State-Approved Cannabis Will Become Permanent in 2019

and he joins us from Los Angeles. Adam, thanks very much for being with us. Tell people about med Men and about your latest and largest acquisition. Hey, Pim, good morning. Always going to talk to you. Um. Yeah, So med Men is a is a cannabis company here based out of Los Angeles. Um. We are a retailer first and foremost. UM. But we also have factories in every market that we operate in, so we completely control the supply chain. UM. But you know, focus is really California and has been

for a while. I think you're referencing the farmer Can transaction that took place a few weeks back. At that time, the largest transaction in the history of US cannabis about seven million dollars UM. But what farmer Can did was it really allowed us to leap frog this next phase of our growth UM and enter into this next set of markets that we were already targeting. Farmer cansa midway Midwest based cannabis company that had operations in six markets,

all Midwest to East coast. So it was a great compliment to our footprint and UH we took action and brought him under our umbrella and we're now stronger for it. Now. For people that may not be familiar with how this industry works and it is a new business, can you explain the role that licenses play, how they differ in cost, and how those licenses then have to be translated into actual physical establishments. But there are a lot of processes

in the in the in the how this comes together. Sure, UM, I could do an hour on it, but I'll do it in their seconds. So basically, basically there's no interstate commerce. First and foremost, so every state has its own program and that program is unique to that state UM and all of the state's been written into their program. UM. It is explicit that you must have a license to grow marijuana in that state in order to manufacture products

distributed in retail at all within the state. So there are nuances to each of these programs, but they're all pretty similar. Um. And so you must have one of these licenses. Uh. You know, at the end of the day, this industry is a nimbie industry. UM. And I think what's really interesting is you have an industry that has such an overwhelming support by the public. However of the public believes medical marijuana should be legal now where you know,

sixty plus percent believe recreational marijuana should be legal. We're in a Congress that just got a lot better for marijuana a week ago. Yet with all the support there is to legalize marijuana and prohibition, it's still a nimbia industry. So you know, this is not in my backyard, which you know, we're okay with. We embrace that's what the public. I think that's what the public wants now and we'll want for the investable future. So you have a really

limited nature of these licenses. And again each state different, um. But I'm here in Los Angeles today and for example, in all of l A County, twelve million people plus a lot of tourists. Um, there are less than two hundred retail licenses, so you know, limited licenses, really arduous owning restrictions around those licenses. Um. But you know enough so that there's critical mass to be able to serve

the public and make marijuana accessible. Okay, got it? And wondering if what you could describe you've learned from the experience in Canada where the country has made it legal for recreational use, has that informed or changed any of

your thoughts? It's progress, right, I mean we've been doing this for almost ten years, and and these check in, these moments to check in on the progress that not only society and the public is making in regards to their viewpoint, but the commercial aspects of this industry and then the political realities. UM, this is a big check in, right. You have the first you know, nation of its size to legalize marijuana for recreational purposes a couple of weeks ago.

And you know what we learned. We learned that the cities didn't burn down, right, And that's what we keep seeing as progress is made around the world. But you know, things are things are better, They're not worse, They get better progressively better. Um. As these laws change. You know, the probition against marijuana just doesn't work. It's a failed effort. Um and legalized marijuana and regulating and taxing it is

the answer. And so what I really like about what we've seen in Canada, because it's been so successful without any hiccups, really is I really feel like it is the big finger wagging down here to us in the US saying, you know, you claim to be leaders, you

know in business and industry. Um, you know, your stock market, your exchanges are you know, leaders in in what they do, and yet you can't list a US weed company on the New York Stock has changed or NAZDAC yet and yet it's still federally illegal while you know your neighbors Tier North here run with this thing. So um, it puts pressure on the US and and that's something that we're grateful for. What would be the most important change that would help the industry. Would it relate to banking

rules and regulations? Not really? I mean, you know, we were fully banked, as are all of our counterparts and peers in this industry. From a depository perspective, you know, we don't have access to traditional banking services, but it all fits in the same bucket. It's banking services, it's merchant processing, it's proper tax treatment, UM, it's everything that comes along with, you know, being a lawful business, paying your taxes and receiving the protections UM, and the opportunities

that paying your taxes and being upstanding provide you. And and so that that next big moment that you're asking about really has to do with Congress, and it really has to do with permanent protection of state sanctioned marijuana businesses. And I firmly believe we will see that here in our country. And f y nineteen, thanks very much for being with us. Adam Bierman, co founder, chief executive Medmen based in Los Angeles, giving us his view based on

his experience in the cannabis industry. Everybody talks about the US dollar, but no one does anything about it. Well, we're going to change that. Here in the Bloomberg Interactor Broker's studio, I want to introduce Gary Shilling. He is the president of a Gary Shilling and Company. He is a Bloomberg opinion columnist. He is also the author of the Age of de Leverage, Investment strategies for a decade of slow growth and deflation a Gary Shilling. Thank you

very much for being with us. Let's begin with the strength of the US dollar. Is it gaining in strength because people love the United States or is it they just don't want to own anything else. It's a combination, Tim, I mean, the US is clue to the safe haven. And you look at all the problems around the world of protectionism, and and the US is growing faster than

other countries, and and it's it's traditional safe haven. One of the interesting things is even if haven of problems start in this country, and I think that's pretty clear with Trump's attitude on the trade wars with China, the dollar benefits. Uh. Show you you have a number of reasons that I think the dollar is going to continue to be strong and right there today as we speak, as fine as I'm sure you're aware, I am aware.

And I'm aware also that you'd say that there are six long term criteria for the dominance of the US dollar. Go ahead, tell us quickly. Well, the first one is that and we've we've I've started this going back to ancient ancient times of Greek in Rome and and looked at what what are the characteristics of the world's leading currency. UM. The first one is rapid growth, and we grew growing much more rapidly than other developed countries. China, yeah, faster growth,

but it's a developing country and it's slowing down. The second one is a huge economy UM. And the US is is still clearly the largest economy in the world, where about bigger than China, which is in second place. Uh. Third one is deep and broad financial markets and and

we certainly have that. Uh In the US. You look for a stock market capitalization thirty two trillion dollars, euro Zone eleven trillion, China about nine trillion, Japan six trillion UM, and and our treasury market, you know, fifteen point three trillion compares to six point seven point six trillion in Japan, six point one and in China and one point six in Germany. So that's that's the third thing. The fourth one is free and open markets and economy, and we

certainly we certainly have that. If you look at the World Bank ranking of of where it's easy to do business, the US is is close to the top, and you look at something like China, course it's it's it's very difficult. UM. Fifth reason is lack of substitutes. And you know, the dollars of all the world's transactions in in trade and capital folls of the dollars involved in seven percent of those, there really isn't any any option UM and and UH in terms of substitution. Most of the over fifty of

the world's currency reserves in dollars six thing credibility. And I think we're seeing that clearly. And and I've added this is a list I've had for some time. I've had a seventh one, which is that Tump is really asserting the US UH power economic, military, financial power on the world stage. We've had that really since World War Two, but it has not been exercise extent that he does. And I think that is gaining a lot of credibility for the U S and the dollar UH foreigners, where

they like it or not. He's really saying, hey, we got this, we got the upper hand, We're going to exercise it. Let's talk about the general economy. Is there a looming recession? Yeah, I think there probably is. Now, you know, to say that it's it's gonna unroll untold in the next month or two, that's always a dangerous pet one one very wise economist one said you should forecast what will happen or when it will happen, but

not both. But there are a lot of signs and I've written that up in our latest of the UH newsletter, Insight UM. Certainly you have it that turned down in stocks, and that's a leading indicator. Housing housing very interest rates sensitive, and it is UH. It is responding to the Feds raising race. And the said raising race, you know, don't fight the Fed. UH. When the Fed starts to graze rates sooner or later. They killed the economy twelve or

thirteen times the postwar period. They didn't get a soft landing only once in the mid nineties. And now they're not only raising interest rates, but they're selling off the portfolio.

They've had a century of experience with interest rates and they still can't affect soft landing, so showing off the portfolio on on top of that, and then you look at the exuberance we've seen in consumers and the expansion of things like leverage loans and you know, people zealous for you rushing into UH, into hedge funds of hedge funds, private equity and so on. All of these things are are very similar similarly occur at the top. So I think there's a lot of reasons to believe we're at

the top. Now, that doesn't mean it's going to turn down immediately, but um, I think that the odds of a recession are probably over fifty starting in the next year or so. Gary, If you happen to be an investor who is expecting higher interest rates, are you going

to be disappointed? Uh? Yeah, I think you probably are because there are two There are two things working there and full disclosures him As you know, I in nine when they yield and the thirty year bond was sixteen point seven percent, I said, we're entering the run bond rally of lifetime. And since then wrong treasuries have outperformed the S and P since the early eighties by six times. So i'm i'm, I'm, I've got a bias there, clearly. But the point is you've got two forces there. The

fetters tightening and there is a spillover. I mean, for every hundred basis point increasing the head funds on average in the post war period, you get a forty four uh basis points fill over the ten years treasuries, but only at twenty four still over to UH to a long term treasury thirty year. I know there's a further way you get from the Fed. The less the Fed matters and the more other things matter. In the long run,

it's it's inflation. There's a sixty percent correlation between UH, the CPI you're over here in the post ar period and and and treasury bonds. UH. So you've got the Fed fighting, but there's some spill over. But on the other side, you've got a lot of deflationary forces here. You look at you look at protectionism, globalization moving all these high paid jobs to China and other developing countries. You look at the uberization of the world, the on demand,

the gig economy, if you will. UH unions they're very high paid and they virtually disappeared, particularly the private sarcy. You go a lot of forces there that are telling you there's deflationary climate, and of course we get a recession. Even more so so, UM, I think that I think we could be getting close to the peak and in interest rates, particularly on the long end, even though the Fed is still raising. On the show, Gary Shilling is a Bloomberg View columnist. He's the president of a Gary

Shilling and Company. It is a consultancy based in Springfield, New Jersey. He is the author of the Age of Deleveraging Investment Strategies for a decade of slow growth and deflation, and he is also the author of a Gary Shillings Inside Economic Research and Investment Strategy. Well, we turn our attention now to the world of crude oil here at the Bloomberg Interactive Brokers Studios and joining us as John killed Off. He is the founding partner of Again Capital,

John Always a Pleasure. Brent crude higher by about one and a half percent at seventy one dollars a barrel, West Texas Intermediate on the NIMEX up one and a half percent at sixty one dollars a barrel. Have we hit the lows for this year when it comes to oil prices? I think potentially him and good morning to you. Great to be on uh. Friday's low is fifty nine six cents for w t I and it's sort of sticking out on the on the charts that we look

at as a bit of a sore thumb low. So we're getting some recovery here, you know, partly because this um nearly seventeen dollar sell off over the course of a month. You know, got the expected reaction you would have thought would come from Saudi Arabia and and the rest of OPEC and Russia to a lesser degree. Well that reaction is what to cut production by how many barrels of oil a day? Well, it's it's a little sketchy, which is why the market isn't necessarily rounding war on

the news. The Saudis came out pushing for a million barrel per day cut. Uh. The Russian oil minister not so enthusiastic about it, and it doesn't seem like the rest of Opec is either, although I'll point out to you that based upon some of the data that we look at that the Satties are already in the process of cutting output by about by thousand barrels for December.

So they are reacting to this now. And it's also not unexpected given that the US elections in their rear view mirror, they probably feel more comfortable being able to reign in production, get prices up a bit, and not

necessarily risk the wrath of their ally President Trump. Does it matter that at the same time that the Saudis are ratcheting back to production by half a million barrels a day, that Iran is now under greater sanction and making it more difficult for it to sell its oil abroad were interesting tim Part of the crush here in prices, um was the fact that the administration granted eight waivers to really Iran's the bulk of Iran's customers to continue

to buy oil. There was a sense when November rolled around and the stantons were supposed to take effect that there would be a big impact on Iranian exports and supplies to the market, that a lot would be coming off. Um, there's still some coming off, don't get me wrong, but nowhere near the sort of feared levels that were in that got into this market and push prices up towards you know, eighty dollars a barrel for w t I

back in October. It was it was the administration really uh cut the legs out from under Saudi Arabian Russia who rushed increased production and exports to the market ahead of the sanctions. So, um, I guess the expressions, you know, did they get played or not? It may be kind of, but the market certainly got played as well. In terms of this, this turnaround in policy at least for now by the administration on Iran. If this is the case,

does that benefit US producers? The U S producers are a real thorn right now in the Saudia's and Opec and Russia's side, where we're exporting more oyal than ever before. We're averaging about two point five liim barrel per day, clipped him from zero just a couple of years ago. Just to put it in perspective, Um, it's only going to go up. There's there's this massive activity along the Gulf coast to outlet more and more US crude oil

to the market. So um. The STATI response in terms of cutting back here, I think is justified if they want to get prices stabilized and back higher. But they might have to be shouldering a lot more of the cutback than they might have realized as we get into this is a very interesting setup now that the U S could actually become one of the dominant global suppliers

here as we get into next year. Take that forward and explain what that would mean for the input costs for the chemical industry, the plastics business, or anything that uses fossil fuel. Well, it's going to keep it low for sure, I think on a global basis, so it should continue to be good times for that very sick local industry. The rub is going to be whether or not the the advantage that U. S A. Finders have

had will persist. I mean, right w T I Texas crew continues to be about ten dollars under the international markers like Brent, which is seventy one today. Um to the extent that US supplies tightened here because of all this export activity like we're seeing with natural gas, uh, the the U. S R. Finders could actually find themselves in a disadvantage because of what the exploration and production companies are doing in terms of not selling to them at a discount, but selling at a higher price to

the world market. Last question to you give you about twenty five seconds natural gas at three dollars and seventy eight cents per million b tou do we see four dollar permannium BTU not gas? Then the natural gas market could get really ugly here for consumers. We're starting off this winter heating season with supplies about fiftent below last year and the five year average. That sets up this

market to be really tightly supplied. You get a couple of more of these early season call snaps, the price could double at this point as you get into January. Uh, in December and January, we're gonna keep watching that, that's for sure. John Killed, a founding partner of Again Capital, telling us about oil and natural gas. Our topic now is the hotel and hospitality industry. My guest is Jay Stein. He is the chief executive of Dream Hotel Group and

he joins us here in studio. Jay, thanks very much for being here. Tell people a little bit about Dream Hotel Group and how it has transformed itself from being an operation that owned and managed the properties to one that is focused. Well, you held a story that's exactly it. So uh and and thanks for having me. Nice to be here. So we have transformed the company. We were more of a ownership and we built hotels and and manage those and they were cool, hip lifestyle hotels, generally

one off properties. And then uh, we took some of those hotels that we're doing very well and the public seemed to enjoy them and converted them into brands. Uh. This started in earnest about five years ago. And UM, it's allowing us to grow much quicker because now we're using other developers as opposed to just our own money UM. And these are expensive assets, are about a hundred fifty million dollars plus a piece to build UM and they take three to five six seven years sometimes to develop.

So on our own it was taking a long time to build up the number of properties. But now we're signing a deal about one every month, every month and a half. So so and you just why wouldn't say, just but you have opened your first hotel in Los ange Chelists we did about a year and four months ago. At this point, uh hundred and sixty eight room property with a tremendous amount of food and beverage, nightlife, entertainment.

We have six different venues there and uh it's one of the most fun hotels certainly in the Explain why that aspect of the hospitality industry, the nightlife, the entertainment, the restaurants. Why is that so important in an era of air B two B. So that is what we do, That's what we're famous for. We create environments where uh,

social activity will happen. A lot of hotels focus on their guest rooms and as we do as well, but we add in that element where people from the community want to come use the hotel for nightlife, food and beverage, health and wellness, uh and other uh social things that that we uh programmed for the hotel. And um you know, Airbnb doesn't have a restaurant in somebody's apartment, So what we do is very different, and uh it's always been something that we've been able to uh hang our hat

on and and make us unique in the industry. Is that something that you encouraged and emphasized and accelerated because you see what is happening with the popularity of air b and B definitely not. We were doing this way before Airbnb had had come to into existence, and um, you know, I look back in the industry and so that's what hotels were back in the forties, fifties, sixties, great meeting places, great uh social hubs for the community, and then we got away from that in the seventies

and eighties nineties. They were really big box hotels. They weren't very meaningful to uh the community that that they were in often and um so around the mid eighties nineties, uh Ian Schraeger started changing what the landscape was like and we caught on pretty quickly, and now we've been doing lifestyle hotels for over twenty years. Now. You've got a background, obviously in the hospitality industry, having worked for Durall Hotels and Resorts as well as Hilton International, star Wood.

What is the limit of consolidation if there is one? In the hotel industry, it seems that they're just getting bigger and bigger, and does that hurt the quality of the product that's being offered? You know, I don't think it hurts the quality. I think it's difficult for individual developers that are going to these big companies and wanting to use one of their brands, because now you've got so much overlap and so much of that product in

the same city. Marriott could have twenty hotels in one city where they if they used to have five or eight, it seemed like a lot. So I think that could be a little difficult for an owner. Remember Marriott doesn't own the hotels, and I'm using Marry Up, but you know, any of the big brands um so, I think their consolidation has been maybe a bit of a concern for us. UM a small a company like like ours, it doesn't

really affect us. In fact, I think it helps us because those developers that really want um a unique, one off type, independent type property. Uh, those it's gonna be difficult for those companies to deliver it where that's really a forte and that's why they come to us. So what is the what is the background of the new brand unscripted hotels? So Unscripted the main reason we launched it. It It gave us the opportunity to go into secondary markets or even tertiary markets, but where there's a cool

vibe again, ability to drive some social interaction. Where are other three brands really belonging to? Durham, North Carolina is an example. We have one of the unscripted brands. You know, it's an up and coming city, but I don't think it's ever gonna become a primary market for a number of years from now. But it's got a great history and the tobacco industry and now much of those old buildings have been converted to tech and uh it's a great foodie town. So it was a perfect example of

where and scripta belonged. What kinds of properties do you look for in individual locations. I know that you've got plans for Palm Springs, for Atlanta, for Dallas, Austin, and so on. What are the properties requirements. So we've got four brands, UH, the Chatwell which is pure luxury UH, the Dream Down Dream brand, which is one notch below that time as well. Difference between those two. One has a lot of food and beverage, one has middle middle

amount of food and beverage. And Unscripted, as I mentioned, could also go in the secondary locations. So we're looking for properties that makes sense for any of those four brands. By adding an unscripted now we have hundreds and hundreds of locations that one of our four brands makes sense for. And looking for a good owner who UH is looking for a lifestyle hotel, someone that's gonna bring the community into the property and believes in UH. The concepts that

we're doing point to. You have money raising money. Do you find that people are throwing money at this industry because it has become such a glamorous part of lifestyle or is it strictly business? You know, everything comes down to business. You may have a high net worth individual that just does a vanity play here or there, but there's not a lot of that out there. So yeah, it comes down to business and you've got to be able to get them financed. UM. Wasn't very easy for

us early. You know, people don't know our brands. But as we're growing now, uh, it's becoming a little easier. UM, but it depends on the ever flow of how lenders are lending. Last point you're having to do with travel is where are you seeing outsized interest in new tourism? Is it in these tertiary and secondary markets? You know,

I think there's tourism everywhere, and there always was. It was interest in uh in great cities, and it was interest in little quirky towns that had something special about them. I think the difference now people are taking advantage of those little quirky things they have if they're known for some great food item or a unique experience that you can do their UM. You know, people want to take advantage as you as you know, everybody's talking about experiences

and experiences. So it's not just the hotel, it's it's you want to travel, you want to go see things, and there's a lot to see around this country and around the globe, and people are as curious as ever. And UM, I think our industry has a long way to go. Thanks very much, Ja stun He is the chief executive of Dream Hotel Group. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast

platform you prefer. I'm Pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio.