since you co found a Verano in twenty seventeen. 0:20:45.640 --> 0:20:49.240 Just give us an overview of where the legalized cannabis 0:20:49.400 --> 0:20:52.800 business is today in US. 0:20:53.560 --> 0:20:56.680 Hey, good morning, pleasure to be here today. Legal cannabis 0:20:56.720 --> 0:21:00.720 business is thriving, doing well, you know, despite a little 0:21:00.800 --> 0:21:03.920 negative sentiment at the moment to safe banking and didn't 0:21:03.920 --> 0:21:06.440 happen last year, and there hasn't been much subtle reforms. 0:21:06.600 --> 0:21:08.439 You know, we've built our business to be able to 0:21:08.440 --> 0:21:11.800 sustain and survivee in times like this, and you know, 0:21:11.840 --> 0:21:14.080 today's the super Bowl of cannabis in an exciting date 0:21:14.119 --> 0:21:16.199 for all of our consumers, our employees, and all of 0:21:16.200 --> 0:21:17.040 our shareholders. 0:21:17.240 --> 0:21:19.760 Yeah, it's I mean, I think it's very exciting. 0:21:20.480 --> 0:21:25.320 You have a billion dollar market cap, but it has 0:21:25.440 --> 0:21:27.120 been much higher? 0:21:27.280 --> 0:21:27.439 Is it? 0:21:27.520 --> 0:21:30.520 You think the disappointment in safe banking or the lack 0:21:30.600 --> 0:21:35.760 of the Safe Banking Act that has had shareholders kind 0:21:35.760 --> 0:21:36.800 of running for the exits? 0:21:39.359 --> 0:21:39.720 I do. 0:21:39.760 --> 0:21:42.680 I mean the biggest issue is the type of shareholders 0:21:42.720 --> 0:21:45.440 to be attractorally, not being able to you know, bring 0:21:45.480 --> 0:21:49.480 in institutional shareholders has affected our industry. We'll mostly case 0:21:49.560 --> 0:21:51.960 on the detail and you know, trade the stock exchange 0:21:51.960 --> 0:21:54.760 and company like ours, with the revenue the profitability that 0:21:54.800 --> 0:21:56.480 we have, we should be in a smater change and 0:21:56.520 --> 0:21:58.679 we should have a legal business that doesn't is the 0:21:58.680 --> 0:22:01.520 subject to to ade and all these onerous laws that 0:22:02.080 --> 0:22:03.920 hinder our capability. 0:22:03.440 --> 0:22:07.879 Will george any any any expectation. Yeah, in terms of 0:22:07.920 --> 0:22:12.040 fighting the fight, I mean, are you guys lobbying? Are 0:22:12.080 --> 0:22:16.440 you banding together with other cannabis businesses to send people 0:22:16.480 --> 0:22:19.440 to Congress to send money, let's face it, to send 0:22:19.480 --> 0:22:22.480 money to congressmen and congresswomen to get them to vote 0:22:22.480 --> 0:22:23.280 the way you want them to. 0:22:25.440 --> 0:22:28.479 You know, we're doing everything we can. Unfortunately we're not 0:22:28.720 --> 0:22:31.520 you know, we're not as put together as pharma and 0:22:31.800 --> 0:22:35.280 big alcohol, so the lobbying dollars aren't as substantial as 0:22:35.280 --> 0:22:37.760 some of those larger industries. But we're doing the best 0:22:37.840 --> 0:22:40.000 we can. You know, there's a lot of new interests 0:22:40.040 --> 0:22:42.880 to the space, coachal equity applicants, et cetera. So we 0:22:42.960 --> 0:22:45.640 have to fight the fights for so many then there's 0:22:45.640 --> 0:22:47.439 only a handful of us that have the capability to 0:22:47.520 --> 0:22:49.879 do so. But we're doing the best we can, and 0:22:49.920 --> 0:22:51.840 the more we speak and the more we talk about it, 0:22:53.000 --> 0:22:54.760 hopefully it gets some change here soon. 0:22:55.440 --> 0:22:58.760 So in the interim, how do companies like yours finance 0:22:58.800 --> 0:23:01.520 themselves on a day to day basis, on a longer 0:23:01.600 --> 0:23:05.360 term basis, how is how have you and your your 0:23:05.400 --> 0:23:10.520 peers kind of evolved in terms of capitalization and financing, so. 0:23:10.520 --> 0:23:13.359 We've all taken different paths. For us, profitability has always 0:23:13.359 --> 0:23:17.000 been a key point of our business, so we've continued 0:23:17.000 --> 0:23:19.520 to grow through our cash flow. This year, we'll have 0:23:19.560 --> 0:23:21.439 a substantial amount of cash flow from our business as 0:23:21.440 --> 0:23:24.000 our capex is doing those the majority of our projects 0:23:24.000 --> 0:23:26.359 are done, so we're excited about that. A lot of 0:23:26.400 --> 0:23:29.320 our acquisition liabilities are done, so we'll have very strong 0:23:29.359 --> 0:23:31.200 cashrow this year to be able to continue to grow 0:23:31.200 --> 0:23:33.159 the business paid on debt, and it gives us a 0:23:33.200 --> 0:23:36.920 lot of optionality. Some others might not be so fortunate. 0:23:37.080 --> 0:23:39.399 You know, they were building their business and hoping for 0:23:39.480 --> 0:23:42.560 safe banking to pass, to be able to access the 0:23:42.560 --> 0:23:45.760 public markets and additional banks, and you know, there might 0:23:45.760 --> 0:23:49.000 be some turbulence ahead for some operators. But for Verano, 0:23:49.160 --> 0:23:51.640 we were built four times like this, like I said earlier, 0:23:51.720 --> 0:23:53.840 and we're going to continue to thrive and hope well, 0:23:54.119 --> 0:23:58.520 we foresee some opportunistic m and A opportunities and we're 0:23:58.520 --> 0:24:02.080 going to continue to go down the road and be successful. 0:24:02.280 --> 0:24:04.879 And we have a great team, great people, great product, 0:24:05.000 --> 0:24:06.359 and we're excited about the future. 0:24:06.880 --> 0:24:12.240 What do you think about the way Americans feel about 0:24:12.240 --> 0:24:12.800 the product? 0:24:12.800 --> 0:24:13.400 I mean, is it. 0:24:13.280 --> 0:24:15.359 Becoming more mainstream stream? 0:24:15.480 --> 0:24:17.720 Is something I guess I can talk about on the 0:24:17.800 --> 0:24:19.359 radio sure days. 0:24:19.600 --> 0:24:22.359 You know, is it becoming more accepted? Are we going 0:24:22.440 --> 0:24:24.359 to see many more states legalize it? 0:24:26.920 --> 0:24:30.440 You will? I mean Connecticut converted over January this year. 0:24:30.600 --> 0:24:33.040 Maryland should convert over hopefully in July of this year. 0:24:33.720 --> 0:24:36.040 I think Florida, Pennsylvania, and Ohio will be coming up 0:24:36.040 --> 0:24:38.200 the next couple of years. You see multiple more markets 0:24:39.000 --> 0:24:43.200 converting over to medical use. You see Alabama and North 0:24:43.240 --> 0:24:47.040 Carolina's got some things moving Texas. So the polling that 0:24:47.119 --> 0:24:50.280 you look state by state has been trending very strongly 0:24:50.359 --> 0:24:52.800 for positive, you know, on the positive side of cannabis. 0:24:52.800 --> 0:24:55.280 So it's something you can't ignore and it's something the 0:24:55.320 --> 0:24:58.359 politicians can't be. So as long as we continue to 0:24:58.400 --> 0:25:01.000 do a great job provide a consistent and state products 0:25:01.359 --> 0:25:04.280 for both our medical and ALUs, consumers will continue to 0:25:04.320 --> 0:25:07.040 grow and positive things will happen for our company and 0:25:07.520 --> 0:25:08.159 others like us. 0:25:08.400 --> 0:25:12.640 What about innovation on the product side, You know, there 0:25:12.800 --> 0:25:15.800 are people out there who say Matt. You know, I 0:25:15.840 --> 0:25:18.840 love weed, but it just makes me eat like a 0:25:18.880 --> 0:25:22.320 pint of hogandas every time I consume it. 0:25:22.359 --> 0:25:24.800 Is there any possibility of altering. 0:25:24.280 --> 0:25:27.080 The product so that you can do it in a 0:25:27.200 --> 0:25:32.760 more nutritious way. 0:25:30.600 --> 0:25:33.240 There are? You know, there's multiple cannabinoids in the plant 0:25:33.280 --> 0:25:36.600 and they all do different things. So there's ongoing research 0:25:37.119 --> 0:25:39.160 not only in our own companies, with other companies as well, 0:25:39.200 --> 0:25:42.119 and we're continuing to fight find cannabinoids that affect the 0:25:42.119 --> 0:25:44.760 body in different ways. And there's even appetites of pressments 0:25:44.880 --> 0:25:48.400 in certain cannabinoids. So the con formulations will continue to change, 0:25:48.440 --> 0:25:52.240 products will continue to develop, and will continue to roll 0:25:52.280 --> 0:25:52.640 them up. 0:25:53.000 --> 0:25:55.400 George, What's what's the growth drivers for your company? I'm 0:25:55.400 --> 0:25:57.600 looking at some of the analysts consensus and they've got 0:25:57.640 --> 0:25:59.800 double digit top line growth for you guys. Is that 0:26:00.119 --> 0:26:02.159 How much is that as just the market growing versus 0:26:02.200 --> 0:26:05.399 you guys doing company specific things to drive the top line. 0:26:07.440 --> 0:26:09.520 It's both. I mean, the biggest driver of our business 0:26:09.560 --> 0:26:12.560 is to flip from medical to adult use. I mean 0:26:12.560 --> 0:26:14.680 we had a pretty big driver last year from New Jersey. 0:26:15.280 --> 0:26:17.840 Illinois was a big, big jump for ours big lifts. 0:26:18.280 --> 0:26:20.600 This year we had Connecticut. We'll also have Maryland here 0:26:20.640 --> 0:26:24.080 hopefully the summer fall. So those are the biggest drivers 0:26:24.080 --> 0:26:27.439 by far. And then you know the medical markets, although 0:26:27.480 --> 0:26:30.040 this year that's declined a bit because of the economy. 0:26:30.520 --> 0:26:34.240 Normally have nice continuous growth, right, So it's a combination. 0:26:34.320 --> 0:26:36.080 They're up. And obviously you have to do a great 0:26:36.160 --> 0:26:38.359 job and you have to provide great products, rate service, 0:26:39.000 --> 0:26:42.040 and state reliable products. So those those all things for 0:26:42.160 --> 0:26:44.320 mine will continue to drive our company forward. There are 0:26:44.440 --> 0:26:46.639 multiple states are out the US that don't have medical 0:26:46.640 --> 0:26:49.880 and ORLT use programs, so there's growth for many years 0:26:49.920 --> 0:26:50.280 I had. 0:26:50.400 --> 0:26:52.320 All right, it is for twenty the Super Bowls. You 0:26:52.359 --> 0:26:54.600 said of cannabis. What are you guys doing at your stores, 0:26:54.880 --> 0:26:55.960 your retail us today? 0:26:57.760 --> 0:27:00.720 You know, today's almost like a massive customerreciation day. We 0:27:00.760 --> 0:27:03.960 have all types of promotions. We do food trucks, music 0:27:04.080 --> 0:27:06.800 events throughout the country and all of our different locations, 0:27:07.000 --> 0:27:09.520 our wholesale partners. You tried them with promotions, et cetera 0:27:09.640 --> 0:27:11.840 for the consumers. So it's a fun day for all 0:27:12.880 --> 0:27:14.440 not only our consumers, but it's a fun day for 0:27:14.480 --> 0:27:17.480 our employees as well, right, the day for them to 0:27:17.520 --> 0:27:19.439 be thankful for what we have and what they've been 0:27:19.480 --> 0:27:22.760 given and what we've been given. And it's just a good, 0:27:23.080 --> 0:27:24.600 good vibe day for us. 0:27:24.800 --> 0:27:27.399 Good vibes. What it's all about. What it's all about, 0:27:27.480 --> 0:27:32.280 Man George Arco's CEO, chairman, co founder of Verano. Verano 0:27:32.320 --> 0:27:34.840 is a public trade of cannabis company trades over the 0:27:34.880 --> 0:27:39.240 counter tickers v r n F. It's kind of market 0:27:39.280 --> 0:27:41.480 cap just under one billion dollars over. 0:27:41.880 --> 0:27:42.239 That was it? 0:27:42.280 --> 0:27:44.160 Just over okay? Just over one non is very good. 0:27:44.640 --> 0:27:47.479 Talking about the legalized cannabis market, it is a growing 0:27:47.520 --> 0:27:49.480 market and again also looking at some of the analysts 0:27:49.480 --> 0:27:52.160 forecasted revenue growth a double digit ten eleven, twelve percent, 0:27:52.200 --> 0:27:55.080 so pretty interesting growth story there, but still lots of 0:27:55.680 --> 0:27:59.720 legalities to be negotiated, including safe banking is probably the 0:27:59.800 --> 0:28:01.879 key one for the growth of that business. 0:28:02.720 --> 0:28:06.159 You're listening to the team Ken's are Live program Bloomberg 0:28:06.200 --> 0:28:09.600 Markets weekdays at ten am eastering on Bloomberg dot com, 0:28:09.640 --> 0:28:12.800 the iHeartRadio app and the Bloomberg Business app, or listen 0:28:12.880 --> 0:28:15.000 on demand wherever you get your podcasts. 0:28:16.920 --> 0:28:19.200 And let's turn to those banks. It's been a busy 0:28:19.280 --> 0:28:22.760 day for earnings and a busy day for the regional banks. 0:28:22.760 --> 0:28:24.960 And this is important because it's been a busy month 0:28:25.000 --> 0:28:27.480 for Herman. It has been a herbin Chen who covers 0:28:27.520 --> 0:28:29.440 the regional banks. I mean, you know, you couldn't pick 0:28:29.440 --> 0:28:31.480 this guy out of a lineup a month ago. Now 0:28:31.480 --> 0:28:34.000 he's like star, stage and screen and radio. 0:28:34.920 --> 0:28:37.480 I actually, I actually the other day I was in 0:28:37.520 --> 0:28:40.440 the car switched on Bloomberg Radio mid sentence and I 0:28:40.480 --> 0:28:41.240 was like, oh, that's Herman. 0:28:41.680 --> 0:28:44.160 But now I recognize his voice on the fly. That's 0:28:44.200 --> 0:28:46.600 how bad it's gotten. So Herman, thanks so much for 0:28:46.680 --> 0:28:48.960 joining us yet again here in studio. Talk to us 0:28:48.960 --> 0:28:50.720 about some of the banks that reported today. What do 0:28:50.760 --> 0:28:51.840 we kind of take away here? 0:28:51.960 --> 0:28:52.720 Yeah, mixed trends. 0:28:52.720 --> 0:28:53.080 Over all. 0:28:53.640 --> 0:28:57.560 I would say that the issues that are facing banks 0:28:57.640 --> 0:28:59.800 is not a liquidator or solvency issue. It's more of 0:28:59.840 --> 0:29:04.320 an earnings issue, with deposits starting to continue to face 0:29:04.360 --> 0:29:08.480 some attrition and higher banks are having to raise their 0:29:08.520 --> 0:29:12.479 deposit pricing. So all that means that netedgor's margins are 0:29:12.480 --> 0:29:16.240 going to be narrower and banks will sort of muddle through. 0:29:16.360 --> 0:29:21.120 But the valuations for these companies has already reflected with 0:29:21.880 --> 0:29:25.520 banks are trading at around tangible book value. So everything's 0:29:25.560 --> 0:29:29.360 been priced in, but the stocks continue to So when I. 0:29:29.280 --> 0:29:31.080 Look at valuation for a regional bank, give me the 0:29:31.440 --> 0:29:33.360 where it trades at the bottom and where it trades 0:29:33.440 --> 0:29:35.000 kind of at the top of kind of where are we? 0:29:35.120 --> 0:29:35.320 Yeah? 0:29:35.360 --> 0:29:38.200 Sure, so during the financial crisis, banks are trading below 0:29:38.240 --> 0:29:40.960 tangible book value because there was a lot of concerns 0:29:40.960 --> 0:29:44.640 that if banks would survive, they. 0:29:44.640 --> 0:29:45.800 Ran European books. 0:29:45.960 --> 0:29:49.719 European banks, by the way, sat at below book value 0:29:49.760 --> 0:29:51.200 for a decade. 0:29:50.880 --> 0:29:54.440 Right exactly, So that was an elongated issue there. And 0:29:54.880 --> 0:29:56.800 on the top range, you know, you're you're talking about 0:29:56.800 --> 0:29:59.680 something like around two times, so it's. 0:29:59.520 --> 0:30:01.840 Okay, and right now we're just about tangible book fag. 0:30:02.280 --> 0:30:05.440 So one could argue, as if you're a value investor, 0:30:05.680 --> 0:30:07.000 I'm gonna go buy some banks here. 0:30:07.240 --> 0:30:10.440 You could argue, if you're a long term investor, some 0:30:10.480 --> 0:30:12.880 of these issues will will go away, and but you're 0:30:12.880 --> 0:30:14.680 gonna have to wait a while because we're not even 0:30:14.800 --> 0:30:21.080 at the recessionary type scenario where banks are facing higher 0:30:21.280 --> 0:30:24.080 net charge off some bad debts, so that part of 0:30:24.120 --> 0:30:25.520 the story hasn't played out yet. 0:30:25.520 --> 0:30:27.239 But well, they pay me dividends. I'm looking at your 0:30:27.280 --> 0:30:29.600 old employer, M and T Bank, I got a four 0:30:29.600 --> 0:30:31.840 percent dividend, Yet I'm getting paid Wait a little bit here, 0:30:31.960 --> 0:30:33.960 get paid the way point? 0:30:33.960 --> 0:30:36.800 Maybe, Yeah, that's right, You're you're getting paid a weight. 0:30:36.920 --> 0:30:40.320 You have to face some volatility, Buy it and forget 0:30:40.320 --> 0:30:41.840 it for a few years and you should be fine. 0:30:41.880 --> 0:30:44.400 Has anybody ever have we seen some of these hedge 0:30:44.400 --> 0:30:46.960 fund managers come out and say I'm buying the banks. 0:30:47.040 --> 0:30:48.880 Have we seen any of that? Not quite yet. 0:30:49.560 --> 0:30:52.600 We're still in a bit of uncertainty mode. But but 0:30:52.680 --> 0:30:57.040 I think what the one Q earnings has has demonstrated 0:30:57.040 --> 0:31:00.680 is that the contagion fears are off the table, where 0:31:00.800 --> 0:31:02.720 the banks are just going to mouddle through and face 0:31:02.760 --> 0:31:03.840 some weaker earnings. 0:31:03.960 --> 0:31:06.239 But yeah, that's the key, right, because we don't know 0:31:06.240 --> 0:31:09.040 how weak they're gonna be. Right, you said they haven't 0:31:09.240 --> 0:31:15.920 repriced deposit rates, so you're still looking at minuscule rates 0:31:16.360 --> 0:31:19.120 on the money you put in the banks. Competition could 0:31:19.200 --> 0:31:22.200 flare up, right, and they could have to start trying 0:31:22.240 --> 0:31:27.040 to out outprice each other, and then you know, next 0:31:27.200 --> 0:31:30.400 quarter's earnings could be worse, the third quarter earnings could. 0:31:30.240 --> 0:31:33.280 Be even worse. And how bad does it get. 0:31:33.120 --> 0:31:36.240 Yeah, the hope is things that are starting to stabilize, 0:31:36.280 --> 0:31:39.320 and the banks are talking about that. There's been about 0:31:39.360 --> 0:31:43.520 two three percent at the average to climb in deposits 0:31:43.280 --> 0:31:46.720 for the regional banks, and they're talking about things stabilizing 0:31:46.760 --> 0:31:48.800 in the third court in the second quarter and beyond. 0:31:48.960 --> 0:31:53.400 So that's helpful. And then the issue is that you're 0:31:53.400 --> 0:31:57.360 gonna as you mentioned, the posit costs are arising. It's 0:31:57.400 --> 0:31:59.160 going to be a case where the banks need to 0:31:59.160 --> 0:32:02.320 pay up to retain the deposit relationships. So it is aheadwind. 0:32:02.440 --> 0:32:04.720 And what are they saying about loan growth, because again 0:32:04.760 --> 0:32:07.160 my concern about the macroeconomy is if I want to 0:32:07.160 --> 0:32:08.920 go if I see a vacant store in some of 0:32:08.960 --> 0:32:10.880 New Jersey and I've got a great idea for a 0:32:10.960 --> 0:32:12.160 store to put in there, and I go to my 0:32:12.160 --> 0:32:15.480 local bank, I either can't get the loan or they're 0:32:15.600 --> 0:32:19.840 they're it's too expensive, and that slows down the economy overall. Yeah, 0:32:19.840 --> 0:32:20.320 that's right. 0:32:20.840 --> 0:32:23.080 The overall take away from a lot of the management 0:32:23.120 --> 0:32:28.480 commentary is that the things are tightening in terms of 0:32:28.680 --> 0:32:31.640 credit availability and the banks are being a bit more 0:32:31.640 --> 0:32:35.120 cautious with who they're lending to. And second, they've also 0:32:35.480 --> 0:32:38.760 mentioned there's caution from the borrowers as well, so business 0:32:38.840 --> 0:32:43.640 borrowers in particular. Huntington just mentioned that their business customers 0:32:43.680 --> 0:32:45.480 are being a bit more cautious and not doing as 0:32:45.600 --> 0:32:47.440 much M and A as they probably would have been 0:32:47.680 --> 0:32:50.080 without some of the disruption that's happened so far. 0:32:50.440 --> 0:32:54.880 That's how Ohioans are. Ohioans. We're a cautious bunch. Cautious bunch. Yeah, 0:32:54.920 --> 0:32:57.840 well you're also a hearty bunch, right, we are hardy, 0:32:58.040 --> 0:33:01.200 big football players, all right. Are what do we look 0:33:01.200 --> 0:33:04.560 at going forward? Herman? I mean we are we still 0:33:04.600 --> 0:33:08.280 focusing on deposits? Are we still focusing on loan growth? 0:33:08.880 --> 0:33:10.680 Are those still the metrics I need to pay attention. 0:33:10.760 --> 0:33:13.760 Yeah, that's right. Deposit growth, loan growth, and what's happening 0:33:13.800 --> 0:33:16.880 with deposit repricing and what are the effects to the 0:33:16.880 --> 0:33:20.000 men ander's margin. Those are the things we're talking about. 0:33:20.040 --> 0:33:23.240 We're not talking about borrowing from the Federal Reserve discount 0:33:23.280 --> 0:33:25.080 window and that's the sort of thing anymore, because that's 0:33:25.200 --> 0:33:26.920 that's not an issue across the region. 0:33:26.920 --> 0:33:30.680 And I'm looking at crisis over crisis averted, Yes, exactly, 0:33:30.760 --> 0:33:32.520 I'm looking at just the earnings for M and T 0:33:32.920 --> 0:33:35.000 Bank again kind of my little poster child for a 0:33:35.040 --> 0:33:37.560 high quality regional bank. And I'm just looking at the 0:33:37.560 --> 0:33:40.440 street consensus and it's kind of got, you know, earnings 0:33:40.560 --> 0:33:43.320 flat year of a year twenty four to twenty three, right, right, 0:33:43.520 --> 0:33:45.280 So and then maybe some growth kicking in. 0:33:45.320 --> 0:33:47.760 Then twenty billion dollar bank trading at one point four 0:33:47.800 --> 0:33:49.920 times tangible book value. 0:33:50.160 --> 0:33:50.360 Right. 0:33:50.840 --> 0:33:55.200 The benefits from interest rates really happened last year, and 0:33:55.280 --> 0:33:57.960 so they're giving back some of the benefits with higher 0:33:57.960 --> 0:34:02.120 deposit repricing. But overall things still look pretty decent for 0:34:02.400 --> 0:34:02.720 a bank. 0:34:02.720 --> 0:34:04.800 Like we had a great story on the Bloomberg terminal 0:34:05.280 --> 0:34:10.600 overnight about corporate debt, you know, investment grade corporate debt. 0:34:10.719 --> 0:34:14.600 The spreads are so tight to treasuries, and when you 0:34:14.640 --> 0:34:18.480 factor in the cost of funding for banks, they're just 0:34:18.520 --> 0:34:20.479 not getting the kind of risk premium that they need, 0:34:20.560 --> 0:34:22.200 and so they're no longer going to be able to 0:34:22.200 --> 0:34:24.640 buy that debt. Now it's only I think banks make 0:34:24.719 --> 0:34:29.360 up about seven percent of the ownership, but how much 0:34:29.520 --> 0:34:31.680 is their cost of funding and what are they going 0:34:31.719 --> 0:34:34.840 to put their money in now that we're also freaked 0:34:34.840 --> 0:34:38.320 out about the whole the maturity portfolios and commercial real estate. 0:34:38.440 --> 0:34:42.200 That's right. The bank securities portfolio will start to shrink 0:34:42.239 --> 0:34:46.440 because they need to balance the balance sheet with the 0:34:46.480 --> 0:34:50.319 decline and deposits, and they'd rather park their assets into 0:34:50.400 --> 0:34:52.759 any sort of lending that's still available to them. So 0:34:54.239 --> 0:34:56.480 that's one of the things that it's critical with what's 0:34:56.480 --> 0:34:58.960 going to happen with how the BRAKE leaders come in 0:34:58.960 --> 0:35:01.880 in and sort of push some of new regulations in 0:35:01.920 --> 0:35:04.080 terms of how they manage the balance sheet with with 0:35:04.160 --> 0:35:07.680 the issues with the unrealized losses. So overall, I think 0:35:07.680 --> 0:35:10.840 going forward for the next few quarters, we'd expect securities 0:35:10.880 --> 0:35:12.920 portfolios to decline. 0:35:12.640 --> 0:35:15.000 All right, And the next big issue to watch for 0:35:15.080 --> 0:35:19.040 the regional banks will be First Republic Bank the report 0:35:19.200 --> 0:35:21.280 their earnings Monday after the close. Look at this stock, 0:35:21.320 --> 0:35:24.520 brutal man. I know down eighty year two. 0:35:24.520 --> 0:35:26.279 You should have got a mortgage from them because they 0:35:26.280 --> 0:35:31.640 were giving interest only at zero rates for like where 0:35:31.719 --> 0:35:34.600 was it years and then it finally kicks in, yeah, 0:35:34.719 --> 0:35:35.440 at three percent. 0:35:36.000 --> 0:35:39.439 About finance. My love that story. Finance my mortgage. Don't 0:35:39.440 --> 0:35:41.319 you worry. I'm going to get a four handle on 0:35:41.360 --> 0:35:43.279 it when I refinanced in twelve to eighteen months time. 0:35:43.320 --> 0:35:46.120 How about that. Herman Chan, he's the regional banks analyst 0:35:46.200 --> 0:35:49.200 for Bloomberg Intelligence. He's been doing Yeoman's work really over 0:35:49.239 --> 0:35:51.920 the last month or so. Get it keeping us up 0:35:51.960 --> 0:35:54.240 to date on what is going on with the bankside 0:35:54.239 --> 0:35:57.320 automaph I know exactly. He's a player. We're gonna have 0:35:57.360 --> 0:35:59.360 more coming up. This is Bloomberg. 0:36:00.800 --> 0:36:03.920 You're listening to the tape kens our live program, Bloomberg 0:36:04.000 --> 0:36:07.600 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:36:07.640 --> 0:36:10.879 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:36:10.920 --> 0:36:13.719 You can also listen live on Amazon Alexa from our 0:36:13.760 --> 0:36:18.800 flagship New York station. Just say Alexa play Bloomberg eleven thirty. 0:36:19.600 --> 0:36:22.160 Well, there are a lot of cross current score investors 0:36:22.160 --> 0:36:25.040 to negotiate these days. What with the Federal Reserve, is 0:36:25.040 --> 0:36:27.520 it going to stop hiking? How when will stop hiking? 0:36:27.560 --> 0:36:31.440 Will start the cut rates? We've got, certainly geopolitical issues, 0:36:31.520 --> 0:36:35.000 We've got economic issues as it relates to recession, How deep, 0:36:35.040 --> 0:36:37.560 how shallow, how long, all those types of things. And 0:36:37.560 --> 0:36:40.759 then oh yeah, we're negotiating earnings as we speak. So 0:36:41.239 --> 0:36:43.360 it really helps if an investor can take a long 0:36:43.640 --> 0:36:46.479 term focus that might make things a little bit easier. 0:36:46.480 --> 0:36:47.920 I think that's what our next guest is going to 0:36:47.920 --> 0:36:51.279 focus on. Heather Brilliant, she's the CEO and president of 0:36:51.400 --> 0:36:53.919 Diamond Hill joining us on the phone, and Hender, thanks 0:36:53.920 --> 0:36:56.400 so much for joining us here. How do you guys 0:36:57.040 --> 0:37:00.560 approach investing given all the cross current out there that 0:37:00.640 --> 0:37:01.760 investors have to navigate? 0:37:03.000 --> 0:37:05.120 Thanks for having me. Yeah, I mean at Diamond Hill, 0:37:05.160 --> 0:37:08.080 we're really trying to take a multi year perspective. We 0:37:08.160 --> 0:37:11.120 try to look out really the next five years into 0:37:11.200 --> 0:37:14.319 the earnings power of the businesses that we own, and 0:37:14.400 --> 0:37:17.520 it really helps navigate environments like this where we see 0:37:17.560 --> 0:37:19.960 a lot of volatility. There's certainly a tremendous amount of 0:37:20.000 --> 0:37:23.120 economic uncertainty, as you were just mentioning on that news 0:37:23.120 --> 0:37:26.240 flash with the data of today even but that matters 0:37:26.239 --> 0:37:28.440 a lot less when you're looking for businesses that you 0:37:28.480 --> 0:37:31.840 think can generate cash flow well into the future and 0:37:32.320 --> 0:37:34.520 return capital to shareholders. 0:37:36.520 --> 0:37:39.400 So what types of sectors does that lead you to? 0:37:39.719 --> 0:37:42.879 I mean, it's a lot of folks, you know, look 0:37:42.880 --> 0:37:45.319 at some of these, whether it's semiconductors for example, there 0:37:45.360 --> 0:37:47.520 are such long cycles and you get a little bit 0:37:47.760 --> 0:37:50.000 spooked by it. But what sectors do you guys tend 0:37:50.040 --> 0:37:51.160 to focus on feel scary? 0:37:53.040 --> 0:37:54.520 I mean, I think we tend to really look for 0:37:54.560 --> 0:37:59.640 businesses that in any sector can compound returns over time. 0:38:00.000 --> 0:38:02.520 So one example of that would be even in the 0:38:02.600 --> 0:38:05.480 property and casualty insurance market, we look at all State 0:38:05.640 --> 0:38:09.360 as a company that is likely to benefit from a 0:38:09.360 --> 0:38:11.520 lot of the changes going on in property casualty. We're 0:38:11.520 --> 0:38:14.759 seeing a lot of changes in pricing there as that's 0:38:14.800 --> 0:38:18.200 become a more challenging market with more claims. But with 0:38:18.320 --> 0:38:20.560 all of the companies really taking a fresh look at pricing, 0:38:20.600 --> 0:38:23.279 it really gives a tailwind to this industry. And All 0:38:23.320 --> 0:38:26.480 State has been valued as a business that historically had 0:38:26.600 --> 0:38:30.560 life and annuity as well as property casualty, and they 0:38:30.600 --> 0:38:32.640 sold their life an annuity business a couple of years ago, 0:38:32.680 --> 0:38:34.880 and we don't really think that's reflected in the valuation. 0:38:35.120 --> 0:38:37.279 As well as some of these business improvements that will 0:38:37.280 --> 0:38:39.240 really start to come through in the next couple of years. 0:38:39.280 --> 0:38:41.000 What are some of the other business improvements talk to 0:38:41.080 --> 0:38:43.320 us about. The company ticker is al L. 0:38:44.840 --> 0:38:48.920 Yeah, So essentially their focus is on being as omni 0:38:49.000 --> 0:38:51.759 channel as possible within property casualty. So they're looking to 0:38:51.800 --> 0:38:55.239 add some more ancillary lines of insurance and things like 0:38:55.880 --> 0:38:59.239 roadside assistants, which are more voluntary. Right generally property and 0:38:59.280 --> 0:39:02.200 casualty is required, and so that's one of the reasons 0:39:02.239 --> 0:39:04.479 why we think it's such a good fundamental business even 0:39:04.480 --> 0:39:07.919 in an economic environment like this. But over the next 0:39:07.920 --> 0:39:09.879 couple of years, they're really looking to focus on some 0:39:09.960 --> 0:39:12.840 of those new areas that I think will be a 0:39:12.880 --> 0:39:15.399 little bit more discretionary and could benefit on the other 0:39:15.480 --> 0:39:18.560 side of you know, coming out of a recession. Also, 0:39:18.760 --> 0:39:22.160 they are essentially you know, across the US and also 0:39:22.480 --> 0:39:26.080 distributing Canada as well, which gives them a scale benefit 0:39:26.200 --> 0:39:28.359 because you know, when they're doing marketing, they can really 0:39:28.400 --> 0:39:31.040 think about how they reach people across the country instead 0:39:31.080 --> 0:39:33.760 of having to think nit more narrowly about their market. 0:39:34.800 --> 0:39:37.319 So, Hea, do you also have Lear Corporation on there? 0:39:37.320 --> 0:39:38.799 When I think of Lear, I think of just kind 0:39:38.800 --> 0:39:42.640 of you know, they work with the automobile industry, and 0:39:42.920 --> 0:39:47.399 there's an industry that's undergoing tremendous amounts of change as 0:39:47.560 --> 0:39:50.839 of airplanes, I think, but that's Learjet. I think this 0:39:50.880 --> 0:39:53.400 is Lear Corporation. So if they make seats. I don't know. 0:39:53.520 --> 0:39:56.320 Let's ask why do you own Lear? L Ea. 0:39:57.200 --> 0:40:01.759 Yeah, so Lear is essentially a automotive seating business. That's 0:40:01.800 --> 0:40:05.000 about seventy five percent of their revenue today, and we 0:40:05.040 --> 0:40:07.239 think it's interesting for a couple of reasons. First of all, 0:40:07.440 --> 0:40:10.160 their focus has been on the luxury side of the 0:40:10.320 --> 0:40:12.960 automotive market, and that means that they're really at the 0:40:12.960 --> 0:40:15.200 cutting edge of technology when it comes to seats. And 0:40:15.600 --> 0:40:17.480 you know, you might laugh about the thought of, you know, 0:40:17.520 --> 0:40:19.719 how innovative can a seat really be, but we all 0:40:19.760 --> 0:40:23.239 know from you know, driving our cars that we want 0:40:23.280 --> 0:40:25.600 them to heat up and be able to be cooled, 0:40:25.680 --> 0:40:28.840 and have all electric mechanisms for moving them around. And 0:40:28.920 --> 0:40:30.360 these days you can even get massages. 0:40:30.440 --> 0:40:32.880 I want them to massage exactly. No, I want to 0:40:32.880 --> 0:40:34.359 be I don't. I don't laugh. 0:40:34.440 --> 0:40:36.640 By the way, I once trecked all the way out 0:40:36.680 --> 0:40:41.760 to Detroit to make an entire package about the kid 0:40:41.760 --> 0:40:43.960 who designed the seats for the Corvette. 0:40:44.040 --> 0:40:48.400 Yeah, and what'd you find? He was awesome, Sean Mauger. 0:40:48.480 --> 0:40:52.280 He designs like everything, but and the seats were amazing 0:40:52.760 --> 0:40:55.680 and it's an incredibly important part of the automobile now. 0:40:56.040 --> 0:40:58.319 So you have to be able to drive a German car. 0:40:58.400 --> 0:41:02.160 There's no heat, no no whatsoever because it's Germans. The 0:41:02.239 --> 0:41:03.520 Germans don't care about that. 0:41:04.480 --> 0:41:07.960 So no, Lear does work with Audi and BMW, so 0:41:08.000 --> 0:41:11.160 they've got some German clients. So eventually maybe some more 0:41:11.239 --> 0:41:12.520 luxuries coming to your seat. 0:41:12.680 --> 0:41:15.759 Do you, guys at your firm, how do you think 0:41:15.760 --> 0:41:18.799 about valuation? Is that a big, big driver of what 0:41:18.920 --> 0:41:21.080 you own? Or are you just looking for a good 0:41:21.120 --> 0:41:24.239 story and you know you can make the valuation work 0:41:24.320 --> 0:41:26.080 or do you have a how do you think about that? 0:41:27.120 --> 0:41:30.080 I really appreciate that question because valuation is critical to 0:41:30.120 --> 0:41:33.360 the way we think about investing. Every business can be 0:41:33.520 --> 0:41:35.799 attractive at the right price and can be unattractive at 0:41:35.800 --> 0:41:38.760 the wrong price. And so we really start by looking 0:41:38.840 --> 0:41:41.000 at what we believe to be the intrinsic value of 0:41:41.000 --> 0:41:43.120 the business, and we do that by building a discounting 0:41:43.120 --> 0:41:44.920 cash flow model and really taking a look at the 0:41:45.000 --> 0:41:47.960 underlying drivers of the business. Not only does that help you, 0:41:48.000 --> 0:41:50.800 I think, really fundamentally understand what the future cash flows 0:41:50.800 --> 0:41:53.279 of the business are worth, but it also gives you 0:41:53.400 --> 0:41:56.120 a good grounding to be able to look beyond, you know, 0:41:56.160 --> 0:41:58.160 the near term when it could be a weaker economic 0:41:58.280 --> 0:42:01.360 environment to the real earning's power of the business. 0:42:01.840 --> 0:42:04.040 By the way, I look at a lot of these 0:42:04.120 --> 0:42:07.120 charts are choppy, leer and all state. 0:42:07.239 --> 0:42:11.799 But I look at HDFC Bank, which you also like. 0:42:11.880 --> 0:42:15.640 The ticker is HDB, and not only does the chart 0:42:15.760 --> 0:42:18.399 just go up into the right like it's amazing, it's 0:42:18.440 --> 0:42:22.560 also a one hundred and thirty billion dollar company that I've. 0:42:22.360 --> 0:42:26.120 Never heard of in India. Where how do you pick this? 0:42:26.160 --> 0:42:27.960 How do you screen for these kind of stocks? 0:42:28.719 --> 0:42:31.239 Well, we do have an international team and strategy that 0:42:31.280 --> 0:42:34.719 are really looking at ideas outside the US, and they 0:42:34.800 --> 0:42:39.680 identified HDFC Bank as an opportunity for a couple of reasons. 0:42:39.920 --> 0:42:42.200 First of all, it is in India, as you point out, 0:42:42.280 --> 0:42:45.160 and it's a private bank in India, which means it 0:42:45.239 --> 0:42:48.879 is privately held as opposed to public you know, owned 0:42:48.880 --> 0:42:51.480 by the government, which is different than of course how 0:42:51.520 --> 0:42:53.800 we define private banking here in the US. So important 0:42:53.800 --> 0:42:56.959 to note that. But by being private, they've been able 0:42:57.000 --> 0:43:00.040 to invest in their business and really be able to 0:43:00.040 --> 0:43:02.520 to be at the forefront of technology, and that is 0:43:02.640 --> 0:43:05.520 really critical for a couple of reasons. First, obviously there's 0:43:05.520 --> 0:43:08.080 a lot of growth in the middle class in India, 0:43:08.320 --> 0:43:11.000 which is a huge tailwind for this business. But second, 0:43:11.040 --> 0:43:14.920 because digital transactions were literally less than twenty percent of 0:43:15.000 --> 0:43:17.680 the market a mere five years ago and are now 0:43:17.719 --> 0:43:20.600 over eighty percent of the market in India. So they've 0:43:20.680 --> 0:43:23.520 really been able to benefit from the customer base in 0:43:23.520 --> 0:43:26.120 India moving more and more to digital while they're at 0:43:26.120 --> 0:43:29.760 the forefront of the technological revolution going on within banking. 0:43:29.800 --> 0:43:30.040 There. 0:43:30.280 --> 0:43:32.920 All right, interesting story there, Heather, thanks so much for 0:43:33.000 --> 0:43:33.400 joining us. 0:43:33.400 --> 0:43:33.560 There. 0:43:33.560 --> 0:43:36.239 Heather Brilliant, CEO and president of Diamond Hill. She is 0:43:36.320 --> 0:43:38.719 all in Chicago. By that, I mean she got her 0:43:38.760 --> 0:43:42.080 undergraduate degree in economics from Northwestern then she figured, hey, 0:43:42.080 --> 0:43:43.799 this is good town. I'll stick around. She gets her 0:43:43.960 --> 0:43:47.040 MBA from the University of Chicago, and I know a 0:43:47.040 --> 0:43:49.600 lot of Chicago Booth graduates, and they're all comfortable with 0:43:49.680 --> 0:43:52.279 the math. I sense that Heather grew up around. I 0:43:52.280 --> 0:43:55.520 can hear the Chicago. You ken in here, boys, the Illinois. 0:43:55.560 --> 0:43:57.960 I hear it, the Illinois. Yeah, okay, all right, interesting, 0:43:58.000 --> 0:44:01.239 but yeah, all in in Chicago again, Universe Chicago NBA. 0:44:01.280 --> 0:44:03.480 I'm a huge fan of the Graduate School of Business 0:44:03.480 --> 0:44:06.200 now called the Booth School at Chicago. A lot of 0:44:06.200 --> 0:44:09.400 the great professors at Duke came from University of Chicago. 0:44:09.880 --> 0:44:13.000 Thanks for listening to the Bloomberg Markets podcasts. You can 0:44:13.040 --> 0:44:16.800 subscribe and listen to interviews at Apple Podcasts or whatever 0:44:16.880 --> 0:44:20.600 podcast platform you prefer. I'm Matt Miller. I'm on Twitter 0:44:20.800 --> 0:44:22.759 at Matt Miller nineteen seventy three. 0:44:23.200 --> 0:44:25.560 And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. 0:44:25.680 --> 0:44:28.359 Before the podcast, you can always catch us worldwide at 0:44:28.360 --> 0:44:30.120 Bloomberg Radio.