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Ladies and gentlemen, welcome to
the Business Brew. 

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I am your host, Bill Brewster. 
As always, this episode features

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Dylan Morello. 
I found Dylan through the 

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Twitter machine. 
He was posting a lot of 

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interesting ideas. 
And when I say interesting, I 

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mean things that I don't see 
people talking about all the 

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time. 
This particular conversation is 

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going to talk about a lot of 
companies that I do not follow 

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and don't have any expertise in.
But what I liked about Dylan's 

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approach is when they said, hey,
Mr. Buffett, if you had to 

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generate 50% returns or 
whatever. 

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What would you? 
Be focused on and he said the 

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nooks and crannies of the 
market. 

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I think Dylan is focused on the 
nooks and crannies of the 

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market. 
I have not seen his returns. 

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I don't know if he has any 
audited returns. 

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I just think he's an interesting
guy to talk to. 

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So should you find this 
conversation interesting, feel 

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free to follow him at 
ragingbullinvestments.substack.com.

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I think that could be something 
interesting to take a look into 

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some of his ideas. 
These are micro caps, These are 

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small. 
These are my perception of the 

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riskiest thing possible for a 
naive investor to get into. 

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So do not listen to this 
conversation and go out and make

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any dumb financial decisions. 
Also, we talk a little bit about

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Seaport Entertainment Group. 
It's a spin off of Howard 

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Hughes. 
We talk about why Bill Ackman 

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may have backstopped the rights 
offering. 

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A subsequent conversation with 
my man Francisco brought out the

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point that I should have thought
of at the time that backstopping

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the rights offering increases 
the probability that the rights 

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offering gets done because it 
gives people confidence that the

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money will be there. 
So that's obviously a component 

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to this. 
I didn't mention that and 

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mention it now. 
Anyway, this intro has gone long

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enough. 
As always, none of this is 

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financial advice. 
Do your own due diligence. 

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Please consult your financial 
advisor before making investment

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decisions. 
All of this. 

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Is for entertainment purposes 
only and enjoy the episode. 

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Before this music drops, I do 
want to give a shout out to my 

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editing team at Speech Docs. 
You can find them on Twitter at 

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Speech and Docs's docs. 
Dax and his team is are 

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fantastic. 
I moved from the podcast 

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consultant to Speech Docs and 
the transition has been, I would

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argue, seamless. 
All I can say is that Dax and 

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his team offer incredibly good 
value and they're very 

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responsive and I very much 
appreciate what they do on the 

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back end of this show. 
So if you are somebody who is 

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thinking about starting a 
podcast, please consider Dax and

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his team at Speech Docs. 
That's SPEECHDOCS, 

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ladies and gentlemen. 
Welcome to the business Brew. 

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I am thrilled to be joined by 
Dylan Morello this episode. 

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I found Dylan through his 
pseudonym on Twitter. 

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He is on on the Twitter machine 
and found him throwing out a lot

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of ideas that I don't typically 
see on Twitter. 

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You see a lot of tech focused 
compoundary type ideas and 

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Dylan, you see him a little bit 
more special sit slash asset 

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based. 
I guess if I were to summarize 

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what I've seen you come up with 
over the last call it seven 

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months or eight months or so. 
So anyway, thank you for saying 

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yes to coming on. 
Well, thanks for having me Ando,

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Appreciate it. 
You want to give people a little

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bit of your background. 
Yeah, sure. 

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So I somewhat of an 
unconventional background for 

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who I've arrived at, although 
perhaps less conventional these 

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days, but with the law school 
route and about as purely as one

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could do it. 
So I did undergrad law school, 

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then I clerked at a Court of 
Appeal and I got a job at a New 

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York law firm as a commercial 
litigator and pretty quickly 

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thereafter realized that was 
never going to offer me the 

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lifestyle that I wanted. 
And by quickly I mean like on 

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day one and. 
You didn't like the the 

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lifestyle of constantly being on
call and having them work all 

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the time? 
Exactly. 

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And like you're not fully 
passionate about the work it 

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entails, then all you see that's
not manageable. 

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They, the nature of the 
profession is that so you kind 

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of get trapped, right? 
Like you've, you've done all 

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this work, you're incurring 
debt, then you get a pretty nice

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paycheck. 
And so it does take a little 

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bit, it's a bit of a challenge 
to get out, I would say. 

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So pretty much early on in my 
litigation career, I already 

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kind of pivoted my mind to being
like, well, what is my best exit

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front of us? 
And I had always, I had had an 

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investing interest dating well 
back before that. 

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Like I did do some Business 
School classes and I had an 

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economics degree in my other 
grad and whatnot. 

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And so, like, my mind had 
already been on the subject of 

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investing a little bit kind of 
in the decade that passed while 

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I was an attorney. 
But kind of in the latter years,

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I really started to pick it up 
and get deep into it and then 

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put myself in a position where I
was able to quit the legal 

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profession entirely, which 
actually was a recent decision. 

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That was January of this year. 
On my phone was that. 

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Honestly, I had no regrets at 
all about it. 

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Honestly, I wasn't fully sure 
what was going to happen. 

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And it's, it's snowballed. 
I mean, on into being on this 

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podcast 8 months later, right? 
But there's been a lot in 

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between. 
There was an exit in January and

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I had had some investing success
on my own for the years that 

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preceded it, which was kind of 
what enabled me to leave. 

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But sort of at the tail end of 
that, I'd started the sub stack,

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which I've been working on and 
that got traction relatively 

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quickly kind of through Twitter.
And that has just kind of 

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compounded into this, right. 
And so now I'm actually at the 

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at the sort of back end of 
starting a small fund which is 

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launching it within the next six
weeks probably. 

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And so, yeah, it's happened 
really quick. 

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And as I was kind of saying to 
you before we hit go on, on the 

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recording here, like I launched 
everything with anonymity 

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largely for the purposes of kind
of having enough confidence and 

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also letting the ideas sort of 
speak for themselves, right. 

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And so Wet launched a Twitter 
account with the pseudonym. 

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And I think because my 
background was completely in the

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dark, it really, like, led the 
ideas to getting a lot of 

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attention because no one knew 
who the author really was. 

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I mean, a lot of people 
obviously do that on Twitter. 

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That kind of helped me position 
myself to get to where I am now.

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Yeah. 
And now it's just completely 

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full time, although it's sort of
been like this for a couple of 

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years, I'll say. 
And by that, I mean, just 

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constantly looking at ideas, 
doing investment research, 

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running my own account. 
And obviously the funds going to

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be pretty small at launch. 
So I'm not expecting all that 

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much of A lifestyle change from 
the last year or so. 

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And we'll see where it takes us.
And obviously there's definitely

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another angle when there's some 
other people's money involved. 

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Yeah. 
But given, given the mandate and

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the size of the fund, I don't 
think it's going to be that much

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of A change at this point. 
Is there a market cap you like 

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to play in or are you pretty 
agnostic? 

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Definitely smaller, but I'm I'm 
definitely not one of these guys

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who's like only the must go 
liquid tiny thing possible. 

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Although there are things in my 
book that are some 50 mil and 

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quite a liquid, but there's also
some 1 to 5 billion market caps.

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Not really anything bigger than 
that, although maybe like a cafe

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will grow into something big. 
Yeah, so you on Spotify, but 

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that was that was a one off. 
That was, yeah, I mean, when I 

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was buying Spotify, which has 
actually turned out to be a 

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pretty big home run, but it was 
trading down at like 75 and I 

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think the market cap was maybe 
15 billion. 

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So and it just kind of had a a 
quirky angle to it, but it's not

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usually where I'm looking. 
The thing that's enabled me to 

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kind of get to where I am, 
because this seems like pretty 

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trite, but there are a lot of 
undiscovered and overlooked 

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things when you go small. 
And for someone who's willing to

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put the time in and turn over 
the rocks and beyond can 

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probably spend way too much time
on the computer, frankly. 

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But if you're willing to do 
that, there are certainly things

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out there where you can actually
get an edge. 

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And given that the size of the 
account I'm running is not 

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prohibitive, it makes sense for 
me to fish there right now. 

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I guess when I hear market caps 
that are that small, one of the 

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things that I like to say or 
that I like that you said is you

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said I'm not one of those guys 
that'll only fish in that pond. 

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There's sometimes I'll read a 
pitch on a micro cap and I'll be

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like, does this person like this
because they like it or do they 

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like it because it's a micro 
cap? 

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And I think sometimes the micro 
cap mind can see things that are

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not there simply because things 
are small. 

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And it's like I, you know, I 
don't know that there's really 

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any better value than something 
large. 

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I kind of simply agree with that
and you also get into a 

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situation where you might just 
not have any incremental buyers 

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for it. 
So it do you think there is a 

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sweet spot when you start 
getting from the 500 mil up 

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range where there's more 
liquidity and there's just kind 

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of there's more of an angle in 
which you can get some momentum 

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in the stock. 
Although if you do get that in 

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something very small, it can 
obviously go parabolic, right. 

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So yeah, it's a trade off, but I
don't really orientate myself 

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with those kinds of parameters 
when I'm looking at ideas, 

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right? 
Like it's not so much like size 

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or liquidity, it's more of like 
a mental model that I have, 

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which is and you're learning to 
invest and like studying value 

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investing. 
There is this sort of dichotomy,

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if not contradiction between 
like the sort of Ben Grahamy net

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net early Buffett stuff and then
the stuff that Buffett kind of 

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did post monger, which I think 
is it, it creates some tension 

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for value investors. 
And some guys are like I'm deep 

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value and other guys kind of as 
you said at the at the outset 

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here, kind of looking more at 
compoundary sort of things. 

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And what I try to look for in 
the ideas are things that 

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perhaps can offer some harmony 
between that tension, right? 

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So if there is deep value and 
some kind of qualitative aspect,

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which is really interesting, for
example, like some competitive 

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advantages, a big runway. 
Now, the only time you really 

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ever find that bridge between 
those two ideas is where there 

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is like some profound 
misunderstanding as to what's 

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going on with the business, 
which is kind of why I end up. 

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In the small stuff. 
Because you're just more likely 

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to find the qualitative aspect 
of the investment being 

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overlooked, right? 
Like anyone in for the most part

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can look at the financials and 
tell you this looks cheap, 

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right? 
But then the question becomes 

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like, what's the insight? 
And so you get a lot of that 

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either in small stuff or that 
the other angle. 

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But she said at the beginning is
sort of hard assets. 

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And I don't know if it's so much
that I'm looking for hard assets

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as much as hard assets maybe 
have somewhat gone out of 

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fashion. 
Yeah. 

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I. 
Think there's some truth to 

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that? 
That's maybe what's leading me 

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to investing down that road, 
right. 

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It's not like I'm necessarily 
after hard asseting, but like I 

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do have some super asset light 
things. 

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But I think just because of the 
the dynamic in markets, right, 

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when you get that real negative 
sentiment is where you can sort 

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of find that opportunity where 
there is D value with quality, 

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right? 
And and I know like we've talked

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about this before, but some of 
the real estate names, right? 

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And I know you had a a series of
podcasts about that, but you 

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know there are some. 
Real estate, well, that was 

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multifamily. 
That's kind of easy to get your 

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head around. 
I mean, then you get into office

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and like, well, the value guy 
and me loves office. 

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The part that recognizes that I 
don't do office is a specialty 

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tempers my bias towards liking 
things that are hated. 

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But like fundamentally and and I
don't, I don't think this is a 

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unique thought to me, But like, 
I just I remember millennials 

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are not going to move to the 
suburbs and I remember malls are

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dead and now office is dead. 
And I just, I've, I've seen too 

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many narratives on real estate 
be wrong to be like, Oh yeah. 

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00:13:06,640 --> 00:13:08,160
For sure. 
I think that's right. 

226
00:13:08,160 --> 00:13:10,840
And so you're fading like when I
think there's a raw consensus, 

227
00:13:10,840 --> 00:13:15,960
but there's also, I am three, I 
am 3 publicly traded real estate

228
00:13:15,960 --> 00:13:19,040
companies. 
And all of them, I think what 

229
00:13:19,040 --> 00:13:21,560
makes them particularly 
interesting is that they have an

230
00:13:21,560 --> 00:13:25,560
office component, but they're 
also not just office real estate

231
00:13:25,560 --> 00:13:28,560
companies. 
And I think just a touch of the 

232
00:13:28,560 --> 00:13:32,040
exposure to office is enough to 
put people completely off the 

233
00:13:32,040 --> 00:13:33,200
idea. 
Yeah. 

234
00:13:33,480 --> 00:13:35,360
I do too. 
And so there's been an 

235
00:13:35,360 --> 00:13:40,680
opportunity in some names, I 
think to buy some really high 

236
00:13:40,680 --> 00:13:44,960
quality multifamily offices or 
some multifamily real estate 

237
00:13:44,960 --> 00:13:47,960
with kind of a call option on 
the office portfolio working 

238
00:13:47,960 --> 00:13:49,800
out. 
And that seems to be working 

239
00:13:49,800 --> 00:13:52,520
really well so far. 
But it's early in the game. 

240
00:13:52,520 --> 00:13:55,560
And maybe I'm wrong, but I mean,
I like what you say about 

241
00:13:56,040 --> 00:13:59,640
there's always this kind of 
narrative around an asset class 

242
00:13:59,640 --> 00:14:01,880
that turns out to not work out, 
right. 

243
00:14:01,880 --> 00:14:03,360
And so I think. 
Yeah, I think that's. 

244
00:14:03,360 --> 00:14:05,880
Right as we get some 
insufficient office probably 

245
00:14:05,880 --> 00:14:07,920
does all right, right, 
Especially if rates are coming 

246
00:14:07,920 --> 00:14:10,160
down. 
Yeah, I just, I mean like 

247
00:14:10,160 --> 00:14:13,600
there's clearly crappy office 
and there's clearly oversupplied

248
00:14:13,600 --> 00:14:17,000
office. 
But I guess my bias would be 

249
00:14:17,000 --> 00:14:22,120
that I've seen enough people say
things like, yeah, I like this 

250
00:14:22,200 --> 00:14:26,280
idea, I like this stock, but I 
can't own it because if it goes 

251
00:14:26,280 --> 00:14:29,760
down, my clients are going to 
call me and I can't, I can't say

252
00:14:30,320 --> 00:14:32,360
I lost money owning office 
today. 

253
00:14:32,360 --> 00:14:34,400
I'd rather just wait for it to 
turn. 

254
00:14:34,880 --> 00:14:37,240
And and I think there's some 
merit in that, right? 

255
00:14:37,240 --> 00:14:42,400
Like the the pro side of that is
you're not buying falling knives

256
00:14:42,400 --> 00:14:46,280
that, you know, kill you. 
The upside is or, or the 

257
00:14:46,280 --> 00:14:50,280
downside is I, I, I do think it 
distorts behavior in, in ways 

258
00:14:50,280 --> 00:14:53,280
that are not right business like
yeah. 

259
00:14:53,280 --> 00:14:57,200
And I've like up to this date 
pre launching the fund, I've not

260
00:14:57,200 --> 00:14:59,360
had to deal with any incentives 
like that right. 

261
00:14:59,360 --> 00:15:05,080
And even once this vehicle gets 
going, I hope that I've 

262
00:15:05,080 --> 00:15:09,600
established the right narrative 
with the LP's that like we are 

263
00:15:09,600 --> 00:15:13,800
going to be trying to do things 
differently and not have a the 

264
00:15:13,800 --> 00:15:16,640
kind of compulsion to follow the
masses, right? 

265
00:15:16,640 --> 00:15:19,040
Like if we lose money on office,
So what? 

266
00:15:19,400 --> 00:15:24,080
Hopefully on net, those 
contrarian bets will end up 

267
00:15:24,080 --> 00:15:26,680
paying off, which I think they 
tend to do. 

268
00:15:27,160 --> 00:15:29,360
And as you say, you can't just 
go and buy every office out 

269
00:15:29,360 --> 00:15:30,560
there. 
Some of them are not good. 

270
00:15:31,040 --> 00:15:32,960
But that's kind of the point of 
stock picking, right? 

271
00:15:32,960 --> 00:15:36,800
Like if you're going to go 
identify something where there 

272
00:15:36,800 --> 00:15:42,200
is a broad negative sentiment 
around the entire asset class, 

273
00:15:42,920 --> 00:15:44,400
but inevitably there are going 
to be some. 

274
00:15:44,400 --> 00:15:47,800
They're really strong, right. 
So in each of the three 

275
00:15:47,800 --> 00:15:54,440
companies, I I think there's 
just a broad base disregard for 

276
00:15:54,440 --> 00:15:57,400
those kinds of companies, which 
causes people to not actually 

277
00:15:57,400 --> 00:16:00,160
look very closely. 
Yeah, two of those, the 

278
00:16:00,160 --> 00:16:01,880
companies are not micro caps, 
right? 

279
00:16:01,880 --> 00:16:03,680
I mean, they're more in the 
small cap range. 

280
00:16:03,680 --> 00:16:07,040
They're they're liquid. 
People know about them, but I 

281
00:16:07,040 --> 00:16:08,640
just don't think people are 
willing to look at them. 

282
00:16:08,720 --> 00:16:12,880
And also, it's funny, I spoke to
Bill Chen recently, who I know 

283
00:16:12,880 --> 00:16:15,600
has been on the pod, and he said
something which struck me, which

284
00:16:15,600 --> 00:16:20,280
I think is definitely correct, 
which is that it's a lot easier 

285
00:16:20,840 --> 00:16:24,720
to see the value in these names 
when you weren't watching them 

286
00:16:24,720 --> 00:16:29,040
go down precipitously, right? 
I never lost money on these 

287
00:16:29,040 --> 00:16:32,520
names on the way down. 
I was up looking at Reit's post 

288
00:16:32,520 --> 00:16:34,280
2020 when they started 
collapsing. 

289
00:16:34,320 --> 00:16:38,160
And so I think when you can come
at it with fresh eyes, it can be

290
00:16:38,160 --> 00:16:41,880
a little bit of an edge there. 
Whereas I think if you were 

291
00:16:41,880 --> 00:16:44,880
looking at these names, not even
necessarily involved, but just 

292
00:16:44,880 --> 00:16:49,560
watching them fall, you might be
thinking, well, I thought that 

293
00:16:49,560 --> 00:16:51,720
was attractive then and look 
what happened, right? 

294
00:16:51,720 --> 00:16:53,720
And so you can get in your head 
a little bit. 

295
00:16:54,240 --> 00:16:58,640
So yeah, I think I think that's 
kind of helped me maybe get 

296
00:16:58,680 --> 00:17:00,320
ultra bullish on this kind of 
stuff. 

297
00:17:00,600 --> 00:17:01,880
And who knows, I could be wrong,
right? 

298
00:17:01,880 --> 00:17:06,800
But I do find that a lot of the 
kinds of guys closer to the real

299
00:17:06,800 --> 00:17:09,720
estate industry tend to be more 
skeptical, and I think that's 

300
00:17:09,720 --> 00:17:11,319
because of what's happened 
recently, right? 

301
00:17:12,920 --> 00:17:15,240
Yeah. 
And I think there's a few guys 

302
00:17:15,240 --> 00:17:19,760
that I follow and I think 
they've been through O eight O 

303
00:17:19,760 --> 00:17:23,599
9. 
And I think maybe one of the 

304
00:17:23,599 --> 00:17:26,640
better pushbacks that I've heard
is that this is really just a 

305
00:17:26,640 --> 00:17:29,880
rates play. 
I don't know how much of that is

306
00:17:29,880 --> 00:17:32,960
reality in any given 
circumstance, probably the asset

307
00:17:32,960 --> 00:17:37,360
class as a whole is, but there's
some guys I think that have some

308
00:17:37,360 --> 00:17:39,400
valid pushback. 
But I think the general 

309
00:17:39,400 --> 00:17:46,880
consensus I I'm not sure I I buy
into yeah, yeah, which to your 

310
00:17:46,880 --> 00:17:49,560
point goes to the hopefully to 
goes to the stock picking 

311
00:17:49,560 --> 00:17:53,600
ability, right? 
Try to try to not open Class C 

312
00:17:53,600 --> 00:17:56,920
office. 
In over supplied markets for 

313
00:17:56,920 --> 00:17:58,760
sure. 
Yeah, there's supply constrained

314
00:17:58,760 --> 00:18:02,480
markets with quality assets and 
there's buildings that are 

315
00:18:02,480 --> 00:18:05,520
pretty clearly trading at a big,
you know, companies trading at a

316
00:18:05,520 --> 00:18:08,000
pretty big discount to their 
asset value. 

317
00:18:08,640 --> 00:18:11,040
But the baby's just been thrown 
out with the backlogger, right. 

318
00:18:11,040 --> 00:18:17,000
So I've, I've spent a lot of 
time there and that's, that's 

319
00:18:17,000 --> 00:18:21,080
just the realistic side. 
But it is kind of a, a broader 

320
00:18:21,080 --> 00:18:24,920
thing that I'm trying to do when
I'm looking for ideas, which is 

321
00:18:25,440 --> 00:18:28,560
honestly pulling up the stock 
charts of the sectors and being 

322
00:18:28,560 --> 00:18:32,320
like, this looks ugly. 
What's happened and figuring out

323
00:18:32,320 --> 00:18:36,200
if that makes sense, right? 
Like another sector that I spent

324
00:18:36,200 --> 00:18:39,800
a lot of time writing about and 
have a decent chunk of My 

325
00:18:39,800 --> 00:18:42,680
Portfolio invested in is 
actually cannabis, which is 

326
00:18:43,000 --> 00:18:47,720
probably the most hated. 
Those companies, if I even bring

327
00:18:47,720 --> 00:18:51,320
them up, people start laughing 
like they don't, they don't even

328
00:18:51,320 --> 00:18:54,360
want to hear it, which gets me 
interested, right? 

329
00:18:54,360 --> 00:19:00,240
Because when people, I, I own 
one cannabis company that trades

330
00:19:00,240 --> 00:19:05,760
at net cash and it just grew its
revenues 40% year over year and 

331
00:19:06,120 --> 00:19:10,040
it's cash flow positive. 
And these are Canadian based 

332
00:19:10,040 --> 00:19:11,280
companies. 
And there's this really 

333
00:19:11,280 --> 00:19:15,560
interesting dynamic there, which
is that there's an excise tax 

334
00:19:15,560 --> 00:19:19,600
that gets charged on revenue. 
So on the top line, you're 

335
00:19:19,600 --> 00:19:25,600
paying a tax and when that tax 
was initially contemplated at 

336
00:19:25,600 --> 00:19:28,800
the legalization of cannabis in 
Canada, so going kind of back to

337
00:19:28,800 --> 00:19:36,360
like 20/17/2018, they priced it 
with the idea that cannabis 

338
00:19:36,360 --> 00:19:43,120
would go for about $10 a gram. 
And so basically the tax is the 

339
00:19:43,120 --> 00:19:48,560
lesser of $1.00 or 10%. 
What's happened is cannabis 

340
00:19:48,560 --> 00:19:52,880
prices have collapsed because of
a flooding of the market, right?

341
00:19:53,240 --> 00:19:57,160
That's a capital cycle. 
And so you've had what people 

342
00:19:57,160 --> 00:20:00,160
expected to be $10 a gram go 
down like 5-6 dollars a gram. 

343
00:20:00,200 --> 00:20:05,480
And the problem is, is you're 
paying a dollar of tax on maybe 

344
00:20:05,480 --> 00:20:09,240
a 5 or $6 sale. 
And so it's eating up a huge 

345
00:20:09,240 --> 00:20:11,160
chunk of the top line of these 
companies. 

346
00:20:11,640 --> 00:20:14,520
And notwithstanding that, really
punitive. 

347
00:20:14,920 --> 00:20:17,760
Tax that they have to deal with 
they're starting to make money 

348
00:20:18,360 --> 00:20:22,280
and so you kind of start 
thinking these are pretty robust

349
00:20:22,280 --> 00:20:26,000
companies that are able to you 
know still eke out a little bit 

350
00:20:26,000 --> 00:20:29,400
of a profit when they're losing 
1/3 of the revenue to the 

351
00:20:29,400 --> 00:20:35,000
government before expenses. 
And what happens if and when the

352
00:20:35,000 --> 00:20:38,480
government gets some reason and 
reforms that tax, right? 

353
00:20:38,480 --> 00:20:41,920
Like if they, which has already 
been tabled before the 

354
00:20:41,960 --> 00:20:44,320
Parliament in Canada. 
And so I would say it's a ripe 

355
00:20:44,320 --> 00:20:50,400
fruit for a new Parliament to 
reform, in which case these 

356
00:20:50,400 --> 00:20:52,960
companies will immediately start
gushing cash, right? 

357
00:20:53,000 --> 00:20:56,720
And so, but you look at these 
things and like, I think they're

358
00:20:56,720 --> 00:20:59,120
pretty quality businesses. 
Like they've established a big 

359
00:20:59,120 --> 00:21:01,360
brand power. 
What's kind of interesting about

360
00:21:01,360 --> 00:21:04,080
some of the like there's 
actually 2 specific, it's called

361
00:21:04,080 --> 00:21:08,840
organic Ram and Crass Group. 
And both of them have major 

362
00:21:08,840 --> 00:21:11,320
shareholdings by the big tobacco
companies. 

363
00:21:11,680 --> 00:21:15,280
Yep. 
And so that gives them a huge 

364
00:21:15,280 --> 00:21:17,680
competitive advantage, right? 
They have a much, much lower 

365
00:21:17,680 --> 00:21:20,040
cost of capital because if 
you're a cannabis company 

366
00:21:20,040 --> 00:21:23,880
without that, you're not really 
able to raise in the capital 

367
00:21:23,880 --> 00:21:28,320
markets and you've got the 
existing distribution networks. 

368
00:21:28,640 --> 00:21:31,080
So I think they're pretty good 
businesses, but you know, they 

369
00:21:31,080 --> 00:21:36,520
traded cash and so I think 
that's another example of sort 

370
00:21:36,520 --> 00:21:38,800
of what I'm looking at. 
You had said that the tax was 

371
00:21:38,800 --> 00:21:40,240
the low. 
I think you said. 

372
00:21:40,240 --> 00:21:42,360
I don't mean to put words in 
your mouth, but I think you said

373
00:21:42,360 --> 00:21:44,840
the lower of a dollar or 10%. 
I think you meant the higher, 

374
00:21:44,840 --> 00:21:46,160
right? 
Yeah, yeah, yeah. 

375
00:21:46,320 --> 00:21:48,520
So anything below $10, you're 
paying a dollar. 

376
00:21:49,080 --> 00:21:51,920
Yeah, I think something you're 
paying, yeah. 

377
00:21:53,040 --> 00:21:56,160
Yeah, I don't know. 
I mean, I, I dabbled in the 

378
00:21:56,160 --> 00:21:59,040
cannabis stocks. 
I, I owned a lot of the 

379
00:21:59,040 --> 00:22:01,440
collapse, which was super fun, 
but thankfully it wasn't a big 

380
00:22:01,440 --> 00:22:04,960
position. 
But yeah, I, I guess the thing 

381
00:22:04,960 --> 00:22:11,120
that has made it tough for me in
the States is I used to think 

382
00:22:11,120 --> 00:22:17,280
that the retail distribution 
would be a, a durable advantage.

383
00:22:17,520 --> 00:22:20,760
And I'm not sure. 
I still believe that. 

384
00:22:21,240 --> 00:22:23,320
I'm not sure. 
I don't, but I'm not sure I do. 

385
00:22:24,000 --> 00:22:25,960
So it's one of those things 
that's kind of tough. 

386
00:22:26,320 --> 00:22:29,000
I just kind of wonder if it 
should have been in my too hard 

387
00:22:29,000 --> 00:22:31,640
pile because I still can't quite
answer that question. 

388
00:22:31,880 --> 00:22:36,080
I've sort of taken the opposite 
approach, if I understand what 

389
00:22:36,080 --> 00:22:40,760
you mean, which is that in 
Canada be retail distribution 

390
00:22:40,760 --> 00:22:44,400
and production are held by 
different companies, right, 

391
00:22:44,400 --> 00:22:47,720
Somewhat alcohol industry in the
US And I do think that 

392
00:22:47,720 --> 00:22:51,240
specialization is actually a 
competitive advantage rather 

393
00:22:51,240 --> 00:22:56,200
than having a manufacturing 
segment, a retail segment, a 

394
00:22:56,200 --> 00:22:59,400
distribution segment, I think 
particularly in the US, right, 

395
00:22:59,400 --> 00:23:03,240
because as if you were dabbling 
in the sector, you're not able 

396
00:23:03,240 --> 00:23:07,280
to really expense yourself at 
this point, you know, spend 

397
00:23:07,280 --> 00:23:10,680
there's nothing, right. 
And so you're really constricted

398
00:23:10,680 --> 00:23:13,440
and you can't operate across 
Interstate lines. 

399
00:23:13,480 --> 00:23:18,360
And so I think it's created and 
this is part of kind of the 

400
00:23:18,360 --> 00:23:23,400
larger thesis with the with the 
large Canadian producers is that

401
00:23:23,400 --> 00:23:26,320
I think the American cannabis 
companies have been sort of 

402
00:23:26,320 --> 00:23:28,920
artificially constricted in the 
way that they've developed. 

403
00:23:29,480 --> 00:23:33,880
It's just not a business doesn't
organically develop such that 

404
00:23:33,960 --> 00:23:37,200
they can't touch another state 
and that they kind of 

405
00:23:37,200 --> 00:23:39,640
integration like that. 
And so I think when the time 

406
00:23:39,640 --> 00:23:44,400
comes, right, because these 
Canadian producers can't operate

407
00:23:44,400 --> 00:23:49,120
in America right now and the 
reason that BTI and Altria have 

408
00:23:49,120 --> 00:23:52,320
taken the position in the 
Canadian companies is because it

409
00:23:52,320 --> 00:23:55,920
would jeopardize their US 
listing and I think have a full 

410
00:23:55,920 --> 00:24:00,200
host of other legal issues. 
And So what I think happens is 

411
00:24:00,200 --> 00:24:04,520
when the time comes in the US 
where there's rescheduling or 

412
00:24:04,520 --> 00:24:09,200
legalization, I think the big 
tobacco players are going to try

413
00:24:09,200 --> 00:24:13,240
to position themselves in 
cannabis through these Canadian 

414
00:24:13,240 --> 00:24:17,320
own entities. 
And because there's already a 

415
00:24:17,320 --> 00:24:22,080
pre-existing infrastructure by 
the tobacco companies in the US 

416
00:24:22,320 --> 00:24:26,520
that might just instantly give 
them a competitive advantage vis

417
00:24:26,520 --> 00:24:32,360
a vis the Msos, which are 
operating within single state 

418
00:24:32,360 --> 00:24:34,640
lines and don't have that 
infrastructure built out. 

419
00:24:35,240 --> 00:24:37,680
Isn't. 
So that's kind of like the 

420
00:24:37,680 --> 00:24:41,880
larger picture thinking there 
and that might never happen and 

421
00:24:41,880 --> 00:24:44,960
could be down the road. 
But I do think that's sort of 

422
00:24:44,960 --> 00:24:50,280
the mega bull case with these 
companies is that they get 

423
00:24:50,280 --> 00:24:53,200
positioned through the big 
tobacco companies in the US and 

424
00:24:53,200 --> 00:24:56,280
take the market. 
And they still have a sense that

425
00:24:56,840 --> 00:25:00,360
over time and, and this is I 
think where the bulls and bears 

426
00:25:00,360 --> 00:25:02,920
and Canada's really differ, 
which is I guess it's a 

427
00:25:02,920 --> 00:25:04,440
commodity. 
And so maybe you're going to 

428
00:25:04,440 --> 00:25:06,760
have this sort of inherent 
cyclicality. 

429
00:25:07,560 --> 00:25:11,280
But in another sense, like you 
don't get that with tobacco and 

430
00:25:11,280 --> 00:25:15,120
beer, for example. 
You have what is more an 

431
00:25:15,120 --> 00:25:19,280
oligopolistic structure 
dominated by brands, even though

432
00:25:19,280 --> 00:25:22,960
the underlying product is 
somewhat of a commodity, right? 

433
00:25:22,960 --> 00:25:27,040
Like, does it really matter if 
you're drinking Budweiser or 

434
00:25:27,720 --> 00:25:31,040
Miller, right? 
Like, maybe maybe marginally, 

435
00:25:31,400 --> 00:25:36,120
but at the end of the day, it's 
just kind of an OK beer. 

436
00:25:36,400 --> 00:25:38,640
And I think people are sort of 
paying for the brands. 

437
00:25:39,160 --> 00:25:41,840
And so you might get a situation
where there's price lapse and 

438
00:25:41,840 --> 00:25:44,960
realization just cuz there's 
maybe four or five players doing

439
00:25:44,960 --> 00:25:47,320
all the cannabis in the country.
Yeah. 

440
00:25:47,440 --> 00:25:49,960
And who better to do that than 
the tobacco guys? 

441
00:25:51,680 --> 00:25:54,960
Well, certainly to the extent 
that you want C store 

442
00:25:54,960 --> 00:26:00,520
distribution. 
Yeah, like, yeah, I mean, like 

443
00:26:00,520 --> 00:26:04,400
the branding in Florida is non 
existent because it's all 

444
00:26:04,400 --> 00:26:06,560
medical. 
So everything has to be in like 

445
00:26:06,560 --> 00:26:10,080
a white container. 
Although they've started to kind

446
00:26:10,080 --> 00:26:13,080
of brand some edibles but 
nothing like out West. 

447
00:26:13,240 --> 00:26:14,200
Right. 
Yeah. 

448
00:26:14,200 --> 00:26:17,200
I'm based in New York and I 
don't think I've said it on the 

449
00:26:17,200 --> 00:26:18,800
recording, but I'm initially 
from Canada. 

450
00:26:18,800 --> 00:26:23,040
And so I've seen the 
dispensaries in Canada versus 

451
00:26:23,280 --> 00:26:26,560
what's on offer in New York. 
And what I will say and what I 

452
00:26:26,560 --> 00:26:30,720
find really interesting is that 
Canada wide you will see 

453
00:26:30,720 --> 00:26:34,600
domination by certain brands 
already within the dispensaries.

454
00:26:35,120 --> 00:26:38,760
Whereas I walk into a dispensary
in New York and there is just a 

455
00:26:38,760 --> 00:26:43,720
multitude of products that don't
really stand out to anyone and 

456
00:26:43,720 --> 00:26:45,480
there is constant turnover of 
inventory. 

457
00:26:45,480 --> 00:26:47,120
Do you have something else in 
there next week? 

458
00:26:47,640 --> 00:26:51,920
And so I don't think at least in
New York and I, I would assume 

459
00:26:51,920 --> 00:26:54,280
it's kind of true throughout the
country as I don't think there's

460
00:26:54,280 --> 00:26:57,000
really been much development of 
real brand power. 

461
00:26:57,680 --> 00:27:00,640
Yeah, I think that's right. 
Until the extent you want 

462
00:27:01,080 --> 00:27:04,120
actually economic profits in 
this industry, I think you're 

463
00:27:04,120 --> 00:27:06,200
going to need to establish brand
power. 

464
00:27:06,240 --> 00:27:09,200
And that's, and that's more easy
to do through edibles. 

465
00:27:09,520 --> 00:27:13,520
Like the example I sort of give 
people is, and I have spoken to 

466
00:27:13,520 --> 00:27:16,800
to some older folks in Canada 
about this, right, who maybe 

467
00:27:16,800 --> 00:27:20,400
they didn't grow up consuming 
cannabis at now that it's been 

468
00:27:20,400 --> 00:27:22,880
legal in the last five years. 
I sort of opened their mind up 

469
00:27:22,880 --> 00:27:26,520
to it. 
And there's this underlying fear

470
00:27:26,520 --> 00:27:30,400
that maybe I'm going to get too 
high or get the spins or I don't

471
00:27:30,400 --> 00:27:31,480
know what it's going to do to 
me. 

472
00:27:31,480 --> 00:27:33,960
And so there's an apprehension 
about consumption. 

473
00:27:34,560 --> 00:27:39,680
And what I found that happens is
they try a certain brand of 

474
00:27:39,680 --> 00:27:42,960
edibles and they say, this one 
makes me feel actually pretty 

475
00:27:42,960 --> 00:27:46,040
good. 
And because they've now gotten 

476
00:27:46,040 --> 00:27:48,720
comfortable with that specific 
brand, they just keep getting 

477
00:27:48,720 --> 00:27:51,040
the same one every time, right? 
Because they don't want to take 

478
00:27:51,040 --> 00:27:54,920
the risk that another product is
going to give them the spins or 

479
00:27:54,920 --> 00:27:58,360
whatever. 
And so interesting by nature, it

480
00:27:58,360 --> 00:28:02,880
kind of has that inherent 
tendency towards a brand, at 

481
00:28:02,880 --> 00:28:06,360
least in the edible space, 
because you are sort of at the 

482
00:28:06,360 --> 00:28:10,680
whim of the producer, right? 
Nobody wants to get sickly high,

483
00:28:11,600 --> 00:28:13,880
no? 
And edibles are a train that 

484
00:28:13,880 --> 00:28:15,320
once it starts, you can't. 
Hop. 

485
00:28:15,320 --> 00:28:17,640
Off exactly right. 
It's not one that you. 

486
00:28:17,640 --> 00:28:20,120
Just say, OK, I've done. 
Yeah, exactly. 

487
00:28:20,920 --> 00:28:22,680
Yeah, I don't know. 
It's very interesting. 

488
00:28:22,680 --> 00:28:27,360
I think that the people that own
Glass House would argue that in 

489
00:28:27,360 --> 00:28:29,720
the US this brand stuff is too 
hard. 

490
00:28:29,720 --> 00:28:32,280
So just go with the lowest cost 
producer that can do it at a 

491
00:28:32,280 --> 00:28:34,880
decent price. 
I think they've done pretty well

492
00:28:34,880 --> 00:28:36,960
off the bottom. 
Certainly not off the top, but 

493
00:28:37,040 --> 00:28:39,520
but nothing did in that 
particular space. 

494
00:28:39,800 --> 00:28:42,080
That may be another one where 
people are so hurt they don't 

495
00:28:42,080 --> 00:28:44,720
even want to look. 
I think that's for sure, right? 

496
00:28:44,720 --> 00:28:46,960
Like so so turned off by it, 
right? 

497
00:28:46,960 --> 00:28:49,040
I mean. 
I'd suspect that actually did 

498
00:28:49,040 --> 00:28:50,120
OK. 
Glass House. 

499
00:28:50,120 --> 00:28:51,920
Interesting. 
Some of those, some of these 

500
00:28:51,920 --> 00:28:54,920
companies are like, if you look 
at the financials, they don't 

501
00:28:54,920 --> 00:28:56,560
look that bad. 
Yeah. 

502
00:28:56,680 --> 00:28:58,880
But the stocks are just so blown
out, right? 

503
00:28:59,040 --> 00:29:03,200
And there's another element to 
this, which I think if you're 

504
00:29:03,200 --> 00:29:07,640
running institutional capital, 
not only do you have that like 

505
00:29:08,400 --> 00:29:11,520
fear of what are you doing, you 
just lost money on cannabis, 

506
00:29:11,520 --> 00:29:15,160
like obviously, but you also 
have a sector right now that is 

507
00:29:15,160 --> 00:29:19,040
particularly prone to meme like 
movements, right? 

508
00:29:19,040 --> 00:29:22,760
Like you'll just be 50% runs in 
a day and that moves in the 

509
00:29:22,760 --> 00:29:25,680
other direction based on 
virtually nothing, like a little

510
00:29:25,680 --> 00:29:27,200
bit of signaling from the 
government. 

511
00:29:27,880 --> 00:29:30,040
Oh, interesting. 
And so I think until that 

512
00:29:30,040 --> 00:29:33,360
subsides, it might be 
untouchable for most people. 

513
00:29:34,320 --> 00:29:39,400
And I mean, yeah, there was when
rescheduling was given the go 

514
00:29:39,400 --> 00:29:42,600
ahead by the Dai think it was 
maybe in May or something. 

515
00:29:42,600 --> 00:29:44,160
And you can look at the charts 
of all these things. 

516
00:29:44,160 --> 00:29:47,120
Yeah, I saw everything ripped. 
Went flying and they retraced 

517
00:29:47,120 --> 00:29:49,680
the entire game, right? 
And nothing's really changed 

518
00:29:49,680 --> 00:29:53,640
other than things tend to move 
slower than investors expect, I 

519
00:29:53,640 --> 00:29:55,760
think. 
And so all the games were just 

520
00:29:55,760 --> 00:29:57,680
getting back, right? 
So that's frustrating. 

521
00:29:57,720 --> 00:30:01,360
And he's somewhat uninvestal. 
Yeah, that's, that's like Will 

522
00:30:01,360 --> 00:30:04,240
Thompson's been on this program 
a couple times and he talks 

523
00:30:04,240 --> 00:30:06,720
about mining. 
There's a thing called the 

524
00:30:06,720 --> 00:30:09,720
Alessanda Curve. 
I, I hope that I said it 

525
00:30:09,720 --> 00:30:13,480
correctly, but it's basically 
like when there's a discovery in

526
00:30:13,480 --> 00:30:19,520
a mine, the stocks rips and then
it takes a while to develop And 

527
00:30:19,520 --> 00:30:23,560
it's like people just get bored 
of the time between the news and

528
00:30:23,560 --> 00:30:26,200
when it actually develops and 
they just sell the stock. 

529
00:30:26,200 --> 00:30:28,680
And it's kind of like a, it's 
not like a through of 

530
00:30:28,680 --> 00:30:31,880
disillusionment as much as it is
just kind of people get bored. 

531
00:30:32,280 --> 00:30:36,240
If I find that dynamic 
fascinating, lack of patience, I

532
00:30:36,240 --> 00:30:41,720
don't know how pervasive that 
has always been historically or 

533
00:30:41,720 --> 00:30:44,720
if that's magnified more now 
than it has been in the past. 

534
00:30:44,720 --> 00:30:47,480
But I don't know if that's 
limited to mining. 

535
00:30:47,480 --> 00:30:50,800
Like I, I see this in all kinds 
of things where you get 

536
00:30:50,800 --> 00:30:53,640
excitement. 
And then one thing that I've 

537
00:30:53,640 --> 00:30:58,600
been pretty heavily invested in 
for a while is offshore and that

538
00:30:58,600 --> 00:31:00,880
sector has ripped. 
It's been a huge success. 

539
00:31:00,880 --> 00:31:06,120
But there have been some 
comments from the company's this

540
00:31:06,120 --> 00:31:12,080
quarter suggesting not that 
there is a slowdown in day 

541
00:31:12,080 --> 00:31:15,160
rates, but that these projects 
have been kind of pushed out a 

542
00:31:15,160 --> 00:31:17,200
few months. 
And so you might get some 

543
00:31:17,200 --> 00:31:19,920
weakness in the next quarter. 
And then at least what they're 

544
00:31:19,920 --> 00:31:22,640
saying when we don't know if 
this will actually pan out, but 

545
00:31:22,720 --> 00:31:25,200
the guide has been that 
nothing's really changed. 

546
00:31:25,200 --> 00:31:27,720
We're just kind of moving things
out three or four months and the

547
00:31:27,720 --> 00:31:31,160
stocks have collapsed, right? 
And so it's like, it's like, 

548
00:31:31,440 --> 00:31:35,320
does that three months really 
make that much difference in the

549
00:31:35,320 --> 00:31:38,400
grand scheme of your IRR owning 
this thing? 

550
00:31:38,840 --> 00:31:41,720
And perhaps if you have 
quarterly performance mandates, 

551
00:31:41,720 --> 00:31:45,080
it makes a difference. 
But if you don't, presumably 

552
00:31:45,080 --> 00:31:47,280
that's an opportunity to just 
hold your breath for three or 

553
00:31:47,280 --> 00:31:49,280
ten months, right? 
Like what what really doesn't 

554
00:31:49,280 --> 00:31:51,800
matter. 
But I do find that dynamic 

555
00:31:51,800 --> 00:31:54,960
fascinating. 
And I think that's another edge 

556
00:31:55,560 --> 00:31:58,320
for, you know, someone without 
those mandates or someone 

557
00:31:58,320 --> 00:32:00,800
running APA. 
It's just like simple time of a 

558
00:32:00,800 --> 00:32:04,760
drage, like just waiting it out 
a little longer than people are 

559
00:32:04,760 --> 00:32:07,760
willing to because there is a 
lot of patience inpatience. 

560
00:32:08,120 --> 00:32:09,760
Cannabis is for sure the worst 
of those. 

561
00:32:09,760 --> 00:32:12,640
But I mean, it's, I think it 
says a lot about the people 

562
00:32:12,640 --> 00:32:16,200
owning cannabis stocks, right? 
Yeah, they should be more chill,

563
00:32:16,200 --> 00:32:19,040
man. 
You'd think they would be. 

564
00:32:19,440 --> 00:32:22,160
Yeah, just let them play out, 
see how it goes. 

565
00:32:22,160 --> 00:32:27,040
Yes, No, I, I mean, I, I hope, I
don't know, I hope the Canada 

566
00:32:27,040 --> 00:32:29,480
Spark, it continues to develop 
and I, and I hope that the 

567
00:32:29,480 --> 00:32:32,920
government gets out of the way 
'cause I, I haven't talked about

568
00:32:32,920 --> 00:32:35,080
it in a while, 'cause I didn't 
want to be known as like a weed 

569
00:32:35,080 --> 00:32:38,800
podcast necessarily. 
But I do, I do think, I mean, 

570
00:32:39,400 --> 00:32:42,160
look, it's a lot, it's a lot 
better for society than a lot of

571
00:32:42,160 --> 00:32:43,920
the things that are allowed to 
exist today. 

572
00:32:44,320 --> 00:32:47,360
So the idea that it shouldn't be
allowed to exist, I think is 

573
00:32:47,360 --> 00:32:49,920
asinine. 
I'm OK with people that say none

574
00:32:49,920 --> 00:32:52,440
of it should exist. 
That's like logically, you know,

575
00:32:52,960 --> 00:32:54,760
that's consistent to me. 
Sure. 

576
00:32:54,760 --> 00:32:58,320
But once you let alcohol out of 
the bag, I think the idea of not

577
00:32:58,320 --> 00:33:01,080
letting marijuana out of the bag
is silly. 

578
00:33:01,440 --> 00:33:04,320
I think I saw a statistic. 
I might be butchering this, too,

579
00:33:04,320 --> 00:33:07,320
but I think it was that. 
And there are more people 

580
00:33:07,320 --> 00:33:09,920
smoking cannabis daily in 
America now than drinking. 

581
00:33:10,520 --> 00:33:13,600
Oh yeah. 
And there are some slides if you

582
00:33:13,600 --> 00:33:17,920
go through some of the MSO 
decks, like looking at the size 

583
00:33:17,920 --> 00:33:19,400
of the market in five years, 
right? 

584
00:33:19,400 --> 00:33:23,000
And we're looking at something 
that's it's on parallel with 

585
00:33:23,000 --> 00:33:26,160
tobacco and like a little bit 
smaller than beer, for example, 

586
00:33:26,160 --> 00:33:28,160
right. 
Like there is huge demand here. 

587
00:33:28,160 --> 00:33:31,520
If the government does get out 
of the way, you'll get an 

588
00:33:31,520 --> 00:33:37,040
organic consolidation, I'm sure.
And if they don't, it's kind of 

589
00:33:37,040 --> 00:33:41,280
a win win because, and I'll just
put it back to the Canadian 

590
00:33:41,400 --> 00:33:47,320
environment here, but that 
excise tax is essentially just 

591
00:33:47,320 --> 00:33:49,600
killing all that we can. 
Yeah, you can't be small and 

592
00:33:49,600 --> 00:33:51,480
compete, right? 
So you're forcing. 

593
00:33:51,480 --> 00:33:53,640
Consolidation, they're almost 
accelerating it. 

594
00:33:53,640 --> 00:33:55,720
And that's what I really think 
about the setup, right, is you 

595
00:33:55,720 --> 00:33:58,920
almost have a capital cycle that
works out either way. 

596
00:33:58,960 --> 00:34:03,160
Like either you cut the tax and 
these guys can start making a 

597
00:34:03,160 --> 00:34:06,400
profit really quickly, or you 
don't and there's only going to 

598
00:34:06,400 --> 00:34:08,880
be two companies left. 
Because like if you can look at 

599
00:34:08,880 --> 00:34:11,960
the statistics, but like the 
Canadian bankruptcy fireways are

600
00:34:11,960 --> 00:34:16,080
dominated by cannabis companies 
because they they simply can't 

601
00:34:16,080 --> 00:34:18,760
survive. 
And I was writing about this 

602
00:34:18,760 --> 00:34:24,679
last week, but it is it has, 
this is purely anecdotal, but it

603
00:34:24,679 --> 00:34:27,440
has to be true. 
It must be the cheapest product 

604
00:34:27,840 --> 00:34:31,880
in Canada for what you get like 
is cheaper than it was 20 years 

605
00:34:31,880 --> 00:34:34,600
ago. 
Oh yeah, right. 

606
00:34:34,600 --> 00:34:40,719
And so if you just think about 
what that means to the upside, 

607
00:34:40,840 --> 00:34:44,400
right, Like if you start getting
real price rationalization 

608
00:34:45,199 --> 00:34:49,719
because the the high cost guys 
are exiting the market pretty 

609
00:34:49,719 --> 00:34:52,800
quickly, everyone's you know, 
everyone's heading to the exits 

610
00:34:53,520 --> 00:34:56,520
and you start getting price tick
up and there's a lot of reef for

611
00:34:56,520 --> 00:34:59,360
that price to run. 
I don't think you see any volume

612
00:34:59,360 --> 00:35:03,720
declines. 
And so these companies I think 

613
00:35:04,000 --> 00:35:06,440
and they also kind of have 
embedded operating leverage. 

614
00:35:06,440 --> 00:35:10,200
I think these companies can have
financial profiles that people 

615
00:35:10,200 --> 00:35:12,720
are completely asleep at the 
wheel on right now. 

616
00:35:13,280 --> 00:35:16,680
And then again, if you get the 
the loss of the government 

617
00:35:16,680 --> 00:35:20,400
intervention with silly things 
like this excise tax, you might 

618
00:35:20,400 --> 00:35:24,600
be looking at some like really 
large cash flow producing 

619
00:35:24,600 --> 00:35:28,480
companies that are trading at 
net cash, right? 

620
00:35:29,120 --> 00:35:31,680
I don't know. 
But on the downside and then 

621
00:35:31,680 --> 00:35:35,360
kind of what I find interesting 
and why it's asymmetric is like,

622
00:35:35,800 --> 00:35:38,160
I really know how you lose money
with. 

623
00:35:38,840 --> 00:35:42,000
So Kronos Group, for example, 
which is my largest cannabis 

624
00:35:42,000 --> 00:35:47,840
clay is an $850 million market 
cap and it has $800 million of 

625
00:35:47,840 --> 00:35:50,080
cash. 
I ended up burning cash. 

626
00:35:50,720 --> 00:35:54,720
And so you have a huge downside 
protection even if this doesn't 

627
00:35:54,720 --> 00:35:56,600
work out. 
Yeah, unless they go out and 

628
00:35:56,600 --> 00:36:00,320
spend the cash somehow, right. 
Like if management gets bought, 

629
00:36:00,720 --> 00:36:04,600
I guess the thing that gives me 
confidence layer is the sector 

630
00:36:04,600 --> 00:36:08,720
evaluation is so depressed that 
they can basically go out and 

631
00:36:08,720 --> 00:36:13,080
buy anything. 
Like you obviously take a risk 

632
00:36:13,080 --> 00:36:17,440
of incinerating cash anytime 
there's cash on the balance 

633
00:36:17,440 --> 00:36:19,880
sheet. 
But like yeah, but given where 

634
00:36:19,880 --> 00:36:22,480
some of these. 
Do you worry about management 

635
00:36:22,480 --> 00:36:25,800
just paying themselves a ton? 
I feel like screw it. 

636
00:36:26,200 --> 00:36:29,200
Like do you ever worry that the 
management's just like I'm, I'm 

637
00:36:29,240 --> 00:36:32,760
just, we're not going to make 
like the stock isn't ever going 

638
00:36:32,760 --> 00:36:33,600
to work. 
We're just going to pay 

639
00:36:33,600 --> 00:36:37,280
ourselves a bunch. 
That'd be a whole lot. 840 

640
00:36:37,280 --> 00:36:39,640
million to just extract. 
From an entity would be a whole 

641
00:36:39,640 --> 00:36:43,080
lot. 
The history of that money is 

642
00:36:43,080 --> 00:36:48,000
from Ultra, who own 42% of the 
company. 

643
00:36:48,280 --> 00:36:51,560
So I'm stealing from the mob. 
And have half the board and it's

644
00:36:51,560 --> 00:36:53,160
best. 
It's been a complete loss for 

645
00:36:53,160 --> 00:36:55,080
Altria, right? 
Like I think they implied 

646
00:36:55,880 --> 00:36:58,720
valuation. 
I think they bought in at an 18 

647
00:36:58,720 --> 00:37:01,960
dollar share price and stocks at
what 240 now. 

648
00:37:02,360 --> 00:37:05,200
So I think they gave Chronos 
Group maybe 2 1/2 billion 

649
00:37:05,200 --> 00:37:08,560
dollars and now it's down to 800
mil. 

650
00:37:09,120 --> 00:37:14,080
But I don't think being a Long 
story short is I don't think 

651
00:37:14,080 --> 00:37:17,440
that there's much appetite for 
them to go just light the cash 

652
00:37:17,440 --> 00:37:20,280
on fire and start paying 
themselves like they have to do 

653
00:37:20,280 --> 00:37:24,120
something with it by mandate 
because I think, but for Altria 

654
00:37:24,120 --> 00:37:27,440
having provided that cash, I get
that casters is there 

655
00:37:27,440 --> 00:37:30,040
organically. 
The thing that would make most 

656
00:37:30,040 --> 00:37:33,080
sense to me is just a huge 
tender for shares, right? 

657
00:37:33,080 --> 00:37:36,960
You're trading at cash, you have
so much excess cash buying just 

658
00:37:36,960 --> 00:37:40,480
buy back all the stock. 
But I just think it's earmarked 

659
00:37:41,080 --> 00:37:44,520
for other reasons, right? 
And what you might start seeing 

660
00:37:44,520 --> 00:37:49,080
and what I hope we start seeing 
is kind of start rolling up some

661
00:37:49,080 --> 00:37:52,760
of the smaller producers, right?
And again, just accelerate the 

662
00:37:52,760 --> 00:37:57,200
consolidation because you do 
have a ton of subscale players 

663
00:37:57,200 --> 00:38:00,360
that are still left. 
Interesting. 

664
00:38:00,360 --> 00:38:05,760
So it looks like what's going on
here is they're making up their 

665
00:38:06,040 --> 00:38:08,680
SG and A. 
So gross profit minus SG and A 

666
00:38:09,600 --> 00:38:11,680
is being made-up in interest 
income. 

667
00:38:12,080 --> 00:38:14,160
Is it Yeah, cuz they're, yeah, 
exactly. 

668
00:38:14,160 --> 00:38:15,920
They're in so much interest in 
the cash balance. 

669
00:38:15,920 --> 00:38:20,080
But I mean, so if you pick all 
the financials, you can see how 

670
00:38:20,080 --> 00:38:22,720
long there's there, I don't know
where you're looking at this, 

671
00:38:22,720 --> 00:38:26,000
but there's, there's a gross 
revenue line and a net revenue 

672
00:38:26,000 --> 00:38:26,920
line, right? 
Yep. 

673
00:38:27,120 --> 00:38:29,560
France between those two is the 
excise tax. 

674
00:38:29,760 --> 00:38:33,200
Yep, 33 million on 1/20. 
That's a huge chunk of money, 

675
00:38:33,200 --> 00:38:35,800
right? 
So, yeah, if you look at 

676
00:38:36,400 --> 00:38:41,320
Organogram OGI, which is I think
the closest company you'll find 

677
00:38:41,320 --> 00:38:45,280
to Cronos Group, they actually 
produced a GAAP profit last 

678
00:38:45,280 --> 00:38:49,600
quarter. 
And you have I think something 

679
00:38:49,600 --> 00:38:52,400
that would be close to a 50% 
EBITDA margin if you got rid of 

680
00:38:52,400 --> 00:38:56,680
that tax, OK. 
So I think ahead and I just say,

681
00:38:56,680 --> 00:39:00,800
is there like, is this tax 
sustainable, right? 

682
00:39:00,800 --> 00:39:04,240
Because yes, it generates a fair
bit of revenue for the 

683
00:39:04,240 --> 00:39:08,160
government, but at a certain 
point, if you keep it going, 

684
00:39:08,160 --> 00:39:10,640
you're just going to kill the 
entire industry and lose that 

685
00:39:10,640 --> 00:39:16,320
tax revenue. 
So it doesn't seem to me like 

686
00:39:16,320 --> 00:39:19,520
that can be sustainable. 
Maybe it goes for a few more 

687
00:39:19,520 --> 00:39:22,000
years, but at some point you're 
just going to kill the revenue 

688
00:39:22,000 --> 00:39:24,400
at the source. 
I extinguish the entire 

689
00:39:24,400 --> 00:39:28,360
industry. 
And so the government, even if 

690
00:39:28,360 --> 00:39:32,360
they don't like do us a favor, 
are going to have to just do 

691
00:39:32,360 --> 00:39:35,440
that out of, you know, purely 
selfish reasons at some point. 

692
00:39:36,160 --> 00:39:41,880
And if you own a company like 
Crown Ass or Anagram who can 

693
00:39:41,880 --> 00:39:45,960
survive for years with their 
current cash balances, you're 

694
00:39:45,960 --> 00:39:47,920
kind of waiting that out, right?
Like. 

695
00:39:48,600 --> 00:39:51,160
There's no assuming interest 
rates continue, but but to your 

696
00:39:51,200 --> 00:39:54,400
point, even if interest income 
was off the balance sheet, if 

697
00:39:54,400 --> 00:39:58,000
the income statement you still 
have 10 years, well call it 8 

698
00:39:58,000 --> 00:40:01,720
years a runway on, on. 
Crown US and just, you know, to 

699
00:40:01,720 --> 00:40:04,120
go back to the pricing thing, 
right, like prices are. 

700
00:40:04,720 --> 00:40:07,400
All time depressed, right? 
Like this is like a commodity, 

701
00:40:07,400 --> 00:40:11,360
like you think like an oil 
company sell a, a barrel at like

702
00:40:11,360 --> 00:40:15,360
40, right? 
And still kind of eating out of 

703
00:40:15,360 --> 00:40:17,480
profit, like not losing money at
least, right. 

704
00:40:17,520 --> 00:40:23,280
And so I don't and things can 
always go lower, but it is 

705
00:40:23,280 --> 00:40:25,920
absolutely ridiculous the price 
of cannabis, right? 

706
00:40:25,920 --> 00:40:29,480
Like you can got you can, you 
can get like poor quality ounces

707
00:40:29,480 --> 00:40:34,000
of wheeze at a dispensary in 
Canada for like 50-60 dollars, 

708
00:40:34,120 --> 00:40:35,760
right? 
So yeah, we're talking oh, for 

709
00:40:35,760 --> 00:40:37,040
an ounce. 
Yeah, that's a. 

710
00:40:37,040 --> 00:40:39,160
That's a whole lot. 
Quantities that didn't punch 

711
00:40:39,160 --> 00:40:40,600
people for a couple months, 
right? 

712
00:40:40,600 --> 00:40:43,880
It like, yeah, it's not not 
sustainable and they're still 

713
00:40:43,880 --> 00:40:47,560
doing OK. 
So I just see a ton of levers to

714
00:40:47,560 --> 00:40:50,520
pull on the upside. 
And then the worst case scenario

715
00:40:50,520 --> 00:40:52,920
is, yeah, maybe they start 
burning cash and like it doesn't

716
00:40:52,920 --> 00:40:55,920
work out, but they trade at 
cash. 

717
00:40:55,920 --> 00:41:00,080
And so the downside is 
minimized, right? 

718
00:41:00,080 --> 00:41:04,640
Like I've, I've learned to be 
extra careful with the idea that

719
00:41:04,640 --> 00:41:08,000
you have as strong of a margin 
of safety as you think you do 

720
00:41:08,000 --> 00:41:10,840
sometimes. 
But in a context like this, I 

721
00:41:10,840 --> 00:41:12,680
mean, it's not the kind of thing
where you're going to lose half 

722
00:41:12,680 --> 00:41:14,880
your money buying at these 
valuations. 

723
00:41:15,840 --> 00:41:19,160
Yeah, right. 
So whereas the upside could be 

724
00:41:19,160 --> 00:41:22,680
multiples. 
Yeah, well, and I guess in 

725
00:41:22,680 --> 00:41:25,440
theory, even if you can lose 
half your money, if the upside 

726
00:41:25,440 --> 00:41:28,760
really can be multiples, you 
can, if it's position sized, you

727
00:41:28,760 --> 00:41:31,560
have confidence then then it can
work, right. 

728
00:41:31,840 --> 00:41:34,680
Exactly. 
I don't have a good answer for 

729
00:41:34,680 --> 00:41:38,440
why I haven't followed along for
it going on recently. 

730
00:41:39,320 --> 00:41:41,960
Yeah, but. 
I mean, it might just be that. 

731
00:41:41,960 --> 00:41:43,720
I mean, you're not allowed 
enough following it, right? 

732
00:41:43,720 --> 00:41:46,920
Like almost no one is. 
Yeah, yeah. 

733
00:41:47,160 --> 00:41:49,960
Although. 
People will learn I'm pitch 

734
00:41:49,960 --> 00:41:51,280
less, right? 
Like they actually just roll 

735
00:41:51,280 --> 00:41:54,400
their eyes and like. 
Yeah, I would. 

736
00:41:54,400 --> 00:41:58,320
I would not roll my eyes that 
that I know is foolish, but I 

737
00:41:58,320 --> 00:42:02,000
also I don't know, it's weird. 
Like I said, I got to the point 

738
00:42:02,000 --> 00:42:04,760
where I was like, why isn't this
sold in C stores? 

739
00:42:04,960 --> 00:42:11,120
I is the retail, I guess I'm 
maybe part of my problem is I'm 

740
00:42:11,120 --> 00:42:13,720
looking at it from A to US 
centric and maybe even East 

741
00:42:13,720 --> 00:42:16,760
Coast centric problem. 
I mean, maybe the people out 

742
00:42:16,760 --> 00:42:19,480
West have a much better feel, 
yeah. 

743
00:42:20,080 --> 00:42:24,240
Yeah, the US landscape is more 
complicated at the time, Yeah. 

744
00:42:24,280 --> 00:42:27,600
You got a whole lot of states 
that really need to rely on the 

745
00:42:27,600 --> 00:42:29,760
revenue. 
Florida's still trying to keep 

746
00:42:29,760 --> 00:42:35,720
it be like prescription based. 
And then I don't know. 

747
00:42:37,360 --> 00:42:40,720
I've had my license lapsed twice
and the last time I did it, I 

748
00:42:40,720 --> 00:42:43,480
was like, I don't even know if I
want to go like mess around with

749
00:42:43,480 --> 00:42:46,960
the doctor anymore. 
Like doctors quack. 

750
00:42:46,960 --> 00:42:48,680
They're going to charge me 200 
bucks. 

751
00:42:48,680 --> 00:42:51,360
I don't know. 
It's almost not worth it. 

752
00:42:51,560 --> 00:42:54,720
Sure, it's annoying. 
I have to like look at this 

753
00:42:54,720 --> 00:42:56,720
person and try to take them 
seriously. 

754
00:42:56,720 --> 00:42:58,400
And I'm like, you're an idiot, 
right? 

755
00:42:59,400 --> 00:43:04,080
Sorry if you're listening. 
As as the demographics of the 

756
00:43:04,080 --> 00:43:08,760
country as the millennials get 
older and Gen. 

757
00:43:08,760 --> 00:43:12,680
Z gets older, I just, it's hard 
to envision there not being an 

758
00:43:12,680 --> 00:43:16,160
appetite for this legal at a 
national scale. 

759
00:43:16,840 --> 00:43:22,160
Maybe I'm long about that 
assessment, but I just, I can't 

760
00:43:22,160 --> 00:43:28,960
see such a convoluted regulatory
landscape persisting for that 

761
00:43:28,960 --> 00:43:32,480
much longer. 
You either just you either just 

762
00:43:32,480 --> 00:43:35,760
legalize it or you don't. 
But like the way it's operating 

763
00:43:35,760 --> 00:43:37,640
right now is completely insane, 
right? 

764
00:43:37,640 --> 00:43:40,560
Like you can't navigate the 
infrastructure of this. 

765
00:43:40,560 --> 00:43:43,160
It's terrible for the companies,
it's terrible for investors. 

766
00:43:43,640 --> 00:43:46,680
Capital markets largely closed 
to these companies, right? 

767
00:43:46,680 --> 00:43:50,320
Like there's just it doesn't 
need to be this way. 

768
00:43:50,320 --> 00:43:54,520
And I think that there is more 
than sufficient political will 

769
00:43:55,320 --> 00:43:57,880
to get rid of these barriers. 
I don't know. 

770
00:43:57,880 --> 00:44:01,240
It's interesting because and not
to talk politics, right, but 

771
00:44:01,240 --> 00:44:06,920
like, it's, it's not really a 
favorable environment for either

772
00:44:06,920 --> 00:44:11,640
party because you have, on one 
hand, Democrats kind of being 

773
00:44:11,840 --> 00:44:15,160
increasingly focused on 
regulation and the 

774
00:44:15,160 --> 00:44:17,720
administrative state. 
And then for the Republican 

775
00:44:17,720 --> 00:44:20,000
side, it's just kind of like a 
sin, right? 

776
00:44:20,000 --> 00:44:24,360
There's still that evangelical 
taint which is evangelical wing 

777
00:44:24,360 --> 00:44:26,960
of the Republican Party, which 
is really not interesting as in 

778
00:44:26,960 --> 00:44:29,240
see what's happening in Florida 
which is not even really 

779
00:44:29,520 --> 00:44:30,440
evangelical. 
All right. 

780
00:44:30,440 --> 00:44:34,280
But you have kind of both sides 
that make this way locator than 

781
00:44:34,280 --> 00:44:36,640
it needs to be, but hopefully 
one day. 

782
00:44:37,200 --> 00:44:40,240
Yeah, but it's kind of why play 
the Canadian ones, right? 

783
00:44:40,240 --> 00:44:42,840
It's another reason for it, 
which is that it's already legal

784
00:44:42,840 --> 00:44:45,760
in Canada and there's no way 
we're going back on that. 

785
00:44:46,680 --> 00:44:48,640
Is that why you guys can't? 
Build enough housing. 

786
00:44:48,640 --> 00:44:51,800
Everybody's always Stoned is 
moving too slowly. 

787
00:44:52,240 --> 00:44:53,360
Yeah, they're like, come on, 
man. 

788
00:44:53,360 --> 00:44:55,920
I don't want to build stuff 
though. 

789
00:44:56,200 --> 00:44:58,920
So when you're messing around 
and I shouldn't say it that way,

790
00:44:58,920 --> 00:45:02,200
I shouldn't say messing around. 
When you are researching these 

791
00:45:02,200 --> 00:45:06,880
smaller cap companies, how do 
you get around the public 

792
00:45:06,880 --> 00:45:11,200
company costs that that is 
necessarily associated with 

793
00:45:11,200 --> 00:45:15,160
being smaller and how do you 
think about some of the 

794
00:45:15,160 --> 00:45:17,600
incentives and some of these 
smaller names? 

795
00:45:17,760 --> 00:45:21,120
Yeah, it's it's a good question 
and it really depends. 

796
00:45:21,520 --> 00:45:28,400
Sometimes you do see, sometimes 
the lack of scale can make it 

797
00:45:28,400 --> 00:45:31,520
interesting for more of like an 
event driven setup where you 

798
00:45:31,520 --> 00:45:34,360
think, hey, this thing is going 
to get taken out right. 

799
00:45:34,360 --> 00:45:39,080
Like if you have a company where
there's a real product there and

800
00:45:39,080 --> 00:45:42,640
it's pretty good and the 
underlying economics look 

801
00:45:42,640 --> 00:45:47,200
attractive, but then you have 
this bloated like corporate SGNA

802
00:45:47,200 --> 00:45:50,920
expense, which is kind of what's
even bloated, but it looks 

803
00:45:50,920 --> 00:45:53,360
bloated because it's so large in
relation to the rest of the 

804
00:45:53,360 --> 00:45:55,960
company. 
That might kind of be a signal 

805
00:45:55,960 --> 00:45:57,840
actually where you're like, hey,
maybe this is going to take in 

806
00:45:57,840 --> 00:46:00,200
private. 
And I've had that happen before 

807
00:46:00,200 --> 00:46:02,360
and I do own a couple names 
right now. 

808
00:46:02,360 --> 00:46:06,680
Or like, I think that's kind of 
the base case of how it plays 

809
00:46:06,680 --> 00:46:12,440
out because it's interesting 
when you go really small, you do

810
00:46:12,440 --> 00:46:17,480
see a lot of companies where you
wonder, how did this even end up

811
00:46:17,480 --> 00:46:19,520
public, right? 
Like, why are you public? 

812
00:46:19,680 --> 00:46:22,880
There's always some kind of 
interesting story there, right? 

813
00:46:22,880 --> 00:46:26,560
Maybe it's a maybe it's just a 
fall from grace and it's now 

814
00:46:26,560 --> 00:46:28,000
tiny. 
Yep. 

815
00:46:28,080 --> 00:46:31,800
Or it, the law like kind of 
SPAC, the dynamic stuff like 

816
00:46:31,800 --> 00:46:34,840
that where you're like, how the 
hell and or sometimes it's like 

817
00:46:34,960 --> 00:46:37,640
really, really old companies 
that went public for whatever 

818
00:46:37,640 --> 00:46:39,240
reason. 
It's not even that easy to 

819
00:46:39,240 --> 00:46:42,720
ascertain, right. 
And that can create an 

820
00:46:42,720 --> 00:46:47,080
interesting way of looking at 
things where you do kind of look

821
00:46:47,080 --> 00:46:49,360
at the incentives and you say, 
why are you here? 

822
00:46:49,400 --> 00:46:50,760
And sometimes it's a problem, 
right? 

823
00:46:50,760 --> 00:46:54,080
Sometimes it is just someone 
paying themselves an egregious 

824
00:46:54,080 --> 00:46:57,360
salary and there's nothing you 
can really do about it because 

825
00:46:58,000 --> 00:47:00,280
like have control of the company
like that. 

826
00:47:00,280 --> 00:47:03,800
Yeah, but then you just passed. 
Then there then there are these 

827
00:47:03,800 --> 00:47:07,200
opportunities. 
I mean, to talk about things 

828
00:47:07,200 --> 00:47:08,680
that have fallen from grace, 
right? 

829
00:47:08,680 --> 00:47:13,480
Like that my largest position 
right now and it's really turned

830
00:47:13,480 --> 00:47:16,880
into a big winner is this 
Canadian company called Cypher 

831
00:47:16,880 --> 00:47:19,400
Pharmaceuticals. 
And if you look at the stock 

832
00:47:19,400 --> 00:47:23,040
chart on that, it went like, I 
think it felt like 90%. 

833
00:47:23,200 --> 00:47:25,200
And it's actually kind of it's 
starting to come all the way 

834
00:47:25,200 --> 00:47:28,880
back up. 
You just see this U-shaped chart

835
00:47:28,960 --> 00:47:33,280
and, you know, basically what 
happened was a series of poor 

836
00:47:33,280 --> 00:47:36,560
acquisitions and a paddock Cliff
for one of its products. 

837
00:47:36,560 --> 00:47:40,800
And then you had the founder son
step in as CEO kind of at the 

838
00:47:40,800 --> 00:47:43,160
bottom. 
He's completely turned the 

839
00:47:43,160 --> 00:47:45,800
company around. 
And so there you had a setup 

840
00:47:45,800 --> 00:47:52,080
where this is a tiny company, 
but only because of a bunch of 

841
00:47:52,080 --> 00:47:55,920
things that have gone wrong here
and it's actually rather good 

842
00:47:55,920 --> 00:47:58,120
business. 
And so you're kind of you're 

843
00:47:58,120 --> 00:48:00,520
starting to see it now like I 
think it's maybe the market caps

844
00:48:00,520 --> 00:48:04,280
300 mil or so. 
It's just getting bigger and 

845
00:48:04,280 --> 00:48:08,640
those concerns about like public
company costs start to get a 

846
00:48:08,640 --> 00:48:11,480
sway and obviously the larger 
the market cap gets. 

847
00:48:11,960 --> 00:48:16,160
And so sometimes you do just see
like this should this is only a 

848
00:48:16,160 --> 00:48:19,120
micro account because it's 
fallen from being a larger 

849
00:48:19,120 --> 00:48:21,600
company and we can get back 
there. 

850
00:48:21,680 --> 00:48:26,200
And therefore you're willing to 
kind of just not, it's not a 

851
00:48:26,200 --> 00:48:28,800
deal breaker that they're 
burning some cash on on 

852
00:48:28,800 --> 00:48:31,160
corporate costs, right? 
Another situation makes 

853
00:48:31,160 --> 00:48:36,160
absolutely no sense, but you can
get sometimes the economics like

854
00:48:36,160 --> 00:48:42,240
the unit economics are just good
enough to justify those 

855
00:48:42,480 --> 00:48:44,760
expenses, right? 
Like that happens to you 

856
00:48:44,760 --> 00:48:47,560
sometimes. 
But you how do you find cipher? 

857
00:48:48,200 --> 00:48:50,400
How did I find it? 
I actually found it. 

858
00:48:51,600 --> 00:48:54,200
There was a. 
There was an right up on the 

859
00:48:54,200 --> 00:48:57,240
Valley Investors Club on it. 
I think it was pitched in like 

860
00:48:57,240 --> 00:49:02,080
the $2.00 range, right? 
And but what happened there was 

861
00:49:02,080 --> 00:49:05,800
the stories it, it's been a 
really, I mean, it's a 

862
00:49:05,800 --> 00:49:11,960
worthwhile kind of case study 
because the setup has continued 

863
00:49:12,080 --> 00:49:14,360
to kind of morph into something 
new. 

864
00:49:14,960 --> 00:49:19,760
And each step along the way has 
offered like basically say at 

865
00:49:19,760 --> 00:49:23,560
$16.00 today, I don't think it's
that much more expensive than it

866
00:49:23,560 --> 00:49:27,600
was at three like things that 
just keep captain proving right.

867
00:49:27,600 --> 00:49:32,120
And so when it was initially 
pitched on Victoria, it was sort

868
00:49:32,120 --> 00:49:37,960
of this really little multiple 
asset light, like kind of like a

869
00:49:38,480 --> 00:49:43,120
coupon, like a bond coupon 
yielder, which is sold like a 

870
00:49:43,120 --> 00:49:46,000
legacy pharma product. 
And it had a ton of cash on the 

871
00:49:46,000 --> 00:49:48,920
balance sheet. 
And it was like, hey, you can 

872
00:49:48,920 --> 00:49:52,640
get like a pretty nice free cash
flow yield on this and you get a

873
00:49:52,640 --> 00:49:56,480
free call option on this drug 
that they have in the pipeline. 

874
00:49:56,480 --> 00:49:59,120
So then that's kind of when I 
started looking at it. 

875
00:49:59,480 --> 00:50:01,920
And then the stock goes from 
like 2:00 to 5:00. 

876
00:50:02,880 --> 00:50:08,480
And then they filed a prospectus
for a substantial issue or bid, 

877
00:50:08,480 --> 00:50:12,040
which is basically a tender in 
Canada, like a large buyback. 

878
00:50:12,080 --> 00:50:15,480
And you have to file 
accompanying that is like 

879
00:50:15,480 --> 00:50:17,280
attached to the valuation 
report. 

880
00:50:17,680 --> 00:50:22,640
And so I'm looking through this 
prospectus on the buyback, which

881
00:50:22,640 --> 00:50:24,640
in and of itself is pretty 
interesting because they have 

882
00:50:24,640 --> 00:50:29,560
too much cash and they're cheap.
But you go into the valuation 

883
00:50:29,560 --> 00:50:34,800
reports and there are these 
projections for the company's 

884
00:50:34,800 --> 00:50:41,040
operating income based on the 
pipeline assets getting 

885
00:50:41,040 --> 00:50:44,280
approved. 
And you can see it goes from 

886
00:50:44,280 --> 00:50:50,800
like, I want to say, 10 billion 
of operating income to like 35 

887
00:50:51,400 --> 00:50:54,760
in the course of a few years. 
And so you're looking at this 

888
00:50:54,760 --> 00:50:59,480
and saying, well, the stock 5 
bucks is at like 2 times 

889
00:50:59,600 --> 00:51:02,640
operating profit in a few years 
if they're right about this. 

890
00:51:03,280 --> 00:51:06,760
Now in the micro cap space, how 
many people rent that 

891
00:51:06,760 --> 00:51:09,120
prospectus? 
Like very few, surely. 

892
00:51:09,680 --> 00:51:12,240
Like I'd be shocked if more than
a couple 100 people read that. 

893
00:51:12,240 --> 00:51:14,720
That's probably even too high, 
like at the time, right? 

894
00:51:14,880 --> 00:51:17,400
Yeah. 
And so then it kind of leads to,

895
00:51:17,480 --> 00:51:20,040
well, what is this pipeline 
product and is it going to get 

896
00:51:20,040 --> 00:51:23,080
approved? 
And I'm certainly not a biotech 

897
00:51:23,080 --> 00:51:27,600
expert, but in this case, it 
turns out that this product is 

898
00:51:27,600 --> 00:51:30,600
already approved in 13 European 
countries, right? 

899
00:51:30,840 --> 00:51:34,320
And so that lends a ton of 
credibility. 

900
00:51:34,480 --> 00:51:36,000
And one thing leads to the 
other. 

901
00:51:36,000 --> 00:51:37,880
And I mean, it still doesn't 
have any other American 

902
00:51:37,880 --> 00:51:39,280
approval. 
But it turns out that doesn't 

903
00:51:39,280 --> 00:51:43,280
really even matter, probably 
because of all the groundwork 

904
00:51:43,280 --> 00:51:46,240
that's been laid in Europe. 
And so that kind of starts 

905
00:51:46,240 --> 00:51:48,600
picking and starting to become 
more popular online. 

906
00:51:48,600 --> 00:51:52,520
That starts getting traction. 
Stock goes from like 5 to, you 

907
00:51:52,520 --> 00:51:58,040
know, 8. 
And then last month they took 

908
00:51:58,040 --> 00:52:00,440
that massive pile of cash that 
they've been building up on the 

909
00:52:00,440 --> 00:52:04,440
balance sheet and they bought 
asset which double S their 

910
00:52:04,440 --> 00:52:08,760
operating profits and really 
transforms the business 

911
00:52:08,760 --> 00:52:12,600
strategically in many ways. 
But kind of the most predominant

912
00:52:12,600 --> 00:52:15,920
way is it turns it into a growth
stock because this asset that 

913
00:52:15,920 --> 00:52:18,240
bought has a ton of upside 
growth potential. 

914
00:52:19,040 --> 00:52:23,360
And so we've gone from this like
basically no growth cash shell 

915
00:52:23,840 --> 00:52:27,640
with one product that just kind 
of spits out a nice coupon to 

916
00:52:27,640 --> 00:52:29,640
gross the asset. 
I think that's probably going to

917
00:52:29,640 --> 00:52:32,800
grow at like 35% a year for the 
next several years. 

918
00:52:33,280 --> 00:52:36,080
And so it deserves that higher 
multiple it has now, but it's 

919
00:52:36,080 --> 00:52:40,360
also like not only have you had 
very big multiple expansion that

920
00:52:40,360 --> 00:52:45,160
you've had the earnings number 
grow a ton, right? 

921
00:52:45,160 --> 00:52:50,160
Like it's I, I think 
conservatively even now we're 

922
00:52:50,160 --> 00:52:55,760
looking at like 5 times growth 
and operating income by 2027. 

923
00:52:56,240 --> 00:53:02,560
And so it's a worthwhile story 
to I think review because kind 

924
00:53:02,560 --> 00:53:06,320
of shows you what can happen 
when, well, a, you have a really

925
00:53:06,320 --> 00:53:08,640
good manager at the helmet of 
micro cap, right? 

926
00:53:08,640 --> 00:53:14,920
Like ACEO owns 40% of the 
company came back incentivized 

927
00:53:14,920 --> 00:53:18,040
to turn this thing around. 
So it's a really good capital 

928
00:53:18,040 --> 00:53:20,200
allocation like very timely 
buybacks. 

929
00:53:20,200 --> 00:53:22,800
So we're getting kind of see the
importance of that. 

930
00:53:22,800 --> 00:53:26,080
You can see the importance of an
asset light company that doesn't

931
00:53:26,080 --> 00:53:29,600
need capital to run its current 
business, right, because what 

932
00:53:29,600 --> 00:53:32,000
you've had here is so much cash 
flow generation. 

933
00:53:32,920 --> 00:53:36,400
Cash with this. 
Enabled this transition, right, 

934
00:53:36,400 --> 00:53:39,560
like they're this is this 
company is so asset light that 

935
00:53:39,560 --> 00:53:42,800
there is no cash flow from 
investing section on the 

936
00:53:42,800 --> 00:53:47,080
cashless statement, right? 
Like there's zero cap and very 

937
00:53:47,080 --> 00:53:49,000
little working capital 
requirements. 

938
00:53:49,000 --> 00:53:53,120
And so basically you have this 
cash generative legacy product 

939
00:53:53,120 --> 00:53:54,760
and then what are you going to 
do with that cash? 

940
00:53:54,880 --> 00:53:56,840
If you buy that at a low 
multiple and you get good 

941
00:53:56,840 --> 00:54:00,600
capital allocation, you might 
get a situation like this, 

942
00:54:00,600 --> 00:54:02,800
right? 
Like obviously it's not going to

943
00:54:02,800 --> 00:54:07,040
happen that option or something 
goes paramolic like that. 

944
00:54:07,040 --> 00:54:12,560
But if you spend enough time 
looking at micro caps, you will 

945
00:54:12,560 --> 00:54:16,680
find that that's not an outlier.
Like there are examples of that 

946
00:54:16,680 --> 00:54:20,520
happening with pretty decent 
regularity. 

947
00:54:21,280 --> 00:54:24,480
So I think if you develop some 
good pattern recognition there 

948
00:54:24,600 --> 00:54:31,840
and I think really importantly 
have the discipline to say no to

949
00:54:31,840 --> 00:54:34,760
honest everything, there's 
definitely opportunities like 

950
00:54:34,760 --> 00:54:36,760
that for real outsized returns, 
right. 

951
00:54:36,760 --> 00:54:41,280
And you're not, it's not 
something that's on, off or as 

952
00:54:41,280 --> 00:54:44,480
much as you move out them market
caps, obviously. 

953
00:54:45,160 --> 00:54:48,160
Yeah, I don't know. 
When I was on value after Hours,

954
00:54:48,160 --> 00:54:51,080
but I said something like small 
and expensive might work well. 

955
00:54:51,760 --> 00:54:54,520
And I was thinking about some of
these Med tech companies that 

956
00:54:54,520 --> 00:54:58,880
have gotten like that whole 
sector and not just Med tech. 

957
00:54:58,880 --> 00:55:02,760
I mean, I realize Cypher is 
pharmaceuticals, but yeah, I do 

958
00:55:02,800 --> 00:55:08,080
I kind of understand why small 
caps are naturally a place where

959
00:55:08,640 --> 00:55:12,560
that type of business would go, 
especially if they have R&D 

960
00:55:12,560 --> 00:55:14,440
components, right? 
Because they do kind of need 

961
00:55:14,440 --> 00:55:17,040
access to capital markets to 
continue to spend. 

962
00:55:17,480 --> 00:55:20,920
And I can totally see why going 
back to our conversation about 

963
00:55:21,280 --> 00:55:24,640
investors get really tired. 
I wouldn't follow on offering 

964
00:55:24,640 --> 00:55:27,920
after follow on offering like 
can get really tedious. 

965
00:55:28,840 --> 00:55:34,000
And then sometimes something can
hit or the OR the time they put 

966
00:55:34,000 --> 00:55:38,920
in since 1998 finally has the 
technology of today, right? 

967
00:55:38,920 --> 00:55:41,920
It's actually becoming the 
vision that is the reason the 

968
00:55:41,920 --> 00:55:45,040
company went public, right? 
And like I do, you got to sift 

969
00:55:45,040 --> 00:55:47,520
through a lot of trash to find 
some gold, but I don't know any 

970
00:55:47,520 --> 00:55:49,320
situation. 
In life where that's not true, 

971
00:55:50,000 --> 00:55:53,560
that's exactly right. 
And, and I think actually that 

972
00:55:53,760 --> 00:55:57,440
that point about sometimes the 
technology takes a long time is 

973
00:55:57,440 --> 00:56:02,400
super applicable. 
And even more so just like the 

974
00:56:03,040 --> 00:56:07,920
function that this business is 
attempting to fulfill might just

975
00:56:07,920 --> 00:56:11,560
be really delayed, right. 
And there's another one which is

976
00:56:11,640 --> 00:56:14,160
back earlier than, well, it's 
actually, I mean, if you look at

977
00:56:14,160 --> 00:56:16,440
it's, I think it's a 10X in the 
last five years. 

978
00:56:16,440 --> 00:56:18,120
But I just got involved kind of 
recently. 

979
00:56:18,120 --> 00:56:20,600
And I think there's a lot of 
upside in it has some 

980
00:56:20,600 --> 00:56:24,840
similarities to Cipher, which is
a company called BTE Water. 

981
00:56:25,400 --> 00:56:31,880
And what they do is water 
treatment from mines. 

982
00:56:32,320 --> 00:56:36,920
So basically you have a 
regulatory landscape that is 

983
00:56:37,240 --> 00:56:42,440
becoming increasingly stringent.
Yeah, I would think mining water

984
00:56:42,440 --> 00:56:45,760
and mining runoff, I would think
would be highly, highly 

985
00:56:45,760 --> 00:56:47,520
regulated. 
Much every mine you're going to 

986
00:56:47,520 --> 00:56:52,640
come across has some kind of 
water runoff concern, right. 

987
00:56:52,640 --> 00:56:56,360
And huge amount of regulation. 
So this is one of these 

988
00:56:56,360 --> 00:56:59,440
companies where the service is 
mandated by regulation. 

989
00:56:59,440 --> 00:57:00,800
There's nothing you can do about
it. 

990
00:57:01,480 --> 00:57:03,480
Historically not a bad place to 
play. 

991
00:57:03,720 --> 00:57:08,080
Yeah, and the miners are not 
cost sensitive because they have

992
00:57:08,080 --> 00:57:11,040
to do a small fraction of what 
they're paying for at the mine, 

993
00:57:11,040 --> 00:57:12,880
right? 
Like they just they just want it

994
00:57:12,880 --> 00:57:15,760
in their regular on in their 
filings with the regulators, 

995
00:57:15,760 --> 00:57:17,240
right, So they can get the mine 
approved. 

996
00:57:17,240 --> 00:57:19,600
But. 
Is this one of these scenarios 

997
00:57:19,600 --> 00:57:23,920
where BQE has demonstrated that 
there is sufficient a good? 

998
00:57:23,960 --> 00:57:27,160
Like a good enough? 
What's this? 

999
00:57:27,280 --> 00:57:29,480
What's the word? 
I'm trying to think of Steward 

1000
00:57:29,480 --> 00:57:32,960
of the Water that like once 
they're proven that they can do 

1001
00:57:32,960 --> 00:57:35,640
it at this mine, all of a sudden
the next mine just says, well, 

1002
00:57:35,640 --> 00:57:38,200
we're just gonna use BQE cause 
like why mess around? 

1003
00:57:38,200 --> 00:57:39,000
With anybody. 
Else. 

1004
00:57:39,680 --> 00:57:42,240
You know, I think we're getting 
there, right? 

1005
00:57:42,240 --> 00:57:45,920
Like it's still early, but for 
example, they've worked with 

1006
00:57:46,120 --> 00:57:50,520
Glencore for 20 years. 
That's not a small firm. 

1007
00:57:50,880 --> 00:57:54,320
No. 
And what's interesting about 

1008
00:57:54,320 --> 00:57:58,920
this business is that every mine
is unique. 

1009
00:57:59,680 --> 00:58:02,560
I like you're kind of building 
an ad hoc solution for water 

1010
00:58:02,560 --> 00:58:06,240
treatment at every mine that 
exists because the kind of 

1011
00:58:06,240 --> 00:58:11,040
contamination could be selenium,
it could be something else will 

1012
00:58:11,040 --> 00:58:13,280
require its own method of 
treatment. 

1013
00:58:13,400 --> 00:58:17,080
And So what what they've done 
and what has then this is kind 

1014
00:58:17,080 --> 00:58:20,280
of getting back to what started 
to be honest, which is the 

1015
00:58:20,280 --> 00:58:22,240
transformation of the company, 
right. 

1016
00:58:22,240 --> 00:58:26,200
So you've had on one part of 
that is just these guys have 

1017
00:58:26,200 --> 00:58:28,880
existed for a long time, but 
it's only now that these 

1018
00:58:28,880 --> 00:58:32,240
regulations have become so 
extreme that like they're, 

1019
00:58:32,440 --> 00:58:35,600
they're, they've become more 
integral in the mining process. 

1020
00:58:36,440 --> 00:58:41,120
Two, you have kind of the 
cyclicality of mining back on 

1021
00:58:41,120 --> 00:58:45,120
the upswing. 
But three, what makes it super 

1022
00:58:45,120 --> 00:58:50,480
attractive is that they have 
changed the operating model in a

1023
00:58:50,480 --> 00:58:52,360
way that makes it far more 
attractive. 

1024
00:58:52,360 --> 00:58:55,920
And So what they do now is they 
come in and they provide what is

1025
00:58:55,920 --> 00:59:00,480
essentially consulting services 
to the minors during like the 

1026
00:59:00,480 --> 00:59:05,040
permitting and development stage
of the mine, which they just 

1027
00:59:05,040 --> 00:59:09,160
charge a consulting fee for. 
And then once the mine is ready 

1028
00:59:09,160 --> 00:59:14,520
to go, the miner actually pays 
the CapEx to build out the water

1029
00:59:14,520 --> 00:59:19,720
treatment facility and BQE 
charges was essentially a toll 

1030
00:59:20,280 --> 00:59:26,000
on the volume of water treated. 
And that could be for 20 years 

1031
00:59:26,000 --> 00:59:29,560
because it generally by 
regulation is just going to have

1032
00:59:29,560 --> 00:59:33,680
to run for the life of the mine 
and in some circumstances, even 

1033
00:59:33,680 --> 00:59:36,400
after the mine shuts because 
there's continued runoff. 

1034
00:59:36,400 --> 00:59:41,640
And So what you actually have is
an asset light kind of full 

1035
00:59:41,640 --> 00:59:45,560
booth and a lot of white space 
because obviously there's a lot 

1036
00:59:45,560 --> 00:59:48,120
of mining development and this 
is the tiny company like they 

1037
00:59:48,120 --> 00:59:51,920
don't need to, they don't need 
to penetrate more than 1% of 

1038
00:59:51,920 --> 00:59:53,920
this market to be a multi 
beggar. 

1039
00:59:53,920 --> 00:59:56,480
But they are kind of at the 
leading edge of certain 

1040
00:59:56,480 --> 01:00:00,680
technological aspects of this, 
particularly selenium treatment,

1041
01:00:01,200 --> 01:00:05,480
which has become a particularly 
pressing concern due to some 

1042
01:00:05,760 --> 01:00:07,920
environmental disasters in the 
last 20 years. 

1043
01:00:08,440 --> 01:00:13,200
And so you basically have these 
guys coming in, investing 

1044
01:00:13,200 --> 01:00:16,440
nothing in the project and then 
just clipping recurring revenue 

1045
01:00:16,840 --> 01:00:19,120
potentially for years, right. 
So you kind of. 

1046
01:00:19,520 --> 01:00:23,960
Again, you get that like quasi 
bond coupon structure, super 

1047
01:00:23,960 --> 01:00:27,400
asset light, very high margin, 
which then frees up all the 

1048
01:00:27,400 --> 01:00:29,760
capital for a shareholder 
returns in one day, right? 

1049
01:00:29,800 --> 01:00:33,840
Like that's kind of the that's 
the hope it's. 

1050
01:00:33,840 --> 01:00:35,840
Wild. 
The gross, gross profit in this 

1051
01:00:35,840 --> 01:00:39,840
thing went nowhere forever and 
then started to go somewhere. 

1052
01:00:40,720 --> 01:00:43,720
What they were doing before this
is actually. 

1053
01:00:44,360 --> 01:00:46,960
First of all, this is. 
Tiny for anyone listening, this 

1054
01:00:46,960 --> 01:00:49,680
is very tiny. 
Really do your own work. 

1055
01:00:49,840 --> 01:00:52,400
This is This is high octane 
stuff. 

1056
01:00:52,720 --> 01:00:55,160
Yeah. 
It's 7 million in gross profit, 

1057
01:00:55,640 --> 01:00:59,800
Yeah, but it was, it was, it was
like 1.5 million for, I don't 

1058
01:00:59,800 --> 01:01:03,280
know from 2013 or I don't know, 
maybe even 2008. 

1059
01:01:03,520 --> 01:01:07,120
When they have a project that I 
believe is going to become an 

1060
01:01:07,120 --> 01:01:09,560
online stream, which could just 
double their recurring revenue. 

1061
01:01:09,560 --> 01:01:12,640
Like what's what's happened is 
the way that they've charged for

1062
01:01:12,640 --> 01:01:17,640
the services is that their 
largest project a few years back

1063
01:01:17,640 --> 01:01:21,640
before this transition was a 
joint venture in China where 

1064
01:01:21,640 --> 01:01:24,320
they did water treatment. 
But how they got paid for that, 

1065
01:01:24,320 --> 01:01:26,760
and this is still on the books 
and it's still a small part of 

1066
01:01:26,760 --> 01:01:30,880
the business, but they'd 
actually get paid because when 

1067
01:01:30,880 --> 01:01:34,640
you treat the water, you extract
the minerals that have been 

1068
01:01:34,720 --> 01:01:37,200
caught in it, right? 
And so you would. 

1069
01:01:37,200 --> 01:01:38,840
Get tell me they sold the 
minerals. 

1070
01:01:38,840 --> 01:01:41,640
They sold the copper that. 
That's a bad business. 

1071
01:01:41,640 --> 01:01:43,800
Terrible business. 
It was in very bad business. 

1072
01:01:44,080 --> 01:01:48,640
They're actually carrying the 
facilities on their balance 

1073
01:01:48,640 --> 01:01:51,560
sheet, paying the cost to build 
them out and then getting paid 

1074
01:01:51,560 --> 01:01:54,480
with commodity pricing, right? 
So it led to a complete 

1075
01:01:54,480 --> 01:01:57,280
disaster. 
They brought in you CEO and 

1076
01:01:57,280 --> 01:02:00,480
about 10 years ago, Glue, I 
think is sort of the one who 

1077
01:02:00,480 --> 01:02:02,280
came up with this model for the 
industry. 

1078
01:02:02,280 --> 01:02:05,280
And it seems to benefit both the
miners and the service 

1079
01:02:05,280 --> 01:02:07,280
providers. 
What if you think of this more 

1080
01:02:07,280 --> 01:02:12,440
as a service provider now than 
like well before was a provider 

1081
01:02:12,440 --> 01:02:14,640
of inventory, right? 
Like that kind of like they 

1082
01:02:14,640 --> 01:02:16,600
built these plants for the 
mines. 

1083
01:02:17,200 --> 01:02:19,880
And so it's been a radical 
transformation. 

1084
01:02:20,280 --> 01:02:22,760
And it's one of these things 
where, yeah, you're right, it's 

1085
01:02:22,760 --> 01:02:26,120
tiny. 
It's a liquid, but the runway is

1086
01:02:26,120 --> 01:02:32,240
very big and given the nature of
the model that growth can be 

1087
01:02:32,240 --> 01:02:36,640
captured without really any 
capital reinvestment. 

1088
01:02:37,080 --> 01:02:40,120
And so you're not kind of you're
not relying on your balance 

1089
01:02:40,120 --> 01:02:43,440
sheet to capture the market. 
And so this is a kind of setup 

1090
01:02:43,480 --> 01:02:47,680
where I think you could see if 
something really turned into a 

1091
01:02:47,680 --> 01:02:49,720
larger company if they execute 
well. 

1092
01:02:49,920 --> 01:02:52,480
Interesting. 
It's funny, it's not everyday 

1093
01:02:52,480 --> 01:02:56,040
that I see a a shareholder list 
that is looks like it's all 

1094
01:02:56,080 --> 01:02:58,240
people. 
Yeah, yeah. 

1095
01:02:58,360 --> 01:03:02,160
The three largest shareholders 
are all individual people. 

1096
01:03:02,920 --> 01:03:05,960
Yeah, yeah. 
And all of that 240,000 shares 

1097
01:03:05,960 --> 01:03:09,240
is at 65 bucks a share Canadian 
and it's not nothing. 

1098
01:03:09,440 --> 01:03:12,880
Well, yeah, I mean, and this is 
again what make it almost, it's 

1099
01:03:12,880 --> 01:03:14,680
like a quasi private investment,
right? 

1100
01:03:14,680 --> 01:03:20,520
Because there are 1.3 million 
shares outstanding and more than

1101
01:03:20,520 --> 01:03:24,600
half of those are controlled by 
those 3 shareholders and then 

1102
01:03:24,600 --> 01:03:26,720
the CEO and a couple board 
members. 

1103
01:03:27,080 --> 01:03:30,800
So really you've got to float 
somewhere in the neighborhood of

1104
01:03:30,800 --> 01:03:34,400
600,000 shares at 6 plus 
Canadian. 

1105
01:03:34,720 --> 01:03:40,520
That's not a lot of stock ain't 
like no so, but you know is 

1106
01:03:40,520 --> 01:03:41,880
that. 
Part of why it's tripled, you 

1107
01:03:41,880 --> 01:03:45,280
think? 
Well, I think it's tripled 

1108
01:03:45,280 --> 01:03:48,160
because their earnings power is 
kind of starting to manifest 

1109
01:03:48,160 --> 01:03:51,760
itself here, right? 
Like you have finally you've had

1110
01:03:51,760 --> 01:03:56,720
that inflection, which is not 
unique to micro caps, but where 

1111
01:03:56,720 --> 01:04:02,320
you do have the recurring 
revenue part of the business now

1112
01:04:02,320 --> 01:04:06,200
take over from what was 
previously that joint venture 

1113
01:04:06,200 --> 01:04:09,440
copper part of the business. 
And so you're you're starting to

1114
01:04:09,440 --> 01:04:13,640
get higher quality earnings. 
You've had you've had the kind 

1115
01:04:13,640 --> 01:04:17,960
of legacy code declining and the
and the new model increasing. 

1116
01:04:18,520 --> 01:04:21,720
And so people are trying to put 
a higher multiple on it because 

1117
01:04:22,600 --> 01:04:26,080
the way that they have laid out 
their projections, which I think

1118
01:04:26,080 --> 01:04:31,760
is definitely feasible, you can 
sort of see like they did four 

1119
01:04:31,760 --> 01:04:34,040
and a half million of EBITDA 
last year. 

1120
01:04:34,680 --> 01:04:39,640
They might be tacking on a 
million or two every year just 

1121
01:04:39,640 --> 01:04:42,320
based on getting one or two new 
projects, which is not a 

1122
01:04:42,320 --> 01:04:49,120
Herculean feed by any means. 
So you have a really easy way to

1123
01:04:49,520 --> 01:04:53,880
50 to 100% growth in recurring 
revenue for several more years 

1124
01:04:53,880 --> 01:04:55,320
here. 
So I mean, if you look at the 

1125
01:04:55,320 --> 01:04:58,560
multiple, it doesn't seem cheap 
for a small business like this. 

1126
01:04:59,960 --> 01:05:03,080
Yeah, no. 
But if you look ahead 20 times 

1127
01:05:03,080 --> 01:05:06,240
EBITDA or so, yeah, but it's 
growing at 100% a year, right, 

1128
01:05:06,360 --> 01:05:09,640
so. 
That old EBITDA to growth. 

1129
01:05:10,120 --> 01:05:13,480
Right, Yeah, yeah, yeah. 
And at least the, the Azona, 

1130
01:05:14,320 --> 01:05:17,680
what they call company maker 
projects, which they haven't 

1131
01:05:17,680 --> 01:05:20,160
really disclosed much of the 
details on, but if you're 

1132
01:05:20,160 --> 01:05:22,440
willing to do scuttlebutt, you 
can kind of figure it out. 

1133
01:05:22,440 --> 01:05:27,480
And so I've written about one of
them on my blog, but it's, it's 

1134
01:05:27,680 --> 01:05:29,320
obvious that this is their 
project. 

1135
01:05:29,320 --> 01:05:32,600
Cause the mining company has to 
file a document and it's a 

1136
01:05:32,600 --> 01:05:35,840
Canadian mine have to file a 
document with regulators 

1137
01:05:35,840 --> 01:05:38,080
explaining how they're going to 
treat the water. 

1138
01:05:38,080 --> 01:05:40,000
And you can see these name all 
over it. 

1139
01:05:40,080 --> 01:05:45,880
And but what you can also see is
what the miner expects to pay 

1140
01:05:45,880 --> 01:05:47,480
for the water treatment 
services. 

1141
01:05:47,960 --> 01:05:51,120
So you can sort of like backdoor
that into what they're going to 

1142
01:05:51,120 --> 01:05:54,880
generate from this project which
is clearly going online. 

1143
01:05:55,480 --> 01:05:59,840
It appears to me that I think 
they're doing $8 million of 

1144
01:05:59,840 --> 01:06:02,880
recurring revenue today company 
wide. 

1145
01:06:02,880 --> 01:06:05,320
I think this project will 
contribute a further 8 million 

1146
01:06:05,320 --> 01:06:07,400
of recurring revenue. 
And so that double s the 

1147
01:06:07,400 --> 01:06:12,760
recurring revenue and it's 50 
plus percent margins with some 

1148
01:06:12,760 --> 01:06:16,080
operating laboratory because 
you've got fixed cost GNA, it's 

1149
01:06:16,080 --> 01:06:19,280
really yeah, Icarus margin, 
Yeah, interesting. 

1150
01:06:19,280 --> 01:06:21,120
How the hell do you come across 
this thing? 

1151
01:06:21,880 --> 01:06:26,520
Honestly, this one somebody 
dropped into my DMS on Twitter 

1152
01:06:26,520 --> 01:06:28,400
and said you might want to take 
a look at this. 

1153
01:06:29,000 --> 01:06:31,960
It's better than some X-rated 
thing I'd rather have people 

1154
01:06:31,960 --> 01:06:34,080
drop good good ideas in. 
Yeah. 

1155
01:06:34,160 --> 01:06:36,600
Well, I think I might have. 
I think I tweeted something. 

1156
01:06:37,360 --> 01:06:42,160
To the to the effect of. 
Like what's a Canadian micro cap

1157
01:06:42,160 --> 01:06:44,480
that could become the next 
Cipher Pharmaceuticals or 

1158
01:06:44,480 --> 01:06:48,080
something? 
And somebody messaged me and I 

1159
01:06:48,080 --> 01:06:52,520
looked at it and it didn't hit 
at all. 

1160
01:06:52,520 --> 01:06:54,400
At first I was like, I don't, I 
don't understand this. 

1161
01:06:54,400 --> 01:06:57,720
Like 3 segments like this copper
business looks terrible. 

1162
01:06:57,720 --> 01:06:59,520
It just didn't click for 
whatever reason. 

1163
01:07:00,320 --> 01:07:06,400
Then I got asked to pitch a 
stock on like a Twitter Spaces 

1164
01:07:06,400 --> 01:07:09,320
forum. 
Oh, and you were on that. 

1165
01:07:09,440 --> 01:07:11,640
Yeah, and it. 
Was like the micro cap forum 

1166
01:07:11,640 --> 01:07:12,560
right? 
Yeah, yeah. 

1167
01:07:12,560 --> 01:07:14,800
Well, I think there's been a few
of them, but I was on one and 

1168
01:07:14,880 --> 01:07:17,200
it's very, very micro cap 
focused. 

1169
01:07:17,200 --> 01:07:21,960
And it was like, OK, well, no, 
the audience like some of the 

1170
01:07:21,960 --> 01:07:23,440
things that I don't aren't going
to work here. 

1171
01:07:23,440 --> 01:07:25,760
So I kind of started like 
thinking about it and then that 

1172
01:07:25,760 --> 01:07:30,360
got me looking at this. 
And upon closer exam, like the 

1173
01:07:30,360 --> 01:07:34,080
stock was at 40 at the time and 
upon closer examination, I was 

1174
01:07:34,080 --> 01:07:35,560
like this actually super 
interesting. 

1175
01:07:37,040 --> 01:07:40,840
So I did a write up and I 
pitched it on the spaces. 

1176
01:07:40,880 --> 01:07:43,960
But before that, I mean, there 
was very, very little attention 

1177
01:07:43,960 --> 01:07:44,920
on that. 
There still is. 

1178
01:07:44,920 --> 01:07:48,280
And like it remains to be seen 
if this one's going to work out 

1179
01:07:48,280 --> 01:07:51,240
as well. 
But I mean, it's worked out very

1180
01:07:51,240 --> 01:07:53,000
well for the guys who bought it 
five years ago. 

1181
01:07:53,000 --> 01:07:55,560
You don't know how you would 
have discovered it at that point

1182
01:07:55,560 --> 01:07:57,680
or even gone liquidity. 
Like I think that was it. 

1183
01:07:58,160 --> 01:08:00,680
I think that was a private 
placement raise, like if you 

1184
01:08:00,680 --> 01:08:02,760
wanted to buy stock back then. 
Yeah. 

1185
01:08:02,800 --> 01:08:05,120
Yeah, it's up what I'm looking 
at the chart here, five years, 

1186
01:08:05,120 --> 01:08:09,640
it's up to 800%. 
So those legacies shareholders 

1187
01:08:09,640 --> 01:08:12,320
you're seeing in there, I think 
have done super well. 

1188
01:08:12,520 --> 01:08:14,160
But yeah, I mean, it's a big 
position for me. 

1189
01:08:14,160 --> 01:08:19,720
And it was kind of probably the 
idea that I've been most 

1190
01:08:19,720 --> 01:08:24,399
associated with like since I, 
like launched the public 

1191
01:08:24,399 --> 01:08:26,200
persona. 
Oh, interesting. 

1192
01:08:26,200 --> 01:08:27,880
Yeah. 
I think of you for Howard 

1193
01:08:27,880 --> 01:08:30,680
Hughes. 
Well, it's one of my favourites.

1194
01:08:30,760 --> 01:08:32,960
Because I was like, I don't 
know, you're just hammering it. 

1195
01:08:32,960 --> 01:08:35,319
And I was like, this dude makes 
a lot of sense. 

1196
01:08:35,680 --> 01:08:38,439
And then I got a buddy that owns
it that I've known for a while. 

1197
01:08:38,439 --> 01:08:40,080
He bought it. 
I think he bought it from the 

1198
01:08:40,080 --> 01:08:41,880
General Growth. 
So it was like. 

1199
01:08:41,960 --> 01:08:42,960
Wow. 
And so, yeah. 

1200
01:08:42,960 --> 01:08:44,520
Yeah, he's owned it for a long 
time. 

1201
01:08:44,720 --> 01:08:47,120
And looks like Ackman might try 
to take it away from us here, 

1202
01:08:47,120 --> 01:08:49,160
but. 
Yeah, Yeah. 

1203
01:08:49,200 --> 01:08:52,479
Well, you know, we'll see. 
Yeah. 

1204
01:08:53,040 --> 01:08:54,840
That was kind of always the 
risk, it seemed. 

1205
01:08:55,720 --> 01:08:59,200
Well, I mean, yeah, if you it's 
hard to complain if you got a 

1206
01:08:59,200 --> 01:09:01,240
big enough premium, but I'm 
skeptical. 

1207
01:09:01,359 --> 01:09:03,040
Yeah. 
I don't think that people that 

1208
01:09:03,399 --> 01:09:05,880
are going to be selling are 
going to be totally thrilled. 

1209
01:09:06,240 --> 01:09:07,920
It's not a. 
Counterparty that I think people

1210
01:09:07,920 --> 01:09:10,640
get like screaming deals from I 
I'm not even saying anything 

1211
01:09:10,640 --> 01:09:13,920
like negative about the guy. 
He he owes his clients a 

1212
01:09:13,920 --> 01:09:15,920
fiduciary news. 
He's assured guy. 

1213
01:09:15,920 --> 01:09:18,680
I mean, I don't blame him, but 
it's it's unfortunate timing 

1214
01:09:18,680 --> 01:09:20,840
because it looks like the 
business is about to really in 

1215
01:09:20,840 --> 01:09:26,240
fact, of course, right. 
The part of the Seaport spin and

1216
01:09:26,359 --> 01:09:29,439
Bill Chen may have put this in 
my head, but that I didn't 

1217
01:09:29,439 --> 01:09:33,279
understand is I understand 
wanting to separate the 

1218
01:09:33,279 --> 01:09:37,560
entertainment assets and like 
sort of the housing and the 

1219
01:09:38,120 --> 01:09:41,080
office assets. 
That minority, the minor league 

1220
01:09:41,080 --> 01:09:46,600
team, I think should have stayed
with Howard Hughes because I 

1221
01:09:46,600 --> 01:09:48,680
think it's like part of the 
community. 

1222
01:09:48,920 --> 01:09:50,439
Yeah, right. 
I don't know that you want a 

1223
01:09:50,439 --> 01:09:54,000
separate public entity trying to
raise ticket prices on minor 

1224
01:09:54,000 --> 01:09:57,360
league games. 
For your community, Yeah, it's 

1225
01:09:57,360 --> 01:10:00,760
interesting. 
I kind of my view of the like I,

1226
01:10:00,800 --> 01:10:02,800
I own a good amount of Seaport 
as well. 

1227
01:10:02,800 --> 01:10:04,760
I think it's actually, I think 
it's pretty interesting. 

1228
01:10:04,920 --> 01:10:09,400
And I have sort of thought that 
the baseball assets went with 

1229
01:10:10,600 --> 01:10:13,920
Seaport for two reasons. 1 is 
that it just, it's not really, 

1230
01:10:14,760 --> 01:10:18,000
it's not an MPC and I think 
they're really trying to just be

1231
01:10:18,000 --> 01:10:21,520
like we are clean real estate 
development kind of NPC company.

1232
01:10:21,520 --> 01:10:25,040
But I also think it doesn't fit 
with Seaport either. 

1233
01:10:25,480 --> 01:10:28,480
And it's possible that that 
might be an asset that they try 

1234
01:10:28,480 --> 01:10:32,680
to shop pretty quickly because 
you have a lot of funding needs 

1235
01:10:32,680 --> 01:10:36,080
for some of the Seaport assets, 
like the actual New York Seaport

1236
01:10:36,080 --> 01:10:38,280
assets and they're burning a ton
of cash. 

1237
01:10:38,880 --> 01:10:42,680
But the break up value, like, I 
don't know, hopefully see what 

1238
01:10:42,680 --> 01:10:46,520
did Seaport spin. 
But like, I think the breakup 

1239
01:10:46,520 --> 01:10:49,160
value is like pretty clearly 
like 100 bucks a share versus 

1240
01:10:49,160 --> 01:10:51,240
25. 
But nobody believes in the 

1241
01:10:51,240 --> 01:10:53,920
story, right? 
And you have you've got Ackman 

1242
01:10:53,920 --> 01:10:57,400
with the potential to take like 
up to 70% of the company on the 

1243
01:10:57,400 --> 01:11:00,480
rights off, right, If no one 
subscribes and it's cash 

1244
01:11:00,480 --> 01:11:02,160
burning. 
But and kind of going full 

1245
01:11:02,160 --> 01:11:05,560
circle to how we started this, 
like my bad, is a hated 

1246
01:11:05,560 --> 01:11:08,320
collection of assets, right? 
Like if you want to, if you want

1247
01:11:08,320 --> 01:11:11,840
to look somewhere where people 
have kind of lost the ability to

1248
01:11:11,840 --> 01:11:14,320
think straight, I think that's a
pretty good place to look. 

1249
01:11:14,680 --> 01:11:16,480
Not saying that. 
Why do you think they've lost 

1250
01:11:16,480 --> 01:11:18,040
the the ability to think 
straight? 

1251
01:11:18,520 --> 01:11:20,880
It's it's always been on the 
comma, hasn't it? 

1252
01:11:20,880 --> 01:11:22,720
It's just been like problem 
after problem. 

1253
01:11:22,720 --> 01:11:25,440
Such a disaster for Howard 
Hughes, right? 

1254
01:11:25,440 --> 01:11:31,240
Like I think they sunk a billion
into it and but they took a $700

1255
01:11:31,240 --> 01:11:37,640
million impairment last year and
it was like advertised as being 

1256
01:11:37,640 --> 01:11:41,800
their crown jewel. 
And I think a lot of like vanity

1257
01:11:41,800 --> 01:11:45,920
went into it, right. 
You had kind of just like, let's

1258
01:11:45,920 --> 01:11:49,920
buy the slug of Manhattan and 
put some luxury restaurants in 

1259
01:11:49,920 --> 01:11:52,720
there. 
And it just it, I clearly spent 

1260
01:11:52,720 --> 01:11:54,600
way too much money on it. 
It never worked. 

1261
01:11:55,400 --> 01:11:59,880
And Howard Hughes itself as a 
result of this and due to some 

1262
01:11:59,880 --> 01:12:01,800
other issues, is also really 
hated. 

1263
01:12:01,800 --> 01:12:07,160
So interesting to get a dynamic 
where the parent company of the 

1264
01:12:07,160 --> 01:12:11,480
spin is already something that 
people probably don't like 

1265
01:12:11,480 --> 01:12:14,000
thinking about very much. 
It's not a particularly popular 

1266
01:12:14,000 --> 01:12:17,200
stock. 
And then you have just spinning 

1267
01:12:17,200 --> 01:12:20,040
out like the piece of that 
that's hated even more. 

1268
01:12:20,560 --> 01:12:23,840
But the way I kind of look at it
is it's like it's a piece of 

1269
01:12:23,840 --> 01:12:26,280
Manhattan. 
Like it must be worth something,

1270
01:12:27,960 --> 01:12:29,600
you know? 
Unless, unless it's completely 

1271
01:12:29,600 --> 01:12:32,040
misused and you got to tear it 
down and rebuild it. 

1272
01:12:32,040 --> 01:12:35,080
But I I mean. 
Yeah, I just and then there's 

1273
01:12:35,080 --> 01:12:37,160
everyone has their theories and 
and playing the game. 

1274
01:12:37,280 --> 01:12:42,120
The game theory with Bill Ackman
is always doesn't really get you

1275
01:12:42,120 --> 01:12:47,280
anywhere, but I do kind of first
of all, why is he willing to 

1276
01:12:47,280 --> 01:12:53,120
spend 175,000,000 to backstop 
this thing and have his LP's? 

1277
01:12:53,200 --> 01:12:55,920
Presumably it's it's within the 
Pershing structure. 

1278
01:12:56,440 --> 01:13:01,320
So you're going to own this like
micro cap in a much larger fund 

1279
01:13:01,680 --> 01:13:05,400
doesn't fit the mandate at all. 
But then the thing that makes it

1280
01:13:05,400 --> 01:13:11,120
even stranger from an incentives
perspective is to flush Seaport 

1281
01:13:11,120 --> 01:13:14,960
out, put yourself in a situation
where you might have to end up 

1282
01:13:15,000 --> 01:13:18,200
owning most of it anyways 
through a backstop and then 

1283
01:13:18,200 --> 01:13:20,520
putting a bid in on Howard 
Hughes, right? 

1284
01:13:20,520 --> 01:13:23,640
Like you might just end up in a 
situation where Ackman owns both

1285
01:13:23,640 --> 01:13:27,760
these assets again, separated. 
So I've spent a lot of time 

1286
01:13:27,760 --> 01:13:30,520
trying to figure out what his 
incentives are here. 

1287
01:13:30,520 --> 01:13:33,120
I'm not sure if there's I've 
heard so many different ideas. 

1288
01:13:33,600 --> 01:13:36,960
It's possible he just got 
frustrated with the Persian US 

1289
01:13:37,600 --> 01:13:40,520
debacle and then has just 
pivoted back to wanting to buy 

1290
01:13:40,520 --> 01:13:43,000
our cues. 
There's a ton of interesting 

1291
01:13:43,000 --> 01:13:45,320
theories out there. 
I don't think anyone knows but 

1292
01:13:45,320 --> 01:13:50,120
it is kind of odd to spin it to 
spend all this money on the spin

1293
01:13:50,120 --> 01:13:51,640
off right? 
Like a power to use I think 

1294
01:13:51,640 --> 01:13:54,320
spent like 30 mil. 
Kind of like getting the whole 

1295
01:13:54,320 --> 01:14:00,320
thing spun out to then have 
Ackman buy both the companies 

1296
01:14:00,320 --> 01:14:03,000
separately. 
Yeah, that would be a little 

1297
01:14:03,000 --> 01:14:04,480
odd. 
It's a little odd, right? 

1298
01:14:04,480 --> 01:14:06,600
But I don't think anyone knows 
what he's thinking. 

1299
01:14:07,000 --> 01:14:10,440
I like both the assets and like.
My guess is he's thinking he's 

1300
01:14:10,440 --> 01:14:12,240
going to make money. 
That's my guess. 

1301
01:14:12,240 --> 01:14:15,400
After that is true. 
And but when you see that like 

1302
01:14:16,200 --> 01:14:19,120
the break up value of the 
Seaporn assets is probably a 

1303
01:14:19,120 --> 01:14:23,280
billion and you can buy it for 
like, like it's, it's, it's 

1304
01:14:23,520 --> 01:14:26,920
incredibly cheap here because 
pro forma this rights offering 

1305
01:14:26,920 --> 01:14:30,680
they're doing the enterprise 
values like 230 million at 25 

1306
01:14:30,680 --> 01:14:34,000
bucks. 
And then there's a bunch of data

1307
01:14:34,000 --> 01:14:36,960
on that which is not a recourse 
and you could probably exclude 

1308
01:14:36,960 --> 01:14:40,280
for your calculus and at which 
point you have like a enterprise

1309
01:14:40,280 --> 01:14:44,320
value that's like in the 
100,000,000 and the baseball 

1310
01:14:44,320 --> 01:14:49,400
assets like the baseball stadium
itself cost 130 million to build

1311
01:14:49,800 --> 01:14:50,840
five years. 
Ago. 

1312
01:14:50,840 --> 01:14:52,440
I'd assume you want to replace 
it. 

1313
01:14:52,840 --> 01:14:53,760
Sure. 
Yeah, I mean like. 

1314
01:14:53,760 --> 01:14:56,880
It could just be a complete 
misallocation of capital haircut

1315
01:14:56,880 --> 01:14:57,960
that in half. 
Right. 

1316
01:14:57,960 --> 01:15:00,760
Like call it sound, that's still
a good chunk of the enterprise 

1317
01:15:00,760 --> 01:15:04,280
value. 
And like non core asset, you get

1318
01:15:04,280 --> 01:15:06,560
all these buildings in 
Manhattan, I know that they're 

1319
01:15:06,560 --> 01:15:09,000
cash burning like there's 
there's a lot of hair on it. 

1320
01:15:09,760 --> 01:15:15,200
But my kind of Occam's razor for
Ackman's incentives here is that

1321
01:15:15,200 --> 01:15:17,040
he thinks that it's worth a lot 
more. 

1322
01:15:18,640 --> 01:15:22,840
Yeah, I mean, look, I, I think, 
I think people can have opinions

1323
01:15:22,840 --> 01:15:25,640
of Ackman. 
A lot of them can be driven by 

1324
01:15:25,640 --> 01:15:28,200
how he uses Twitter or whatever.
But I, I don't think that 

1325
01:15:28,200 --> 01:15:31,840
anything that I don't think it's
valid to think he's not in it to

1326
01:15:31,840 --> 01:15:34,720
make money. 
His, I mean his track record 

1327
01:15:34,720 --> 01:15:39,440
would suggest he is I. 
Agree, but people and like I 

1328
01:15:39,440 --> 01:15:41,120
don't necessarily subscribe to 
this view. 

1329
01:15:41,120 --> 01:15:43,160
Whether or not you get taken 
under is sort of a different 

1330
01:15:43,160 --> 01:15:43,960
issue. 
That's the. 

1331
01:15:43,960 --> 01:15:46,480
You're not on the same side of 
the table necessarily. 

1332
01:15:46,720 --> 01:15:51,720
But she has to buy per the 
rights offering backstop, what 

1333
01:15:51,720 --> 01:15:56,400
could be a majority of the 
company at $25 a share, right? 

1334
01:15:56,400 --> 01:15:58,600
And it's basically at 25 right 
now. 

1335
01:15:59,120 --> 01:16:01,640
I think it's gone surging today,
but it's in and around that 

1336
01:16:01,640 --> 01:16:04,480
range. 
And so it's not like like the 

1337
01:16:04,480 --> 01:16:08,720
take under thing. 
Maybe he can maybe he can grab 

1338
01:16:08,720 --> 01:16:11,920
an extra 30% of this for a 
really low ball price. 

1339
01:16:11,920 --> 01:16:14,760
But he's already having to pay 
what we're paying at 25, right? 

1340
01:16:14,760 --> 01:16:18,000
So I just, I feel like he just 
thinks this is really cheap and 

1341
01:16:18,000 --> 01:16:19,120
something that could happen 
here. 

1342
01:16:19,680 --> 01:16:24,520
And as it goes up 4X, he's got a
billion dollar market cap in 

1343
01:16:24,520 --> 01:16:26,640
Pershing, which makes a lot more
sense. 

1344
01:16:27,360 --> 01:16:28,760
But I don't know, it's hard, I 
think. 

1345
01:16:29,240 --> 01:16:32,600
I think because of the distrust 
that a lot of investors have for

1346
01:16:32,600 --> 01:16:36,080
him, they're distorting movie 
incentives. 

1347
01:16:36,240 --> 01:16:38,480
But I could be wrong too. 
Maybe he is up to something. 

1348
01:16:38,480 --> 01:16:40,720
But I just think he probably 
thinks it's cheap, right? 

1349
01:16:40,760 --> 01:16:42,560
I don't know. 
I don't know. 

1350
01:16:42,600 --> 01:16:46,840
He's been doing a lot of things,
whether or not it's the spark in

1351
01:16:46,840 --> 01:16:48,800
PSTH. 
Yeah. 

1352
01:16:49,080 --> 01:16:53,040
Whatever you think about him, I 
think he, I think you can't not 

1353
01:16:53,040 --> 01:16:54,680
give him credit for always 
trying. 

1354
01:16:54,680 --> 01:16:57,640
You think, right, like he is. 
He's a very resilient guy, 

1355
01:16:57,640 --> 01:17:01,320
seemingly, yeah. 
And he seems quite talented at 

1356
01:17:01,320 --> 01:17:04,040
real estate. 
So yeah, absolutely. 

1357
01:17:04,040 --> 01:17:07,360
I mean, yeah, he's got his big 
failures, but he never keep, 

1358
01:17:07,400 --> 01:17:09,320
never stops trying. 
So I don't know what he's going 

1359
01:17:09,320 --> 01:17:12,760
to do with these two companies, 
but I do think it's about Howard

1360
01:17:12,760 --> 01:17:17,880
Hughes and Seaport are really 
interesting entities to look at 

1361
01:17:18,080 --> 01:17:21,600
whether from an investment 
perspective or just like trying 

1362
01:17:21,600 --> 01:17:24,520
to curiosity. 
Yeah, very it's a very curious 

1363
01:17:24,520 --> 01:17:29,320
case of of very kind of end of 
one situation and see where 

1364
01:17:29,320 --> 01:17:32,480
those go, I have no idea. 
But I do think that what kind of

1365
01:17:32,480 --> 01:17:36,400
prices are pretty interesting. 
The thing that still confuses me

1366
01:17:36,400 --> 01:17:38,960
about like the REIT series, I 
mean it doesn't confuse me. 

1367
01:17:38,960 --> 01:17:42,080
But I guess the question I 
cannot answer is it would have 

1368
01:17:42,080 --> 01:17:44,920
been nice to see if rates had 
continued to go up with the 

1369
01:17:44,920 --> 01:17:47,440
stocks have worked. 
Because you know, the question 

1370
01:17:47,440 --> 01:17:49,640
that I said to Bill the last 
time he was on, is it, is it 

1371
01:17:49,640 --> 01:17:52,960
really just a rates trade? 
And I think these sort of fall 

1372
01:17:52,960 --> 01:17:57,920
into that same question, right? 
Is it, is it rates or is it 

1373
01:17:57,920 --> 01:17:59,720
really cheap and. 
Yeah. 

1374
01:18:00,840 --> 01:18:02,680
Maybe the answer doesn't have to
be 1 or the other. 

1375
01:18:02,680 --> 01:18:04,280
Maybe they can occur at the same
time. 

1376
01:18:04,280 --> 01:18:07,360
Think. 
That it's both and what I mean 

1377
01:18:07,360 --> 01:18:12,400
by that is I don't know if the 
stock works if rates were to go.

1378
01:18:12,400 --> 01:18:16,080
Up but like. 
Does the business work and will 

1379
01:18:16,080 --> 01:18:20,240
them market eventually just like
give it its worth, I think are 

1380
01:18:20,240 --> 01:18:26,880
different questions, right? 
Like I always found the Howard 

1381
01:18:26,880 --> 01:18:29,520
Hughes in the last couple of 
years, like trading on rates to 

1382
01:18:29,520 --> 01:18:33,520
be a little bit ridiculous. 
Like obviously that's impacting 

1383
01:18:33,520 --> 01:18:37,400
the cap rates, but like you have
like what is a pretty like 

1384
01:18:37,400 --> 01:18:43,200
decent capital stack and so and 
a company that's just like, but 

1385
01:18:43,200 --> 01:18:46,200
yeah, rates are higher, it's 
puts pressure on cap rates, but 

1386
01:18:46,200 --> 01:18:48,080
also NOI is growing a lot, 
right. 

1387
01:18:48,080 --> 01:18:52,040
And so those two things are are 
fighting against each other. 

1388
01:18:52,040 --> 01:18:58,200
But I do think that like there 
is just this general flow of 

1389
01:18:58,200 --> 01:19:02,200
funds going in and out of these 
names based on the anticipation 

1390
01:19:02,200 --> 01:19:06,400
of war rates head, which I can 
kind of like the cannabis thing,

1391
01:19:06,400 --> 01:19:09,240
I think sort of makes people 
pass, right. 

1392
01:19:09,240 --> 01:19:11,440
Like if you have a quarterly 
mandate, well, it's like, 

1393
01:19:12,960 --> 01:19:14,960
there's nothing I can do about 
these. 

1394
01:19:14,960 --> 01:19:18,360
Like flow of funds based on like
some of your rate expectation is

1395
01:19:18,360 --> 01:19:19,680
nothing to do with the company 
really. 

1396
01:19:20,160 --> 01:19:23,680
But maybe it's better just to 
avoid this because it could get 

1397
01:19:23,680 --> 01:19:24,800
money. 
And that's what happened. 

1398
01:19:24,800 --> 01:19:28,040
I mean, it was when I first 
started tweeting about Howard 

1399
01:19:28,040 --> 01:19:33,000
Hughes, it was in April and I 
think it had dropped that had 

1400
01:19:33,000 --> 01:19:37,480
dropped below 60. 
And I was a company that I'd 

1401
01:19:37,480 --> 01:19:39,440
watched for a long time. 
And I just kind of thought like,

1402
01:19:39,440 --> 01:19:42,720
this doesn't make a ton of 
sense, but it was at a point 

1403
01:19:42,720 --> 01:19:46,400
where people were pretty 
preoccupied about the direction 

1404
01:19:46,400 --> 01:19:49,320
of interest rates, right? 
And so it created an 

1405
01:19:49,320 --> 01:19:51,000
opportunity. 
But I think I think you're right

1406
01:19:51,000 --> 01:19:53,360
to say that like if rates just 
kept going up, this probably 

1407
01:19:53,360 --> 01:19:55,640
wouldn't work. 
Yeah. 

1408
01:19:55,640 --> 01:19:59,960
And look, I mean, I what 6 
months is not working or or not 

1409
01:19:59,960 --> 01:20:02,360
working and that that's only 
been four months. 

1410
01:20:02,360 --> 01:20:06,280
So that's like short term stuff.
But I I agree with you. 

1411
01:20:06,560 --> 01:20:10,960
The private marker, from a 
private market owners 

1412
01:20:10,960 --> 01:20:14,240
perspective, I don't think the 
rates really matter that much. 

1413
01:20:14,640 --> 01:20:17,920
But from public ownership 
perspective, yeah, it is kind of

1414
01:20:17,920 --> 01:20:21,400
the thesis, which is a 
frustrating thing sometimes 

1415
01:20:21,400 --> 01:20:25,680
about public equities, right, is
they may just not trade on 

1416
01:20:25,680 --> 01:20:29,200
fundamentals. 
Well, you know, Ed Castle said 

1417
01:20:29,200 --> 01:20:33,040
something about smaller names 
that I thought was pretty sharp,

1418
01:20:33,560 --> 01:20:35,720
he said. 
A lot of people don't like to to

1419
01:20:35,720 --> 01:20:41,080
own them because if you go into 
like let's say it's the 30th of 

1420
01:20:41,320 --> 01:20:45,920
of some quarter end and somebody
just decides to puke it like 

1421
01:20:46,120 --> 01:20:48,200
your mark, you're kind of 
screwed. 

1422
01:20:48,520 --> 01:20:50,960
Yeah, for the quarter. 
Yeah, right. 

1423
01:20:50,960 --> 01:20:53,040
Or I mean, if you have monthly 
marks or whatever. 

1424
01:20:53,520 --> 01:20:56,920
So you really need, you really 
need to have like that 

1425
01:20:56,920 --> 01:20:59,400
intestinal fortitude to just. 
Not. 

1426
01:21:00,160 --> 01:21:03,720
You often have some kind of 
alignment with your LP's, right 

1427
01:21:03,720 --> 01:21:06,960
where and perhaps some kind of 
compensation structure that's 

1428
01:21:06,960 --> 01:21:10,120
not based on that because it 
does make it difficult, right? 

1429
01:21:10,120 --> 01:21:13,840
Like if you have someone just 
decide they need out of the 

1430
01:21:13,840 --> 01:21:16,040
stock drops 20%. 
Yeah. 

1431
01:21:16,320 --> 01:21:19,080
That can ruin your compensation 
for the year, right, depending 

1432
01:21:19,080 --> 01:21:20,880
on on how your fund is 
structured. 

1433
01:21:20,880 --> 01:21:25,880
So yeah, I I get that. 
But at the same time that 

1434
01:21:25,880 --> 01:21:28,800
volatility can hugely be your 
friend. 

1435
01:21:28,800 --> 01:21:32,680
And I think if you keep at it 
and stay disciplined, then 

1436
01:21:32,680 --> 01:21:36,200
perhaps over a longer periods of
time it can actually help your 

1437
01:21:36,200 --> 01:21:39,200
returns. 
Yeah, like few following a stock

1438
01:21:39,200 --> 01:21:42,000
flows here and said, oh, this is
actually BQE though when I was 

1439
01:21:42,000 --> 01:21:46,200
talking about it just it, it 
dumped a couple months ago. 

1440
01:21:46,800 --> 01:21:49,600
There was a director who had 
been, it's not really like a 

1441
01:21:49,600 --> 01:21:54,000
core person in the business, but
was starting to exit and it put 

1442
01:21:54,000 --> 01:21:56,200
a lot of pressure on the stuff 
it's out. 

1443
01:21:56,240 --> 01:21:57,720
Yeah, who the hell are they 
selling to? 

1444
01:21:57,720 --> 01:21:59,480
Like no one, right? 
No one right, So I was buying 

1445
01:21:59,480 --> 01:22:03,080
them, but like you did have and 
then they they released 

1446
01:22:03,080 --> 01:22:07,240
earnings, Q1 earnings, which 
were like fine. 

1447
01:22:07,240 --> 01:22:09,880
But then this is something you 
also get with these micro caps 

1448
01:22:09,880 --> 01:22:16,600
is sometimes the investor base 
might be a lot of retail people 

1449
01:22:17,000 --> 01:22:20,920
who saw me tweet about it or 
something and don't fully grasp 

1450
01:22:20,920 --> 01:22:22,560
the idea maybe. 
You. 

1451
01:22:22,560 --> 01:22:26,800
See Q1 results and they see 
revenue down and they start 

1452
01:22:26,800 --> 01:22:31,520
dumping without realizing that 
Q1 is a seasonally weak quarter.

1453
01:22:31,520 --> 01:22:34,280
And therefore like it, it's not 
surprising that it's down, 

1454
01:22:34,520 --> 01:22:35,960
right? 
Or that there are just kind of 

1455
01:22:35,960 --> 01:22:40,720
like there are maybe the cadence
of revenue is just a little bit 

1456
01:22:40,720 --> 01:22:42,800
different than a quarterly 
thing, which I think is what's 

1457
01:22:42,800 --> 01:22:44,600
going on. 
But it was the stock went from 

1458
01:22:44,600 --> 01:22:50,880
like 67 to 53 and then back up 
to like 62 within the day, 

1459
01:22:50,960 --> 01:22:52,280
right? 
And so you could have been a 

1460
01:22:52,280 --> 01:22:58,760
buyer at 53, you know, been up 
double digit percent on the 

1461
01:22:58,760 --> 01:23:00,200
basis of nothing out there 
though. 

1462
01:23:00,200 --> 01:23:03,680
Although as I'm saying this, I'm
thinking about what happens to 

1463
01:23:03,680 --> 01:23:07,560
mega cap tax during earnings. 
And it's yeah, you need 

1464
01:23:07,560 --> 01:23:09,120
different, right? 
Like sometimes you'll just see 

1465
01:23:09,120 --> 01:23:12,640
like Amazon's down 7% and then. 
After the call, it's up 5%. 

1466
01:23:12,960 --> 01:23:15,360
Yeah, I'm not really sure that's
much different there to be 

1467
01:23:15,360 --> 01:23:18,240
honest. 
Like, well the micro cap stuff 

1468
01:23:18,240 --> 01:23:20,480
is a little different. 
I mean, I'm watching one right 

1469
01:23:20,480 --> 01:23:23,840
now and it just won't go down. 
And it's like the the 

1470
01:23:23,840 --> 01:23:27,080
probability that the incremental
money, I mean, I don't know. 

1471
01:23:27,080 --> 01:23:30,680
I may know most of the people 
that are buying it, but it seems

1472
01:23:30,680 --> 01:23:34,200
like it's probably new people. 
And the idea that they're going 

1473
01:23:34,200 --> 01:23:38,960
to be there for the long term, I
think is we'll see, right? 

1474
01:23:38,960 --> 01:23:41,280
It's up to them to do their own 
work. 

1475
01:23:41,720 --> 01:23:43,160
You know what they own. 
Yeah. 

1476
01:23:43,160 --> 01:23:47,360
If you're, I mean it is, I think
if you think about these things 

1477
01:23:48,320 --> 01:23:52,960
as quasi private investments and
maybe you have them in APA, look

1478
01:23:52,960 --> 01:23:55,320
at it that often and you like 
kind of get to know the 

1479
01:23:55,320 --> 01:24:00,200
operators and believe in the 
business, you can, you can sort 

1480
01:24:00,200 --> 01:24:04,920
of mitigate the psychological 
costs of yeah, some of that. 

1481
01:24:05,200 --> 01:24:07,640
I said that just Sweeney. 
I was like, it's almost as if 

1482
01:24:07,640 --> 01:24:09,880
you're paid not to look at these
things. 

1483
01:24:09,880 --> 01:24:11,480
Yeah. 
Yeah, exactly. 

1484
01:24:11,560 --> 01:24:15,640
And you obviously it magnifies 
the importance of doing work, 

1485
01:24:15,640 --> 01:24:17,360
right? 
Like you really need to, you 

1486
01:24:17,360 --> 01:24:20,440
need to understand this business
and what you're doing here 

1487
01:24:20,440 --> 01:24:26,280
because you're paying a premium,
like an illiquidity premium on 

1488
01:24:26,280 --> 01:24:29,040
the way in and then a discount 
on the way out. 

1489
01:24:29,640 --> 01:24:32,880
And it's just like an like a 
high implied cost of equity, 

1490
01:24:32,880 --> 01:24:34,960
right? 
Like you're just kind of, and, 

1491
01:24:34,960 --> 01:24:36,640
and I mean that also 
psychologically. 

1492
01:24:36,640 --> 01:24:41,200
So it's not the kind of thing 
that you should. 

1493
01:24:41,200 --> 01:24:43,760
I mean, you really can't do it, 
but it's not meant for trading. 

1494
01:24:44,520 --> 01:24:45,880
Yeah, that's right. 
I like that. 

1495
01:24:46,120 --> 01:24:50,400
I don't do that anyways, so it's
fine with me, but it really 

1496
01:24:50,400 --> 01:24:52,680
does. 
Like I can't stress it enough 

1497
01:24:52,680 --> 01:24:55,600
when I talk to people about it. 
Like you really need to like be 

1498
01:24:55,600 --> 01:24:58,840
comfortable with what this 
business is doing because if 

1499
01:24:58,840 --> 01:25:01,840
they have a bad quarter or 
something, you're getting out 

1500
01:25:01,840 --> 01:25:07,200
for really low, right? 
Yeah, you're everybody else is 

1501
01:25:07,200 --> 01:25:09,440
getting out and then if you want
to get out, you're probably 

1502
01:25:09,440 --> 01:25:13,520
moving it lower as you get out. 
So have fun with. 

1503
01:25:13,520 --> 01:25:16,320
That exactly like you almost 
just, you know, just kind of 

1504
01:25:16,320 --> 01:25:19,280
think about it like once I put 
this money and I'm not getting 

1505
01:25:19,280 --> 01:25:23,760
it out, I'm in this business, 
it's like investing in a in a 

1506
01:25:23,760 --> 01:25:28,040
private vehicle, like we have a 
five year exit strategy or 

1507
01:25:28,040 --> 01:25:31,640
something and like who knows 
what the mark is, yeah. 

1508
01:25:32,000 --> 01:25:32,600
Right. 
Yeah. 

1509
01:25:32,640 --> 01:25:34,000
I think that's. 
I think that's. 

1510
01:25:34,000 --> 01:25:35,720
The right way to go about it, 
yeah. 

1511
01:25:37,600 --> 01:25:40,080
And if nothing else, it puts you
in the right frame of mind. 

1512
01:25:41,160 --> 01:25:46,440
For sure, which and I think it's
advantageous frame of mind for 

1513
01:25:47,080 --> 01:25:50,000
public market investing broadly.
Yeah. 

1514
01:25:50,120 --> 01:25:53,080
We just kind of thinking about 
things like you're an owner in a

1515
01:25:53,080 --> 01:26:01,400
private business and not getting
too bogged down in the minutiae 

1516
01:26:01,400 --> 01:26:05,160
of like daily and quarterly 
movements and focusing more on 

1517
01:26:05,160 --> 01:26:08,720
what the business is doing. 
Now the of course, the issue 

1518
01:26:08,720 --> 01:26:12,160
with that is that if no one else
is thinking about markets that 

1519
01:26:12,160 --> 01:26:15,880
way, you might not get the value
you think you're going to get 

1520
01:26:15,880 --> 01:26:21,600
right, which is. 
Yes, but if you trust management

1521
01:26:22,160 --> 01:26:24,080
and you believe that it's going 
to. 

1522
01:26:24,080 --> 01:26:25,680
Be cash generative. 
You haven't heard? 

1523
01:26:25,680 --> 01:26:27,400
The episode yet because it drops
tomorrow. 

1524
01:26:27,920 --> 01:26:31,080
But one of the things that 
Richard Cook was saying is like 

1525
01:26:31,080 --> 01:26:36,400
he's invested with people that 
understand buybacks on average 

1526
01:26:37,040 --> 01:26:39,520
and like, eventually we'll get 
that money out. 

1527
01:26:40,760 --> 01:26:43,360
That can be a real bag holder 
thing to say. 

1528
01:26:43,360 --> 01:26:46,160
And I understand why, like short
term people would laugh at it. 

1529
01:26:46,160 --> 01:26:49,760
But I do. 
I think it's closer to reality. 

1530
01:26:50,600 --> 01:26:52,760
Yeah. 
What I don't know that I believe

1531
01:26:52,760 --> 01:26:57,680
anymore is that I have the 
ability and or willingness to 

1532
01:26:57,680 --> 01:27:00,840
take like these concentrated 
bets for a number of reasons, 

1533
01:27:00,840 --> 01:27:04,520
which is not to say that people 
should or should not everybody 

1534
01:27:04,600 --> 01:27:08,480
has their own goals. 
But for me, I've kind of been 

1535
01:27:08,480 --> 01:27:10,320
like, all right, I could be 
wrong on the people. 

1536
01:27:10,320 --> 01:27:12,480
I could be a little bit more 
wrong on the business than I 

1537
01:27:12,480 --> 01:27:14,480
thought. 
Like my risk tolerance has gone 

1538
01:27:14,480 --> 01:27:16,760
down. 
When you say concentrated, what 

1539
01:27:16,760 --> 01:27:20,200
do you mean by that like 5% 
positions 10% or? 

1540
01:27:20,800 --> 01:27:25,200
Oh, yeah, I, yeah, I mean, I 
would say, look, I'm not going 

1541
01:27:25,200 --> 01:27:27,400
to ever run like A6 stock 
portfolio. 

1542
01:27:27,880 --> 01:27:31,040
That's just a function of what 
I'm trying to accomplish and 

1543
01:27:31,040 --> 01:27:33,440
where I'm at I don't think many 
people can can handle. 

1544
01:27:33,440 --> 01:27:38,000
That yeah, yeah. 
So, you know, I don't know, like

1545
01:27:38,040 --> 01:27:41,280
I I'd, I'd like to hover around 
15 to 20. 

1546
01:27:41,680 --> 01:27:44,200
And I think for some people 
that's concentrated like I think

1547
01:27:44,200 --> 01:27:48,880
some people, right. 
I mean, particularly if you, if 

1548
01:27:48,880 --> 01:27:52,480
you allow, which is kind of the 
way that I approach it. 

1549
01:27:52,480 --> 01:27:55,640
I, I think I own a little bit 
more companies than I would like

1550
01:27:55,640 --> 01:27:59,520
to actually I know that I do. 
But the problem is Betty just 

1551
01:27:59,520 --> 01:28:01,960
having a really interesting 
opportunity set recently. 

1552
01:28:02,400 --> 01:28:05,880
But if you have 15 stocks, 
right, and then you kind of 

1553
01:28:05,880 --> 01:28:11,160
allow for them to run, you kind 
of end up getting some kind of 

1554
01:28:11,160 --> 01:28:14,040
organic concentration. 
Yeah, right. 

1555
01:28:14,120 --> 01:28:18,640
Where it's like from me now, 
Cypher Pharmaceuticals is almost

1556
01:28:18,640 --> 01:28:21,120
a 20% position. 
Oh my. 

1557
01:28:21,400 --> 01:28:24,760
But certainly to start there, 
right, It's just I didn't sell 

1558
01:28:24,760 --> 01:28:27,240
any of it. 
But now it's like I feel 

1559
01:28:27,240 --> 01:28:30,760
concentrated. 
But I do own like 15 socks. 

1560
01:28:31,320 --> 01:28:34,280
Yeah, we. 
But because one of them is just,

1561
01:28:34,400 --> 01:28:37,840
it's just gone so bloated. 
I mean, maybe that's one way of 

1562
01:28:37,840 --> 01:28:40,040
approaching it, but then you 
just now have the same problem 

1563
01:28:40,040 --> 01:28:43,880
or it's like a lot of money in 
one company even though, but the

1564
01:28:43,880 --> 01:28:45,560
other one's just becoming 
significant. 

1565
01:28:45,560 --> 01:28:47,000
Honest. 
Yeah. 

1566
01:28:47,680 --> 01:28:52,800
Which sort of like reminds me of
that sad thing about that hat in

1567
01:28:53,080 --> 01:28:57,560
his letter a couple years ago 
about whatever the 10 or 12 

1568
01:28:57,560 --> 01:29:00,000
decisions that Berkshires may 
have like made all the 

1569
01:29:00,000 --> 01:29:02,840
difference, Right? 
Where And that you can kind of 

1570
01:29:02,840 --> 01:29:05,760
see that in portfolios if you're
not, if you don't have too much 

1571
01:29:05,760 --> 01:29:09,920
turnover. 
What you kind of, I think pretty

1572
01:29:09,920 --> 01:29:13,640
quickly realize is you can 
actually afford to make quite a 

1573
01:29:13,640 --> 01:29:17,880
few mistakes if you have a 
decent slugging percentage on a 

1574
01:29:17,880 --> 01:29:23,080
couple of the ideas because the 
stinkers will just like fade 

1575
01:29:23,080 --> 01:29:27,880
into nothing and winners will 
come to dominate your portfolio,

1576
01:29:27,880 --> 01:29:31,040
right? 
Yeah, you just can't swing like 

1577
01:29:31,040 --> 01:29:35,200
super hard and strike out. 
No, I agree, But I tend to kind 

1578
01:29:35,200 --> 01:29:38,840
of, I size them not, you know, I
don't think I've ever taken more

1579
01:29:38,840 --> 01:29:44,080
than a 10% position on sizing. 
Yeah, Well, then that stock 

1580
01:29:44,080 --> 01:29:46,560
double S and you still like it 
Maybe. 

1581
01:29:46,560 --> 01:29:48,600
I don't know. 
I think it's slightly, I don't 

1582
01:29:49,280 --> 01:29:51,640
not even sure that makes sense 
rationally speaking. 

1583
01:29:51,640 --> 01:29:54,040
But psychologically it feels 
different, right? 

1584
01:29:54,040 --> 01:29:56,160
It feels like a different kind 
of concentration. 

1585
01:29:56,160 --> 01:29:59,360
Yes, it's funny because some of 
the things that I say, like I 

1586
01:29:59,360 --> 01:30:02,120
wonder how it sounds or I think 
like, Oh well, somebody that's a

1587
01:30:02,120 --> 01:30:05,880
pro at like .72 would clearly 
think this is stupid or 

1588
01:30:05,880 --> 01:30:09,520
whatever. 
But there's just a lot of value.

1589
01:30:09,880 --> 01:30:12,320
Like when when Berkowitz said 
financial, that cash is 

1590
01:30:12,320 --> 01:30:14,880
financial value. 
I mean, I would argue there's a 

1591
01:30:14,880 --> 01:30:18,560
level of diversification that's 
financial value and too and the 

1592
01:30:18,560 --> 01:30:22,600
ability to just be like, this 
isn't going to kill me and then 

1593
01:30:22,600 --> 01:30:25,840
take my time to figure out what 
I actually think and do not have

1594
01:30:25,840 --> 01:30:29,320
like the monkey brain of or 
lizard brain or whatever of like

1595
01:30:29,320 --> 01:30:31,320
I'm being attacked. 
I need to figure out something 

1596
01:30:31,320 --> 01:30:35,320
right now goes a long way. 
And and you know, hopefully on 

1597
01:30:35,320 --> 01:30:38,000
the concentrated stuff, you have
a sense of what you're looking 

1598
01:30:38,000 --> 01:30:40,560
for before it. 
So it went when it happens. 

1599
01:30:40,560 --> 01:30:42,360
You can be done quick, right? 
Yeah. 

1600
01:30:42,360 --> 01:30:45,040
I think that's why I say 
psychologically it's different. 

1601
01:30:45,040 --> 01:30:49,400
I think if you had and this, 
this could actually be a totally

1602
01:30:49,400 --> 01:30:52,840
foolish thing, obviously, and it
could be a sense of like 

1603
01:30:53,040 --> 01:30:56,000
survivorship bias. 
But I, I, I think when 

1604
01:30:56,000 --> 01:30:59,960
something's worked for you and 
you, you've had time to really 

1605
01:30:59,960 --> 01:31:02,560
start to understand the business
and trust the people running it,

1606
01:31:03,160 --> 01:31:05,600
perhaps there's a sense of 
comfort in that, even though 

1607
01:31:05,600 --> 01:31:08,320
it's become large. 
And of course I can be a trap, 

1608
01:31:08,320 --> 01:31:09,680
right? 
Because you might just, you 

1609
01:31:09,680 --> 01:31:12,720
might just be early and, and end
up being raw later on. 

1610
01:31:13,080 --> 01:31:20,160
But I just, for whatever reason,
feel the longer I own stock, the

1611
01:31:20,160 --> 01:31:22,880
more I'm kind of involved with 
the company, the more I feel 

1612
01:31:22,880 --> 01:31:25,560
comfortable holding it in larger
size. 

1613
01:31:26,240 --> 01:31:30,200
When I initiate a position, I'm 
generally like, I don't know. 

1614
01:31:30,200 --> 01:31:32,600
I'm more skeptical about the 
work I've put in. 

1615
01:31:33,240 --> 01:31:35,040
Yeah, as you probably should be,
right? 

1616
01:31:35,080 --> 01:31:36,240
You don't. 
You don't know what you don't 

1617
01:31:36,240 --> 01:31:38,360
know. 
I mean, I said it the other day,

1618
01:31:38,360 --> 01:31:42,640
like, I I wish, I wish I could 
learn from other people's 

1619
01:31:42,640 --> 01:31:44,800
mistakes. 
I wish I could learn as well as 

1620
01:31:44,800 --> 01:31:47,080
I otherwise would learn without 
money on the line. 

1621
01:31:47,080 --> 01:31:49,360
Like I just don't. 
Yeah. 

1622
01:31:49,360 --> 01:31:52,760
So the dumbest possible thing is
to be like, it doesn't matter. 

1623
01:31:52,760 --> 01:31:56,760
I can still go big in the 
beginning, but, you know, it's, 

1624
01:31:57,680 --> 01:31:59,120
I don't know. 
Yeah. 

1625
01:31:59,120 --> 01:32:01,480
The more the more I do it, the 
more I realize it's there's a 

1626
01:32:01,480 --> 01:32:04,720
lot of art to this. 
It's it is such a craft, right? 

1627
01:32:04,720 --> 01:32:06,440
Like it's there's a lot of ways 
of doing it. 

1628
01:32:06,440 --> 01:32:09,080
But the contradiction I was 
talking about the headset of 

1629
01:32:09,080 --> 01:32:16,120
this kind of also applies to, so
the idea of concentration versus

1630
01:32:16,280 --> 01:32:21,280
diversification, right? 
Like as you and you imagine you,

1631
01:32:21,280 --> 01:32:25,160
you find something like I did 
with Cyber Pharmaceuticals when 

1632
01:32:25,160 --> 01:32:28,680
it's 3 bucks and you just go all
the way, right? 

1633
01:32:28,680 --> 01:32:31,400
The fin you're done for your 
career, right? 

1634
01:32:31,720 --> 01:32:34,120
Yeah. 
Yeah, yeah, it's just like you 

1635
01:32:34,360 --> 01:32:36,280
spin a zero yourself if you're 
wrong, right? 

1636
01:32:36,280 --> 01:32:40,160
But yeah, you could, you could 
long run save yourself so much 

1637
01:32:40,160 --> 01:32:44,400
brain damage and psychological 
torment by just finding a big 

1638
01:32:44,400 --> 01:32:48,360
winner early on in life that you
concentrated on and letting that

1639
01:32:48,360 --> 01:32:50,160
ride, right. 
And then, and then there's the 

1640
01:32:50,160 --> 01:32:52,800
calculus of like, well, do you 
have dependents? 

1641
01:32:52,800 --> 01:32:54,600
Are you really gone? 
How much money is really at 

1642
01:32:54,600 --> 01:32:57,560
stake? 
I do think these variables are 

1643
01:32:57,560 --> 01:32:59,280
always changing through a time, 
right? 

1644
01:32:59,280 --> 01:33:05,520
But there's something to be sad 
about taking those slings early 

1645
01:33:05,520 --> 01:33:08,720
on in life, I think, or at least
when you can afford to lose that

1646
01:33:08,720 --> 01:33:10,920
capital. 
It's so for sure. 

1647
01:33:11,040 --> 01:33:12,800
It's like the poker analogies, 
right? 

1648
01:33:12,800 --> 01:33:16,520
Like you've never wanna, you 
never want to go all in and you 

1649
01:33:16,600 --> 01:33:20,280
always want chips on the table. 
But when the odds are stacked in

1650
01:33:20,280 --> 01:33:23,800
your favor, I think makes a ton 
of sense to swing. 

1651
01:33:24,440 --> 01:33:28,400
But you know that calculus is 
impacted so much by your 

1652
01:33:28,400 --> 01:33:31,280
circumstances in life, right? 
Like I don't I don't have 

1653
01:33:31,280 --> 01:33:36,080
dependents of in my early 30s. 
So I have, I think, more of a 

1654
01:33:36,080 --> 01:33:40,280
stomach for this kind of stuff, 
right, than one who has five 

1655
01:33:40,280 --> 01:33:43,600
kids and, you know, has worked 
their whole life to build the 

1656
01:33:43,600 --> 01:33:46,120
savings. 
Yeah, that's right. 

1657
01:33:46,400 --> 01:33:49,120
That's right. 
Just make sure your LP's 

1658
01:33:49,200 --> 01:33:51,800
understand that and and don't 
over allocate. 

1659
01:33:51,800 --> 01:33:54,280
I got myself in a problem once 
where I over allocated to 

1660
01:33:54,280 --> 01:33:56,640
somebody. 
Yeah, I still am mad about how 

1661
01:33:56,640 --> 01:34:00,640
it all went down, but I do. 
I blame myself more now right 

1662
01:34:00,640 --> 01:34:04,920
than I used to. 
I still think it's like 7030 on 

1663
01:34:04,920 --> 01:34:07,360
them, but the 30 was on me. 
Yeah. 

1664
01:34:07,560 --> 01:34:11,880
I think, I mean, it's, it's part
of what I said, I think before 

1665
01:34:11,880 --> 01:34:14,840
we start recording, which is 
just the portfolio management 

1666
01:34:14,840 --> 01:34:17,720
aspect of it just has to change 
regardless. 

1667
01:34:17,720 --> 01:34:21,680
It doesn't matter like how big 
the fund is or the instructions 

1668
01:34:21,680 --> 01:34:24,840
you get the LP's or like what 
the purported understanding is 

1669
01:34:24,840 --> 01:34:26,880
like. 
I just think like there's a, 

1670
01:34:26,920 --> 01:34:30,720
there's a kind of required 
respect for this kind of thing 

1671
01:34:30,720 --> 01:34:34,640
where it just like even if you 
tell them like this can be 

1672
01:34:34,640 --> 01:34:37,000
really concentrating the 
volatility is going to be pretty

1673
01:34:37,000 --> 01:34:40,240
wild. 
I just, I think a lot of people 

1674
01:34:40,240 --> 01:34:43,920
can sign off on that in the 
apps, but then when it happens, 

1675
01:34:44,240 --> 01:34:47,560
they can't, right? 
And that's you just, you know, 

1676
01:34:47,600 --> 01:34:49,240
you just have to be cognizant of
that. 

1677
01:34:49,240 --> 01:34:52,040
Like, yeah, it's fine. 
Like I don't mind being down 20%

1678
01:34:52,040 --> 01:34:53,800
of the day. 
It's like, I can guarantee you, 

1679
01:34:53,800 --> 01:34:58,240
you will really mind. 
I'll tell you when you mind is 

1680
01:34:58,240 --> 01:35:00,760
if the market's only down 10, 
yeah. 

1681
01:35:00,760 --> 01:35:03,120
Or if, like if there's a 
prolonged period where the 

1682
01:35:03,120 --> 01:35:05,880
market's up. 
Because a lot of these stocks, 

1683
01:35:06,080 --> 01:35:10,000
at least from people that I'm 
learning from there, there's one

1684
01:35:10,000 --> 01:35:13,680
that, you know, I'm involved in.
And it's kind of in the Lassonda

1685
01:35:13,680 --> 01:35:16,320
Curve part, right? 
And people are really getting 

1686
01:35:16,320 --> 01:35:19,160
frustrated. 
And a number of people have been

1687
01:35:19,160 --> 01:35:22,240
like, look, some of my biggest 
winners went nowhere for three 

1688
01:35:22,240 --> 01:35:25,120
years and then they popped, 
right? 

1689
01:35:25,120 --> 01:35:27,960
And it's like, OK, well, if you 
have a big position that goes 

1690
01:35:27,960 --> 01:35:31,000
nowhere for three years and the 
market's going up in a straight 

1691
01:35:31,000 --> 01:35:34,440
right line, it's just hard to 
tell people you're 

1692
01:35:34,440 --> 01:35:37,600
underperforming, even if even if
the business is getting better. 

1693
01:35:37,600 --> 01:35:39,480
And it's like, no, it's gotta 
work out. 

1694
01:35:39,520 --> 01:35:42,080
It's like. 
It, it is the really difficult 

1695
01:35:42,080 --> 01:35:47,240
thing about value investing 
within a fund structure, right? 

1696
01:35:47,240 --> 01:35:52,080
And I think it's, it is where 
this this lost foreclosed 

1697
01:35:52,320 --> 01:35:55,560
capital comes from, you know, 
just like permit capital 

1698
01:35:55,560 --> 01:36:01,000
structures really lend itself to
the ability to be like, hey, 

1699
01:36:01,000 --> 01:36:03,480
this is we're looking three 
years out and like there's some 

1700
01:36:03,480 --> 01:36:05,680
time arbitrage here. 
I'm like, I'm pretty confident 

1701
01:36:05,680 --> 01:36:08,720
that this will work. 
But like if you have the risk of

1702
01:36:08,720 --> 01:36:11,760
redemptions, like you said, it 
gets really hard to do that. 

1703
01:36:12,160 --> 01:36:16,880
But I think this from my 
experience, like my big winners 

1704
01:36:16,880 --> 01:36:19,240
have almost all taken time to 
play out, right? 

1705
01:36:19,840 --> 01:36:21,000
Like. 
As it should. 

1706
01:36:21,120 --> 01:36:23,720
Like Cypher Pharmaceuticals when
I was buying a three, I think 

1707
01:36:23,720 --> 01:36:25,480
sat there for a year and a half.
Right. 

1708
01:36:25,520 --> 01:36:26,600
Oh, really? 
Yeah. 

1709
01:36:26,600 --> 01:36:29,880
I think it was just like it was 
like like not much happening, 

1710
01:36:29,960 --> 01:36:34,520
but it was like that's kind of 
looking at it and being like, 

1711
01:36:34,520 --> 01:36:36,560
what am I missing here? 
Yeah. 

1712
01:36:36,760 --> 01:36:41,920
And then it does often take a 
catalyst and and this goes back 

1713
01:36:41,920 --> 01:36:45,160
to the buyback thing, right, 
which you know Einhorn was 

1714
01:36:45,160 --> 01:36:47,680
talking about in his letter I 
think a couple quarters ago 

1715
01:36:47,680 --> 01:36:50,080
where you might not get the 
incremental buyer. 

1716
01:36:50,080 --> 01:36:52,560
And so like having that return 
of capital is increasingly 

1717
01:36:52,560 --> 01:36:54,560
important. 
And I think what happened there 

1718
01:36:54,560 --> 01:36:58,000
was they announced a buyback and
that started getting people 

1719
01:36:58,000 --> 01:37:01,960
involved, right? 
And it's, it's something that 

1720
01:37:01,960 --> 01:37:06,120
capital return variable is 
something I've been prioritizing

1721
01:37:06,120 --> 01:37:08,880
a lot more recently. 
Yeah, there would be dividends 

1722
01:37:08,880 --> 01:37:12,680
or buybacks. 
I just think it helps you deal 

1723
01:37:12,680 --> 01:37:17,960
with the kind of like the 
schizophrenia of the market in 

1724
01:37:17,960 --> 01:37:21,840
the short term sometimes, right?
Like just if no one cares, like 

1725
01:37:21,840 --> 01:37:24,000
it can be very frustrating to 
just sit on that money and be 

1726
01:37:24,000 --> 01:37:25,680
like, this is a really good 
idea, but it's not going 

1727
01:37:25,680 --> 01:37:27,720
anywhere. 
At least if you know you're 

1728
01:37:27,720 --> 01:37:31,040
getting some yield out of it, it
helps, right? 

1729
01:37:31,200 --> 01:37:35,520
Even if it's a lock back and you
don't see that today, it just it

1730
01:37:35,520 --> 01:37:38,320
quells your anxiety that like 
one day this will work, right? 

1731
01:37:38,320 --> 01:37:40,720
Like if you buy some three times
free cash flow and they're 

1732
01:37:40,720 --> 01:37:44,600
buying back stock, it's very 
hard for that to not work if 

1733
01:37:44,600 --> 01:37:46,160
that cash was sustainable, 
right? 

1734
01:37:46,160 --> 01:37:48,640
Like, yeah, there's just going 
to be enough shares to buy at 

1735
01:37:48,640 --> 01:37:49,920
some point. 
And so. 

1736
01:37:50,120 --> 01:37:52,720
Yeah, that's right. 
Yeah, I've been. 

1737
01:37:52,760 --> 01:37:55,640
And if there aren't, you do a 
big special and then everybody 

1738
01:37:55,640 --> 01:37:57,640
parties. 
Maybe like management tools, 

1739
01:37:57,640 --> 01:38:01,520
maybe I might be, maybe it's 
just the sectors that I, I'm 

1740
01:38:01,520 --> 01:38:04,000
spending time and I feel like 
they're becoming more sensitive 

1741
01:38:04,000 --> 01:38:06,800
to this need as well. 
Maybe that's pressure from 

1742
01:38:06,800 --> 01:38:10,840
shareholders, right? 
Or, or just certain capital 

1743
01:38:10,840 --> 01:38:13,640
cycle dynamics, like if you're 
investing in commodities and 

1744
01:38:13,640 --> 01:38:17,120
stuff and you've watched 
governments kind of shut your 

1745
01:38:17,120 --> 01:38:20,000
business down and what on you're
like, right, I own a lot of pool

1746
01:38:20,000 --> 01:38:24,080
companies and like that's one 
sector where it's like, hey, we 

1747
01:38:24,080 --> 01:38:28,400
have low multiples. 
The the future of the industry 

1748
01:38:28,400 --> 01:38:30,320
is really in jeopardy. 
Probably never going to like 

1749
01:38:30,640 --> 01:38:32,920
we're going to, we're going to 
be shuttered pretty soon. 

1750
01:38:32,920 --> 01:38:34,760
So let's just start buying back 
the stock. 

1751
01:38:35,320 --> 01:38:41,160
And in a large respects, they 
have it free rated like Peabody 

1752
01:38:41,160 --> 01:38:43,960
Energy trades at some 
ridiculously low free cash flow 

1753
01:38:43,960 --> 01:38:45,880
multiple. 
And they just had an activist 

1754
01:38:45,880 --> 01:38:49,840
actually file A13D today with 
some proposals, right. 

1755
01:38:49,840 --> 01:38:53,480
But and almost all of those are 
like, let's get the buyback 

1756
01:38:53,480 --> 01:38:56,800
going really hard here because, 
you know, if you're at four 

1757
01:38:56,800 --> 01:38:59,280
times free cash flow and you 
start like just hammering the 

1758
01:38:59,280 --> 01:39:05,200
bid on your own stock. 
And anyone who isn't, I think 

1759
01:39:05,200 --> 01:39:11,760
flagged by sort of 
environmentalist ideology can 

1760
01:39:11,760 --> 01:39:14,600
understand that coal isn't just 
going to disappear in five 

1761
01:39:14,600 --> 01:39:17,960
years, right? 
Like, sure, it's declining, but 

1762
01:39:17,960 --> 01:39:21,800
so is the supply. 
And, you know, if you just can 

1763
01:39:21,800 --> 01:39:25,120
somewhat sustain this cash flow 
and buy back your stock, like 

1764
01:39:25,120 --> 01:39:26,960
it's going to go out. 
Yeah. 

1765
01:39:27,440 --> 01:39:29,520
But the question becomes how I 
did to wait. 

1766
01:39:31,200 --> 01:39:33,640
But I don't know. 
I think I think time arbitrage 

1767
01:39:33,640 --> 01:39:36,600
and stuff like that is a really 
nice place to be looking. 

1768
01:39:36,920 --> 01:39:40,200
I quite agree. 
You always have the risk in like

1769
01:39:40,200 --> 01:39:43,480
coal in theory, the terminal 
value 0, but I would argue that 

1770
01:39:43,680 --> 01:39:48,320
terminal when that zero may come
as a very it's it's much longer 

1771
01:39:48,320 --> 01:39:50,680
than probably most people might 
think, right? 

1772
01:39:50,680 --> 01:39:52,800
I mean, all you have to do is 
look at any forecast. 

1773
01:39:52,840 --> 01:39:55,520
Certainly further out than it's 
being priced in, right, Like, 

1774
01:39:55,520 --> 01:39:57,280
yeah, so. 
You don't want to. 

1775
01:39:57,280 --> 01:40:01,160
You don't want to buy in to when
that terminal value occurs. 

1776
01:40:01,160 --> 01:40:04,000
But if you can do it when the 
market implies a shorter 

1777
01:40:04,000 --> 01:40:06,400
duration than is reality, you 
can get some really nice 

1778
01:40:06,400 --> 01:40:07,560
returns. 
Right. 

1779
01:40:08,080 --> 01:40:10,560
Yeah. 
We'll see. 

1780
01:40:11,520 --> 01:40:13,960
Dude, I've enjoyed this. 
I, you know, I, I'm going to get

1781
01:40:13,960 --> 01:40:17,800
you out of here on time. 
And also the editing does goes 

1782
01:40:17,800 --> 01:40:19,760
by the minute. 
So I like to keep them under 2 

1783
01:40:19,760 --> 01:40:22,360
hours, but I appreciate you 
stopping by then. 

1784
01:40:22,360 --> 01:40:24,640
It's been a fun conversation. 
One of the things that I really 

1785
01:40:24,640 --> 01:40:27,520
liked about this podcast when it
was small and I didn't think 

1786
01:40:27,520 --> 01:40:30,720
anybody listened because I got 
to feature a lot of guys like 

1787
01:40:30,720 --> 01:40:36,360
yourself and have conversations 
that I was not like as, as 

1788
01:40:36,360 --> 01:40:38,920
concerned about, I guess like 
people listening. 

1789
01:40:39,320 --> 01:40:42,120
And I, I'm glad that you went 
where you went with it. 

1790
01:40:42,120 --> 01:40:45,720
I hope anyone that heard any 
micro Cab names understands the 

1791
01:40:46,280 --> 01:40:49,640
risk and, you know, should they 
buy and sell and liquidate, 

1792
01:40:49,640 --> 01:40:51,200
they're probably liquidating to 
you. 

1793
01:40:51,760 --> 01:40:56,080
So beware of the beware of the 
risks. 

1794
01:40:56,160 --> 01:40:58,640
But it's been nice to have one 
of these kinds of conversations 

1795
01:40:58,640 --> 01:41:00,080
again, and I'm glad that I did 
it with you. 

1796
01:41:00,520 --> 01:41:02,280
Thank you for what you 
contributed. 

1797
01:41:03,000 --> 01:41:04,160
Well, thank you for having you, 
Bill. 

1798
01:41:04,160 --> 01:41:07,080
This is yeah, man, Great time, 
great conversation. 

1799
01:41:07,920 --> 01:41:10,760
Maybe we'll do a space sometime.
Yeah, that'd be awesome. 

1800
01:41:11,520 --> 01:41:13,480
Cool. 
Thanks again and have a good 

1801
01:41:13,480 --> 01:41:14,440
day. 
Cheers. 

1802
01:41:14,440 --> 01:41:14,760
Thank you.