Speaker 1: Strap on your parachute. It's time for What Goes Up
Speaker 1: with Sarah Ponzick and Mike Reagan. Hello and welcome to
Speaker 1: What goes Up, a Bloomberg weekly market podcast. I'm Sara Pantek,
Speaker 1: a reporter on the Cross Asset team, and I'm Mike Reagan,
Speaker 1: a senior editor on the Markets team at Bloomberg. This
Speaker 1: week on the show, COVID nineteen has changed how we
Speaker 1: all live and how many invest and that evolution is
Speaker 1: still taking place. So how has it all changed for
Speaker 1: the type of investor that some would call an opportunistic
Speaker 1: bear a short seller. We speak with one of the
Speaker 1: best in the industry, and of course we will close
Speaker 1: out the episode with our tradition the craziest thing I
Speaker 1: saw in markets this week? And please, if you saw
Speaker 1: something crazy, give us a call and let us know
Speaker 1: about it on the Bloomberg Podcast hotline at six ft
Speaker 1: six three to four three f nine, Oh, and leave
Speaker 1: us a voicemail. Maybe we'll play it on the show. Also,
Speaker 1: you can tweet in our general direction at podcasts and
Speaker 1: let us know the craziest thing you saw on markets
Speaker 1: and we'll we'll perhaps bring it up in the show.
Speaker 1: I got a couple of crazy things, Sarah, get ready,
Speaker 1: I'm coming in hot. I'm gonna see if you can
Speaker 1: top yours from last week because I'm still impressed um
Speaker 1: by it, Mike. But also I do want to say
Speaker 1: we got a reply from one of our listeners on
Speaker 1: Twitter who reached out in response to one of our
Speaker 1: crazy things from last week, so I also have that
Speaker 1: tweet handy for us to read out. Absolutely good. We
Speaker 1: like the interaction, so keep the tweets coming, keep the
Speaker 1: voicemails coming. We're happy to hear, uh, you're crazy. Thanks.
Speaker 1: In just a general opinion of the show, who you
Speaker 1: think would be a good guest. We're open to all
Speaker 1: your suggestions here and what goes up Sarah. Before we
Speaker 1: introduced our guests, I gotta give a shout out and
Speaker 1: thank you to my friend Dave. I'm actually in my
Speaker 1: friends basement right now because there's work being done at
Speaker 1: my house and these guys are making a lot of
Speaker 1: noise and making even more noises my my darn dog
Speaker 1: will not shut up. So thanks to Dave for letting
Speaker 1: me squat in his basement. Here well as Dave a
Speaker 1: listener of the podcast, I'll probably listen to this one
Speaker 1: if I tell him, Okay, gave a shout out and
Speaker 1: his kids got one of those cool video game chairs.
Speaker 1: You know, I feel like Captain Kirk here sits in
Speaker 1: the chair, if only you had the big headphones onto.
Speaker 1: I know, I know, I need I need more, I
Speaker 1: need more gear. But as you said, uh, Sarah turning
Speaker 1: the show this week, actually second time on the show. Uh.
Speaker 1: He's the founder and chief investment officer of the hedgephone
Speaker 1: spruce Point Capital Management. Uh. He's very successful short seller
Speaker 1: and researcher into companies and short ideas. His name is
Speaker 1: Ben Axer. Also, Sarah, I'm claiming this guy is a
Speaker 1: Jersey guy too. I know, I don't think he lives
Speaker 1: there anymore, but he is a Jersey guy at heart
Speaker 1: to the show. Let's be clear, that's South Jersey, not
Speaker 1: North Jersey. Oh boy, yeah yeah, I'll say being from Florida,
Speaker 1: making that South versus North distinction is pretty pretty important too.
Speaker 1: That's important Ben, as uh, Sarah alludes to in the introduction.
Speaker 1: You know, you've kind of made your your name and
Speaker 1: your fame as a short seller. But your fund is
Speaker 1: a long short fund, and I'm just curious, I know,
Speaker 1: especially in the ball utility earlier in this year, was
Speaker 1: it almost time to take your your short seller hat
Speaker 1: off and start looking at long So I mean, any
Speaker 1: opportunities on the long end for you this year? Yeah,
Speaker 1: I mean certainly, um in March when there was a
Speaker 1: lot of forced the leveraging and forced selling, that was
Speaker 1: you know, a good time to rebalance the book a
Speaker 1: little bit, you know, take some opportunistic gains on the
Speaker 1: short side, um, and look to rebound, look to find
Speaker 1: you know, opportunistic longs. More of our longs are you
Speaker 1: know index hedges. You know, with what we're trying to do,
Speaker 1: We're trying to find fundamentally flawed companies with poor governance,
Speaker 1: bad accounting, short those and be you know long and
Speaker 1: underlying index like and industry index and then create alpha
Speaker 1: right by benefiting from the decline and the the overvalued
Speaker 1: or poorly organized security and uh you know be headed
Speaker 1: with some some underlying index there. So yeah, it was
Speaker 1: a great time to rebalance and uh, reorganize and rethink
Speaker 1: about the strategy um in the post COVID world. So,
Speaker 1: like you said, you like to really dig into statements,
Speaker 1: balance sheets and and find issues with accounting. But I
Speaker 1: am just curious. There's this one index that I track
Speaker 1: often just kind of as a sentiment indicator of what's
Speaker 1: going on in the market, and that's a Golden SAS
Speaker 1: basket of the most shortage stocks, and it hit a
Speaker 1: record high. I tweeted about this, and my little claim
Speaker 1: to fame, I guess is that it went viral. Jim
Speaker 1: Chaino's brought it up in a conversation and mentioned that
Speaker 1: of Bloomer Reporter had written R I P shorts And
Speaker 1: I do want to get your sense like, yes, yes,
Speaker 1: you focus on individual companies, but if you look at
Speaker 1: this market from a whole, how difficult has it been
Speaker 1: to be someone who really does make a business or
Speaker 1: make a profit from being bearished on companies? No, it's been.
Speaker 1: It's an incredibly difficult and it's getting more difficult. I
Speaker 1: think the biggest impediment to successful short selling is you know,
Speaker 1: monetary policy and and what the Feds you know, looking
Speaker 1: to do, which is, you know, bring rates to ultra low,
Speaker 1: ultra low levels that make you know, holding cash, you know, unattractive.
Speaker 1: I mean, I'm I'm constantly looking at you know, interest
Speaker 1: rates and what what banks are offering, how yield savings banks,
Speaker 1: which at the beginning of the year we're offering to
Speaker 1: two and a quarter two and a half percent and
Speaker 1: now offering sixty basis points. So you know, you look
Speaker 1: at inflation and then you you take the after tax
Speaker 1: gain on holding money and how yield savings account and
Speaker 1: you're losing money, right, So, UM, the money, relatively speaking,
Speaker 1: is going into the market. Some people view the market
Speaker 1: is attractive UM, and that's pushing up valuations, which makes
Speaker 1: it very difficult to short individual securities, particularly individual securities
Speaker 1: that are heavily you know, index owned UM. As you said,
Speaker 1: now there's an index that even tracks most shorted UM stocks.
Speaker 1: I mean there's an index for almost everything, and then
Speaker 1: you have a lot of money following index behavior. So
Speaker 1: what we're trying to do is find stocks that are
Speaker 1: not heavily indect owned, that are heavily retail traded or
Speaker 1: hedge fund owned. That way, we know there's an act
Speaker 1: an active holder that we can communicate with and try
Speaker 1: to convince them of our alternative viewpoints on the stock.
Speaker 1: So so yeah, it's gotten more difficult. It's it's very
Speaker 1: m rate dependent, index dependent, but there are still ways
Speaker 1: to be successful by you know, navigating what works and
Speaker 1: what doesn't. Well. Sorry, I like that humble brag you
Speaker 1: got in there about your tweet that went viral. That
Speaker 1: was that was well done that. I had a viral
Speaker 1: tweet recently too. It was I was drinking a beer
Speaker 1: at a bumble bee landed in my beer and drek
Speaker 1: itself to death and I took a video of it.
Speaker 1: That tweet went viral too, but maybe not as cool
Speaker 1: as your. I I saw that video, that's the one
Speaker 1: that went viral, like that was sort of baby fire.
Speaker 1: I kind of felt bad for the bee people. A
Speaker 1: lot of people were mad at me for not saving
Speaker 1: that be, but I'm I'm a little chicken. It was
Speaker 1: a good been, a good Jersey beer cane. I couldn't.
Speaker 1: I could not let that be get away with drinking
Speaker 1: too much of it. But Charah's your point about the
Speaker 1: most shorted uh you know uh index Goldman index. But
Speaker 1: I think if I know your process a little bit
Speaker 1: the way I do, I think you you probably tend
Speaker 1: to stay away from the type of sort of popular,
Speaker 1: crowded shorts that end up on a list like that.
Speaker 1: Is that sort of an intentional thing? Um? You know,
Speaker 1: you try to sort of go where other shorts you know,
Speaker 1: aren't really crowded into and making it sort of the
Speaker 1: position susceptible to a squeeze. Yeah, now that's a great point, Mike.
Speaker 1: Um I would say some of my least successful shorts
Speaker 1: have been ones that you know, the short interest has
Speaker 1: been over ten or fift it indicates some level of
Speaker 1: crowded nous and or you know, there's already a well
Speaker 1: known short thesis in the marketplace. Um So, our better
Speaker 1: success has been with companies short interests under five percent,
Speaker 1: ideas not heavily socialized. You know where we scour the public,
Speaker 1: you know, blogosphere and don't see any evidence that anyone's
Speaker 1: talked about a particular stock. Um you know, we've written
Speaker 1: two reports recently, one on son Nova, another one on
Speaker 1: GFL environmental relatively undiscussed companies still multibillion dollar market caps
Speaker 1: where we can be a leading voice, you know, companies
Speaker 1: of low short interests, where you know the risk of
Speaker 1: a squeeze is low. So, Ben, something that I thought
Speaker 1: of a lot about lately, and I feel like we
Speaker 1: hear about constantly is how the coronavirus is changing trends
Speaker 1: and what that may mean and Oftentimes people point to
Speaker 1: big mega cap tech companies or the likes of Zoom,
Speaker 1: which we are using right now, UM, that really enable
Speaker 1: people to work from home, that enable a digitized environment.
Speaker 1: And I'm curious from your perspective the way you think
Speaker 1: if there are any trends that you see really emerging
Speaker 1: from what's happened in and lasting and how you can
Speaker 1: then funnel that into possibly your process or just a
Speaker 1: broad investing process in general. Yeah. Absolutely, We're definitely looking
Speaker 1: at how covid has reshaped the universe and the world
Speaker 1: we know and certainly you know, one of our key
Speaker 1: early conclusions was that the you know, internet and e
Speaker 1: commerce was gonna was going to really grow its share
Speaker 1: of the consumers um purchasing behavior. You know, we identified
Speaker 1: a company earlier this year that we we've showed him
Speaker 1: been public about called Prestige Brands. UM. They're a roll
Speaker 1: up of OTC branded products. UM. These could be throat
Speaker 1: lozengers or other things you might find in a write
Speaker 1: aid or a CBS in the drug store. They have
Speaker 1: a relatively undeveloped e commerce strategy, you know, under ten
Speaker 1: percent of their sales re reconnerce and they celebrant, you know,
Speaker 1: a branded product when you know, for example, if you
Speaker 1: go into CBS or Walmart, you might find a store
Speaker 1: brand at a cheaper price. So you know, in the
Speaker 1: COVID world, you have high unemployment, you have consumers looking
Speaker 1: to save money UM, and you have consumers looking to
Speaker 1: shop online. So a company like Prestige Brands, we believe
Speaker 1: it's ill suited for this with a higher price product
Speaker 1: and a very undeveloped e commerce strategy. So you know,
Speaker 1: absolutely we're thinking about this. I mean, these are going
Speaker 1: to be longer term impact trends. We had always been
Speaker 1: vocal in our belief that you know, a vaccine and
Speaker 1: a resolution to this pandemic was going to take longer
Speaker 1: than anticipated. They were continuing to think about ways and
Speaker 1: UM which companies are going to benefit and and being
Speaker 1: a disadvantage in this new paradigm. Yeah, but I know
Speaker 1: some of your early successes were with companies from Trying
Speaker 1: that had had listed in the US. I feel like
Speaker 1: that's come full circle now where there's so much scrutiny
Speaker 1: on those companies that the Trump administration obviously putting a
Speaker 1: lot of threats and pressure on UM potentially delisting them
Speaker 1: and you know that sort of thing. Has that opportunity
Speaker 1: set sort of been exhausted or maybe not exhausted, but
Speaker 1: you know, it seemed to be a very sort of
Speaker 1: not to say shooting fish in a barrel, but but
Speaker 1: almost a very lucrative, you know, fertile place to look
Speaker 1: for shorts, say five to ten years ago. Is that
Speaker 1: Are there still opportunities there? Or has the rest of
Speaker 1: the world caught up with the people who were looking
Speaker 1: skeptically at China and and even the regulators in the
Speaker 1: US catching up this undergreen. Yeah, that's a great question.
Speaker 1: I would say, Um, it's definitely gotten harder UM in
Speaker 1: the quest to find, you know, find, exploit, uh and
Speaker 1: hold accountable Chinese investment scams UM. The first generation that
Speaker 1: I was involved with back in two thousand, eight, nine
Speaker 1: and ten, exposing those companies, it was like shooting whether
Speaker 1: they say fish in a barrel or ducks in a barrel. UM.
Speaker 1: Some of the frauds were very obvious. UM. But it's
Speaker 1: like a cat and mouse scheme, right the uh you know,
Speaker 1: the mouse got smarter and figured out, you know, how
Speaker 1: to avoid the cat. UM. So successive generations of Chinese
Speaker 1: frauds have been harder to identify. And also I would
Speaker 1: point out, you know, getting information out of China's been
Speaker 1: very hard. I mean, the Chinese are very attuned to
Speaker 1: the fact that short sellers are looking at their stocks
Speaker 1: here in the New York Stock Exchange in the NASDAK
Speaker 1: and so accessing information UM that was more easily available
Speaker 1: ten years ago is getting harder. And frankly, that's you know,
Speaker 1: one of the reasons, you know why we've been spending
Speaker 1: a little bit less time on our shorts in China.
Speaker 1: We've actually found more success up in Canada. We've spent
Speaker 1: a lot of time looking at the Canadian market, which
Speaker 1: is very receptive to short selling, has been receptive to
Speaker 1: us UM and I we think is you know, underserved
Speaker 1: from a short selling perspective, But there are still opportunities globally.
Speaker 1: China has definitely gotten harder, but other markets, other companies
Speaker 1: from around the world to come here certainly are good
Speaker 1: opportunities for us to know, to really dig in. So
Speaker 1: sticking with factors then that make your job harder. You
Speaker 1: mentioned the FED earlier on in the show Monetary Policy.
Speaker 1: Looking even further than that, because I remember the last
Speaker 1: time you came on the show, we discussed how fed
Speaker 1: policy and decreasing regulation I'll throw right now although the
Speaker 1: economy needed it, but fiscal policy and a growing deficit,
Speaker 1: all of these factors right now which are really helping
Speaker 1: stocks rise in general. At the same time, though, do
Speaker 1: they make your job at all easier? The fact that
Speaker 1: there are companies that can prosper, that can grow in
Speaker 1: this type of environment that maybe otherwise wouldn't be able
Speaker 1: to do so, or have other underlying issue is at
Speaker 1: stake that can be pinpointed. No, that's a great question. Actually, Um,
Speaker 1: there are puts in takes with everything right, I would
Speaker 1: say the opportunities currently are that we're seeing very immature,
Speaker 1: very poorly diligence companies come public probably prematurely. Um. You've
Speaker 1: probably heard a lot about the bulliance and frost in
Speaker 1: the spack market. Special purpose acquisition corporations raising money UM,
Speaker 1: some with almost very limited defined purposes going out buying
Speaker 1: companies and helping them accelerate their I p O process
Speaker 1: quicker than the traditional route. That certainly has caught our
Speaker 1: attention because those companies has said, we believe are a
Speaker 1: little bit less diligence UM and and a little premature. Um,
Speaker 1: so those are those are good opportunities to SPACs and
Speaker 1: even the traditional I p O s that are that
Speaker 1: are coming public now you know, we're seeing them come
Speaker 1: public with less regulatory scrutiny to I mean, the SEC
Speaker 1: is lower the bar a little bit in terms of
Speaker 1: you know, a company not necessarily needing an audit or
Speaker 1: certain at testations. Uh, if they're below a certain threshold level.
Speaker 1: These are opportunities for us, no doubt. Um, well, you know,
Speaker 1: and we certainly welcomed them each thing. You say that
Speaker 1: because I think when the whole we work to baccle
Speaker 1: went down, you know, and they you know, couldn't get
Speaker 1: that I p O to the finish line. Um. I
Speaker 1: think a lot of people interpreted that as, uh, you know,
Speaker 1: it's it's tough to get sort of a questionable company
Speaker 1: to public markets. But you're you're not finding that to
Speaker 1: be the case. It sounds like no. I mean, one
Speaker 1: thing that we like to look at is, uh, you know,
Speaker 1: companies are very keen on promoting their EBITDA or their
Speaker 1: adjusted EBITDA with we work. I remember the whole pushback was,
Speaker 1: you know, we work defined a community EBITDA, which you
Speaker 1: know it was highly adjusted. I mean, look, we wrote
Speaker 1: a report on company called GFL recently and they had
Speaker 1: or run rate EVA DA and it came with a
Speaker 1: paragraph this long of disclaimers about what how they were
Speaker 1: defining it. And these are big red flags. I mean,
Speaker 1: invest just have to get really comfortable with language and
Speaker 1: EVA DA that you could drive a truck through um
Speaker 1: and all the assumptions that management can put into it.
Speaker 1: But this is a classic sign of a you know,
Speaker 1: of a bolt market when companies are able to sell highly,
Speaker 1: highly adjusted, highly aggressive interpretations of EVA DA. So you said,
Speaker 1: these are classic signs of a bowl market. And every
Speaker 1: time I hear that, it's so amazing to me because
Speaker 1: to some of these might seem like late cycle signals,
Speaker 1: but we just experienced a recession and the fastest fall
Speaker 1: into a bear market on record. I mean, when you
Speaker 1: see what's going on with SPACs, when you see other
Speaker 1: factors as you just mentioned, of the sort, what does
Speaker 1: that tell you about where we stand in the market cycle,
Speaker 1: Because it just seems like everything is so twisted lately.
Speaker 1: I think it speaks and and recent evidence points to
Speaker 1: the fact that the cycles are getting shorter and they're
Speaker 1: getting more severe. I remember not long ago in December
Speaker 1: of eighteen, when you know, Donald Trump was ratcheting up
Speaker 1: his China trade war rhetoric, and the market corrected pretty
Speaker 1: swiftly in in December, and then with COVID and slow down,
Speaker 1: the market correct even bigger. I can't tell you what
Speaker 1: the next shock shock is going to be, but it
Speaker 1: wouldn't surprise me if we haven't an even bigger draw down,
Speaker 1: you know, next time. Each each of these cycles, you're
Speaker 1: seeing liquidity getting Look, cycles are good and necessary, particularly
Speaker 1: in my industry, where you know, you have headge funds
Speaker 1: selling strategies and their ability to produce alpha and manage risk.
Speaker 1: And then what happens is, you know, when the market
Speaker 1: corrects really swiftly, you find out who who's doing what
Speaker 1: they're saying, and you know who's really managing risk and
Speaker 1: who's not, and the ones that aren't are getting you know,
Speaker 1: wiped out of the system. And you know, the general
Speaker 1: liquidity in the market we found has been going down.
Speaker 1: So I would expect, you know, more ciglicality. I would
Speaker 1: expect the magnitude of the draw downs and the intensity
Speaker 1: to increase each time. And yeah, and and and I
Speaker 1: think possibly diminishing returns to what the FED can do.
Speaker 1: I mean they've already pulled out unprecedented you know, measures
Speaker 1: and buying ETFs, and I don't know how many more
Speaker 1: arrows they have left in the quiver to solve increasingly growing,
Speaker 1: growing problems. And start Just one note to listeners. You know,
Speaker 1: Ben mentioned a few of these stocks. He's he's short
Speaker 1: just out of interest of fairness to them. I'm gonna
Speaker 1: try to dig up all the comments those companies have
Speaker 1: made in response to Ben. No offense been some some
Speaker 1: of them not very friendly towards towards you, as you're
Speaker 1: gonna expect. But but he's rattling, rattling them off left
Speaker 1: and right. So I'll try to find them and we'll
Speaker 1: we include those comments at the end of the episode.
Speaker 1: But I encourage anyone who's interested in this, you can
Speaker 1: read pretty much everything bends are are written about a
Speaker 1: company on his website at spruce Point was it spruce
Speaker 1: Point Capital dot com? Beent spruce Point caps dot com, Ye,
Speaker 1: spruce Point Cap And there's some fact that your whole
Speaker 1: method I find fascinating. I mean that's really deep dive
Speaker 1: and heavy duty research. So we will include the company's comments,
Speaker 1: um and anyone. You know, obviously, as an investor, you
Speaker 1: have to do your own due diligence and and it's
Speaker 1: interested in what Ben has to say, read his reports, uh,
Speaker 1: and and make up your own mind. Uh, you know,
Speaker 1: but we will include any comments we've gotten from the
Speaker 1: companies at the end of the episode comment comment. There's
Speaker 1: several no comments. Yeah, there's no I was hoping you'd
Speaker 1: only talk about the ones who had no comments. That
Speaker 1: makes a lot easier, but there's there's and you know,
Speaker 1: and anyone, anyone who's paid attention to this stuff knows
Speaker 1: that the judge and jury and this obviously is the market.
Speaker 1: So we'll see how these trades work out. We always
Speaker 1: like to point out to like in some cases where
Speaker 1: you know, we we have a short recommendation, the stock
Speaker 1: goes up, well, the whole market's gone. You have to measure,
Speaker 1: like how has it gone up relative to the industry
Speaker 1: in the market. What we find is a lot of
Speaker 1: the times that the names that we've written on they
Speaker 1: tend to underperform um and that's really where the you know,
Speaker 1: alpha has generated. So you do obviously a lot of
Speaker 1: digging into balance sheets and a lot of accounting work,
Speaker 1: and I want to get your takes. Something I've been
Speaker 1: thinking a lot about because I read a report that
Speaker 1: talked about how now about of the SMP five hundreds
Speaker 1: value is from intangible assets? How do you possibly view
Speaker 1: intangibles when that's not necessarily something that's going to show
Speaker 1: up in writing on a balance sheet? Or is it
Speaker 1: something that you guys think about when you are thinking
Speaker 1: about a new short position. No. Absolutely, And the GFL
Speaker 1: environmental I keep referencing is is one that we wrote
Speaker 1: about as a perfect example. I mean, they're a roll
Speaker 1: up of over a hundred and forty plus companies in
Speaker 1: the waste management industry. And you know, every time you
Speaker 1: buy a company, you buy the assets of the business,
Speaker 1: you buy the people, and then sort of everything above
Speaker 1: that that you can't ascribe value to is typically goodwill
Speaker 1: and intangibles. It's sort of a plug. Think of it
Speaker 1: as an accounting plug, accounting magic. You know, it's a
Speaker 1: measure to a degree of how much a company is overpaying,
Speaker 1: you know, for an asset. And you know, in the
Speaker 1: case of GFL, they have six and a half billion
Speaker 1: dollars of goodwill from acquiring so many businesses to the
Speaker 1: point where you know, good will is almost of their
Speaker 1: market cap, which is an extreme measure in that industry.
Speaker 1: But but yeah, I mean goodwill is highly susceptible to
Speaker 1: impairment because you know, what we do at Spruce Point
Speaker 1: is look to see, Okay, you know, any company can
Speaker 1: buy another company, but how how do they perform post
Speaker 1: acquisition and did they pay a fair price? And a
Speaker 1: lot of times we find serial acquires like GFL that
Speaker 1: are buying so many businesses they bite off a little
Speaker 1: bit more than they can chew and and end up
Speaker 1: having to impair that goodwill down the road once it
Speaker 1: becomes clear that the businesses haven't performed up to expectations
Speaker 1: and or they've overpaid for that. So, yeah, goodwills and
Speaker 1: intangible is definitely, certain certainly something we look heavily at.
Speaker 1: We look to see what percentage of the balance sheets
Speaker 1: assets um they are and also you know how big
Speaker 1: is that goodwill and intangibles relative to other companies in
Speaker 1: the industry to assess, you know, how aggressive or conservatives
Speaker 1: management been in their accounting for for deals. But I
Speaker 1: wanted to go back to something you pointed out earlier.
Speaker 1: You said you're finding a lot of opportunities in Canada.
Speaker 1: I wonder if that's if there's something systemic at play there.
Speaker 1: You know, are the Canadian regulators sleep on the job
Speaker 1: or is it Canadian investors are too polite to be
Speaker 1: short dollars? Maybe I picture them being very polite. Is
Speaker 1: is there any or is it just one of those
Speaker 1: pockets of the market that's just been over overlooked by
Speaker 1: guys like you for some reason. I think it's been
Speaker 1: it's been overlooked, But I think structurally there's a little
Speaker 1: bit of a difference there. Um. I think it's more
Speaker 1: of a retail driven investor market. They do have you know,
Speaker 1: institutions and pension funds, but it's not as deep, um
Speaker 1: and developed as as it is here. Um. So you
Speaker 1: find a lot of a lot of you know, retail participation.
Speaker 1: You also have to understand the Canadian economy is slightly
Speaker 1: different than ours, right um. Particularly they have heavy natural resources,
Speaker 1: a lot of gold and silver mining and resource mining.
Speaker 1: So those are certainly industries that are prone to uh
Speaker 1: promotions so to speak. You know, where promoters promote that
Speaker 1: they have the next world's greatest gold mine, for example, um,
Speaker 1: somewhere up in the Northern Yukon UM. But no, I
Speaker 1: think it's a little bit more retail driven, a little
Speaker 1: bit less develop from an institutional point of view, and
Speaker 1: also fewer, I would say, there's fewer research coverage providers
Speaker 1: UM in Canada, and particularly alternative research research providers. You
Speaker 1: won't you won't. You don't find any independent firms independent
Speaker 1: of the major banks you know, up in Canada, So
Speaker 1: that that's another reason there's opportunity there. Yeah, but I
Speaker 1: know a lot of times hedge fund managers don't want
Speaker 1: to say what their returns are year to date. Uh.
Speaker 1: But if that's the case with you, can you tell
Speaker 1: us good year, bad year? What kind of year you having?
Speaker 1: I can tell you you know, we're still in business.
Speaker 1: We haven't laid anybody off. We haven't. We haven't laid
Speaker 1: any boy anybody off. And you know we're selectively looking
Speaker 1: to hire two. So I'm not allowed to talk about
Speaker 1: rich earns, you know, publicly. But you know, I still
Speaker 1: have my hair left, the most important, that's the most
Speaker 1: important I have. I haven't. I haven't lost you know,
Speaker 1: too much hair this year, and uh, you know, everything
Speaker 1: everything is good on our And I can just say
Speaker 1: that well, that's great to hear, and you know, you
Speaker 1: make a good point. I've actually been experiencing more hair
Speaker 1: loss this year than usual, and maybe it's just because
Speaker 1: yeah bad, I find hair everywhere really horriful. Ok, well,
Speaker 1: I get it. In my house. You know, three daughters
Speaker 1: and a wife. It's like, uh, well, no, you're not.
Speaker 1: My daughter shed a lot though, I don't. I don't
Speaker 1: get it. I didn't realize you you shed as much hair.
Speaker 1: I've done pretty good. I'm proud of I've got a
Speaker 1: pretty good rug on top. Still, just throw that out
Speaker 1: there for the listeners who don't know. I think we're
Speaker 1: getting to the crazy part. Is it's getting a little crazy, sir.
Speaker 1: Oh yeah, the crazy part isn't is an our hair discussion.
Speaker 1: The crazy part, Charlie Pellet will have to tell us
Speaker 1: stand clear of the craziest things we saw in markets
Speaker 1: this week. All right, Sarah, I'm double dipping. I've got to.
Speaker 1: But let's start with you. Let's hear what you got alright,
Speaker 1: So this one's for you because I know you love
Speaker 1: alternative investments and yeah, so it's pretty alternative, but it's
Speaker 1: not as alternative as Michael Jackson Ivy bag I will
Speaker 1: say that Ben, this was Mike's most recent crazy thing.
Speaker 1: He really went off the grid with that one. Um.
Speaker 1: But this was a headline that came across the Buck
Speaker 1: terminal this past week. And it's a JP Morgan sees
Speaker 1: frequent flyer points as alternative for investors, and the lead
Speaker 1: re JP Morgan wants to help turn airline and hotel
Speaker 1: loyalty points into an asset it can to stock or
Speaker 1: corn futures. Um. So basically it's this idea that JP
Speaker 1: Morgan wants to go ahead. They're working with Affinity Capital
Speaker 1: Exchange to let companies turn ward programs into a standardized
Speaker 1: exchangeable currency that can be traded by institutional investors. UM.
Speaker 1: So pretty pretty interesting, uh, And I had to raise
Speaker 1: it in the alternative space look and can More importantly,
Speaker 1: can JP Morgan spoof it? I don't know if you
Speaker 1: saw they just they just they just set out a
Speaker 1: billion dollars. Can they spoof a market that they've created? Well, well,
Speaker 1: the exchange hasn't been created yet, so to be seen back,
Speaker 1: I gotta say I've heard crazier ideas. I don't know.
Speaker 1: I it's definitely crazy, Sarah, I give you props for
Speaker 1: that right. Well, that's the thing. It's it's an alternative investment,
Speaker 1: but it doesn't seem that alternative in this day and age.
Speaker 1: I mean you also think about a lot of these
Speaker 1: airlines putting loyalty points down as collateral. Uh in, I
Speaker 1: mean it seems like it's almost a logical progression. Maybe
Speaker 1: is that stuff transferable? I guess they would have to
Speaker 1: agree to get the companies to to allow to be transferred.
Speaker 1: You know, Charlie Pellett is the expert on airline points
Speaker 1: and credit points. That guy's always got like five credit
Speaker 1: cards opening and shutting, and he's got a pocket full
Speaker 1: of CBS poopons. The guy knows. The guy knows that
Speaker 1: space pretty well. Everything. Ben, how about you? Have you
Speaker 1: seen anything crazy this week? Oh? Boy, every day is
Speaker 1: a crazy day. Um yeah, I mean you know what's crazy?
Speaker 1: Speaking of JP Morrigan, you know, we released a new
Speaker 1: report on Sonova Energy. They're basically a solar financing company.
Speaker 1: Right now, alternative energy stocks are very hot on fire
Speaker 1: so to speak. Um, I guess possibly discounting, you know,
Speaker 1: democratic win and and maybe some more support of these
Speaker 1: money losing businesses. But you know it with Sova, there Um,
Speaker 1: you know, we think they're overvalued because they're not really
Speaker 1: a solar company, but they just financed the solar installation.
Speaker 1: And GP Morrigan of all of all banks that we
Speaker 1: were just talking about, you know, upgraded their set dur
Speaker 1: and upped all the price targets, including for Senova, and uh,
Speaker 1: you know, JP Morgan um should probably receive a gift
Speaker 1: from the chairman of the audit committee of Senova because
Speaker 1: you know, when the when the price of Senova rose yesterday,
Speaker 1: he unloaded a couple hundred thousand shares. So we always
Speaker 1: look to see what insiders are doing. And you know,
Speaker 1: when insiders are are selling on an on a nice
Speaker 1: upgrade front from a bank, um, you know, that's something
Speaker 1: that always catches our eye. That's pretty interesting. I like
Speaker 1: how you bring it back home. There been nice well done,
Speaker 1: well done, All right, Sarah, I got a good one.
Speaker 1: I don't know I like yours though. This is some
Speaker 1: stiff competition this week. So we just had recently the
Speaker 1: twelfth anniversary of Leman Brothers failure. And what I find
Speaker 1: remarkable about this story is that twelve years later, everything's
Speaker 1: still not resolved, and in fact, there are invest ster's
Speaker 1: in two subordinated bonds from Lehman that just found out
Speaker 1: they're gonna get paid. They're gonna receive a payment, uh
Speaker 1: in sometime in December, I believe it is. Now. They
Speaker 1: haven't said the size of the payment, but these was
Speaker 1: it was one was a five million dollar issue and
Speaker 1: the other was in euros, a two hundred million euro issue.
Speaker 1: They were called enhanced capital advantage preferred securities, So I
Speaker 1: don't know how enhanced they were, but uh. The Bloomberg
Speaker 1: story notes that the less bid on record for one
Speaker 1: of them was at less than one cent on the dollar,
Speaker 1: So who knows what the pain is, but but it'll
Speaker 1: be something. Maybe that one that less than one cent
Speaker 1: bid will end up being a good trade. Who does?
Speaker 1: But did you also find this on and I, you know,
Speaker 1: this was what most read. That's one of my other
Speaker 1: tips is I always look at the most read stories
Speaker 1: of the week, and I think people are asmazed as
Speaker 1: I was that a it's it blows my mind that
Speaker 1: this is still going on twelve years older, that it's
Speaker 1: everything's not resolved and how long that's. You know, it
Speaker 1: just gives you an idea of how big of a
Speaker 1: blow up that was. And how messy it was. Yeah,
Speaker 1: I mean they're getting their they're getting their pay day,
Speaker 1: for sure, but then here's my Twelve years later, they're
Speaker 1: still on the job for the same case of the
Speaker 1: billabill hours. I'd love to see a total tally of
Speaker 1: of legal billbill hours for the Lehman brother It's got
Speaker 1: to be in the millions of hours. But I can't
Speaker 1: even imagine. I can't even here's my fun one from
Speaker 1: the Alternative Assets space. Barack Obama's high school basketball jersey
Speaker 1: from nineteen seventy nine is up for auction at Julian's Auctions,
Speaker 1: California based auction house. Barack Obama's high school basketball jersey
Speaker 1: nineteen seventy nine, Sarah, I'm guessing no one would buy
Speaker 1: the shorts from that air. The shorts were basketball shorts
Speaker 1: were atrocious in that air. My favorite part about it.
Speaker 1: His number was twenty three, just like Michael Jordan's, but
Speaker 1: but a couple of decades earlier. And you know what
Speaker 1: time it is, start It's time to play prices right
Speaker 1: on what you would bid for Barack Obama's high school
Speaker 1: jersey YouTube? Ben, what's your what's your bid? Barack Obama's
Speaker 1: high school. Does it? Is it autographed? It's bast ball
Speaker 1: jersey's not all. I don't believe it's autographed. And I
Speaker 1: don't think they had names on the jerseys. Alably they don't.
Speaker 1: It's gonna say it. Does it say Obama on the back?
Speaker 1: That makes they don't say, They don't say if the
Speaker 1: if the name is included, I'm assuming not, just for
Speaker 1: my general knowledge of nineteen seventy high school basketball, dating
Speaker 1: myself a little bit there been, but also it comes
Speaker 1: with a yearbook with pictures of him. Uh, nice form,
Speaker 1: nice shot with the jersey on, and I mean look
Speaker 1: as a novelty. If the proceeds went to charity for
Speaker 1: a couple of grand you know, I'd wear as a
Speaker 1: Halloween May Halloween costume. Alright, Sarah. I. Sarah's usually the
Speaker 1: high ball bidder on these things, Ben you Ben's I
Speaker 1: was so terribly off last week, but so was our guest. Um.
Speaker 1: But but you know what, I'm gonna bring it much
Speaker 1: lower this time around, and I'll go with I'll go with. Okay,
Speaker 1: Sarah was saying, I'll pay that, but someone will. Sarah
Speaker 1: was willing to bid two hundred fifty k for Michael
Speaker 1: Jackson's I V Bag Bloodstained. Albeit at ivy Bag talk
Speaker 1: about Froth in the market, I think Sarah's our poster
Speaker 1: child for Froth in the alternative. So the auction house
Speaker 1: and you know who knows how accurate this is, they're
Speaker 1: hoping for a hundred and fifty to two hundred thousand
Speaker 1: for the jersey. See, I was I was gonna go
Speaker 1: with two hundred again, but because I was so terribly
Speaker 1: off last week, I always said, you know, there's absolutely
Speaker 1: no way I can say that once again. Um, I
Speaker 1: don't know. I uh, I don't know about you. I'm
Speaker 1: from out Florida, big Heat fans. So it was watching
Speaker 1: the Heat Lakers game Wednesday and they kept showing Obama
Speaker 1: as one of the virtual fans, and I don't know
Speaker 1: what who or who he was talking to, but he
Speaker 1: just kept looking at the camera and speaking. Obviously here
Speaker 1: he was saying, that's pretty good series. Yeah, except for
Speaker 1: the blowout that we had favor the opposite way that
Speaker 1: I was hoping. Um No, but I do want to
Speaker 1: read that tweet that we got from one of our
Speaker 1: listeners too. So this comes from at David Taggart David
Speaker 1: Taggart pet macro dot com and last week we spoke
Speaker 1: about Amazon and Echelon and this supposed prime bike that
Speaker 1: was coming out for five hundred dollars. There was this
Speaker 1: huge saga back and forth. Anyway, UM, so you know this,
Speaker 1: this kind of comes back to you too. I don't
Speaker 1: know if anyone's called a cameo. You know that app
Speaker 1: or that website that you can go on and you
Speaker 1: can get a celebrity um to say happy birthday or
Speaker 1: whatever it is to anyone. But with this, uh listener
Speaker 1: did was he shared with us that the Peloton girl,
Speaker 1: her name is Monica louise Um. She's on Instagram and
Speaker 1: also on cameo and another Twitter user at typical VC
Speaker 1: booked her, the girl from that now infamous Peloton commercial,
Speaker 1: to actually send a cameo UM to Sitron Research because
Speaker 1: they infamously put out a short call on Peloton and
Speaker 1: it's honestly hilarious. It's it's it's hysterical, especially if you've
Speaker 1: seen that went horribly wrong. That is pretty funny. All right,
Speaker 1: Maybe we'll book some of bench shorts for some cameos
Speaker 1: just to get under his skin. Do any of them
Speaker 1: have some bad commercials out there? Not that I know of,
Speaker 1: not so much. Whoever thought a bad commercial would be
Speaker 1: the basis of a good short It's amazing, but I
Speaker 1: guess it didn't last long. And finally, Sarah, I want
Speaker 1: to read those comments from some of the companies that
Speaker 1: Ben has written about. Um. GFL Environmental responded to Ben's
Speaker 1: report after it came out in August. Uh He said
Speaker 1: Spruce Point Capital's commentary on the company is consistent with
Speaker 1: a quote short end distort strategy. Lead Independent Director Dino
Speaker 1: Chiesa said that the board had reviewed the allegations and
Speaker 1: found them deeply flawed. He said the board stands by
Speaker 1: its management team and that gfl's financial disclosures are accurate
Speaker 1: in all material respects, appropriate, and comply with all regulatory requirements.
Speaker 1: Uh CEO Patrick Dvigi also issued a statement. Uh He too,
Speaker 1: called the statements by Spruce Point misleading, said they contained
Speaker 1: factual errors. He did not specify what the factual errors were.
Speaker 1: He said he believes the acquisitions are quote solely intended
Speaker 1: to benefit the author of the report, who has disclosed
Speaker 1: that it stands to realize significant gains in the event
Speaker 1: that's the stock price of g f VL declines and
Speaker 1: I did receive a response from Sonova Energy International. This
Speaker 1: is via Kelsey Holtberg, the chief of Staff in the
Speaker 1: Office of the CEO. The statement reads quote, we disagree
Speaker 1: with the substance and merit of the report as disclosed
Speaker 1: in the form for shares sold by the chair of
Speaker 1: the Audit Committee were sold pursuing to a ten B
Speaker 1: five one plan and serted into an advance of Spruce
Speaker 1: Points Report in accordance with SEC rules and the company's policies.
Speaker 1: We have not yet received response from Prestige Consumer Healthcare
Speaker 1: to Ben's report. We will update you with any comment
Speaker 1: where we received from them in future episodes. That does it,
Speaker 1: Ben Acler. We're gonna have to leave it there, but
Speaker 1: thank you so much for joining us this week. Thank
Speaker 1: you my pleasure. Let's do it again, SI absolutely what
Speaker 1: goes up. We'll be back next week. Until then, you
Speaker 1: can find us on the Bloomberg Terminal website and app,
Speaker 1: or wherever you get your podcasts. We'd love it if
Speaker 1: you took the time to rate and review the show
Speaker 1: on Apple Podcasts so more listeners can find us. And
Speaker 1: you can find us on Twitter. Follow me at at
Speaker 1: Sara Panzac, Mike is at Reaganonymous, and you can also
Speaker 1: follow Bloomberg Podcasts at podcasts. Also thank you to Charlie
Speaker 1: Pellett of Bloomberg Radio and the voice of the New
Speaker 1: York City subway system. What Goes Up is produced by
Speaker 1: Jordan Gospore. The head of Bloomberg podcast is Francesco Levie.
Speaker 1: Thanks for listening, See you next time.