Stock Club EP #188: Inside Google's Antitrust Showdown: What Investors Need to Know!
Emmet and Mike explore the Google vs. Epic legal battle and the wider implications for the tech industry.
Dec. 14, 2023

Key Highlights:

1. Google vs. Epic: The App Store Battle

Get insights into the legal showdown between Google and Epic Games. Understand the stakes and potential outcomes of this lawsuit, and its impact on the app store landscape and tech giants.

2. Macy's Future: Investor Buyout?

Delve into the possibilities surrounding Macy's potential investor buyout and what it could mean for the future of department stores. We examine Macy's current situation and investor interest.

3. The Broader Tech and Retail Impact

Explore how these developments affect the larger tech and retail industries. From real estate strategies to legal precedents, we discuss what these changes mean for the future.

Emmet: 0:00

There's no debating that department stores have come under a lot of pressure. You know, as we've all seen it, every single listener has changed the way they engage with retail.

Mike: 0:10

Epic started pushing its users to go directly to Epic, basically to buy new games, and circumventing that 30% App Store tax. We call for the sake of this episode.

Emmet: 0:22

There's barely a business out there in the digital world that hasn't looked at the chokehold they have on the ecosystem.

Mike: 0:34

Hi there and welcome to Stock Club, a podcast brought to you by my Wall Street. I'm Mike and you're in today's episode. It's my Wall Street's Chief Investor, emmett Savage. This podcast is brought to you by Vote From Business. Now, if you're like us here in my Wall Street, you'll know that running a business is hard. There are countless things to think about. Some get ignored and some get completely forgotten about. That's what our Vote From Business can help. They crafted a suite of tools and supports to boost your business's operations, and the best part is it's free for everyone. From cybersecurity to harnessing the power of AI, building a website and improving how your teams operate remotely, vote From Business will help you address the often overlooked but crucial elements for your business's success. To get started today, check out their Vote From V-Hub Digital Support and Advice Service. You'll find everything you need right there. Find the link in our show notes or just simply Google Vote From V-Hub for more details. Now let's dive into the show. Emmett, how are you? How are you getting on?

Emmet: 1:27

Good seeing you, Mike. I'm doing good. Are you recovered after our Christmas?

Mike: 1:31

party, I am. I am Just about how did you get on?

Emmet: 1:35

It's coming to the Atlantic was pretty temperate at the end. It wasn't as lovely, it was just like the med.

Mike: 1:40

That's what I was going to say. There are two big things how did you get on with the swim and what did you get for Secret Santa?

Emmet: 1:49

The swim was. It was Baltic. Imagine melting a glacier, which unfortunately we don't need to imagine too hard to do. Imagine melting a glacier and swimming in it. That's what we endured last Thursday morning in Galway on Salt Hill Strand. The problem with walking into the ocean is that it comprises of about 20 or 30 decisions. Like each footstep is a decision, you get there and you jump, whereas if you just go to a pier and jump, it's only one decision, and that's why I would have rather go to the high board and jump into the sea, but we went to the agonizing one step at a time route, so I find it pretty tough. As for Secret Santa, it was brilliant. I got a Michael D Higgins, the president of Ireland, t Cosy, and I also got an incense burner, but it smells like Irish turf and you can burn it in a little cottage. So lovely stuff. What did you get?

Mike: 2:50

I got the basics. I got a sock, a pair of socks and a mug. I don't think my Chris Grinnell was getting too creative, but I know he's listening, so I feel like the socks are special.

Emmet: 2:59

I don't want to say that much they are special.

Mike: 3:01

What's the muck saying? The muck says sound is a pound.

Emmet: 3:08

Irish expression. For what, mike? How do you describe sound as a pound? What would sound as a pound? Be it just means like some it's solid. Yeah, someone is solid or a situation is solid. Sound is a pound, sound is a pound Right.

Mike: 3:24

That's for Americanists. All right, let's get into the show. So we have a big landmark case against Google that just kicked off this week.

Emmet: 3:34

Yeah, I believe you're looking at it. So what was the story? A decision was found against Google where there was anti-trust offences and monopolistic behavior, and I was reading it only yesterday in the Wall Street Journal. Can you talk us through the story, mike?

Mike: 3:49

Yeah, so there's been a very public court case ongoing between Google and Epic Games. Epic Games is the maker of Fortnite and a little bit of other popular mobile games obviously, which people access through Google's Play Store. It's App Store, so most people know, but it's the basis of the lawsuit, so we may as well go over it. Basically, there's an App Store tax. Google and Apple will take 30% of basically any in-app purchase made or any purchase for an app made on their App Stores, which is essentially I don't know about you, but every app on my phone anyways for subscriptions now this drops to 15% in the second year and then for smaller developers that take in under a million revenue, they can also get applied that 15% instead of the 30%. But if you're a big company like Epic or Spotify or Match Spotify and Match have also been through a similar rigmarole and they've come out with different outcomes we'll say but if you're one of those big companies, that's a huge tax on your revenue because the vast majority of your revenue is coming from that one source. Do you know what I mean? No, I know exactly what you mean, mike.

Emmet: 5:03

For the first five years, my Wall Street was at the behest of the duopoly of Apple and Google, and it is a horrendous tax and it really hurts.

Mike: 5:14

Yeah. So the important distinction here is that it's only for digital services. So if you're listening to this and thinking like 30% of your delivery or Uber orders go to Apple or Google, that's not the case. It's just kind of if you were to sign up for Tinder Plus, but it's basically them gatekeeping the entire mobile ecosystem that, in fairness to them, they built. Ios and Android are powering almost every phone in the world, apart from a few kind of smaller operating systems. So there is the case that, well, we've built this system and you're using it, so we're able to charge you what we want. But for those companies that have enough power to kind of, let's say, go up against the big dogs, it's coming to a head now, and Epic is kind of the harbinger of this new wave, we'll say so. What happened originally was Epic started pushing its users to go directly to Epic, basically to buy new games, and circumventing that 30% App Store tax. We call for the sake of this episode. They swiftly got kicked off both app stores and then they brought the antitrust case against both Apple and Google, and so in Google's case it concluded this week jurors found in favor for Epic on all counts. Google was accused of anti competitive behavior, quashing competition, overcharging its developers, who had no choice but to use their service, and one of the key allegations was that Google legally tied together its Play Store and its billing service, meaning developers are required to use both to have their apps included in the store. And this is the big one, the kind of well, it was all inclusive. It's not one thing, but essentially it was just guilty of anti competitive behavior, antitrust, monopolistic behavior. So that's kind of where we're standing now. Now, no, no decision has been made in terms of remediation or anything but but yeah, that's the lay of the land and it's a pretty, it's a pretty big deal.

Emmet: 7:21

It's a huge deal. I mean, there's barely a business out there in the digital world that hasn't looked at the chokehold I have on the ecosystem. And you're right, apple and Google built that ecosystem and all credit to them. They've built the department store, as it were. But the internet has existed for 20 years before that and there was no kind of top skimming For any product sold over the internet. So I think digital businesses are now kind of comparing the way it was to the way it is, and certainly we and my Wall Street Walked about them have lived that experience. So what happens next, mike? I mean, how is this gonna play out? So it seems to be now just frozen. Determination came out and the world is waiting to see. So what?

Mike: 8:05

Yeah, so the courts gonna begin. It's not till January, I think I'm. What remedies to implement? Bush, let's, let's kind of move away from that and maybe talk the long tail effects, which is that the entire mobile Ecosystem could be kind of on its head if the decision is appelled. Of course Google are gonna be appealing and, in fairness to them, you know they're not a monopoly, they're they're a doopoly. So there might have something to fall back on there, I think. According to its lawyers, it's saying that they compete intensely on price, quality and security against Apple's app store and they do not want to lose 60 million Android users to Apple every year. It's Google has lowered its fee structure to compete with Apple and it said this is not the behavior of a monopolist, which I mean you know fair enough. I don't know if that's I'm not a legal expert. I don't know if that's enough grounds to say, all right, we're not a monopoly, but we are a doopoly, if you will, and yeah, that will that be enough to get you away with it. So it's interesting to see what happens next and we can kind of speculate here and Obviously, look, this court case will go through years of appeals and million dollars leave is, and yeti at it. But what Epic have said and this is important line to draw here is that and this is a quote here Google's app store practices are legal and they abuse their monopoly to extract exorbitant fees, stifle competition and reduce innovation. Mmm, what's?

Emmet: 9:31

no, it's interesting, sorry, sorry.

Mike: 9:33

Mike, no, no, continue on there. I'm just gonna say what's important is that that is what a jewelry of peers have said about Google. You know that's not going away anytime soon.

Emmet: 9:44

What I was gonna say was A duopoly and a monopoly. They're their first cousins. You know there's a duopoly. Is sigmes twins a monopoly with sigmes twins and has Apple done anything? Have they has to mean any signal from Apple. How is it gonna play out for them? Is there kind of a thought process out there on Apple's response or is it literally? Are they just gonna sit back and watch the show and glad it's not them?

Mike: 10:08

Well, a bit of both. So absolutely to your second point there already doing that. But Epic brought this similar lawsuit against Apple that ended in 2021 and, yeah, for the most part it rules with the judge rule like largely in favor of Apple. So the difference there was there was no jury and the decision was just left in the hands of one judge. So there was some concessions and Apple is still fighting some changes to its rules from the judgment, the main one being that developers would be allowed send customers to their own websites to basically circumnavigate the the Apple payment. But that's, I think there's a state of execution on that and that was kind of the main concession which Apple are still fighting. So there's nothing as concrete as this whatsoever. So but Now the fact that maybe Apple made the right decision and not bring in any jury and maybe had some better lawyers than Google, but off the back of this decision, that epic wants to Basically revive some key points from that case in the Supreme Court, that's tough to see why they can't if they're set up Present here with the Google ruling, because they're basically the same allegations on both companies. I don't see why there would be a distinction.

Emmet: 11:21

Yeah, it reminds me of last week. We spoke about Spotify and and, as far as I recall, a few years ago Well, actually, I definitely recall a few years ago they're very much in locked horns with Apple, who were in abuse of their monopolistic position. They didn't need to pay themselves a 30% cut, whereas Spotify did. Am I right in saying so?

Mike: 11:41

Yeah, so actually Spotify were brought up in the Google case as well, because Google has essentially made a special Dispensation for Spotify, where they can send people to Spotify, comm or whatever else to pay. Oh.

Emmet: 11:55

So there's a precedent set and a customer practice, if you like, for by passing the rulebook if you fight hard enough.

Mike: 12:02

Yeah, pretty much there's. Just it was a special relationship between Google and Spotify because Spotify is such a it's probably one of the largest Revenue apps on the place. You know, I mean, and that was actually a big part of epic's case, where I suppose it kind of shows that Google knew what they were doing, wasn't completely right. Do you know what I mean? It's like, oh, make an exception for the big boys, and but yeah, it's really interesting if we want to start speculating about what, first of all, what the mobile ecosystem looks like after this. I think we're going to see a lot more power in developer's hands. We'll see. Obviously, the main one is sending people directly to Directly their own sites for payment and stuff. You know, if you could pass on that 30% discount to the customer, we're gonna benefit from that, which, in time, at its most basic case, is you know the benefits of not Not anti competitive practices. You know what I mean. I think where anti competitive and like anti trust is gone is Does it negatively affect the consumer, and if apps can go and turn around and be like we're getting, we're getting 25% off your subscription Because we don't have to pay Google 30% anymore, that's a very clear case of it. When we talk about Google, we can speculate here even more and it gets a little spicier. So it's not a huge, huge part of Google's revenue source and it came up in the core case. It made 12 billion in operating profit in 2021, with margins more than 70% According to sooner Pichai. This is not accurate margins wise, so doesn't account for R&D costs for Android and other us. But what's really interesting is the timing of this. So, as I mentioned, what epic said you know like isn't. Basically, google is been found guilty of what is it now? Illegal practices and abuses of their monopoly to extract extorbitant fees. So this is coming out while Google also has two more cases running against the Justice Department, the first one against its search engine Donovan it's, and the second against its advertising technology business. So the fact that a San Francisco court is that kind of on its Quivocally said yes, google is guilty of anti-competitive behavior and monopolistic pricing, doesn't look great right now, and you know, if you really want to get into it, could this be the straw that breaks the camel's back? And Is this the? Is this the one core case that might lead to even Google getting broken up? I feel like I feel like that's a big statement to say, but it's a lot more possible now than maybe, maybe last week. Do you know what I mean?

Emmet: 14:46

Yeah, yeah. It's funny because we live with monopolies and we stop seeing them after a while, whether it's a utility provider or whether it is, of course, the search engine we just all use. And it brings me back to a conversation we had in a recent podcast about Porter's five forces. And it's only when one of those Bargaining powers rises to a level that they can actually disrupt the system, whether it's legally or through negotiation you actually see a monopoly start to fail. Like if you take it Slightly off topic, but like the bargaining power supplier. I think of Taylor Swift that time at Apple, where I think she just wasn't getting Pain enough, for did she threaten to pull her music? There was something about her rights on Apple music and Spotify, just she wasn't happy with the terms and conditions. And now we see an equivalent With Epic, as they go, as they have now locked horns with Google, and they are actually disrupting the rule book as it sits, although I'm very curious to hear that that rule book has already had it has already had an exception with this special relationship status. So I wonder could it be resolved? Could the epics and Case be resolved with a special relationship status, or is the entire Rule book going to have to?

Mike: 16:04

change. Well, this is interesting as well, and it kind of puts epic in this freedom fighter status a bit, where they weren't looking for Compensation at all in their remediation process. They wanted Google's app store to be open and more competitive, which is completely vague. But the intention is look, we're not gonna, we're not trying to, we're not trying to profit off this and we're not trying to get a better relationship for ourselves. This is to actually Bring in change within the mobile ecosystem, and so for that reason, I think we will see much more long-term impacts than just Epic and paid out whatever 500 million quid or something. Yeah, it leaves Google in a very tenuous position. Just out of curiosity, if Google was broken up, where would you like what? What company would you invest in? Or would you invest in all of them? Would you invest in the search business, the ad tech business, the cloud business, flipping, now what's it called? The? The driverless taxis, waymo?

Emmet: 17:09

Yeah, I, based on the four choices there and without knowing the economics of any of them, I'd lean towards the cloud business Because I think the ad tech business is. I mean, they have the lead position, but I believe ad tech is getting Smarter and smarter and disruptors are coming up and actually changing the dynamics of that particular market, even though Google hold the keys with the algorithm search business. I mean the search business and the ad business. That's the same thing, isn't it?

Mike: 17:42

they like to make a distinction isn't, probably, isn't fair, but more so the the ad exchanges and the auctions which Are so linked to the search business. That that is why I think they're getting them.

Emmet: 17:57

They're getting another competitive Antitrust case against them, but yeah, if you could invest in Google ventures, which is their, their bottom drawer of their kitchen, which is yeah, that's the moon shot. Yeah, the moon shot. I'm very, I'm very interested in that because they're out to cure things like senescence, which is like the Process. It's a disease but it really is, just as we all know, getting old. So when you look at somebody's 80, you can tell they're 80 because of senescence. It's a, I suppose a. Well, just say it's a. It's a convergence of illnesses that all together you just say out they died of old age. Yeah, they're, they're to cure senescence, so they're thinking very big. I read an article once in I was either fortune or Forbes that if you walked in with his surgery brain with a time machine and you said, right, I plugged this in, I've invented a time machine, he'd be annoyed that you need to plug it in. So good isn't good enough, great isn't great enough. Like he's the type of person who strives for more. More is not enough. So I kind of like the incubation of what it's almost reflected in. That's also invested in my Investment style. I like businesses that are earlier on in their journey with a big disruptive mission, and so that's probably whatever aligns with that is what I would invest in. Should that, should that break up, ever happen. What about you? Which of the, let's say, four or five Piles of business would you have most interest in?

Mike: 19:28

I think, I like the cloud business because it's probably the only one not guilty. I'm not a monopoly. I think it's behind Amazon and Microsoft. The, the moonshot portfolio actually makes a lot less sense by itself because it's Basically using excess profits to fund it From Google's other ventures. I think and maybe this isn't making a distinction because Waymo was originally a moonshot. I'm not sure if it still is, but I think Waymo could be really interesting. I think there's there's a lot of progress being made there very fast.

Emmet: 20:03

No doubt. Yeah, well, driverless, as we discussed in recent times, is Inevitable. It's just, I think, arriving a little slower than one might think. But, yes, I think Waymo they the open source brand that Google brings, I think, is ultimately going to be the Android of Driverless cars is going to be Waymo, I think we can say.

Mike: 20:23

I'm gonna do a quick promo first. First, so quick reminder folks from Vodafone business sponsors stock club, check out their free one-to-one digital support advice Today to discuss a range of topics from social media tips, cyber security and building a website for your business. Search a Vodafone vhub or click on the link in the show notes. Right, emmett Macy's so I remember it is from. She said how long ago it was now three years ago, I'd say. Where you said on this podcast that you thought Macy's was, it was in a lesson. Five dollars a share, you thought it was in the bargain basement and you thought it was gonna double in the year ahead. Was that your call? That was the call. Yeah, so it's back in the news after an announcement Monday that an investor group consisting of our house management and brigade capital has made a five point eight billion offer to take the department chain store. Private Shares are up about 20% on the news. So talk to me about everyone's favorite visit to when they're in New York.

Emmet: 21:21

Right, well, first start, macy's operates under three brands Macy's, bloomingdale's and blue Mercury, which I'm not familiar with. I think it might be a makeup brand, but anyway, that's the three big brands that they have and together they have seven hundred and eighty stores, I think entirely in the United States and, of course, online. But interestingly, the company goes back to 1858 when Roland Hussie Macy opened a small dry goods store. That's a great old-fashioned name there, great grandpa Roland Hussie I love that name is like you know, you don't mess with a Roland Hussie Macy like that's a 10 out of 10 for a name. But what's interesting is that about 12 years after he opened the first store, great grandpa be Roland introduced to concept of Fixed prices, which eliminated haggling and provided customers, of course, with transparency. And then, a few years later, macy's pioneered the use of window displays to capture attention and showcase all the lovely things that they have for sale. And they're two giant retail innovations that we don't see or even regard regard anymore, because they're the norm. You go in, there's a fixed price and there's a window that you saw the item that you want to buy. But you can imagine going into Macy's now and haggling for a bottle of Odeclone. I'll give you 10 turnips for that. No, 12 turnips or nothing 11 turnips. Okay, 11 and a half turnips. You're an awful man, the boss. 11 and a half turnips. Here's your perfume. I'll put the turnips in the cash register. Mark Mike, apart from the colony, mark Mike, apart from the retail brands and the network and all that retail you stuff that goes With owning a chain of department stores, do you know what else you're buying when you purchase Macy's? Oh, really, yeah, I'll get on to that, but you're buying the Thanksgiving Day Parade which is a tradition since 1924. Did you ever see that when you lived in New York, the Thanksgiving parade I never went to?

Mike: 23:25

it no.

Emmet: 23:26

Well, it's 100 years old next year, mike, so we should head over to see it. I think I heard the real Spider-Man is going to be there, so we should definitely head over. Well, as you said, what are they buying? I think you hit the nail on the head. Their shares surged on Monday after Arkhouse Management and Brigade Capital submitted a buyer proposal, which is 21 books a share. It's pretty much there now, so that was a 32% premium on where the shares closed the day before. And, as Arkhouse is a specialist acquisition firm, they look at real estate investments and they've been in the past for office-based developer Columbia Property Trust and Preferred Apartment Communities, which manage multi-family housing, and Brigade Capital Management. On the other hand, which is the other half of the bidder, they're more retail-focused and they have investments that have included JC Penney's and Sears and Nyman Marcus and lots of other brands, so this is potentially a perfect acquisition partnership, but they are almost certainly interested in Macy's for its real estate and, of course, macy's has declined to comment and, as of January, macy's owned more than 300 of its 780, 783 stores, which, as I said, includes Bloomingdale's and this Blue Mercury beauty chain, and it owns an additional 102 locations, but leases the land that the stores sit on. So that's the kind of backdrop of what's actually happening.

Mike: 25:01

Okay, interesting. So if they're looking at the real estate rather than the stores, could this be the beginning of the end for Macy's? Hi folks, just cutting in here to give a shout out to our friends at Babel. Did you know that learning a new language affects areas of the brain unrelated to language processing, such as visual spatial span? With Babel, you're not only acquiring a new language, but you're also expanding your cognitive universe. This fall, start speaking a new language in just three weeks with Babel, instead of paying hundreds of dollars for a private tutor or fooling yourself with language apps that are little more than games. Babel's quick 10 minute lessons are designed by over 150 language experts to help you start speaking a new language in as little as three weeks. It's designed by real people for real conversations, and all of its tips and tools for learning new language are approachable, accessible, rooted in real life situations and delivered with conversational based teaching. I personally use Babel to brush up on my French, and I can survive now in bars and restaurants, which is all I've been doing, but not a bad problem to have. Who knows, if I keep this up, maybe in this time next month I'll be doing this whole ad read in French, we'll see Fingers crossed. Studies from Yale Michigan University and others continue to prove that Babel is better. For instance, one study found that using Babel for 15 hours is equivalent to a full semester of college. It depends what you did in college. You know the gist. With over 10 million subscriptions sold, babel is real language learning for real conversations. With that in mind, here's a special limited time deal for our listeners. To get you started, right now you can get 55% off your Babel subscription, but only for our listeners at babelcom. 55% off at babelcom. Babel is spelled B-A-B-B-E-Lcom. Rules and restrictions may apply. Back to the show.

Emmet: 26:47

There's no debating that department stores have come under a lot of pressure. We've all seen it, every single listener has changed the way they engage with retail over the last four years, whether it's the fact that we've moved to online or discount stores or fast fashion retailers or we're buying directly from brands. If you like Allbirds, you don't go to Macy's to buy them, you go to allbirdscom. This has really disrupted the retail and especially the department store. Experience. Rules is an example of a publicly traded department store chain which has faced pressure from activist investors and continues to struggle with really poor sales. Jc Penney is filed for bankruptcy and was rescued by mall owners. Sacks of Fifth Avenue, neiman Marcus, have been looking at mergers because there's been a huge slump, and apparently there's a chain called Bantan which is again just seems to be withering in the sun Now, according to the Wall Street Journal, only Dillard's, which was run by its founding family, has continued to thrive. There is an existential threat for all department stores, and Macy's is not immune to it. What's interesting, I suppose, is it did fend off pressure from activists in the past who were keen for the chain to sell its real estate and then lease it back. These moves generate profits for investors upfront, but they really do saddle a business with debt-like rent payments.

Mike: 28:28

That reduces its ability to do that 100%. Imagine someone coming into your business and being like we want to turn all your assets into liabilities. Oh, look.

Emmet: 28:35

When I hear of it, mike, I think of things like mobile operators who sell their terror networks to companies for example, american terror, the giant REITs and, in doing so, get a check up front, but, in essence, divest a very important and strategic asset. That is just not easy. To build A mobile phone network, just like a department store network, is a really difficult thing. The planning laws, the building, the maintenance, the management and I can see the frontal lobe thinking for a company going well, just get rid of this. It's a non-core asset. It's not what we do. We run the department stores. Indeed, if you're mobile operators, we wire up routers and gooters and we build people, but we don't run big metal towers. In essence, I personally don't like it. Where are we? Well, mervins, for example, is a defunct department store chain. It offers a real cautionary tale about this kind of sale and leaseback approach. Private equity firms moved in and they bought Mervins and split it into an operating co, and then this property company the property company raised its friends just as the economy flipped over into a recession and Mervins went bust as a result of that strategic decision. As I mentioned Sears, sears went bankrupt in 2018 after its owner, which was the head fund manager, eddie Lampard, sold off its real estate over a period of years and didn't reinvest enough of the proceeds into retail operations. Today, sears is just as what once was an American icon is just a shadow of its former self. It's a handful of stores which had thousands and thousands of stores in its heyday when I lived in Maine in 1988, it was Sears everywhere. But anyway, up until now Macy's has only opted to sell some locations, such as a store in San Francisco, and then it has a team and real estate firms to look and value the rest of their assets. And here's an interesting fast fact or fast something, I don't know if it's a fact Again. According to that Wall Street Journal piece, macy's flagship New York store in Harold Square accounts for about a fifth of the value of its real estate portfolio. So really, when you go to a New York, I mean, and most Irish tourists in New York City end up heading into Macy's, it's an amazing event, like it's a huge thing. And every morning they clap you as you arrive. If you're an early riser, it's a great thing. That piece of real estate, you can just imagine its value sitting in the bull's-eye of Manhattan Island and Macy's is an American icon. It is one of these brands that just is as American as Apple Pie and I prefer if they were just left alone, unless they say over here leave good enough alone and just let this new incoming CEO, who's starting in January or February to give it a shot, continue to improve operations without selling the gold and goose Like. Macy has really improved its overall position in the market over the last couple of years. Its share price, as you said in the opener, went from something like four books and change a few years ago to about 30 books at a high, and now someone is moving in to buy it at $20 and change. And I would prefer to see it left alone because the history books show that this type of acquisition does not work out in the long term.

Mike: 32:14

If your interest is keeping a department chain store open, yeah, I think these kind of funds, though, are only interested in the bottom line, aren't they? It's just, it's a classic asset play, really, and it's really interesting to think of those legacy businesses that would have built up this real estate portfolio, not unintentionally, but like almost just as part of their normal operations. But over the course of how long has Macy's been? Around 100 years, you said 99. Over the course of that 99 years, they've amassed what has become this unbelievable real estate portfolio across. America and what you said like one of the most valuable buildings in New York is part of it. It's an interesting way of looking at stocks and I remember Peter Lynch it was one of his six types of stocks and he mentioned that in particular. He had an example I think it was some ranch in Texas that the real estate the land was on was worth twice as much as the stock price. So it is interesting, and that's probably where these types of investors look is for those legacy businesses, especially when it comes to real estate that I've built up almost unbeknownst to them. I really say a portfolio like that. So yeah, it's good, it's good, I wonder if I move off it. Sorry, mike. No, no, it's just the same. I'd love to know about McDonald's McDonald's before print when it comes to real estate. I think it'd be really interesting.

Emmet: 33:40

Are they freeholders or leaseholders? Do they actually buy the turf of land? I think they must have a mixed approach. They couldn't roll out the way they do if they didn't have a bit of both.

Mike: 33:49

I think originally it was they bought the land and then would rent it back to the manager of that store was how it worked.

Emmet: 33:57

Oh, interesting. But never have I heard of anyone selling their house, for example, and then renting it off the buyer, and that's bringing it right back to a domestic situation. Maybe it happens, and I can see why you would do it If you felt like I'm in my 70s I've only so many years left on this planet and I want to unlock some capital. But when you take the fact that people don't do it with what is generally their primary asset and then transpose that feeling or thought onto a commercial property or a chain of department stores, the same logic applies the asset is the asset. Selling it for cash, a checkup front, sure, that's fine. But there you go. I just don't think it's a good thing to do. But then again, maybe if I was selling one of those capital acquisition firms, I'd have a different opinion.

Mike: 34:44

Yeah, I think maybe your analogy was unintentionally very, very accurate, where someone is in their later ages and just wants a bit of cash to enjoy before they kick the bucket. Yeah, could be the same thing for Macy's.

Emmet: 34:58

Yes, exactly, oh haunting. Anyway, look on the subject of Christmas, because Macy's, to me, is just a total seasonal business. When I think of Macy's, I think of Christmas. I thought it'd be fun for the two of us to do a seasonal pitch. You know, at the time of year we're at middle December, with two weeks left in the year there's Christmas trees and lights up everywhere. So I'm going to hit you, mike, for a seasonal pitch. It can be whimsical or absolutely factual, like the one I'm going to hit you with. So go ahead.

Mike: 35:31

Yeah, and the obvious one to go for is anything e-commerce. You can go Amazon, shopify, etsy, even Global E for a less obvious name in this space. But I thought we'll stay with e-commerce, but we'll go a bit further.

Emmet: 35:45

Global E as a Christmasy stock. You're nearly as bad as me. Anyway, go on to keep going.

Mike: 35:51

Oh it's going to get a lot more boring, don't worry. So I was like I just said no, in fairness, I might have been a bit rushed so I didn't have time to go around Googling stuff, but I just said e-commerce what's a good e-commerce stock, basically. So we're going e-commerce but we're avoiding the tech companies and actually going for a reach, and that reach is prologous. So for the uninitiated, a reach stands for real estate investment trust and gives smaller investors access to real estate. Basically, you can buy it through stock exchanges instead of going through the rigmarole of actually buying up real estate yourself. You can buy a very small portion of it. So they operate portfolios of income generate and real estate. They basically operate as normal businesses, except for a few exceptions. The most important one for us investors is that they have to give 90% of their taxable income back to investors in the form of dividends. So prologous is one of the largest reach in the world, with nearly 5,000 buildings in about 20 countries. It operates warehousing space for companies like Amazon, fedex, ups and Walmart, so it's a huge logistics operation, essentially. So VitalCOG in the global supply chain continues to deliver growth and as more and more business operate as either digital first, or solely digital and online. A company like prologous is only becoming more and more relevant. So, as you said, really strong dividend yield 93%. Great CEO. He's got about 40 years of experience in industrial real estate. His name is Hamid Mohadim, which isn't a great pronunciation. I assume he also has a pretty significant stake in the business themselves. Yeah, there's a lot to like there, only risk. Well, there's obviously plenty of risks, but one of the big risks you can immediately recognize is that it's very close relationship with Amazon, who is at the minute like is always building out its logistics and fulfillment network. So would Amazon look to kind of bring those costs internal Eventually? That would be the only concern I'd have. But yeah, really strong business and interesting. Especially if you don't know REITs, it's a good place to start there.

Emmet: 38:06

So Santa Claus could keep a sleigh in a prologous warehouse, and that's why it's a Christmas-y stock.

Mike: 38:12

Well, like I think there's an argument to be made that a prologous warehouse could be Santa's workshop, the modern, modern day Santa's workshop.

Emmet: 38:21

I wonder if you have a business like selling logs or something and you have a prologous warehouse, is it a badge of honor? It's like, come on, man, I'm coming to show you a new business. You sell on logs and you go, ma'am, it's a prologous warehouse. And she's like oh, son very proud of you.

Mike: 38:38

It is actually interesting if you look at where you get your deliveries from. There might be a high chance of a prologous sticker.

Emmet: 38:48

Come on, you're pulling my leg. Have you ever seen a prologous sticker on anything?

Mike: 38:52

Oh, yeah, all the time, really, yeah, yeah, yeah. A lot of Amazon deliveries, a lot of the big shops, and you get a prologous sticker when you get to the little reason.

Emmet: 39:02

That's why it's Christmasy and nailed it might. That was absolutely magnificent. Well, I'm gonna go with this one in a similar vein, and it's an American icon a little bit better known than prologos, and it's FedEx to do this. We're so dry this episode. We're gonna have to put Christmas music in the background in the same way. Honestly, I just don't know how we're gonna kind of jazz it up a bit. I want FedEx. Everyone knows what it is $68 billion. You know they deliver footballs at Christmas in planes that crash Wilson. But basically it's just an American icon and it is busier in Q4 every year and it is such an efficient business. It's one of those stocks that you don't think about much. It has an amazing dividend 1.8% it has. Its share price has just been on a multi-year term and floated around, I think around January 85. And since then it's just been grown and grown and grown and it kind of went down a trap way back in the 80s and $9 a share. It's an end now by $270 a share. But it's not like the game is over. This business just continues to deliver stuff. It continues more or less to grow revenue. Revenue is a slow upward. It goes up a bit, down a bit up, a bit, down a bit. It's very capital efficient with return on equity and I just think it's a great business. I mean, what says Christmas more than FedEx? You know I was gonna pitch Coca-Cola because I don't know, is there any truth in the rumor that Coke invented the modern day image of Santa Claus, or is that just a load of baloney and urban myth? Oh, she said no clue. What from the ad?

Mike: 40:47

the truck ad.

Emmet: 40:49

Well, yeah, that's the modern incarnation, but I believe, like it was Coca-Cola who fashioned the white beard red suit that Santa is known for. But either way, that's not my pitch. It's not Coca-Cola, I'm going with FedEx, everybody's favorite Christmas stock.

Mike: 41:06

All right, that's two of the most boring Christmas elevator pitches you've ever heard.

Emmet: 41:14

Ah, here Between interweaves, interrupting you and the pictures, I honestly, mike, I swear to God, you know we're gonna have to do, just send everybody something nice when they listen to this podcast All right Before we finish up, just a quick thank you for our friends at Vodafone Business.

Mike: 41:29

If you're a business owner in need of a leg up when it comes to your digital transformation, get yourself over to Vodafone V Hub to book your appointment today. You can find the link and our show notes for more details. All right, evers, thank you very much for joining me on today's show and thank you everyone for listening. Remember, if you have any questions you like answered or elevator pitches you like us to tackle, maybe more interesting than the ones we just gave you, make sure to get in touch. You can find us on Twitter, at mywaastreetcom, on TikTok at mywaastreet, or simply just email us at pod at mywaastreetcom. If you're enjoying the show, leave us a review and tell your friends all about us. Thanks for joining us and we'll talk to you next week.

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