Chit Chat Stocks - Foreclosure Investing - Jason Greenwald

Episode Date: July 27, 2021

We are joined by Jason Greenwald, founder of Greenwald Capital. Jason spent many years buying up real estate through the foreclosure process. He sheds some light on what that process entails as well as how he went from real estate investing to the stock market. Listen after the interview to hear Brett and Ryan share their favorite stories from the week. Let's go! 7investing is empowering members to invest in their future. Use our code “CCM” to get $10 off your first month or annual subscription, or use this link: https://7investing.com/subscribe/ Want more of Jason Greenwald? Follow him on Twitter: https://twitter.com/JGreenwald86?s=20 Want updates on future shows and projects? Follow us on Twitter: https://twitter.com/chitchatmoney Rather watch us on video? Subscribe to our YouTube channel: https://www.youtube.com/channel/UCG5Ni-SI-jyrEsoNUhqftNQ Contact us: [e-mail] Timestamps Interview | (2:30) Interview Continued | (32:24) Show Notes | (1:01:30) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. Today is Tuesday, July 27th. Today we have an interview with Jason Greenwald. He is a self-made real estate owner, investor. He kind of describes himself as an investor. He's an investor across multiple asset classes too, so we talk a little bit about stocks. Just a generally fun discussion. It was wide-ranging. Yeah, learned a lot about the foreclosure real estate market. That's where he focuses on. I mean, he goes to, what, five a day in a normal time or something like that, maybe even more. He's pretty avid, loves it, so great to chat it up with him. And then we have our stories after the interview, which mine aren't huge,

but I'm talking about the Greenlight Capital second quarter letter. Pretty interesting. Has a hilarious sign-off, so I'll mention that. But then I've also got the Snapchat earnings and some cold takes from our man, Professor Galloway. Oh, no need to beat a dead horse, but I guess that'll be a fun discussion. Easy got to dunk on because he has such bold takes. Yeah, his snap takes have not aged well, but that's okay. And I got China crackdown.

We're going to talk into that if you've heard that in the news, and then we're going to talk Twitter earnings as well. So do a double dose on the social media. And before we get to our interview, our friends, 7investing, you can use our code, check it out, CCM. I'm blanking on the price, but you get $10 off using our code. So it's a no-brainer if you're signing up. Seven stock picks a month from seven different experts.

You've got PhDs there. It's really smart, people. Just listen to our Max Chatscout interview and ask yourself, do I want seven of these type of analysts helping me out each month, helping my research process, whether you're a big fund or just a small individual? I mean, their interviews on our shows kind of sell the service themselves. So go ahead and check those out as well. Without further ado, let's get to the interview.

Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chitchat Money by Ryan or Brett or any other podcast guest is not formal advice or recommendation.

Now, please enjoy this episode. Hey, today we are welcomed by Jason Greenwald slash Greenwald Capital. We basically met over Twitter. Yeah, it's been a while. We've been following, you know, communicating on Twitter for a while, but finally get to talk in person. Yeah. So welcome to the show.

I appreciate you guys having me. I've had some great guests in the past, so I'm just happy to be on. Yeah, of course. And why don't you kind of give us a bit of the background? So how did you get started? And then I guess, what do you do now for anyone that's unfamiliar? Right. So I would say my start kind of came in two different groups.

I graduated college in 2008, May of 2008, and didn't really have anything to do, quite frankly. I had a poli-sci major, and I had a family member that had a friend's house that was in foreclosure. So he went to the auction. He purchased it. And I kind of saw the dynamics of a forced seller, the banks, basically, right? You had like 100 houses at auction for three bidders. And so I saw this kind of happen, and I didn't have anything else to do, truthfully. and I had about $5,000 at the time. So I took my $5,000 and I purchased, at the time,

the prices were just crazy low. So at the time, I purchased a two-bedroom, two-bath condo. I quickly wholesaled it for $39,000. So I turned $5,000 into $39,000 and I didn't have to even touch it. I just strictly purchased it. I had a buyer who I just kind of hustled and found. um i take that 39 you know you obviously have taxes so you have about 30 and then at that time guys you could buy single family properties for 30 40 grand that are now worth 400 like it was unbelievable so what i did is i took 30 i took 15 and purchased one took 15 and purchased the other i had two other partners i did the purchasing and the selling so my equity was higher and so we took those thirty thousand dollar purchases and i found um a buyer who would

buy them for 120 so basically the five turned into 39 and the 39 turned into 120 and this happened in the span of about a year and a half okay and can we get a timeline on that this is 08 and 09 this is um as this would be late 08 to late 09 so i mean that's 15 months it could have been 18 it could have been 12 i mean it's close enough so that i take that 120 and i just um kind of did that same thing for literally for from 2008 to 2012 my whole goal was to get um was to get the capital i had to have to have the properties i had to have to create a cash generating mechanism because at the end my goal

was to be a full-time independent investor i mean that was the goal right so pretty much from 2008 to 2012 i had about 10 of these kinds of deals where you put in 15 and you had 60 back and those deals kind of um kind of laid the way for the rental properties that i have now um um and those properties i started to buy around 2013 ish um yeah so from 2013 to 2018 um pretty much my goal was to buy the properties and those and those properties i was buying at like a 14 cap rate on leverage cap rate is for right so it's basically just um so let's just say you buy a property for a hundred thousand and once you get all of your rent and you pay off all of your expenses, you have 10,000, your cap is a 10 cap. It's 10% right. So I was buying these

properties at like a 14 cap, 15 cap, um, properties that, that are not like horrible properties at all it's just the sentiment was just was just so low that i kind of took what the for me i think taking what the defense hands you is something that has helped me um you know, I'm not trying to be like a John Elway and to swing it in there. I mean, I'm, I'm pretty cognizant. I'm pretty aware of the things I can do and the things that I can't do. So pretty much the journey from 2008 to 2012 was just purchasing these cheap properties, selling them off to have the capital in order to be independent enough with the properties I have to be a full-time investor. And that's what happened.

And so today, what does your day-to-day routine look like? Are you still trying to kind of seek out deals yeah i mean it's different in today's world with with the coronavirus right um in 2008 i was seeing about 140 properties per week like i was seeing 20 properties a day every day monday to sunday plus auctions um those times are not here anymore i would say in a normal non-corona time my day usually consists of seeing anywhere from uh 50 to 60 properties a week attending let's just say i mean there's no normal uh four to ten auctions a week and each auction could have two houses or each auction could have 20 houses um there is no normal here um so at the auctions i have i have two pretty large clients whom i wholesale to

they are in um i'll just say they're not in maryland um sorry what is what is wholesaling the houses to them wholesaling pretty much means jason one two three main street i would like to buy it i don't know how the foreclosure auction process works which is a very complicated process which i'm sure we'll be chatting um about i don't know how the process works i don't live there you purchased a property for me and then i hand you a fee and do they so to the people that you're wholesaling them to have an idea of the kind of house they want or do you just find them at these foreclosure auctions say hey you might i have um that's actually a great question i send them property lists with pictures and like the property the address the square feet um pretty much all the

information that they would have to know to make an informed choice okay right so so that's one thing and i'll probably wholesale uh in normal times maybe 30 properties a year um and then my other options are to purchase to purchase and just hold and my other option is purchase and flip um i'll probably flip anywhere from i mean it's hard to come up with probably anywhere from five to twelve houses per year okay all right yeah can can you describe, I guess, why foreclosure auctions and foreclosure, I guess, just that part of the real estate market instead of just any part of it? And go through what that process is a bit for anyone that might be interested in getting into that business. 100%. I will tell you

every foreclosure process varies from state to state. So the rules in Georgia are not the rules in maryland that are not the rules in texas so i can only really state the rules that i know of in maryland i know at least in one state they have all of their auctions on one day and i believe that's georgia but please don't quote me on that um in maryland it's a very convoluted process um because it goes through a court system and there's bureaucratic aspects to it so let's just say for argument's sake you've seen a house you have a property that that you are trying to purchase um and it's and it's july 16th and typically your deposit is 10% of debt, right? So, you know, if the debt is 300,000, your deposit's 30 grand,

right? Now, here's the issue. Sometimes there are people inside the houses. And just because you buy them at auction doesn't mean that the people leave. And usually they're not in a real attitude to want to leave because why would you? So it's a very messy business. It's not like in stocks where you go on E-Trade, you buy 100 shares of Berkshire Hathaway and it's over. um in my world it's july 16th that court process could take two months it could take 12 months you have no real clue so you're buying a property and you're comping the property for july 16th so you're buying a property you've tied up your cash and you really don't know

when you're taking possession of that property, because the lender, they want, they want you to pay for it. Irregardless if people are in there, they don't care about you guys. So it's a very messy business. It's not very straightforward. You don't know really when you take possession, you don't know when you're going to have the property for sale and you don't know like really the comp right like the comp from july 16th can change some so i'm just used to dealing in a world that is um it's a very um non-straight lots of friction forward business it's kind of like a deep valley it's like deep valley investing in a stock market right you know it is man i mean you better be right i and the problem for me is is like i went to my first auction on in around

June or July of 2008, I was 21 years old. I was 20 years old. And I saw properties going down every week. Literally, it went from 400 to 395 to 390 to 385. It would be like starting the stock market during the 29 crash, basically. So I always have that thought in my head that something like that could happen and like a 2008 is a once in a hundred year thing but i think just because of of when i started i always kind of have that in me so um so i would just say that the foreclosure the process is a messy process and you really better know what the hell you're doing um you can really you can really um lose money quickly so i mean i've seen people probably spend a million dollars on deposits and walked from them so if i'm understanding it right

you've got basically people in whatever these houses have been told that they need to get out or whatever they defaulted on their mortgage right correct and now they're selling to you but they you could possibly still have people in there so oh yeah for sure what happens then do you go ask them to leave or do you have to go through i mean it's a precarious type of deal man um it's not something they teach you at in like school um i would say i would really love to give you like a stat-based statistic on this i would say it's a higher percentage now because of the economy but i would say 80 of the homes i see are occupied and it's a very hostile type of uh conversation I mean, you're knocking on someone's door who hasn't paid for probably, well, in Maryland, you can go probably two, three years and not pay.

So you're going to them and saying, sir or ma'am, like, I just purchased your house. And eight to nine times out of ten, they're going to say words that we can't really repeat on this show and slam the door. You know, sometimes they send the dogs on you. I've had some crazy stories, man. What is COVID? A lot of the stories I think we probably have to talk about offline, probably. How's COVID changed that at all? like are they allowed to stay in there longer now with i think yeah because of the moratorium um

basically i can tell you in 2008 there were i mean there were so i think now because people know the rules and they know how to kind of extend things that there are more occupied properties in 2008 no one had any idea i mean no one knew like what to do so in 2008 you know if someone hands you a thing from a blender saying that you owe us leave then you just leave but now people they um the the tricks of the trade have been have been spread out so pretty much you have a couple things you can do a cash for keys um that works i can tell you that the amount of cash has increased dramatically i mean in 2008 used to be able to give someone 500 bucks a thousand bucks and they would leave now it's like 10 grand

10 15 grand and if not it's like screw you so i basically deal in a world where i don't know when i'm taking now i see i see every house that i bid on so i know if it's vacant or occupied so how expensive would it be if you had to go through the court system it's just such it's just such a pain in the ass man i mean how expensive is it i have attorneys who are family friends uh you definitely have to put a risk premium on that um how much of a risk premium i wish i had the answer because i truly don't know but you better put it in your margin of safety that someone could just like stay there for a year and here you are paying property taxes you're paying your debt if you have any on the properties so it's a very different world than the

world of e-trade apple shares hundred shares purchase right yeah that's not too passive it's a whole other world man yeah it's a whole other world but but i found the greatest deals though so i think when you have that much complexity um that's where you can find some opportunity right and you mentioned and everyone talks about this with real estate about using debt how do you use debt when financing any transactions and then i guess if you don't use debt why not so i'm the old i'm like the strange guy in the group i have not ever used leverage before um what got me to my point was my my reinvestment rate from 2008 especially until 2012

was so, it was crazy high. I mean, I was living off nothing. Right. So I don't like, I hate to quote you what my reinvestment rate, maybe it was 80%. I mean, pretty much, I mean, like pretty much besides paying taxes, I was, I was reinvesting everything. Um, in terms of the rentals, I have not taken a penny out of them. Um, for me, that's just a choice. Um, My returns would be certainly a lot more gaudy if I had used leverage. But also the thing is this, you know, in 2008, banks were crippled. One. Two, dude, I was 20 years old. I had $5,000. I didn't have anything to hand them. And three, the properties that I – the properties that I were purchasing were great in terms of a quick – I guess it's a Buffett-style cigar butt.

But the problem is, is the rents were not like basically in that group, like people just didn't pay rent. so like you could have used leverage but your debt service coverage would have been tough because i mean i have so many stories about taking tenants to court um so i could have but to be completely honest, the, the rents that were coming in were so sporadic that to cover the debt would have been like, my stress would have been crazy high. And my goal was to not, um, like my goal was to be independent. Um, and I knew that it would take me, you know, it's taken me 13 years. Um, so I didn't use debt primarily because of the properties that I was purchasing the the earnings or rent um were just so like maybe 20 of the people paid

you know so it was just it just the properties i had didn't match up with a levered type of deal Right. Because I guess that makes sense. If the risk of, say, permanent loss on one property is decently high, it's not something you want to have. Right. I mean, I could have easily gotten, you know, a 50% LTV because I was purchasing them so cheap. But when you have to take people to court all the time, you know, like it just really would have created a true hassle. The properties I have now are definitely um in areas where that's not a problem all right and so you you also invest in public market equities which we're going to talk about i guess more in the second half but i'm curious and a lot of people uh i won't belabor the point because everyone kind of knows what real estate is like

right now with all the prices so i'm curious which market or which asset you found is harder to stay patient in real estate or equities because it feels like the FOMO or the fear of missing out is a lot higher in real estate, but maybe I'm wrong. Oh, I think real estate lends itself to long-term holding. I think the liquidity of stocks where you can just go on your e-trade and sell 100 chairs of Apple really makes people kind of jump in, jump out. The very essence of the properties is that you have to go through listing the house and, you know, cleaning it and going through home inspections and going through appraisals and doing all this kind of stuff so real estate for me kind of um and i was almost long term to begin with um i really don't

let the FOMO get inside my head i mean it's hard to because of twitter right i mean like do you have um you know things being thrown at you um i would say for me um just because of the liquidity aspect of stocks and how, plus it's free now. I mean, on E-Trade in 2008, I think, you know, they charged you. Um, so for me, I would say real estate really lends itself to a more long-term um um uh more of a mindset long-term holding mindset all right so then what is your best and worst purchase real estate wise i would say the the purchases from 2008 to 2012 um especially the condo that i bought for 5 000 and and that i sold for 39 um i probably have had um probably 10 deals where they were four x'd um in the matter

of about a year. So that's pretty good. The Brentals I have now, I was buying them at about a 14 cap or a 15 cap, and they're now selling for about a five cap. So I would say those are probably my best deals. The worst deals, quite frankly, were the ones I, were the, were the houses I sold too early. Um, whether it was, I didn't have the cash to purchase something else, I had about four or five houses with two other investors, and sometimes you have too many cooks in the kitchen. And we had to sell those at 2018, and I probably would have made probably two times more if I hadn't. So knock on wood, I haven't lost on any real estate deals. It would just, for me, it would just be selling too early.

All right. So you're saying never sell. Oh, man. I mean, that sounds like such a, I would say, I would say, here's the issue, right? Is then you have to use that capital again. So, you know, and plus it also means that you have to be right three times. You have to be right when you purchased it. You have to be right when you sell it.

And then you have to be right when you purchase the new house or company. So I would say that staying put has helped me more often than trying to time the market. That makes a lot of sense. Do you want to add that? Yeah, we're going to have a quick ad break and then I want to pick your brand about public equities as well in the second half. This episode is brought to you by La Quinta by Wyndham. Here you are, miles from home, and ready to start your vacation. Good thing you're staying at La Quinta by Wyndham. They have free high-speed Wi-Fi to stream all your favorite movies.

And in the morning, get fresh waffles with their free Bright Side breakfast. Or squeeze in a workout at their fitness center. Either way, you're ready to conquer the day. Tonight, La Quinta. Tomorrow, you triumph. Book your stay at LQ.com. This episode is brought to you by KPMG. As a business leader, how can you innovate, build trust, and move forward in a digital era? KPMG can help by bringing together the right talent and technologies, generating insights that spark opportunities.

To explore their thinking, visit reed.kpmg.us slash opportunities. Okay, welcome back in. So we're kind of going to try to cross over to the public equities here. So I'm curious, since you're in both markets, I guess, what parallels are there? And then how has real estate investing helped you analyze public market companies? It's a great question. Real estate has helped me evaluate public market companies in the following ways. Um, in real estate, unlike stocks, you know, where it's a Facebook or a Google or, you

know, fill in the blank, you don't really have 20 and 30% earnings growth, which means in quick terms, you don't have earnings to bail you out if you purchase a stock. You don't have the earnings in real estate that you do in stock. So in real estate, the money is truly made on the buy um and you could say the same thing pertaining to to public market as well but because of the craziness of public markets you can purchase a a, a stock, you know, 20% too high, and then the stock runs 20% more, and then you seem smart. In real estate, it really doesn't work like that. I mean, my growth of rents is pretty modest. So for me, it really put an emphasis on, on the buy. Um, I believe there are parallels. I mean,

a house is just like a company, right? You have revenue, you have, you have expenses, you have these types of things, but they're kind of like apples and oranges. I mean, they're both sweet fruit, but they're pretty different. Um, I would say, um, I think for me, it was beneficial to get the real estate part in first. I think that really helped me because also, I mean, I could see a hundred houses, guys, and not purchase one of them. so just because you're seeing these houses and you're going to auctions that doesn't mean that that you buy them um they don't hand you the they don't hand you the bid price prior to right so that opening bid could be 20 000 that opening bid could be 500 000 so it's

really taught me to be extremely patient. Um, it's really taught me to, when you see very large opportunities where the risk is in your favor to bet quite heavily. Um, I mean, I don't buy a ton of properties for me, but when I see something pretty large and pretty right. I kind of, I just, it's just some people have a problem pulling the trigger. And in my world, when you see something big and right, you just have to plow in. All right. So if you had to choose one of those asset classes? So either stocks or real estate to have all your money in, which would you pick? To be honest with you, if you told me, and so all of my properties, guys, um, I manage them like, um, personally. Right. So I don't have a management team that handles that.

with that being said, because of the BS that tenants hand you, and I wish one day, I wish that I could post on Twitter, the crazy texts, you know, that I get at. And we saw that picture you posted. Dude, that's just one of them. I mean, I wish I could post. So, so for me, guys, I need to get paid for that. That's very different than me sending my capital to Omaha and saying, Buffett, play around. I would be extremely comfortable putting 100% of everything I had into the same pieces of real estate that I have currently. But I have to preface this by saying that I'm really a firm believer of really taking what the

defense hands you. And right now the defense is not handing me those properties. So that's why I've jumped into, to, to the public markets. No, that makes a lot of sense. And I guess to transition, maybe some companies that operate in real estate that are trading in the public markets, there's a lot of talk about iBuying right now. How have these iBuyers and I guess the tech companies coming in, this would be Redfin, Compass, although I'm not exactly sure what Compass does, open door. How have they affected the market that you operate in, in the last few years, if at all?

You know, a lot of people ask me about Redfin. I come at it from a very different angle than a stock person. I'm a real estate agent. And, you know, I have my license in DC and Maryland. And I have to preface this by saying that I'm more of a part-time agent. But the issue I see with Redfin is if you are a good agent, you have no real incentive to join there. I mean, I have spoken to a couple agents who work there. They work their ass off. I could think of 20 agents off the top of my head who do one deal, two deals per month, who would make four or five times what they would be making at Redfin, and they would be working about a quarter of what they would be. So for me, I see Redfin as a good place for someone to start who is green, who doesn't have a network, who wants to see how the process of buying and selling a house, how that whole process happens.

It's really a good, I mean, that to me would be the greatest source. Number two would be a part-time agent who's 60 to 65 years old that doesn't really want to retire, but wants to work some. Um, but if you are an experienced agent, or even if you're just a good agent, or even if you're just a crappy agent, but you have very high quality clients, you have no reason to join them. I mean, they, I mean, you will end up working three times as much and you'll probably make a quarter. So I think what's going to be very interesting with Redfin is the agent attrition, because what I could see happening is you're a green agent, you join Redfin, you hustle, you find your own network, and then you leave them.

um i also think buying and selling a house is a very personal kind of thing generally the agents that people pick are friends of theirs people that they trust and when you do it with redfin and i could be wrong on this so if i'm wrong i i am sorry but um And once you join Redfin, I mean, the purchaser or the seller of the house, they don't get to choose who they work with. So in reality, you're dealing with someone who, frankly, just doesn't care, in quotes, as much as someone who is a friend with the person. um i can also tell you the big time flippers these are guys that probably flip anywhere from 20 to 100 houses per year they only pay their agents one point you know maybe 1.5 so i am not as gung-ho on redfin as a lot of people i think what's gonna happen i mean

i could be totally wrong i know their ceo is great um hey you're coming out of seattle company i know man i i know i'm coming at you guys hard but i'm just trying to like like spit truth um i mean pretty much what you're going to get is green agents that don't know what the hell they're truly doing and i guess at some point all agents are green and they don't know what they're doing but um i think redfin it's a great tool for someone who's green who just got their license but if you are even green and you have through you know cousins or family you have a network i mean there are plenty of small brokerages out there i mean hell the brokerage that i'm with um where they'll offer you a you know a a 90 10 split you know which means you

would keep 90 of the uh deal so i just see i don't see red fin as rose colored glasses as fin twit okay what about what about the eye buyers zillow i guess redfin is doing this a bit zillow open door especially does that model work at all or is it just automated same thing house flip is the eye buying where they are just like flipping houses they offer you like the the company offers to buy yeah i think that's tantamount to crazy um comping a house is more than just a formula um i would be very suspicious and and i don't and i could be totally wrong on this i would love to see the spreads of what prices they are the prices that zillow and redfin are offering and what the house is actually worth. I have probably seen 40 to 50,000 houses

since 2008. And I have learned something about how to comp a house every single time. And unless it's a process that you have done and a process that you have real skin in the game i would be very um i'm not trying to be too harsh here but like i would be very curious and skeptical to what those spreads are truly like it's like even to us it sounds dangerous from a business model perspective because i guess you just don't know yeah inventory a lot of inventory risk but also guys like houses like comps of houses can change from across the street like you can have a house that's one two three main street and you go across the street which is one two two or one two four right and

because of the way the backyard is or the way or let's just say they have a driveway or not or if they have a walkout basement i mean these are the things that unless you know what the hell you're doing and unless you've been burned on like i know in certain neighborhoods you have to have a driveway i mean if you don't have a driveway your house will go from 400 to 370 um and i just like i think the i buyers quote if i remember correctly they quote usually really low prices like whatever like 70 people have been anecdotally given out that they've been 20 below every other offer right now yeah um i mean that's great i would be this business in my mind is a good mom and pop business like kind of someone like me

um in fact everyone that goes to the auctions are basically mom and pop now mom and pop could mean that they're doing 100 houses per year i mean 100 houses per year is a lot of work guys I mean, that's doing eight per month. Um, I would just be very skeptical of how they're comping them and the algorithms involved with comping them. Um, it's just not something that gives me a warm and fuzzy feeling inside. Right. All right. We've talked a ton about real estate i've learned a ton i think the listeners will too or and close things out with a little disney talk yes sir well first i'll have to say is that you bought in the spring and i think you probably bought from me because that was the stock sorry about that bro you know

i ended up making some decent investments and other stuff but i'm sure you did i mean and you could have bought anything you could buy anything at that time uh but what gave you the confidence to buy in the spring of last year and what is the thesis going forward for disney to own for long term i will preface this by saying i sold fedex at like 125 so it's not all peaches and cream over here um for me march 2020 and like i didn't have a playbook um i don't think anyone did In my mind, March 2020 was the time to buy as high quality stock as humanly possible, whether that was Berkshire, you know. For me, Disney is a thesis that has the best IP that the world has. Disney has a trust with parents that I believe is almost irreplaceable.

disney i mean people go to hot and humid orlando spend a hundred dollars for a crappy lunch spend spend thousands on hotels and food and clothes and you know and like and this is considered a rite of passage. So I didn't come into Disney with any financial thesis. It was all brand. And I felt like, and I don't remember the exact price I bought it. It was probably close to like a hundred, like $95 or a hundred dollars. I felt like, and I hate to use this term because it sounds cliche-ish. I felt like it was a once in a generational opportunity. Um, I think as long as Disney keeps that trust that parents have and, you know, the, a parent's most prized possession is their children and they will plop their children in front of disney plus or a

disney show or a movie for hours and the content that the kids are are receiving is is not even a question in the parents minds where i don't know if parents would plop their kids in front of twitter for two or three hours or youtube for two or three hours or facebook for two or three hours or so they have that certain trust um pretty much i think that mouse is worth a ton of money and it's probably worth more than any of you it's probably worth more than any person truly thinks it is so i think for me the thesis was high quality brand um they have a warm cozy blanket feeling with their customers and right like they like they have to keep that going um if they have a problem and their parents can't trust the

content then disney has a huge problem on their hands but you know when you see on twitter people crying when they're going to disney world again i mean to me that's all i truly like they're crying that's it yeah that's it right there so i don't have any real financial dcf to hand you but i think for all the reasons that i have stated is why disney plus works that seems like a permanent part of society yeah i i mean to me like it's all one big revolving circle the trust the ip the i mean so um for me it was it just kind of like screamed out at me and saying like you seem cheap here yeah it's it's funny like hindsight i know this is maybe crushing

brett right now but it seems like it seemed like such a fat pitch just because all you you didn't have to do any work you could just say like this is permanent and yeah i mean disney can't right they have to keep that moat open and right and and as as soon as they do something to screw that up which i hope never happens then we have a problem but as long as they have that trust that warm blanket feeling um i think that brand is worth tons of money not to mention disney plus had impeccable timing i mean it couldn't have come yeah and to be honest with you i don't think i even knew about i mean i i think i knew some about disney plus then but that really wasn't even in my mindset right um yeah it's just a

cherry on the top right for me it just seemed like the time to buy as high quality as i could and something that i felt like i could put my hands around but i mean i'm pretty cognizant of the things I can do and pretty cognizant of the things that I can't. So for me, it seemed like a pretty fat pitch. Um, I guess time will tell on that one. Right. All right. Let's get the wrap up questions. First one. What is one financial saying that you disagree with? Yeah. So I'm going to cop out and just say like kind of a couple of things because of my lack of really a formal financial education, I think there's not one way to do it. I mean, I think you're investing, I think your personality and how you invest have a pretty high correlation.

So, I would say there's a lot of financial things that I don't truly agree with. Buy high and sell higher. Okay, nice. How about that one? Yeah, that is – I don't think we've heard that one before. So what's the reasoning behind that? Well, it's the first one I came up with. Because why would you just buy low and sell high?

I don't feel like I'm capable of figuring out – like when you buy high and sell higher, I just think it – it just rubs me kind of the wrong way i i just like just buy right and if nothing changes with the aspects of the business hold on buy right and sit tight exactly all right what's what is one piece of advice you have for anyone that's considering a career in real estate investing? Yeah. I had this question actually asked on a podcast yesterday, and it was tough to answer because the time in which I started was so different. I would say if you want to invest in real estate right now, I would be quite careful. um i'm a big proponent i think i've said it on this pod like three times like take

what the take what the defense hands you um i mean i have sat on my hands i have not bought a rental property for myself in almost three years so i have essentially been sitting on my hand. So the one piece of advice I would say is don't buy the first property that you see. You will probably see hundreds of them. And if you don't see hundreds of them, you probably didn't see enough of them. I would also say that if you really want to start purchasing, rehabbing properties, it would be, um, it would behoove you to have at least not some home construction knowledge to have someone that you trust because contractors can, can really can really uh i mean they can really screw you over um they can really hold your feet to the

coals in terms of pricing and they can just like take ten thousand dollars and just leave so i would be extremely cognizant of who you use for rehabbing. I see purchasing houses as a punch card mentality. So you don't have to buy the first property that you see. The house has no feelings for the price that you paid for it. So just be patient. And if you kind of understand what you're looking for, your opportunity will come, but it takes time.

All right. That's a great way to wrap it up. All right. Yeah. For, uh, for any of our listeners that want to see more of your stuff, get in touch with you. what's the best place to do that what's the i would just say on twitter guys um my my handle is is at j greenwald 86 at greenwald capital and you can feel free to uh dm me anytime awesome all right thank you for your time jason enjoyed it i appreciate you all having me guys thanks again

cox panoramic wi-fi includes advanced security to help protect all your connected devices you'll get real-time alerts oh like this one so you don't have to worry about malware or when your kid downloads a song from a shady link and now all your computer can play is red color red color where are you all blocked thanks to advanced security included with cox panoramic wi-fi advanced Security must be enabled in the panoramic Wi-Fi app. Restrictions apply. All right. Welcome back in. Thanks again to Jason Greenwald for coming on. Enjoyed it. But we're going to get to our stories and I'm going to kick things off with the Greenlight Capital second quarter letter. So Greenlight Capital is David Einhorn's hedge fund for anyone

that's unfamiliar. And the partnership was down 2.9 percent this quarter. It's had a bit of a rough decade in relation to the S&P 500. I think the S&P since 2012 is up like more than 200% and they're up like 60%. So it's not been great for him. It's supposedly like a long, short equity fund, but it's turned into this kind of just macro predictor fund. I feel like that's like- Well, his letters are at least. He loves talking about it each quarter, right? Yeah. I feel like that's, everyone was talking about it on Twitter. There's like a life cycle of an investor you go from a great equity only investor to having absurd takes or not absurd having uh takes on the overall landscape of the economy but it's tough to resist being the take

machine because people are going to listen to you if you have a good track record that's something i guess well i mean he got famous through shorting layman brothers before the great financial crisis So it's like everyone's – I imagine he gets asked all the time what he thinks of the economy or inflation or stuff like that. And so – and that was pretty much the focus of his second quarter letter. And he did – so for reference, this Greenlight Capital used to have over $12 billion in assets under management. At one point today, it sits around less than $1.5 billion. So it has not been a great portfolio for him – or sorry, performance for him. But I'm not sure that he's that bothered by it.

I think he's doing well enough now. And reading the quarterly commentary, he seems like he's fine and happy. He doesn't really care. But anyway, a lot of the stuff he talked about was basically inflation-oriented. So he said, the majority of investors today accept the Fed's premise and believe that inflation is topping and the Fed has the situation under control. Basically, their stance was that it's not transitory. Yeah, the bond. Well, and just you can see that the investor stance is that it is transitory because typically the bond market, there was that cool chart that I forget who posted it, that cool chart of the bond, the interest rates on the bond market or treasuries or whatever. It's a bit out of my league, but the interest rates and that kind of tracked the changes in inflation over the last decade. But now inflation has skyrocketed and interest rates haven't gone at all.

So the investors at large think it's a one-time blip, but he disagrees. Yeah, he goes on to say, we remain positioned on the other side as there are, and we believe there will continue to be, too many dollars chasing too few goods and services. And then he also goes through several companies in his long portfolio, but he wraps up his letter with a wonderful quote from Steve Burns, the former CEO of Lordstown Motors, and says, i don't think anybody thought we had actual orders that's just not the nature of this business i don't i don't know what that means what what does that even mean you remember when he was on cnbc and they got caught in the scam and he said that jesus and then they said you said you had very serious orders and he goes no one thought these were serious orders that's not how this business works it was just yeah what business is it i thought the business was selling cars

it's uh he also ends with bucks and six which congrats man i guess yeah don't uh yeah i was listening to some buffett one of those sorry not buffett berkshire hathaway um you know the old investor meetings that are on in podcast form and there was one from 04 and there was a uh boston guy who was like go socks world series champs home of the champs And it's like, dude, we all got our cities, man. No need to bring your sports takes into the annual meeting. And I just remember Buffett going, good, all right, cool. Yeah, I don't know if you read the quarterly letter or if you read any of his,

but it feels like a guy that doesn't really care that much anymore. Care about what? Like public perception or performance for that matter. or maybe he's willing to take the super long view and get right i mean you think about the lehman stuff like the returns in 08 for him probably made uh enough to make his all-time returns look good uh yeah it's hard to tell i don't know enough about him but i don't think anyone should care about what anyone else thinks of them but he's you know you gotta you gotta balance that with being on a crusade mission that isn't going anywhere you know what i mean

yeah it's tough that's a tough bouncing act because he has that conviction but when does he know if he's wrong and is this a great example i mean this is the exact the prime examples that tell me or discourage me from having some macro thesis because if it can't work for them it's like that meme it's like well it didn't work for them but it could work yeah it could work yeah it's yeah that arrested development stuff don't fight the fed does that apply here because Because he's basically bashing the Fed for not defining transitory enough. Right, right. Kind of the Fed.

Countering their take. Yeah, kind of. I don't know. These gripes are interesting because you can say don't fight the Fed, but then the response from someone, and who knows if they're right or wrong, their response is, oh, just wait. And are you just going to say, oh, just wait forever? Or are they eventually going to be right?

I have no idea. And it's kind of, I mean, it's a bit scary. But it's also like, gosh, I don't know if you – how do I even think about – like, you know what I mean? It's so unpredictable. This is also a great letter if you want to learn how to color poor performance in a good light. He can write with sass if I remember reading it. Oh, yeah. He's very good at writing with some sass.

A lot of passive aggression in here. Yeah, yeah. He's very good at that. I mean he brought up the deli though, that $100 million deli. They're always a fun read. Yeah, they are a good read, but I always think like, man, are you just – I guess this comes to the saying that a lot – this is the cliche saying too of do you invest how you think the world works or do you invest how it actually works? Because I think maybe a lot of people with his view are getting caught up in how they believe things are and that's different than how things actually are. But who knows?

Maybe it's flipped and maybe they're about to get vindicated. This is also why I said it looks like he doesn't care anymore because he has so much sass in these quarterly letters. It's like you wouldn't be sassy if you were underperforming perpetually. Yeah. But like most people wouldn't, but he is. Yeah. Yeah. I guess he, I mean, if you're in his position, you don't care what anyone else thinks.

You probably don't care about outside capital and withdrawals and stuff like that. Yeah. I imagine a lot of it's his money now. Yeah. All right. Well, it'll be interesting to see how, from the sidelines, how this fund, what is it called? Greenlight does over the next five, ten years. What's your story?

Okay, China crackdown. It is continuing. It is getting, I mean, so bad out there. Maybe this is the time now, if you're using the FinTwit indicator, it seems like everyone, ourselves included, are in consensus saying it's time to, everyone's like, no, no, no, you can't. Everyone's now. oh you can't touch chinese stocks maybe that's indication to go long but that's really that's a tough way to make an investment thesis but last week and then continuing on top of it there's been plenty other things besides this there's been reports out of china that the tutoring

and education companies may be forced to go non-profit and will be unable to trade publicly so all these industry stocks got absolutely hammered uh there's one with the tier g-o-t-u the i couldn't pronounce the name so it's just gotu was down 95 year to date now oriental education and tech is down 90 year to date and then tall education group is down 95 year to date totally getting crushed i mean if you have those positions it's so hard to recover from that it's going to be very very difficult for them we've talked a lot about the risk of the ccp from an investing standpoint and ccp if anyone doesn't know it's the chinese communist party flipping that around we know that there's the threats of the ccp but

what potential downside regulatory threats most scare you when investing in the u.s i'll go first and it's mainly just from reduced harm stuff where there's products and the easiest one to look at it is probably like coca-cola where there's been all these regulations around soda a lot of it local you know trying to get people off of soda and stuff like that and that's like product specific taxes yeah taxes and stuff like that if anything is perceived as unhealthy and i think coke call is unhealthy whatever no matter what buffett says uh you know he always says i live long i uh and i had coke call but i mean come on man you know that's a little disingenuous but the uh that that risk seems the heaviest to me in the united states what about you

what do you think yeah but it's never like i mean here's the thing is like going non-profit and the education sector might be good versus i actually haven't really thought it through but like there there could be benefits to that for society um but it's just makes it so hard to invest yeah in china i i just don't see anything like that ever happening well they shut down i mean they shut down the for-profit colleges like in 2014 in the u.s yeah what so they're not for i'm unfamiliar with this i think yeah i don't know this just goes straight to their uh i think they just got uh pension fund i don't know this i i don't know the um i don't know the story too well but people have thrown around the ideas or sorry the old news stories that yeah i think it

was in 2014 something happened in the u.s where the for-profit colleges got they got hammered like this it's just i don't know like a full-blown shutdown of a sector doesn't seem realistic if anything it's sort of just like gradual tax increases or making the competitive environment or the operating environment difficult more difficult for businesses ultra is like the perfect example yeah the i think the difference is counterproductive yeah the difference between the ccp and maybe the u.s is in the ccp at least from my standpoint i have no idea what's going to happen but in the u.s you can kind of you can understand what the threats are before you underwrite investment you and you know it's not just going to change on a whim most most of the

time sometimes it can but yeah i don't know i don't think i don't i don't really think that much about the regulatory threats in the u.s i i don't know some is i mean it happens do you see sector being completely shut down i mean you can't think of one i think you you know i think the data stuff people the data collection stuff but even that was done private i mean you could say apple took the initiative on that yeah but i still think there's that threat of uh especially i mean kind of like how europe's done it although that's it seems kind of half-assed i i think the regulatory threat from the u.s is a lot higher than than you might think i mean there's a lot of stuff with real estate like where you know local laws whatever i mean there's i mean there's a lot of laws out

there in the u.s i mean this is kind of overhead but i don't know there's i think the clear difference though is that in the u.s like the the laws are there and it has to pass these processes or whatever you know the whole you kind of have a good idea of what's going to happen like you can tell early on or you can tell what the threats are yeah all right well i'm gonna get to my story which is snapchat earnings uh so they kind of crushed this week they reported i think on july 22nd and they reached 293 million global daily active users 982 million in revenue for the quarter, which is up 116% year-over-year, up 66% versus Q1. They had over $100 million in EBITDA, which, I don't know, take that with a grain of salt, I guess. And then they said the iOS change

didn't have nearly the impact they thought it would. So I guess they're seeing great engagement, I mean, just all around a pretty solid quarter. And so, of course, some old Professor Galloway takes had to resurface this week as well and on twitter i saw a video uh of him speaking on cnbc and in 2018 he said snap is a great company a great product and it's the walking dead it will be acquired within the next 18 months for a fraction or a shadow of its current price right now obviously this did not age well at all but it aged worse well worse or better than our tesla takes just as bad about the same about the same returns about 10x yeah obviously professor galloway is known for some cold takes uh but is this a great example of what because it did sound

smart at the time like they were getting pressure from all basically facebook was starting to dominate video ads or that was the consensus for you there was the kylie jenner thing right that sent it totally in the tank uh but is this a great example of why people should never speak in certainties because if you were guessing in 2018 you would not have guessed these returns for snapchat yeah if you looked at their user numbers i believe it was a lot less healthy than right now i mean it was a risk investing in them then and i think it's still a big risk investing in them now what's their what are they greater than 30 times last 12 month revenue never generated true free cash profits i think their adjusted ebita was like i saw a tweet or something like

250 million of it of the 100 million was stock-based compensation shares have doubled i think maybe not double i mean i i don't think he's that far off he just was way too you know he exaggerated it maybe but at the time the anecdotal evidence would have had you believe that snapchat was dead and that kind of i really try to avoid doing that and just looking at the data because there's a lot of things with anything consumer facing where you can pick up one piece of anecdotal evidence and you'd be like oh this person doesn't like it oh dude this company's screwed but if you look at the data they're doing fine so did snapchat's performance over the last like exclude multiple expansion like the operating performance hasn't surprised you

it's tough to tell i mean the people are people already seem to like it a lot but i never really i never got it as like a long-term product i thought it was just messaging for a lot of people but it's a closed ecosystem so it's hard for anyone outside of it you know what i mean it's like there's no it doesn't really relate with other apps that much right or am i wrong uh um yeah what do you mean relate like you know how twitter and you can like cross sharing yeah you can't really cross share on there it's kind of a closed ecosystem but so first i guess people like the discovery stuff that they've added more than more so than i thought uh but does this also go to show that maybe ad spend will be more fragmented on the platform like will it have

more diverse platforms than we initially thought it won't just be facebook and google yeah i think there's plenty of spots yeah i mean facebook and google are clearly well i think they probably are the best at targeting and they're perceived at being the best too so people are going to allocate budgets there until it doesn't until it stops working uh and it might never stop working but if you snapped your fingers and facebook went away yeah there'd be a giant effect but there's a lot of places that ad dollars could flow because there's so many i mean isn't there just a ton of inventory and like ctv podcasts for us um video games a lot of ad inventory that just doesn't even get filled right now yeah especially on mobile for sure for sure i i mean but that's a

huge hole if they go i mean facebook and google are the dominant ones but i don't know but we'll get to twitter i guess we're going to roll into twitter yeah um their ad targeting seems so atrocious but i mean they continue to put up good numbers as well that'll be fun to go over them right now just for reference eva to sales is 12 uh so a little bit less than uh snapchat so it's obviously a bargain they're gonna write this that's kind of an example of the relative valuation and how that can get you in trouble but uh let's go through the numbers quick 1.19 billion in sales up 74 percent year over year and monetizable daily active users reach 206 million up 11 percent year over year rolling out tip jar ticketed spaces and super follows renewed the partnership with

the nfl and they're going to have live nfl spaces coming in 2021 sales and marketing expenses that 302 million sbc expenses 178 million 15 of revenue but they bought back 334 million dollars in stock in q1 however share count continues to rise which is just i nothing makes me angrier than seeing that although we hold although we own autodesk right now so i don't know what's maybe i'm a hypocrite yeah buying back stock and then giving out stock feels a little i don't know like it just feels like a waste of money at that point but maybe i'm wrong uh yeah it they talk a lot about the spaces and a lot of the new features but every single time they think about new initiatives i always think it's just going to end up coming back to its core

business or its core function it's yeah they got to get the ad targeting right that's it isn't that the only thing i'm just thinking about the user experience like spaces was cool for the first few weeks but i'm pretty much over it yeah the fleets was a total flop but they recognized that early which is good i mean yeah maybe they're gonna have maybe only like two or three of these of maybe they launched 10 products over the next few years maybe only two or three stick but that's better than doing nothing like they used to do um their subscription product seems not great though they're kind of like giving people options for 30 second like limits to edit your tweet and it's like why would i pay for that maybe there's some other things on there but wouldn't the subscription

product just be no ads or am i just totally mistaken but the ads are so bad that they don't even contribute to anything yeah i don't know how a freemium model would work here but i mean i would pay to have access to twitter i think but if there's they will never do that but if there's yeah if you could only had to pay i would pay but if there was a free if there's a free one i'm just going to go because the i'm really just using it for the core feed functions yeah maybe getting maybe pay to get rid of topics and trending for you oh it's trending for you if we could just eliminate that i'd pay five bucks a month for that uh all right we'll wrap things up with the twitter one what would have to happen to get you interested in twitter stock dorsey out it won't

happen no i don't think that's that much of a help i think he's pretty bitcoin's gonna solve world peace guy i don't think he's that influential on twitter's business it sounds like it sounds like it's kind of ned seagal and cave on i think that's his name they're the core they're actually doing the kind of core product stuff yeah i just don't think i can get interested in twitter it's just such a catch it's like a catch-22 like they've got they've built a great platform for sharing information and ads just make it worse and what are you going to advertise that doesn't detract from the experience no i mean you're reading messages yeah but it's i think yeah promoted tweets are useless i remember when we tried those out but think about like companies

companies trying to push products on here it's just guaranteed to detract from the user experience maybe books or something like that promoted tweets yeah they don't work very well well okay those are tend to be totally random and not at all interesting like i never have any interest in some of those promoter tweets yeah i mean just standard sponsored video ads seems the right way to do it but you could see a world where um how how would i say where the stock does well over the long term this business does well over the long term if they can get the ad targeting right but just betting on that at this valuation i don't know but you kind of come back and say all right this feels like a very durable asset yeah i'll be i spend tons of time on there

it's just hard to monetize but i've thought that for three years and i still don't think it's changed yeah it's yeah what's who knows story all right all right two quick takes anecdotal evidence type stuff here so yeah it's just gonna be streaming stuff i know this always turns into like recommendations but if there was box office futures if you kind of get what that would mean where they could throw out a pricing and go like buy a call option or buy a put or whatever on it on a specific movie on a specific movie i would buy them on dune after seeing that preview and then i'd go all in on that because it's it'd probably go out right now like 200 million maybe 150 million i think it's that could be the movie that really gets people back to the theaters

um in mass although it seems like them streaming on hbo max like it might detract from that i might just watch it is it like a do you have to pay is it one of those things you have to pay for specifically no no it's included on hbo max i think it's the ad free one kind of thing it's included with your hbo max subscription ad free that's how they've been doing these movies like once every two weeks it's pretty nice and that comes with my other topic this that strategy seems great and it seems like hbo max is already me again this is anecdotal so i just said don't listen to this type of stuff but it seems like it's like already better than netflix i'd agree 100 i'm becoming a netflix bear purely because

of the content catalog but it's because personally i don't like the catalog short it but it's been bad for like four months yeah it's been pretty bad i would i can confidently say that if i were paying for my own i would not have a netflix right now i'd go hbo max i'd go hbo max uh if if we're working on a budget. But they've got Love Island in every country now. That's huge. I mean, how are you going to miss that? Yeah.

All right. Well, I think that's going to do it. Thanks again to Jason Greenwald for coming on. Thank you for listening. We are not financial advisors. Anything we say or discuss here on Chit Chat Money is not formal advice or a recommendation. We are, however, general partners at Arch Capital,

so clients may have positions in the securities discussed in this podcast. Thank you for listening. We'll see you next time. this family is on the brink of civil war on september 18th mob land the hit original series is back on paramount plus we are the harrigans don't know the net and google us from the underworld of guy ritchie do you want to step up the ladder i want karma dead starring tom Hardy, Pierce Brosnan, and Helen Mirren.

Do I have to do everything myself? You want more? I'll give you more! Mobland. New season hits September 18th on Paramount+.