Chit Chat Stocks - Investing Power Hour #20: Adam Neumann Is Back, Potential of WhatsApp, Embracer Group Acquisitions

Episode Date: August 21, 2022

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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 Chit Chat Money by Ryan or Brett or any other podcast guests is not formal advice or a recommendation.

Now, please enjoy this episode. Pairing to live stream. This meeting is being live streamed. Okay. Welcome into the Chit Chat Money Investing Power Hour on the show. We come with nothing prepared. We're basically riffing on financial markets. Anything and everything is fair game. Earnings season is coming to an end. I should also mention that if you guys have any questions or you want to listen to these things live for anyone that's on the podcast. We do these live on YouTube at 12 o'clock Pacific time, three o'clock Eastern time, and you can definitely get your questions in. We always appreciate it. News that I think needs to be talked about, Newman's back.

That's what you want to hit first? Yeah, there's quite a bit. Markets have been boring, but there's quite a bit of news out there this week. We can probably discuss that Bed, bath and beyond thing although that's a developing situation um but yeah newman what were your thoughts that's it's actually i think it's completely insane all right i know that's kind of like not everyone thought the same thing but how do you this man might be the best salesman alive what um he has no business it's just an idea and he's already everyone knows what can happen when he gets going and what can how how a business can deteriorate um and how much he can spend yet he had no problem selling it to what are widely regarded as some of the better investors

in the world, or people that have had success with investments in the past, and they wrote him a giant check. I think he might be the best salesman of our generation. To do it once, he was already a great salesman. To do it twice, it's hard to beat. I can't think of someone that's better. Gosh, yeah. $350 million.

That blog post was interesting. the Andreessen Horowitz one where they discussed why they're investing in flow. And look, I hope it does what they think it's going to do or they want it to do, if you get what I mean,

where it lowers housing costs because we know that's a big issue. And there's no, you know, the less people need to spend on shelter, the better all else equal. But I just kind of doubt that's going to happen by inserting a middleman

that wants a bunch of the profits. I think the other funny part was the fact that Mark Andreessen and, I believe, his spouse wouldn't let people develop in their neighborhood. Yeah, well, not let. They wrote a letter, right, to whoever the… It had a lot of all capitals, words in all capitals. it was and he's nimby he is yeah i didn't realize that well i think uh everyone is not in my backyard person once they get into that backyard i would be like that come on if i had a really nice place and someone wanted to build a giant apartment building next to it i wouldn't like that i want

my privacy but i get yeah but then i want to turn around and act like you're saving the world like saving grace because i let adam i wrote adam newman a check to build apartments yeah i wouldn't uh yeah would you live in these things well i was discussing with you the basically the the play of they're gonna subsidize the i don't know but jesus out of these so it might be time for us to move to nashville but then we were discussing again how it may not be a place I would like to live. Yeah, with all of the

things they talk about, it sounds like everything I would not want in an apartment. I don't want to talk to... Are they already trying to do this? The We Live? This is definitely a springboard off of We Live. Yep, with probably just more rationalized without the wife in

whatever her name was, Rebecca Newman doing it. This is the insert insert Jerry Seinfeld yelling at Newman. If we could get Brady to go in and throw that sound bite in there.

I don't think that's what he writes. Yeah, the $350 million they're probably going to get more. These places are going to get subsidized for a bit. You can probably get some cheap rent, but I don't know how many times I would like to have my neighbor pitch in their crypto

thing to me in the lobby. during the force meeting time um so that might might keep me away what uh i think his web three thing ended right that's gone no that's flow flow is a part of it it's like flow is also the web three thing so i think there could be a crypto angle here which would just be a nice little cherry on top i think the flow carbon could be the the coin they're using but who knows there's no information so we're all just speculating I wonder if he's just propagating or

perpetuating the web 3 buzz so that he could get Andrews in his check yeah just what a poor use of resources huh like this could go to like it could go to like real yeah like the 350 million dollars is a lot of money

you know what I've thought about more than I care to admit is that picture of him walking around New York City without shoes on. Yeah, New York, that's the... That's... I'm just wondering what kind of a night he had. It was like 6 a.m. or something like that.

I think that was when... That was when WeWork was collapsing, so it was definitely... If you watch the show Recrashed, I think they got that pretty darn well. How much you want to bet Masa's son ends up backing this in some way.

Oh, I would bet money that he wouldn't. He's not going to. They really... SoftBank's suing them. Or was. I don't know what happened with it. It's the greatest salesman of all time that we're talking about here.

Yeah, well, maybe I guess we shouldn't doubt Adam Newman's ability to raise money. But SoftBank and Masa-san don't seem to be on good terms with Newman from what you know

reading through the tea leaves alright anything else entertaining non Newman related yeah Newman well that's going to be I mean it's going to be fun to follow that this year no doubt no doubt let's see there was

not Best Buy Bed Bath & Beyond similar tickers we seem to be going through a pump and dump there and did you see the story of the reportedly now this is developing at this time so new information could be coming out while everyone's listening

to this the 20 year old USC student who invested in it on behalf of other people I think it was like a fund that was set up seems a bit sketch I don't know also honestly props to the kid

well very ballsy yeah I mean I you know he got the money from other people I mean we don't know how much we don't know what percentage that was of the fund do we of his fund so but yeah hard to say but I think

a lot of it I mean he wrote a decent letter to bed bath and beyond when they I think they own like 6% dude no way a 20 year old wrote that I'm sorry if they did this guy's in that if you wrote that letter that like nice that good of a letter he this is this guy's insanely smart because if you're 20 years old and you can write that letter like i think there's there's got to be other

people you know working with the team there potentially but it's good marketing it's good marketing to have a 20 year old be kind of the face you know what i mean who's this guy's dad honestly i mean what got 25 million in college to start up his little fund well usc you know not not too surprising it's a lot of money though that's crazy he did look like a young story quite the pump and dump i mean not on his part not him yeah yeah although i guess i read somewhere that he was kind of responsible for creating the catalyst like yeah well there could be new information that comes up but it it's it's strange strange times Do you think anything happens here, regulatory-wise?

Is there anything to do here for the SEC? Well, look, I'm no expert in the securities law stuff, but it seems like the Ryan Cohen guy, who is associated with this company now, is associated with GameStock, founder of Chewy. He was, I believe, bought a stake, weekend he just sold some don't quote me on this let me let me confirm ryan cohen but beyond no i did say that he sold but yeah he reveals his well apparently it was too early and uh like there was

some i don't know this is stuff floating around twitter but we'll see what actually happens but apparently it violated some rule like what form 144 rule or something like that where we know someone else who's done that but yeah I guess maybe these laws don't

apply if you're rich if you're rich or they don't care anymore but I guess the you know the SEC acts slow so we'll see they're not going to be doing this tomorrow they're gonna be knocking down

his door but I don't know that meme stock stuff Cohen it just doesn't feel like you gotta have some morals at some point man this isn't luck that it just doesn't seem like luck that he's involved in every meme stock craze yeah finds a way to sell at the top well none of my

stocks get named yeah it'd be nice it'd nice it's also stressful i think bill brewster said this like last week but he's like you know i used to think that i had too much integrity to make money that way but i'll take what i can get now i think if someone wants to meme any of my stocks i've got a great i'd be more than willing to accept that and uh i'll take the returns that way i don't need i don't need true intrinsic value appreciation i need i mean i think it was a truck that said the only thing that matters is whether or not the stock is which direction the stock's going i guess yeah i mean we're not gonna start a pump and dump scheme but sure if a stock goes up i'll sell i you know i like just

don't uh right if a stock goes up 10 times yeah i think i tried to get into wall street bets once just to see what it was like and they didn't admit me so i think i'd have a hard time being i think we were trying to promote that uh i was trying to promote the interview with the guy that started wall street bets whatever i can't blank it on his name that we did i know we were oh we were you know we were early on wall street bets not to brag not to not not to brag why why why did he come on too initially well there was something that it was like something small that wall street bets got noticed for the infinite it was we were talking about the infinite money printer thing on robin hood where you could sell

uh there was no limit to the amount of call options or put options you could sell remember that stuff oh oh right i believe it was that but that was like two years ago so yeah that was that was before before the big blow up and all the drama that came with it yeah yeah all right here's here's a topic that i want to talk about because people seemed really interested and had a bunch of different takes on it when i tweeted it out what are your thoughts on whatsapp payments and why facebook slash meta is not investing more into it well i don't keep up with meta enough and i don't use whatsapp do you use whatsapp yeah i mean for people that uh basically older family group chats

um you don't just do it what's what's your alternative on android just like a basic messenger app google messages you can there's tons google messages is fine it's the exact same as i message but it shows up green on yours yeah well i can it can show up as uh any color i want it's customizable i can it can look the exact same as i message if i wanted to when you try to add a reaction it describes the reaction and text yeah not anymore not anymore actually They changed that. Yeah. If you're listening to this ad right now, we know you're already a listener to our show, but for our avid listeners, we've also started a paid membership service called Chit Chat Money Plus that extends beyond just our podcast. Every Tuesday, subscribers get

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Capital Investment Fund, along with shows on our broader investment strategy. Sign up and become a Chitchat Money Plus subscriber today. We can't wait for you to join our community. But either way, back to the topic. WhatsApp payments potential there. I see a lot of, I think there's a ton of potential given that there's 2 billion users around the globe that use it constantly.

So what do you mean? What does WhatsApp payments consist of right now? Well, they're trying to do peer-to-peer in different markets. I think they're trying to invest heavily in Brazil and India. Although, again, it's very international, so it's hard to track all the exact details. But my thinking is, you try to build, you already have 2 billion users. In a lot of countries, it's replaced. It's basically the core messaging distribution platform and has replaced email. So it's really, you know, all forms of communication are going through WhatsApp. I basically would think of trying to do a copy of Venmo in all these different markets.

And essentially a combination of Venmo plus a remittance company or remittance service would be super powerful. yeah it just i mean it sounds like they're already trying to do that yeah but my thing is they need to do it yeah why not invest 10 times as many dollars and 10 times as many people into this because the opportunity is just massive because those resources needs to need to go towards the metaverse and and the bill look here's what's what kind of was thinking of on that is they invested so much into that crypto thing remember when that was the

whole thing I forget what it was called Libra and then it was called DM D I E M they're partnering with remotely on something and now they canceled it I believe or it's spun off or something like that So, I don't know. Think about how much value they could... It's all speculative. It's all potential value. But think about how much value they could have if for the last five years,

they were investing to basically be a really robust remittance service through WhatsApp, which takes a lot of years to build up. Plus, you have peer-to-peer stuff for domestic transfers in all the different countries. I honestly think they could be doing hundreds of billions of payment volume if they invested enough into it. But I guess they're not for whatever reason. I wonder if Apple would have provided compatibility

across to iMessage. Well, look, you're thinking U.S. I mean, U.S. is obviously not the market to go after here because WhatsApp's basically... It'd be really tough for them to... A lot of people that had concerns, they're like, do you really think they can dethrone Venmo?

And I was like, probably not in the US just because WhatsApp's not nearly as popular here. But in almost all other markets, I think there's a really, really good shot. India, WhatsApp is insanely popular and they just haven't executed apparently from some of the anecdotes I was reading. There's a lot of other payment companies

that have done better. I just think why not invest a ton of money into that I think it's better than the metaverse did you see that funny video or picture of Zuck in his metaverse thing that looked like it was a 90s

video game I mean in front of the Eiffel Tower without legs yeah what what is this well Mike O'Downa is one of the dumbest bets of all time alright well let's call the

let's let's yeah fade ourselves and say maybe the investments are gonna i mean 10 billion dollars a year is a ton like obviously oculus has some sweet technology but it'd just be interesting to see when they come out with these new products like if any of them actually are revolutionary you know what i mean yeah just not seeing it yet the thing is okay if they are revolutionary you don't have to own it before that you don't have to own it before that it proves to be

revolutionary technology and they get this mass adoption like once it's proven once they start to see adoption like you've seen it with the iPhone there's still good returns to be had yeah you didn't have to own Apple

what was it 09 was that when the iPhone was at 07 but App Store wasn't really materialized until a few years after because when it

first came out it was basically just access to the internet I don't think they had the App Store at first

so all that lock-in all that kind of thesis around there you probably

would have been able to formulate in 2009-2010 probably still speculative at that point

but you could have seen the potential maybe what do you think Meta's returns are

over the last five years latch pretty flat yeah but is it flat pretty damn close it's up 5% isn't that crazy

think about how much operating income has grown for them yeah I know it uh I guess this is why management matters not to say anything bad about Zuck I actually I've warmed up to Zuck

But where you end up allocating that capital is obviously a huge part of the equation. And he's taking a pretty big bet on something that's fairly speculative. Although I feel like whenever we talk about meta, we just go round and round in the same conversation. We don't know what this is going to be, but they're obviously betting a ton of money on it. What was their price to free cash flow? And I'll look it up in 2017. What would you pay for the core family of apps? Whatsapp, Instagram, Facebook

Anything else? No clue Which is why I'm not investing Let's assume 30% operating margins I forget if it's around there right now 30% operating margins I think users grew like 1% Core family

Core family is Oh their operating margins are way higher Alright let's go 50% I don't know dude I don't know come on there's too much i was actually someone chirped me on twitter and said i should uh i need to be more like i need to have it but uh i can't say i don't know it's all the questions what i

don't know and i was like all right man these sometimes are the things that give some give some sort of a take you've got if i give you instagram facebook whatsapp combined let's say they're doing i'm gonna get the numbers totally wrong i don't know 30 billion dollars in operating income on, I don't know, what is it, $60 billion in revenue annually? It's higher. Yeah, you're way off on that. But I think operating income is closer to $50 billion.

Am I? All right. Let's say I gave that to you for $300 billion. You could buy that business. For family apps? Yeah, the VR reality labs that just doesn't exist. Let me look at what they did. I got to confirm what they did.

I got to confirm their operating income in 2020 from Family Apps. In 2021, excuse me. Let me just look up that number so I'm not totally off here. Last 12-month EBITDA was like 48 million. Yeah, but that includes all their losses, though. Okay. Family of apps, family of apps. Revenue was like 100.

2021 operating income from family of apps was 57 billion yeah I would pay for just family of apps yeah easy 300 billion all right 600 but that's not

what you're paying for I'm giving you a theoretical I know but it's so it's not like if it's only these it's just not let's say tomorrow Zuckerberg says

we're closing these initiatives yeah but don't you got chirped for saying i don't know so you just got to play along with the theoretical yeah but the management still matters and their their their capital allocation strategy just seems risky to me so do i trust like because they're also talking about you know five years ago or whatever investing a ton in libra which just seems risk was seemed risky at the time so yeah i also worry about their timing on buybacks um they're what's her name gone too sandberg yeah i don't really didn't she have like some she used she expensed her wedding or something like that yeah that's fine did i she she created so much shareholder value like she's

she's the one that you know got it all going from a monetization perspective so I wonder if she just wasn't on board with the metaverse and that was the she's got to go Matt says we have to channel our inner Stephen A. Smith I think maybe 10% of that look yeah family of apps I would pay 300 billion for that for

sure for sure in that hypothetical are you worried at all about let's say WhatsApp didn't exist the Facebook and Instagram businesses is there any concern around durability I was just

in the richer markets for Facebook Instagram no I'm not concerned I was more well actually slightly concerned I was more concerned probably a year ago then I got a little bit more religion on

Instagram well gosh I don't know they seem to be taking a big risk of trying to embrace short form video so that could be a misstep so i guess there is some uncertainty there but if you could spin out one business not only a facebook but like a segment of any big tech company let's go fan mag you get a spin out a segment what is it at any price or assuming

what like the same earnings ratio let's assume they trade at 20 times their earnings all the businesses well WhatsApp because

then you could actually run it with you could you know there's so much potential there there's so much

potential there and the moat of the user moat is phenomenal you'd pick that over the cloud providers

or over YouTube yeah just because the like the earnings ratio would be you know if it's at 20 times earnings that's kind of a loophole there

but you know what I mean obviously the cloud providers would be the safest bet I mean well

of the cloud providers AWS would be the safest bet just because they're the ones that approved they can generate tons of operating income what's the most profitable business

you've ever seen Google oh what do you mean profitable like margins higher yeah

highest whatever it's even margins operating margins I'm not talking about like a sub segment of a business I'm talking about consolidated financials oh it's it was either evolution gaming or

visa or Moody's no I don't know if Moody's is that high but I think it's a visa right I think it'd be visa add in add in was high when we looked at them yeah didn't someone say like MasterCard of Visa could be run with

like 50 employees yeah there was a business breakdown some that i don't think that's a hot take right we all know what it is yeah i was just thinking about that because i don't know i heard some anecdotes around shall we say corporate bloat and some of the big tech companies uh around the seattle area and it just made me think if you just cut expensive like do they need to send all their employees to baseball games do they need to put them in hotels for the first week that they joined the company probably well i will take it a step further do they need all these employees in general no almost i this might be a hot take but almost all employees are a waste no not almost all but a good a good chunk of employees are waste hey so are we

the company we work at they're a waste at some point there's extreme inefficiencies in corporate america and maybe that's fine oh there's a bug sorry if anyone's watching there's a there's a fly which might look weird but there's extreme i mean you know you just told me that anecdote of putting up people like whatever 100 people in a hotel all their own room hey they all do something during the day yeah we yeah they they do something what are you gonna have 50 unemployment no just gotta have people with you gotta give people purpose i know it's the responsibility of companies that could earn 60 percent 70 percent ebit margins to cut those in half for the good of america to hire people for wasteful for for uh pointless jobs look it's

the system i mean there's too many mbas or whatever you want to describe it there's too many uh people that have the skill set that is not actually necessary but man would it be better if you know there was the ability to do more purposeful work um but in general isn't it Like this power hour that we're doing right now. Oh, I'm not. Value to society. I'm not saying we're... I'm not saying...

Yeah. I'm not saying we're providing tons of value. It's just part of the game. But it is... Yeah. Without going too deep, it is part of... You just got to realize that. If you're a cog at a big company,

You got to realize, man, I could get kicked out of here. Nothing will affect this business. Like, I don't know. That would give me a little, you know, make me nervous if I was working there. What? A looming recession could just eliminate your job? Not even a looming recession. Just basically at any time, like, okay, how much value am I actually providing this company?

If I'm not providing any value to this company, then they can fire me at any time. I would just be really nervous about that. Yeah. It's fair. All right. My favorite segment, stocks on your radar. Found anything interesting? I was looking at Calaway again this week.

Just been doing some research on them. Went to Topgolf. What'd you think? There was a check. That's for sure. You're welcome. next quarter Callaway shareholders

yeah talk about a waste of money this Topgolf but people I was with a group of like eight people

now granted we bought some drinks and some food we were there for two hours eight people I think it was like

50 bucks a person it's a lot of money yeah yeah don't be listening you New Yorker investor people it's a lot of money

out here if you were a lot of money and not in new york city if you had to do an emotional hedge portfolio so companies that you're like you don't want to see their stocks rise but if you owned them at least it would like offset your emotional response so emotional what do you mean other you mean like spending like if apple continues to do really well it's going to frustrate me from like a, well, you know, like- You're locked into the ecosystem. You understand the moat.

Yeah. And if they're gouging developers, let's say, or they just did that app tracking technology feature, what was that a year ago? And they heard a bunch of other advertisers, but then they used it to boost their own advertising. It would frustrate me to see them do well. But if I owned it, it would offset that frustration

because i'd be doing well if you had to have an emotional hedge portfolio that's what i'm calling the emotional hedge what companies would be in that basket i think it's fair to say probably tesla's in that tesla yeah yeah well yeah for sure for sure tesla's in that for me um don't like that that no i mean emotional hedge do you mean like yeah they're in a tough spot emotional hedge is tough i mean i would think it would be one where the stock goes up you're frustrated but you make money i'm frustrated with the i'm not sure i understand the question am i frustrated with the company or am i frustrated that the stock continues to rise oh

I think Bed Bath & Beyond GameStop AMC AMC yeah for sure Bitcoin this might as well

just be called the schadenfreude portfolio yeah the Bitcoin Bitcoin for sure okay

100% any crypto thing come on I that is pure schadenfreude right on their downfall well this is what it would

right this is what it would be no you're getting it right there's stocks in there okay oh no no Microsoft and Amazon because of Seattle housing for sure that right

because of if they if Microsoft and Amazon stock price goes whatever or if they're okay they say stock price doubles or triples again within the next few years watch out we could be screwed better lock it

we will take up Adam Newman's new apartments we'll be forced to move to his wherever those are which is perfect that it was like Miami, Nashville and Austin was just beautiful that those were the three cities he was choosing

yeah it's hard to put like it's a lot easier to put cryptocurrencies in there because they're not actually creating tangible benefits to society. What do you mean? What do you mean? Come on. What do you mean?

I'm kidding. I think it's wasting resources. Oh, yeah. But most stocks, unless it's like a shell company, are representative of an underlying business that's hopefully not detracting from society, hopefully benefiting the world by creating something real. So typically I wouldn't be resentful of their stocks, Rose.

Yeah, unless management is immoral because that's just never good for society. AMC's management is just being super immoral with the tricks they're pulling. Inspires copycats. inspires copycats yeah I think Musk could be in that category for me

of inspiring the copycats although I was thinking like if I ever met Musk I really dislike him I think he's terrible for society but if I ever met him I was thinking like yeah he'd probably have me eating out of the palm of his hand just like you know

talking whatever I'm not trying to hype up any sort of engineering thing I did even though I think he's you know a fraud but It's how it goes. He's a pretty compelling guy. I found the Manchester United tweet fairly interesting. I bet he didn't know that was publicly traded.

Gosh. Most people don't. I know, but pick one team. That's just bad luck on his part. I think there are some other teams that you can buy. What if he said, I'm buying the Atlanta Braves? i know but that's still pretty unlucky if that was the one team well there's there's so many sports teams out there it's like the most followed and they

they just lost like four to zero it's uh they're in a everyone seems to be they are ripe for a new i i think potentially right for a new ownership group so still lucky it wasn't just happenstance but it was unlucky that they just so happened to be publicly traded also happenstance that someone bought a bunch of call options right okay but there was also i saw that but there was rumors of new ownership stepping in that day when all the call options were bought okay so the rumors all right so they're real rumors okay there was like someone was thinking about buying and i believe that's when the call options were purchased still sketchy i think the thing is like that stock is so hard to uh matt h says he didn't

see the options trading volume the few days before on manu yeah no i'm saying there was i think we may have a time lapse on the comments there but uh um i believe that day that the options volume whatever like 10x this was before musk tweeted his thing on that same day there was rumors of a different person potentially buying the club which have spurred the options volume increase also i used to have that stock on my little watch list when i was like young just to like oh they won let's see if anything happens this is like no correlation between performance and stock price there sports teams are uh yeah they're not great

like I can't imagine they're very profitable investments typically unless you find a reseller maybe we should do a not so deep dive

or someone to buy it from you yeah it's not they're strange assets for sure because I would hate to do the deep dive on Manchester United

because I don't know what actually drives well that's why we should do it that's why we should do it we'll figure it out we'll figure out where they make money or don't make money i mean from what all i've read it seems like they're not actually that great at businesses and they don't make that much money but you just got to find a a rich owner so maybe income inequality that can help but who knows yeah because they talk about the value of the franchises

and i always find that suspect where they're like we estimated the value of the dallas cowboys and it's like would you run it would you run a dcf on this what jerry what's his name jerry smith jerry jones jerry jones what his grandson ran a dcf yeah i don't understand why they do there it's like the brand value stuff when they're like what's when they do those reports amazon's brand value is blank and it's like fantastic thank you what does that mean yeah thank you for doing that really important work um or or the the the ones that are like studies find that um no they're like studies find that black people have harder time getting houses in rich neighbors than white people and it's like thank you thank you for that really powerful insight i

did not know that that was occurring yeah the study had to tell you the yeah i'm starting to be a study hater and a survey hater yeah i'm actually kind of i would say the ant going anti the survey's results are more likely to be right on the average survey because the only people that are inclined to respond

you're only getting responses from the people that are inclined to respond which means they've either had a perfect experience or a terrible experience as opposed to the average person who probably doesn't care. Bingo. There's a bit of a hot tick that the opposite

that we're going to George Costanza this but all right you ran that poll you're like if spotify increased its subscription price by a dollar which i think was like it's 10 bucks to 11 bucks let's say which they did the year before yeah and no one everyone's like i a bunch of people said they'd churn they like 30 or something like that yeah but they already did that and turned to the change i know so you like you muffed you kind of muffed the survey which ended up being like a i think i'm using the term right like a freudian slip where it ended up being like ironic because it would have been the exact opposite answer would have been correct yeah no i have no idea if you're using that term freudian

slip correct but go ahead use it i have no idea i don't know what that means people use it all the time and i'm like all right sounds smart i'm just gonna start using it and hoping it's right but I'm a survey hater no doubt. Team anecdotal evidence that's honestly if you know like data is so hard to

understand like okay there could be some weird trends going on it could be bad data people could be and it's crazy it's crazy that people make huge capital allocation decisions based on surveys and like

I guess what I'm trying to say is and I'm saying this poorly if you can invest based off of anecdotal evidence and you know for a fact that something is actually sustainable and durable and has a moat without needing to see the data

that can be much much more powerful to me because it's sometimes the data is just wrong I've found that Being around college campuses, collecting anecdata from college campuses gives good insights in terms of certain consumer trends. I agree. Zen, very popular.

If you're around college campuses, you probably were onto that prior to the explosion in Zen volume. but half of our portfolio match group Spotify because Spotify dominates college

campuses yeah what am I forgetting well RIP Swedish match but is that RIP yet

has the acquisition gone through do we know well it's above the acquisition price because Elliot management's in there

trying to do its thing Let's ruin them on. See if I can get some good value for shareholders. But I mean, RIP to us. We don't own it anymore. Okay. Here's another topic. Remember Embracer Group?

That they are buying... They are continuing their acquisition bonanza. They are buying a company called Tripwire. Oh, gosh. Okay. But here's the other thing. They're buying the IP rights to the Lord of the Rings and The Hobbit. which um i thought amazon had to be honest but i guess it's kind of divvied up it's not like a

marvel um stuff like that so this is a great chance to uh shameless plug our interview with the ceo yeah one of the craziest we've ever had not craziest uh craziest gets we've ever had yeah we're a bit out of our realm there on that one but uh there's nice he was he answered all questions he kind of roasted me at one point um i don't remember that what happened you know i was just like what are you like i basically said like what are you looking for in acquisitions like why i don't know i hopefully i framed the question better but it was something around like what are you looking for in acquisitions it's like and he was like or no what uh what indicator what metrics do you use to determine sort of success on acquisitions and and uh success

internally and he's just like profits yeah all right it's fair easy enough the cash the companies still generate but here's here's what's interesting is that they were video games only but from this announcement they said they are floating the idea of a gandalf movie lord of the rings character and exploring other opportunities based on iconic characters such as aragorn golem galadriel all these lord of the ring characters they're trying to be a not just a video game conglomerate but a real entertainment giant and it's they're moving so quickly it's hard to follow them to be honest um i had i always struggle with like the serial acquirers like trying to keep up oh yeah especially because they're in financials just a pain yeah especially because they're in

sweden um i had a tough time yeah valuing them which is kind of why we passed but man they are being ambitious it'll be interesting to see what happens yeah they've done probably more acquisitions than any other company i can think of i'm sure a bunch of the big tech ones just get like swept under the rug and we never even noticed but yeah they are got serial acquirers yeah i'm looking at it right now lord of the rings was lord of the rings like did the rights to that game exist within Tripwire? How did that work?

Or are they unrelated? I think it was a different company. They're acquiring five companies. Total value of $577 million. It would suck

to be like an analyst trying to model this and then they just lump like five acquisitions at once

like totally change up the business and now you got to like go in and spend probably a week weeks trying to figure it out

yeah the video game analyst that I follow said basically said Embracer just acquired and listed all these companies and then said what in the dot dot dot dot yeah the

I guess then he said we're about to be acquired by Embracer but hey if they're looking for a podcast here here one that your ceo has been on um gosh that is yeah oh here's the other what's up with everyone buying ally financial people buying it did uh everyone's buying it the buff dog buffett's buying uh that punch card capital company that like only buys

they've owned it right I think that's a is that a new one no no they've owned it that's no Smith and Wesson is the new one punch card on that well talk about sorry I can make a bad joke there but

I don't know people people seem to love ally they're reducing share count quite aggressively would you ever switch banks as a consumer I don't care that much because I just have spending money

and then investments and then I basically there's like I keep like whatever I need to have any sort of comfort that I don't and then the rest goes into investments right away so I don't particularly

care at this moment but bank of america has pretty shit interest rates so if i really you know yeah exactly if i really had cash that i needed to save up i would for sure switch like if i was uh saving for a house but if i was saving for a house i'd probably do i bonds so i don't know i haven't switched from bank of america so maybe it's maybe if i had a survey i would be way off i would say i would switch but i still haven't switched for bank of america jamie diamond is on the uh the mexico hype train see that that's great to hear that's the guy it's definitely someone i want on my side yeah although we only own one mexican company so not like we're hugely embracing it but

speaking of that we are exploring doing different themes for our not so deep dives mexico could be a good theme a lot of interesting stuff down there yeah mexico could be a fun theme you uh you were an ex-mexico resident i was an expat there for two months is that i think that's the right term um what was the term what do you say expat isn't that what it's called no it's a joke i don't know what that is an expat is a person who resides outside their native country hey yeah that was correct for two months I was down there

it was an expatriate give the give the anecdotes what's that what's that burgeoning manufacturing hub there believe yeah there's a lot of manufacturing

sure a lot of beer manufacturing a lot of oil and gas manufacturing um and they love whatsapp love it there's your anecdotal evidence um all right we got like eight ten minutes left matt says buff dog yep what's the coolest warren buffett nickname i'm big fan of buff dog yeah it's a good one speaking of that uh yeah the oracle no that's not me come The Oracle. That's quite the name. Yeah.

Types him up quite a bit. The Oracle of Omaha. I saw that... Now, this is kind of... I'm going to put this in here as a real topic, but I saw that Li Lu bought the same stock as us in Q2. When? I'm not saying that...

I'm just saying that to... Not to brag, but when you're looking at any sort of investments, do you care? Because typically I try to be like, all right, it doesn't matter what anyone else is doing, but is there any certain investors you look out and say like, okay, if they're buying something here and we were buying at the same time or something like that, or they're buying something, I should look at it. Does that matter at all to you? Because I felt a little bit of, I'm not going to lie, comfort that he was buying the same stock as us in Q2?

The correct answer should be no. But I don't know about Leloo in particular because he's been... Wasn't he big on Alibaba as well? I guess in American companies, he's done

really well. He's got a good track record, so I can't... Obviously, phenomenal track record. Yeah. He's not the only one that owns that company either. I think a lot of big investors on that company. It seems to be probably the most, maybe the most owned.

In the hedge fund space? Among the value community. Yeah, but the timing of the purchase. Let me say, if you kind of get what I mean. Yeah, that's nice. Yeah, it's nice to know. I mean, there's some that I like, I don't like it's not it doesn't change my it feels good I guess yeah sure it's validating but

it doesn't change a little bit of vanity there it doesn't change any um like my next purchasing decision yeah for that company there are certainly managers that I follow for like idea inspiration can we talk about Burry's portfolio I mean the guy we got a comment I hear from Matt saying that everyone loves looking at it. There's a fascination with him, even though he turns over so much. I mean, I don't have a problem with turnover. No, no. This last one was ridiculous.

No, it's just the 13 Fs are unreliable is what I mean. Yeah. So I guess for anyone that doesn't know, Michael Burry sold every stock he owns and bought a private. Prison business? Yeah, but I think that was a bit off because, was it Scion? His asset base is a lot higher than his ownership in GEO. So I think it might just be, he might just have a lot of cash.

Yeah. The market value of his GEO investment is only $3.4 billion, according to Whale Wisdom. He bought a little bit of... Million. Million. Yeah, not billion, million. He bought some shares last quarter, but that was much higher than,

or sorry, the rest of what he sold was much higher than Gio. So I think he has a lot of cash. At least as of June 30th, it could have been totally different a few days later. It's kind of a bummer that I think he might be, I don't know, it's kind of a never meet your hero situation. I wish he never got a Twitter account.

he's a little crazy maybe he knows more than everyone but he just feels a little crazy Cassandra yeah that's he's a strange person the doc the doctor yeah

no comments people should look I wonder how Greenspan feels about him now after the movie yeah Greenspan probably can't watch any finance movies huh tough luck well he might be dead that shit actually joel no alan greenspan oh you're talking about joel greenblatt joel greenblatt not alan greenspan sorry wow alan greenspan is still alive 96 he's still kicking

joel greenblatt was the big one that backed him right i believe so that i don't know for certain but they i think that was the person that had the relationship don't know if the person from the movie was more of a fictionalized character of his. Yeah. I'm curious if Greenblatt and Burry still get on. You know?

Yeah. Burry seems to be not get along with a lot of people. If his Twitter account is any indication. He is gosh. What is it? Prickly? He's prickly.

Right? It's probably a good way to describe it. yeah he's very Christian Bale made him look pretty good that is right that is totally right no I think it didn't probably get a start on value investors club isn't that like he was writing stuff up yahoo message boards yeah yahoo message boards oh was it well I mean you can't even

knock green black because he ended up probably making a ton of money on his investment yeah all right here's the last topic coverage was

there was good coverage on this from the science of hitting shout out to them very good they get us a ton of Alex's research service gets us a ton

of substack subscribers since he recommends us. So thank you to that. But Dan Loeb wants, among other things, Disney to spin off ESPN. Now, I think that would be a dumb move

because the bundle of sports is kind of where the value is because you can bundle other things with it, with the exclusivity. What are your thoughts on that? Because I kind of think sports on its own is just so tough. Your value, if you know what I mean, the value is just like you're not going to make much profit But just because the leagues have the exclusivity that you're paying the rights for, you got

to make money in other ways. Yeah, I think that's totally right. Sports on zone, I think would suck. It's kind of the, you sign a risky deal. If you squeak out any profit, the league comes up on renewal and takes it all back essentially on the next contract that you sign with them. You can run that as almost a loss later or sort of at breakeven, run it like your typical sports business.

But if it's within a bundle where you own the IP, it dramatically enhances the value of the bundle while also not hindering the profitability. Yeah. Unless those rights holders, i.e., let's say the NFL, come calling for some of that bundle profit as well. like the stuff beyond what espn itself generates in views but i don't know if they'd have the right to do that the uh i think this is what dan lobe's second attempt at trying to go activist on disney yeah need a bigger fund well i don't know right it feels to me unlikely that an activist investor who

hasn't been in the company knows how to run Disney better than Disney yeah that's fair also there should be a rule that activists like remember the Exxon mobile activists that own like .04%

of the stock I just the activists you need a big stake yeah I think I mean I think I like Alex's response basically

this is why a lot of management teams ignore activist investors is because they've they're renters yeah and Dan Loeb sold his shares

on several occasions I think we're running up on time though so gotta close it out alright any other closing thoughts do we miss anything

nope it was kind of a chaotic one I don't know if we had any good topics but Who knows? That's why the no rules, that's how it comes in sometimes. Yeah.

All right. Well, that is going to do it. Thank you guys for tuning in. Thanks, Matt, for being our warrior in the comments here. If you guys want to listen, if you're listening on the podcast and you want to get questions in live, remember, just look up Chit Chat Money on YouTube on Thursdays at three o'clock Eastern time. It should be up and running and you can post questions in the chat.

We love getting questions. that's going to do it though. I want to remind our listeners, we're not financial advisors. Anything we say or discuss is not formal advice or recommendation. We are general partners at Arch Capital though. So clients may have positions and securities discussed in this podcast. Thank you guys for listening and tuning in. We'll see you next time.