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Facebook Is Real Business, But Google Is Better For Ad Exposure · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim
• 0:08
  Speaker 1: Fox along with my co host Lisa Abramowitz. Each day
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  Speaker 1: we bring you the most important, noteworthy, and useful interviews
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• 0:32
  Speaker 1: The shares of Facebook, they continue their decline to about
• 0:36
  Speaker 1: a hundred and seventy five dollars right now. That drop
• 0:40
  Speaker 1: being reflected because of the poor report that the company
• 0:44
  Speaker 1: gave after the close of trading yesterday, surprising many analysts
• 0:47
  Speaker 1: joining us now. Colin gillis Director of Research at Chatham
• 0:50
  Speaker 1: Road Partners. Colin gillis always a pleasure if someone said
• 0:55
  Speaker 1: to you, gee, I'm an analyst who covers Facebook and
• 0:59
  Speaker 1: I just got by what they reported. What are you
• 1:03
  Speaker 1: feeling right now? It's a painful day to watch Facebook shares,
• 1:08
  Speaker 1: but a little bit of perspective is needed. Right the
• 1:12
  Speaker 1: shares are just back to the level they were at
• 1:14
  Speaker 1: in May. We knew that Facebook was going to be
• 1:16
  Speaker 1: continuing to invest in security. We knew there's gonna be
• 1:19
  Speaker 1: some concerns around the g d p R, right, the
• 1:22
  Speaker 1: General Data Protection Regulation that's happening in Europe. So the
• 1:26
  Speaker 1: magnitude of the pullback is severe. But this is still
• 1:31
  Speaker 1: a real company, and it's still a real business, and
• 1:33
  Speaker 1: it's still in an area where we're gonna see material growth. Alright.
• 1:37
  Speaker 1: So Colin, is this a buying opportunity? You know it is.
• 1:41
  Speaker 1: But what I always tell people is, if you're looking
• 1:44
  Speaker 1: at the space right and you want to have exposure
• 1:47
  Speaker 1: to know Internet advertising, why not just own Alphabet You've
• 1:52
  Speaker 1: got a very similar type of company, the same revenue stream,
• 1:56
  Speaker 1: but you've got a more diversified suite of services, right,
• 1:58
  Speaker 1: you know, Alphabet a A Google has eight platforms with
• 2:03
  Speaker 1: a billion users, right, whether it's Gmail, Chrome, Maps, YouTube, Android,
• 2:08
  Speaker 1: the play Store, and Google Drive. So they have a
• 2:11
  Speaker 1: much broader diversity of products, whereas Facebook really just has
• 2:15
  Speaker 1: their core platform and Facebook and to a separate degree, Instagram.
• 2:20
  Speaker 1: When does the bleeding stop in terms of the stocks
• 2:22
  Speaker 1: sell off at Facebook? Do you believe right that that
• 2:25
  Speaker 1: that's the number one question that's being asked, and you
• 2:28
  Speaker 1: know it's gonna take several days to shake out. Um,
• 2:31
  Speaker 1: you know, the concern is the forward guidance. Right, we
• 2:34
  Speaker 1: are going to see revenue decelerate and we are going
• 2:36
  Speaker 1: to see expenses likely to tick up, but it may
• 2:39
  Speaker 1: not be as bad as people are expecting. So, just
• 2:42
  Speaker 1: like what we saw with the March quarter results, right
• 2:45
  Speaker 1: where people were expecting the worst, it didn't come in
• 2:48
  Speaker 1: quite as bad. And that's why they bit it back
• 2:50
  Speaker 1: up to these record levels. You know, let's let it
• 2:53
  Speaker 1: settle down for a little bit. I do think that
• 2:57
  Speaker 1: Facebook is a real business. I think the advertise users
• 3:00
  Speaker 1: are not going to disappear, and I do think that
• 3:02
  Speaker 1: people are still going to continue to use it. Right,
• 3:05
  Speaker 1: there is some saturation that's happening. They have total about
• 3:08
  Speaker 1: two and a half billion users across all their platforms.
• 3:11
  Speaker 1: There's only three billion people who have access to the internet. Okay,
• 3:14
  Speaker 1: but Colin, you know some people could say, as you said,
• 3:18
  Speaker 1: this is a real business. They still can count more
• 3:20
  Speaker 1: than two billion people. You know, this is a huge
• 3:24
  Speaker 1: proportion of the globe that uses the platform. So perhaps
• 3:28
  Speaker 1: the flaw lies with the management, the executives who didn't
• 3:32
  Speaker 1: guide the market better, who didn't basically indicate, look, things
• 3:36
  Speaker 1: are slowing down, just hold your horses and and sort
• 3:39
  Speaker 1: of and provide better expectations for what's to come in
• 3:42
  Speaker 1: real time. Yeah, you could say that, and you could
• 3:45
  Speaker 1: also say that they did try to, you know, give
• 3:48
  Speaker 1: certain signals right that that this was was coming um
• 3:51
  Speaker 1: and that the market did not pay any attention to
• 3:52
  Speaker 1: those signals, right, And that's why we're getting the reset
• 3:55
  Speaker 1: that's happening today. Colin tell us about Amazon, Right, So, Alexa,
• 3:59
  Speaker 1: which company will become the trillion market cap first? And
• 4:03
  Speaker 1: we're going to find that out today after Amazon print.
• 4:07
  Speaker 1: And you know, Amazon is one of these companies that
• 4:11
  Speaker 1: has built this incredible ecosystem right around their their prime
• 4:14
  Speaker 1: member systems, and it is a strong contender to become
• 4:18
  Speaker 1: the first company to rease that trillion dollar market cap.
• 4:20
  Speaker 1: So again, an unbelievable run into this earnings print today, right. Uh,
• 4:26
  Speaker 1: you know, we're looking at something a fifty year to date,
• 4:29
  Speaker 1: So I wouldn't be necessarily surprised if there is, you know,
• 4:32
  Speaker 1: as a hiccup because expectations are so strong. But that
• 4:35
  Speaker 1: being said, for the for the longer term, for the
• 4:38
  Speaker 1: longer term view, Amazon is an incredible opportunity to own.
• 4:42
  Speaker 1: So Amazon is sort of this interesting company because they
• 4:45
  Speaker 1: don't see incredible margins, they actually aren't as profitable as
• 4:51
  Speaker 1: their dominance would suggest, because that's their whole business model, right,
• 4:54
  Speaker 1: basically to offer the lowest price uh in order for
• 4:58
  Speaker 1: bigger market share. So what two investors have to see
• 5:01
  Speaker 1: to keep that going to the one trillion to our valuation, right,
• 5:05
  Speaker 1: And what they do is is it's the degree of
• 5:07
  Speaker 1: leverage that is baked into that Amazon business model. And
• 5:12
  Speaker 1: when when you look, when you play around and you see,
• 5:15
  Speaker 1: you know what a small decrease in marketing spend UM
• 5:19
  Speaker 1: or you know some improvement in shipping costs or you
• 5:22
  Speaker 1: know a tick up UH in in AWS. Right. You
• 5:26
  Speaker 1: know services that UM are not physical goods, right, but
• 5:30
  Speaker 1: more digital goods. Right. That's the area where people want
• 5:33
  Speaker 1: to be focusing in on to to to see that profitability.
• 5:36
  Speaker 1: And quite honestly, right, you know they've run the core
• 5:38
  Speaker 1: business at break even, right. All the profit is coming
• 5:41
  Speaker 1: from AWS to to get that market share. But you've
• 5:44
  Speaker 1: got one million prime customers. They are winning the entire
• 5:49
  Speaker 1: retail battle, and um, that profitability will come just quickly. Colin,
• 5:56
  Speaker 1: is there any other company that you need to own
• 5:58
  Speaker 1: other than Amazon and Alphabet? It wouldn't be Apple in
• 6:03
  Speaker 1: my mind right, you know, certainly you know Apple prints
• 6:05
  Speaker 1: next week. Um, they're lagging so far behind in my view.
• 6:09
  Speaker 1: You know, there's the thesis is is that services will
• 6:12
  Speaker 1: will make up for a saturated smartphone marketplace. But I
• 6:16
  Speaker 1: don't see Apple having the chops in AI. I see
• 6:19
  Speaker 1: Siri lagging behind Alexa and Google, and so I'd be
• 6:23
  Speaker 1: concerned about that. Colin Gillis, thank you so much for
• 6:26
  Speaker 1: joining us today. Colin Gillis is director of research at
• 6:28
  Speaker 1: See our partners take a look at small and mid
• 6:43
  Speaker 1: cap stocks with Davils and Blubertocks editor, columnist and blogger
• 6:46
  Speaker 1: at M Live. Go on the Bloomberg. The Russell two
• 6:49
  Speaker 1: thousand is up, even though you are seeing some turbulence
• 6:53
  Speaker 1: in the broader indices. Oh, absolutely, Lisa, and the Russell's
• 6:57
  Speaker 1: gain amounts to nine tents of a percent, quite a
• 7:00
  Speaker 1: contrast with the SMP five hundred, which is lower by
• 7:03
  Speaker 1: a tenth of a percent. The Russell's sharpest game by
• 7:07
  Speaker 1: far belongs to Supervalue, whose ticker is s VU. The
• 7:11
  Speaker 1: grocery wholesaler and supermarket owner has risen sixty four and
• 7:17
  Speaker 1: a half percent after agree to a two point nine
• 7:20
  Speaker 1: billion dollar takeover by United Natural Foods No Supervalue, had
• 7:23
  Speaker 1: been under pressure from activist investor Blackwell's Capital to consider
• 7:26
  Speaker 1: a sale United National Their ticker U and f I.
• 7:32
  Speaker 1: That stock has one of the Russell's biggest losses in
• 7:35
  Speaker 1: response to the deal. It's down thirteen and a half percent. Now.
• 7:40
  Speaker 1: Another stock lifting the index is Annika Therapeutics tooker a
• 7:44
  Speaker 1: n i K, the maker of orthopedic products, is up
• 7:48
  Speaker 1: twenty two percent. Anaka's second quarter earnings were more than
• 7:52
  Speaker 1: twice analyst average estmate in the Blueberg survey, and sales
• 7:55
  Speaker 1: beat projections. And you've got an even bigger gain in
• 7:58
  Speaker 1: John Bean Technologies ticker j A b T. It's up
• 8:00
  Speaker 1: almost twenty five The food and beverage technology company posts
• 8:05
  Speaker 1: a second quarter profit in revenue. Of the top Deestmates
• 8:07
  Speaker 1: and UH, the Russell's steepest decline belongs to l s
• 8:12
  Speaker 1: B Industries ticker l x U, the chemical companies, down
• 8:15
  Speaker 1: fourteen and a half percent. LSB had a wider second
• 8:19
  Speaker 1: quarter loss than analysts expected. Thank you very much, Dave Wilson.
• 8:23
  Speaker 1: Remember to send Dave an email at d Wilson at
• 8:25
  Speaker 1: Bloomberg dot net to sign up for his daily free
• 8:28
  Speaker 1: email newsletter. Well, you know, Lisa, we've been talking on
• 8:31
  Speaker 1: a regular basis about the high cost of real estate
• 8:34
  Speaker 1: in places such as Seattle, Silicon Valley as well as Austin, Texas.
• 8:39
  Speaker 1: But it appears that there might be a slowdown on
• 8:43
  Speaker 1: the way. And here to tell us more about it
• 8:45
  Speaker 1: is Pressant Gopal, us real estate reporter from Bloomberg News,
• 8:49
  Speaker 1: joining us from our one oh six one Boston Newberry
• 8:53
  Speaker 1: Studios in Boston. And you can follow Pressant on Twitter
• 8:57
  Speaker 1: at Mr Gopal and are god Paul? Alright? Mr Gopaul?
• 9:03
  Speaker 1: Tell us about the potential slowdown in these pretty hot
• 9:06
  Speaker 1: real estate areas well. I guess you could say it
• 9:10
  Speaker 1: was bound to happen, right, So, prices have just been
• 9:13
  Speaker 1: um rising at a very rapid pace for for years now. Uh,
• 9:18
  Speaker 1: they're out pacing uh income growth. It's, you know, more
• 9:22
  Speaker 1: than twice income growth right now. So um, and then
• 9:26
  Speaker 1: you throw in the increase in mortgage rates, and you
• 9:28
  Speaker 1: could see that people who are stretching can only stretch
• 9:32
  Speaker 1: so much. All right, So here's what I'm struggling to understand.
• 9:36
  Speaker 1: Mortgage rates haven't gone up that much. Uh, and you
• 9:40
  Speaker 1: have seen a dearth of inventory in recent years. That's
• 9:43
  Speaker 1: what people say. People aren't actually selling their homes. So
• 9:46
  Speaker 1: how is this sort of how do you how do
• 9:49
  Speaker 1: you sort of prove that it really is mortgage rates
• 9:50
  Speaker 1: that's causing the slowdown. Well, I mean it's it's the
• 9:54
  Speaker 1: one thing that has changed. But if you think about it,
• 9:57
  Speaker 1: mortgage rates. You know, the prices that we had, you
• 10:00
  Speaker 1: had the low mortgage rates baked in so on a
• 10:03
  Speaker 1: you know, percentage basis percentage point. You know, if you
• 10:06
  Speaker 1: look at the how much mortgage rates increased in terms
• 10:08
  Speaker 1: of what it's done to UM monthly payments, it is
• 10:12
  Speaker 1: somewhat significant. And then throwing in the uh, these home prices,
• 10:18
  Speaker 1: you could you know, people, especially on the bottom end
• 10:20
  Speaker 1: where prices are rising the most, UM, are starting to
• 10:23
  Speaker 1: feel that, you know, homebuilder today, UM Politic Group just
• 10:27
  Speaker 1: had their earnings and they actually, uh, they had a
• 10:30
  Speaker 1: drop in orders and UM they blamed the increase in
• 10:34
  Speaker 1: in mortgage rates UM and they said it was that
• 10:38
  Speaker 1: they were seeing a slowdown, especially with the first time
• 10:40
  Speaker 1: buyers pre Shan. We spoke earlier today with Doug Duncan,
• 10:45
  Speaker 1: economist at Fannie May. He said houses that have yet
• 10:49
  Speaker 1: to be built are already being purchased that you can't
• 10:52
  Speaker 1: find a home. What are your thoughts? Uh, Well, you know,
• 10:57
  Speaker 1: there's there's some truth to that. So there is a
• 11:00
  Speaker 1: real shortage of inventory. So you know, it sounds like
• 11:04
  Speaker 1: it conflicts with what I've just been saying. But you know,
• 11:07
  Speaker 1: the inventory levels are very low historically. They're just starting
• 11:11
  Speaker 1: to rise now from that very low level. So it's
• 11:14
  Speaker 1: kind of like, um, you know, maybe we're on the
• 11:17
  Speaker 1: cusp of a turning point um where you know, things
• 11:22
  Speaker 1: still remain strong, but you know they're they're not uh,
• 11:26
  Speaker 1: you know, prices aren't accelerating. Price coross isn't accelerating anymore
• 11:30
  Speaker 1: in inventories which have been just dropping um month after
• 11:34
  Speaker 1: month or now starting to rise, especially in the UH
• 11:38
  Speaker 1: in the hottest markets. So one thing that I think
• 11:42
  Speaker 1: is sort of underlying this discrepancy, maybe we could call it,
• 11:46
  Speaker 1: is that there seems to be a two tier market,
• 11:48
  Speaker 1: which is affordable homes for people who perhaps are first
• 11:51
  Speaker 1: time buyers or who are starting families, and homes that
• 11:55
  Speaker 1: sell for more than a million dollars and are in
• 11:58
  Speaker 1: urban areas um. And that there seems to be plenty
• 12:02
  Speaker 1: of the higher end homes for sale, but the inventory
• 12:06
  Speaker 1: of lower end homes, isn't there Is that an accurate
• 12:10
  Speaker 1: assessment of what's going on. Yeah, you know, it's actually
• 12:13
  Speaker 1: even within the markets, right, So if you look at
• 12:16
  Speaker 1: some of those price your markets, Uh, there's a shortage
• 12:21
  Speaker 1: of starter homes in those markets. Um. You know, there
• 12:24
  Speaker 1: may be more expensive homes in the markets, but there
• 12:27
  Speaker 1: aren't as many of the entry level homes. And that's
• 12:30
  Speaker 1: sort of what's making it really hard for folks to
• 12:34
  Speaker 1: get into, um the housing market. Uh. And prices you
• 12:38
  Speaker 1: know are rising much faster on the bottom of those markets,
• 12:40
  Speaker 1: you know, the lower end homes those persons rising much
• 12:43
  Speaker 1: faster than they are for the for the more expensive homes.
• 12:46
  Speaker 1: Not just real quick, here are we heading for another
• 12:48
  Speaker 1: housing crash? Huh? You know, I wish I had my
• 12:51
  Speaker 1: crystal ball, I spend it out. Well, I'm not hearing
• 12:56
  Speaker 1: that from a lot of people, so I think a
• 12:57
  Speaker 1: lot of at least you know, they were wrong the
• 13:00
  Speaker 1: last time, of course, but uh they're saying that, you know,
• 13:03
  Speaker 1: we have a still a strong economy, and um, this
• 13:07
  Speaker 1: is just all an affordability problem. And if prices actually
• 13:10
  Speaker 1: fall a little bit, it actually helps because people will
• 13:14
  Speaker 1: be able to get back in you might see more
• 13:17
  Speaker 1: sales as a result. Prosianco Paul, thank you so much
• 13:21
  Speaker 1: for being with us. Always a pleasure to speak with
• 13:23
  Speaker 1: you in your story today on the Bloomberg was really
• 13:25
  Speaker 1: good on this issue. Proshanko Poul's US real estate reporter
• 13:28
  Speaker 1: for Bloomberg News. Marijuana is a growing business and a
• 13:47
  Speaker 1: growing number of professionals are entering the field in a
• 13:50
  Speaker 1: host of very traditional ways. And here joining us now
• 13:54
  Speaker 1: is Richie Gautam. He's executive chairman of M. Harden Group,
• 13:57
  Speaker 1: which is based in Denver. He's here with us in
• 13:59
  Speaker 1: our and three studios in New York. RICHI, Um, you
• 14:03
  Speaker 1: worked at Goldman Sachs, you managed money with a private office.
• 14:07
  Speaker 1: You're at the original investor four years ago with M
• 14:09
  Speaker 1: Hardin Group. Why did you get into this business? So
• 14:14
  Speaker 1: as an investor, we were attracted to the market four
• 14:16
  Speaker 1: years ago. It was such a new market and a
• 14:18
  Speaker 1: developing market within the US, and we had an existing
• 14:23
  Speaker 1: relationship with one of the founders of M Hardin who
• 14:26
  Speaker 1: brought us into uh into the industry to really understand
• 14:29
  Speaker 1: the marketplace and how it was so fragmented from state
• 14:32
  Speaker 1: by state that we wanted to take advantage of the
• 14:34
  Speaker 1: opportunity by creating what is now known as M Martin
• 14:37
  Speaker 1: the management company, and the industry being marijuana mostly medical
• 14:42
  Speaker 1: or everything predominantly medical. Today it's obviously changing with more
• 14:46
  Speaker 1: recreational coming online, but our business today over is focused
• 14:50
  Speaker 1: on the medical market. Tell people about your business, what
• 14:53
  Speaker 1: actually do you do. M Martin's a management company. So
• 14:56
  Speaker 1: we started the business managing cannabis assets on behalf of
• 15:00
  Speaker 1: license owners. So anyone who came into the industry and
• 15:02
  Speaker 1: got a license, whether it was Colorado or other states,
• 15:05
  Speaker 1: frankly didn't have the operational background to run a cannabis asset. Really,
• 15:09
  Speaker 1: no one had that background coming into the space in
• 15:11
  Speaker 1: the legal framework. So M Hardan set up a management
• 15:14
  Speaker 1: company to come in and operate the assets turn key
• 15:17
  Speaker 1: on behalf of the license owner. So not too dissimilar
• 15:19
  Speaker 1: from a real estate owner hiring a Marriott or Starwood
• 15:22
  Speaker 1: to come in with a flag and operate a turnkey hotel.
• 15:25
  Speaker 1: So our hotel flag was the original genesis of the business. So,
• 15:30
  Speaker 1: for example, you have actual workers that are employed by
• 15:34
  Speaker 1: M Hardan that are working in green houses, that are
• 15:38
  Speaker 1: working in retail establishments. There's three D sixty two employees
• 15:42
  Speaker 1: across the US managing cultivation, processing, and retail facilities and cannabis.
• 15:47
  Speaker 1: And for cultivation it's indoor grows, outdoor and greenhouse facilities.
• 15:52
  Speaker 1: How big do you think the marijuana industry could become
• 15:55
  Speaker 1: in the US if the recreational aspect is legalized? So
• 16:00
  Speaker 1: the numbers point to a seven billion or so industry
• 16:02
  Speaker 1: size today in the US that's growing to billion over
• 16:05
  Speaker 1: the next few years. We also have exposure to Canada,
• 16:08
  Speaker 1: which is about a half a billion dollar industry today
• 16:10
  Speaker 1: growing to six or seven billion. That growth is really
• 16:14
  Speaker 1: predicated by the opening of the recreational market in those
• 16:17
  Speaker 1: in those states and jurisdictions. So so long as recreational
• 16:20
  Speaker 1: opens up the way that we expect it to, you'll
• 16:22
  Speaker 1: have that lift. So one big question is, once you
• 16:25
  Speaker 1: do get a legalization, what stops the Philip morris Is
• 16:29
  Speaker 1: of the world from plowing right into this field and
• 16:32
  Speaker 1: using their vast distribution and cultivation networks to blow everybody
• 16:37
  Speaker 1: else out of the water. And what would you say
• 16:38
  Speaker 1: to that Philip Morris doesn't grow cannabis, And growing cannabis
• 16:42
  Speaker 1: is a real specialty commodity. It takes a lot of
• 16:45
  Speaker 1: experience and and efficiencies to bring product to market. So
• 16:49
  Speaker 1: many folks outside looking into this space really think it's
• 16:52
  Speaker 1: just a plant, you grow it, and really don't put
• 16:55
  Speaker 1: a quantum of risk on on what it takes to
• 16:57
  Speaker 1: bring product to market. We have mastered that says of
• 17:00
  Speaker 1: bringing legal cannabis to the market, passing health standards, optimizing
• 17:05
  Speaker 1: space capture, and all of these production facilities. Our business
• 17:08
  Speaker 1: has produced and sold. Our license facilities are produced and
• 17:11
  Speaker 1: sold over one hundred thousand ms of this product since
• 17:14
  Speaker 1: we started. That's a number that no one can match.
• 17:16
  Speaker 1: And that includes Philip Moore's. Now you've got the different segments, right,
• 17:21
  Speaker 1: you have cultivation, yes, processing, and then ultimate retail sale.
• 17:26
  Speaker 1: How do you scientifically or technically offer consistency across all
• 17:32
  Speaker 1: that are there testing facilities or like in any kind
• 17:36
  Speaker 1: of let's say drug you know from the pharmaceutical industry,
• 17:38
  Speaker 1: you want to make sure that what you're buying from
• 17:40
  Speaker 1: one pill bottle is the same as you're getting from
• 17:44
  Speaker 1: another pill bottle. All right, that's a great question. So
• 17:47
  Speaker 1: the genesis of our businesses on the cultivation side, we
• 17:49
  Speaker 1: were cultivators first. We we had we bolted on the
• 17:52
  Speaker 1: processing expertise, and we bolted on the retail management side
• 17:56
  Speaker 1: over the years. Cultivation is the driver of the consistency,
• 18:00
  Speaker 1: and our facilities that we've stood up, whether it's in
• 18:03
  Speaker 1: Hawaii or in Halifax, have a very standardized approach to operations,
• 18:07
  Speaker 1: to production and ultimately the consistency of the product. Folks
• 18:11
  Speaker 1: right now have more of a niche approach where you
• 18:13
  Speaker 1: have one particular facility type in California another in Colorado.
• 18:17
  Speaker 1: We've standardized the process of bringing product to market, which
• 18:21
  Speaker 1: ultimately will yield to pharmaceutical products with consistency, recreational products
• 18:26
  Speaker 1: with consistency across multiple jurisdictions. So you're planning currently in
• 18:30
  Speaker 1: initial public offering and you've raised money, certainly in the
• 18:33
  Speaker 1: debt markets. I'm just wondering, does the fact that you're
• 18:35
  Speaker 1: dealing with a currently mostly illegal substance complicate your fundraising abilities?
• 18:42
  Speaker 1: Not necessarily complicated. And we've been obviously as an investor
• 18:45
  Speaker 1: in this business four years ago and understanding the nuances
• 18:48
  Speaker 1: of the industry. What we've done is take the knowledge
• 18:51
  Speaker 1: of how to raise capital in general from prior experiences
• 18:54
  Speaker 1: and other industries and just a general landscape of capital
• 18:57
  Speaker 1: sources today and we've really focused are in tris in Canada.
• 19:01
  Speaker 1: Canada is where we're going to list. Canada is our
• 19:04
  Speaker 1: h for all intents and purposes are booking center and
• 19:06
  Speaker 1: the booking center for many of these cannabis companies that
• 19:08
  Speaker 1: are public today. So we've spent the last year and
• 19:11
  Speaker 1: a half um putting together our Canadian capital market strategy.
• 19:16
  Speaker 1: Of our company today is owned by Canadian institutions long
• 19:19
  Speaker 1: only money that have really had limited experience in the cannabispace,
• 19:23
  Speaker 1: but they bought our opportunity because it's a managing company.
• 19:26
  Speaker 1: We have actual revenue, actual earnings, actual operational experience. So
• 19:30
  Speaker 1: we've already planted an institutional shareholder base in our company.
• 19:34
  Speaker 1: We've already planted the Canadian landscape there and that's where
• 19:37
  Speaker 1: the source of capital has come from, and that's where
• 19:39
  Speaker 1: we will be listed. RI should just give you about
• 19:41
  Speaker 1: twenty seconds here. What's the biggest mistake people make when
• 19:45
  Speaker 1: they hear about investing in the cannabis industry and they
• 19:48
  Speaker 1: want to get into it understanding that there's a difference
• 19:51
  Speaker 1: between a license owner and an asset manager. So there
• 19:54
  Speaker 1: are plenty of companies out there that own licenses. Very
• 19:57
  Speaker 1: few of them actually have the operational expertise to scale
• 20:00
  Speaker 1: their businesses, and that's what we have. I want to
• 20:02
  Speaker 1: thank you very much for joining us. Richid is the
• 20:05
  Speaker 1: executive chairman of m hard Dean Group. They are based
• 20:08
  Speaker 1: in Denver, giving us details about raising capital and the
• 20:13
  Speaker 1: intricacies of the legal cannabis industry. A rocky period for
• 20:31
  Speaker 1: the automobile industry. There has been widespread disruption on a
• 20:36
  Speaker 1: variety of levels. We have tariffs, we have the peak
• 20:40
  Speaker 1: Auto sort of meme that's been going around here to
• 20:44
  Speaker 1: talk about all that is. Scott Painter, founder of Fair
• 20:47
  Speaker 1: f a i R. Based in Santa Monica, California. Um, Scott,
• 20:52
  Speaker 1: you are the former chief executive and founder of True Car.
• 20:55
  Speaker 1: Can you just tell us before we get into a
• 20:57
  Speaker 1: wood summer calling Carmen Geddon which was yesterday, UM, can
• 21:01
  Speaker 1: you just explain what is fair? Sure? Fair is an
• 21:05
  Speaker 1: app that represents a completely new form of ownership. It's
• 21:08
  Speaker 1: a way to get a car on your phone, and
• 21:10
  Speaker 1: you subscribe to it in the same way that you
• 21:12
  Speaker 1: get your your data, your content, your music, your movies.
• 21:17
  Speaker 1: But there's no long term commitment. You just simply download
• 21:20
  Speaker 1: the app, scan your driver's license, link a form of
• 21:23
  Speaker 1: payment shop and you can sign with your finger. So, Scott,
• 21:26
  Speaker 1: the reason why I wanted to start with the model
• 21:28
  Speaker 1: of your business is because it sort of points to
• 21:33
  Speaker 1: a real seismic shift in the automobile industry. Do you
• 21:37
  Speaker 1: think that the weakness that we're seeing today, certainly led
• 21:40
  Speaker 1: by Ford, but also in GM and Chrysler, do you
• 21:43
  Speaker 1: think that the weakness really comes as much from this
• 21:47
  Speaker 1: changing model of car ownership as it does from tariffs. Well,
• 21:54
  Speaker 1: I think that this is a really interesting time to
• 21:55
  Speaker 1: be in the auto industry. If you're an incumbent automaker,
• 21:58
  Speaker 1: you're certainly thinking about how do you regain the trust
• 22:00
  Speaker 1: and the relationship with modern consumers who have almost binarily
• 22:04
  Speaker 1: said they don't want to go into a dealership and
• 22:06
  Speaker 1: do battle. They don't want the long term commitment. So
• 22:08
  Speaker 1: I think you're seeing all sorts of new business models arrive, arise,
• 22:13
  Speaker 1: and you've got a lot of diversification happening, happening. I
• 22:16
  Speaker 1: think most of the carmakers at this point are almost
• 22:19
  Speaker 1: invested in just about any new ownership model that comes
• 22:22
  Speaker 1: up on the horizon. Just recently we saw you know,
• 22:25
  Speaker 1: GM in er the peer to peer market as well,
• 22:27
  Speaker 1: which is, you know, sort of a big question mark
• 22:30
  Speaker 1: as to whether or not customers are going to go
• 22:31
  Speaker 1: for it, but it does show that they are willing
• 22:34
  Speaker 1: to be flexible and explore options that they never would
• 22:36
  Speaker 1: have before. Now you have been in the autumn more
• 22:40
  Speaker 1: of connected to the automobile industry in one way or
• 22:43
  Speaker 1: another since you were fourteen years old, correct, You know,
• 22:47
  Speaker 1: I think that great entrepreneurs and great companies solve real problems.
• 22:51
  Speaker 1: I think the problem of buying and owning a car
• 22:54
  Speaker 1: is something that really technology can offer a great solution for.
• 22:58
  Speaker 1: And I do think that, you know, it should be simpler,
• 23:00
  Speaker 1: it should be more accessible, and I think you know,
• 23:02
  Speaker 1: technology can offer that and delivered incredible savings. All right.
• 23:06
  Speaker 1: What I was going with that is, do you believe
• 23:08
  Speaker 1: over the course of your career that the large automobile
• 23:12
  Speaker 1: manufacturers such as four GM and now Fiat Chrysler, have
• 23:16
  Speaker 1: they been leaders or are they followers when it comes
• 23:20
  Speaker 1: to connecting with customers. Well, I think historically they have
• 23:24
  Speaker 1: not been leaders. I think that right now though, they
• 23:26
  Speaker 1: are absolutely leading and innovating and doing almost anything they
• 23:31
  Speaker 1: can to reset that relationship with our consumers. So it
• 23:34
  Speaker 1: is a time where the smartphone and technology and transparency
• 23:39
  Speaker 1: have really created a real transformational opportunity. And I think
• 23:43
  Speaker 1: that companies like Tesla and Uber and all of this
• 23:48
  Speaker 1: have really changed the paradigm where it's no longer just
• 23:52
  Speaker 1: about making a good product, it is about really shaping
• 23:56
  Speaker 1: that relationship and how you buy and how you engage
• 23:59
  Speaker 1: the car, and so new ownership models like what we're
• 24:01
  Speaker 1: building at fair I think, really have a lot to
• 24:03
  Speaker 1: do with it. Certainly, there's a lot of exogenous stuff
• 24:06
  Speaker 1: tariffs and the industry and the health of the industry
• 24:09
  Speaker 1: that are certainly affecting all of this, But keep in
• 24:11
  Speaker 1: mind there's also a new and a used car business.
• 24:15
  Speaker 1: The used car business by dollar volume is twice as
• 24:18
  Speaker 1: big as the new car business, and by velocity it's
• 24:21
  Speaker 1: three times larger. So what are you seeing in the
• 24:23
  Speaker 1: used car market right now? Well, right now, I think
• 24:26
  Speaker 1: we're getting to a place where we've got really great
• 24:28
  Speaker 1: information if you're a buyer for a used car, though,
• 24:31
  Speaker 1: the used car prices are coming down. In fact, over
• 24:33
  Speaker 1: the last twelve months we've seen used car wholesale and
• 24:37
  Speaker 1: retail pricing drop more ratably than we have over the
• 24:42
  Speaker 1: last one thirty years, almost a decline, and that's in
• 24:46
  Speaker 1: large part because we've been at peak production for the
• 24:49
  Speaker 1: last three or four years, and that's creating an oversupply situation.
• 24:52
  Speaker 1: We almost make seventeen million cars. On the new car
• 24:55
  Speaker 1: side here in the US, We're going to see six
• 24:58
  Speaker 1: million lease returns coming back into the market over the
• 25:01
  Speaker 1: next twelve to eighteen months, and that will have a
• 25:03
  Speaker 1: continued effect on retail and wholesale pricing of used cars,
• 25:07
  Speaker 1: and that will make used cars a greater value than
• 25:10
  Speaker 1: they've been over the last decade. Scott, what does that
• 25:13
  Speaker 1: mean though about where we are in this auto market?
• 25:17
  Speaker 1: I mean, does this sort of give steam to the
• 25:19
  Speaker 1: peak auto discussions that we're hearing well? I think that
• 25:24
  Speaker 1: there's no question that if you look at demand for
• 25:27
  Speaker 1: cars over a long period of time, it tends to
• 25:30
  Speaker 1: be very linear, but the industry itself tends to also
• 25:33
  Speaker 1: behave very cyclically. We go from a peak production and
• 25:37
  Speaker 1: say two thousand, you know, six seven, where we are
• 25:40
  Speaker 1: making almost sixteen million cars, down to a low of
• 25:44
  Speaker 1: almost nine million cars in two thousand nine and ten,
• 25:47
  Speaker 1: and then now we're back up at historic highs of
• 25:49
  Speaker 1: seventeen plus million cars being produced. So when those cycles
• 25:53
  Speaker 1: sort of come through the industry, they have a massive
• 25:56
  Speaker 1: impact on whether we are buying new cars or buying
• 25:59
  Speaker 1: used cars. And then you also have very interesting financial contracts,
• 26:03
  Speaker 1: Whereas in two thousand and nine to get the industry
• 26:06
  Speaker 1: going again in terms of volume, we actually introduced and
• 26:10
  Speaker 1: overweighted on leasing. Today almost of premium and luxury luxury
• 26:14
  Speaker 1: cars are leased. Scott, is there, Ah, Is there a
• 26:20
  Speaker 1: model that Tesla is following that you believe will ultimately
• 26:24
  Speaker 1: have to change or can you envision that the industry
• 26:28
  Speaker 1: is going to follow the Tesla model? Well, I think
• 26:31
  Speaker 1: that Tesla is sort of leaning in this direction. But
• 26:34
  Speaker 1: I think that the way that we all go to
• 26:37
  Speaker 1: the bank to borrow a big pile of money to
• 26:39
  Speaker 1: buy a depreciating asset is really what has to change.
• 26:42
  Speaker 1: You've got almost one point five billion cars on planet
• 26:46
  Speaker 1: or carrying five trillion dollars of consumer automotive debt, and
• 26:51
  Speaker 1: it's the worst financial decision free somebody just getting started
• 26:54
  Speaker 1: in life, or somebody who has maybe got a spotty
• 26:56
  Speaker 1: payment history or is in financial trouble or is just
• 26:59
  Speaker 1: building a family to go out and get into debt
• 27:02
  Speaker 1: in order to get transportation and the thing they need
• 27:05
  Speaker 1: to get a job or to get around. So I
• 27:07
  Speaker 1: think the model of ownership fundamentally does have to change
• 27:11
  Speaker 1: because the you know, it's not just a convenience issue,
• 27:15
  Speaker 1: it's just a bad financial bargain to go out and
• 27:17
  Speaker 1: borrowed a bunch of money tipped by a depreciating asset.
• 27:21
  Speaker 1: And finally, Scott, what kind of car do you drive?
• 27:26
  Speaker 1: You know, I've got about four cars all from Fair.
• 27:28
  Speaker 1: And you know this, this model really works for anybody.
• 27:33
  Speaker 1: It doesn't matter whether you have great credit and just
• 27:35
  Speaker 1: want convenience and you're an early adopter or you're somebody
• 27:37
  Speaker 1: who's really working a couple of jobs and struggling and
• 27:40
  Speaker 1: on a budget. Um. But I've got right now, four kids,
• 27:43
  Speaker 1: and I've got different cars for different different things, but
• 27:46
  Speaker 1: they're all cars that I subscribed to through Fair. Thank
• 27:49
  Speaker 1: you very much for being with us. Scott Painter is
• 27:51
  Speaker 1: the founder of Fair. They are based in Santa Monica, California.
• 27:55
  Speaker 1: He is the former chief executive and the founder of
• 27:59
  Speaker 1: True Are. Thanks for listening to the Bloomberg P and
• 28:04
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 28:07
  Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform. You prefer. I'm
• 28:12
  Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on
• 28:15
  Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You
• 28:18
  Speaker 1: can always catch us worldwide on Bloomberg Radio