WEBVTT - UAW, ABC, Signet, and Marijuana Investing (Podcast) 0:00:00.840 --> 0:00:02.560 Welcome to the Bloomberg Markets Podcast. 0:00:02.720 --> 0:00:03.480 I'm Paul Sweeney. 0:00:03.520 --> 0:00:05.240 Alongside my co host Matt Miller. 0:00:05.640 --> 0:00:09.720 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.640 and Bloomberg experts, along with essential market moven news. 0:00:14.160 --> 0:00:17.279 I'm the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.919 you listen to podcasts, and at Bloomberg dot com Slash podcast. 0:00:21.280 --> 0:00:24.120 For our Bloomberg television radio audiences worldwide. I'm David Western. 0:00:24.160 --> 0:00:26.880 We're welcome now, Mary bar She is the General Motors 0:00:26.960 --> 0:00:29.840 chair and CEO. So, Mary, you are the woman of 0:00:29.880 --> 0:00:31.840 the hour. I must say, whether you like it or not, 0:00:32.280 --> 0:00:33.840 let me ask the question I think on everyone's mind. 0:00:33.880 --> 0:00:36.559 What comes next? We know there's individual plans to instruct 0:00:36.560 --> 0:00:39.400 at all three of the big automakers in Detroit. How 0:00:39.440 --> 0:00:42.360 far away are we from layoffs as other plants really 0:00:42.440 --> 0:00:42.840 run out. 0:00:42.760 --> 0:00:43.200 Of the parts. 0:00:44.640 --> 0:00:45.720 Well, you know, David. 0:00:45.760 --> 0:00:48.440 First, I want to say, I'm extremely disappointed and frustrated 0:00:48.440 --> 0:00:50.120 that we're even on a strike. We didn't need to 0:00:50.120 --> 0:00:52.920 get here. General Motors has an exceptionally strong offer on 0:00:52.960 --> 0:00:53.360 the table. 0:00:53.400 --> 0:00:54.120 It's historic. 0:00:54.520 --> 0:00:59.400 It's the largest increase from a wage's perspective in our 0:00:59.400 --> 0:01:02.440 one hundred and fifteen year history, along with world class 0:01:02.440 --> 0:01:06.080 healthcare benefits and many other provisions job security, etc. 0:01:06.680 --> 0:01:07.800 And a cola adjustment. 0:01:08.000 --> 0:01:09.560 So when you look at the strength of the agreement 0:01:09.640 --> 0:01:12.640 we have on the table, you know, we really don't 0:01:12.680 --> 0:01:15.000 need to be here. Yes, they have one plant down 0:01:15.080 --> 0:01:17.440 right now, and you know it'll. 0:01:17.200 --> 0:01:19.720 Impact two three very important products. 0:01:19.720 --> 0:01:24.160 Two brand new our Chevrolet Colorado and our GMC Canyon, 0:01:24.200 --> 0:01:27.039 both mid size pickups that are in strong demand, as 0:01:27.080 --> 0:01:30.320 well as our Chevrolet cargo van that does exceptionally well 0:01:30.319 --> 0:01:33.240 in the market. So this is having an impact and 0:01:33.240 --> 0:01:35.600 we'll have to see where they go next. I will 0:01:35.640 --> 0:01:37.640 say we're ready for this, you know, as we've dealt 0:01:37.680 --> 0:01:40.959 with COVID and dealt with the semiconductor shortage as well 0:01:41.000 --> 0:01:44.240 as other supply chain challenges that have you know, continued 0:01:44.280 --> 0:01:47.080 to persist from COVID. Our team knows how to manage 0:01:47.120 --> 0:01:49.480 these situations. They are staying agile and we're going to 0:01:49.520 --> 0:01:50.960 do what's right for the company. We're going to make 0:01:51.000 --> 0:01:53.280 sure everyone stays safe. But this is a strike that 0:01:53.320 --> 0:01:54.160 didn't need to happen. 0:01:54.600 --> 0:01:56.840 As you say, you've made an offer already for rather 0:01:56.840 --> 0:02:00.480 substantial increase in wages it's not what the OW wants. Implicitly, 0:02:00.520 --> 0:02:03.200 you've agreed that they do need and deserve some increase 0:02:03.240 --> 0:02:05.680 in wages. But is this about more than that? Is 0:02:05.720 --> 0:02:08.520 this existential sense for the auto companies in terms of 0:02:08.560 --> 0:02:10.720 your need to move into electric vehicles and from the 0:02:10.720 --> 0:02:12.680 you at W point of view that they believe in 0:02:12.680 --> 0:02:15.720 effect moving to evs will actually cut the workforce by 0:02:15.760 --> 0:02:17.040 as much as forty percent. 0:02:18.160 --> 0:02:19.600 Well, you know, you're absolutely right. 0:02:19.639 --> 0:02:23.519 This is a once in a century transformation. We're in 0:02:23.560 --> 0:02:26.800 the middle of moving from internal combustion engine vehicles to 0:02:26.960 --> 0:02:30.120 electric vehicles, and at GM we're at a very pivotal 0:02:30.160 --> 0:02:32.880 point because we have so many electric vehicles ready to 0:02:32.960 --> 0:02:35.760 launch in the process of launching, and this is important 0:02:35.800 --> 0:02:37.919 to securing all of our futures. We need to get 0:02:37.960 --> 0:02:41.160 these vehicles out. We need to they're wonderful vehicles. We've 0:02:41.200 --> 0:02:44.000 got waiting lists for most of them or orders already 0:02:44.000 --> 0:02:46.600 in place, so it's important that we meet that demand. 0:02:46.960 --> 0:02:50.120 And one thing from a General Motors perspective, from job security, 0:02:50.520 --> 0:02:52.840 we have jobs for all of our people as we 0:02:52.880 --> 0:02:55.840 make this transformation. More than two years ago we started 0:02:55.880 --> 0:02:58.200 planning for this, and one of the reasons General Motors 0:02:58.200 --> 0:03:01.280 invested in doing our own power, which is a component 0:03:01.320 --> 0:03:05.040 that's very important on electric vehicle. We design them internally 0:03:05.080 --> 0:03:07.800 and we are now allocating that production to the plants 0:03:07.800 --> 0:03:10.359 that build internal combustion vehicle. 0:03:10.120 --> 0:03:11.040 Engines right now. 0:03:11.360 --> 0:03:14.080 So we have worked very carefully to have a job 0:03:14.120 --> 0:03:17.920 for everyone so we can make this transformation together. And frankly, 0:03:17.960 --> 0:03:20.520 when you put it up, have a strike and we're 0:03:20.560 --> 0:03:22.680 not making vehicles, you start to put that at risk. 0:03:22.720 --> 0:03:25.959 So it's a historic transformation. We need to make sure 0:03:26.000 --> 0:03:28.320 we can compete, and we need the company to be 0:03:28.360 --> 0:03:32.480 profitable because those profits get invested in new products. That again, 0:03:32.560 --> 0:03:35.440 it's a circle of when we invest in a new product, 0:03:35.720 --> 0:03:39.600 there's demand for that product from consumers that provides the jobs. 0:03:39.640 --> 0:03:42.280 Because we're building those vehicles in our plants. We need 0:03:42.320 --> 0:03:44.720 to invest in our future and we have a plan 0:03:44.800 --> 0:03:46.680 to take all of our employees along. I think this 0:03:46.800 --> 0:03:49.280 is very important. So that concern there's not a place 0:03:49.280 --> 0:03:51.080 for them is not true at General Motors. 0:03:51.760 --> 0:03:54.240 If Mary, you were to find it in your heart 0:03:54.320 --> 0:03:56.600 to come close to what they demand to accept it, 0:03:56.600 --> 0:03:58.720 what would it mean for the future of General Motors. 0:03:59.080 --> 0:04:01.040 You've just come outankruptcy fifteen years ago. 0:04:01.080 --> 0:04:03.920 As I recall, you know, I think that's a very 0:04:03.960 --> 0:04:06.880 important point because if we can't invest in new vehicles, 0:04:07.520 --> 0:04:09.760 which we need, we need to be profitable to do that, 0:04:10.400 --> 0:04:13.920 then we're not going to have a strong future. And David, 0:04:13.920 --> 0:04:16.839 do you know extremely well, this is a very competitive industry. 0:04:16.839 --> 0:04:19.719 There's new entrants that are not represented by the UAW 0:04:20.040 --> 0:04:24.040 that already had a lower wage structure, so we need 0:04:24.040 --> 0:04:27.359 to compete. I'm really proud of our manufacturing team, the 0:04:27.400 --> 0:04:29.919 way they managed through COVID, the way that they have 0:04:30.240 --> 0:04:32.520 worked and been very agile as we've dealt with all 0:04:32.560 --> 0:04:35.440 the supply chain shortages, and the fact that for the 0:04:35.560 --> 0:04:39.600 last two years, between our engineering our manufacturing teams, they've 0:04:39.600 --> 0:04:44.080 delivered world class quality as recognized by JD Powers. We 0:04:44.200 --> 0:04:46.440 have a strong team. We want to do everything in 0:04:46.440 --> 0:04:49.599 our power to win the future, secure their future, and 0:04:49.720 --> 0:04:51.800 lead for the next one hundred and fifteen years. 0:04:52.200 --> 0:04:53.320 We need to be able to do that. 0:04:54.080 --> 0:04:57.280 Mary, are the negotiating teams meeting today, to the best 0:04:57.279 --> 0:04:59.039 of your knowledge, and by the way, are you participating 0:04:59.120 --> 0:05:00.280 directly in any way? 0:05:01.160 --> 0:05:02.320 I have been participating. 0:05:02.320 --> 0:05:07.480 I've been involved since before July eighteenth, when the talks 0:05:07.600 --> 0:05:11.760 kicked off. I've been on call more than once a day, calls, 0:05:11.839 --> 0:05:15.800 text meetings, and I have been at the main table 0:05:15.839 --> 0:05:18.120 myself over the last few days. I'll continue to be 0:05:18.600 --> 0:05:22.640 extremely involved. Our team's ready, they're there waiting to negotiate. 0:05:22.960 --> 0:05:26.520 So my request is the UAW leadership needs to get 0:05:26.520 --> 0:05:28.560 back to the table so we can get these problems solved, 0:05:28.720 --> 0:05:31.200 get our people back to work. I think another important 0:05:31.200 --> 0:05:34.680 point is for every job that General Motors has, there's 0:05:34.720 --> 0:05:37.720 six more jobs in the economy that depend on us running. 0:05:37.920 --> 0:05:40.440 So this is broader than just General Motors. This is 0:05:40.480 --> 0:05:44.520 important for the plant cities especially, but really for the nation. 0:05:45.120 --> 0:05:47.760 Yeah, we talk about one hundred and fifty thousand petitions, 0:05:47.800 --> 0:05:50.960 a lot more than that. To your point there. Lastly, Mary, 0:05:51.360 --> 0:05:53.120 I'm mindful of the fact that your father was a 0:05:53.160 --> 0:05:56.080 tool and dime maker at Pontiac when my father was 0:05:56.120 --> 0:05:58.159 a tool and die maker at Acy Sparkplay, just some 0:05:58.279 --> 0:06:02.039 thirty miles apart, and as young people have gone through 0:06:02.120 --> 0:06:04.680 UAW strikes different from this one, but we've gone through them. 0:06:04.880 --> 0:06:06.520 What do you think our fathers, if they were with 0:06:06.600 --> 0:06:08.360 us today, what do you think they'd say to each 0:06:08.400 --> 0:06:09.880 other about what we're seeing right now. 0:06:11.279 --> 0:06:14.880 Well, you know, I think my father would say, as 0:06:14.920 --> 0:06:18.279 he looked at the historic deal that we put on 0:06:18.320 --> 0:06:21.200 the table, that the company is committed and wants to 0:06:21.240 --> 0:06:24.159 recognize our employees for their hard work and wants to 0:06:24.160 --> 0:06:26.360 make sure they have a secure future. So I think 0:06:26.400 --> 0:06:28.560 he would look at this offer and if it was 0:06:28.680 --> 0:06:30.640 on the table for him to vote, he'd vote yes. 0:06:31.080 --> 0:06:32.760 Okay, Mary, thank you so much for your time. As 0:06:32.800 --> 0:06:34.279 I say, I'm a very very busy day for I 0:06:34.279 --> 0:06:37.960 really appreciate. That's Mary Barr. She's General Motors chair and CEO. 0:06:39.400 --> 0:06:42.760 You're listening to the team Ken's are Live program Bloomberg 0:06:42.880 --> 0:06:45.160 Markets weekdays at ten am Eastern. 0:06:44.920 --> 0:06:47.840 On Bloomberg dot Com, the iHeartRadio. 0:06:47.240 --> 0:06:50.040 App and the Bloomberg Business app, or listen on demand 0:06:50.080 --> 0:06:51.640 wherever you get your podcasts. 0:06:53.160 --> 0:06:56.120 All right, and well, Githa ranging enough and she covers 0:06:56.120 --> 0:06:58.039 all the Meatia stocks, which means she covers Disney, which 0:06:58.040 --> 0:06:59.760 means she's going down to their investor day. 0:06:59.640 --> 0:07:01.559 So all over the place. 0:07:01.640 --> 0:07:04.120 I'm sure, Hey, Githa, there's gonna be a lot to 0:07:04.200 --> 0:07:06.120 talk about at Disney. 0:07:06.120 --> 0:07:06.400 Here. 0:07:06.880 --> 0:07:10.400 Are they really gonna sell the ABC television network? 0:07:11.640 --> 0:07:15.559 It definitely seems like it, Paul. I mean, Bob Iger 0:07:15.720 --> 0:07:17.680 just a few weeks ago, of course, at that Sun 0:07:17.760 --> 0:07:20.360 Valley conference, said that, you know, they're not married to 0:07:20.440 --> 0:07:24.600 the linear TV network business. It's not core to Disney anymore. 0:07:24.600 --> 0:07:27.320 I mean, that's so ironic considering you know, they've they 0:07:27.400 --> 0:07:29.560 bought ABAC for there was that huge deal back in 0:07:29.640 --> 0:07:32.360 nineteen ninety five for nineteen billion dollars. I mean, so 0:07:32.560 --> 0:07:36.520 much of you know, Disney's reputation has you know, kind 0:07:36.520 --> 0:07:38.480 of been tied to its TV network. So it's it's 0:07:38.960 --> 0:07:41.000 it's strange, but it really I think what it really 0:07:41.040 --> 0:07:43.440 tells us is that they see the writing on the 0:07:43.480 --> 0:07:46.400 wall and they think that the PayTV universe is probably 0:07:46.440 --> 0:07:49.440 going to implode sooner than the rest of us think. 0:07:50.000 --> 0:07:53.119 All right, so who could buy it? And what's it worth? 0:07:54.600 --> 0:07:56.840 Okay, So there are a lot of rumors and a 0:07:56.840 --> 0:07:59.520 lot of press reports right now circulating. So there has 0:07:59.600 --> 0:08:04.160 been some talk about Disney exploring a sale of ABC 0:08:04.240 --> 0:08:06.720 Networks and the owned and operated stations. They have about 0:08:07.080 --> 0:08:11.160 eight stations in top ten markets with Nextstar, which is 0:08:11.320 --> 0:08:14.600 the largest TV broadcaster right now in the US. So 0:08:15.080 --> 0:08:17.320 you know, Nexttar has said that they should they're very 0:08:17.360 --> 0:08:20.000 interested in the ABC assets, they should be able to 0:08:20.920 --> 0:08:24.560 acquire most of them without too much friction, Meaning there 0:08:24.680 --> 0:08:28.160 is an FCC ownership cap of about thirty nine percent 0:08:28.200 --> 0:08:31.520 for broadcast stations. But NEXTTAR, because it already has a 0:08:31.560 --> 0:08:34.640 presence in most of these stations with their CW network, 0:08:34.920 --> 0:08:37.560 thinks that it should be able to get the deal done. That'said. 0:08:37.600 --> 0:08:39.240 I mean, I think they still will have to you know, 0:08:39.280 --> 0:08:42.560 they have the swaps, so that is a little bit of. 0:08:42.559 --> 0:08:43.160 A question mark. 0:08:43.520 --> 0:08:47.439 So we think that the ABC stations are actually worth 0:08:47.679 --> 0:08:50.880 upwards of stations as well as a network are worth 0:08:50.960 --> 0:08:54.240 upwards of you know, four billion dollars. That's applying a 0:08:54.280 --> 0:08:58.840 pretty conservative seven x EBITDA multiple. Now Byron Allen, who 0:08:58.880 --> 0:09:02.200 is like this really pro media mogul, has put in 0:09:02.360 --> 0:09:05.880 a bid which apparently values those networks at about eight 0:09:06.360 --> 0:09:09.040 x ebitda, which means that those you know, those the 0:09:09.520 --> 0:09:11.839 ABC property would be worth a five billion nine and 0:09:11.840 --> 0:09:14.280 obviously Disney wants to get the most for it. The 0:09:14.320 --> 0:09:17.480 problem with most of these acquirers or the parties that 0:09:17.520 --> 0:09:20.760 are interested in possibly acquiring ABC's that they're all highly 0:09:20.880 --> 0:09:24.720 levered themselves. So most broadcasters, so even an Extra, for instance, 0:09:24.760 --> 0:09:28.199 currently has about seven billion dollars in debt. Alan Media 0:09:28.200 --> 0:09:30.600 obviously has a lot in debt, so we'll have to 0:09:30.600 --> 0:09:32.480 see how they kind of get the deal done. 0:09:33.280 --> 0:09:35.880 So Githa, I guess that calls into question. It's one 0:09:35.920 --> 0:09:40.160 thing to sell a declining broadcast network and some TV stations. 0:09:40.160 --> 0:09:42.080 I think most people would agree that are at the 0:09:42.120 --> 0:09:45.920 time of that business is probably past and all about streaming. 0:09:46.280 --> 0:09:48.280 The bigger question, I think for a lot of investors, 0:09:48.280 --> 0:09:50.199 and you'll probably talk about it next week when you're 0:09:50.240 --> 0:09:54.520 down visiting the Walt Disney folks, is ESPN. What do 0:09:54.600 --> 0:09:56.319 they do with ESPN? What do you think is kind 0:09:56.320 --> 0:09:58.120 of what do you think they will do? What should 0:09:58.160 --> 0:09:58.440 they do? 0:10:00.440 --> 0:10:01.480 So ESPN? 0:10:01.559 --> 0:10:04.440 I actually think they definitely want to keep the asset. Now, 0:10:04.520 --> 0:10:07.720 remember they are going to be breaking out the financials 0:10:07.760 --> 0:10:10.800 for ESPN in a few quarters. That is what they've promised. 0:10:10.800 --> 0:10:12.679 It's going to you know, kind of be its own segment. 0:10:12.800 --> 0:10:14.880 That's the first time that they're doing that in Disney's history. 0:10:15.040 --> 0:10:17.040 So they obviously want to clean up house before they 0:10:17.080 --> 0:10:19.480 do that. And we've seen a lot of you know, 0:10:19.600 --> 0:10:22.000 cost cutting, We've seen a lot of these new deals 0:10:22.000 --> 0:10:24.520 they had that deal with you know, Penn National, and 0:10:24.679 --> 0:10:27.800 most recently, and I think this is really transformative for 0:10:27.880 --> 0:10:30.920 the entire PATV universe, is the deal that they inked 0:10:30.920 --> 0:10:33.880 with Shoter. This is the first time in the history 0:10:34.000 --> 0:10:37.720 of of you know, the PATV media ecosystem that a 0:10:37.760 --> 0:10:41.920 content company is actually offering access to its streaming services. Okay, 0:10:41.920 --> 0:10:43.960 and for you know, kind of either a wholesale rate 0:10:44.040 --> 0:10:46.160 or even for free in certain cases. But the more 0:10:46.200 --> 0:10:49.000 important part is that they're actually going to offer access 0:10:49.040 --> 0:10:52.960 to the flagship ESPN streaming product when it goes out 0:10:53.080 --> 0:10:54.920 in full force, which probably will be sometime in twenty 0:10:55.000 --> 0:10:57.600 twenty five, twenty twenty six, we don't know, but they're 0:10:57.640 --> 0:10:59.360 definitely preparing for that future. 0:10:59.400 --> 0:11:00.520 That's what it So. 0:11:00.559 --> 0:11:03.280 I don't really think that they want to kind of 0:11:03.320 --> 0:11:05.199 get rid of this asset. Maybe they really want to 0:11:05.240 --> 0:11:06.840 clean it up, maybe they want to spin it out, 0:11:06.880 --> 0:11:10.000 but I still think they want to keep control of it. 0:11:11.040 --> 0:11:15.840 I wonder if this is, like Paul Au, the kind 0:11:15.840 --> 0:11:18.960 of shift that you saw when you know, radio used 0:11:19.000 --> 0:11:21.480 to be it. Radio used to be the thing for 0:11:21.720 --> 0:11:25.679 listeners and for advertisers, and that all went away. And 0:11:25.720 --> 0:11:29.520 it's probably a completely uninteresting business for most people. 0:11:30.240 --> 0:11:31.000 They went to TV. 0:11:31.240 --> 0:11:35.000 Right, is this linear TV going through that same transition, 0:11:35.160 --> 0:11:39.360 that same death, and then is streaming the new TV? 0:11:39.720 --> 0:11:40.560 Yeah? I mean it was. 0:11:40.640 --> 0:11:42.640 You know, we went from broadcast television when you had 0:11:42.640 --> 0:11:45.360 three networks and then four with Fox, and then cable 0:11:45.400 --> 0:11:48.880 TV came along, and that totally redefined what we watch, 0:11:48.920 --> 0:11:51.719 how we watch it, and it really made it so 0:11:51.800 --> 0:11:52.480 much more competitive. 0:11:52.480 --> 0:11:53.520 We got so much more product. 0:11:53.720 --> 0:11:56.600 Now you're even taking that to the next stage. And 0:11:56.640 --> 0:11:59.559 I GUESSKEITHA, that brings us to the question if all 0:11:59.559 --> 0:12:01.400 the big companies that you follow, the. 0:12:01.360 --> 0:12:03.160 Paramounts of the world, the Warner. 0:12:02.920 --> 0:12:06.640 Brothers, the Discoveries, is he when you talk to investors, 0:12:06.679 --> 0:12:09.880 do they believe that this transformation can actually work and 0:12:09.920 --> 0:12:12.480 they can make money on it, or does nobody want 0:12:12.520 --> 0:12:13.240 to talk to you anymore? 0:12:14.960 --> 0:12:16.000 A little bit of both. 0:12:16.360 --> 0:12:18.240 But I think the one thing, I mean, for any 0:12:18.320 --> 0:12:22.080 investor who had questions about whether streaming is a good business, 0:12:22.440 --> 0:12:25.080 I think we have our answer right because we've seen 0:12:25.160 --> 0:12:29.680 Netflix kind of turn things around. They are actually expected 0:12:29.679 --> 0:12:32.840 to generate about seven billion dollars in EBITDA this year 0:12:33.240 --> 0:12:36.800 twenty approximately twenty percent margins and the idea is that 0:12:36.840 --> 0:12:39.640 as they kind of gain subscribers and as they lower costs, 0:12:39.640 --> 0:12:41.960 they're able to kind of spread those costs over wider base, 0:12:42.160 --> 0:12:45.240 eventually getting to you know, a twenty five to thirty 0:12:45.280 --> 0:12:47.920 percent margin, which then kind of makes you agnostic because 0:12:47.960 --> 0:12:50.240 in its heyday, you know, TV networks were generating about 0:12:50.240 --> 0:12:52.920 thirty thirty five percent margins. So yes, streaming may not 0:12:53.000 --> 0:12:55.679 be better than the TV network business, but it could 0:12:55.720 --> 0:12:59.640 potentially be as good as Again that we're talking about Netflix, 0:12:59.640 --> 0:13:01.480 which is our see, the industry leader. It is going 0:13:01.559 --> 0:13:05.600 to be a much harder road for all these smaller companies, 0:13:05.640 --> 0:13:08.079 whether it's a paramount of Warner Brothers Discovery, but they 0:13:08.080 --> 0:13:10.200 are kind of doing a lot in terms of content 0:13:10.240 --> 0:13:14.000 cost rationalization. Again, Paul, I mean we've spoken about this 0:13:14.040 --> 0:13:16.000 many times, and I know you think too that there 0:13:16.040 --> 0:13:18.280 will be as streaming shakeout, at some point, there will 0:13:18.280 --> 0:13:20.679 be consolidation. So all that is going to play out 0:13:20.679 --> 0:13:23.200 I think over the next you know, eighteen months, eighteen 0:13:23.240 --> 0:13:26.080 to twenty four months. But yeah, I think we will 0:13:26.080 --> 0:13:28.080 be you know, we'll land up with maybe three four 0:13:28.360 --> 0:13:31.840 major streaming players who should be all profitable hopefully. 0:13:32.000 --> 0:13:34.120 All Right, now we've got some In addition to all 0:13:34.160 --> 0:13:36.920 of that. If that wasn't enough for the industry and 0:13:36.920 --> 0:13:40.320 for investors, there's also this thing of strikes. We've got 0:13:40.360 --> 0:13:43.520 writers on strikes, We've got actors on strikes. What's the 0:13:43.600 --> 0:13:47.120 impact on media, on the companies, on what you and 0:13:47.160 --> 0:13:49.160 I and other consumers will be able to see on 0:13:49.200 --> 0:13:50.920 our TV screens in theaters. 0:13:52.320 --> 0:13:55.880 Yeah, so definitely we're seeing some you know, small effects 0:13:55.880 --> 0:13:59.600 of that right now, nothing really major interms of disruption 0:13:59.720 --> 0:14:01.760 of s edules. But you know, as we kind of 0:14:01.800 --> 0:14:04.319 get deeper into like the film slate for twenty twenty 0:14:04.360 --> 0:14:07.600 three and even twenty twenty four, that's when we're really 0:14:07.600 --> 0:14:09.760 going to start having some problems. We've already seen some 0:14:09.840 --> 0:14:13.120 film delays. You know, Doom two, for instance, from Warner 0:14:13.160 --> 0:14:15.600 Brothers has already moved to twenty twenty four because they're 0:14:15.640 --> 0:14:17.960 not able to market the film, They're not able to 0:14:17.960 --> 0:14:19.800 do promotions. So that's you know, a lot of film 0:14:19.840 --> 0:14:22.440 studios are kind of running into that problem. In fact, 0:14:22.560 --> 0:14:25.320 from a financial aspect, though, what we're seeing is that 0:14:25.440 --> 0:14:29.080 most of these companies and have actually raised their free 0:14:29.080 --> 0:14:31.560 cash flow guidance through the rest of the year. They 0:14:31.640 --> 0:14:33.840 raise their free cash flow guidance, but they've lowered their 0:14:33.840 --> 0:14:37.400 EBITDA guidance because the lack of fresh programming is definitely 0:14:37.400 --> 0:14:40.920 going to have an impact on you know, advertising sales. 0:14:40.920 --> 0:14:43.000 And that's what they've all said. They've all said, you know, 0:14:43.120 --> 0:14:46.200 expect double digit ad declines because you're not going to 0:14:46.200 --> 0:14:48.160 have any fresh programming. We really have nothing to go 0:14:48.200 --> 0:14:52.000 to advertisers with. I think it really becomes a problem 0:14:52.120 --> 0:14:54.520 in twenty twenty four if you know, they're not able 0:14:54.520 --> 0:14:56.480 to resolve the strikes, if people are not going to 0:14:56.480 --> 0:14:59.880 get back, you know, to work and produce new ca 0:15:00.200 --> 0:15:02.600 and we're going to have a real, real headache in 0:15:02.600 --> 0:15:03.440 twenty twenty four. 0:15:03.680 --> 0:15:05.640 All right, Keitha, thanks so much for joining us. As always, 0:15:05.680 --> 0:15:08.880 keith is the expert, Keitha Ranganathan. She is covers all 0:15:09.040 --> 0:15:11.960 the media industry. She's going to the park and she's 0:15:12.000 --> 0:15:14.360 going down on Monday for the investors. 0:15:14.560 --> 0:15:16.640 I was thinking, kause Tucker asked when the last time 0:15:16.680 --> 0:15:20.720 I was there was, And I remember that the Corey 0:15:20.800 --> 0:15:23.320 Hart album Boy in a Box had just come out. 0:15:23.360 --> 0:15:26.720 I bought the cassette for my Walkman, and so I 0:15:26.760 --> 0:15:30.440 believe it was spring break of nineteen eighty six spring break. 0:15:30.720 --> 0:15:33.840 You're listening to the tape catch are live program Bloomberg 0:15:33.920 --> 0:15:37.520 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:15:37.560 --> 0:15:39.640 tune in app, Bloomberg dot Com. 0:15:39.360 --> 0:15:40.800 And the Bloomberg Business App. 0:15:40.840 --> 0:15:43.640 You can also listen live on Amazon Alexa from our 0:15:43.640 --> 0:15:49.680 flagship New York station, Just say Alexa play Bloomberg eleven thirty. 0:15:49.920 --> 0:15:52.240 All right, we talked about one of my favorite assa classes, 0:15:52.240 --> 0:15:55.040 wuld jump. My second unis another one of my all 0:15:55.080 --> 0:15:57.160 time faves. Really since the last ten years has been 0:15:57.200 --> 0:15:58.640 this private credit. 0:15:58.440 --> 0:15:58.920 I love it too. 0:15:59.080 --> 0:15:59.680 I love it man. 0:15:59.720 --> 0:16:01.880 And we had this person in a dare or two ago. 0:16:02.200 --> 0:16:04.720 She's more on the syndicated loan side, and I was saying, 0:16:04.720 --> 0:16:06.360 how much competitors are these guys to you? 0:16:06.400 --> 0:16:08.600 And she's just they're big. Yeah, think they're getting bigger. 0:16:08.680 --> 0:16:11.480 Randy Schwimmer, co head of Senior Lending and Senior Managing 0:16:11.520 --> 0:16:14.360 Director Churchill Asset Management, joins us. Randy, talk to us 0:16:14.360 --> 0:16:17.360 about your business, the private credit business. How's it been 0:16:17.400 --> 0:16:20.120 this year? Are are there deals? Because it seems like 0:16:20.200 --> 0:16:22.080 seems slow, But I don't know in your market? 0:16:22.160 --> 0:16:22.720 What do you sing? 0:16:22.760 --> 0:16:22.840 So? 0:16:23.040 --> 0:16:24.520 Last time I was here I promised you guys some 0:16:24.560 --> 0:16:28.200 good news September. Right, so post Labor Day, we're all 0:16:28.240 --> 0:16:31.240 we always wait for the post labor day rush. Well 0:16:31.280 --> 0:16:33.680 I'm here to report that we have a post labor 0:16:33.760 --> 0:16:36.320 day rush. Okay, So let's talk with the public markets 0:16:36.400 --> 0:16:39.280 right now. So high yield bond market, which was kind 0:16:39.320 --> 0:16:43.720 of you know, not very active all year, rates are 0:16:43.800 --> 0:16:47.440 very high issue and slow. They had an eleven billion 0:16:47.520 --> 0:16:52.000 dollar a week last week. Okay, that's the large issuance 0:16:52.040 --> 0:16:52.680 in two years. 0:16:52.760 --> 0:16:53.400 So that's good. 0:16:53.400 --> 0:16:56.040 So that's waking up the liquid loan market, which you 0:16:56.240 --> 0:16:59.680 talked about, probably syndicated loans twenty billion dollars so far 0:16:59.720 --> 0:17:03.080 and so stember first two weeks. That's that's more than 0:17:03.160 --> 0:17:05.879 any month, full month, all year long. So we're starting 0:17:05.880 --> 0:17:08.840 to see some activity in the public side. Why because 0:17:08.960 --> 0:17:11.840 things are starting to heal. The economy is better, inflation 0:17:11.960 --> 0:17:15.120 is under control. The other thing that's going on now 0:17:15.240 --> 0:17:18.200 is some of the as a result, the larger buyouts 0:17:18.240 --> 0:17:21.120 are starting to come to the market. We haven't seen 0:17:21.160 --> 0:17:24.760 any of those mega deals this year, going back once 0:17:24.800 --> 0:17:27.480 the Fed started raising rates. So we now have the 0:17:27.560 --> 0:17:32.520 ninth largest deal ever since the Great Recession, company called 0:17:32.560 --> 0:17:33.360 World Pay. 0:17:33.520 --> 0:17:34.879 That's what this other guest was talking to. 0:17:34.960 --> 0:17:38.639 Yes being launched this week and seventeen billion dollar LBO 0:17:39.280 --> 0:17:42.760 nine billion dollars in financing. That's a big deal, and 0:17:42.840 --> 0:17:46.679 so the private credit. So right now it's not clear. 0:17:46.800 --> 0:17:48.560 It looks like it's you know, some of it's going 0:17:48.560 --> 0:17:50.960 to be in that market, but that's a big number. 0:17:50.760 --> 0:17:52.760 Right for so that's something you would take a look at. 0:17:52.920 --> 0:17:56.520 Yeah, I think it's all about pricing instruction, but the 0:17:56.520 --> 0:17:58.480 fact that a large deal like that's coming out is 0:17:58.480 --> 0:18:02.359 a big deal. One of your all time favorite restaurant chains, 0:18:02.359 --> 0:18:05.240 Foga to Chow, which is you know, a billion dollar 0:18:05.280 --> 0:18:07.119 deal also coming out. So what's happening now in the 0:18:07.160 --> 0:18:09.720 large cat market. They're starting to wake up now that 0:18:10.200 --> 0:18:13.520 the direct lending market. Our business has actually been active 0:18:13.560 --> 0:18:15.880 all year long. We if you'd said to me back 0:18:15.880 --> 0:18:17.800 in January, Randy, what do you think the year is going. 0:18:17.720 --> 0:18:18.080 To be like? 0:18:18.200 --> 0:18:20.920 Just giving all the static on rates and inflation, I 0:18:20.960 --> 0:18:23.359 would have said, boy, we'll be lucky to get to 0:18:23.440 --> 0:18:26.359 where we were last year. We are now at and 0:18:26.400 --> 0:18:29.640 perhaps even ahead in some of our businesses of last year, 0:18:29.920 --> 0:18:32.240 in part because of this flow going from public to 0:18:32.280 --> 0:18:35.400 private so and then I think, you know, our skill 0:18:35.480 --> 0:18:39.159 now is growing. We have the ability to hold larger deals. 0:18:39.240 --> 0:18:41.840 Since the result of that is the sponsors. They keep 0:18:41.840 --> 0:18:44.400 coming back to us for Okay, we like the witch 0:18:44.400 --> 0:18:47.040 you did the last deal, Let's do it again. You know, 0:18:47.080 --> 0:18:49.399 we negotiated all the documents. That was a pain in 0:18:49.400 --> 0:18:52.119 the neck. Let's let's do just the same document and 0:18:52.200 --> 0:18:55.080 keep going. The other thing that's adding to the activity 0:18:55.240 --> 0:18:57.160 is these and I mentioned this to you last time. 0:18:57.560 --> 0:19:01.240 The number of acquisitions that the platform businesses are doing 0:19:01.320 --> 0:19:05.159 in order to grow has significantly increased. So we actually 0:19:05.200 --> 0:19:07.359 we just looked at the league tables for the quarter 0:19:07.920 --> 0:19:11.720 we are we're the most active lender in direct lending 0:19:11.840 --> 0:19:16.640 right now for for add on acquisition Churchill Asset Management, 0:19:17.760 --> 0:19:20.600 and we're like the second largest for all everything in 0:19:21.160 --> 0:19:24.479 the traditional direct lending business. So what's happening is our 0:19:24.520 --> 0:19:29.720 portfolio is actually generating deal flow. It's by just virtue 0:19:29.720 --> 0:19:32.439 of these are platform companies that are making acquisitions. You know, 0:19:32.480 --> 0:19:35.360 my wife calls it shopping in your closet. So this 0:19:35.400 --> 0:19:38.359 is what's happening. The portfolio companies are actually generating deal flow. 0:19:38.440 --> 0:19:41.200 So we are having a bigger year than we thought. 0:19:41.240 --> 0:19:43.720 And then in our junior capital business, which is mezzanine 0:19:43.800 --> 0:19:48.399 dat co investor equity, that team is having a significantly 0:19:48.400 --> 0:19:52.040 better year than last year because of the activity that 0:19:52.080 --> 0:19:55.240 the sponsors are looking for more equity to put into 0:19:55.400 --> 0:19:58.439 their deals because who knows when their next fundraising is 0:19:58.480 --> 0:20:00.800 going to happen. They have limited capital, so they go 0:20:00.840 --> 0:20:03.159 to their LP relationships say hey, Churchill, how would you 0:20:03.200 --> 0:20:04.520 like to put in some money into this deal. 0:20:04.760 --> 0:20:08.200 It's so interesting that this whole market that you guys, 0:20:08.359 --> 0:20:12.040 but also the whole industry is growing so quickly in 0:20:12.080 --> 0:20:15.359 the face of rising rates, right, or maybe because of 0:20:15.560 --> 0:20:18.120 rising rates. I was talking with Mark Liftschultz last week 0:20:18.160 --> 0:20:21.760 from Blue Owl, and he thinks that we're gonna see 0:20:22.119 --> 0:20:26.840 a ten billion dollar private credit deal, you know, shortly correct, 0:20:27.560 --> 0:20:29.680 which would be you know now, I think the biggest 0:20:30.040 --> 0:20:33.400 single direct lending deal is like five billion dollars, which 0:20:33.440 --> 0:20:36.240 is already huge. No question, is it because of rising 0:20:36.320 --> 0:20:38.800 rates that this industry is growing? I mean, why why 0:20:38.800 --> 0:20:42.920 are the banks letting so much of this high. 0:20:42.800 --> 0:20:43.640 Get away right away? 0:20:43.760 --> 0:20:44.040 Yeah? 0:20:44.080 --> 0:20:46.960 So they've been letting it get away since nineteen ninety three, right, 0:20:47.040 --> 0:20:51.359 because they've been regulated consolidated out of the leverage lending business, 0:20:51.359 --> 0:20:53.720 particularly in the middle market. So the deals that you're 0:20:53.720 --> 0:20:57.320 seeing now are very like corporatetty, double Beach, triple b 0:20:57.480 --> 0:21:00.520 those kinds of things for the For the direct lenders, 0:21:00.520 --> 0:21:03.600 what's happening is everything else is coming our way. All 0:21:03.600 --> 0:21:06.280 the middle market flow is coming our way. A lot 0:21:06.320 --> 0:21:10.080 of the sponsors who are trying to get quick executions 0:21:10.080 --> 0:21:13.159 in this market are trying to get this stuff done. Now, 0:21:13.200 --> 0:21:16.879 what's driving it. The investors who in a high rate 0:21:17.000 --> 0:21:20.159 environment are looking for yield right now are looking to 0:21:20.200 --> 0:21:23.080 private debt. That's what's actually fueling our activity because the 0:21:23.119 --> 0:21:26.159 more money that we raise, more fundraising that happens in 0:21:26.200 --> 0:21:29.200 our business, allows us to scale our platform. The most 0:21:29.400 --> 0:21:30.359 interesting stats. 0:21:30.160 --> 0:21:32.199 There's just so many more lenders out there, not as 0:21:32.320 --> 0:21:33.639 much about the borrowers. 0:21:33.320 --> 0:21:37.200 Well, it's more the investors who are focusing on the 0:21:37.320 --> 0:21:40.679 leading lenders like Churchill to dedicate their money to. So 0:21:40.760 --> 0:21:42.440 there was a survey I was at a conference Lase. 0:21:42.480 --> 0:21:45.919 We got on a panel. Sixty two percent of investors 0:21:45.920 --> 0:21:49.720 surveyed said they were under allocated private debt. That was 0:21:49.840 --> 0:21:52.640 that blew me away, Like wait a minute. The three 0:21:52.680 --> 0:21:54.399 of US have been talking about private debt for a 0:21:54.400 --> 0:21:57.240 couple of years now, right, you think this messagers out there, 0:21:57.520 --> 0:22:00.000 But because rates are higher, and now I can get 0:22:00.040 --> 0:22:03.960 at a twelve percent yield on a unleveraged senior debt 0:22:04.040 --> 0:22:06.520 investment you know, out of whether it's a Churchill or 0:22:06.560 --> 0:22:09.440 you know some of our other you know, uh providers 0:22:09.480 --> 0:22:11.840 out there, that's a that's a really good number. And 0:22:11.880 --> 0:22:13.639 so when you compare that to it even what you 0:22:13.640 --> 0:22:16.080 can get in the bond market. What's happening is investors 0:22:16.080 --> 0:22:17.720 are saying, you know, I need to do more. 0:22:17.880 --> 0:22:18.600 Even though I'm. 0:22:18.640 --> 0:22:21.160 Maybe allocated right now to private, I need to do more. 0:22:21.240 --> 0:22:23.440 So I feel I'm there's two thirds of the market 0:22:23.520 --> 0:22:26.560 saying they're under allocated in this asset class. And we 0:22:26.640 --> 0:22:29.280 haven't really gotten going yet. I mean, it's still there's 0:22:29.280 --> 0:22:30.760 still a lot of runway for us. 0:22:31.080 --> 0:22:34.040 So are you guys raising money at the moment currently? 0:22:34.080 --> 0:22:35.480 We're always raised always. 0:22:35.200 --> 0:22:35.520 Is that right? 0:22:36.040 --> 0:22:38.879 So I'm headed to Scandinavia next week to people with 0:22:38.880 --> 0:22:42.200 our clients and potential clients there, going to Copenhagen, going 0:22:42.240 --> 0:22:46.159 to Stockholm, and I know your favorite Helsinki never been 0:22:46.200 --> 0:22:47.840 to hell sinking, So let me know, if you've got 0:22:47.840 --> 0:22:52.760 some good restaurants. But when I'm no, because it's out thinking, okay, 0:22:53.000 --> 0:22:53.639 do you like fish? 0:22:53.720 --> 0:22:55.040 Yeah. 0:22:55.080 --> 0:22:56.680 So I was in and I was in the West 0:22:56.680 --> 0:23:02.160 Coast this week, and I'm telling very sophisticated institutional investors 0:23:02.440 --> 0:23:04.840 are saying, we'd like to talk to you about your 0:23:04.840 --> 0:23:07.840 platform because we think we need to explore more in 0:23:07.880 --> 0:23:08.720 the private det space. 0:23:09.280 --> 0:23:12.159 So who's your competition. 0:23:12.880 --> 0:23:16.119 Well, it's funny, you know, we don't really have competition. 0:23:16.160 --> 0:23:20.320 We have collaborators, we have partners that we lend with. 0:23:20.359 --> 0:23:22.520 So what happens is since we're an investor in all 0:23:22.560 --> 0:23:25.800 of the funds with the sponsors that we're financing, we 0:23:25.800 --> 0:23:28.239 don't lose deals. They'll say, hey, even if let's say 0:23:28.240 --> 0:23:30.919 Blue Out perfect example, they say to Mark, hey, you know, 0:23:31.000 --> 0:23:32.959 we want you to lead this one, because you know, 0:23:33.000 --> 0:23:34.679 they tell us Church that you led the last too, 0:23:34.720 --> 0:23:37.120 so we're gonna give Mark one. They'll say to Mark, hey, 0:23:37.400 --> 0:23:39.440 would you please include Church on the deal because they're 0:23:39.440 --> 0:23:43.080 a significant LP investor in our fund, and Mark saying okay, fine, 0:23:43.119 --> 0:23:46.200 we'll give them a little piece. So that that makes 0:23:46.280 --> 0:23:49.760 us sort of invaluable to the sponsors because they know 0:23:49.800 --> 0:23:51.200 that we're always investing in their funds. 0:23:51.600 --> 0:23:54.399 Frankly, we're investing equity into their equity. 0:23:54.000 --> 0:23:54.639 Into their funds. 0:23:54.920 --> 0:23:57.760 And it also makes it invaluable for the other lenders 0:23:57.760 --> 0:23:59.680 out there because they know they can always count in 0:23:59.800 --> 0:24:02.880 Church for a good transaction to split the deal with them, 0:24:03.080 --> 0:24:05.400 lead the deal with them, and we we frankly, whether 0:24:05.440 --> 0:24:07.639 we lead or you know, we co lead with someone, 0:24:07.880 --> 0:24:11.199 all we really want to do is have split the 0:24:11.240 --> 0:24:13.560 deal fifty to fifty, be able to talk to the 0:24:13.600 --> 0:24:16.440 economics in terms of the transaction, so we control the deal. 0:24:17.320 --> 0:24:19.040 But other than that, you know, we have a lot 0:24:19.040 --> 0:24:21.360 of partners out there that we do business with, and 0:24:21.440 --> 0:24:22.919 we're very happy to do business with them. 0:24:22.960 --> 0:24:24.480 All Right, So you do a deal, how much do 0:24:24.520 --> 0:24:26.280 you sell off and how much do you keep? 0:24:26.359 --> 0:24:29.040 We just did it financing right now that it was 0:24:29.080 --> 0:24:31.760 five hundred million dollar hole that we're we're probably going 0:24:31.800 --> 0:24:33.560 to sell down to. I'm going to say like three 0:24:33.680 --> 0:24:34.399 hundred millions. 0:24:34.600 --> 0:24:37.880 You'll still hold three big un Is it typical? 0:24:38.400 --> 0:24:41.640 Because it Chase Bank we sell down to fifteen cents left. 0:24:41.800 --> 0:24:44.159 That's why you're not in the business anymore. Okay, But 0:24:44.240 --> 0:24:46.560 what's happening is we have mouths to feed too, right, 0:24:46.560 --> 0:24:48.880 We have all these investors, and so the more investors 0:24:48.920 --> 0:24:51.520 that we have, the more we want to spread that 0:24:51.720 --> 0:24:54.360 wealth out too, and so the more money we raise, 0:24:54.400 --> 0:24:56.359 now we're going to spread four hundred around. Now we 0:24:56.400 --> 0:24:58.719 do five hundred. But if you have forty funds that 0:24:58.760 --> 0:25:02.199 you're allocating across all forty funds, the amount of that 0:25:02.240 --> 0:25:04.920 deal per fund is really small. We don't have any 0:25:04.920 --> 0:25:06.840 exposure over two percent of the whole portfolio. 0:25:07.040 --> 0:25:09.920 What is the default rate? 0:25:10.040 --> 0:25:13.400 Because people look at these juicy yields and say, sure, 0:25:13.440 --> 0:25:17.680 I want to get in, but this is floating rate debt, right, 0:25:17.760 --> 0:25:23.360 So some of your deals previously would have been paying. 0:25:23.080 --> 0:25:25.320 I don't know, six percent interest, and. 0:25:25.240 --> 0:25:27.840 Now they're paying double that, right, So you that's got 0:25:27.840 --> 0:25:29.680 to be hard for some of the portfolio companies. 0:25:29.720 --> 0:25:29.880 Yea. 0:25:30.200 --> 0:25:33.679 So because we've been through this before, we pre model 0:25:33.760 --> 0:25:35.760 everything as if it's going to be a twelve percent, 0:25:35.840 --> 0:25:38.320 so we haven't had the kind of issues. Now the 0:25:38.760 --> 0:25:42.000 coverage has shrunk for sure. We did just a model 0:25:42.040 --> 0:25:43.680 the other day and it looks like instead of four 0:25:43.720 --> 0:25:45.880 times coverage, we're like two and a half times coverage 0:25:46.160 --> 0:25:49.199 because of that doubling of interest costs. But you know, 0:25:49.320 --> 0:25:51.240 the free cash flows of these companies and the growth 0:25:51.240 --> 0:25:53.919 of these businesses. I mentioned the add ons. All of 0:25:53.920 --> 0:25:57.399 that is helping to grow those companies to accommodate the 0:25:57.480 --> 0:26:00.119 higher debt. But still you've got every deal we do, 0:26:00.160 --> 0:26:01.840 we look at it and say, what's gonna happen if 0:26:01.920 --> 0:26:04.199 rates continue to go up, what's gonna happen if we 0:26:04.240 --> 0:26:07.600 go into recession. The result is we do only like 0:26:07.720 --> 0:26:10.280 five deals of every hundred that come in the door. 0:26:10.400 --> 0:26:13.919 Think about that. So I'm turning down ninety five percent 0:26:13.960 --> 0:26:15.600 of every deal that comes in the door. I mean, 0:26:15.600 --> 0:26:19.720 that's a tough commercial proposition. But the reason that we're successful. 0:26:19.800 --> 0:26:22.159 You're very picky, well very picky, but you know the 0:26:22.160 --> 0:26:24.760 people you're lending money to, you're working hand in hand 0:26:24.760 --> 0:26:25.080 with them. 0:26:25.119 --> 0:26:27.119 And we don't see hundred deals. We see a thousand deals. 0:26:27.160 --> 0:26:29.680 So we do fifty new transactions, one hundred and fifty 0:26:29.680 --> 0:26:32.679 add ons, and with each deal we're doing more and 0:26:32.720 --> 0:26:33.840 more per deal. 0:26:34.359 --> 0:26:35.800 So we'll still do six. 0:26:35.680 --> 0:26:38.879 Billion dollars or so of volume this year. And just 0:26:38.920 --> 0:26:39.879 senior lending. 0:26:39.800 --> 0:26:42.000 Man, what a business I want to be in that business? 0:26:42.040 --> 0:26:43.840 No, exactly what am I doing here? 0:26:44.080 --> 0:26:46.439 Exactly get Randy, I'm gonna I'm gonna pep up my 0:26:46.480 --> 0:26:48.159 resume and send it on. 0:26:48.600 --> 0:26:50.640 All right, Randy, thanks so much for joining us. We 0:26:50.680 --> 0:26:52.760 was appreciate getting some of your time. Randy Swimmer East 0:26:52.760 --> 0:26:56.479 cohead of Senior Lending and Senior Managing Director Churchill Asset Management, 0:26:56.520 --> 0:26:58.560 and more than anybody else, I think he schooled us. 0:26:58.680 --> 0:27:00.800 All right, Well, he schools I think the industry because 0:27:00.840 --> 0:27:03.440 he also is the publisher of The Left Lead, which 0:27:03.480 --> 0:27:06.840 is one of the most popular places to get information 0:27:06.880 --> 0:27:07.200 on this. 0:27:07.320 --> 0:27:11.200 Yep, you're listening to the team Ken's Are Live program 0:27:11.320 --> 0:27:14.200 Bloomberg Markets weekdays at ten am Eastern. 0:27:13.960 --> 0:27:17.040 On Bloomberg dot com, the iHeartRadio. 0:27:16.320 --> 0:27:19.080 App, and the Bloomberg Business App, or listen on demand 0:27:19.119 --> 0:27:20.840 wherever you get your podcasts. 0:27:22.720 --> 0:27:25.920 All right, let's switch gears do our C suite. Check 0:27:25.960 --> 0:27:29.359 in here today with Jenna Droso's CEO of Signet Jewelers. 0:27:29.359 --> 0:27:34.440 Signat Jewelers trades on New York Stock Exchange SIG based 0:27:34.480 --> 0:27:37.960 in Akron, Ohio. Se Matt, We've got you another Ohio 0:27:37.960 --> 0:27:39.960 company like good Stuff. It's got a market cap of 0:27:40.000 --> 0:27:42.320 three point four billion stocks up about twelve. 0:27:42.040 --> 0:27:45.040 And it's a very correlated town, right, because isn't that 0:27:45.080 --> 0:27:46.080 we're good good year. 0:27:46.119 --> 0:27:48.280 Yeah, one of the tire things. Man, Jinna, thanks so 0:27:48.320 --> 0:27:50.200 much for joining us here. Talk to us about your 0:27:50.240 --> 0:27:52.240 business here. What are the trends you're seeing so far 0:27:52.800 --> 0:27:54.680 this year and what are you telling your shareholders about 0:27:54.680 --> 0:27:55.080 next year. 0:27:56.640 --> 0:28:00.399 Yes, we're seeing some very interesting trends. In the second order, 0:28:00.960 --> 0:28:05.680 we were able to over deliver our revenue and bottom 0:28:05.720 --> 0:28:09.600 line guide. And some of the strength that we saw 0:28:09.760 --> 0:28:13.719 was in lower priced fashion jewelry, So jewelry under one 0:28:13.720 --> 0:28:17.760 thousand dollars, almost a back to school like trend, whether 0:28:17.800 --> 0:28:20.359 you go back to school or not. You know, people 0:28:20.440 --> 0:28:24.560 often refresh their look at that time of year, and 0:28:24.600 --> 0:28:28.520 we saw strong sales that boats well for jewelry being 0:28:28.560 --> 0:28:32.760 in the consideration set as people move toward holiday. I 0:28:32.760 --> 0:28:35.199 think the other really big trend that we've seen is 0:28:35.240 --> 0:28:40.080 that there has been a lull in engagements. So this 0:28:40.240 --> 0:28:44.719 year calendar year twenty three, engagements are down about twenty 0:28:44.800 --> 0:28:49.080 five percent versus a typical pre COVID year. That's a 0:28:49.160 --> 0:28:54.760 temporary COVID disruption. People usually get engaged three point two 0:28:54.840 --> 0:28:58.680 five years after they meet, and and you know, three 0:28:58.720 --> 0:29:01.160 years ago we were in lockdown and so people were 0:29:01.200 --> 0:29:02.920 not meeting in the same way. 0:29:03.080 --> 0:29:06.240 So that's for metic Yeah, yeah, exactly that. 0:29:06.560 --> 0:29:10.040 So that trough of engagements is happening right now, but 0:29:10.120 --> 0:29:12.800 we expect it to begin to come back in our 0:29:12.880 --> 0:29:17.040 fourth quarter and that provides a three year tailwind actually 0:29:17.120 --> 0:29:20.040 for us because about fifty percent of our business is 0:29:20.040 --> 0:29:21.160 in the bridle category. 0:29:22.800 --> 0:29:26.239 So do you care about the Chinese and coming in 0:29:26.520 --> 0:29:29.040 and buying stuff or is that really not your business 0:29:29.120 --> 0:29:32.160 Chinese consumer to you know, tourists coming into the States 0:29:32.440 --> 0:29:34.120 that or is that not really your business because I 0:29:34.120 --> 0:29:36.800 know for a lot of the folks here in New 0:29:36.880 --> 0:29:39.680 York City, they welcome they can't wait for the Chinese 0:29:39.720 --> 0:29:40.560 consumer to come back. 0:29:42.440 --> 0:29:45.200 That's not really a big part of our business. So 0:29:46.080 --> 0:29:48.880 it's not a strong impact one way or the other. 0:29:49.680 --> 0:29:52.680 What is interesting, though, is that people tend to buy 0:29:52.760 --> 0:29:57.120 jewelry associated with travel. And one of the things that 0:29:57.160 --> 0:29:59.680 we talked a lot about on our second quarter earnings 0:29:59.720 --> 0:30:04.680 call is the proprietary data that we now understand about 0:30:04.720 --> 0:30:09.080 couple's relationship formation. So we have forty five milestones that 0:30:09.120 --> 0:30:12.160 we look at that happened from you know, we went 0:30:12.160 --> 0:30:14.640 to a movie all the way to we met the parents, 0:30:14.720 --> 0:30:18.040 to we move in together, and so we can track 0:30:18.120 --> 0:30:20.720 that going on a romantic trip together is. 0:30:20.600 --> 0:30:21.760 One of those milestones. 0:30:21.840 --> 0:30:24.880 So for our business, it was actually good to see 0:30:24.920 --> 0:30:28.040 a lot of couples traveling together over the summer, attending 0:30:28.040 --> 0:30:31.840 a concert together. That kind of thing is good for 0:30:31.960 --> 0:30:33.520 future engagement ring sales. 0:30:34.200 --> 0:30:39.120 How about you know, I think of class rings, yep, I. 0:30:39.000 --> 0:30:40.960 Think of Super Bowl rings. 0:30:41.120 --> 0:30:45.360 I think of signet rings, and I assume that's where 0:30:45.400 --> 0:30:48.680 you got your name. Are those things anywhere near as 0:30:48.720 --> 0:30:50.040 important as engagement rings? 0:30:50.080 --> 0:30:50.320 To you? 0:30:52.280 --> 0:30:55.120 Not as important? But it's part of the you know, 0:30:55.520 --> 0:30:58.080 customers journey. I mean, what we try to do is 0:30:58.520 --> 0:31:01.959 meet customers at the point of market entry to the category, 0:31:02.320 --> 0:31:05.760 which is usually either getting your ears pierced or buying 0:31:05.800 --> 0:31:09.719 an engagement ring, and then we try to follow that 0:31:09.800 --> 0:31:13.600 customer and you know, throughout their life through other milestones 0:31:13.680 --> 0:31:18.920 like birthdays or graduations or you know, anniversaries, things like that. 0:31:19.080 --> 0:31:22.840 So rings itself, fashion rings are a big part of 0:31:22.840 --> 0:31:23.400 our business. 0:31:23.760 --> 0:31:26.960 Also, our k banner makes all of the NFL Hall 0:31:27.040 --> 0:31:27.720 of Fame. 0:31:27.560 --> 0:31:32.840 Rings, and our sales banner makes all of the rings 0:31:32.920 --> 0:31:38.160 for historically black colleges and universities and so we have 0:31:38.240 --> 0:31:40.600 a presence in those special kind of rings as well. 0:31:41.280 --> 0:31:43.640 Jina, talk to us about the cost side of your business. 0:31:43.640 --> 0:31:45.960 What are the key drivers in your cost structure and 0:31:46.040 --> 0:31:48.080 kind of where are they moving these days. 0:31:48.760 --> 0:31:51.120 Yeah, that's a great story for us. 0:31:51.160 --> 0:31:54.480 We've really developed a competitive advantage in sourcing. 0:31:55.240 --> 0:31:56.640 We are vertically integrated. 0:31:56.720 --> 0:32:01.040 We're one of only a small group of retailers who 0:32:01.040 --> 0:32:03.000 are site holders with de Beers. 0:32:03.440 --> 0:32:05.680 So we buy diamonds right from the mine. 0:32:06.000 --> 0:32:09.400 We own our own cutting and polishing facility in Botswana 0:32:10.120 --> 0:32:13.800 and contract with several others in India, and so we 0:32:13.840 --> 0:32:18.320 have very good visibility into how the prices move of 0:32:18.520 --> 0:32:20.560 diamonds at different times. 0:32:20.960 --> 0:32:22.800 What that gives us is an ability to. 0:32:22.880 --> 0:32:27.600 Continuously offer customers a great value, and it also is 0:32:27.640 --> 0:32:31.920 part of our responsible sourcing strategy. We know that all 0:32:32.000 --> 0:32:36.440 of the gemstones and metals that we sell are sourced 0:32:36.480 --> 0:32:40.080 in an ethical way and completely conflict free. That's something 0:32:40.080 --> 0:32:43.640 customers really care about. So I'm proud that our company 0:32:43.680 --> 0:32:43.920 can be. 0:32:43.920 --> 0:32:44.520 A leader in that. 0:32:45.440 --> 0:32:47.120 How about the cost of gold is that not a 0:32:47.440 --> 0:32:50.240 I mean that's what I think of. Of course, the 0:32:50.280 --> 0:32:53.320 diamond is I guess far more valuable than the gold 0:32:53.400 --> 0:32:56.280 ring that you put it in. But we have seen 0:32:56.320 --> 0:33:00.440 gold rise up right now we're just under one nine 0:33:00.760 --> 0:33:01.880 and thirty dollars a troy. 0:33:01.680 --> 0:33:05.920 Ounce, yes, so so that does matter. What I would 0:33:05.920 --> 0:33:06.400 say is. 0:33:06.360 --> 0:33:11.760 That while our product contains commodities like gold, like diamonds, 0:33:11.760 --> 0:33:15.920 it's not a commodity product, and so the retail pricing 0:33:16.120 --> 0:33:20.880 tends to have less fluctuation than the actual ingredient cost, 0:33:21.840 --> 0:33:24.160 and we tend to be able to price to cover 0:33:24.240 --> 0:33:28.680 that because you know, when when people want a great look, 0:33:28.800 --> 0:33:31.720 you know with a gold necklace or a chain or whatever, 0:33:31.840 --> 0:33:34.800 they are willing to pay to get the high quality 0:33:35.120 --> 0:33:37.800 that we can provide them. The other thing that we 0:33:37.880 --> 0:33:40.320 do in a time like this is we bring innovations 0:33:40.360 --> 0:33:43.200 to the market. So one of the innovations that we 0:33:43.280 --> 0:33:47.320 have for holiday, and the technical name of it is electroform. 0:33:47.800 --> 0:33:51.760 But think of it like putting gold around a straw, 0:33:52.400 --> 0:33:55.240 where you know, we have a metal in the inside 0:33:55.240 --> 0:34:00.640 that we actually can can chemically remove like straw, and 0:34:00.680 --> 0:34:03.480 so then the gold is just formed around the outside. 0:34:03.640 --> 0:34:06.720 So you get a very big look for a lot 0:34:06.920 --> 0:34:11.440 less cost because there's less actual gold in the product. 0:34:11.760 --> 0:34:15.200 And so innovations like that. We work, you know, years 0:34:15.239 --> 0:34:18.280 out with our vendors to be able to uniquely offer 0:34:18.280 --> 0:34:20.760 to our customers so they can get a great value 0:34:21.239 --> 0:34:23.759 no matter what the commodity price market looks like. 0:34:24.160 --> 0:34:26.280 Hi, Jenna, thanks so much for joining us. Really appreciate 0:34:26.280 --> 0:34:30.160 getting some of your time. Jennett draws us. She is 0:34:30.200 --> 0:34:32.680 the CEOP signa jewelers that trades on the New York 0:34:32.680 --> 0:34:33.520 Stock Exchange. 0:34:33.800 --> 0:34:36.880 You're listening to the tape cans our live program, Bloomberg 0:34:37.000 --> 0:34:40.600 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:34:40.640 --> 0:34:42.799 tune in app, Bloomberg dot Com, and the. 0:34:42.680 --> 0:34:43.879 Bloomberg Business App. 0:34:43.920 --> 0:34:46.719 You can also listen live on Amazon Alexa from our 0:34:46.760 --> 0:34:51.760 flagship New York station, Just say Alexa play Bloomberg eleven thirty. 0:34:52.280 --> 0:34:54.200 That certainly one of the key stories we are following 0:34:54.239 --> 0:34:57.239 today is the strike by the UAW against the big 0:34:57.239 --> 0:34:59.960 three auto makers. Ed Corey, he's an anchor and reporter 0:35:00.080 --> 0:35:03.160 for Bloomberg Radio. He is at the Detroit Auto Show, 0:35:03.239 --> 0:35:04.600 so we can get a little bit of a different 0:35:04.640 --> 0:35:07.360 view there from the floor. Ed, thanks so much for 0:35:07.440 --> 0:35:10.560 joining us here. What's the feeling there at the auto show? 0:35:10.600 --> 0:35:13.040 About you know, day one of this strike. 0:35:14.719 --> 0:35:16.200 You know, it's kind of a mixed vibe. 0:35:16.200 --> 0:35:18.719 The people who are behind the show promoting it, the 0:35:18.719 --> 0:35:23.759 people putting displays together, the people working refreshments and so on. 0:35:23.960 --> 0:35:26.840 They know that their goal is to continue to push 0:35:26.880 --> 0:35:29.959 the future, the electric future of the auto industry, show 0:35:29.960 --> 0:35:32.360 off what's new, and try to build some excitement. On 0:35:32.400 --> 0:35:35.160 the other hand, there is a lot of nervousness about 0:35:35.200 --> 0:35:39.839 this strike. How long will it last? Auto plans affected, 0:35:40.120 --> 0:35:43.560 which are very profitable for the automakers. So kind of 0:35:43.640 --> 0:35:45.480 a mixed bag of emotions here. 0:35:46.880 --> 0:35:49.640 In terms of the political fallout. 0:35:49.719 --> 0:35:54.600 Are they expecting, you know, President Biden, who is reportedly 0:35:54.680 --> 0:35:56.960 going to come out and make a statement on this today, 0:35:57.239 --> 0:36:00.440 to get behind the unions as he is, you know, 0:36:01.120 --> 0:36:04.279 as he proclaims himself the most pro union president and 0:36:04.400 --> 0:36:05.240 history of America. 0:36:05.360 --> 0:36:06.520 Or is he going to try and put us out 0:36:06.560 --> 0:36:07.080 to this strike. 0:36:08.480 --> 0:36:10.960 You know what we've been hearing from the President that 0:36:11.000 --> 0:36:15.240 he wants an agreement to be hammered out. He doesn't 0:36:15.360 --> 0:36:19.400 want the detrimental economic effects that we've all heard about 0:36:19.400 --> 0:36:21.799 to come to fruition. Now we're going to see some 0:36:21.920 --> 0:36:28.120 political political action this evening here at Huntington place in Detroit. 0:36:28.120 --> 0:36:31.120 There will be a charity preview for the auto show. 0:36:31.120 --> 0:36:34.560 They raise a ton of money for kids charities in Detroit. 0:36:34.880 --> 0:36:38.600 Outside just a block from here, the Bernie Sanders will 0:36:38.600 --> 0:36:41.759 be here with a bunch of uaw members. They will 0:36:41.760 --> 0:36:46.640 be demonstrating near the UAW Ford Center. So we're going 0:36:46.719 --> 0:36:50.160 to have that type of you know, again, mixed feelings 0:36:50.200 --> 0:36:53.040 about this evening and the strike. And I think it's 0:36:53.040 --> 0:36:56.719 safe to say that everyone involved on's a quick resolution. 0:36:56.920 --> 0:36:59.319 But right now, as you've been hearing, there doesn't seem 0:36:59.320 --> 0:37:02.080 to be one in at least not in the near future. 0:37:02.560 --> 0:37:05.560 So is there any sense out there of how strong 0:37:05.640 --> 0:37:09.440 or how together, how cohesive unit the rank and file 0:37:09.520 --> 0:37:10.440 are behind the strike. 0:37:12.160 --> 0:37:18.080 Oh, in Detroit there have been union members speaking out 0:37:18.640 --> 0:37:21.120 even at plants that are not affected yet by any 0:37:21.120 --> 0:37:24.680 type of walkout. As you know, selected plants have been 0:37:25.800 --> 0:37:29.600 picked for strike activity. But even those who are working 0:37:29.640 --> 0:37:33.839 today said they, you know, they feel a little nervousness 0:37:33.880 --> 0:37:34.400 about this. 0:37:34.760 --> 0:37:36.560 They don't want a lengthy strike. 0:37:36.880 --> 0:37:38.759 But you know, the thing you hear over and over 0:37:38.800 --> 0:37:41.120 again from the rank and file here at Detroit in 0:37:41.120 --> 0:37:43.239 the area auto factories, they want they want to go 0:37:43.280 --> 0:37:44.080 back to where they were. 0:37:44.120 --> 0:37:46.560 They lost some ground, you know, two thousand and eight 0:37:46.800 --> 0:37:47.280 was rough. 0:37:47.920 --> 0:37:51.360 They don't like the fact that some workers doing the 0:37:51.400 --> 0:37:54.799 same job or making more than others. So if they 0:37:54.840 --> 0:37:58.680 want that parody to be restored. And again they would 0:37:58.719 --> 0:38:01.160 like to see a pay increase because they hear and 0:38:01.200 --> 0:38:04.600 read about the increases that the CEOs have been giving. 0:38:05.280 --> 0:38:05.879 That's for sure. 0:38:05.960 --> 0:38:11.200 And you know ed David weston Bloomberg Television interviewed Borough 0:38:11.280 --> 0:38:13.680 of a borough of GM earlier today. 0:38:14.120 --> 0:38:17.040 Boy, she came across, at least to me, is quite upset. 0:38:17.160 --> 0:38:19.680 I mean, I think she feels that General Motors has 0:38:19.680 --> 0:38:23.440 put a very credible deal on the table. And I 0:38:23.520 --> 0:38:25.800 kind of came away from that interview thinking, boy, I 0:38:25.840 --> 0:38:27.440 don't think the auto guys are going to be at 0:38:27.440 --> 0:38:29.120 the company's going to be budging much, at least in 0:38:29.120 --> 0:38:30.040 the near near term. 0:38:31.360 --> 0:38:35.400 Well you might expect that kind of stance maybe, you know, 0:38:36.280 --> 0:38:40.560 in the initial phase of this strike. The automakers are, 0:38:40.680 --> 0:38:46.160 you know, trying to maintain the position that they've had. 0:38:46.560 --> 0:38:50.279 You know that we came through tough economic times, that 0:38:50.760 --> 0:38:54.840 there is a bright future ahead. And you heard Mary 0:38:54.880 --> 0:38:59.080 Barrs say that her salary is based on the performance 0:38:59.120 --> 0:39:02.680 of the company, and the company has earned money, and 0:39:02.719 --> 0:39:05.839 then just part of her contract she gets increases too. 0:39:06.200 --> 0:39:09.120 But the rank and file, the union members, say, hey, look, 0:39:09.160 --> 0:39:13.440 you know we are a huge part of the of 0:39:13.920 --> 0:39:18.000 the of the success that the company has had. Models 0:39:18.000 --> 0:39:21.080 are coming in as a new models are coming on 0:39:21.120 --> 0:39:23.680 the scene, and as we head into an electric future. 0:39:23.719 --> 0:39:25.920 They want to make sure that they're not going to 0:39:25.920 --> 0:39:28.319 be behind. They at least want to recoup some of 0:39:28.360 --> 0:39:31.319 what they believe they've lost over the last few years. 0:39:31.520 --> 0:39:33.080 Had you been at the auto show for a couple 0:39:33.120 --> 0:39:36.400 of days now? I used to go every single year. 0:39:36.520 --> 0:39:40.680 It was like the biggest event of my on my calendar, 0:39:42.600 --> 0:39:45.560 and it has dwindled, right, I mean back in the 0:39:45.640 --> 0:39:48.640 day everybody was at the Detroit Auto Show is the 0:39:48.640 --> 0:39:52.120 most important one for the industry. What's it like this 0:39:52.239 --> 0:39:53.800 year and have you seen anything cool? 0:39:55.200 --> 0:39:58.920 Well, you know, the good news is it is bigger 0:39:58.960 --> 0:40:02.239 than last year. There was you know, the pandemic when 0:40:02.280 --> 0:40:04.880 we didn't see any activity, and so yeah, it is 0:40:04.920 --> 0:40:07.200 bigger than last year. No, it's not up to pre 0:40:07.320 --> 0:40:11.720 pandemic levels. But there's a lot of excitement at the show. 0:40:12.080 --> 0:40:14.440 I mean, sure, you have the prototypes, you know, the 0:40:14.760 --> 0:40:17.359 whiz bang models that may or may not go into 0:40:17.360 --> 0:40:20.640 production ten years from now, but models that you can buy, 0:40:21.040 --> 0:40:24.280 you know, in the very near future are are pretty 0:40:24.280 --> 0:40:26.480 hot here. I mean, Ford is out with a new 0:40:26.600 --> 0:40:32.319 F one fifty. There is a jeep that's coming out 0:40:32.400 --> 0:40:37.080 and it's attracting a lot of excitement. And also the 0:40:37.120 --> 0:40:41.239 Cadillac CT five has a new look this year and 0:40:41.280 --> 0:40:44.319 that's been a very very popular model. So those big 0:40:44.360 --> 0:40:47.600 three Detroit automakers with a strong showing of something you know, 0:40:47.640 --> 0:40:51.680 people can really check out and then you know, put 0:40:51.680 --> 0:40:53.799 a deposit on or go, you know, order from the 0:40:53.800 --> 0:40:54.840 automaker too. 0:40:54.640 --> 0:40:56.759 So there's still is some excitement here. 0:40:57.360 --> 0:40:59.280 And thanks so much for joining us. So I appreciate 0:40:59.280 --> 0:41:02.440 getting it ten and reporting from you. Ed Query's anchor 0:41:02.520 --> 0:41:07.040 and reporter for Bloomberg Radio in the great city of Detroit. 0:41:07.360 --> 0:41:10.480 You're listening to the tape ketch Are live program Bloomberg 0:41:10.560 --> 0:41:14.160 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:41:14.200 --> 0:41:16.279 tune in app, Bloomberg dot Com, and the. 0:41:16.239 --> 0:41:17.439 Bloomberg Business app. 0:41:17.480 --> 0:41:20.279 You can also listen live on Amazon Alexa from our 0:41:20.320 --> 0:41:25.320 flagship New York station, Just say Alexa Play Bloomberg eleven thirty. 0:41:26.160 --> 0:41:28.520 I've been looking forward all day to this. We have 0:41:28.600 --> 0:41:32.399 somewhat of a Wall Street legend. Nice joining us right now. 0:41:32.480 --> 0:41:36.000 Todd Harrison is founding partner and chief investment officer at 0:41:36.000 --> 0:41:37.880 CB one Capital Management. 0:41:37.920 --> 0:41:40.279 But he has spent decades. 0:41:39.840 --> 0:41:44.600 On Wall Street working for the big banks, including Morgan Stanley. 0:41:44.760 --> 0:41:47.040 He founded a company that I think a lot of 0:41:47.120 --> 0:41:50.759 us loved very much, Minyonville Media back in the day, 0:41:50.760 --> 0:41:55.080 which won Emmy Awards, And as I said, he founded 0:41:55.080 --> 0:41:57.560 the Ruby Peck Foundation for Children's Education, which is an 0:41:57.560 --> 0:41:59.000 important charity that I think a lot of people on 0:41:59.040 --> 0:42:03.239 Wall Street like to support as well. Todd, first of all, 0:42:03.440 --> 0:42:05.960 great to see you, Thanks so much for joining us. 0:42:06.160 --> 0:42:08.680 Tell us what you're doing now at CB one Capital Management. 0:42:08.719 --> 0:42:09.560 What's that business? 0:42:10.800 --> 0:42:13.399 I mean, we've been involved in the cannabis space for 0:42:13.480 --> 0:42:17.760 over a decade now. I actually just uncovered an interview 0:42:17.840 --> 0:42:20.200 that we did about ten years ago talking about how 0:42:20.200 --> 0:42:23.120 cannabis was going to be my single best investment idea 0:42:23.160 --> 0:42:24.960 for the next decade, and that was actually. 0:42:24.760 --> 0:42:27.040 Nine years ago and it hasn't been. 0:42:27.760 --> 0:42:30.680 But recently there's been some news that we think is 0:42:30.719 --> 0:42:33.480 going to change the space and change the fortunes and 0:42:33.520 --> 0:42:35.960 really move this in a better direction. But CB one 0:42:36.080 --> 0:42:39.239 Capital we have an investment arm, we have an advisory. 0:42:38.760 --> 0:42:40.640 Arm, and we have an advocacy arm where we. 0:42:40.600 --> 0:42:43.399 Help Weldon Angelis and Mission Green to get people out 0:42:43.400 --> 0:42:44.880 of prison for this plant. 0:42:44.960 --> 0:42:46.359 So it's pretty comprehensive. 0:42:46.640 --> 0:42:52.279 It surprises me that potstocks haven't done better considering the 0:42:52.400 --> 0:42:53.640 uptake of the product. 0:42:54.000 --> 0:42:57.799 You know, on I think right now twenty three. 0:42:57.640 --> 0:43:02.120 States have legalized recreational marriaorrijuana, and you only have to 0:43:02.120 --> 0:43:03.840 walk around New York City for a few minutes to 0:43:03.880 --> 0:43:09.000 understand that people are consuming cannabis. Is there a disconnect 0:43:09.120 --> 0:43:14.200 between the sales, the outlook, and you know, the performance 0:43:14.239 --> 0:43:14.920 of the stocks. 0:43:16.360 --> 0:43:16.800 Certainly. 0:43:17.200 --> 0:43:20.839 I think it's one of the biggest asymmetric opportunities right now, 0:43:20.960 --> 0:43:22.919 right here that I've seen in my thirty four years 0:43:22.960 --> 0:43:23.640 on Wall Street. 0:43:23.680 --> 0:43:26.520 And and why now is very. 0:43:26.400 --> 0:43:29.720 Much because of how we got here, right so, because 0:43:29.800 --> 0:43:33.719 cannabis has been a Schedule one narcotic for so long, 0:43:33.800 --> 0:43:36.560 and we won't go into that rabbit hole of why, 0:43:37.239 --> 0:43:40.760 But because of that, the big takeaways that US cannabis 0:43:40.760 --> 0:43:44.319 companies can't deduct normal operating expenses it's called Section two 0:43:44.400 --> 0:43:47.200 eighty of the tax code. So they're being taxed at 0:43:47.239 --> 0:43:50.240 an effective rate right now of seventy five to eighty percent, 0:43:50.400 --> 0:43:52.960 and they have been for years, which is why only 0:43:53.000 --> 0:43:54.880 the best have been able to survive. 0:43:55.080 --> 0:43:58.640 And the industry was up until two weeks ago. 0:43:58.560 --> 0:44:02.040 Really you know, looking at an extinction event because of 0:44:02.120 --> 0:44:06.839 the regulatory construct. But as you probably know, the HHS 0:44:06.880 --> 0:44:09.280 came out two weeks ago on Wednesday. 0:44:09.280 --> 0:44:10.960 It was the last couple of days of summer. I 0:44:11.040 --> 0:44:12.399 was here, but not many people were. 0:44:12.840 --> 0:44:15.439 They recommended cannabis go to a Schedule three, which would 0:44:15.440 --> 0:44:16.680 importantly remove. 0:44:16.400 --> 0:44:19.440 That two way to e tax code. And now we're 0:44:19.480 --> 0:44:21.840 just waiting on the DEA to codify that opinion. 0:44:21.920 --> 0:44:24.160 We think that could happen by year end and then 0:44:24.200 --> 0:44:26.640 buy to consign it into law before next year's election. 0:44:27.320 --> 0:44:30.080 That's just one thing that's happening. Safe banking we heard 0:44:30.120 --> 0:44:32.880 last night. It was broke news broke last night, and 0:44:32.920 --> 0:44:36.160 it's moving around today or getting out today that safe 0:44:36.160 --> 0:44:38.400 Banking is going to go through a Senate committee markup. 0:44:38.440 --> 0:44:41.320 This is the sign or the tell that the Senate's 0:44:41.320 --> 0:44:43.719 going to pass safe banking for the first time. The 0:44:43.840 --> 0:44:47.520 Upper Chamber and then conceivably be tacked onto a must 0:44:47.520 --> 0:44:50.520 pass bill by year end. So there's a few things right, 0:44:51.520 --> 0:44:53.760 and if they all happened, this could get really spicy. 0:44:53.800 --> 0:44:57.200 But just on the math alone, without anything else. 0:44:57.280 --> 0:44:59.800 If we moved to a schedule three, if that gets codified, 0:45:00.080 --> 0:45:02.520 talking about a two to three x turn on. 0:45:02.440 --> 0:45:03.959 Some of these names, just on map. 0:45:04.760 --> 0:45:09.319 So explain to us why it's developed this way. Ten 0:45:09.400 --> 0:45:11.720 years ago you thought it would be a much better 0:45:11.760 --> 0:45:16.040 proposition than it has been. What have been the big missteps? 0:45:16.080 --> 0:45:19.280 Maybe what is the industry missed? What has Washington missed 0:45:19.760 --> 0:45:20.640 over the last decade. 0:45:21.840 --> 0:45:22.720 You know, it's interesting. 0:45:23.000 --> 0:45:25.040 We spent a lot of time in Washington, and they 0:45:25.040 --> 0:45:27.319 had explained to us that the states are designed to 0:45:27.320 --> 0:45:29.960 be nimble and the federal government's designed to move slow. 0:45:30.320 --> 0:45:33.080 And then added, but the thing about the federal government 0:45:33.200 --> 0:45:35.080 is that when change happens, it tends. 0:45:34.800 --> 0:45:35.800 To happen all at once. 0:45:36.400 --> 0:45:39.560 But because of the disconnect between state and federal laws, 0:45:40.120 --> 0:45:43.320 because the politicians have been very slow on the uptake, 0:45:43.600 --> 0:45:47.040 because cannabis is a complex issue with a lot of stakeholders, 0:45:47.320 --> 0:45:48.440 stakeholders that have a. 0:45:48.400 --> 0:45:52.080 Legitimate claim to participate in the industry. 0:45:52.680 --> 0:45:55.640 It's really become muddled down in a lot of different 0:45:55.800 --> 0:46:00.400 cross currents as the illicit markets really proliferated, you know, 0:46:00.480 --> 0:46:04.000 as this comes online and becomes a legal framework, which 0:46:04.000 --> 0:46:07.000 we just took again a seismic shift two weeks ago 0:46:07.040 --> 0:46:07.759 for the first time. 0:46:07.800 --> 0:46:09.520 That they're two and a half year bear market. 0:46:09.800 --> 0:46:11.919 This is the first domino and it's a big one, 0:46:12.440 --> 0:46:14.440 and if the others fall, it can get spicy. But 0:46:14.520 --> 0:46:18.440 we need this to sort of relax the arbitrage between 0:46:18.520 --> 0:46:19.520 federal and state law. 0:46:19.680 --> 0:46:22.040 Allow these companies to operate on an even playing field. 0:46:22.080 --> 0:46:24.400 And after what they've just been through, I would argue 0:46:24.400 --> 0:46:26.360 that they're they're pretty lean and mean and ready to 0:46:26.560 --> 0:46:27.000 ready to. 0:46:26.960 --> 0:46:27.480 Go to work. 0:46:28.280 --> 0:46:29.239 I look across the. 0:46:31.480 --> 0:46:34.239 Market, there are a lot of different participants, right, not 0:46:34.360 --> 0:46:38.759 just in North America, but mainly right in the US 0:46:38.800 --> 0:46:41.600 and Canada. Are there companies you think that really have 0:46:41.680 --> 0:46:44.280 got it right? Are the companies you think that are solid, 0:46:45.040 --> 0:46:48.520 you know, investible that we should be looking at more closely? 0:46:49.440 --> 0:46:51.880 And sure? So, yeah, of. 0:46:51.920 --> 0:46:54.440 Course, And I say this, you know word, we have positions. 0:46:54.520 --> 0:46:56.480 We advise some of these companies, but we got to 0:46:56.520 --> 0:46:58.200 know a lot of companies very well. 0:46:58.400 --> 0:46:59.920 You know, iron sharpens iron. 0:47:00.080 --> 0:47:01.799 During the two and a half year bear market, this 0:47:01.880 --> 0:47:04.640 was a ninety one percent drawdown for MSOs, which is 0:47:04.640 --> 0:47:08.719 the ETF that we advise. But you know, certainly you 0:47:08.760 --> 0:47:10.640 can learn a lot just by watching how some of 0:47:10.680 --> 0:47:13.600 these companies did during that trough. As we think it 0:47:13.680 --> 0:47:16.080 is as in front of all these states onboarding. 0:47:15.600 --> 0:47:18.040 On the East coast, and you know, you look at. 0:47:17.880 --> 0:47:21.719 The Veranos, the Terra sends the green thumbs, and there's 0:47:21.760 --> 0:47:23.839 others right at Glasshouse in California. 0:47:24.520 --> 0:47:26.960 You know, as two way to eges away. 0:47:27.160 --> 0:47:29.759 As the federal government starts to move out of the way, 0:47:30.280 --> 0:47:33.760 it has to be incremental the change, and that change 0:47:34.200 --> 0:47:37.719 because it's incremental, like we don't have the political wherewithal 0:47:37.840 --> 0:47:41.239 capacity to move this to a deschedule where it should be. 0:47:41.520 --> 0:47:44.359 But Schedule three is a stepping stone to descheduling. 0:47:44.920 --> 0:47:46.400 Happens to play right. 0:47:46.280 --> 0:47:50.320 Into the MSOs and the publicly traded companies hands because 0:47:50.440 --> 0:47:52.840 they still have some of the protections and the barriers 0:47:52.840 --> 0:47:56.240 to entry and a very regulated market at the state level. 0:47:56.440 --> 0:48:00.279 But the federal government's moving to really support the tenth 0:48:00.320 --> 0:48:04.040 Amendment and let the states become the laboratories of democracy. 0:48:04.160 --> 0:48:08.520 And those industries evolve at the state level as the 0:48:08.520 --> 0:48:11.680 federal framework pick shit. So this is a big you know, 0:48:11.960 --> 0:48:14.360 this is a big, big catalyst. I don't think people 0:48:14.400 --> 0:48:18.480 really understand it. What's interesting a is that there is 0:48:18.760 --> 0:48:21.920 a pretty significant structural short in these names, we feel 0:48:22.520 --> 0:48:26.320 because of without getting too far into the weeds, because 0:48:26.719 --> 0:48:29.520 the US cannabis companies have to list on the Canadian 0:48:29.520 --> 0:48:32.759 Stock Exchange. They can't list on US stock exchanges, but 0:48:32.800 --> 0:48:35.719 the MSOs ETF is on the New York Stock Exchange. 0:48:36.000 --> 0:48:40.120 There's been a pretty pernicious algorithm that's been hitting these 0:48:40.440 --> 0:48:43.840 stocks down. Naked short we believe, naked short in these stocks, 0:48:44.440 --> 0:48:46.400 routing them through Europe, however it may be. 0:48:46.800 --> 0:48:49.280 But we think they're still there. We think they're still trapped, 0:48:49.280 --> 0:48:52.359 and we'll see how that plays out over the time 0:48:52.400 --> 0:48:52.719 to come. 0:48:52.760 --> 0:48:55.680 But the other interesting part is all the institutions and 0:48:55.719 --> 0:48:56.920 you know, you know, we talked to a. 0:48:56.920 --> 0:48:59.120 Lot of these guys. We made a lot of calls 0:48:59.160 --> 0:49:00.160 after this news. 0:49:00.040 --> 0:49:03.000 And even the institutions or the funds of the family 0:49:03.080 --> 0:49:06.960 offices that can buy US cannabis are telling us, a 0:49:06.960 --> 0:49:09.680 lot of them are telling us. After so many disappointments, 0:49:09.719 --> 0:49:11.440 we want to actually see it happen. We want to 0:49:11.440 --> 0:49:13.480 see this play through. We want to see it get 0:49:13.480 --> 0:49:15.919 done before we're going to believe it. And I think 0:49:15.920 --> 0:49:16.960 that's incredibly bullish. 0:49:16.960 --> 0:49:20.640 Also, Tod, given all that background, what types of investments 0:49:20.840 --> 0:49:22.520 are you making in the space today? 0:49:24.680 --> 0:49:26.879 I mean we mentioned some of them. You know, there's 0:49:26.880 --> 0:49:31.360 only a handfeit. There's really only so many tradable names 0:49:31.400 --> 0:49:31.920 in this space. 0:49:31.960 --> 0:49:35.360 I mean the top holdings in MSOs or Green Thumb, 0:49:35.640 --> 0:49:38.280 cure Leaf, Verano, truly, Cresco. 0:49:39.080 --> 0:49:41.560 So that's is there anything in the private space you're 0:49:41.560 --> 0:49:42.000 looking at? 0:49:42.840 --> 0:49:43.120 Sure? 0:49:43.239 --> 0:49:45.600 I mean, just to talk about MSOs, the way that 0:49:45.600 --> 0:49:48.640 that portfolio is constructed is that fang on one side 0:49:48.680 --> 0:49:50.400 that you know, if you look at Y two K 0:49:50.520 --> 0:49:52.520 as sort of a preamble of what we're going through. 0:49:52.520 --> 0:49:53.440 Everything they said. 0:49:53.239 --> 0:49:55.799 Technology was going to be happened, but not before the 0:49:55.880 --> 0:49:58.560 tech crash. I think cannabis is that is at that 0:49:58.680 --> 0:50:01.400 spot right now. But I think that you know the 0:50:01.520 --> 0:50:04.799 fang if you will, those five names on one side 0:50:04.840 --> 0:50:07.280 and then forgotten as we say, some of these lower 0:50:07.640 --> 0:50:10.439 tiered MSOs on the other side, I think are having 0:50:10.480 --> 0:50:12.799 more beata because a lot of them were treating at 0:50:12.800 --> 0:50:14.759 their cash levels a couple of weeks ago, because there 0:50:14.800 --> 0:50:16.640 was no visibility on how they were going to service 0:50:16.680 --> 0:50:19.280 their debt, on what they're on, what their cash generation 0:50:19.440 --> 0:50:21.759 levels are we're going to be and that's starting to 0:50:21.760 --> 0:50:24.759 come into view right now. So both of the I 0:50:24.760 --> 0:50:27.239 think that portfolio as well positioned MSS and. 0:50:27.280 --> 0:50:28.160 Again we're involved. 0:50:28.640 --> 0:50:31.319 But on the private side, Yes, the capital markets have 0:50:31.320 --> 0:50:31.840 been shut. 0:50:31.680 --> 0:50:34.040 Down for a number of years, and I think that 0:50:34.239 --> 0:50:35.880 you know, not only for the stocks, but for the 0:50:35.960 --> 0:50:39.279 research and for the sentiment. This will help close the 0:50:39.360 --> 0:50:43.080 chasm between the state and the federal sort of discrepancies. 0:50:43.080 --> 0:50:47.600 Do you have a view on what the heck has 0:50:47.680 --> 0:50:49.440 gone wrong in New York State? 0:50:50.000 --> 0:50:52.719 I mean, it is an absolute mess, right. 0:50:52.800 --> 0:50:58.200 There's only a few licensed dispensaries here. They only sell 0:50:58.800 --> 0:51:02.840 a select number of products, the best stuff that everybody wants. 0:51:03.320 --> 0:51:08.120 You know, the Kana and the Camino products are only 0:51:08.200 --> 0:51:11.040 in like Empire, and then you know the million other 0:51:11.120 --> 0:51:13.279 shops around town that aren't licensed. 0:51:14.239 --> 0:51:19.000 How did they do such a bad job in New York? 0:51:19.560 --> 0:51:21.560 Well, you sound like a consumer, my man. 0:51:21.640 --> 0:51:23.760 I mean you you just rattled a couple of brands 0:51:23.840 --> 0:51:26.480 right there that this is not your first rodeo, I 0:51:26.520 --> 0:51:26.959 could tell. 0:51:27.719 --> 0:51:30.439 But New York, I mean, you know, it's a cautionary tale. 0:51:31.360 --> 0:51:33.960 And listen, well intentioned, right, I mean, they tried to 0:51:33.960 --> 0:51:34.680 do the right thing. 0:51:35.080 --> 0:51:38.080 But what happened was when when COVID hit and and 0:51:38.120 --> 0:51:40.200 you know, again follow the money. The reason this was 0:51:40.200 --> 0:51:43.160 coming online in all these states was because the tax 0:51:43.200 --> 0:51:46.560 revenues are ridiculous, the job creations are ridiculous, and oh, 0:51:46.560 --> 0:51:48.319 by the way, it's good for you, like as we're 0:51:48.360 --> 0:51:51.319 finding out more and more. But when the COVID, when 0:51:51.320 --> 0:51:55.120 COVID hit, and the federal government just completely you know, 0:51:55.360 --> 0:51:58.719 flushed all these budgets with cash. New York in particular said, 0:51:58.760 --> 0:52:01.480 you know, we're going to create this framework that we 0:52:01.520 --> 0:52:05.799 think is just and rights the wrongs of the war 0:52:05.880 --> 0:52:09.240 on drugs, And like I said, well intentioned, But anybody 0:52:09.320 --> 0:52:10.960 that's been around the block a few times knows that 0:52:11.000 --> 0:52:13.560 you can't legislate wealth, right. And there's a big difference 0:52:13.600 --> 0:52:16.080 between criminal justice. People shouldn't be in prison for a 0:52:16.120 --> 0:52:19.239 plant and social justice. Right, they necessarily shouldn't be at 0:52:19.239 --> 0:52:21.359 the front of the line either. And I think that 0:52:21.400 --> 0:52:24.120 there is there's a balance there, and there's a Toget. 0:52:24.160 --> 0:52:26.480 You know, we can do this together. I believe that. 0:52:26.680 --> 0:52:30.440 But New York never really allowed the opportunity. Maryland did 0:52:30.440 --> 0:52:31.759 it right, Missouri did it right. 0:52:31.800 --> 0:52:35.480 They levered the medical industry into an adult use industry, 0:52:35.560 --> 0:52:38.839 and then when they made money, they you know, sort 0:52:38.840 --> 0:52:41.640 of address the social issues, justice issues. New York tried 0:52:41.680 --> 0:52:44.839 to do that the opposite way. Now you walk down 0:52:45.000 --> 0:52:48.040 there's fourteen thousand, you know street, fourteen thousand shops in 0:52:48.040 --> 0:52:48.399 New York. 0:52:48.400 --> 0:52:51.640 Most New Yorkers think that's the legal framework. But that's 0:52:51.680 --> 0:52:53.000 going to transition, right, So. 0:52:53.080 --> 0:52:56.920 It's a process. Over time, prices will come down, the 0:52:56.960 --> 0:52:58.640 ilestle market will get crowded out. 0:52:58.760 --> 0:53:02.080 Besides, they're selling pest size and a multification agents that 0:53:02.120 --> 0:53:05.440 are literally poison, so that'll go away like bathtub Gin 0:53:05.600 --> 0:53:05.960 once went. 0:53:06.040 --> 0:53:08.919 Dude, imagine if you could only buy Brooklyn Lauger. Yeah, 0:53:09.120 --> 0:53:12.399 you want a Lagunitas or you want Sierra Nevada, and 0:53:12.440 --> 0:53:14.799 they're telling you you can't get that at. 0:53:14.680 --> 0:53:16.799 A legal show. The social injustice of it all. 0:53:16.800 --> 0:53:18.680 Todd Harrison, thank you so much for joining us founding 0:53:18.680 --> 0:53:22.640 partner and CIO at c B one Capital Management. 0:53:23.000 --> 0:53:26.600 You're listening to the tape cansur live program Bloomberg Markets 0:53:26.640 --> 0:53:30.040 weekdays at ten am Eastern on Bloomberg Radio, the tune 0:53:30.080 --> 0:53:31.959 in app, Bloomberg dot Com, and the. 0:53:31.840 --> 0:53:33.040 Bloomberg Business App. 0:53:33.080 --> 0:53:35.880 You can also listen live on Amazon Alexa from our 0:53:35.920 --> 0:53:41.000 flagship New York station, Just say Alexa play Bloomberg eleven thirty. 0:53:42.360 --> 0:53:43.920 Let's get to what I'm driving this week? 0:53:44.040 --> 0:53:45.239 Yeah, what are you driving? I? 0:53:45.280 --> 0:53:47.839 Well, I just a disclaimer that you know, the car 0:53:47.880 --> 0:53:51.080 makers allow me to use these cars to test drive. 0:53:51.080 --> 0:53:53.560 You've been covering the industry for twenty years now, and 0:53:54.080 --> 0:53:56.720 so I often get a new car or a truck 0:53:56.800 --> 0:54:00.200 or a motorcycle to test out. This week, I have 0:54:00.280 --> 0:54:04.280 something special, and so the purpose of this hit is twofold. 0:54:04.360 --> 0:54:06.480 Number one, I want to tell. 0:54:06.280 --> 0:54:10.480 Our viewers about a product, and number two, I'm trying 0:54:10.520 --> 0:54:13.240 to convince you to get to get one of these cars. 0:54:13.400 --> 0:54:15.160 I'm going to bring in my buddy Matt Hart agree 0:54:15.200 --> 0:54:17.560 to help me do that. He was the editor in 0:54:17.640 --> 0:54:21.040 chief of Jalopnik. He's now working on a site called Autopia, 0:54:21.120 --> 0:54:23.399 but he's been also in the industry for a couple 0:54:23.480 --> 0:54:26.560 of decades here at covering cars. Matt, you know it's 0:54:26.640 --> 0:54:30.120 long been the dream of I think every auto journalist 0:54:30.320 --> 0:54:33.280 to get an absolute stripper of a nine to eleven, 0:54:33.640 --> 0:54:38.040 that is, to order the base model with no options 0:54:38.160 --> 0:54:40.920 at all, and I have almost achieved that in this 0:54:41.000 --> 0:54:44.800 test Dride. It's a Carrera T, which is like already 0:54:44.800 --> 0:54:47.920 the stripped down version of the nine to eleven. It 0:54:47.960 --> 0:54:49.960 only has the essentials, the things you need, like a 0:54:49.960 --> 0:54:52.839 short throw shifter, and it has almost no options on it. 0:54:52.920 --> 0:54:56.839 I absolutely love it, with one exception, and. 0:54:56.760 --> 0:54:57.560 That is the color. 0:54:57.640 --> 0:54:58.040 I love. 0:54:58.080 --> 0:54:58.440 The color. 0:54:59.160 --> 0:55:00.840 I don't know, Matt, you I probably can't see it, 0:55:00.840 --> 0:55:04.040 but maybe you've seen. The color is called ruby star Neo. 0:55:04.400 --> 0:55:05.000 It's like a. 0:55:04.920 --> 0:55:06.800 Purple pink, like a Barbie pink. 0:55:08.080 --> 0:55:10.960 You mean, it's the best color. You got the best color, 0:55:11.000 --> 0:55:11.680 and you're complaining. 0:55:12.160 --> 0:55:14.800 My daughter thinks so as well. But give me your thoughts. 0:55:14.800 --> 0:55:17.280 First off, on the Carrera T, the nine to eleven 0:55:17.360 --> 0:55:19.719 Carrera Tea, it's great. 0:55:19.800 --> 0:55:23.160 I mean, I think what Portia has done is realized that, 0:55:24.080 --> 0:55:26.840 as with a lot of things in life, the more options, 0:55:26.880 --> 0:55:29.479 the better and the more money they can get. And 0:55:29.920 --> 0:55:33.319 you know, for an enthusiast, I am not likely to 0:55:33.440 --> 0:55:36.120 buy a nine to eleven Turbo. It's a little pricey, 0:55:36.160 --> 0:55:38.080 but if I'm in a nine to eleven range. They 0:55:38.120 --> 0:55:41.040 have created something that fits between the true bass Carrera 0:55:41.239 --> 0:55:43.439 and the Korera S and they call it the Karrera Tea. 0:55:43.960 --> 0:55:47.560 And somehow by creating a cheaper version of the Karrera S, 0:55:47.640 --> 0:55:51.279 they've made it more desirable than a Korera S. They 0:55:51.280 --> 0:55:54.120 are selling at a pretty high levels for people I've 0:55:54.120 --> 0:55:55.920 spoken to. And the problem is even though it's the 0:55:55.920 --> 0:55:58.760 stripper version, it's a little bit faster than the base Carrera. 0:55:59.600 --> 0:56:02.200 I'm I did one myself. I built one before the 0:56:02.200 --> 0:56:03.600 show and I was like, oh, you know, it starts 0:56:03.600 --> 0:56:05.320 a one hundred and thirty. That's such a great price. 0:56:05.400 --> 0:56:07.279 I'm only going to add a couple of options. And 0:56:07.320 --> 0:56:09.759 you get on a port of personalization page and then 0:56:09.760 --> 0:56:13.640 you're like, well, I need Hardiburg yellow seatbelts. I definitely 0:56:13.640 --> 0:56:15.640 need to have this special I like it in brown, 0:56:15.640 --> 0:56:17.879 the special brown color. I need this, I need that, 0:56:17.920 --> 0:56:21.439 And then all of a sudden it's you're one hundred 0:56:21.480 --> 0:56:23.440 and forty thousand dollars into a car. So it's genius. 0:56:23.440 --> 0:56:25.320 I think it's genius. You got it with the manual. 0:56:25.320 --> 0:56:27.040 Who cares what color it is as long as it 0:56:27.080 --> 0:56:28.879 has a manual that is the right cardigat well. 0:56:28.800 --> 0:56:29.799 And that's the beauty of this. 0:56:30.160 --> 0:56:33.320 So the base model Carrera, the absolute cheapest one you 0:56:33.320 --> 0:56:36.279 could get, doesn't have the manual as an option. You 0:56:36.320 --> 0:56:39.600 have to get the PDK, which is a very amazing 0:56:39.640 --> 0:56:43.840 automatic transmission, but it's still an automatic transmission. And Matt 0:56:43.880 --> 0:56:47.360 the benefit that the T has over the Carrera S. 0:56:47.440 --> 0:56:48.200 I was talking Luke. 0:56:48.239 --> 0:56:52.000 With Luke van Derzany, you know who runs PR for 0:56:52.600 --> 0:56:55.319 the nine to eleven at Portia in the US. He 0:56:55.440 --> 0:56:58.440 told me you can't get the short throw shifter on 0:56:58.520 --> 0:57:00.520 the S. You have to go up a level to 0:57:00.560 --> 0:57:03.680 the GTS to get that, And that to me has 0:57:03.719 --> 0:57:05.920 been the revelation with this car. You know, I had 0:57:05.920 --> 0:57:08.520 a Carrera ass a nine nine to one Carrera ass sure, 0:57:08.920 --> 0:57:13.800 and I I had never thought about changing out the stick. 0:57:14.160 --> 0:57:17.320 This little stick is so much better than the big stick. 0:57:17.360 --> 0:57:18.280 I don't like a big stick. 0:57:18.320 --> 0:57:19.320 I like a little students. 0:57:19.640 --> 0:57:22.600 You know. The other revelation for me with this car 0:57:22.760 --> 0:57:23.160 is the. 0:57:23.160 --> 0:57:27.320 Cloth seats are amazing. I've never preferred cloth over leather, 0:57:27.840 --> 0:57:31.920 and these are just I'd rather have them. So I 0:57:31.960 --> 0:57:34.880 feel like it's an opportunity for Paul Sweeney to get 0:57:34.920 --> 0:57:36.400 a new car and save a little bit of money 0:57:36.400 --> 0:57:37.760 because he's not buying the turbos. 0:57:38.760 --> 0:57:40.800 It's a great deal. Oh all right, I think you 0:57:40.840 --> 0:57:43.040 would really not to buy it at this point. 0:57:43.240 --> 0:57:45.600 Hey, Matt, how about you're you would like matter a 0:57:45.600 --> 0:57:48.400 car guy and you're at the high end here. I 0:57:48.440 --> 0:57:51.600 can't imagine the Ferraris, the Lamborghinis, the portions of the 0:57:51.600 --> 0:57:55.680 world they are going electric willingly. Are they scratching and 0:57:55.720 --> 0:57:58.000 clawing to remain in the ice world. 0:57:59.440 --> 0:58:02.520 No. If you look at especially in Germany, there's been 0:58:02.520 --> 0:58:05.720 a big push with the EU regulations coming up the 0:58:05.720 --> 0:58:08.280 theoretically that in a decade, you know, we're going to 0:58:08.360 --> 0:58:11.880 have to have essentially no gas powered cars to get 0:58:11.920 --> 0:58:17.440 that legislation through Brussels. Basically, the Germans said, specifically, Portia 0:58:17.480 --> 0:58:20.080 of Volkswagen said, you know what, E fuels, give us 0:58:20.120 --> 0:58:24.400 an exception for carbon neutral e fuels because no matter what, 0:58:24.680 --> 0:58:26.680 even if they build electric cars, even if they sell 0:58:26.720 --> 0:58:29.800 primarily electric cars. No one I've talked about Ferrari, no 0:58:29.840 --> 0:58:33.120 one I've talked about Portia has given up on a 0:58:33.160 --> 0:58:35.800 gas powered car because for a sports car, even though 0:58:35.840 --> 0:58:39.400 an electric car might be faster. Nothing just sounds, and 0:58:39.440 --> 0:58:41.920 I love driving sports cars. Nothing sounds right. You don't 0:58:41.920 --> 0:58:43.800 get that feel of a short throw shifter like you 0:58:44.080 --> 0:58:47.760 need that visceral reaction because that's what you're paying where. 0:58:47.800 --> 0:58:49.760 You're not paying to get somewhere faster, You're paying to 0:58:49.800 --> 0:58:52.400 get somewhere with more excitement, with more joy. 0:58:53.240 --> 0:58:56.400 That's this car definitely fits that bill. I mean, it 0:58:56.440 --> 0:58:59.360 isn't the fastest car on the road. It doesn't feel 0:58:59.400 --> 0:59:02.200 as quick as my Carrera S, and it doesn't have 0:59:02.200 --> 0:59:04.680 as much horse powers three hundred and seventy nine horse power. 0:59:05.520 --> 0:59:08.000 You know, my Carera had I think four hundred and 0:59:08.040 --> 0:59:09.000 now the Carrera S. 0:59:09.040 --> 0:59:10.440 Has probably four thirty. 0:59:11.760 --> 0:59:15.360 But it's got that build up, it's got that uh 0:59:15.800 --> 0:59:19.440 you know, the gradual acceleration and the sound from the 0:59:19.440 --> 0:59:22.360 sport exhausted just amazing that I absolutely love. Plus it 0:59:22.400 --> 0:59:25.280 only weighs like thirty one hundred pounds, so that's incredibly light. 0:59:25.440 --> 0:59:27.200 By the way, maybe you can help Paul out with 0:59:27.240 --> 0:59:30.560 his conundrum veering away from the nine to eleven for 0:59:30.600 --> 0:59:33.760 a moment. He has the last manual five series. He 0:59:33.800 --> 0:59:37.200 has the twenty fourteen five point thirty five Eye with 0:59:37.320 --> 0:59:40.640 a stick, and now he's worried that it's gonna start 0:59:40.640 --> 0:59:44.120 getting old and he's gonna have to make repairs. Should 0:59:44.160 --> 0:59:45.800 he get something else or should he just make the 0:59:45.840 --> 0:59:47.880 repairs and keep the car that he loves the most. 0:59:49.360 --> 0:59:50.680 He should get rid of it and give it to me, 0:59:50.800 --> 0:59:52.960 because I have a I have a two thousand and 0:59:52.960 --> 0:59:55.400 three five Series five thirty I with the five speed, 0:59:55.760 --> 0:59:57.800 and it has two hundred and thirty five thousand miles 0:59:57.880 --> 0:59:58.160 on it. 0:59:58.120 --> 1:00:00.680 Two hundred thirty five thousand miles two. 1:00:00.640 --> 1:00:02.840 D and thirty five. The look twenty fourteen. It's a 1:00:02.840 --> 1:00:05.200 little sketchy. You're you're on the edge where the car 1:00:05.280 --> 1:00:09.960 is so modern that sometimes fixing things becomes cost prohibitive. 1:00:10.960 --> 1:00:12.760 But you're just on the right side of the edge. 1:00:12.760 --> 1:00:15.160 I think, I think you can make this car last. 1:00:15.280 --> 1:00:17.920 And it's not like mine. Mine is like Legos. You 1:00:17.920 --> 1:00:19.640 can pop something out, you can pop something in, you 1:00:19.640 --> 1:00:22.720 can generally fix the car. Your car isn't Legos, unfortunately, 1:00:22.760 --> 1:00:25.080 it's tech Lego technic. It's a little bit more advanced. 1:00:25.120 --> 1:00:27.720 But no, you're never going to find this is the problem. 1:00:27.840 --> 1:00:31.640 You're never going to find something new that feels as 1:00:31.680 --> 1:00:34.480 good as that car, because they can't make cars like 1:00:34.520 --> 1:00:37.040 that anymore. So either put it on, bring a trailer, 1:00:37.080 --> 1:00:38.720 and regret it for the rest of your life, or 1:00:38.920 --> 1:00:41.160 you know, spend two or three thousand dollars a year 1:00:41.160 --> 1:00:43.600 with your mechanic getting out. I think that's the best move. 1:00:43.720 --> 1:00:45.760 Got to keep the car or give it to me also. 1:00:47.720 --> 1:00:50.640 Exactly that could be an option, all right, Matt, thanks 1:00:50.640 --> 1:00:52.040 so much for joining us. 1:00:51.760 --> 1:00:53.920 Lots for me to think about over the weekend. 1:00:54.320 --> 1:00:57.480 Matt Hart agree, he's a publisher of the Auto Utopian. 1:00:57.880 --> 1:01:00.640 Sorry and talking cars with Matt Miller. Matt driving the 1:01:01.160 --> 1:01:04.520 Barbie Pink Portie. 1:01:04.040 --> 1:01:05.560 Carrera T love it. 1:01:05.640 --> 1:01:06.520 I have to give it back. 1:01:06.600 --> 1:01:09.000 Unfortunately I only had it for a week. But I 1:01:09.120 --> 1:01:12.720 joined The Utopian so I get that membership I think 1:01:12.720 --> 1:01:14.640 for a whole year. And plus they're gonna send me 1:01:14.760 --> 1:01:16.400 like a velvet T shirt. 1:01:16.560 --> 1:01:17.440 Oh cool, very good. 1:01:17.440 --> 1:01:19.560 And I'll tell you the Bloomberg Courtyard is a great 1:01:19.600 --> 1:01:21.000 place to kind of showcase cars. 1:01:21.000 --> 1:01:21.640 It looks cool. 1:01:21.880 --> 1:01:23.800 Yeah, I mean you could rent that out, maybe make 1:01:23.840 --> 1:01:25.400 up a couple of bucks where our owns this place. 1:01:27.080 --> 1:01:30.160 Thanks for listening to the Bloomberg Markets podcast. You can 1:01:30.200 --> 1:01:33.960 subscribe and listen to interviews at Apple Podcasts or whatever 1:01:34.080 --> 1:01:37.760 podcast platform you prefer. I'm Matt Miller. I'm on Twitter 1:01:38.000 --> 1:01:39.919 at Matt Miller nineteen seventy three. 1:01:40.360 --> 1:01:42.800 And I'm fall Sweeney. I'm on Twitter at pt Sweeney. 1:01:42.840 --> 1:01:45.520 Before the podcast, you can always catch us worldwide at 1:01:45.560 --> 1:01:47.320 Bloomberg Radio