2min chapter

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Episode 631 | "Pizza Pizza"

The Joe Budden Podcast

CHAPTER

The Real Estate Blue Wall

"I know you won't even come in here and what? And what? All the whole company here?" he asks. "Your man is scamming. That's why you was white." He adds: "What you make a promise? You can't really promise," before going on to talk about his own real estate business.

00:00
Speaker 1
But I guess my lesson would have been and had I looked at the company earlier this year before the meltdown really took hold, would have led me to pretty easily pass because you're always looking for the one thing that matters. And in this case, it would have been the inventory, right? And it's like, all right, yeah, look, this can be stored. It can be bled off for cash. It could even be financed if necessary. But what would lead me to believe that this inventory needs to be this high. And with a balance sheet that's already pretty levered, it just doesn't leave me the wiggle room. Again, another concept that seems to have been completely tossed in the garbage can the past few years is immersion of safety. Like, well, what if something bad does happen? Right? And now something bad has happened. And the stock price is at a level that's 50% lower than it was five years ago. Right? I mean, this is not a good outcome for anybody. And so getting back to my old favorite dead horse that I love to beat is Peloton. And again, like I was trying very hard all along the way to not be overly pessimistic and not sound like I'm short to stock because I never was. But it was one of the dumbest things I've ever seen in my life. And just to tie a bone, the stock is now at $9 a share. The all time high about five quarters ago was $171 per share. The IPO price, which was only in 2019, was $25 a share. I mean, this is a complete and total categorical disaster for anyone who's owned this equity through this through this parabola. And look, the sales arc has been a parabola. But there are two problems I would have had here. One is that the company never made money. And to extrapolate it into something that is never before happened because you assume that current trends are not only going to persist but accelerate because they would have definitely had to accelerate to justify anything. Doesn't leave any room to be wrong. There's absolutely no margin of safety in that. And then if you find one thing similar to the inventory issue, it's got some miracle growth. You find one thing that just makes absolutely no sense. It's really hard to justify the rest of it. And in the case of Peloton, I've said over and over again, the assumption they were making internally with their lifetime customer value or their customer acquisition costs and all the other stuff they were telling was that they were going to have a 13 year customer relationship is just madness and total nonsense. And I said at the time, and I'll say it again, there was never a reason to suspect anything other than a huge glut in a roaring secondary market for Peloton bikes within a couple of years. And that's exactly what we have. I mean, there's plenty of articles you go look up right now, you go find them on Craigslist or eBay, right? I mean, everybody's dumping their Peloton bike right now. And it's because fitness has always been a short lifecycle, fad, come and go kind of thing. And I can't tell you how many people just said I was too old or stupid or dumb to understand like this is different because of the community or the competitive nature of it or the flat screen on the bike itself or whatever it was. And it was just all nonsense and saying 13 years is going to be the average life of your subscriber was totally totally nuts. And so here we are. So when I find something like that that's just foundationally wrong, I just it's a quick and easy pass
Speaker 2
for me.

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