WEBVTT - Generous Portion: FTC, CMG, ETF 0:00:03.120 --> 0:00:08.360 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:10.400 --> 0:00:13.240 Hello and welcome to The Money Stuff podcast, your weekly 0:00:13.280 --> 0:00:18.239 podcast where we talk about stuff related to money. I'm 0:00:18.239 --> 0:00:20.799 Matt Levie and I are at the Money Stuff column for. 0:00:20.840 --> 0:00:24.000 Bloomberger Painton, and I'm Katie Greifeld, a reporter for Bloomberg 0:00:24.040 --> 0:00:25.880 News and an anchor for Bloomberg Television. 0:00:27.240 --> 0:00:29.160 What are we talking about today? 0:00:29.560 --> 0:00:32.320 Arbageddon? I hope I said that right, and then. 0:00:32.200 --> 0:00:35.360 We're currently spelled it because it's not a real word. 0:00:35.400 --> 0:00:36.239 I'm not going to correct this. 0:00:36.360 --> 0:00:39.880 That's good. There's an upside there. We're going to talk 0:00:40.080 --> 0:00:45.479 about securities fraud in the burrito market, and then we're 0:00:45.479 --> 0:00:53.159 going to talk about leverage. Warren Buffett. Let's see how 0:00:53.200 --> 0:00:56.639 it goes. I didn't look at anything, so I don't 0:00:56.640 --> 0:00:58.280 know if I did that. I don't know if I 0:00:58.280 --> 0:01:01.120 did that in the right order, but I did it. 0:01:01.120 --> 0:01:05.440 In order of your own interest, which is interest. Yeah, 0:01:05.480 --> 0:01:06.480 that's what we need, all right. 0:01:06.800 --> 0:01:11.440 I am intoxicated with power anyway. Merger arb arbageddon, Arbageddon. 0:01:11.480 --> 0:01:13.560 I think arbageddon is a term that has applied to 0:01:13.600 --> 0:01:16.280 like something that happened in my twenty fourteen It doesn't matter, 0:01:16.520 --> 0:01:17.319 but yeah, does the. 0:01:17.400 --> 0:01:22.440 Term arbageddon apply here. No, yeah, So why are we 0:01:22.440 --> 0:01:23.520 saying it's an arbageddon? 0:01:23.600 --> 0:01:25.920 Oh no, we're not. So what happened is that there 0:01:25.959 --> 0:01:27.880 have been over the years bad things that happened to 0:01:27.880 --> 0:01:32.399 merger arb firms, most recently when the handbag deal blew up, 0:01:32.640 --> 0:01:35.080 which is what is it a tapestry in Capri or 0:01:35.160 --> 0:01:37.720 the companies that it's like a very narrow market segment 0:01:37.880 --> 0:01:42.720 definition which is like expensive but not very expensive handbags as. 0:01:42.640 --> 0:01:44.880 Far as I can affordable luxury. 0:01:44.480 --> 0:01:47.800 Afordable luxury, something like that. And so those companies dominate 0:01:47.840 --> 0:01:50.600 the market for affordable luxury. And so they announced the 0:01:50.680 --> 0:01:54.560 merger merger arbit treasure is loaded up on Capri stock, 0:01:54.640 --> 0:01:57.680 I think, and then the Federal Trade Commissions sued to 0:01:57.680 --> 0:02:00.240 block the deal. A judge agreed at the FT and 0:02:00.320 --> 0:02:03.400 blocked the deal. Capri's stock fell like forty nine percent, 0:02:04.000 --> 0:02:07.040 and some merger ARBs they lost a lot of money. Yeah, 0:02:07.080 --> 0:02:10.000 and more generally, like in the last few years, the 0:02:10.080 --> 0:02:13.160 FTC has been gung ho on sewing to block deals. 0:02:13.560 --> 0:02:16.560 Sometimes it has succeeded, and the result of that is 0:02:16.600 --> 0:02:19.040 bad news for merger arms, and some number of them 0:02:19.040 --> 0:02:21.320 have lost their jobs. According to a Wall Street Journal 0:02:21.400 --> 0:02:22.880 article that was published earlier this week. 0:02:23.000 --> 0:02:25.760 Yeah, I was messy. The headline of the Wall Street 0:02:25.840 --> 0:02:29.600 Journal article is that basically arbageddon potentially is over. 0:02:29.960 --> 0:02:33.680 Yeah, the Arbageddon's have occurred, but like the assumption is 0:02:34.280 --> 0:02:37.440 that Donald Trump will and least animal spirits in the 0:02:37.440 --> 0:02:38.040 merger market. 0:02:38.480 --> 0:02:41.080 That is the region consensus right now. I don't know 0:02:41.120 --> 0:02:44.000 how many we're so back memes that you've seen over 0:02:44.000 --> 0:02:46.680 the past week, but that is most of my social 0:02:46.720 --> 0:02:47.480 media right now. 0:02:48.000 --> 0:02:48.760 M and A Bankers. 0:02:48.919 --> 0:02:51.880 Yes, me. I didn't know that I followed so many 0:02:51.919 --> 0:02:55.200 financial meme accounts, but apparently I do. And in light 0:02:55.240 --> 0:02:57.200 of that, it was interesting to see the tapestry and 0:02:57.240 --> 0:03:00.200 could pre deal fall apart. We're recording this on Thursday, 0:03:00.240 --> 0:03:02.680 and the headline crossed this morning that they're walking away 0:03:02.680 --> 0:03:06.280 from the deal. And the reason that the companies gave 0:03:06.600 --> 0:03:09.440 was that it's in the best interest of both companies 0:03:09.440 --> 0:03:13.080 as the required closing condition of receiving necessary US regulatory 0:03:13.080 --> 0:03:16.119 approvals was unlikely to be met by the outside date 0:03:16.160 --> 0:03:20.120 of February tenth. By February tenth, of course, there will 0:03:20.120 --> 0:03:22.519 be a new administration, at least in the White House. 0:03:22.560 --> 0:03:25.800 Yeah, it's cutting Yeah, it's a little close. Yeah, once 0:03:25.840 --> 0:03:27.840 you have a judge ruling that your deal is an 0:03:27.880 --> 0:03:30.639 antitost violation, it's like hard to walk that back. It's 0:03:30.680 --> 0:03:35.440 not completely impossible, but it's hard and it's harder to do. 0:03:35.560 --> 0:03:37.960 And you know, three weeks after, you know, the new 0:03:37.960 --> 0:03:40.040 administration is inaugurated. So there, and it's a lot of 0:03:40.080 --> 0:03:42.040 uncertainty between now and then. Yeah. 0:03:42.200 --> 0:03:44.800 Yeah, So I just I liked this story because it 0:03:44.880 --> 0:03:48.520 was a little bit of reality that there are going 0:03:48.560 --> 0:03:50.800 to be some lost causes when it comes to the 0:03:50.840 --> 0:03:55.280 deal landscape right now. After the election last week, you 0:03:55.400 --> 0:03:59.520 saw so many potential deal stocks just shoot up. I'm 0:03:59.560 --> 0:04:02.520 thinking about like Capital One and Discovery in particular, and 0:04:02.560 --> 0:04:06.120 I'm not commenting on those odds, but not all of 0:04:06.120 --> 0:04:08.120 those deals are going to go through. Some of them 0:04:08.160 --> 0:04:12.560 will die on the vine before things actually change, right, There's. 0:04:12.360 --> 0:04:15.360 Like so much of a like immediate psychological shift in 0:04:15.440 --> 0:04:18.240 how people see the new administration, like even before it's 0:04:18.480 --> 0:04:23.720 in place, and my general sense is that the wheels 0:04:24.120 --> 0:04:29.080 grind kind of slowly and it is hard to reverse course. Now, 0:04:29.560 --> 0:04:33.400 this is clearly an administration that is not you know, 0:04:34.040 --> 0:04:37.560 a respector of norms and procedures, and so the wheels 0:04:37.560 --> 0:04:40.960 will grind a little faster than they usually do. But right, like, 0:04:41.000 --> 0:04:43.520 once you have a court decision, it's pretty tough. The 0:04:43.560 --> 0:04:45.440 other thing that I think is weird is like everyone 0:04:45.520 --> 0:04:48.280 kind of assumes that this will be a far more 0:04:49.080 --> 0:04:53.760 merger friendly administration, and the backing of all these business 0:04:53.760 --> 0:04:57.320 people and bankers suggest that there's some reason to assume that. 0:04:57.760 --> 0:05:00.480 But like Jennie Vance has praised Lena co On, the 0:05:00.800 --> 0:05:04.279 head of the FTC, who's been very relatant about blocking 0:05:04.320 --> 0:05:08.480 big mergers, it's not obvious that a sort of heterodox 0:05:08.920 --> 0:05:12.480 populist Republican administration will actually be that much more pro merger, 0:05:12.760 --> 0:05:14.760 or that they'll be pro merger in all the ways 0:05:14.760 --> 0:05:16.919 that people want them to be. Yeah, but you know 0:05:17.040 --> 0:05:19.040 that is everyone's assumption, so we are. 0:05:19.360 --> 0:05:21.560 Yeah, it's a good point. I do wonder, and I 0:05:21.560 --> 0:05:23.520 don't want to talk about politics, but I do wonder. 0:05:23.680 --> 0:05:25.479 You know how much of us, say jd Vance, is 0:05:25.480 --> 0:05:26.000 going to happen. 0:05:26.040 --> 0:05:28.440 Oh, none, none, But but but I'm not you know, 0:05:28.520 --> 0:05:29.360 I'm not sure anyone. 0:05:29.440 --> 0:05:31.520 It's like a, yeah, there's going to be. 0:05:31.480 --> 0:05:34.119 Some random television personalities, but in charge of the FTC, 0:05:34.200 --> 0:05:36.880 and who knows what that person thinks, right, Like, who knows? Oh, 0:05:37.160 --> 0:05:40.600 Katie is pointing to herself. Kat Katie as a television personality, 0:05:40.720 --> 0:05:42.520 should be put in charge of the FTC. That's a 0:05:42.640 --> 0:05:43.360 that's a good uh. 0:05:43.560 --> 0:05:46.360 It would be an honor to serve my country. Specific 0:05:46.440 --> 0:05:50.320 to Tapestry and Capri. Though you point out that it's 0:05:50.360 --> 0:05:53.279 a quick turnaround. Two weeks is not a lot of time. 0:05:53.279 --> 0:05:55.640 But also I wonder, Yeah, one thing that could happen 0:05:55.839 --> 0:05:58.680 is that, like a deal gets dropped and it goes away, 0:05:59.040 --> 0:06:02.200 and then like six months they start negotiating again. It 0:06:02.240 --> 0:06:04.080 circumstances the change. You have an argument that I was 0:06:04.120 --> 0:06:06.599 not anti coompetitive now and like you have much friendlier 0:06:06.680 --> 0:06:08.840 de FTC and you know it all works out, But 0:06:08.880 --> 0:06:11.479 that's pretty risky for you know, a jilted merger target. 0:06:11.520 --> 0:06:14.400 At that point, it does seem like Tapestry shareholders do 0:06:14.480 --> 0:06:15.520 not want this deal to happen. 0:06:15.520 --> 0:06:18.320 There sure, I mean, like if both sides wanted this 0:06:18.360 --> 0:06:21.120 deal to happen, like you say, well, appeal and you 0:06:21.200 --> 0:06:23.400 know there's a deadline at February time, that doesn't matter. 0:06:23.680 --> 0:06:26.160 You can you can mutually get together and wave the deadline. 0:06:26.200 --> 0:06:28.360 But if you don't want to mutually get together, then 0:06:28.680 --> 0:06:29.520 it deals off, you know. 0:06:29.760 --> 0:06:33.000 But also, this isn't eighteen month saga, like this deal 0:06:33.080 --> 0:06:35.280 has been going on for a long time. Things have 0:06:35.680 --> 0:06:39.000 been pretty good at Tapestry. Their earnings have been solid. 0:06:39.040 --> 0:06:42.320 They recently raised guidance for the year. Apparently the Coach 0:06:42.400 --> 0:06:45.200 brand is popping off, and it seems like things have 0:06:46.440 --> 0:06:49.839 kind of been deteriorating at Capri during that time. So 0:06:50.520 --> 0:06:52.680 maybe there's a sigh of relief here. 0:06:52.880 --> 0:06:55.320 Oh yeah, definitely. It is often the case that when 0:06:55.360 --> 0:06:59.120 a deal is blocked and people are like, ah, it 0:06:59.200 --> 0:07:02.520 was blocked. Often what that means is that one side 0:07:02.640 --> 0:07:05.600 is kind of relieved it was blocked, right, like circumstances 0:07:05.600 --> 0:07:07.200 of changing, you know, like or want to do the deal, 0:07:07.400 --> 0:07:09.359 and you can't just back out of the deal. But 0:07:09.400 --> 0:07:12.080 if there's some regulatory impediment, you can do things like 0:07:12.520 --> 0:07:14.320 not agreed to extend the deadline. 0:07:14.400 --> 0:07:16.600 And then there you are, Yeah, we gave it the 0:07:16.640 --> 0:07:19.280 good college trial. It's not going to work out, you guys, 0:07:19.800 --> 0:07:20.520 You know, you have. 0:07:20.400 --> 0:07:24.120 An obligation to give it a words or like use 0:07:24.400 --> 0:07:26.760 you know, all reasonable best efforts. But then once you 0:07:26.800 --> 0:07:29.200 do that, you're done. Yeah, I do think that. Like 0:07:29.680 --> 0:07:31.680 there's just the more general point of like the you know, 0:07:31.720 --> 0:07:37.560 the merger ARB business, which has been difficult but lucrative 0:07:37.920 --> 0:07:39.760 in the last few years. Right, So like merger IR right, 0:07:39.840 --> 0:07:41.520 think of as like being sort of almost like market 0:07:41.520 --> 0:07:43.880 making business, where like you're doing a lot of trades. 0:07:44.040 --> 0:07:46.880 Each trade is like kind of a small spread you 0:07:46.960 --> 0:07:49.200 make the spread and expectation and every soft and you 0:07:49.400 --> 0:07:51.240 like absolutely run over on a deal like tap a 0:07:51.240 --> 0:07:53.400 stry Capri, where like you lose you know, fifty percent 0:07:53.440 --> 0:07:55.720 of your investment or whatever. In this scenario where like 0:07:55.800 --> 0:07:58.239 Lena Khan is running the FTC and the FTC sues 0:07:58.320 --> 0:08:01.080 to block a lot of deals that then they lose 0:08:01.120 --> 0:08:05.200 in court. Like that's a really fun environment for merger 0:08:05.360 --> 0:08:09.800 ARB because you can do things like buy Target stock 0:08:09.880 --> 0:08:13.080 after the FTC sues and like the stock has gone down, 0:08:13.200 --> 0:08:15.480 and then the FDC loses and the stock goes up 0:08:15.480 --> 0:08:17.360 and you make a lot of money. Right, it's anything 0:08:17.360 --> 0:08:19.240 else Like if you think of like merger ARB as 0:08:19.240 --> 0:08:22.480 a market making business, then market makers make more money 0:08:22.600 --> 0:08:24.800 in volatile periods, right, And so if you have a 0:08:24.840 --> 0:08:27.800 volatile period where some mergers don't go through, some mergers 0:08:27.840 --> 0:08:29.840 do go through. Some mergers get sued and they go down, 0:08:29.840 --> 0:08:31.840 and then like they go through and they go up. 0:08:32.320 --> 0:08:34.000 You can make a lot of money in this like 0:08:34.080 --> 0:08:38.040 sort of liquidity provision business where you buy stocks when 0:08:38.080 --> 0:08:39.880 the merger's announced and sort of sell them into the 0:08:39.880 --> 0:08:43.000 merger when the merger closes. So it's a good lucrative business, 0:08:43.320 --> 0:08:45.160 but it's also a business where you can get blown up, right, 0:08:45.200 --> 0:08:46.960 and if you just make a couple of the wrong bets, 0:08:46.960 --> 0:08:48.880 you get blown up and you're you're out of the business. 0:08:49.440 --> 0:08:53.520 Whereas the assumption is that in a TRUBI administration, you 0:08:53.559 --> 0:08:55.599 know there'll be a lot of mergers, so you'll have 0:08:55.640 --> 0:08:57.400 a lot of volume. You know, if you think of 0:08:57.400 --> 0:08:59.000 it as a market making business, you'll have a lot 0:08:59.000 --> 0:09:02.520 of deals to do and they'll all go through, so 0:09:02.559 --> 0:09:04.000 you won't really have a lot of risk and you 0:09:04.040 --> 0:09:05.800 won't get blown up. The flip side of that, it 0:09:05.840 --> 0:09:07.800 spreads will compress and you'll just make a sort of 0:09:07.880 --> 0:09:10.280 more modest profit and not make tons of money and 0:09:10.440 --> 0:09:12.040 h deal, but like you'll have an easier life. 0:09:12.559 --> 0:09:17.640 What a pleasant and sedate landscape that sounds like I 0:09:17.720 --> 0:09:19.760 kind of like the high octane. 0:09:19.600 --> 0:09:23.280 Yeah, I think that almost everything about financial markets and 0:09:23.360 --> 0:09:27.400 the world will be like less sedate under a Trump administration. 0:09:27.440 --> 0:09:29.280 But like you know, mahade your arb, it'll be like yeah, 0:09:29.320 --> 0:09:31.920 they all they all go, they all close, yeah or 0:09:31.960 --> 0:09:34.960 not or not right or there will be you know, 0:09:35.080 --> 0:09:37.839 a confounding expectations and they'll suit a block every deal. 0:09:52.240 --> 0:09:56.680 Let's get to the good stuff. What's that burritos and 0:09:56.720 --> 0:09:59.359 how little meat is in Chipotle burritos? 0:09:59.559 --> 0:10:01.760 The lost suit that we're going to talk about also 0:10:02.120 --> 0:10:05.120 points out that some of these burritos skimp on the 0:10:05.200 --> 0:10:05.880 rice and beans. 0:10:06.000 --> 0:10:06.800 Unbelievable. 0:10:06.960 --> 0:10:09.240 It's not just the expense of it's it's everything. 0:10:09.600 --> 0:10:11.600 I haven't been to a Chipotle in like fifteen. 0:10:11.320 --> 0:10:13.720 Years when I worked at deal Breaker, my job before this, 0:10:14.280 --> 0:10:16.480 we were upstairs from a Chipotle, and there was a 0:10:16.520 --> 0:10:18.640 period right at Chipotle like three times a week for 0:10:20.000 --> 0:10:24.440 months on end, and probably never since then. I don't 0:10:24.480 --> 0:10:26.560 like a burrito with like a like a regular burrito. 0:10:27.200 --> 0:10:29.040 Yeah, regular guy, I. 0:10:29.080 --> 0:10:31.640 Think I got. I don't even remember what I what 0:10:32.440 --> 0:10:33.160 meat I had of my. 0:10:33.280 --> 0:10:35.720 Probably was it a true burrito, not a burrito bowl. 0:10:35.960 --> 0:10:37.360 I don't think I've ever eaten neverat a. 0:10:37.360 --> 0:10:39.080 Ball Wow, we're different people. 0:10:40.760 --> 0:10:43.160 I don't know. I found it off putting. It's like 0:10:43.160 --> 0:10:44.720 a very wrong salad. 0:10:44.880 --> 0:10:47.600 Yeah, it's like a salad but more fun, with less 0:10:47.600 --> 0:10:50.640 carbs than a burrito, but still a lot of more 0:10:50.679 --> 0:10:53.160 carbs than a salad because there's rice. 0:10:53.520 --> 0:10:54.559 The tortilla is so thin. 0:10:54.640 --> 0:10:57.280 How many who would shock you? 0:10:58.520 --> 0:11:00.840 Anyway? I've never had a burrito bo but I've had 0:11:01.280 --> 0:11:04.199 hundreds of or at least dozens of Chipotle burritos. I'm 0:11:04.200 --> 0:11:04.640 pretty good. 0:11:04.960 --> 0:11:06.840 What were the portion sizes? 0:11:06.920 --> 0:11:09.280 Like, I don't remember, but this is more than a 0:11:09.320 --> 0:11:11.760 decade ago, and so I think they were ample. I 0:11:11.800 --> 0:11:12.280 think this was. 0:11:12.320 --> 0:11:17.240 Before chip Well, apparently things have deteriorated since then. If 0:11:17.320 --> 0:11:19.959 you spend any time on social media, this has been 0:11:20.440 --> 0:11:23.120 a long running issue. By long running issue, I mean 0:11:23.200 --> 0:11:25.080 at least a couple of months. 0:11:25.040 --> 0:11:26.600 Yeah, it's been like a thing this year. 0:11:26.800 --> 0:11:27.120 Yeah. 0:11:27.360 --> 0:11:28.920 Maybe maybe last year too, but I think it was 0:11:28.920 --> 0:11:31.079 like really sort of took off and like Spring Suwheer 0:11:31.120 --> 0:11:35.000 of twenty twenty four. Like people on social media, I'm 0:11:35.040 --> 0:11:37.120 not on the YouTube channels where people are. 0:11:36.960 --> 0:11:43.200 Like YouTube like wherever TikTok, Yeah, wherever people are going 0:11:43.480 --> 0:11:46.760 to like post videos about their disappointment with their burritos. 0:11:46.800 --> 0:11:49.760 I'm not on those channels, no, but they exist and 0:11:49.800 --> 0:11:55.800 they're hugely influential, and I guess some people have posted 0:11:55.840 --> 0:11:59.640 serious complaints about the size of Chipotle burrito balls, to 0:11:59.679 --> 0:12:04.000 the point that Wells Fargo equity research analysts went and 0:12:04.040 --> 0:12:08.400 did a study where I remember this, They ordered seventy 0:12:08.400 --> 0:12:11.800 five quote like for like burrito bowls across eight locations 0:12:11.840 --> 0:12:14.319 of Chipotle in New York City and found the smallest 0:12:14.320 --> 0:12:16.560 bawl was thirteen point eight ounces and the largest was 0:12:16.559 --> 0:12:18.080 twenty six point eight ounces. 0:12:18.320 --> 0:12:21.280 This had to be interns, I don't know, sending them 0:12:21.280 --> 0:12:24.120 out to various locations and having them. 0:12:24.040 --> 0:12:28.439 Pick up I hear you, but like I mean sounds. 0:12:28.120 --> 0:12:29.520 Like a summer project or something. 0:12:29.600 --> 0:12:32.160 Yeah, that's probably right, but didn't they fun? But also 0:12:32.280 --> 0:12:34.319 like I don't know, like like what a fun that 0:12:34.400 --> 0:12:36.280 you're an equity researchology, Like I'm going to get out 0:12:36.320 --> 0:12:39.320 of the building and order seventy five burrito balls like 0:12:39.360 --> 0:12:41.080 that's funny. I don't know. I don't know. 0:12:41.200 --> 0:12:43.520 Wells Fargo stock should fall because this is how their 0:12:43.559 --> 0:12:44.720 analysts are spending their time. 0:12:44.760 --> 0:12:47.320 But what I was supposed to spend their times. 0:12:46.960 --> 0:12:48.960 A groundbreaking conclusion. 0:12:48.960 --> 0:12:51.360 Did they find the biggest bowl is the twice as 0:12:51.360 --> 0:12:52.360 big as the smallest ball. 0:12:52.440 --> 0:12:53.120 That's pretty bad. 0:12:53.160 --> 0:12:57.600 It's pretty bad. Yeah, and it prompted endless, endless soul 0:12:57.640 --> 0:13:02.240 searching from Chipotle. Yeah, the CEO and the July Ironers 0:13:02.280 --> 0:13:04.480 call said, before I give an update on our five 0:13:04.559 --> 0:13:06.600 key strategies, I want to take a minute to address 0:13:06.640 --> 0:13:09.520 the portion concerns that have been brought up in social media. First, 0:13:09.760 --> 0:13:12.480 there was never a directive to provide less to our customers. 0:13:12.880 --> 0:13:15.440 Generous portion is a core brand equity of Chipotle. 0:13:16.120 --> 0:13:17.080 Okay, I know what that means. 0:13:17.360 --> 0:13:19.680 It always has been and always will be. With that said, 0:13:19.679 --> 0:13:22.080 getting the feedback caused us to relook at our execution 0:13:22.160 --> 0:13:24.480 across our entire system, with the intention to always serve 0:13:24.520 --> 0:13:28.720 our guests delicious, fresh custom burritos and bowls with generous portions. 0:13:29.200 --> 0:13:33.200 Was this still Brian Nicol Yeah. Yeah. By the way, 0:13:33.800 --> 0:13:37.080 if they make the Starbucks drinks smaller, I am going 0:13:37.120 --> 0:13:38.960 to riot sure. 0:13:39.000 --> 0:13:42.800 Well you'll see. Yeah, we're getting away from the point, 0:13:42.840 --> 0:13:45.240 which is that. Okay, I feel I have complained about 0:13:45.360 --> 0:13:49.320 various small consumer indignities on the internet forever, but like 0:13:49.880 --> 0:13:53.760 there's this incredible modern technology, the securities road lawsuit that 0:13:53.840 --> 0:13:56.560 allows you to turn this into a multi billion dollar lossuit. Right, 0:13:56.640 --> 0:13:59.240 You're like, oh, the portions of my burrito are too small. 0:13:59.640 --> 0:14:01.679 What can you do a you're gonna sue because you're 0:14:01.720 --> 0:14:03.480 burritos too small. You don't have a class action. We 0:14:03.520 --> 0:14:06.560 get everyone else's butos too small. It's crazy, right, But Like, 0:14:06.960 --> 0:14:11.240 what happens here is that these reports come out and 0:14:12.160 --> 0:14:16.319 the stock goes down a little bit. Chipotle actually announces earnings, 0:14:16.360 --> 0:14:19.400 like most recently, like their earnings for Q three, which 0:14:19.640 --> 0:14:21.840 i'd like just a couple of weeks ago, and their 0:14:21.880 --> 0:14:24.960 earnings have like an increase in cost of good sold 0:14:25.200 --> 0:14:28.920 because they're putting more meat in the burritos. They're like, like, 0:14:29.000 --> 0:14:31.840 we did a throw audit of our portions and we 0:14:31.880 --> 0:14:34.480 found that some stores were not putting enough in and 0:14:34.520 --> 0:14:37.000 so we're putting more in everything. That's not exactly what 0:14:37.080 --> 0:14:39.800 they said, but like they're putting more in everything. Yeah, 0:14:39.840 --> 0:14:41.520 And so the stock goes down. Why is this not 0:14:41.600 --> 0:14:43.600 go down? Well, it's earnings released. There's a number of 0:14:43.600 --> 0:14:45.080 reasons that stock could go down, and one of them, 0:14:45.120 --> 0:14:47.320 you know, might be that the future cost of good 0:14:47.360 --> 0:14:49.960 sold is higher. And another one might be that you 0:14:50.080 --> 0:14:54.760 worry that you've lost some brand value by you know, yeah, 0:14:54.840 --> 0:14:57.080 getting yelled at for skimping on portions. All we know 0:14:57.120 --> 0:14:58.680 is the stock goes down, right, and the stock goes 0:14:58.720 --> 0:15:02.600 down by like a single digit number of percentage points. 0:15:02.680 --> 0:15:05.320 That translates into billions of dollars of losses, right, And 0:15:05.400 --> 0:15:07.280 so if your securities are you just like slapped that 0:15:07.360 --> 0:15:10.720 in a lawsuit, you're like, they said the portions were big. 0:15:11.360 --> 0:15:14.480 In fact, the portions were small. They were lying. It's frawed. 0:15:14.800 --> 0:15:16.800 The stock went down when the fraud came out, so 0:15:16.800 --> 0:15:19.960 everyone who bought the stock was defrauded out of you know, 0:15:20.760 --> 0:15:24.120 billions of dollars. And then you sue and then you know, 0:15:24.360 --> 0:15:26.680 it's like kind of ridiculous, but like maybe you settle 0:15:26.680 --> 0:15:28.440 it for like, you know, pennies on the dollar and 0:15:28.480 --> 0:15:31.720 you collected you know, multimillion dollar legal fee for bringing 0:15:31.760 --> 0:15:33.720 this lawsuit. It's amazing, it. 0:15:33.680 --> 0:15:36.280 Is amazing, and I'm excited to see how this turns out. 0:15:36.480 --> 0:15:38.200 I read all the time everything is security is fraud. 0:15:38.240 --> 0:15:41.840 It's like an amazing like use of the American legal 0:15:41.840 --> 0:15:46.880 system to go after like really incredible complais You. 0:15:46.880 --> 0:15:49.160 Want to speculate on how it might shake out. Do 0:15:49.200 --> 0:15:51.160 you think that they're actually going to settle? 0:15:51.360 --> 0:15:53.440 I don't, Actually, I don't. I always like write out 0:15:53.440 --> 0:15:55.360 these people. When people file them, A lot of them 0:15:55.400 --> 0:15:58.680 do not go very far. Some of them settle. 0:15:58.920 --> 0:15:59.720 Yeah, I don't know. 0:16:00.280 --> 0:16:02.440 It takes you like an hour to write this complaint. 0:16:02.560 --> 0:16:05.080 It's so funny. And then like maybe they said it 0:16:05.120 --> 0:16:06.280 and you get a few million dollars. 0:16:06.400 --> 0:16:08.800 Well, if it does go that route, I wonder, like, 0:16:08.840 --> 0:16:13.880 does this set any precedent for what you could sue for? 0:16:14.440 --> 0:16:17.440 Like I've been writing this for years. You can see 0:16:17.480 --> 0:16:19.320 for anything if it's a public company. Anything. 0:16:19.440 --> 0:16:24.040 If a company sells marbles, for example, and it says like, oh, 0:16:24.200 --> 0:16:26.920 people are loving the green marbles, and then on their 0:16:26.920 --> 0:16:29.480 earnings call they have to say, actually, people didn't love 0:16:29.520 --> 0:16:32.200 the green marbles that much. You can sue for that. 0:16:32.280 --> 0:16:34.680 Of course, wow, for anything. 0:16:35.320 --> 0:16:38.080 Not all these cases win, but like enough make money 0:16:38.080 --> 0:16:40.160 that Like it's a lucrative business for a plaintiffs, for 0:16:40.320 --> 0:16:41.240 security layers. 0:16:41.400 --> 0:16:44.400 Well, I don't know. Maybe if I don't, you know, 0:16:44.680 --> 0:16:47.360 become the next FTC head. This is something I could do. 0:16:47.720 --> 0:16:51.680 Brian nicol knew that people were upset about the Chipotle 0:16:52.440 --> 0:16:57.240 portion sizes. There was this amazing article by Fortune in 0:16:57.440 --> 0:17:01.480 late May. The headline is, Chipotle, our portion sizes aren't 0:17:01.480 --> 0:17:03.800 getting smaller, but you can get more food with a 0:17:03.880 --> 0:17:06.760 secret look. Do you remember this? Did this enter your 0:17:06.800 --> 0:17:10.639 sphere of knowledge? Okay, I'm so excited to tell you 0:17:10.640 --> 0:17:13.720 about this. In an interview with Fortune, Nicol said portions 0:17:13.760 --> 0:17:17.080 have not gotten smaller and offered disappointed customers seeking an 0:17:17.080 --> 0:17:20.240 even bigger burrito or bowl a pro tip. Give the 0:17:20.280 --> 0:17:23.760 workers a secret look. This is a direct quote. One 0:17:23.840 --> 0:17:26.320 of the things I think is great about Chipotle is 0:17:26.400 --> 0:17:28.480 if you come into the restaurant and you want a 0:17:28.480 --> 0:17:30.680 little more rice, or you want a little more pico 0:17:30.720 --> 0:17:34.200 de gallo, Nicol told Fortune, who then widened his eyes 0:17:34.240 --> 0:17:40.520 slightly and did I say that wrong? What did I say? 0:17:41.680 --> 0:17:50.679 Did I really sorry? I said that? Okay? If you 0:17:50.960 --> 0:17:56.280 want more cheese on your case adilla, or you want 0:17:56.320 --> 0:18:01.439 more gilapanos, this is a direct quote. One of the 0:18:01.480 --> 0:18:02.680 things I think is great. 0:18:02.720 --> 0:18:04.320 She's gonna play the tape of himself. 0:18:05.400 --> 0:18:07.240 One of the things I think is great about Chipotle 0:18:07.400 --> 0:18:10.680 is if you come into the restaurant. If you I'm 0:18:10.680 --> 0:18:13.159 gonna start saying that though we used to call it 0:18:13.200 --> 0:18:16.440 that in my family. One of the things I think 0:18:16.560 --> 0:18:18.840 is great about Chipotle is if you come into the 0:18:18.840 --> 0:18:21.560 restaurant and you want a little more rice, or you 0:18:21.600 --> 0:18:33.840 want a little more Pico the gayo, I say, what 0:18:33.960 --> 0:18:35.520 is it? Wait? How do I say it? Now? I'm 0:18:35.560 --> 0:18:39.280 in my own head Pico to Gio, Nickel told Fortune, 0:18:39.320 --> 0:18:41.840 who then widened his eyes slightly and nodded his head. 0:18:42.160 --> 0:18:45.119 Usually our guys and women give them a little more scoop, 0:18:45.960 --> 0:18:49.119 so he was aware of the complaints. And I just 0:18:50.320 --> 0:18:53.720 love the suggestion of giving like a secret nod and 0:18:53.800 --> 0:18:56.400 like maybe a wink to one of the Chipotle workers. 0:18:56.760 --> 0:18:58.600 I just think it's like, you know, it is not 0:18:58.680 --> 0:19:01.159 a factory produced product should have exactly the same way 0:19:01.240 --> 0:19:03.359 each time. It's like you're talking to a person who's 0:19:03.400 --> 0:19:05.880 like using a spoon, right, Like you can you can 0:19:05.960 --> 0:19:07.960 do that, You can give it. You could even say, 0:19:08.600 --> 0:19:10.280 could get bet a little more on that. I don't know, 0:19:10.320 --> 0:19:11.640 I haven't done this in ten years, but it does 0:19:11.680 --> 0:19:13.679 seem like a thing you could do. And you know, 0:19:13.800 --> 0:19:16.040 then like Wells Fargo is going out, and like I 0:19:16.080 --> 0:19:20.520 wonder if Wells Farger like controlled for like the books, right, Yeah, 0:19:20.560 --> 0:19:23.040 like there's maybe the big the twenty six ounce ball 0:19:23.200 --> 0:19:25.119 was like they like I looked at the worker a 0:19:25.119 --> 0:19:26.800 little bit too intensely, and the workers like, all right, 0:19:26.880 --> 0:19:27.239 here's it more. 0:19:27.400 --> 0:19:29.680 Yeah, we do need to know the methodology, like did they. 0:19:29.560 --> 0:19:31.680 Make right Like one intern like was making more eye 0:19:31.680 --> 0:19:33.280