In this episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle chat about:
- Sushi Roll Economics
- Loeb’s Mickey Mouse Activism $DIS
- Streaming Wars And The Future Of $CMCSA
- Ethical Investing
- Income Or Growth Stocks
- Fading ESG Returns
- Pabrai Concentrated Investing
- Growing Business, Stagnant Share Price
- Distributors vs Content Creators
- Apple TV
You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:
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Full Transcript
Tobias: And we are live. It’s 10:30 AM on the West Coast, 1:30 PM East Coast, 5:30 PM UTC. How are you, fellas?
Bill: I’m pretty good. I’m a little bit confused and kerfuffled. Other than that, things are great.
Jake: What’s new there?
Bill: Not much.
Jake: But coming into this podcast was not the most seamless experience for me.
Tobias: Got a new Howard Marks letter. We’ve got Dan Loeb going public with Disney, getting an immediate response.
Bill: Toe to toe.
Tobias: Yeah. What’s up, folks?
Jake: Yeah.
Bill: Where are you from?
Jake: Where’re they from, Toby?
Bill: Yeah, get Toby happy everybody!
Tobias: I love it.
Jake: Let’s do like the first 40 of them.
Tobias: P&G, Oslo, India. Put them in, fellas. Let me know. New Hampshire. Melbourne, yeah! Apopka, Florida. Maryland, Dubai. There we go.
Bill: No, bro, I’m not in Apopka.
Tobias: All over the place. Edmonton.
Bill: I don’t even know where Apopka is.
Tobias: I love it. Butler. Finland. Estonia. Yeah!
Bill: It looks like it’s on the– Where is it?
Tobias: My wife is part Estonian, so good to see some of her folk calling in.
Bill: Oh, Apopka is, I guess it looks like it’s Orlando-ish. [crosstalk] Well, shoutout to you for tuning in. Let’s get into this thing.
Tobias: Ian Kessel from Amish country, Delaware.
Bill: Shout out to Ian. He’s everywhere.
Tobias: VSG too. Good to see you. Martin Titus. All right. Who wants to do the intro?
Bill: I’ll do it. Welcome to Value: After Hours. My name is Bill Brewster. I’m here with my esteemed colleagues and cohosts, Jake Taylor and Toby Carlisle. Jake, what you’re going to be talking about today?
Jake: I have a little segment on– we’re going to call Sushi Roll Economics.
Tobias: [laughs]
Bill: Nice. Okay. Toby?
Jake: Yeah, we’ll see. It might be bad.
Tobias: Yeah, I’ve got a few things I want to talk about. First, Dan Loeb sent a letter to Disney and then Disney immediately responded. And somebody, not me, coined the phrase ‘Mickey Mouse Activism,’ which I think is a great expression for it. I might have been a little bit cynical yesterday when I tweeted it out. I’ve gone back and thought about a little bit more. Maybe, this is the way activism should be done.
I also want to talk about value, because I was going through my portfolio, it just occurred to me– I do a little valuation on these things all the time. For the first time, it’s clear to me that value can outperform from here without any multiple rewriting. I think you get the multiple rewriting if it starts outperforming. I think it sort of has been under the covers, been outperforming for about three months now. Let’s talk about that.
Bill: The man is making a call, folks. Well, his whole career is actually a call.
Tobias: There you go. I’m going to win.
Bill: [laughs] I’m actually going to follow on a little bit of your Disney discussion, and I’ll probably loop it into Comcast and what I’m thinking about. So, Jake, you want to start off and then Toby, and I’ll piggyback each other– [crosstalk]
Tobias: Eat your veggies first.
Jake: All right, let’s get it out of the way. So, this segment is inspired by a podcast that I listened to this weekend that came out recently that was talking about government intervention and stimulus and how we fixed a lot of the aggregate demand problem. I found it to be a very traditional Keynesian viewpoint. Now, these things almost get to religious proportions because it’s very unscientific because we don’t have any counter. There’s no control group ever. We’re always–
Tobias: You’re middling in the experiment all the time.
Sushi Roll Economics
Jake: That’s right. So, anyway, take it for what it’s worth, but as a rebuttal to that podcast, which I’m not going to name specifically, is this really great little October 2008 paper from this guy, Professor Robert Murphy. He’s in the Austrian school. He’s a pretty funny writer, and he has like a really good sense of humor. And coincidentally, I’ve hung out with him a few times. He’s pretty good at karaoke.
Bill: Oh, big man!
Tobias: [laughs]
Bill: [crosstalk] –right there. Coincidentally, I’ve hung out with him.
Jake: So, the name of this article that he wrote is called The Importance of Capital Theory. And he in that article was rebutting Paul Krugman basically. But I’m going to try to walk through what Murphy lays out here and for us to maybe think about it, and you’re probably better off just reading the article than what I’m going to do butchering it, but here we go anyway. All right.
Imagine that there’s this hypothetical island economy. There’s 100 people that live on this island. The only consumption good that’s available are sushi rolls. Every day, there’s 25 people who they get into their row boats, and they go out and they catch fish with nets. And 25 people are out there gathering rice. Then, there’s another 25 people who take the fish and the rice and assemble it together. And then, the last 25, they do the–
Tobias: They work for the Feds.
Jake: [crosstalk] –boats. Yeah, that’s right. They’re PhD economists. They keep the boats and the nets up, so that they can keep catching fish. Okay, so in a nice equilibrium, this island economy will produce 500 sushi rolls, which is five sushi rolls for each person. One day, then Paul Krugman washes up on the beach, and he starts advising them about how he can boost aggregate demand for sushi rolls, everyone can have more consumption. He shows them this his outboard motor that he used to get there, so we have a new technological advancement. All right, cool. So now, he’s advised them and they’re following his advice.
Now, there are 30 islanders who are out in the boats catching fish, including one of them with this motorboat. We have 30 now who are gathering rice, and there are 30 making rolls. And that leaves then we have five people divided out to go look for the materials to keep, like oil and gas to keep this engine running. So, we had to reallocate some of the people. We have five left now to maintain the boats and the nets. Okay.
As we’re going along, Krugman looks like a genius because now all of a sudden, we’re producing over 600 rolls. And that’s more than– that’s six each, including feeding Krugman as the new king. And [crosstalk] everything is great because now we have six rolls each instead of five. We’re all wealthier. We’ve boosted aggregate demand, and it’s all good. Now, a lot of people would say like, “Oh, this is probably due to the motor that we’ve introduced, this new technology.” But really, it’s mostly about the reassignment of tasks and getting people working on– we have 30 people who are now going fishing instead of 25.
Eventually, though, as this goes on, there’s a reduction in the boat and net maintenance, and that starts to catch up with you because now there’s holes in the nets, the boats– maybe someone’s got to be bailing half the time because they’re getting holes in them. And they’re getting less fish out of the sea now. So, what ends up happening is now we have an imbalance of rice, we have the same 30 people who are doing rice before. What they do is they start cheating and putting smaller amounts of fish into each sushi roll.
Eventually, the boats break down to where now we’re only running some of the boats, and now we have a lot less sushi. What’s going to end up having to happen is that they’re going to have to have a period of deprivation, where we get more people working on fixing the boats and the nets, so that we can get this thing stood back up and everyone eating again.
What ended up happening there really is, it looked like we were wealthy, we had six sushi rolls each instead of five. But what we were doing was consuming capital. We were consuming our fixed goods of our boats and our nets and not keeping them up. So, that initial prosperity was really illusory. It wasn’t real prosperity.
Now, and obviously like during the transition, as we try to get things back up and running again, there’s going to be a bunch of islanders who don’t have anything to do because we already have enough people making rice, or gathering the rice. We already have enough people producing the sushi. Now, we have guys just standing around. And obviously, that’s how we can end up in a situation where everyone is starving, and we have unemployment. We have a mismatch between the coordination of resources. So, I’m going to read this really nice little passage that Murphy wrote on this, that sums it up.
“In modern economies, workers use capital goods to augment their labor as they transform nature’s gifts into consumption goods. Because of the time structure of production, it is possible to temporarily boost everyone’s consumption, but only at the expense of maintaining the capital goods, the boats and the nets, which are thus consumed. At some point, engineering reality sets in and no stimulus policies can prevent a sharp drop in consumption.”
The conventional wisdom right now is that we are stimulating the economy through all of these different programs, whether it’s the Fed or direct fiscal stimulus from the government. Well, is this actually that we’re creating this consumption that we were all going to enjoy? Or are we really consuming capital that we’re going to have to end up paying for later?
Murphy makes the point, because he’s writing this in October of 2008 when the housing crisis is– we’re in the teeth of it. I remember very specifically that time period when TARP was announced, and it was $700 billion–
Tobias: That felt like a lot of money.
Jake: That was so much money. It was an unconscionable amount of money at the time. You had people who were much more up in arms about that. I don’t know if you remember, but they were like– you had economists, you had businesspeople saying, like, “What are you doing?” And now, that’s such a quaint number. I find it fascinating.
Tobias: We count in trillions now.
Jake: I know.
Tobias: Plural.
Jake: For how much longer are going to use trillions? So, he’s talking about how Americans in 2006, they consumed a massive amount of consumption goods that were imported during that housing boom, because they erroneously thought that the rising home values would more than make up for that. But then, it turns out that that was kind of illusionary and they ended up basically overconsuming and consuming really the capital of their houses without realizing it.
When you think about all this stuff, and you think interest rates exist to coordinate the time of consumption now versus consumption later, do we do invest more to create the production for more of us to have more things later? Or do we want to consume it now? The interest rate is what tells us, that’s the price of time. We have a lot of meddling with interest rates around the world. I guess my big takeaway from all this is that to declare it a victory now is, I think, horribly shortsighted and we have to see all of the effects of this before we can say whether fiscal and monetary stimulus is really a good thing and that we have these new tools that are amazing that plug all the holes and are going to help us. Long, pedantic, but maybe brought a little bit of real-world feeling to it by this island, this sushi economy.
Tobias: Can I just play devil’s advocate?
Jake: No.
Tobias: [chuckles] The arrival of the motorboat or the engine, why does that then require us to allocate more people to fishing?
Jake: It didn’t. It was Krugman advice to get more people consuming now to get more aggregate demand boosted.
Tobias: To get more people consuming. So, you start with the consumption, everybody’s going eat six sushi rolls. Now, we need more. Now, we’ve got a deficit of 100 sushi rolls.
Jake: Well, we need to get more people making more sushi rolls, we need to consume more.
Tobias: And to boost sushi rolls. Okay, so it’s at equilibrium at 500. We allocate more resources to fishing because that’s the bottleneck in the sushi roll production. And now, we’ve got more– now, we can eat more sushi rolls, but we do it at the expense of the equipment. So, what’s the direct analogy– That’s the analogy. What does it mean in the context of this of our economy?
Jake: Well, I can’t help but wonder if we don’t underinvest in some things– and this isn’t the only reason. A lot of it is, I think, the short-termism of a lot of– the way that management tenures are structured, what is the average CEO, under five years? That’s the turnover in the S&P 500? I don’t care about the boats and the nets if I know I’m out the door in four years with a big option package and a golden parachute. I will need to boost those numbers today. I need to have everyone eating lots of sushi rolls today. Don’t worry about the nets. I think it’s pervasive and a lot of it might even be fighting human instincts to consume more now. But I think interest rates being squished down like they are, only encourages more of this behavior. You can borrow more now. You think that you’re going to have a very easy time to be able to borrow in the future as well, so there’s not that liquidity concern, the markets are always going to be open with fresh money for you. So, you can just keep kicking the can down the road.
Tobias: I think about it in terms a little bit like– So, you think about Tobin’s Q. What Tobin’s Q is, is the market value of assets versus the replacement value of assets. The market value of the assets that are in Tesla is massive. So, you get a massive multiple if you can come out with some sort of truck or car that runs on a battery. Trevor Milton says, “Well, that’s what I’m going to do. I’m going to invest essentially nothing, and I’m going to say this thing is going to be doing that thing.” And then, look at the massive multiple that it actually got in the market. So, he really did demonstrate that in real time. We don’t know if that’s a valuable thing that he’s created or not, but I suspect that there are other truck companies out there that are going to be able to do something similar if it turns out that it is. So, we’re misallocating resources by putting it into those things, which the market seems to be valuing extremely highly.
Jake: Yeah. And that buy it versus build it calculus, it’s even easier to just promise to build it.
[chuckles]Jake: You would never buy it, and you don’t even actually have to build it. You just have to– [crosstalk]
Tobias: I’ve got this killer PDF of what I’m going to do, and that’s worth $30 billion.
Jake: Well, we’ve got that HTML5 supercomputer.
Tobias: Oh, yeah. I forgot that. That’s how I made the deck.
Jake: [laughs] Jesus. All right, enough veggies. Let’s get something more fun here.
—
Loeb’s Mickey Mouse Activism $DIS
Tobias: All right, let’s talk a little bit about Disney. Dan Loeb, fearsome activist, used to write the nasty letters, as we’ve discussed previously, has sort of taken a vow of– not chastity, not poverty vow. He’s not going to be saying nasty things to management teams anymore. So, he wrote this note to Disney. I actually think the rationale is pretty good. He said, “You’re spending $3 billion a year on the dividend. Cut the dividend and reinvest it into streaming.” That’s a lot of money if you stick it into streaming because at the moment in the market, even putting aside the short-term stuff that everybody’s quarantined and watching a lot of TV, clearly the world is going to go in that direction. Netflix has got an enormous multiple on it. Disney get that multiple by reinvesting in the streaming infrastructure.
I concur with the strategy. I think it’s a good strategy, but I just wanted to get this little addendum that he put onto it. I tweeted something out yesterday, it was a little bit cynical. I’m going to take it back a little bit because he added this in. This was a footnote by the way. “By providing you with our analysis, we do not intend to participate or intrude in the basic business decisions of the company. We do, however, believe it is an important aspect of our free enterprise system for management and boards of directors to listen to investors’ perceptions of a company’s long-term prospects, and opportunities to enhance shareholder value.” 100% agree with that. I think that’s an entirely legitimate thing.
So, really, all they’ve done is they’ve written a letter, and they’ve said, “Here’s our idea, don’t spend so much on the dividend, reinvest into the streaming.” And then, he’s shown some of their analysis. I really liked the letter. So, then Disney responded, and they said, “Yes, what we’re going to do is we’re going to restructure, we’re going to allocate some more resources to the streaming side. We’re going to do some sort of cosmetic stuff internally in a management sense,” and then the stock popped 5% after hours. My tweet was, Loeb pretends to do activism, Disney pretends to respond, stock price pops 5%.
But on thinking about it again, I actually think this is how– capitalism and public companies and big investors, this is how it should be done. He doesn’t necessarily have to make this little public but I’m glad that he did because as a potential investor in Disney, I like learning from Dan Loeb, I think it’s a good thing. As a big investor, you just express your wishes. And management, they said no to the dividend cut, because there are lots of good reasons to keep the dividend. But they said, “Yes, we’re going to do something with the streaming.” I thought that was a pretty good illustration of the way that– maybe that’s how business should be done.
Jake: I’m curious about that everyone looks at these TAMs and talks about how big, great these companies are. But right in front of our face, we have Netflix talking about going into animation, and Disney trying to get into streaming content. So, this is like a collision course. Tell me there’s not going to be a bloody ocean waiting for all of this stuff a couple years out from now?
Bill: [crosstalk] I’m not sure that that’s true. I think your bloody ocean might be filled with Viacom and CBS and all that. I’m not sure there’s not a chance for Netflix and Disney to coexist, and that’s your next $60 bundle.
Tobias: The only thing I would say is that– and this is the criticism that I made of Netflix when I was short last year. There’s a big difference between being a cable company and having the wire punch through a wall where there’s really no competition, and you set the price that the customer will bear. The introductory number is $40 a month, then it’s $80 a month, and then it’s $120 a month and what are you going to do? You can’t get anything else. On the other hand– And so, that’s the business that the cable companies are in.
The movie studios, they stick a billion dollars– that might be an exaggeration, but let’s say hundreds of millions of dollars into these big movies. And if they work, then it’s a bonanza, and you get Marvel, or you get Titanic or you get something like the big blue aliens on the other planet, whatever that was.
Bills and Jake: Avatar.
Tobias: Avatar, thanks. Yeah. But the other option is you spend a whole lot of money in these things and you get Waterworld or you get something like that, it’s a boom-bust kind of business. And all of your investment is upfront, that’s a tough business.
Bill: Yeah. Disney has less of a problem of that than Netflix does. That’s why I’ve always thought that if you like the math behind Netflix, you could love the math behind Disney.
Jake: Whose multiple is wrong, then?
Tobias: Netflix.
Bill: I can understand why people assign the multiple they assign to Netflix. I also understand why people are offended at the multiple that Netflix carries. But–
Jake: Have you ever streamed it, bro? [laughs]
Bill: Well, the fact of the matter is– I don’t know, they’ve done much, much better than I thought that they would, and their scale is getting bigger and bigger. It’s not like the capital markets are turning off to them. They have a shareholder base that wants him to go do this. I wouldn’t be smart enough to run the same strategy, but if you drop me in their shoes, I would do the exact same thing. I’d probably try to spend more. I mean, I don’t see why they– There is no incentive when you’re trying to own the rest of eternity basically. They’re trying to get a scale advantage on video content. I mean you laugh, but they might actually do this.
Tobias: But the thing is, if you’ve got a smart TV now– I think that’s an old term. That’s like Space Age, when that was 50 years ago. If you’ve got a smart TV, you can get a tile on that smart TV, and I can produce the content and give you a tile for your TV. No one cares whether you’ve got– I can switch off any of those tiles at any stage and I regularly do. If HBO sucks, I’ll turn HBO off. And then, if something comes on that I want to watch, I’ll turn it back on again. So, I can just turn a tile on and off anytime that I want.
Bill: Yeah, but who’s going to be around at the end of this?
Tobias: Anybody. It’s democratized.
Bill: And Netflix is going full-blown scorched earth.
Jake: [chuckles] Anybody.
Tobias: But so is YouTube, without spending money.
Bill: Yeah, I guess. Well, that’s sort of a business model objection.
Jake: When has anyone ever won in a scorched earth scenario?
Tobias: [laughs]
Bill: I think that when you’re chasing global scale, if you win, you win. That’s why you do it. They’re playing a different game. People have won local scale advantage games before. Netflix’s local scale advantage game is the globe.
Tobias: But the way that you win this game is not–
Bill: And that’s fucking crazy.
Tobias: I don’t think the way that you win the game is by signing up the entire world. The way that you win the game is by producing the best content and that’s extremely hard to do, but Disney has a huge advantage there. Disney, they’re very, very good. We’re going to get a tentpole Princess, and we’re going to own that demographic of little girls who remember that– like Frozen, Elsa, everybody who’s got kids, girls of a certain age, that’s their princess. There’ll be another one that will come out and it’ll be– they’ll own that. Disney is very good at recycling that content through merchandise, television, that’s the– [crosstalk]
Bill: If I ever get the opportunity to renegotiate with my wife, the one girl that I could leave her for, Kristen Bell is going to be like way high on that list. The fact that she was both Sarah Marshall and can sing like Anna. Oh. Oh my. That got me hot and bothered.
Jake: She’s good.
Tobias: Is that– Forgetting Sarah Marshall, is that–?
Bill: Yeah, dude. Yeah, and she can sing. That was sexy. But I digress. I guess that the way that like my– [crosstalk]
Jake: Did you watch The Good Place? You might like that one. Check out The Good Place.
Bill: Maybe, I don’t know if I need more of her in my life. I may need less.
[chuckles]Bill: I just think Disney has a real shot. I’ve talked about this particular letter now for hours and hours with Francisco, my buddy, The Science of Hitting, and I guess that where I think I’ve come on this is Disney has a unique opportunity right now to really push the envelope and to flex customer relationships in a way that no other company has. Other than maybe Netflix.
Netflix, I happen to agree with you, Toby, when you were like their inventory ages like food. I can’t even remember the De Niro movie that came out. Honestly, I didn’t even think that thing was that good. It sucked to watch it on a screen at home. These arguments about going direct to consumer, I think, are insane. The theater experience made Marvel and Star Wars what they are. I don’t think if you drop a bunch of movies direct to consumer and collapse the theater window and have everybody watching stuff on shitty ass sound in their house– God forbid your house is tile, there’s no sound. It’s just bouncing all over the place. Frozen sounds like shit. I don’t think you can do that.
Jake: Wife never lets you turn it up anyway, loud enough to get that little thud in your chest.
Bill: Yeah, well, like your speaker– I don’t know, I just think the theater experience is very important to somebody like Disney. So, I think that people that are arguing that Disney should copy Netflix in that way are really missing a big part of the picture. But I do understand why this is the time to press the advantage. I thought Loeb’s letter at first was– the feedback that I had heard about it, I was like, “This is kind of nuts.” And then when I read it, I did kind of like it. And I think that the stock reaction today seems pretty rational to me. If you start doing the math on 200 million subs, 10 bucks a month or whatever, it gets pretty crazy. And they don’t have that– Disney doesn’t have that perpetual machine to feed like Netflix does. I think Disney could get to similar numbers with much better economics than Netflix can end up happening, just as a function of their franchises and back catalogue. And that shit is hard to do. Watch the Frozen–Making of Frozen 2 is awesome. That was really good. Forget about Kristen Bell. Don’t forget about Kristen Bell. But watch it despite that, she’s the bonus.
—
Streaming Wars And The Future Of $CMCSA
Tobias: What’s your topic segue onto the– Who does this hurt? So, if Netflix and Disney both win, who gets bloodied in this?
Bill: I don’t know. I think Comcast is really stuck in the middle here. As a shareholder, it makes me not thrilled about the choices that I think they may face and how they may respond. I don’t really know whether or not that’s a fair thing to say. I had tweeted something out like imagine what Netflix would pay for DreamWorks and Illumination. And I now realize that was pretty stupid, just given Netflix’s culture. I thought about it a little bit more, and I can understand why DreamWorks may not work in Netflix. I would like for Comcast call up Apple and offer them DreamWorks or AT&T or something like that. I think that you’re going to have a lot of people that are going to try to spend a lot of money, and there’s only going to be a couple that can do it.
To me, I look at Comcast and it’s interesting because I like the cable business. I think NBCU was a really good acquisition when they made it. But the future is definitely harder than the last 10 years have been. So, then what are you really getting into? Are you getting into a scenario where the free cash from the cable business is used to invest a shit ton of money in Peacock which I think it’s sort of a so-so experience as it is? And then like, they’ve got a bunch of different strategies– where I watch Xfinity on my Roku, but that kind of sucks. But their cable box experience, I think, is actually kind of awesome. But no one wants to hear about it anymore because you have to rent a box and people are pissed off at that. I just think that they’ve got a lot of problems.
So, I don’t know. Some of Comcast content could make a lot of sense with AT&T, or AT&T’s with Comcast or something like that. And then Apple just has so much money, they’ll just spray it everywhere.
Tobias: That’s what you want to hear [laughs] as an Apple shareholder.
Jake: Yeah, as an Apple shareholder.
Bill: The thing is, Apple shareholders are just going to be like, “Who cares?”
Jake: Are they?
Bill: Well, yeah, dude. Let’s say Apple blows $20 billion on content, that’s like two-quarters of cash flow. It doesn’t even fucking matter, man. [crosstalk] That’s crazy but it’s true.
Jake: For what end though? What are they getting with that $20 billion, Apple TV stuff?
Bill: Part of the ecosystem, I guess. Yeah.
Distributors vs Content Creators
Tobias: The old rule used to be– [crosstalk] When the technology changes, there’s this sort of short period where the value accrues to the distributors, like the pipes get the value. But then, it always returns to the content creators because the content creators, they’re the ones who have the unique offering. I get that they need distribution too. But, in this day and age, distribution is the easy part. Worst case scenario, you Cobra Kai and you stick it up on YouTube. Or if you got a little bit more kind of infrastructure behind, you do what that Masterclass, is that what they’re called?
Bill: Yeah.
Tobias: They build their own app. And then basically, they just go and interview interesting people and charge you a couple hundred bucks for a year to learn something maybe while you’re watching Masterclass. I see there are lots and lots of models out there that mean that it’s going to be very easy for someone to get into the game.
I think if you’re a content producer now, aside from getting some fina– assuming that you can finance yourself, you’ve got enough finance there. So, someone like the Harry Potter lady, she owns basically– she’s got a franchise that is the scale of any other– that’s a Star Wars scale franchise. She’s a billionaire as a result, but she could turn herself into a mini Disney if she wanted. She could make little television shows for all of those characters, write another book, create spin-offs. She could do that if she wanted to. She could create her own app where you just sign up for Harry Potter World, or whatever she wants to call it. The challenge isn’t distribution anymore. The challenge is having a good idea that lots of people will buy into.
Bill: Yeah, Harry Potter has got the– what? The Wizarding World of Harry Potter at Universal.
Tobias: Right. She’s doing lot of it.
Bill: I don’t know. I guess– [crosstalk]
Jake: Although paying $12 for a Butterbeer chapped my ass. [laughs]
Tobias: What’s in a Butterbeer?
Jake: There’s no beer but it’s like butterscotch syrup drink.
Tobias: Why you not call it a butterscotch? Feel like you missed out there.
Bill: The other reason that I kind of wanted Comcast to sell some assets to Netflix is, I think the park business– I think there’s a shot that Netflix could actually sort of recreate some of what Disney has with–
Tobias: Action figures.
Bill: –enough money. Yeah. Animation is, from what I can tell, by far the best place to play in content from a business standpoint. I don’t see why if you’re Netflix, why you don’t have Disney’s playbook of that wheel that feeds itself. And then, you have the figurines, and then you have all this shit. So, just seems to me– and I guess, like Reid doesn’t want to have anybody else’s culture, and I sort of get that. But the other side of it is you have an engine that’s actually currently working in the amount that Netflix could spend and still justify, it’s kind of interesting
Tobias: Would you say that the engine is currently working?
Bill: Within Comcast?
Tobias: No, Netflix, sorry.
Bill: Oh, well, I think that they have some economic questions that they could help to solve. I think that if you had some, like– if you could actually acquire a parks business and you could start to bring out–
Tobias: Do they make money?
Bill: What? Comcast parks business? Yes, great business. So, then you get if you start to get– I mean it’s not a great business now.
Jake: What are they going to have? Like Stranger Things?
Tobias: Yeah, there you go. That’s what they should be doing.
Jake: House of Cards.
Bill: Well, dude, this is what they’re investing. It’s not about today, it’s about 10 years from now. So, if you can really spend as much as they’re spending on animation, I don’t think it’s unfathomable that they can make one or two franchises out of that, and then you invest in parks and then you start to get the flywheel going. I mean it takes a while. But we all claim to be long-term oriented. If I was long-term oriented for Netflix, it’s 100% where I drive that company. Now, maybe they won’t, maybe they just want to be a media company. But that’s not as good of a business in my opinion.
Jake: Let me ask you this. Do you think there’s any fatigue to franchises in general? I’m just tired of superhero movies. I’m a little tired of– [crosstalk]
Bill: No, bro. They fucking crush when they drop. People go to the theaters like crack fiends.
Tobias: [laughs] Yeah, I’m with you there.
Bill: Look at Endgame.
Tobias: I can’t watch another Star Wars. I can’t watch another superhero.
[crosstalk]Jake: Well, let me ask you this, how many more are there that we could plug in? Is there room for 10 more Star Wars level franchises to go around? Or is that like, “Well, that was sort of a window of nostalgia based–” I don’t know, man, I’m not sure there’s enough. I’m not sure that pie is that big on the franchise slots.
Bill: Well, I don’t know that you have to be that sure. Let’s see, top-grossing lifetime movies, Star Wars Episode Seven: The Force Awakens, that’s 2015. Avengers Endgame, 2019. Avatar is three. Black Panther was number four. Avengers Infinity War is number five. So, what? Three of the top five are Avengers and came out in the last two years.
Jake: Call of Duty, more money than all of those combined, the last drop. Maybe they’re missing the real obvious thing, which is video games.
Bill: Well, I don’t know that Disney is a video game company. But you asked a movie franchise issue and what I’m telling you is three of the top five grossing films of all time belong to Avengers and came out in the last– I mean, really two years that theaters were open. So, it’s hard for me to say that there’s consumer fatigue. Data, bro, data.
Jake: Fair enough.
Tobias: I think it’s funny how few watchable movies there are. Maybe it’s because there’s been a huge investment in TV. Everybody’s worked out that you don’t want to get– don’t spend $200 million making a movie that people are going to watch once. If you’re going to spend the $200 million, make a season of something and give people 10 or 13 chances to watch something and get into it and have their friends talk about it and tell you about it. And then, you’ve proved over the course of a season that there’s demand for it. And now, you’ve got something very valuable because you can– Game of Thrones, and every week we’re going to bring out– like the thing that everybody wants to watch this week is the final episode of Game of Thrones or the episode, whatever it happens to be.
Bill: Yeah, I don’t know. It’s interesting how Game of Thrones didn’t drop the whole season at once and that benefited it.
Tobias: That’s an HBO thing, right?
Bill: Yeah. HBO could have pivoted, I guess, in theory, but probably not. But it was nice to have an event and watch the end of the season together.
Tobias: Yeah, I agree.
Bill: Part of the things that sucks about streaming is it drops, and it’s already gone before I even find out about it.
Tobias: Yeah.
Bill: Can’t have any water cooler talk. It’s like, “Oh, no, I didn’t watch that.” I got into Cobra Kai and people are like, “Yeah, dude, two years, too late, loser.”
Tobias: Yeah, well, I got into it this week.
Bill: “Yeah, whatever, I fuckin’ like it. Shut up.”
Tobias: I found it this week, so that’s how– [crosstalk]
Bill: Right. Yeah, I didn’t know.
Jake: Late adopter.
Tobias: I’m a very late adopter of the TV. Yeah.
Jake: How’s that Pixel phone working out for you? [laughs]
Tobias: It’s a different matter. It’s just my little kids and other things going on.
Bill: It’ll be interesting to see– Discovery just partnered with Qurate, my beloved Hi, Barry Schwartz. You’re welcome for the mansion of Qurate again. And they want to do food network with QVC, that’s kind of interesting. I don’t know if it’s possible to scale up these legacy companies and then release this version of Zaslav’s love skinny bundle that he always wants to see. But, man, my wife, she is addicted to Bravo. She’s like a fiend. So, the idea that there’s not something there–
Jake: My condolences.
Bill: I actually kind of like it. You ever watch Below Deck? It’s not that bad.
Jake: No, I haven’t seen that one.
Bill: Oh, it’s not bad. I mean I’m not going to sit here and go tell people like, “Oh, yeah, Below Deck is the best thing ever,” but I’ll watch that shit for sure. MTV, The Challenge, you’ll find me watching that, putting up with the commercials. But I’m digressing. So, anyway, I don’t know if there’s some package of content that makes sense for those people, and I don’t know how you distribute it. I don’t know, these are hard questions. I don’t know where the world’s going.
Tobias: Throw your questions in, folks.
Bill: Well, that’s what makes me nervous about Comcast because they used to be the distributor, what are they going to do? They’re going to invest in Peacock? Some shitty as technology if you ask me.
Tobias: Don’t you just need the content?
Bill: I legitimately– I know this really makes people mad on Twitter when I say this, but I use Roku. I don’t think Roku is that good of a product. I find if you want to buy a cheap TV and you want that software, I get it, it’s fine. But I actually think the Xfinity product is quite good. To your point, I don’t know how they– you need a distribution mechanism and then you need the content to distribute. So, how do they have that and how do the economics work? That’s the hard question.
Jake: You’re going to get Peacock-blocked now.
Tobias: What’s the Roku? I’ve seen it talked about a lot. I know that it’s a streaming thing. It’s a TV–
Jake: Well, it’s like TV, but for hobos.
Bill: No, it’s the software that basically they partnered with– It was TCL and maybe Hisense, and one other company. Their distribution strategy was to lead with hardware. So, if you look at their financials, you’ll see that the hardware gross margins are super tight. And in the beginning, people were like, “Oh, this is a shit business.” But what people didn’t see is they were just leading– It was like a razor blade model. So, then they got their software into enough homes, that at least in the US– I think this is globally, but they’re involved in the standard setting. So, if Netflix wants to come out with an app, like redesign, I’m pretty sure Roku is in the discussion. Maybe not against Netflix, but I think that they’re like some of the– the hurdle that you have to get through is that Roku says, “Yes, this looks good.” And then, they got a bunch of advertising. And you own a big screen.
Apple TV
Tobias: Are they competing with Apple TV? I’ve got a Google TV and there’s Amazon Prime, Amazon Fire.
Bill: Yeah, everybody’s trying to sell you something and take a rake off it. Roku’s theory is we get in enough homes, and then you sign up for Disney+, and then we get our commission on Disney+ and that’s the game.
Tobias: Yeah, that’s a tough business. The Apple TV is pretty cheap, but then the Google version is 30 bucks, and the Amazon Fire’s like 30 bucks. That’s what you’re competing with.
Bill: Apple TV sucks.
Tobias: Yeah, but there’s other options.
Bill: And everyone’s like, “Oh, check out Apple TV.” I’m never going to. For seven years, I’ve been waiting for Apple TV to get good, and it’s never happened.
Tobias: What do you mean get good?
Bill: They’re not going to get me back in with Jennifer Aniston.
Tobias: With content?
Bill: No, man. No, I had one of the very first boxes, the Apple TV box. It just sucks to use. I don’t really care for the remote, the interface.
Tobias: There’s a Google version of it. There’s an Amazon version of it.
Bill: Yeah. Well, Google and Roku are the smart– Google, I guess, has the rest of the world and then Roku has a pretty strong position in the US, is my understanding.
Tobias: I have the Google one. I have a little fob that I can take with me when I travel. And it’s got all my stuff on it. It already talks to my phone and my computer. It just means that I don’t have to think when I go anywhere else.
Bill: That’s what they like.
Tobias: We’ve got Apple TV, it’s just that–
Jake: All of Daddy’s special videos?
Tobias: There’s nothing special on that. [laughs]
Jake: Okay.
Tobias: It just seems to me you need that little bit of hardware, I get that. But then, once you’re in that hardware. From the Apple TV, I can access Amazon. From the Google TV, I can access Amazon. Amazon’s like– well, you can go through a hardware, you can go through– it’s my phone– you can go through the tile, and we don’t care. If you go through the tile, you buy up. I’ve got a Prime membership anyway, so I think that’s a tough business to be competing, gee.
Bill: Yeah, I think they were smart to hook up with TV manufacturers. That was an intelligent decision to get in the home.
Tobias: Google’s done the same thing.
Bill: Yeah, that’s right. That’s why I think Amazon should do the same thing. I don’t know what Amazon’s messing around with this Fire Stick. It seems like a real waste of time.
Tobias: But they’ve got the tile. You can get the tile through Apple TV. Apple TV is probably the dominant part of the market run.
Bill: I don’t think that Apple TV is. But, yeah, I mean you could in theory– but it’s more layers. If you’re Amazon, don’t you want to be the initial landing layer? I’d want to partner with the TV manufacturers and then be the layer of software that other things write on. I wouldn’t want to write on somebody else’s software.
Tobias: And then, sell it through Amazon for cheap. It’s easy. They’re going to win that. The big issue there is antitrust.
Bill: Well, you would say that they were going to win it, but Roku continues to execute. So, I don’t think that they can just win. But it’s interesting.
Tobias: Both parties are making antitrust noises at the moment. Nobody’s doing anything, but I don’t know what you would do. It does seem like something is coming. That’s the greatest buying opportunity for less things ever when it finally gets here.
Jake: Toby!
Bill: I don’t know. I actually think most people have already priced that in probably. I’m not sure it would sell off. People have been having this discussion for so long. Everybody that I know is like, “You’ve got to buy the shit out of them once it regulates.”
Tobias: [laughs]
Bill: It’s just going to strangle competitions.
Tobias: No competitors, then.
Bill: Yeah.
Ethical Investing
Tobias: Here’s a question. How do you think about the ethics of a company before making an investment? Do you avoid companies that go too far, like rumors of child labor? Or do you just look at fundamentals?
Bill: I don’t know, I’d buy Nike now. I would have bought them in the 90s if I was smart enough. So, they built something on the back of child labor, allegedly and that didn’t matter to me very much. I’m not trying to go out and– [crosstalk]
Jake: Bill’s pro-child labor.
Bill: No, I’m not going to sit there and– I don’t know.
Tobias: JT?
Jake: I would advise in the short term, you can get away with that kind of thing. But in the long term, eventually, you have to have every interface that a company has to have a good relationship. Otherwise, there’ll be defections that can sacrifice the company.
Bill: Dude, that was 20 years ago, and Nike is crushing it. They basically moved all their labor over to China–
Jake: Did they stop doing that?
Bill: Yeah, well, they stopped exploiting children, but it’s not like they have fair labor practices. They’re made in China. They’ve abused people for decades. And no one gives a shit.
Tobias: So has Apple by that measure.
Bill: Yeah, that’s right. So, I don’t know, where do you draw this line? On one hand, are they abusing people? Or are they giving people opportunity? I don’t know, these issues get so murky that I just decide I’m not going to deal with them.
Jake: It’s fair. I don’t take umbrage with that either. I think that those jobs may be better than what the alternative was for that person.
Bill: Yeah, the other side of it is there’s suicide nets under the windows, so they’re probably not great jobs. But maybe that’s the best alternative. I don’t know. So, I don’t know where you start drawing the line, in my opinion, I think it’s very, very hard.
Tobias: I think the specific example aside, you can have legitimate moral arguments on both sides of that and resolve that to your own satisfaction. But I have a quantitative approach that doesn’t consider things like that. However, if I was running a discretionary portfolio, I’d be on the lookout for any single thing that could poke a hole in anything that I held, because I’d want to hold it for basically forever. And so, anything like that, like any ethical missteps or anything that I was a little bit nervous about, if I saw them doing it, then that would be a big issue for me is the answer. For me.
Bill: I just bought cigarette companies. So, I don’t think I can sit here and say I care too much.
Tobias: No one’s holding a gun to their head and telling them to smoke them. These days, everybody knows. That’s doesn’t necessarily mean I would buy them either, but I’m just saying, it is what it is.
Bill: At this point, that’s sort of where I’m at. And I’ve bitched at my mom to quit smoking her whole life, and she hasn’t. If I’m going to lose my mom to cancer, I might as well make some money on the cigarette companies.
Income Or Growth Stocks
Tobias: That’s fair. It’s a closed system. Do you have a focus on dividends or growth potential when composing portfolio?
Bill: Not really.
Jake: The question, do I want my money now or management to hang on to it? Is that the question?
Tobias: I guess the question is, the question [unintelligible [00:49:43].
Jake: Well, obviously, it depends on the management, I guess. I would challenge if you are big into dividends and you think about Berkshire, would you have wanted that dollar back to figure out what to do with it? Or would you rather have Warren kept it and compounded book value at 20%? To me, I’m pretty happy to let him keep working with that dollar. So, it just depends on the management though.
Tobias: Yeah, that’s a good answer. I agree with that. I was going to say I have a slight preference for yield, not necessarily dividends, I like to see. I just like to see the money.
Jake: Either way. I mean whenever return of capital.
Tobias: The fact is, most companies can’t reinvest all the cap– most good companies can’t reinvest all the capital that they generate. And so, they need to be paying it out or opportunistically buying back stock, making smart acquisitions, doing things like that. I have a bias towards a little bit of that rather than reinvesting it because I think that most management teams aren’t up to reinvesting it, but then that might just be focused more on the management team. Certainly, Buffett’s one of those guys. He’s in the discussion. We’re thinking about bringing him on the team, maybe starting five, next time, next season, see how it goes.
Bill: The thing about dividends is cashflow is what actually makes you rich or wealthy, I should say. Riches in number, cashflow is passive income exceeding your expenses. So, I haven’t seen too many people pay bills with buybacks. Now, you could sell proportionally into one and that makes sense to me.
Jake: That was the most out of 2020 comment I’ve heard all year. [chuckles] Don’t get rich with cash flow.
Tobias: Well, that’s what Greenblatt said on the Ritholtz podcast.
Bill: What?
Tobias: That if you took all the companies last year that had a billion-dollar market caps, all great– I think it was market caps that had lost money, and you invest in those, you’re up like 65% this year or something like that. And you have outperformed, obviously, if you’re up that much.
Bill: Yeah, man, it’s the golden age of selling dreams.
Fading ESG Returns
Tobias: Comment here from Value Stock Geek. Fading ESG will be a solid source of returns for the next decade? I just put that up because I wanted to make a comment about that. The problem that I see with ESG, aside from the fact that the same argument that everybody always makes, everybody’s got their own definition of it, objectively, there are some problems with definitions of ESG. There are things that we can all agree on and probably, we could produce a good ESG product, but nobody who’s sensible and agrees on all those things is going to invest in it, unfortunately. You need to be appealing to the fringes, so they’re always going to be loopy, these ESG funds.
Bill: Well, look, when I said what I said about Nike. I’m not trying to go invest in companies with the hope that they’re going to go exploit children. That’s not my statement. But if I was in Nike, I mean, honestly–
Tobias: That’s how you screen for it.
Bill: Yeah, well, that’s what I’m saying because I’m sure somebody’s going to get all mad. But–
Tobias: How about Rick?
Bill: –on the other hand, if I held Nike, and that came out, I don’t think I’d sell it. And that’s just honest, and I’m sorry if that pisses somebody off, but that’s the truth. I mean, I’m betting on the brand, not whether or not they’re going to exploit child labor in perpetuity. So, I don’t think I’d sell based on that. If Apple is exploiting children, I don’t think most Apple shareholders would sell. I think they’d be like, “Oh, buy back into the shares selling off.” Just make sure that I get more buybacks.
Jake: What about the ESG argument that’s similar to the indexing one, where it’s just the flow of funds is going to be enough to kill you for the next 10 years if you were to try to fade it?
Tobias: And I have the same argument with the other argument, the other flow argument. Doesn’t that just leave you with all of these good– I don’t care about multiple rerating. I just want something that has a reasonable yield and reasonable growth. And if I buy it at that level and I keep on getting those things, I don’t care if the multiple doesn’t rerate. That’s the thing that these arguments seem to miss. I don’t care if the multiple doesn’t rerate. If these things get cheap enough that I can buy, I’ll go and take them over. I’ll go and take them out myself. I will be the agent and I will make money doing that. The arguments are so silly. I didn’t mean to direct that at you. Sorry.
Jake: Wasn’t at me? I do know who it was at. [laughs]
Bill: No. Well, the other thing is, say that there are no flows into Altria. I mean Altria fundamentally–
Tobias: You get a 10% dividend.
Bill: –is selling. And it’s selling one of the most addictive products in the world that’s ever been invented, and it’s one of the best businesses ever. So, if you want to pound that down to five times earnings, they’re going to buy the shit out of their shares and the cash flow is going to be there. So, if you have a long time horizon and you actually don’t care about underperforming, that’s really okay. It’s sort of in a weird way presents the opportunity that everybody else is afraid of. So, fine, just puke it, I’ll take it.
Tobias: If you’re fundamental guy, it’s the best thing that could possibly happen to.
Bill: As long as you have the capital–
Jake: As long as you can survive.
Bill: –allocator that will return it.
Tobias: As long as you can survive.
Bill: And has a cash flow. Yeah. That’s right.
Pabrai Concentrated Investing
Tobias: What do you think about concentrated portfolios? Pabrai. Pabrai only holds two stocks at the moment?
Bill: No, he’s got a bunch of Indian ones. He only has to disclose the US ones.
Tobias: Okay.
Jake: Don’t we answer this like every other week?
Tobias: Pabrai specific?
Jake: [crosstalk] No, just concentration in general.
Bill: Yeah, the guys that you read about and worship are going to have concentrated portfolios and they are littered with people that tried and didn’t– now they’re like poor and the wife hates them. So, how much do you care about survivorship bias when you worship– [crosstalk]
Tobias: There’s a big survivorship bias. That’s right.
Bill: Yeah.
Jake: You can make the argument it’s perfectly rational for them though to do that because you either hit a home run or strikeout and go find another job. Inherently, you have to kind of expect if you’re trusting a manager, their incentives are to go big or go home. Unless they’ve got their own money really right next to yours, which is the only semi anecdote of that.
Tobias: That’s one of the interesting– the concentrated investing book, we looked at guys who had 25-year track records of outperformance. I think the thing that really stood out to me was that the nature of the businesses that they bought, more Buffett stuff. We’re not going to buy anything that’s got any catastrophe risk in it whatsoever because if you’re going to be concentrated and you’ve got 10% or 15% or 20% of your portfolio into something and that blows up, you lose a limb if that happens, you might be out of business.
Jake: You wind up being like really safe stuff like hotels, airlines.
[laughter]Jake: Real steady cash flows, restaurants.
Growing Business, Stagnant Share Price
Bill: I was thinking about this the other day with a lot of these SAS multiples. I really do understand why people are doing it. I just think the hard thing for me to then get to is if you’re buying those companies because of some of the inherent safety and growth in the stocks, if you end up underperforming because you didn’t do good valuation work, and the valuation already has blown past– Like a couple people are like, “Oh, we’re only in the third inning.” It’s like, “Yeah, but the fucking stock is priced like–”
[crosstalk] [laughter]Bill: That’s not really the question here. Unless I just don’t understand the game, which I may not. But there used to be two parts of this game that mattered.
Tobias: They still matter.
Bill: Maybe, I don’t know. But what I do know is if in seven years, they haven’t really gone anywhere, but the business has grown into the valuation, I think you still own a good business. And maybe if you have a 30-year time horizon, and you’re right–
Jake: Which they all do, you know that– [crosstalk]
Bill: Yeah.
Jake: –thinking. [laughs]
Bill: Right. What I’m saying is I understand the behavior. I think that the behavior has been taken way too far, and I think that it is been too rewarded. I think if I was one of them listening to this, I’d be like, “You don’t know what the hell you’re talking about. You missed out on all that,” some of that’s a fair criticism. I don’t disagree. But I also don’t think that the comments that I’m making don’t have merit because I missed out on some of– I admit, I maybe don’t understand what Twilio can be. If you think I’m not at least curious enough to understand what that company does, then I don’t think you’ve listened to the podcast. And what I’m telling you is, I’m curious enough to know what it does, and I don’t have a clue how you get that build up on it here. But-
Tobias: Snowflake.
Bill: –I would have said the same thing before.
Jake: Well, it’s first order thinking that we say this company will be bigger in five years. Okay. Totally, I believe you. I think that’s a very reasonable assumption. However, I’m not sure that the security price will be bigger five years from now.
Tobias: The business will be bigger. The company might be the same size or smaller.
Bill: Yeah. I think that the error that I used to make when before I really thought deeply is, your terminal cap rate is going to be quite a bit lower. So, your terminal multiple is going to be quite a bit higher in these companies than it will be in other companies. I mean they are going to trade at steep multiples in perpetuity. But–
Jake: I’ll take the under on that.
Tobias: Perpetuity is a long time.
Jake: There’ll be a day when this stuff is super cheap.
Bill: Software, in general, that’s going to trade a big multiple. No fucking way, man.
Tobias: I don’t why.
Bill: Why? Because they’re incredible businesses.
Tobias: They are. If it’s that easy to start and disrupt, why won’t they be competed? Why won’t the competition come in and compete for some of that?
Bill: I think that’s a fair question about TAM and duration and all that stuff, which is why I have not been comfortable playing that game.
Tobias: Snowflake has a $62 billion TAM, and it has a $65 billion market capitalization. I think that’s amazing.
Bill: That can’t be the TAM like five years out. That might be today’s.
Tobias: The market capitalizations today’s?
Bill: Yeah, I know. I mean, I get it. I do get it.
Jake: That’s real.
Tobias: The margins are negative 52%. But the Credit Suisse report said that by 2042, margins will be 48% and they will have grown revs from– I think they’re like $558 million, then you grow them 90 times. Good luck, everybody holding that from [crosstalk] 2042.
Jake: That’s to get to breakeven.
Tobias: It’s currently trading on 80 times, 2021, expected price to revenue. [laughs]
Bill: 2021 is a little early. 2023, I think you’ve got to think. First of all, I agree with what you’re saying and the sentiment you’re laying down in how you’re saying it. I also do think that if you’re looking at this year’s sales multiple, you’re doing it a little wrong. But–
Tobias: I’m looking at 2021’s.
Bill: No, I know, but I think you;ve really got to look at like 2023, I mean if you’re really going to play that game. With these hyper-growth– [crosstalk]
Tobias: Okay. It’s probably like on 30 times.
Bill: What?
Jake: What’s the right multiple then though?
Bill: I don’t fucking know. If I knew this stuff, I’d play in that world. But what I’m saying is, I used to say that I definitively knew that it was crazy. I do not know that, and I have been wrong in the past. I also do believe that the price you pay matters, and in my opinion, the reason that I was comfortable laying the bet Zoom, and I still think that I have a reasonable shot at winning that bet, is I was betting on an $80 billion base compounding, and $80 billion used to be a lot of money. Maybe it no longer is, but as far as I’m concerned–
Jake: What’s the update on that? Where are you at?
Bill: Oh, I don’t know. I haven’t looked but–
Tobias: We’re running out of time here, fellas. But if you can–
Bill: But–
Jake: Give us an update later.
Bill: –big bases compounding for a long time is by definition difficult.
Tobias: I like big bases and I cannot lie.
Bill: There you go.
Jake: [chuckles]
Tobias: All right, guys. Thanks very much, fellas. We’ll be around next week. See you then.
Bill: Have a good one.
Jake: Cheers, everyone.
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