Latest / Bloomberg Intelligence / UAW, ABC, Signet, and Marijuana Investing (Podcast)

Transcript

UAW, ABC, Signet, and Marijuana Investing (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast.
0:02
Speaker 2: I'm Paul Sweeney.
0:03
Speaker 1: Alongside my co host Matt Miller.
0:05
Speaker 3: Every business day we bring you interviews from CEOs, market pros,
0:09
Speaker 3: and Bloomberg experts, along with essential market moven news.
0:14
Speaker 1: I'm the Bloomberg Markets podcast called Apple Podcasts or wherever
0:17
Speaker 1: you listen to podcasts, and at Bloomberg dot com Slash podcast.
0:21
Speaker 4: For our Bloomberg television radio audiences worldwide. I'm David Western.
0:24
Speaker 4: We're welcome now, Mary bar She is the General Motors
0:26
Speaker 4: chair and CEO. So, Mary, you are the woman of
0:29
Speaker 4: the hour. I must say, whether you like it or not,
0:32
Speaker 4: let me ask the question I think on everyone's mind.
0:33
Speaker 4: What comes next? We know there's individual plans to instruct
0:36
Speaker 4: at all three of the big automakers in Detroit. How
0:39
Speaker 4: far away are we from layoffs as other plants really
0:42
Speaker 4: run out.
0:42
Speaker 5: Of the parts.
0:44
Speaker 6: Well, you know, David.
0:45
Speaker 7: First, I want to say, I'm extremely disappointed and frustrated
0:48
Speaker 7: that we're even on a strike. We didn't need to
0:50
Speaker 7: get here. General Motors has an exceptionally strong offer on
0:52
Speaker 7: the table.
0:53
Speaker 6: It's historic.
0:54
Speaker 7: It's the largest increase from a wage's perspective in our
0:59
Speaker 7: one hundred and fifteen year history, along with world class
1:02
Speaker 7: healthcare benefits and many other provisions job security, etc.
1:06
Speaker 6: And a cola adjustment.
1:08
Speaker 7: So when you look at the strength of the agreement
1:09
Speaker 7: we have on the table, you know, we really don't
1:12
Speaker 7: need to be here. Yes, they have one plant down
1:15
Speaker 7: right now, and you know it'll.
1:17
Speaker 6: Impact two three very important products.
1:19
Speaker 7: Two brand new our Chevrolet Colorado and our GMC Canyon,
1:24
Speaker 7: both mid size pickups that are in strong demand, as
1:27
Speaker 7: well as our Chevrolet cargo van that does exceptionally well
1:30
Speaker 7: in the market. So this is having an impact and
1:33
Speaker 7: we'll have to see where they go next. I will
1:35
Speaker 7: say we're ready for this, you know, as we've dealt
1:37
Speaker 7: with COVID and dealt with the semiconductor shortage as well
1:41
Speaker 7: as other supply chain challenges that have you know, continued
1:44
Speaker 7: to persist from COVID. Our team knows how to manage
1:47
Speaker 7: these situations. They are staying agile and we're going to
1:49
Speaker 7: do what's right for the company. We're going to make
1:51
Speaker 7: sure everyone stays safe. But this is a strike that
1:53
Speaker 7: didn't need to happen.
1:54
Speaker 4: As you say, you've made an offer already for rather
1:56
Speaker 4: substantial increase in wages it's not what the OW wants. Implicitly,
2:00
Speaker 4: you've agreed that they do need and deserve some increase
2:03
Speaker 4: in wages. But is this about more than that? Is
2:05
Speaker 4: this existential sense for the auto companies in terms of
2:08
Speaker 4: your need to move into electric vehicles and from the
2:10
Speaker 4: you at W point of view that they believe in
2:12
Speaker 4: effect moving to evs will actually cut the workforce by
2:15
Speaker 4: as much as forty percent.
2:18
Speaker 6: Well, you know, you're absolutely right.
2:19
Speaker 7: This is a once in a century transformation. We're in
2:23
Speaker 7: the middle of moving from internal combustion engine vehicles to
2:26
Speaker 7: electric vehicles, and at GM we're at a very pivotal
2:30
Speaker 7: point because we have so many electric vehicles ready to
2:32
Speaker 7: launch in the process of launching, and this is important
2:35
Speaker 7: to securing all of our futures. We need to get
2:37
Speaker 7: these vehicles out. We need to they're wonderful vehicles. We've
2:41
Speaker 7: got waiting lists for most of them or orders already
2:44
Speaker 7: in place, so it's important that we meet that demand.
2:46
Speaker 7: And one thing from a General Motors perspective, from job security,
2:50
Speaker 7: we have jobs for all of our people as we
2:52
Speaker 7: make this transformation. More than two years ago we started
2:55
Speaker 7: planning for this, and one of the reasons General Motors
2:58
Speaker 7: invested in doing our own power, which is a component
3:01
Speaker 7: that's very important on electric vehicle. We design them internally
3:05
Speaker 7: and we are now allocating that production to the plants
3:07
Speaker 7: that build internal combustion vehicle.
3:10
Speaker 6: Engines right now.
3:11
Speaker 7: So we have worked very carefully to have a job
3:14
Speaker 7: for everyone so we can make this transformation together. And frankly,
3:17
Speaker 7: when you put it up, have a strike and we're
3:20
Speaker 7: not making vehicles, you start to put that at risk.
3:22
Speaker 7: So it's a historic transformation. We need to make sure
3:26
Speaker 7: we can compete, and we need the company to be
3:28
Speaker 7: profitable because those profits get invested in new products. That again,
3:32
Speaker 7: it's a circle of when we invest in a new product,
3:35
Speaker 7: there's demand for that product from consumers that provides the jobs.
3:39
Speaker 7: Because we're building those vehicles in our plants. We need
3:42
Speaker 7: to invest in our future and we have a plan
3:44
Speaker 7: to take all of our employees along. I think this
3:46
Speaker 7: is very important. So that concern there's not a place
3:49
Speaker 7: for them is not true at General Motors.
3:51
Speaker 4: If Mary, you were to find it in your heart
3:54
Speaker 4: to come close to what they demand to accept it,
3:56
Speaker 4: what would it mean for the future of General Motors.
3:59
Speaker 4: You've just come outankruptcy fifteen years ago.
4:01
Speaker 7: As I recall, you know, I think that's a very
4:03
Speaker 7: important point because if we can't invest in new vehicles,
4:07
Speaker 7: which we need, we need to be profitable to do that,
4:10
Speaker 7: then we're not going to have a strong future. And David,
4:13
Speaker 7: do you know extremely well, this is a very competitive industry.
4:16
Speaker 7: There's new entrants that are not represented by the UAW
4:20
Speaker 7: that already had a lower wage structure, so we need
4:24
Speaker 7: to compete. I'm really proud of our manufacturing team, the
4:27
Speaker 7: way they managed through COVID, the way that they have
4:30
Speaker 7: worked and been very agile as we've dealt with all
4:32
Speaker 7: the supply chain shortages, and the fact that for the
4:35
Speaker 7: last two years, between our engineering our manufacturing teams, they've
4:39
Speaker 7: delivered world class quality as recognized by JD Powers. We
4:44
Speaker 7: have a strong team. We want to do everything in
4:46
Speaker 7: our power to win the future, secure their future, and
4:49
Speaker 7: lead for the next one hundred and fifteen years.
4:52
Speaker 6: We need to be able to do that.
4:54
Speaker 4: Mary, are the negotiating teams meeting today, to the best
4:57
Speaker 4: of your knowledge, and by the way, are you participating
4:59
Speaker 4: directly in any way?
5:01
Speaker 6: I have been participating.
5:02
Speaker 7: I've been involved since before July eighteenth, when the talks
5:07
Speaker 7: kicked off. I've been on call more than once a day, calls,
5:11
Speaker 7: text meetings, and I have been at the main table
5:15
Speaker 7: myself over the last few days. I'll continue to be
5:18
Speaker 7: extremely involved. Our team's ready, they're there waiting to negotiate.
5:22
Speaker 7: So my request is the UAW leadership needs to get
5:26
Speaker 7: back to the table so we can get these problems solved,
5:28
Speaker 7: get our people back to work. I think another important
5:31
Speaker 7: point is for every job that General Motors has, there's
5:34
Speaker 7: six more jobs in the economy that depend on us running.
5:37
Speaker 7: So this is broader than just General Motors. This is
5:40
Speaker 7: important for the plant cities especially, but really for the nation.
5:45
Speaker 4: Yeah, we talk about one hundred and fifty thousand petitions,
5:47
Speaker 4: a lot more than that. To your point there. Lastly, Mary,
5:51
Speaker 4: I'm mindful of the fact that your father was a
5:53
Speaker 4: tool and dime maker at Pontiac when my father was
5:56
Speaker 4: a tool and die maker at Acy Sparkplay, just some
5:58
Speaker 4: thirty miles apart, and as young people have gone through
6:02
Speaker 4: UAW strikes different from this one, but we've gone through them.
6:04
Speaker 4: What do you think our fathers, if they were with
6:06
Speaker 4: us today, what do you think they'd say to each
6:08
Speaker 4: other about what we're seeing right now.
6:11
Speaker 7: Well, you know, I think my father would say, as
6:14
Speaker 7: he looked at the historic deal that we put on
6:18
Speaker 7: the table, that the company is committed and wants to
6:21
Speaker 7: recognize our employees for their hard work and wants to
6:24
Speaker 7: make sure they have a secure future. So I think
6:26
Speaker 7: he would look at this offer and if it was
6:28
Speaker 7: on the table for him to vote, he'd vote yes.
6:31
Speaker 4: Okay, Mary, thank you so much for your time. As
6:32
Speaker 4: I say, I'm a very very busy day for I
6:34
Speaker 4: really appreciate. That's Mary Barr. She's General Motors chair and CEO.
6:39
Speaker 8: You're listening to the team Ken's are Live program Bloomberg
6:42
Speaker 8: Markets weekdays at ten am Eastern.
6:44
Speaker 5: On Bloomberg dot Com, the iHeartRadio.
6:47
Speaker 8: App and the Bloomberg Business app, or listen on demand
6:50
Speaker 8: wherever you get your podcasts.
6:53
Speaker 1: All right, and well, Githa ranging enough and she covers
6:56
Speaker 1: all the Meatia stocks, which means she covers Disney, which
6:58
Speaker 1: means she's going down to their investor day.
6:59
Speaker 2: So all over the place.
7:01
Speaker 1: I'm sure, Hey, Githa, there's gonna be a lot to
7:04
Speaker 1: talk about at Disney.
7:06
Speaker 9: Here.
7:06
Speaker 1: Are they really gonna sell the ABC television network?
7:11
Speaker 10: It definitely seems like it, Paul. I mean, Bob Iger
7:15
Speaker 10: just a few weeks ago, of course, at that Sun
7:17
Speaker 10: Valley conference, said that, you know, they're not married to
7:20
Speaker 10: the linear TV network business. It's not core to Disney anymore.
7:24
Speaker 10: I mean, that's so ironic considering you know, they've they
7:27
Speaker 10: bought ABAC for there was that huge deal back in
7:29
Speaker 10: nineteen ninety five for nineteen billion dollars. I mean, so
7:32
Speaker 10: much of you know, Disney's reputation has you know, kind
7:36
Speaker 10: of been tied to its TV network. So it's it's
7:38
Speaker 10: it's strange, but it really I think what it really
7:41
Speaker 10: tells us is that they see the writing on the
7:43
Speaker 10: wall and they think that the PayTV universe is probably
7:46
Speaker 10: going to implode sooner than the rest of us think.
7:50
Speaker 1: All right, so who could buy it? And what's it worth?
7:54
Speaker 10: Okay, So there are a lot of rumors and a
7:56
Speaker 10: lot of press reports right now circulating. So there has
7:59
Speaker 10: been some talk about Disney exploring a sale of ABC
8:04
Speaker 10: Networks and the owned and operated stations. They have about
8:07
Speaker 10: eight stations in top ten markets with Nextstar, which is
8:11
Speaker 10: the largest TV broadcaster right now in the US. So
8:15
Speaker 10: you know, Nexttar has said that they should they're very
8:17
Speaker 10: interested in the ABC assets, they should be able to
8:20
Speaker 10: acquire most of them without too much friction, Meaning there
8:24
Speaker 10: is an FCC ownership cap of about thirty nine percent
8:28
Speaker 10: for broadcast stations. But NEXTTAR, because it already has a
8:31
Speaker 10: presence in most of these stations with their CW network,
8:34
Speaker 10: thinks that it should be able to get the deal done. That'said.
8:37
Speaker 10: I mean, I think they still will have to you know,
8:39
Speaker 10: they have the swaps, so that is a little bit of.
8:42
Speaker 11: A question mark.
8:43
Speaker 10: So we think that the ABC stations are actually worth
8:47
Speaker 10: upwards of stations as well as a network are worth
8:50
Speaker 10: upwards of you know, four billion dollars. That's applying a
8:54
Speaker 10: pretty conservative seven x EBITDA multiple. Now Byron Allen, who
8:58
Speaker 10: is like this really pro media mogul, has put in
9:02
Speaker 10: a bid which apparently values those networks at about eight
9:06
Speaker 10: x ebitda, which means that those you know, those the
9:09
Speaker 10: ABC property would be worth a five billion nine and
9:11
Speaker 10: obviously Disney wants to get the most for it. The
9:14
Speaker 10: problem with most of these acquirers or the parties that
9:17
Speaker 10: are interested in possibly acquiring ABC's that they're all highly
9:20
Speaker 10: levered themselves. So most broadcasters, so even an Extra, for instance,
9:24
Speaker 10: currently has about seven billion dollars in debt. Alan Media
9:28
Speaker 10: obviously has a lot in debt, so we'll have to
9:30
Speaker 10: see how they kind of get the deal done.
9:33
Speaker 1: So Githa, I guess that calls into question. It's one
9:35
Speaker 1: thing to sell a declining broadcast network and some TV stations.
9:40
Speaker 1: I think most people would agree that are at the
9:42
Speaker 1: time of that business is probably past and all about streaming.
9:46
Speaker 1: The bigger question, I think for a lot of investors,
9:48
Speaker 1: and you'll probably talk about it next week when you're
9:50
Speaker 1: down visiting the Walt Disney folks, is ESPN. What do
9:54
Speaker 1: they do with ESPN? What do you think is kind
9:56
Speaker 1: of what do you think they will do? What should
9:58
Speaker 1: they do?
10:00
Speaker 6: So ESPN?
10:01
Speaker 10: I actually think they definitely want to keep the asset. Now,
10:04
Speaker 10: remember they are going to be breaking out the financials
10:07
Speaker 10: for ESPN in a few quarters. That is what they've promised.
10:10
Speaker 10: It's going to you know, kind of be its own segment.
10:12
Speaker 10: That's the first time that they're doing that in Disney's history.
10:15
Speaker 10: So they obviously want to clean up house before they
10:17
Speaker 10: do that. And we've seen a lot of you know,
10:19
Speaker 10: cost cutting, We've seen a lot of these new deals
10:22
Speaker 10: they had that deal with you know, Penn National, and
10:24
Speaker 10: most recently, and I think this is really transformative for
10:27
Speaker 10: the entire PATV universe, is the deal that they inked
10:30
Speaker 10: with Shoter. This is the first time in the history
10:34
Speaker 10: of of you know, the PATV media ecosystem that a
10:37
Speaker 10: content company is actually offering access to its streaming services. Okay,
10:41
Speaker 10: and for you know, kind of either a wholesale rate
10:44
Speaker 10: or even for free in certain cases. But the more
10:46
Speaker 10: important part is that they're actually going to offer access
10:49
Speaker 10: to the flagship ESPN streaming product when it goes out
10:53
Speaker 10: in full force, which probably will be sometime in twenty
10:55
Speaker 10: twenty five, twenty twenty six, we don't know, but they're
10:57
Speaker 10: definitely preparing for that future.
10:59
Speaker 1: That's what it So.
11:00
Speaker 10: I don't really think that they want to kind of
11:03
Speaker 10: get rid of this asset. Maybe they really want to
11:05
Speaker 10: clean it up, maybe they want to spin it out,
11:06
Speaker 10: but I still think they want to keep control of it.
11:11
Speaker 3: I wonder if this is, like Paul Au, the kind
11:15
Speaker 3: of shift that you saw when you know, radio used
11:19
Speaker 3: to be it. Radio used to be the thing for
11:21
Speaker 3: listeners and for advertisers, and that all went away. And
11:25
Speaker 3: it's probably a completely uninteresting business for most people.
11:30
Speaker 9: They went to TV.
11:31
Speaker 3: Right, is this linear TV going through that same transition,
11:35
Speaker 3: that same death, and then is streaming the new TV?
11:39
Speaker 2: Yeah? I mean it was.
11:40
Speaker 1: You know, we went from broadcast television when you had
11:42
Speaker 1: three networks and then four with Fox, and then cable
11:45
Speaker 1: TV came along, and that totally redefined what we watch,
11:48
Speaker 1: how we watch it, and it really made it so
11:51
Speaker 1: much more competitive.
11:52
Speaker 2: We got so much more product.
11:53
Speaker 1: Now you're even taking that to the next stage. And
11:56
Speaker 1: I GUESSKEITHA, that brings us to the question if all
11:59
Speaker 1: the big companies that you follow, the.
12:01
Speaker 2: Paramounts of the world, the Warner.
12:02
Speaker 1: Brothers, the Discoveries, is he when you talk to investors,
12:06
Speaker 1: do they believe that this transformation can actually work and
12:09
Speaker 1: they can make money on it, or does nobody want
12:12
Speaker 1: to talk to you anymore?
12:14
Speaker 6: A little bit of both.
12:16
Speaker 10: But I think the one thing, I mean, for any
12:18
Speaker 10: investor who had questions about whether streaming is a good business,
12:22
Speaker 10: I think we have our answer right because we've seen
12:25
Speaker 10: Netflix kind of turn things around. They are actually expected
12:29
Speaker 10: to generate about seven billion dollars in EBITDA this year
12:33
Speaker 10: twenty approximately twenty percent margins and the idea is that
12:36
Speaker 10: as they kind of gain subscribers and as they lower costs,
12:39
Speaker 10: they're able to kind of spread those costs over wider base,
12:42
Speaker 10: eventually getting to you know, a twenty five to thirty
12:45
Speaker 10: percent margin, which then kind of makes you agnostic because
12:47
Speaker 10: in its heyday, you know, TV networks were generating about
12:50
Speaker 10: thirty thirty five percent margins. So yes, streaming may not
12:53
Speaker 10: be better than the TV network business, but it could
12:55
Speaker 10: potentially be as good as Again that we're talking about Netflix,
12:59
Speaker 10: which is our see, the industry leader. It is going
13:01
Speaker 10: to be a much harder road for all these smaller companies,
13:05
Speaker 10: whether it's a paramount of Warner Brothers Discovery, but they
13:08
Speaker 10: are kind of doing a lot in terms of content
13:10
Speaker 10: cost rationalization. Again, Paul, I mean we've spoken about this
13:14
Speaker 10: many times, and I know you think too that there
13:16
Speaker 10: will be as streaming shakeout, at some point, there will
13:18
Speaker 10: be consolidation. So all that is going to play out
13:20
Speaker 10: I think over the next you know, eighteen months, eighteen
13:23
Speaker 10: to twenty four months. But yeah, I think we will
13:26
Speaker 10: be you know, we'll land up with maybe three four
13:28
Speaker 10: major streaming players who should be all profitable hopefully.
13:32
Speaker 1: All Right, now we've got some In addition to all
13:34
Speaker 1: of that. If that wasn't enough for the industry and
13:36
Speaker 1: for investors, there's also this thing of strikes. We've got
13:40
Speaker 1: writers on strikes, We've got actors on strikes. What's the
13:43
Speaker 1: impact on media, on the companies, on what you and
13:47
Speaker 1: I and other consumers will be able to see on
13:49
Speaker 1: our TV screens in theaters.
13:52
Speaker 10: Yeah, so definitely we're seeing some you know, small effects
13:55
Speaker 10: of that right now, nothing really major interms of disruption
13:59
Speaker 10: of s edules. But you know, as we kind of
14:01
Speaker 10: get deeper into like the film slate for twenty twenty
14:04
Speaker 10: three and even twenty twenty four, that's when we're really
14:07
Speaker 10: going to start having some problems. We've already seen some
14:09
Speaker 10: film delays. You know, Doom two, for instance, from Warner
14:13
Speaker 10: Brothers has already moved to twenty twenty four because they're
14:15
Speaker 10: not able to market the film, They're not able to
14:17
Speaker 10: do promotions. So that's you know, a lot of film
14:19
Speaker 10: studios are kind of running into that problem. In fact,
14:22
Speaker 10: from a financial aspect, though, what we're seeing is that
14:25
Speaker 10: most of these companies and have actually raised their free
14:29
Speaker 10: cash flow guidance through the rest of the year. They
14:31
Speaker 10: raise their free cash flow guidance, but they've lowered their
14:33
Speaker 10: EBITDA guidance because the lack of fresh programming is definitely
14:37
Speaker 10: going to have an impact on you know, advertising sales.
14:40
Speaker 10: And that's what they've all said. They've all said, you know,
14:43
Speaker 10: expect double digit ad declines because you're not going to
14:46
Speaker 10: have any fresh programming. We really have nothing to go
14:48
Speaker 10: to advertisers with. I think it really becomes a problem
14:52
Speaker 10: in twenty twenty four if you know, they're not able
14:54
Speaker 10: to resolve the strikes, if people are not going to
14:56
Speaker 10: get back, you know, to work and produce new ca
15:00
Speaker 10: and we're going to have a real, real headache in
15:02
Speaker 10: twenty twenty four.
15:03
Speaker 1: All right, Keitha, thanks so much for joining us. As always,
15:05
Speaker 1: keith is the expert, Keitha Ranganathan. She is covers all
15:09
Speaker 1: the media industry. She's going to the park and she's
15:12
Speaker 1: going down on Monday for the investors.
15:14
Speaker 3: I was thinking, kause Tucker asked when the last time
15:16
Speaker 3: I was there was, And I remember that the Corey
15:20
Speaker 3: Hart album Boy in a Box had just come out.
15:23
Speaker 3: I bought the cassette for my Walkman, and so I
15:26
Speaker 3: believe it was spring break of nineteen eighty six spring break.
15:30
Speaker 8: You're listening to the tape catch are live program Bloomberg
15:33
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
15:37
Speaker 8: tune in app, Bloomberg dot Com.
15:39
Speaker 5: And the Bloomberg Business App.
15:40
Speaker 8: You can also listen live on Amazon Alexa from our
15:43
Speaker 8: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
15:49
Speaker 1: All right, we talked about one of my favorite assa classes,
15:52
Speaker 1: wuld jump. My second unis another one of my all
15:55
Speaker 1: time faves. Really since the last ten years has been
15:57
Speaker 1: this private credit.
15:58
Speaker 9: I love it too.
15:59
Speaker 2: I love it man.
15:59
Speaker 1: And we had this person in a dare or two ago.
16:02
Speaker 1: She's more on the syndicated loan side, and I was saying,
16:04
Speaker 1: how much competitors are these guys to you?
16:06
Speaker 2: And she's just they're big. Yeah, think they're getting bigger.
16:08
Speaker 1: Randy Schwimmer, co head of Senior Lending and Senior Managing
16:11
Speaker 1: Director Churchill Asset Management, joins us. Randy, talk to us
16:14
Speaker 1: about your business, the private credit business. How's it been
16:17
Speaker 1: this year? Are are there deals? Because it seems like
16:20
Speaker 1: seems slow, But I don't know in your market?
16:22
Speaker 2: What do you sing?
16:22
Speaker 4: So?
16:23
Speaker 12: Last time I was here I promised you guys some
16:24
Speaker 12: good news September. Right, so post Labor Day, we're all
16:28
Speaker 12: we always wait for the post labor day rush. Well
16:31
Speaker 12: I'm here to report that we have a post labor
16:33
Speaker 12: day rush. Okay, So let's talk with the public markets
16:36
Speaker 12: right now. So high yield bond market, which was kind
16:39
Speaker 12: of you know, not very active all year, rates are
16:43
Speaker 12: very high issue and slow. They had an eleven billion
16:47
Speaker 12: dollar a week last week. Okay, that's the large issuance
16:52
Speaker 12: in two years.
16:52
Speaker 5: So that's good.
16:53
Speaker 12: So that's waking up the liquid loan market, which you
16:56
Speaker 12: talked about, probably syndicated loans twenty billion dollars so far
16:59
Speaker 12: and so stember first two weeks. That's that's more than
17:03
Speaker 12: any month, full month, all year long. So we're starting
17:05
Speaker 12: to see some activity in the public side. Why because
17:08
Speaker 12: things are starting to heal. The economy is better, inflation
17:11
Speaker 12: is under control. The other thing that's going on now
17:15
Speaker 12: is some of the as a result, the larger buyouts
17:18
Speaker 12: are starting to come to the market. We haven't seen
17:21
Speaker 12: any of those mega deals this year, going back once
17:24
Speaker 12: the Fed started raising rates. So we now have the
17:27
Speaker 12: ninth largest deal ever since the Great Recession, company called
17:32
Speaker 12: World Pay.
17:33
Speaker 2: That's what this other guest was talking to.
17:34
Speaker 12: Yes being launched this week and seventeen billion dollar LBO
17:39
Speaker 12: nine billion dollars in financing. That's a big deal, and
17:42
Speaker 12: so the private credit. So right now it's not clear.
17:46
Speaker 12: It looks like it's you know, some of it's going
17:48
Speaker 12: to be in that market, but that's a big number.
17:50
Speaker 1: Right for so that's something you would take a look at.
17:52
Speaker 12: Yeah, I think it's all about pricing instruction, but the
17:56
Speaker 12: fact that a large deal like that's coming out is
17:58
Speaker 12: a big deal. One of your all time favorite restaurant chains,
18:02
Speaker 12: Foga to Chow, which is you know, a billion dollar
18:05
Speaker 12: deal also coming out. So what's happening now in the
18:07
Speaker 12: large cat market. They're starting to wake up now that
18:10
Speaker 12: the direct lending market. Our business has actually been active
18:13
Speaker 12: all year long. We if you'd said to me back
18:15
Speaker 12: in January, Randy, what do you think the year is going.
18:17
Speaker 5: To be like?
18:18
Speaker 12: Just giving all the static on rates and inflation, I
18:20
Speaker 12: would have said, boy, we'll be lucky to get to
18:23
Speaker 12: where we were last year. We are now at and
18:26
Speaker 12: perhaps even ahead in some of our businesses of last year,
18:29
Speaker 12: in part because of this flow going from public to
18:32
Speaker 12: private so and then I think, you know, our skill
18:35
Speaker 12: now is growing. We have the ability to hold larger deals.
18:39
Speaker 12: Since the result of that is the sponsors. They keep
18:41
Speaker 12: coming back to us for Okay, we like the witch
18:44
Speaker 12: you did the last deal, Let's do it again. You know,
18:47
Speaker 12: we negotiated all the documents. That was a pain in
18:49
Speaker 12: the neck. Let's let's do just the same document and
18:52
Speaker 12: keep going. The other thing that's adding to the activity
18:55
Speaker 12: is these and I mentioned this to you last time.
18:57
Speaker 12: The number of acquisitions that the platform businesses are doing
19:01
Speaker 12: in order to grow has significantly increased. So we actually
19:05
Speaker 12: we just looked at the league tables for the quarter
19:07
Speaker 12: we are we're the most active lender in direct lending
19:11
Speaker 12: right now for for add on acquisition Churchill Asset Management,
19:17
Speaker 12: and we're like the second largest for all everything in
19:21
Speaker 12: the traditional direct lending business. So what's happening is our
19:24
Speaker 12: portfolio is actually generating deal flow. It's by just virtue
19:29
Speaker 12: of these are platform companies that are making acquisitions. You know,
19:32
Speaker 12: my wife calls it shopping in your closet. So this
19:35
Speaker 12: is what's happening. The portfolio companies are actually generating deal flow.
19:38
Speaker 12: So we are having a bigger year than we thought.
19:41
Speaker 12: And then in our junior capital business, which is mezzanine
19:43
Speaker 12: dat co investor equity, that team is having a significantly
19:48
Speaker 12: better year than last year because of the activity that
19:52
Speaker 12: the sponsors are looking for more equity to put into
19:55
Speaker 12: their deals because who knows when their next fundraising is
19:58
Speaker 12: going to happen. They have limited capital, so they go
20:00
Speaker 12: to their LP relationships say hey, Churchill, how would you
20:03
Speaker 12: like to put in some money into this deal.
20:04
Speaker 3: It's so interesting that this whole market that you guys,
20:08
Speaker 3: but also the whole industry is growing so quickly in
20:12
Speaker 3: the face of rising rates, right, or maybe because of
20:15
Speaker 3: rising rates. I was talking with Mark Liftschultz last week
20:18
Speaker 3: from Blue Owl, and he thinks that we're gonna see
20:22
Speaker 3: a ten billion dollar private credit deal, you know, shortly correct,
20:27
Speaker 3: which would be you know now, I think the biggest
20:30
Speaker 3: single direct lending deal is like five billion dollars, which
20:33
Speaker 3: is already huge. No question, is it because of rising
20:36
Speaker 3: rates that this industry is growing? I mean, why why
20:38
Speaker 3: are the banks letting so much of this high.
20:42
Speaker 11: Get away right away?
20:43
Speaker 5: Yeah?
20:44
Speaker 12: So they've been letting it get away since nineteen ninety three, right,
20:47
Speaker 12: because they've been regulated consolidated out of the leverage lending business,
20:51
Speaker 12: particularly in the middle market. So the deals that you're
20:53
Speaker 12: seeing now are very like corporatetty, double Beach, triple b
20:57
Speaker 12: those kinds of things for the For the direct lenders,
21:00
Speaker 12: what's happening is everything else is coming our way. All
21:03
Speaker 12: the middle market flow is coming our way. A lot
21:06
Speaker 12: of the sponsors who are trying to get quick executions
21:10
Speaker 12: in this market are trying to get this stuff done. Now,
21:13
Speaker 12: what's driving it. The investors who in a high rate
21:17
Speaker 12: environment are looking for yield right now are looking to
21:20
Speaker 12: private debt. That's what's actually fueling our activity because the
21:23
Speaker 12: more money that we raise, more fundraising that happens in
21:26
Speaker 12: our business, allows us to scale our platform. The most
21:29
Speaker 12: interesting stats.
21:30
Speaker 3: There's just so many more lenders out there, not as
21:32
Speaker 3: much about the borrowers.
21:33
Speaker 12: Well, it's more the investors who are focusing on the
21:37
Speaker 12: leading lenders like Churchill to dedicate their money to. So
21:40
Speaker 12: there was a survey I was at a conference Lase.
21:42
Speaker 12: We got on a panel. Sixty two percent of investors
21:45
Speaker 12: surveyed said they were under allocated private debt. That was
21:49
Speaker 12: that blew me away, Like wait a minute. The three
21:52
Speaker 12: of US have been talking about private debt for a
21:54
Speaker 12: couple of years now, right, you think this messagers out there,
21:57
Speaker 12: But because rates are higher, and now I can get
22:00
Speaker 12: at a twelve percent yield on a unleveraged senior debt
22:04
Speaker 12: investment you know, out of whether it's a Churchill or
22:06
Speaker 12: you know some of our other you know, uh providers
22:09
Speaker 12: out there, that's a that's a really good number. And
22:11
Speaker 12: so when you compare that to it even what you
22:13
Speaker 12: can get in the bond market. What's happening is investors
22:16
Speaker 12: are saying, you know, I need to do more.
22:17
Speaker 11: Even though I'm.
22:18
Speaker 12: Maybe allocated right now to private, I need to do more.
22:21
Speaker 12: So I feel I'm there's two thirds of the market
22:23
Speaker 12: saying they're under allocated in this asset class. And we
22:26
Speaker 12: haven't really gotten going yet. I mean, it's still there's
22:29
Speaker 12: still a lot of runway for us.
22:31
Speaker 2: So are you guys raising money at the moment currently?
22:34
Speaker 12: We're always raised always.
22:35
Speaker 2: Is that right?
22:36
Speaker 12: So I'm headed to Scandinavia next week to people with
22:38
Speaker 12: our clients and potential clients there, going to Copenhagen, going
22:42
Speaker 12: to Stockholm, and I know your favorite Helsinki never been
22:46
Speaker 12: to hell sinking, So let me know, if you've got
22:47
Speaker 12: some good restaurants. But when I'm no, because it's out thinking, okay,
22:53
Speaker 12: do you like fish?
22:53
Speaker 13: Yeah.
22:55
Speaker 12: So I was in and I was in the West
22:56
Speaker 12: Coast this week, and I'm telling very sophisticated institutional investors
23:02
Speaker 12: are saying, we'd like to talk to you about your
23:04
Speaker 12: platform because we think we need to explore more in
23:07
Speaker 12: the private det space.
23:09
Speaker 2: So who's your competition.
23:12
Speaker 12: Well, it's funny, you know, we don't really have competition.
23:16
Speaker 12: We have collaborators, we have partners that we lend with.
23:20
Speaker 12: So what happens is since we're an investor in all
23:22
Speaker 12: of the funds with the sponsors that we're financing, we
23:25
Speaker 12: don't lose deals. They'll say, hey, even if let's say
23:28
Speaker 12: Blue Out perfect example, they say to Mark, hey, you know,
23:31
Speaker 12: we want you to lead this one, because you know,
23:33
Speaker 12: they tell us Church that you led the last too,
23:34
Speaker 12: so we're gonna give Mark one. They'll say to Mark, hey,
23:37
Speaker 12: would you please include Church on the deal because they're
23:39
Speaker 12: a significant LP investor in our fund, and Mark saying okay, fine,
23:43
Speaker 12: we'll give them a little piece. So that that makes
23:46
Speaker 12: us sort of invaluable to the sponsors because they know
23:49
Speaker 12: that we're always investing in their funds.
23:51
Speaker 1: Frankly, we're investing equity into their equity.
23:54
Speaker 5: Into their funds.
23:54
Speaker 12: And it also makes it invaluable for the other lenders
23:57
Speaker 12: out there because they know they can always count in
23:59
Speaker 12: Church for a good transaction to split the deal with them,
24:03
Speaker 12: lead the deal with them, and we we frankly, whether
24:05
Speaker 12: we lead or you know, we co lead with someone,
24:07
Speaker 12: all we really want to do is have split the
24:11
Speaker 12: deal fifty to fifty, be able to talk to the
24:13
Speaker 12: economics in terms of the transaction, so we control the deal.
24:17
Speaker 12: But other than that, you know, we have a lot
24:19
Speaker 12: of partners out there that we do business with, and
24:21
Speaker 12: we're very happy to do business with them.
24:22
Speaker 1: All Right, So you do a deal, how much do
24:24
Speaker 1: you sell off and how much do you keep?
24:26
Speaker 12: We just did it financing right now that it was
24:29
Speaker 12: five hundred million dollar hole that we're we're probably going
24:31
Speaker 12: to sell down to. I'm going to say like three
24:33
Speaker 12: hundred millions.
24:34
Speaker 2: You'll still hold three big un Is it typical?
24:38
Speaker 1: Because it Chase Bank we sell down to fifteen cents left.
24:41
Speaker 12: That's why you're not in the business anymore. Okay, But
24:44
Speaker 12: what's happening is we have mouths to feed too, right,
24:46
Speaker 12: We have all these investors, and so the more investors
24:48
Speaker 12: that we have, the more we want to spread that
24:51
Speaker 12: wealth out too, and so the more money we raise,
24:54
Speaker 12: now we're going to spread four hundred around. Now we
24:56
Speaker 12: do five hundred. But if you have forty funds that
24:58
Speaker 12: you're allocating across all forty funds, the amount of that
25:02
Speaker 12: deal per fund is really small. We don't have any
25:04
Speaker 12: exposure over two percent of the whole portfolio.
25:07
Speaker 9: What is the default rate?
25:10
Speaker 3: Because people look at these juicy yields and say, sure,
25:13
Speaker 3: I want to get in, but this is floating rate debt, right,
25:17
Speaker 3: So some of your deals previously would have been paying.
25:23
Speaker 9: I don't know, six percent interest, and.
25:25
Speaker 3: Now they're paying double that, right, So you that's got
25:27
Speaker 3: to be hard for some of the portfolio companies.
25:29
Speaker 2: Yea.
25:30
Speaker 12: So because we've been through this before, we pre model
25:33
Speaker 12: everything as if it's going to be a twelve percent,
25:35
Speaker 12: so we haven't had the kind of issues. Now the
25:38
Speaker 12: coverage has shrunk for sure. We did just a model
25:42
Speaker 12: the other day and it looks like instead of four
25:43
Speaker 12: times coverage, we're like two and a half times coverage
25:46
Speaker 12: because of that doubling of interest costs. But you know,
25:49
Speaker 12: the free cash flows of these companies and the growth
25:51
Speaker 12: of these businesses. I mentioned the add ons. All of
25:53
Speaker 12: that is helping to grow those companies to accommodate the
25:57
Speaker 12: higher debt. But still you've got every deal we do,
26:00
Speaker 12: we look at it and say, what's gonna happen if
26:01
Speaker 12: rates continue to go up, what's gonna happen if we
26:04
Speaker 12: go into recession. The result is we do only like
26:07
Speaker 12: five deals of every hundred that come in the door.
26:10
Speaker 12: Think about that. So I'm turning down ninety five percent
26:13
Speaker 12: of every deal that comes in the door. I mean,
26:15
Speaker 12: that's a tough commercial proposition. But the reason that we're successful.
26:19
Speaker 3: You're very picky, well very picky, but you know the
26:22
Speaker 3: people you're lending money to, you're working hand in hand
26:24
Speaker 3: with them.
26:25
Speaker 12: And we don't see hundred deals. We see a thousand deals.
26:27
Speaker 12: So we do fifty new transactions, one hundred and fifty
26:29
Speaker 12: add ons, and with each deal we're doing more and
26:32
Speaker 12: more per deal.
26:34
Speaker 9: So we'll still do six.
26:35
Speaker 12: Billion dollars or so of volume this year. And just
26:38
Speaker 12: senior lending.
26:39
Speaker 1: Man, what a business I want to be in that business?
26:42
Speaker 9: No, exactly what am I doing here?
26:44
Speaker 3: Exactly get Randy, I'm gonna I'm gonna pep up my
26:46
Speaker 3: resume and send it on.
26:48
Speaker 1: All right, Randy, thanks so much for joining us. We
26:50
Speaker 1: was appreciate getting some of your time. Randy Swimmer East
26:52
Speaker 1: cohead of Senior Lending and Senior Managing Director Churchill Asset Management,
26:56
Speaker 1: and more than anybody else, I think he schooled us.
26:58
Speaker 3: All right, Well, he schools I think the industry because
27:00
Speaker 3: he also is the publisher of The Left Lead, which
27:03
Speaker 3: is one of the most popular places to get information
27:06
Speaker 3: on this.
27:07
Speaker 8: Yep, you're listening to the team Ken's Are Live program
27:11
Speaker 8: Bloomberg Markets weekdays at ten am Eastern.
27:13
Speaker 5: On Bloomberg dot com, the iHeartRadio.
27:16
Speaker 8: App, and the Bloomberg Business App, or listen on demand
27:19
Speaker 8: wherever you get your podcasts.
27:22
Speaker 1: All right, let's switch gears do our C suite. Check
27:25
Speaker 1: in here today with Jenna Droso's CEO of Signet Jewelers.
27:29
Speaker 1: Signat Jewelers trades on New York Stock Exchange SIG based
27:34
Speaker 1: in Akron, Ohio. Se Matt, We've got you another Ohio
27:37
Speaker 1: company like good Stuff. It's got a market cap of
27:40
Speaker 1: three point four billion stocks up about twelve.
27:42
Speaker 3: And it's a very correlated town, right, because isn't that
27:45
Speaker 3: we're good good year.
27:46
Speaker 1: Yeah, one of the tire things. Man, Jinna, thanks so
27:48
Speaker 1: much for joining us here. Talk to us about your
27:50
Speaker 1: business here. What are the trends you're seeing so far
27:52
Speaker 1: this year and what are you telling your shareholders about
27:54
Speaker 1: next year.
27:56
Speaker 14: Yes, we're seeing some very interesting trends. In the second order,
28:00
Speaker 14: we were able to over deliver our revenue and bottom
28:05
Speaker 14: line guide. And some of the strength that we saw
28:09
Speaker 14: was in lower priced fashion jewelry, So jewelry under one
28:13
Speaker 14: thousand dollars, almost a back to school like trend, whether
28:17
Speaker 14: you go back to school or not. You know, people
28:20
Speaker 14: often refresh their look at that time of year, and
28:24
Speaker 14: we saw strong sales that boats well for jewelry being
28:28
Speaker 14: in the consideration set as people move toward holiday. I
28:32
Speaker 14: think the other really big trend that we've seen is
28:35
Speaker 14: that there has been a lull in engagements. So this
28:40
Speaker 14: year calendar year twenty three, engagements are down about twenty
28:44
Speaker 14: five percent versus a typical pre COVID year. That's a
28:49
Speaker 14: temporary COVID disruption. People usually get engaged three point two
28:54
Speaker 14: five years after they meet, and and you know, three
28:58
Speaker 14: years ago we were in lockdown and so people were
29:01
Speaker 14: not meeting in the same way.
29:03
Speaker 15: So that's for metic Yeah, yeah, exactly that.
29:06
Speaker 14: So that trough of engagements is happening right now, but
29:10
Speaker 14: we expect it to begin to come back in our
29:12
Speaker 14: fourth quarter and that provides a three year tailwind actually
29:17
Speaker 14: for us because about fifty percent of our business is
29:20
Speaker 14: in the bridle category.
29:22
Speaker 1: So do you care about the Chinese and coming in
29:26
Speaker 1: and buying stuff or is that really not your business
29:29
Speaker 1: Chinese consumer to you know, tourists coming into the States
29:32
Speaker 1: that or is that not really your business because I
29:34
Speaker 1: know for a lot of the folks here in New
29:36
Speaker 1: York City, they welcome they can't wait for the Chinese
29:39
Speaker 1: consumer to come back.
29:42
Speaker 14: That's not really a big part of our business. So
29:46
Speaker 14: it's not a strong impact one way or the other.
29:49
Speaker 14: What is interesting, though, is that people tend to buy
29:52
Speaker 14: jewelry associated with travel. And one of the things that
29:57
Speaker 14: we talked a lot about on our second quarter earnings
29:59
Speaker 14: call is the proprietary data that we now understand about
30:04
Speaker 14: couple's relationship formation. So we have forty five milestones that
30:09
Speaker 14: we look at that happened from you know, we went
30:12
Speaker 14: to a movie all the way to we met the parents,
30:14
Speaker 14: to we move in together, and so we can track
30:18
Speaker 14: that going on a romantic trip together is.
30:20
Speaker 15: One of those milestones.
30:21
Speaker 14: So for our business, it was actually good to see
30:24
Speaker 14: a lot of couples traveling together over the summer, attending
30:28
Speaker 14: a concert together. That kind of thing is good for
30:31
Speaker 14: future engagement ring sales.
30:34
Speaker 3: How about you know, I think of class rings, yep, I.
30:39
Speaker 9: Think of Super Bowl rings.
30:41
Speaker 3: I think of signet rings, and I assume that's where
30:45
Speaker 3: you got your name. Are those things anywhere near as
30:48
Speaker 3: important as engagement rings?
30:50
Speaker 5: To you?
30:52
Speaker 14: Not as important? But it's part of the you know,
30:55
Speaker 14: customers journey. I mean, what we try to do is
30:58
Speaker 14: meet customers at the point of market entry to the category,
31:02
Speaker 14: which is usually either getting your ears pierced or buying
31:05
Speaker 14: an engagement ring, and then we try to follow that
31:09
Speaker 14: customer and you know, throughout their life through other milestones
31:13
Speaker 14: like birthdays or graduations or you know, anniversaries, things like that.
31:19
Speaker 14: So rings itself, fashion rings are a big part of
31:22
Speaker 14: our business.
31:23
Speaker 15: Also, our k banner makes all of the NFL Hall
31:27
Speaker 15: of Fame.
31:27
Speaker 14: Rings, and our sales banner makes all of the rings
31:32
Speaker 14: for historically black colleges and universities and so we have
31:38
Speaker 14: a presence in those special kind of rings as well.
31:41
Speaker 1: Jina, talk to us about the cost side of your business.
31:43
Speaker 1: What are the key drivers in your cost structure and
31:46
Speaker 1: kind of where are they moving these days.
31:48
Speaker 15: Yeah, that's a great story for us.
31:51
Speaker 14: We've really developed a competitive advantage in sourcing.
31:55
Speaker 15: We are vertically integrated.
31:56
Speaker 14: We're one of only a small group of retailers who
32:01
Speaker 14: are site holders with de Beers.
32:03
Speaker 15: So we buy diamonds right from the mine.
32:06
Speaker 14: We own our own cutting and polishing facility in Botswana
32:10
Speaker 14: and contract with several others in India, and so we
32:13
Speaker 14: have very good visibility into how the prices move of
32:18
Speaker 14: diamonds at different times.
32:20
Speaker 15: What that gives us is an ability to.
32:22
Speaker 14: Continuously offer customers a great value, and it also is
32:27
Speaker 14: part of our responsible sourcing strategy. We know that all
32:32
Speaker 14: of the gemstones and metals that we sell are sourced
32:36
Speaker 14: in an ethical way and completely conflict free. That's something
32:40
Speaker 14: customers really care about. So I'm proud that our company
32:43
Speaker 14: can be.
32:43
Speaker 15: A leader in that.
32:45
Speaker 3: How about the cost of gold is that not a
32:47
Speaker 3: I mean that's what I think of. Of course, the
32:50
Speaker 3: diamond is I guess far more valuable than the gold
32:53
Speaker 3: ring that you put it in. But we have seen
32:56
Speaker 3: gold rise up right now we're just under one nine
33:00
Speaker 3: and thirty dollars a troy.
33:01
Speaker 15: Ounce, yes, so so that does matter. What I would
33:05
Speaker 15: say is.
33:06
Speaker 14: That while our product contains commodities like gold, like diamonds,
33:11
Speaker 14: it's not a commodity product, and so the retail pricing
33:16
Speaker 14: tends to have less fluctuation than the actual ingredient cost,
33:21
Speaker 14: and we tend to be able to price to cover
33:24
Speaker 14: that because you know, when when people want a great look,
33:28
Speaker 14: you know with a gold necklace or a chain or whatever,
33:31
Speaker 14: they are willing to pay to get the high quality
33:35
Speaker 14: that we can provide them. The other thing that we
33:37
Speaker 14: do in a time like this is we bring innovations
33:40
Speaker 14: to the market. So one of the innovations that we
33:43
Speaker 14: have for holiday, and the technical name of it is electroform.
33:47
Speaker 14: But think of it like putting gold around a straw,
33:52
Speaker 14: where you know, we have a metal in the inside
33:55
Speaker 14: that we actually can can chemically remove like straw, and
34:00
Speaker 14: so then the gold is just formed around the outside.
34:03
Speaker 14: So you get a very big look for a lot
34:06
Speaker 14: less cost because there's less actual gold in the product.
34:11
Speaker 14: And so innovations like that. We work, you know, years
34:15
Speaker 14: out with our vendors to be able to uniquely offer
34:18
Speaker 14: to our customers so they can get a great value
34:21
Speaker 14: no matter what the commodity price market looks like.
34:24
Speaker 1: Hi, Jenna, thanks so much for joining us. Really appreciate
34:26
Speaker 1: getting some of your time. Jennett draws us. She is
34:30
Speaker 1: the CEOP signa jewelers that trades on the New York
34:32
Speaker 1: Stock Exchange.
34:33
Speaker 8: You're listening to the tape cans our live program, Bloomberg
34:37
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
34:40
Speaker 8: tune in app, Bloomberg dot Com, and the.
34:42
Speaker 5: Bloomberg Business App.
34:43
Speaker 8: You can also listen live on Amazon Alexa from our
34:46
Speaker 8: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
34:52
Speaker 1: That certainly one of the key stories we are following
34:54
Speaker 1: today is the strike by the UAW against the big
34:57
Speaker 1: three auto makers. Ed Corey, he's an anchor and reporter
35:00
Speaker 1: for Bloomberg Radio. He is at the Detroit Auto Show,
35:03
Speaker 1: so we can get a little bit of a different
35:04
Speaker 1: view there from the floor. Ed, thanks so much for
35:07
Speaker 1: joining us here. What's the feeling there at the auto show?
35:10
Speaker 1: About you know, day one of this strike.
35:14
Speaker 11: You know, it's kind of a mixed vibe.
35:16
Speaker 16: The people who are behind the show promoting it, the
35:18
Speaker 16: people putting displays together, the people working refreshments and so on.
35:23
Speaker 16: They know that their goal is to continue to push
35:26
Speaker 16: the future, the electric future of the auto industry, show
35:29
Speaker 16: off what's new, and try to build some excitement. On
35:32
Speaker 16: the other hand, there is a lot of nervousness about
35:35
Speaker 16: this strike. How long will it last? Auto plans affected,
35:40
Speaker 16: which are very profitable for the automakers. So kind of
35:43
Speaker 16: a mixed bag of emotions here.
35:46
Speaker 9: In terms of the political fallout.
35:49
Speaker 3: Are they expecting, you know, President Biden, who is reportedly
35:54
Speaker 3: going to come out and make a statement on this today,
35:57
Speaker 3: to get behind the unions as he is, you know,
36:01
Speaker 3: as he proclaims himself the most pro union president and
36:04
Speaker 3: history of America.
36:05
Speaker 9: Or is he going to try and put us out
36:06
Speaker 9: to this strike.
36:08
Speaker 16: You know what we've been hearing from the President that
36:11
Speaker 16: he wants an agreement to be hammered out. He doesn't
36:15
Speaker 16: want the detrimental economic effects that we've all heard about
36:19
Speaker 16: to come to fruition. Now we're going to see some
36:21
Speaker 16: political political action this evening here at Huntington place in Detroit.
36:28
Speaker 16: There will be a charity preview for the auto show.
36:31
Speaker 16: They raise a ton of money for kids charities in Detroit.
36:34
Speaker 16: Outside just a block from here, the Bernie Sanders will
36:38
Speaker 16: be here with a bunch of uaw members. They will
36:41
Speaker 16: be demonstrating near the UAW Ford Center. So we're going
36:46
Speaker 16: to have that type of you know, again, mixed feelings
36:50
Speaker 16: about this evening and the strike. And I think it's
36:53
Speaker 16: safe to say that everyone involved on's a quick resolution.
36:56
Speaker 16: But right now, as you've been hearing, there doesn't seem
36:59
Speaker 16: to be one in at least not in the near future.
37:02
Speaker 1: So is there any sense out there of how strong
37:05
Speaker 1: or how together, how cohesive unit the rank and file
37:09
Speaker 1: are behind the strike.
37:12
Speaker 16: Oh, in Detroit there have been union members speaking out
37:18
Speaker 16: even at plants that are not affected yet by any
37:21
Speaker 16: type of walkout. As you know, selected plants have been
37:25
Speaker 16: picked for strike activity. But even those who are working
37:29
Speaker 16: today said they, you know, they feel a little nervousness
37:33
Speaker 16: about this.
37:34
Speaker 11: They don't want a lengthy strike.
37:36
Speaker 16: But you know, the thing you hear over and over
37:38
Speaker 16: again from the rank and file here at Detroit in
37:41
Speaker 16: the area auto factories, they want they want to go
37:43
Speaker 16: back to where they were.
37:44
Speaker 11: They lost some ground, you know, two thousand and eight
37:46
Speaker 11: was rough.
37:47
Speaker 16: They don't like the fact that some workers doing the
37:51
Speaker 16: same job or making more than others. So if they
37:54
Speaker 16: want that parody to be restored. And again they would
37:58
Speaker 16: like to see a pay increase because they hear and
38:01
Speaker 16: read about the increases that the CEOs have been giving.
38:05
Speaker 2: That's for sure.
38:05
Speaker 1: And you know ed David weston Bloomberg Television interviewed Borough
38:11
Speaker 1: of a borough of GM earlier today.
38:14
Speaker 2: Boy, she came across, at least to me, is quite upset.
38:17
Speaker 1: I mean, I think she feels that General Motors has
38:19
Speaker 1: put a very credible deal on the table. And I
38:23
Speaker 1: kind of came away from that interview thinking, boy, I
38:25
Speaker 1: don't think the auto guys are going to be at
38:27
Speaker 1: the company's going to be budging much, at least in
38:29
Speaker 1: the near near term.
38:31
Speaker 16: Well you might expect that kind of stance maybe, you know,
38:36
Speaker 16: in the initial phase of this strike. The automakers are,
38:40
Speaker 16: you know, trying to maintain the position that they've had.
38:46
Speaker 16: You know that we came through tough economic times, that
38:50
Speaker 16: there is a bright future ahead. And you heard Mary
38:54
Speaker 16: Barrs say that her salary is based on the performance
38:59
Speaker 16: of the company, and the company has earned money, and
39:02
Speaker 16: then just part of her contract she gets increases too.
39:06
Speaker 16: But the rank and file, the union members, say, hey, look,
39:09
Speaker 16: you know we are a huge part of the of
39:13
Speaker 16: the of the success that the company has had. Models
39:18
Speaker 16: are coming in as a new models are coming on
39:21
Speaker 16: the scene, and as we head into an electric future.
39:23
Speaker 16: They want to make sure that they're not going to
39:25
Speaker 16: be behind. They at least want to recoup some of
39:28
Speaker 16: what they believe they've lost over the last few years.
39:31
Speaker 3: Had you been at the auto show for a couple
39:33
Speaker 3: of days now? I used to go every single year.
39:36
Speaker 3: It was like the biggest event of my on my calendar,
39:42
Speaker 3: and it has dwindled, right, I mean back in the
39:45
Speaker 3: day everybody was at the Detroit Auto Show is the
39:48
Speaker 3: most important one for the industry. What's it like this
39:52
Speaker 3: year and have you seen anything cool?
39:55
Speaker 16: Well, you know, the good news is it is bigger
39:58
Speaker 16: than last year. There was you know, the pandemic when
40:02
Speaker 16: we didn't see any activity, and so yeah, it is
40:04
Speaker 16: bigger than last year. No, it's not up to pre
40:07
Speaker 16: pandemic levels. But there's a lot of excitement at the show.
40:12
Speaker 16: I mean, sure, you have the prototypes, you know, the
40:14
Speaker 16: whiz bang models that may or may not go into
40:17
Speaker 16: production ten years from now, but models that you can buy,
40:21
Speaker 16: you know, in the very near future are are pretty
40:24
Speaker 16: hot here. I mean, Ford is out with a new
40:26
Speaker 16: F one fifty. There is a jeep that's coming out
40:32
Speaker 16: and it's attracting a lot of excitement. And also the
40:37
Speaker 16: Cadillac CT five has a new look this year and
40:41
Speaker 16: that's been a very very popular model. So those big
40:44
Speaker 16: three Detroit automakers with a strong showing of something you know,
40:47
Speaker 16: people can really check out and then you know, put
40:51
Speaker 16: a deposit on or go, you know, order from the
40:53
Speaker 16: automaker too.
40:54
Speaker 11: So there's still is some excitement here.
40:57
Speaker 1: And thanks so much for joining us. So I appreciate
40:59
Speaker 1: getting it ten and reporting from you. Ed Query's anchor
41:02
Speaker 1: and reporter for Bloomberg Radio in the great city of Detroit.
41:07
Speaker 8: You're listening to the tape ketch Are live program Bloomberg
41:10
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
41:14
Speaker 8: tune in app, Bloomberg dot Com, and the.
41:16
Speaker 5: Bloomberg Business app.
41:17
Speaker 8: You can also listen live on Amazon Alexa from our
41:20
Speaker 8: flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
41:26
Speaker 3: I've been looking forward all day to this. We have
41:28
Speaker 3: somewhat of a Wall Street legend. Nice joining us right now.
41:32
Speaker 3: Todd Harrison is founding partner and chief investment officer at
41:36
Speaker 3: CB one Capital Management.
41:37
Speaker 9: But he has spent decades.
41:39
Speaker 3: On Wall Street working for the big banks, including Morgan Stanley.
41:44
Speaker 3: He founded a company that I think a lot of
41:47
Speaker 3: us loved very much, Minyonville Media back in the day,
41:50
Speaker 3: which won Emmy Awards, And as I said, he founded
41:55
Speaker 3: the Ruby Peck Foundation for Children's Education, which is an
41:57
Speaker 3: important charity that I think a lot of people on
41:59
Speaker 3: Wall Street like to support as well. Todd, first of all,
42:03
Speaker 3: great to see you, Thanks so much for joining us.
42:06
Speaker 3: Tell us what you're doing now at CB one Capital Management.
42:08
Speaker 3: What's that business?
42:10
Speaker 17: I mean, we've been involved in the cannabis space for
42:13
Speaker 17: over a decade now. I actually just uncovered an interview
42:17
Speaker 17: that we did about ten years ago talking about how
42:20
Speaker 17: cannabis was going to be my single best investment idea
42:23
Speaker 17: for the next decade, and that was actually.
42:24
Speaker 13: Nine years ago and it hasn't been.
42:27
Speaker 17: But recently there's been some news that we think is
42:30
Speaker 17: going to change the space and change the fortunes and
42:33
Speaker 17: really move this in a better direction. But CB one
42:36
Speaker 17: Capital we have an investment arm, we have an advisory.
42:38
Speaker 13: Arm, and we have an advocacy arm where we.
42:40
Speaker 17: Help Weldon Angelis and Mission Green to get people out
42:43
Speaker 17: of prison for this plant.
42:44
Speaker 13: So it's pretty comprehensive.
42:46
Speaker 3: It surprises me that potstocks haven't done better considering the
42:52
Speaker 3: uptake of the product.
42:54
Speaker 9: You know, on I think right now twenty three.
42:57
Speaker 3: States have legalized recreational marriaorrijuana, and you only have to
43:02
Speaker 3: walk around New York City for a few minutes to
43:03
Speaker 3: understand that people are consuming cannabis. Is there a disconnect
43:09
Speaker 3: between the sales, the outlook, and you know, the performance
43:14
Speaker 3: of the stocks.
43:16
Speaker 13: Certainly.
43:17
Speaker 17: I think it's one of the biggest asymmetric opportunities right now,
43:20
Speaker 17: right here that I've seen in my thirty four years
43:22
Speaker 17: on Wall Street.
43:23
Speaker 13: And and why now is very.
43:26
Speaker 17: Much because of how we got here, right so, because
43:29
Speaker 17: cannabis has been a Schedule one narcotic for so long,
43:33
Speaker 17: and we won't go into that rabbit hole of why,
43:37
Speaker 17: But because of that, the big takeaways that US cannabis
43:40
Speaker 17: companies can't deduct normal operating expenses it's called Section two
43:44
Speaker 17: eighty of the tax code. So they're being taxed at
43:47
Speaker 17: an effective rate right now of seventy five to eighty percent,
43:50
Speaker 17: and they have been for years, which is why only
43:53
Speaker 17: the best have been able to survive.
43:55
Speaker 13: And the industry was up until two weeks ago.
43:58
Speaker 17: Really you know, looking at an extinction event because of
44:02
Speaker 17: the regulatory construct. But as you probably know, the HHS
44:06
Speaker 17: came out two weeks ago on Wednesday.
44:09
Speaker 13: It was the last couple of days of summer. I
44:11
Speaker 13: was here, but not many people were.
44:12
Speaker 17: They recommended cannabis go to a Schedule three, which would
44:15
Speaker 17: importantly remove.
44:16
Speaker 13: That two way to e tax code. And now we're
44:19
Speaker 13: just waiting on the DEA to codify that opinion.
44:21
Speaker 17: We think that could happen by year end and then
44:24
Speaker 17: buy to consign it into law before next year's election.
44:27
Speaker 17: That's just one thing that's happening. Safe banking we heard
44:30
Speaker 17: last night. It was broke news broke last night, and
44:32
Speaker 17: it's moving around today or getting out today that safe
44:36
Speaker 17: Banking is going to go through a Senate committee markup.
44:38
Speaker 17: This is the sign or the tell that the Senate's
44:41
Speaker 17: going to pass safe banking for the first time. The
44:43
Speaker 17: Upper Chamber and then conceivably be tacked onto a must
44:47
Speaker 17: pass bill by year end. So there's a few things right,
44:51
Speaker 17: and if they all happened, this could get really spicy.
44:53
Speaker 13: But just on the math alone, without anything else.
44:57
Speaker 17: If we moved to a schedule three, if that gets codified,
45:00
Speaker 17: talking about a two to three x turn on.
45:02
Speaker 13: Some of these names, just on map.
45:04
Speaker 1: So explain to us why it's developed this way. Ten
45:09
Speaker 1: years ago you thought it would be a much better
45:11
Speaker 1: proposition than it has been. What have been the big missteps?
45:16
Speaker 1: Maybe what is the industry missed? What has Washington missed
45:19
Speaker 1: over the last decade.
45:21
Speaker 13: You know, it's interesting.
45:23
Speaker 17: We spent a lot of time in Washington, and they
45:25
Speaker 17: had explained to us that the states are designed to
45:27
Speaker 17: be nimble and the federal government's designed to move slow.
45:30
Speaker 17: And then added, but the thing about the federal government
45:33
Speaker 17: is that when change happens, it tends.
45:34
Speaker 13: To happen all at once.
45:36
Speaker 17: But because of the disconnect between state and federal laws,
45:40
Speaker 17: because the politicians have been very slow on the uptake,
45:43
Speaker 17: because cannabis is a complex issue with a lot of stakeholders,
45:47
Speaker 17: stakeholders that have a.
45:48
Speaker 13: Legitimate claim to participate in the industry.
45:52
Speaker 17: It's really become muddled down in a lot of different
45:55
Speaker 17: cross currents as the illicit markets really proliferated, you know,
46:00
Speaker 17: as this comes online and becomes a legal framework, which
46:04
Speaker 17: we just took again a seismic shift two weeks ago
46:07
Speaker 17: for the first time.
46:07
Speaker 13: That they're two and a half year bear market.
46:09
Speaker 17: This is the first domino and it's a big one,
46:12
Speaker 17: and if the others fall, it can get spicy. But
46:14
Speaker 17: we need this to sort of relax the arbitrage between
46:18
Speaker 17: federal and state law.
46:19
Speaker 13: Allow these companies to operate on an even playing field.
46:22
Speaker 17: And after what they've just been through, I would argue
46:24
Speaker 17: that they're they're pretty lean and mean and ready to
46:26
Speaker 17: ready to.
46:26
Speaker 13: Go to work.
46:28
Speaker 15: I look across the.
46:31
Speaker 3: Market, there are a lot of different participants, right, not
46:34
Speaker 3: just in North America, but mainly right in the US
46:38
Speaker 3: and Canada. Are there companies you think that really have
46:41
Speaker 3: got it right? Are the companies you think that are solid,
46:45
Speaker 3: you know, investible that we should be looking at more closely?
46:49
Speaker 5: And sure? So, yeah, of.
46:51
Speaker 13: Course, And I say this, you know word, we have positions.
46:54
Speaker 17: We advise some of these companies, but we got to
46:56
Speaker 17: know a lot of companies very well.
46:58
Speaker 13: You know, iron sharpens iron.
47:00
Speaker 17: During the two and a half year bear market, this
47:01
Speaker 17: was a ninety one percent drawdown for MSOs, which is
47:04
Speaker 17: the ETF that we advise. But you know, certainly you
47:08
Speaker 17: can learn a lot just by watching how some of
47:10
Speaker 17: these companies did during that trough. As we think it
47:13
Speaker 17: is as in front of all these states onboarding.
47:15
Speaker 13: On the East coast, and you know, you look at.
47:17
Speaker 17: The Veranos, the Terra sends the green thumbs, and there's
47:21
Speaker 17: others right at Glasshouse in California.
47:24
Speaker 13: You know, as two way to eges away.
47:27
Speaker 17: As the federal government starts to move out of the way,
47:30
Speaker 17: it has to be incremental the change, and that change
47:34
Speaker 17: because it's incremental, like we don't have the political wherewithal
47:37
Speaker 17: capacity to move this to a deschedule where it should be.
47:41
Speaker 17: But Schedule three is a stepping stone to descheduling.
47:44
Speaker 13: Happens to play right.
47:46
Speaker 17: Into the MSOs and the publicly traded companies hands because
47:50
Speaker 17: they still have some of the protections and the barriers
47:52
Speaker 17: to entry and a very regulated market at the state level.
47:56
Speaker 17: But the federal government's moving to really support the tenth
48:00
Speaker 17: Amendment and let the states become the laboratories of democracy.
48:04
Speaker 17: And those industries evolve at the state level as the
48:08
Speaker 17: federal framework pick shit. So this is a big you know,
48:11
Speaker 17: this is a big, big catalyst. I don't think people
48:14
Speaker 17: really understand it. What's interesting a is that there is
48:18
Speaker 17: a pretty significant structural short in these names, we feel
48:22
Speaker 17: because of without getting too far into the weeds, because
48:26
Speaker 17: the US cannabis companies have to list on the Canadian
48:29
Speaker 17: Stock Exchange. They can't list on US stock exchanges, but
48:32
Speaker 17: the MSOs ETF is on the New York Stock Exchange.
48:36
Speaker 17: There's been a pretty pernicious algorithm that's been hitting these
48:40
Speaker 17: stocks down. Naked short we believe, naked short in these stocks,
48:44
Speaker 17: routing them through Europe, however it may be.
48:46
Speaker 13: But we think they're still there. We think they're still trapped,
48:49
Speaker 13: and we'll see how that plays out over the time
48:52
Speaker 13: to come.
48:52
Speaker 17: But the other interesting part is all the institutions and
48:55
Speaker 17: you know, you know, we talked to a.
48:56
Speaker 13: Lot of these guys. We made a lot of calls
48:59
Speaker 13: after this news.
49:00
Speaker 17: And even the institutions or the funds of the family
49:03
Speaker 17: offices that can buy US cannabis are telling us, a
49:06
Speaker 17: lot of them are telling us. After so many disappointments,
49:09
Speaker 17: we want to actually see it happen. We want to
49:11
Speaker 17: see this play through. We want to see it get
49:13
Speaker 17: done before we're going to believe it. And I think
49:15
Speaker 17: that's incredibly bullish.
49:16
Speaker 1: Also, Tod, given all that background, what types of investments
49:20
Speaker 1: are you making in the space today?
49:24
Speaker 17: I mean we mentioned some of them. You know, there's
49:26
Speaker 17: only a handfeit. There's really only so many tradable names
49:31
Speaker 17: in this space.
49:31
Speaker 3: I mean the top holdings in MSOs or Green Thumb,
49:35
Speaker 3: cure Leaf, Verano, truly, Cresco.
49:39
Speaker 1: So that's is there anything in the private space you're
49:41
Speaker 1: looking at?
49:42
Speaker 5: Sure?
49:43
Speaker 17: I mean, just to talk about MSOs, the way that
49:45
Speaker 17: that portfolio is constructed is that fang on one side
49:48
Speaker 17: that you know, if you look at Y two K
49:50
Speaker 17: as sort of a preamble of what we're going through.
49:52
Speaker 13: Everything they said.
49:53
Speaker 17: Technology was going to be happened, but not before the
49:55
Speaker 17: tech crash. I think cannabis is that is at that
49:58
Speaker 17: spot right now. But I think that you know the
50:01
Speaker 17: fang if you will, those five names on one side
50:04
Speaker 17: and then forgotten as we say, some of these lower
50:07
Speaker 17: tiered MSOs on the other side, I think are having
50:10
Speaker 17: more beata because a lot of them were treating at
50:12
Speaker 17: their cash levels a couple of weeks ago, because there
50:14
Speaker 17: was no visibility on how they were going to service
50:16
Speaker 17: their debt, on what they're on, what their cash generation
50:19
Speaker 17: levels are we're going to be and that's starting to
50:21
Speaker 17: come into view right now. So both of the I
50:24
Speaker 17: think that portfolio as well positioned MSS and.
50:27
Speaker 13: Again we're involved.
50:28
Speaker 17: But on the private side, Yes, the capital markets have
50:31
Speaker 17: been shut.
50:31
Speaker 13: Down for a number of years, and I think that
50:34
Speaker 13: you know, not only for the stocks, but for the
50:35
Speaker 13: research and for the sentiment. This will help close the
50:39
Speaker 13: chasm between the state and the federal sort of discrepancies.
50:43
Speaker 3: Do you have a view on what the heck has
50:47
Speaker 3: gone wrong in New York State?
50:50
Speaker 9: I mean, it is an absolute mess, right.
50:52
Speaker 3: There's only a few licensed dispensaries here. They only sell
50:58
Speaker 3: a select number of products, the best stuff that everybody wants.
51:03
Speaker 3: You know, the Kana and the Camino products are only
51:08
Speaker 3: in like Empire, and then you know the million other
51:11
Speaker 3: shops around town that aren't licensed.
51:14
Speaker 9: How did they do such a bad job in New York?
51:19
Speaker 13: Well, you sound like a consumer, my man.
51:21
Speaker 17: I mean you you just rattled a couple of brands
51:23
Speaker 17: right there that this is not your first rodeo, I
51:26
Speaker 17: could tell.
51:27
Speaker 13: But New York, I mean, you know, it's a cautionary tale.
51:31
Speaker 13: And listen, well intentioned, right, I mean, they tried to
51:33
Speaker 13: do the right thing.
51:35
Speaker 17: But what happened was when when COVID hit and and
51:38
Speaker 17: you know, again follow the money. The reason this was
51:40
Speaker 17: coming online in all these states was because the tax
51:43
Speaker 17: revenues are ridiculous, the job creations are ridiculous, and oh,
51:46
Speaker 17: by the way, it's good for you, like as we're
51:48
Speaker 17: finding out more and more. But when the COVID, when
51:51
Speaker 17: COVID hit, and the federal government just completely you know,
51:55
Speaker 17: flushed all these budgets with cash. New York in particular said,
51:58
Speaker 17: you know, we're going to create this framework that we
52:01
Speaker 17: think is just and rights the wrongs of the war
52:05
Speaker 17: on drugs, And like I said, well intentioned, But anybody
52:09
Speaker 17: that's been around the block a few times knows that
52:11
Speaker 17: you can't legislate wealth, right. And there's a big difference
52:13
Speaker 17: between criminal justice. People shouldn't be in prison for a
52:16
Speaker 17: plant and social justice. Right, they necessarily shouldn't be at
52:19
Speaker 17: the front of the line either. And I think that
52:21
Speaker 17: there is there's a balance there, and there's a Toget.
52:24
Speaker 13: You know, we can do this together. I believe that.
52:26
Speaker 17: But New York never really allowed the opportunity. Maryland did
52:30
Speaker 17: it right, Missouri did it right.
52:31
Speaker 13: They levered the medical industry into an adult use industry,
52:35
Speaker 13: and then when they made money, they you know, sort
52:38
Speaker 13: of address the social issues, justice issues. New York tried
52:41
Speaker 13: to do that the opposite way. Now you walk down
52:45
Speaker 13: there's fourteen thousand, you know street, fourteen thousand shops in
52:48
Speaker 13: New York.
52:48
Speaker 17: Most New Yorkers think that's the legal framework. But that's
52:51
Speaker 17: going to transition, right, So.
52:53
Speaker 13: It's a process. Over time, prices will come down, the
52:56
Speaker 13: ilestle market will get crowded out.
52:58
Speaker 17: Besides, they're selling pest size and a multification agents that
53:02
Speaker 17: are literally poison, so that'll go away like bathtub Gin
53:05
Speaker 17: once went.
53:06
Speaker 3: Dude, imagine if you could only buy Brooklyn Lauger. Yeah,
53:09
Speaker 3: you want a Lagunitas or you want Sierra Nevada, and
53:12
Speaker 3: they're telling you you can't get that at.
53:14
Speaker 2: A legal show. The social injustice of it all.
53:16
Speaker 1: Todd Harrison, thank you so much for joining us founding
53:18
Speaker 1: partner and CIO at c B one Capital Management.
53:23
Speaker 8: You're listening to the tape cansur live program Bloomberg Markets
53:26
Speaker 8: weekdays at ten am Eastern on Bloomberg Radio, the tune
53:30
Speaker 8: in app, Bloomberg dot Com, and the.
53:31
Speaker 5: Bloomberg Business App.
53:33
Speaker 8: You can also listen live on Amazon Alexa from our
53:35
Speaker 8: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
53:42
Speaker 9: Let's get to what I'm driving this week?
53:44
Speaker 2: Yeah, what are you driving? I?
53:45
Speaker 3: Well, I just a disclaimer that you know, the car
53:47
Speaker 3: makers allow me to use these cars to test drive.
53:51
Speaker 3: You've been covering the industry for twenty years now, and
53:54
Speaker 3: so I often get a new car or a truck
53:56
Speaker 3: or a motorcycle to test out. This week, I have
54:00
Speaker 3: something special, and so the purpose of this hit is twofold.
54:04
Speaker 9: Number one, I want to tell.
54:06
Speaker 3: Our viewers about a product, and number two, I'm trying
54:10
Speaker 3: to convince you to get to get one of these cars.
54:13
Speaker 3: I'm going to bring in my buddy Matt Hart agree
54:15
Speaker 3: to help me do that. He was the editor in
54:17
Speaker 3: chief of Jalopnik. He's now working on a site called Autopia,
54:21
Speaker 3: but he's been also in the industry for a couple
54:23
Speaker 3: of decades here at covering cars. Matt, you know it's
54:26
Speaker 3: long been the dream of I think every auto journalist
54:30
Speaker 3: to get an absolute stripper of a nine to eleven,
54:33
Speaker 3: that is, to order the base model with no options
54:38
Speaker 3: at all, and I have almost achieved that in this
54:41
Speaker 3: test Dride. It's a Carrera T, which is like already
54:44
Speaker 3: the stripped down version of the nine to eleven. It
54:47
Speaker 3: only has the essentials, the things you need, like a
54:49
Speaker 3: short throw shifter, and it has almost no options on it.
54:52
Speaker 3: I absolutely love it, with one exception, and.
54:56
Speaker 9: That is the color.
54:57
Speaker 2: I love.
54:58
Speaker 9: The color.
54:59
Speaker 3: I don't know, Matt, you I probably can't see it,
55:00
Speaker 3: but maybe you've seen. The color is called ruby star Neo.
55:04
Speaker 2: It's like a.
55:04
Speaker 9: Purple pink, like a Barbie pink.
55:08
Speaker 18: You mean, it's the best color. You got the best color,
55:11
Speaker 18: and you're complaining.
55:12
Speaker 9: My daughter thinks so as well. But give me your thoughts.
55:14
Speaker 3: First off, on the Carrera T, the nine to eleven
55:17
Speaker 3: Carrera Tea, it's great.
55:19
Speaker 18: I mean, I think what Portia has done is realized that,
55:24
Speaker 18: as with a lot of things in life, the more options,
55:26
Speaker 18: the better and the more money they can get. And
55:29
Speaker 18: you know, for an enthusiast, I am not likely to
55:33
Speaker 18: buy a nine to eleven Turbo. It's a little pricey,
55:36
Speaker 18: but if I'm in a nine to eleven range. They
55:38
Speaker 18: have created something that fits between the true bass Carrera
55:41
Speaker 18: and the Korera S and they call it the Karrera Tea.
55:43
Speaker 18: And somehow by creating a cheaper version of the Karrera S,
55:47
Speaker 18: they've made it more desirable than a Korera S. They
55:51
Speaker 18: are selling at a pretty high levels for people I've
55:54
Speaker 18: spoken to. And the problem is even though it's the
55:55
Speaker 18: stripper version, it's a little bit faster than the base Carrera.
55:59
Speaker 18: I'm I did one myself. I built one before the
56:02
Speaker 18: show and I was like, oh, you know, it starts
56:03
Speaker 18: a one hundred and thirty. That's such a great price.
56:05
Speaker 18: I'm only going to add a couple of options. And
56:07
Speaker 18: you get on a port of personalization page and then
56:09
Speaker 18: you're like, well, I need Hardiburg yellow seatbelts. I definitely
56:13
Speaker 18: need to have this special I like it in brown,
56:15
Speaker 18: the special brown color. I need this, I need that,
56:17
Speaker 18: And then all of a sudden it's you're one hundred
56:21
Speaker 18: and forty thousand dollars into a car. So it's genius.
56:23
Speaker 18: I think it's genius. You got it with the manual.
56:25
Speaker 18: Who cares what color it is as long as it
56:27
Speaker 18: has a manual that is the right cardigat well.
56:28
Speaker 9: And that's the beauty of this.
56:30
Speaker 3: So the base model Carrera, the absolute cheapest one you
56:33
Speaker 3: could get, doesn't have the manual as an option. You
56:36
Speaker 3: have to get the PDK, which is a very amazing
56:39
Speaker 3: automatic transmission, but it's still an automatic transmission. And Matt
56:43
Speaker 3: the benefit that the T has over the Carrera S.
56:47
Speaker 9: I was talking Luke.
56:48
Speaker 3: With Luke van Derzany, you know who runs PR for
56:52
Speaker 3: the nine to eleven at Portia in the US. He
56:55
Speaker 3: told me you can't get the short throw shifter on
56:58
Speaker 3: the S. You have to go up a level to
57:00
Speaker 3: the GTS to get that, And that to me has
57:03
Speaker 3: been the revelation with this car. You know, I had
57:05
Speaker 3: a Carrera ass a nine nine to one Carrera ass sure,
57:08
Speaker 3: and I I had never thought about changing out the stick.
57:14
Speaker 9: This little stick is so much better than the big stick.
57:17
Speaker 9: I don't like a big stick.
57:18
Speaker 1: I like a little students.
57:19
Speaker 9: You know. The other revelation for me with this car
57:22
Speaker 9: is the.
57:23
Speaker 3: Cloth seats are amazing. I've never preferred cloth over leather,
57:27
Speaker 3: and these are just I'd rather have them. So I
57:31
Speaker 3: feel like it's an opportunity for Paul Sweeney to get
57:34
Speaker 3: a new car and save a little bit of money
57:36
Speaker 3: because he's not buying the turbos.
57:38
Speaker 18: It's a great deal. Oh all right, I think you
57:40
Speaker 18: would really not to buy it at this point.
57:43
Speaker 1: Hey, Matt, how about you're you would like matter a
57:45
Speaker 1: car guy and you're at the high end here. I
57:48
Speaker 1: can't imagine the Ferraris, the Lamborghinis, the portions of the
57:51
Speaker 1: world they are going electric willingly. Are they scratching and
57:55
Speaker 1: clawing to remain in the ice world.
57:59
Speaker 18: No. If you look at especially in Germany, there's been
58:02
Speaker 18: a big push with the EU regulations coming up the
58:05
Speaker 18: theoretically that in a decade, you know, we're going to
58:08
Speaker 18: have to have essentially no gas powered cars to get
58:11
Speaker 18: that legislation through Brussels. Basically, the Germans said, specifically, Portia
58:17
Speaker 18: of Volkswagen said, you know what, E fuels, give us
58:20
Speaker 18: an exception for carbon neutral e fuels because no matter what,
58:24
Speaker 18: even if they build electric cars, even if they sell
58:26
Speaker 18: primarily electric cars. No one I've talked about Ferrari, no
58:29
Speaker 18: one I've talked about Portia has given up on a
58:33
Speaker 18: gas powered car because for a sports car, even though
58:35
Speaker 18: an electric car might be faster. Nothing just sounds, and
58:39
Speaker 18: I love driving sports cars. Nothing sounds right. You don't
58:41
Speaker 18: get that feel of a short throw shifter like you
58:44
Speaker 18: need that visceral reaction because that's what you're paying where.
58:47
Speaker 18: You're not paying to get somewhere faster, You're paying to
58:49
Speaker 18: get somewhere with more excitement, with more joy.
58:53
Speaker 3: That's this car definitely fits that bill. I mean, it
58:56
Speaker 3: isn't the fastest car on the road. It doesn't feel
58:59
Speaker 3: as quick as my Carrera S, and it doesn't have
59:02
Speaker 3: as much horse powers three hundred and seventy nine horse power.
59:05
Speaker 3: You know, my Carera had I think four hundred and
59:08
Speaker 3: now the Carrera S.
59:09
Speaker 9: Has probably four thirty.
59:11
Speaker 3: But it's got that build up, it's got that uh
59:15
Speaker 3: you know, the gradual acceleration and the sound from the
59:19
Speaker 3: sport exhausted just amazing that I absolutely love. Plus it
59:22
Speaker 3: only weighs like thirty one hundred pounds, so that's incredibly light.
59:25
Speaker 3: By the way, maybe you can help Paul out with
59:27
Speaker 3: his conundrum veering away from the nine to eleven for
59:30
Speaker 3: a moment. He has the last manual five series. He
59:33
Speaker 3: has the twenty fourteen five point thirty five Eye with
59:37
Speaker 3: a stick, and now he's worried that it's gonna start
59:40
Speaker 3: getting old and he's gonna have to make repairs. Should
59:44
Speaker 3: he get something else or should he just make the
59:45
Speaker 3: repairs and keep the car that he loves the most.
59:49
Speaker 18: He should get rid of it and give it to me,
59:50
Speaker 18: because I have a I have a two thousand and
59:52
Speaker 18: three five Series five thirty I with the five speed,
59:55
Speaker 18: and it has two hundred and thirty five thousand miles
59:57
Speaker 18: on it.
59:58
Speaker 9: Two hundred thirty five thousand miles two.
1:00:00
Speaker 18: D and thirty five. The look twenty fourteen. It's a
1:00:02
Speaker 18: little sketchy. You're you're on the edge where the car
1:00:05
Speaker 18: is so modern that sometimes fixing things becomes cost prohibitive.
1:00:10
Speaker 18: But you're just on the right side of the edge.
1:00:12
Speaker 18: I think, I think you can make this car last.
1:00:15
Speaker 18: And it's not like mine. Mine is like Legos. You
1:00:17
Speaker 18: can pop something out, you can pop something in, you
1:00:19
Speaker 18: can generally fix the car. Your car isn't Legos, unfortunately,
1:00:22
Speaker 18: it's tech Lego technic. It's a little bit more advanced.
1:00:25
Speaker 18: But no, you're never going to find this is the problem.
1:00:27
Speaker 18: You're never going to find something new that feels as
1:00:31
Speaker 18: good as that car, because they can't make cars like
1:00:34
Speaker 18: that anymore. So either put it on, bring a trailer,
1:00:37
Speaker 18: and regret it for the rest of your life, or
1:00:38
Speaker 18: you know, spend two or three thousand dollars a year
1:00:41
Speaker 18: with your mechanic getting out. I think that's the best move.
1:00:43
Speaker 18: Got to keep the car or give it to me also.
1:00:47
Speaker 1: Exactly that could be an option, all right, Matt, thanks
1:00:50
Speaker 1: so much for joining us.
1:00:51
Speaker 2: Lots for me to think about over the weekend.
1:00:54
Speaker 1: Matt Hart agree, he's a publisher of the Auto Utopian.
1:00:57
Speaker 1: Sorry and talking cars with Matt Miller. Matt driving the
1:01:01
Speaker 1: Barbie Pink Portie.
1:01:04
Speaker 2: Carrera T love it.
1:01:05
Speaker 9: I have to give it back.
1:01:06
Speaker 3: Unfortunately I only had it for a week. But I
1:01:09
Speaker 3: joined The Utopian so I get that membership I think
1:01:12
Speaker 3: for a whole year. And plus they're gonna send me
1:01:14
Speaker 3: like a velvet T shirt.
1:01:16
Speaker 2: Oh cool, very good.
1:01:17
Speaker 1: And I'll tell you the Bloomberg Courtyard is a great
1:01:19
Speaker 1: place to kind of showcase cars.
1:01:21
Speaker 2: It looks cool.
1:01:21
Speaker 1: Yeah, I mean you could rent that out, maybe make
1:01:23
Speaker 1: up a couple of bucks where our owns this place.
1:01:27
Speaker 3: Thanks for listening to the Bloomberg Markets podcast. You can
1:01:30
Speaker 3: subscribe and listen to interviews at Apple Podcasts or whatever
1:01:34
Speaker 3: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
1:01:38
Speaker 3: at Matt Miller nineteen seventy three.
1:01:40
Speaker 1: And I'm fall Sweeney. I'm on Twitter at pt Sweeney.
1:01:42
Speaker 1: Before the podcast, you can always catch us worldwide at
1:01:45
Speaker 1: Bloomberg Radio