Yet Another Value Podcast - Chris DeMuth's State of the Markets November 2023

Episode Date: December 2, 2023

It's time to welcome back Chris DeMuth for his monthly state of the markets. For this November 2023 edition, Chris provides his take on the opacity and aggression of the FTC, how he is thinking about the Spirit trial, Amazon / iRobot deal and reflections on Charlie Munger. For more information about Rangeley Capital, please visit: http://www.rangeleycapital.com/ Chapters: [0:00] Introduction + Episode sponsor: Alphasense [2:07] What is on Chris' mind this month: M&A, arbitrage, anti-trust, recent podcast with Lena Khan, Chair of the FTC [7:49] How Chris is thinking about the Spirit trial, and the implications if the merger does not go through [21:07] Spirit trial: airplane shortages and expert witnesses [29:35] Spirit / JetBlue bear argument about hot docs [33:47] Amazon / iRobot deal [40:16] Final thoughts: reflections on Charlie Munger Today's episode is sponsored by: Alphasense This episode is brought to you by AlphaSense, the AI platform behind the world's biggest investment decisions. The right financial intelligence platform can make or break your quarter. AlphaSense is the #1 rated financial research solution by G2. With AI search technology and a library of premium content, you can stay ahead of key macroeconomic trends and accelerate your investment research efforts. AI capabilities, like Smart Synonyms and Sentiment Analysis, provide even deeper industry and company analysis. AlphaSense gives you the tools you need to provide better analysis for you and your clients. As a Yet Another Value Podcast listener, visit alpha-sense.com/fs today to beat FOMO and move faster than the market.

This episode is brought to you by AlphaSense, the AI platform behind the world's biggest investment decisions. The right financial intelligence platform can make or break your quarter. AlphaSense is the number one rated financial research solution by G2. With AI search technology and a library of premium content, you can stay ahead of key macroeconomic trends and accelerate your investment research efforts. AI capabilities like smart synonyms and sentiment analysis provide even deeper industry and company analysis. Alphasense gives you the tools you need, to provide better analysis for you and your clients. As yet another value podcast listener,

visit alpha-sense.com slash FS today to beat FOMO and move faster than the market. That's alpha-dash-sense.com slash FS. A quick and somewhat embarrassing note, before this podcast was taped, I unplugged my podcast mic to take a very cute photo of my child with the podcast mic in it. but I forgot to plug the podcast mic back in before recording this podcast. So the audio is from like in my laptop's microphone. It's not the best.

I really apologize for that. But you know, the solutions are either we trash the podcast and nobody gets to hear it or we put the podcast out with kind of subpar audio. So appreciate you bearing with me. And we will try we. And I mean we, I mean MIDI when I say we will try to do better on the ones going forward. Thanks so much. Bye.

Hello. Welcome to the yet another value podcast. I'm your host, Andrew Walker. If you like this podcast, it would mean a lot. If you could rate, subscribe, review, wherever you're watching or listening to it. Obviously, five stars would mean a lot. With me today, I'm happy to have on my friend and the founder of Ranger Capital, Chris, the Mewth.

Chris, how's it going? Going just fine, Andrew. Glad to be here. Really glad to have you here. Before we get started, I'll just start the way I start every podcast. A quick reminder, mind everyone, nothing on this podcast, investing advice. Please do your own work, consult a financial advisor. That's always true, but particularly true today because Chris and I, I know we're going to be

talking about a legal situation or two, and everybody should remember, Chris and I certainly aren't lawyers, but we're probably going to cover a bunch of different stocks. Everyone should just remember, please consult a financial advisor, not investing in a business. Anyway, Chris, it is November Wednesday, Wednesday, November 29th, 2023, you're on for your monthly state of the market. So post- Thanksgiving, pre-Christmas, I just want to ask you, what's on your mind right now? M&A, arbitrage, antitrust, kind of trying to be thoughtful about pricing what's both procedurally and timing wise, one of the kind of quote unquote worst or hairiest or most subjectively dramatic time for antitrust in terms of

the process, but also one of the very best times in terms of actual deal risk, feeling like we still have crazy people running agencies and we still have sane people running courtrooms. And so I kind of like to get my foot in the door between the subjectively hairy, delaying nonsense that we've gotten out of the FTC and DOJ, both in terms of the weaknesses of their cases, the shrillness with which they bring, the uncharitable nature in which they don't even listen to or react to people fixing what they nominally say is wrong, kind of like. a, you know, like an angry girlfriend who's pissed at something and then you offer a solution and they don't listen to the solution. And then judges that just see the whole thing and respond much in the way that you or I would. So I think that's an interesting dynamic. Did you listen to, and this is like poor podcast hosting probably, did you listen to this? But did you listen, Lena Khan was on, Lena Khan, chair of the FTC was on the odd lots podcast a week or two ago.

Did you listen to that? I did. Okay, great, great. So I found it really fascinating. A, she's very well spoken. She's very thoughtful. Obviously, her views are, say again? She's a smart person.

Her views are diametrically the person's mine. But there was one piece that really stuck out in there. You know, I could tell the odd lot host, they knew they had a very high up, and they asked her some hard-ish questions, but that could have been much harder, right? But one of the questions they asked was, hey, the FTC has lost a lot of cases in court. Do you think you can kind of fulfill your mission while you're losing all these cases? And Lena Kahn said, oh, well, you know, one of the things we hear from dealmakers is antitrust is now at the top of dealmaker's minds whenever they do deals. And I was kind of thinking to myself, you know, like, I'm not sure that she was obviously very proud of that and she thought that was a great thing.

And I understand that you don't want people thinking they can merge, you know, the number one and number two player into monopolies forever. But I's kind of thing, like, you know, if I told you, hey, Chris, the New York City police are at the top of my mind whenever I leave the house. That's not a good thing. That's a really bad thing. It's grotesque. It's a moral abomination for a law enforcer to say, hey, in a free society, I have these citizens afraid of me because of my aggressive, bombastic, and often outside of the court's extra legal behavior.

I mean, it's, I mean, one of my regrets of this era and of modernity as we have become gone from, and this is that I'm a very secular person, but we've gone from a religious to a very irreligious society. We have not become hyper-rational logicians. People have grabbed all sorts of different religions, and this is her religion. This is something that she is a fundamentalist. She hates these companies. She hates their deals. And if she's doing something against them, the minutia has, she has no curiosity in divestitators or minutia or the fact-based specific things and deals because she has a religious aversion to them. And even as a smart person, we've kind of found ourselves in these weird, kind of psychological dramas

with regulators. But no, it's grotesque that you'd be proud of that. Bull Connor would have been proud of that, that he's gotten the people scared. But as a taxpayer, being told that by a law enforcement officer is grotesque. I mean, again, I'm not saying, like, look, if AT&T and Verizon, the number one and number two wireless players wanted to merge tomorrow, like, yeah, I'd hope antitrust would be in the discussion, right but for horizon amgen was one of the cases that she seemed pretty proud she discussed it and horizon amgen i think most people thought was kind of embarrassing for the fdc and they settled before the case could go because they realized how bad was she seemed pretty proud of bringing that case and

getting the settlement i was kind of like i yeah it just and again i i know some of my peers i probably have more a libertarian bent you have more libertarian bent than me so my peers would dunk on her endlessly i mean i think she's very smart and very thoughtful we just have dimension of those views but that was the one thing where it was like hey we're so glad that when people are in the boardroom like the third person in the boardroom is they're thinking about the regulators. Like, that's kind of sad. Anyway, I think it's, and it's pure leakage. It's that's pure friction costs for society.

We should do all of the things that are legal and rational, and we should do none of the things that aren't legal and rational, and we should know with utter clarity where that line is. So this opacity and aggression is just a just deadweight cost to society. It's shameful. But it's great for us because it gives us something to do. So we might be some of the few beneficiaries. And now a quick break to remind you that this episode is brought to you exclusively by AlphaSense, the AI platform behind the world's biggest investment decisions.

AlphaSense gives you the tools you need to provide better analysis for you and your clients. As yet another value podcast listener, visit Alpha-Sense.com slash FS today to beat FOMO and move faster than the market. That's alpha dash sense.com slash FS. So listeners who have been listening to podcasts know, like Spirit is a huge focus on this podcast right now. Like that's not going to be a surprise. I would encourage everyone to go listen to the Lionel Hutz episode where we talked about kind of spirit before the trial got started. I did a halftime report with MDC who has been at every day of the trial.

And, you know, I think his stock market is waiting for him to send his daily summaries at this point because you can see the stock really moves when he says, Today went well for the, but I know Spirit's a big focus bars. I think the other two really interesting merger arbitrage candidates out there with high regulatory overhang are I-Robot and Capri. I know all have been various areas of focus. I think that's kind of what we wanted to focus on today. So where would you like to start? Spirit.

Okay, so let's start Spirit. So you and I are talking November 29th. We actually have a break in the court today. So there's for the trial, for those who aren't listening, there's one more day of trial. Jeff Liu had three days to present present their defense. They did two of them on Monday and Tuesday. We're talking Wednesday. The last day for their defense is November 30th tomorrow.

And then December 5th, both sides will present their closing arguments for about one hour and then the trial's over. So you and I are, we're almost at the end point, right? There's a little bit left, but we're almost at the end point. How are you thinking about the spirit trial so far? I've hung on every word. I haven't been physically there, but we've gotten very, very good updates and kind of constant updates in real time from the courtroom.

I've been impressed by the judge, which, given that we think we're right, the more impressive the judge is, the better for us. Do you want to know what someone told me, which has made me laugh? Someone told me the biggest risk to the deal was right now? What? The judge is between 81 and 83. I can't remember exactly. But we were going to the Thanksgiving break, and somebody said the biggest risk is that the

judge has an unhealthy Thanksgiving dinner, and we have to reassign the judge halfway through the trial with the biggest risk. Especially given the jurisdiction, I wish him well for every reason, for the personal reason, for the professional reason, and for as a taxpayer, for having a sane judge on that court. But he seems pretty good. He seems to follow. He hasn't asked any questions that make you think he's not following the minutia. He's funny. I mean, he's had a couple of moments where he's asked a question.

There's been an objection, and he sustained the objection to his question, which I thought, I don't know that. noticed that dynamic before. So he seems like he's humble, smart, engaged, and this is probably his swan song. I don't think he's going to be afraid of making a decision. I don't think he's going to kow to the government because it's an administrative agency. Mike, worry about him and kind of I'm just picturing what a decision would look like adverse to us, which I don't expect. And that he's a by the book rules guy. Like he is not some, you know, freewheeling anarcho-capitalist wild man who just wants to stick it to the government. He's not going to have a, he's not going to have a fun time siding with the companies. And if he reads the antitrust

law very literally and narrowly and pedantically in a way that gives him in his mind very little maneuvering room, he could, you could imagine kind of a crusty old guy saying, uh, there are these costs to these customers and we don't have this explicit materiality in the law and just sides of the government. I don't think that's going to happen, but I mean, that would be the kind of case. The government does not have a strong case and it does not have a substantively persuasive one. Like, they're not right, and they kind of know it. And you can tell they know it because they're so just, even by the standard of paid consultants,

they're just completely pretextual in how they do everything, and they hide the ball at every turn in a way that's completely obnoxious and should just destroy their credibility with this judge. But if he says, that's fine, the law asks this narrow. question. The government's answered it. I'm blocking the deal. Could happen. Okay, the reason why I started with that is I read every word coming into the trial. I don't think I have been swayed that much. I would say that the government's hypothetical case, their theoretical case, their academic theory is a plausible one. I really struggle caring. If you have a deal of this size,

deal of the size is going to always have a gross cost at a narrow enough definition. I mean, anything you do is going to have, you know, hi, my name's Bob. I live in Baton Rouge. I want to go to Des Moines today. And I want to have an unbundled flight. And I don't want to have to pay extra for landing gear or bathrooms or snacks. I just want, I'm a sadist. I like the smallest seat possible. I want to sit in the back, middle seat. And Bob, going to be hurt by this. You know, God bless him, why he wants that, why he doesn't want to just make a phone call, why he wants to go to Des Moines, why he doesn't want to sit in a comfortable seat, I don't know. But if you can say Bob, you know, and first of all, we could give Bob

a charter. I mean, we could solve this. I mean, if you have a specific enough problem, good Lord, we could just fix it somehow. But these standards that the government set is absurd. If, And now maybe over drinks off the record, I think they would agree with this statement. If they can block this, then they can block anything. Then it's just unlimited. There's nothing that's acceptable if the standard is gross costs, infinitely narrow market definition, then the gig is up. That's it. They're in charge.

We just capitalism has to wait on Jonathan Cantor and Lena Khan. And I think over drinks, not off the record, they'd say, right. That's right. You know, because a lot of this is just like Spirit is a low-cost provider and somebody who's not an ultra-low, Spirit's an ultra-low-cost provider, someone who's not an ultra-low-cost provider is buying them. Like, if they win this, then you could imagine, hey, Andrew and Chris run an upscale chain of restaurants. They're buying a downscale chain of restaurants. Well, you can't do that because maybe they'll put a premium price in like, I know the subway, the subway deal and the sandwich monopoly was getting lots of play, but it, it's, it's sanctifies.

the nominally low-cost provider at the same time that this White House's big push is to re-bundle because the unbundled is tricky and misleading to low-end customers that are confused that they're not getting first-class treatment at the nominally lowest price. So it is absurd. It is schizophrenic. And it is saying that they somehow know what future customers want. I mean, there's soothsayers. They know the future. And they know what customers want. or should want and they should want it to be bundled and it should want it to be unbundled or rather you should get the best of both worlds which just doesn't exist um so i think that that's let me go back through a few things that you mentioned there so number one i did think a

a your example of bob you said he didn't want to pay extra for landing here which bob is a very brave flyer if he doesn't want to pay for landing income but one thing you said he flies in the most spartan conditions and that that specific word choice of yours was interesting because i was struck the judge at one point said, I can't remember in what regard it was, but he said something about flying Spartan conditions on spirit. And I thought that was very interesting because you generally don't associate the term Spartan, unless you're referring to somebody who's like training for the MMA or something. You don't associate Spartan with something good. And I thought the judge interjecting something with Spartan was really interesting, just showing his views of kind of spirit in

the bungling. I don't know if you read anything into that or if I was reading to it, but I thought that was very interesting. I thought it was interesting. And I think the judge's intelligence and humility, which is his tone, his thematic tone throughout, I think comports with a total comfort level that some private player makes a decision about a business model that slides up and down benefits customers by the nominal price or benefits customers by giving them more. And the idea that that should be determined in Washington, D.C. by the Department of Justice or in his courtroom by him, I think would seem anathema. And it should be determined by JetBlue. And it will be determined by countless ULCCs, which have not said a syllable that makes you think

they will not come in to fill the gaps if there's demand and gaps. to be filled in these individual markets. I mean, the government's case I would describe as kind of theoretical. And the practicality is something that I just have a working assumption with every day, which is there's smart people who like money. And if you leave that money sitting there on the sidewalk, because you run off and do something and you try to fix this market and try to exploit a monopoly, smart people who like money, and I don't even know, you say, well, what are their names and where are they?

I don't know their names offhand. and they're probably hiding in secret until they can pounce. But they're there. I mean, there's plenty of pilots. You live in a growing town and there's no Thai restaurant. Like when this town hits enough size, some entrepreneur is going to launch a Thai restaurant in that town because there's demand for Thai food.

Yes, I can't point to specifically it is. But let me ask a few questions. So two questions on JetBlue's expert witnesses, right? Obviously, we're going deep here. On JetBlue's expert. So the first question, I'm really interested. So the government has tried to define the market as point to point. point. You know, I keep mentioning Des Moines to Badruch. That is one point. If JetBlue and Spirit are the only two people flying and JetBlue by spirit, that is an antitrust problem, right? And Des Moines have badmourge. There's only one way. But most people kind of, I mean, I think JetBlue, obviously, if you find nationally, JetBlue's got like 4% share of spirit, it's got three. That's not an antitrust problem. Most people have kind of been defined as metros, right? Where, you know, LaGuardia and JFK are, yes, two separate airports and point to point, but they are part of the same metro. So you could define them that way.

JetBlue didn't really, I thought they would try to contest the market, but it seems like they kind of gave the market away to the government. They didn't really make any efforts to define it as anything other than point to point to point to point. Was actually doing all of his analysis on point to point markets. I was kind of surprised by that. Were you surprised by that? What were your thoughts on that?

Yes, I would not have done that. I would have contested it hard. I think it's incorrect. I think it's one of a couple ways that JetBlue could just pull. the Jenga block out from underneath the government's case. I think that, yeah, so I don't know, I would love when this is done to go back and kind of get their strategy.

I think at least Metro. I mean, first of all, I just think Metro is right, and I'm certain the econometric support that. I'm certain subjectively, if you think about your behavior, you know, I check Westchester, Bolton, a LaGuardia. I do Expedia, I just do NYC. And when you do NYC, they give you Newark, LaGuardia, and JFK. And honestly, I don't even know why, I mean, maybe I'm too optimistic here, but aside from

a few constrained airports, I'm not sure why it shouldn't be national because airplanes move. If, like, all of a sudden you had a monopoly in a New York to Las Vegas market, well, there's plenty of New York to Las Vegas skates. But if we were thinking legally, if we were just thinking as investors and as businessmen about this, just trying to practically be more or less right, that's obviously. correct. I mean, we're talking about airplanes. We're talking about vehicles. Stop me. I might have mentioned this one in the past because it's one of my favorite regulatory disasters, but George Mitchell was the head of the Senate, Maine Senator, passed this big yacht tax that he thought was going to

raise all this money and he's going to really stick it to the rich guys. And he actually sponsored the bill to repeal it a few years later because it literally raised no money. Like there was literally zero revenue. And he had all these boat builders in Maine. They're boats. I mean, so you just build it somewhere else and you sail it to where you want to sail it. And that never crossed his mind. I mean, in a million years, he was flabbergasted by that, you know, people like money and they'd prefer not to waste it on government taxes. And so you just build it in Holland and you ship it across the ocean wherever you need it. So these people, it would never occur to them that you would move an airplane to a different location.

I mean, that that's not something that smart people do what kind of makes sense. These are people who want to require or ban everything. And if they don't specifically know, they assume it doesn't happen. I had another question on expert witnesses, but I did want to ask you a question of airplane shortages. So it's just been coming to me like, the judge has asked questions on. hey, you know, there's an airplane shortage right now. Everyone agrees there's an airplane shortage. JetBlue, the reason they were buying Spirit was because they wanted more airplanes.

They wanted access to Spirit's order book, right? So everybody agrees that there is an airplane shortage right now. And one thing the judge has asked, the government stressed a lot, has been, hey, if JetBlue by Spirit, are there going to be enough airplanes for ULCCs to come in and compete? And the ULCCs have all said, yes, like, we will move airplanes from less profitable routes to the more profitable routes, making it by Spirit, in order to come. compete here. But I was just kind of wondering, like, that does presuppose that because there is an aircraft shortage, you know, if this deal would be legal without an airplane shortage, this deal

should not be legal because of an airplane shortage. And that does strike me as a little strange that like a supplier shortage issue could prevent an otherwise fine anti-dress deal from going through just because like the suppliers were having problems and there was an industry shortage. Like we're talking about the number six and number seven players here in any other market, that nobody would have an issue with this, but because the supplies limit, like, let's go investigate why Boeing has a duopoly in the aircraft market to me. I'm not sure why that should preclude mergers, if any of that makes sense. I don't know. What are your thoughts on that? Makes sense of a couple of different reactions to the shortage. One is, and we can talk at some point

about the material adverse effect case that JetBlue could have against Spirit, but I would say that cuts into the MAE case. Like, they're getting a decent amount of assets. from this deal, which is in terms of the value to jet blue, I think, is a big part of where they're getting. So they're getting a big slug of airplanes, which if you wanted to do this, recreating this deal, hodgepodge would be a lot slower and a lot harder. Secondly, of the many, many things that the government expert did not consider was international entrance. Like, there's a lot of ULCCs around the world. If you look nationally, there's a shortage, but especially as you're willing to go down

and down market, there are international options, and then there are kind of MRO options to change plane layout, including like what JetBlue plans to do with spirit planes. You can also move in the opposite direction. So like the definition in supply is broader when you look internationally, when you look at what can be converted. I think it's revealing that the government didn't want to look at that. The other thing I think is very revealing that the government didn't want to look at. And this was the line that was probably probably the line that struck me the most in the trial so far in terms of feeling confident that we are substantively right. We're on the side of angels here

and maybe truth outs, maybe it doesn't, was that in looking at a loss of competition, trying to understand ULCC behavior in a given market, the government, and I couldn't believe this at first, but I believe it was pretty clear. Expert did not consider the deal itself. They were trying to analyze an M&A deal, but they said we didn't look at, we were just kind of looking at in this market would a ULCC enter? And they didn't say, they'll enter because of the deal. They'll enter because, like, you've created this void.

are going to fill in the void. And all of them in practice act, I mean, I think ones of them said feeding frenzy. I mean, they all act like, yeah, that's what we do. Like, we love to, like, they misstep. We are going to exploit that misstep for profit. And that was something, I mean, I think it was very revelatory of kind of the obtuseness and staticness that they think about when they think about markets. And they don't think it's this dynamic place where, you know, market share, they act as if it's something that is like a force of nature. like we're talking about gravity or we're talking about a law of thermodynamics.

And then casually we'll mention some market where the market share was 2%. I mean 10%, I mean 40%. It's like, well, the numbers move around like that. They just, it's it's weather, not gravity. It's something that's just highly competitive dynamic ever changing. And I don't know what this is going to be tomorrow. And I know the government doesn't either. Not to dunk on them too much.

But one of the things that I was really surprised by was the government expert, his model that presented, it came out that when you looked at the model, like, you know, he presented it as a straight line, right? As this yoga, less competent. But it turned out the model was actually parabola. So as competition really went crazy to one side or crazy to the other, prices would drop. So like if you had a monopoly, it was actually showing prices would drop. And he ignored all the points that didn't work for him. And I was like, I can't believe. Like, it reminds me a little bit of one time we were in a, a private case. And the, the CFO got on the, stand and he testified all this stuff. And then I specifically remember that our judges or lawyers

came back to say, uh, that was great. But we looked at the model and, you know, lines seven and eight are the most important. And you hard coded the numbers in there. And if we actually just drag the formula out, the numbers would agree with us, not with you. And the CFO was quiet per second. And then he said, I stand by everything I've said. And he wouldn't testify anymore. And I was just like, you know, just to get caught on that was so bad. And I haven't seen anybody like really, I guess the expert witness to the extent they do. They are academics. I wanted to ask you one more question about the JetBlue expert way there. This was the one other area I might have disagreed with him.

In his presentation, he netted out consumer harm with consumer benefit, right? So if you are the person who likes flying Spartan who pays $100, absolute minimum, and JetBlue this deal goes through and they're going to bump JetBlue basis price from 100 to 110, right? You are harmed by $10. And if I love JetBlue, but my route only has spirit and I pay $100, but then JetBlue comes and I can fly JetBlue for 110, but I actually value JetBlue at 700 times the amount. So I get $690 worth of benefit.

Their expert would kind of argue that's $680 of consumer benefit, right? My 690 offset by year 10 loss. I'm not sure if you can do that. What did you think about that offsetting of kind of the higher end benefits from the lower end harms? That is a weakness. I mean, certainly it's a political weakness. Certainly, I listened to that and thought,

ooh, the government's never going to settle this case. They're never going to. I mean, I think that that's a hard one for them. But that's going to be a really important part of this decision. So I don't know what the decision is going to read on this. But it's going to be a off-sighted one. If he comes down hard one way or another, I don't think we have a case that says with super clarity,

you can or can't make that case. I'm habitually irritated with the government trying to be so narrow that the idea if there's any harm. I mean, there's somebody who hates the color blue and loves yellow. And if you repaint the spirit airplane blue from yellow, they're going to be harmed by it. There's at least one person. There's probably one person who has some phobia about blue and will never fly again because it's repainted, but how the heck can grownups do anything at the corporate scale that has to have the standard somebody's hurt somewhere? But so, so no, I think the whole, there's the

separate population that's benefited and we should just net them out. I mean, I think that's, I think it's totally appropriate from the business plan, but I think you're on thin ice from the antitrust plan. Yeah, that was the weakest case to me. I don't think, I mean, I think you can rule for the defendants on a hundred different reasons without without that. But, you know, again, I was just, my understanding is the JetBlue expert, particularly the first one, came up and was very credible, presented very well, was for the deal, all this sort of stuff. I heard he was the best expert witness, all this sort of stuff. I was just surprised by the arguments. Like, again, I don't think this netting of consumer benefit and harm. I don't think that is the standard.

I don't think it's a great argument. And then, again, I was very, I was surprised by the not contesting the markets. Because I thought if JetBlue won on markets, the whole thing's over. And maybe they feel like they don't even need to win on market. They think they can just win on everything. You know, honestly, I'd probably kind of agree with them. But those are just surprised. Let me, let me turn to one other thing. I know there are a lot of Spirit JetBlue bears out there, right? They don't talk to me. Please reach out to me. I'd love to swap thoughts. I'd love to swap notes. But I know there are a lot of JetBlue. Some of them just think, look, spirit's so bad. They've obviously suffered an MAE. The deal is going to break. Okay,

fine, put that aside. Some of them think, hey, this government will do everything extra legal to block this deal. There's that DOT wildcard hanging out there. Even if the judge rules for JetBlue Spirit, they're going to, you know, the government has the guns and ultimately they can stop things if they want to. Fine. If you think the government is going to send the army to stop the JetBlue Spirit deal, great. Let's put that aside. When I hear people who are bearish because of the court case, the thing they say to me is, hey, look, deference to the government. The government does not bring cases they don't don't win so it's deference to the government plus there are hot docs from the spirit side plus there's a hot dock from get blue that says prices up that's all you need

right prices up hot docs government deference boom done what would you say to a spirit bear who said that i think it's a very very persuasive set of reasons to think that this government would bring the case Right? I think the hot docs are highly persuasive to the DOJ. I think the whole government brings winning cases. I think that would make sense if you'd been in a coma for the last several years. But I'm not going to mention the litany of counter examples because you already know them to how that's clearly no longer the case. And the substance of the hot docs is going to be less interesting to this judge and this DOJ, because these are people who went to business school, not law school and who are talking about their competitors and talking about their plans and have a freewheeling way to discuss things. And also we're comparing apples to oranges because JetBlue offers something different than spirit.

if that's a scandal, if this is a, if we are going to sanctify this specific business model, then the hot docs are relevant. But I think if the judge says a different mix of quality and a different mix of bundling has somewhat different prices, I think that it's okay. It's too bad, right? Like the hot dogs make it more likely that I'm simply wrong. But, we live in a free country, you're allowed to, you have freedom of speech, and you can say dumb things, and talking about price hikes before or during a deal is going to come back and haunt you, and it is here, but it's not legal people talking about the law, and it's not even the people who will, at least individually set prices, talking about prices. So there's free-willing talk that I'm 100% used to and comfortable with, and, um, it's less scandalous to me. But the government just loves when they find this. I mean, they find this and they think, I mean, even the phrase hot doc,

I mean, they think they got you. But they got you in the same way that every time a quarterback in the locker room says we're going to kill them, that you got him on an attempted murder charge. It's just people talking. It's like if you came into the trial with that opinion, I could completely understand it. I kind of, especially after the pretrial briefs, I thought JetBlue already had laid out a great case that exclaimed away a lot of this. But if you came into the trial, I completely understand that. But if you're, if you told me you thought JetBlue had a 20% chance of winning going into the

trial based on price up plus hot docs plus government docs, and then you listen to this trial and you listen to, you know, the frontier CEO saying, we can't wait. This is going to be open season. It's going to be a feeding frenzy for us competing. And you listen to the JetBlue defense and you listen to the Spirit Chairman defense. I don't know how you could still, you could say, hey, there's a chance of losing, but I hear Spirit Bears who say 20% this goes through and they were there before the trial, they were there now. And I just don't know how you're not like kind of updating your priors if that's it. Anyway, I want to go to one other situation, just completely different, but it's really interesting. So again, we are talking November 29th.

And the most interesting thing that happened over the past week was on November 24th, the day after Thanksgiving, you know, no one's up there to ask, nobody's checking. Roiders comes out with the story that says Amazon is going to get unconditional clearance for their I-Robot deal from the EU, right? And people can go pull up the stock chart. I-Robot stock goes from $30 to $40 in a day, still way below their deal price, but it goes from 30 to 40 in a day. You can see that in stock park. And then on Monday, a minute before the EU releases a statement of objections, Bloomberg reports, Amazon is set to get a statement of objections on the I-Robot deal from the European Commission. And sure enough, at 2 p.m. Eastern, the statement of objection comes out.

And I robot stock kind of goes from 40 to 35. So, I mean, I think the I robot deal is interesting on a whole host of levels. But I just would actually like, this is this. You know, Rogers had, I think, three sources in their report that said I robot was going through. I'm really surprised that they could get something this wrong. And my mind was immediately burning to was there a game of missed telephone, were they like reporting something different where, you know, a statement of objections, objections, but you can beat them and then you'll go through.

Were they kind of reporting that there's going to be objections and then they'll get cleared as Amazon addressing? What do you think is going on here? I can't read the two articles other than simply that Reuters was wrong and Bloomberg was right. However, I talked to both these sets of journalists and deal reporters constantly. And one of the big differences between a New York Post-Sandwin side and Reuters Bloomberg, Wall Street Journal, New York Times, FT on the other, is they double or triple source

everything. Like, when I'm certain of something and a deal reporter is certain that they're confident in me, that I'm credible, they never public, never, that's always like, then they need to run around and get a second or third source, and then they publish, which is why it's always precarious talking, it's a little nerve-wracking talking to a journalist that signal sources and put something out because I don't want to look stupid. I don't want them to look stupid. And I can always be wrong or misinterpreted or misunderstood or maybe somebody lied to me or what have you. Or they or a game of telephone between me and them. And so I see something that I think is correct and then they publish because of a miscommunication between us.

It's much more relaxing when you talk to one of the like really credible places. And I put Reuters on this list. So it's curious. Was there a change? Is this a statement of objection that maybe does it make you think maybe it's more precarious or fixable? Because you can imagine a world in which you absolutely can't do this deal unless you're willing to some condition that Amazon was totally willing to do and just an order of operations.

Now we have a statement of objection. will have the fix. I mean, I think it's a completely fixable antitrust situation if there's even a problem. And maybe it could be analogous to the Horizon deal in which the whole time the buyer was saying, we're listening to what you say, we're listening to your demands,

we're willing to do that whole thing. Why are we still talking? You could imagine that there was a reaction similar, but for whatever reason they want to go through the kabuki of presenting their discomfort. So you can imagine a positive version in which Raiders kind of had something right. You could also imagine a negative version

in which the EU's desire to publicize this is a reflection of the U.S. desire to block this. And so they're kind of jumping on that. So you could imagine that it's actually more negative than a normal statement of Jackson would be. but but yeah so very curious very unusual i can't remember was the statement of objection or the bloomberg report that said that said the EU was talking to other regulators about this deal when they published it true if it's the statement of objection that's one thing if it's the but i'm with you the you know

the EU said that themselves yeah which is clearly like hey you know the fTC really wants amazon's involved fc's already suing amazon for antitrust issues just for being amazon so you know is like, Spirit, I mentioned when we were talking Spirit. Everyone who I talk, most people who talk to her bearish are like, Spirit suffered in MAE, you know, the company is going bankrupt without this deal. It's come up multiple times in the court trial. Like, hey, Spirit is really in some distress. Like, they're going to have to change their model one way or another going forward.

And then I robot, you know, when I talk to people, they're like, okay, the stock's at 40, the deal goes through, it's 50. If the deal breaks, is I robot bankrupt? Is the IROBA is there? And it's just, it's funny that you've got these two companies where fundamental investors are looking and be like, hey, If this deal doesn't go through, like, they're going to have to restructure, is the equity at 10? Is it a zero?

I don't know, but there's a lot of downside. Like, it's going to face a tough future as a standalone. This is a bad business. And regulators are here like, hey, absolutely not. This business is a crown jewel. If you buy them, consumers are going to be harmed. Martians are going to be harmed. Everyone's going to be harmed.

Like, it just strikes me is so funny. And I understand, I'm not saying like a firm that's in some distress can't be an antitrust issue, but it's just funny, these two small distress, losing money, hand over fist firms are, getting held up as the paragon of antitrust right now. They're going to dominate the future. They're going to crush customers and they're going to leave you with no options, just like Rite Aid would have. Yeah, like right after they filed for chapter. Like Rite Aid, like Staples Office Depot, which would have been a huge issue if that had gone through aside from the looming bankruptcy. I mean, there are multiple, multiple issues. And look, Rite Aid, I am like Rite Aid,

there was pharmacy issues. I get it. But, you know, there's a thousand Rite Aid stores that are currently shuttered empty boxes that would have been Walgreens boxes with at least a Walgreens guarantee on the least that, you know, that antitrust did. And now a quick break to remind you that this episode is brought to you exclusively by AlphaSense, the AI platform behind the world's biggest investment decisions. AlphaSense gives you the tools you need to provide better analysis for you and your clients. As yet another value podcast listener, visit Alpha-Sense.com slash FS today to beat FOMO and move faster than the market.

That's alpha-sense.com slash fs. Anything else you want to talk about here? I think that's pretty good. I don't have anything unique to say about Charlie Munger, but he lived a great long life and was an example just in every way of somebody who had and shared a lot of wisdom. I think that his lifelong friendship with Warren Buffett was just such a wonderful example of a friendship between two guys. One of the things I liked is that they never spent any energy

trying to kind of maintain that friendship. You know, sometimes they'd meet, sometimes they'd call. But for extended periods of time, they were just off doing their own thing. And somebody would ask Warren about Charlie, and they kind of hadn't talked in a while, but they never missed a beat. They were completely aligned.

They were argumentative and never spent any energy trying to coordinate their views. You know, Charlie was a Republican, Warren's a Democrat, Charlie was much more of a business quality guy when Warren was a Graham Acolyte more specifically. And so I just love that version of friendship where you're not compromising and cutting your sales. It's not 50-50. It's kind of, I'll do my thing, you do your thing. And if we come a line, then great. And if not, that's fine too. Maybe you and I have that sometimes. I think so. The most impressive thing to me, just on their

friendship and I hate to relate Charlie Munger through Warren Buffett and their friendship because he was obviously much more than that but it is impressive you know somebody put pointed out they had a basically creative partnership for about 60 years together and to my knowledge they never had at least a public dispute they never thought about breaking up and you know Charlie Munger was obviously a genius he was great for him to kind of willingly take second fiddle you know Buffett's obviously the one most of the things are Warren Buffett's partner Charlie Munger died and there's tons of praise for him But for him to willingly take second bill, I think just like really speaks to, you know, he always said, live without an ego, all that sort of stuff. And he didn't just say it.

He practiced it a lot because it's pretty impressive for him to do that. For him, I mean, obviously he was a billionaire multi-man many times over, but him to willingly take that for him to kind of let Warren take all the phrases. Pretty great. Yeah, I'm sad. I'm sad. But, you know, I'm not going to go do a Twitter thread and try and find clickbait for it like that. I think I was a little disgusted by how many people posted the threads trying to clearly get some clickbait and get some likes. If it was you, I'm not saying it was you, but there were a few people who, you know,

hey, I run a multi-billion dollar VC fund. We've lost billions of dollars investing in crypto and NFTs, but Charlie Munger was my idol, and here's a thread of everything I learned from. It's like, I don't think you're learning much from him, big guy. Those aren't exactly Charlie Munger type things. Fair enough. Cool. All right.

Well, hey, Chris, this is. Okay, last question. So we'll probably tape our next one, you know, around Christmas, between Christmas and the year, something like that December state of the markets. do you think ignore the what way the ruling is do you think we will have a jet blue ruling before then no you don't I will uh we'll we'll bet a neither of us drink coves we'll bet a steak or something on that I think we're going to get it before Christmas I think it's a fit a fit a steak and a fit a steak and I like that I think we're going to get it week of December 18th to be honest with you I understand I'm probably taking the bad odds because

you get everything after that and I basically only have a one week window but I think this judge wants to rule this year, and I don't think he wants to work between Christmas and New Year. So that's a I'll file like a convoluted ex parte objection just to kind of delay him a little bit. Don't you dare. There's another bet that I think both of us would rather win than the steak and fidate bet, and that involves JetBlue winning. Anyway, I think the earliest, let me throw out one, let's say, I think the earlier, the better. I think if we have a decision popping up in December, shares not halted, nothing yet, I might pick away a little. I think that, I think that there are cleaner cases to be made for the companies and for the government. I think the government case actually

takes a little more time to write. Probably right. Though, you know, I think we always think, oh, when the ruling comes out, matters. And what I frequently hear is like, hey, these judges are writing the cases as they're going. It's not like they, you know, it's not like they wait for all the things and then they start. So that's one. And then two, like, you know, I think about something like Burford, YPF, I was like, oh my God, this case has taken 15 months to write. Like, it seems super simple. She's had all of it. Like, how is it taking this long?

This is going to be some crazy whirling for Argentina? No, it's right down the books for Burford. But, you know, judges are busy people. They've got other things. They want to make sure everything's right. And they'll kind of get to it when they get to it. Now, in this case, they want to get to it early because obviously the merger would time out if they took 17 years to write.

But yeah, anyway, before we close, I'll just remind everyone, disclaimer. Chris and I have a position in spirit. I'm sure that came out. We are not lawyers or not financial advice. is spirit. There is a lot of upside and there's a lot of outsides. Everybody should just really consider the risk there. Remember, this was a financial advice. Chris, this has been great. Let me say, I have a position and I robot too. Okay, perfect. Perfect. So we just close all that. Talk to everybody soon. Thank you. A quick disclaimer. Nothing on this podcast should be considered

an investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.