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