10/20/26 Money at the Pump, Fracking's Future & Bakersfield Businesses in Transition

The Moneywise Radio Show and Podcast Tuesday, October 20th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Radio Show & Podcast" call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com https://www.moneywiseguys.com/ facebook: Moneywise_Wealth_Management https://www.facebook.com/moneywiseguys/ LinkedIn: Moneywise_Wealth_Management https://www.linkedin.com/company/moneywise-wealth-management-bakersfield/ Guest: John Cox, Business Editor at The Bakersfield Californian website: www. Bakersfield.com https://www. Bakersfield.com The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. John Cox and The Bakersfield Californian are not affiliated with nor endorsed by LPL Financial or Moneywise Wealth Management

• 0:00Speaker 00

  Live from the basement inside the historic Woolworths Building in downtown Bakersfield.

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  Call or text in at 661-396-1000.

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  Securities offered through LPL Financial, member FINRA, SIPC. Investment advisory services offered through LPL Financial. LPL Financial and MoneyWise Wealth Management are independently owned and operated.

• 0:37Speaker 00

  Now, let's start the MoneyWise Show.

• 0:41Speaker 03

  Welcome to the MoneyWise Show. We are live from the basement of the historic Woolworths Building in downtown Bakersfield. For the next hour, we are on News Talk 96.1 and 1230 AM KERN, streaming live at MoneyWiseGuys.com. You can call or text into the show 24 hours a day at 661-396-1000. Today, we are your hosts. I'm Sammy Abiyawi with our senior producer.

• 1:06Speaker 00

  Steven Nicholas.

• 1:07Speaker 03

  Steven.

• 1:08Speaker 00

  Hey.

• 1:09Speaker 03

  How goes it?

• 1:10Speaker 00

  We are here in the basement and it's just me and you.

• 1:14Speaker 03

  Yeah, any, any changes since last week? Did the Dolphins win?

• 1:18Speaker 00

  Hey, we didn't lose this weekend. I'll say that. We had a bye week.

• 1:21Speaker 03

  You had bye, that's right. That's right. My Steelers won.

• 1:24Speaker 00

  Yeah, I saw that.

• 1:26Speaker 03

  Yeah, I was, I was.

• 1:27Speaker 00

  Is it your Steelers now?

• 1:29Speaker 03

  Well, no, not really.

• 1:31Speaker 00

  As long as Rogers and McCarthy are there.

• 1:33Speaker 03

  McCarthy got injured.

• 1:35Speaker 00

  I saw that.

• 1:36Speaker 03

  He's got, I don't know if he's going to be out for, for a while.

• 1:39Speaker 00

  Is that what you're pushing for?

• 1:40Speaker 03

  Yes.

• 1:42Speaker 00

  I've never seen that. I'm pushing for the coach to be injured and stay on the injured reserve.

• 1:47Speaker 03

  It just doesn't feel the same after so many years with Tomlin at the Helms and, and so many great things. I don't know.

• 1:54Speaker 00

  I've heard some rumors that Tomlin might be coming back. Obviously not with the Steelers.

• 1:57Speaker 03

  Correct.

• 1:58Speaker 00

  But coming back to coaching.

• 2:00Speaker 03

  Yes, yes. That's sometimes in January, February, he might make a decision, I heard.

• 2:04Speaker 00

  But since then, I mean, we have a World Series all set up.

• 2:07Speaker 03

  Yes.

• 2:08Speaker 00

  Not with the Dodgers for once.

• 2:09Speaker 03

  Yeah, the Brewers. That, that, that kid from Bakersfield, is he still pitching for the Brewers?

• 2:14Speaker 00

  Corbin Burns. I, I looked him up. He was actually traded during the season to the Orioles. So he is not with the Brewers anymore.

• 2:22Speaker 03

  Yeah.

• 2:22Speaker 00

  But, you know, being, being a guy, you know, that roots on the underdogs like the Dolphins. I mean, it's kind of cool to see two teams in the World Series that haven't won a World Series. And this, I believe, the first time since the eighties that there is two teams that haven't won a World Series.

• 2:39Speaker 03

  That's awesome. Great to see. I love, I love the underdog stories, especially in something like baseball. I don't know if, growing up, I watched a lot of movies and all of them were around baseball, especially summer.

• 2:51Speaker 00

  The Major League.

• 2:52Speaker 03

  Yes.

• 2:52Speaker 00

  Oh, yeah.

• 2:53Speaker 03

  Yeah, Sandlot.

• 2:54Speaker 00

  Oh, yeah. One of the best.

• 2:55Speaker 03

  Yeah, one of the best movies ever. I love that. I love that movie. And I, I, I grew up without playing baseball or even around baseball, and I still love that movie.

• 3:03Speaker 00

  But I know we're a money type show, so I'm going to ask you, because one of the main topics during baseball was at the end of the season, at the end of December, their, their contract with the MLBPA, the Players Association, is ending. And one of the main topics is a lot of these teams that don't spend as much money. They have the money, but they don't spend as much money as much as, you know, the, the Dodgers or the Yankees. And a lot of Dodger fans are saying, see? You can say all that, but you don't buy pennants. And, you know, do you think they have a, a fight or a foot to stand on with this one now?

• 3:41Speaker 03

  I, I think so. I think so. I mean, to me, it's, it's not just what you spend on the players. It's the coaching staff, it's the culture. It's, I mean, I, I remember how some, some college football teams, I mean, like, we still see upsets. Like, just last week, we saw a lot of upsets. So I really see, I, I love the fact that without a lot of resources, you, you get to the point where you're now going to the World Series as a small market.

• 4:11Speaker 00

  Yeah, it's a team sport at the end of the day.

• 4:13Speaker 03

  Exactly. So, and, and to me, it's, it's leadership at the helm. Like, who's, who's running the operation? Who are you trading for? Which missing piece you're going to put in your puzzle so it makes it work? And then you, you, you assign a great coach or some coach with a vision, and you, the result is what you're seeing now. And, and, and I truly believe in that.

• 4:32Speaker 00

  I definitely see both sides. I mean, there's saying of any given Sunday, you know, I'm still a Dolphin fan, no matter how this season ends. But I still, when I wake up on Sunday, I still think we have a chance.

• 4:45Speaker 03

  Yeah, I'm, my son tells me every weekend when I watch Manchester United play, he's like, Dad, why don't you just give up? I mean, but I've been a fan for like, I don't know, as long as I remember, and I'm still, I wake up at 6:00 AM and I watch the game and I'm upset, but I still wake up, watch the game and, and he's like, just move to Manchester City, you know, just.

• 5:04Speaker 00

  Jump ship.

• 5:05Speaker 03

  Uh-uh. No, no, I'm a.

• 5:07Speaker 00

  That's a real fan.

• 5:08Speaker 03

  Correct.

• 5:08Speaker 00

  That's a real fan. My wife is like, why are you still rooting on? Like, hey, this is going to happen.

• 5:14Speaker 03

  Because she has to deal with the emotional distress you get after every game.

• 5:17Speaker 00

  Years. I don't, I don't take it as personal. I used to just take a nap. I'm like, okay, I'm just going to go in the room. This is, I hate Sundays. But like any other show, you could call or text in anytime throughout the show at 661-396-1000. You want to start tackling these messages?

• 5:35Speaker 03

  Yes, sir. Let's go.

• 5:36Speaker 00

  All right. The first one, it says, I know from listening to your show and, well, reading the paper, it's not, to not let headlines make your investing decisions. I've also learned personally to not ride the headlines to try to time the markets, or however the term is, which you guys say, but can election time affect certain stocks up or down when they're big pieces when it comes to certain politicians?

• 6:02Speaker 03

  It, it, first, congrats on just the instant. It's really, really good. You have the right instant asking this, this question. And you will see movement during election time, you know, the, the certain sectors especially, defense sector, pharmaceutical sector, things that affect, because they spend money on these elections through, through PACs, right? But

• 6:29Speaker 03

  timing that is where the, the difficulty comes in. Like, oh, I'm going to buy this stock because it's going to go up, right? I don't truly believe in that because I don't believe in the elections actually dictating what the market does. The market still is in a capitalistic market. It's offer and demand, right? So if you see a lot of the demand on the stock, the price is going to go up. That's basically what dictates that. Yes, there's financial results and things that dictate, so that also helped with the stock price. But personally, I do not give a lot of weight to the election. I have a risk profile, right? And I solve for that risk profile. That risk profile for me, I have between zero and 10. I'm a medium type of risk taker.

• 7:10Speaker 03

  So I divide my portfolio amongst multiple things, not just stock market.

• 7:16Speaker 00

  All in the one.

• 7:16Speaker 03

  No. So I'll, I'll talk about my own vision, like what I do for me. My portfolio will, will, will have real estate. Will have some, some stock and maybe some other things. But mainly, mainly for me, I truly, truly believe in real estate. That's my vision, me. Like, I've always been in real estate. My dad has been in real estate. My grandfather was in real estate. So I truly believe in that. And, and I don't let the elections dictate. Now, I try sometimes to just look at like interest rates and, and whatever, but I always follow the risk profile I have for me personally, and I try to buy assets that fit that risk profile. And also a budget.

• 7:58Speaker 00

  Yeah. And I mean, over the 20 years I've been with MoneyWise, I've always learned it's not about timing the market.

• 8:04Speaker 03

  That's correct.

• 8:05Speaker 00

  It's time in the market.

• 8:06Speaker 03

  Yeah. And, and, and definitely, definitely do not just, oh, you know, X is going to go up because it's, and, and they make.

• 8:15Speaker 00

  So and so was talking about it. Oh, it's going to, it's going to go up tomorrow.

• 8:19Speaker 03

  Yeah. So I, I definitely just decide what your risk profile is and make decisions, investment decision based on that. What your life is, what your budget is, and if you're in a retirement.

• 8:31Speaker 00

  And how aggressive, how close to retirement, all of that.

• 8:34Speaker 03

  Exactly. And that's where, I, I mean, I invest for myself, but I also have a financial advisor too, that I sit with at least twice, three times a year. Also my CPA. So there's not just financials, but also tax advice.

• 8:48Speaker 00

  Professionals.

• 8:49Speaker 03

  You want to, you want to, you want to surround yourself with that type of team to make really, really good decisions.

• 8:53Speaker 00

  The next one says, the news are reporting that gas dropped 20 cents over the weekend. If it did happen, what the heck? What gas station am I going to? I go to the one on Panama. I really enjoy your program and was wondering if you guys can share the website that shows the cheapest gas in town. I would like to see if I need to change my usual gas station.

• 9:15Speaker 03

  Well, yes, there is an app called GasBuddy, or AAA also publishes prices. But GasBuddy is a lot more in tune with the market. So you can download the app on your phone and depending on the zip code or your location, it can give you the prices around you within, I think, certain radius. With, with that being said, here's what happens with, when gas prices go down and they're not reflected right away at the gas pump or what you're paying. The owner is going to take advantage of those couple of days. Okay? So if prices go down, they've been taking a beating because prices were up and their margins were stressed. Now that the prices go down, they're going to definitely try to take advantage of at least two, three days with those prices.

• 9:57Speaker 03

  Until the competition comes in or until they change the, the price because they are seeing less and less traffic. I'm, I'm a true believer in big box, like Costco or Sam's Club. I think that's the best option, and that's what I do. I have a bunch of friends that have gas stations. And guess where I go?

• 10:16Speaker 00

  You still go to Costco.

• 10:18Speaker 03

  Yeah.

• 10:18Speaker 00

  I'm the same way.

• 10:19Speaker 03

  So, so definitely Costco is a good option. I have a diesel truck, $8. My friend crosses the street, he's, he's got it at 8:30 or 8:40. So definitely, definitely, I prefer going to Costco so I can stretch my dollar.

• 10:35Speaker 00

  And the last one says, we have a lot, or we hear a lot about fracking being bad for the environment, but is it really that much different from the oil drilling?

• 10:44Speaker 03

  So this is probably a question coming from Chad Hathaway from yesterday. I do want to put, take a break. And when we come back, because of our guest, I want to engage in this conversation with him. We'll take a break. We'll be right back.

• 10:58Speaker 04

  John Cox. He's a man of a million words. John Cox. He's the king of the business nerds. He looks like Jimmy Elson from Superman, but a little bit taller and a bit of a tan. John Cox. He's from Bakersfield, California. John Cox. He likes stories on credit unions. It's a good thing that he's only on the radio air. Or else you'd be distracted by his dark flowing hair. John Cox.

• 11:27Speaker 03

  Welcome to the show. Welcome back to Money Wise.

• 11:30Speaker 05

  Thank you.

• 11:31Speaker 03

  We're live here in the basement with Steve and now the great John Cox.

• 11:36Speaker 05

  Live in the basement.

• 11:37Speaker 03

  I love that intro. John Cox. Yeah, I'm excited to have you on the show today. We're excited to have you on the show today. We had Chad Hathaway yesterday. We started talking about oil, oil production prices. Then we got to the subject of fracking.

• 11:54Speaker 05

  Fracking.

• 11:55Speaker 03

  And this question came up yesterday. I'll repeat the question just so it gives us some content. We hear a lot about fracking being bad for the environment. But is it really that much different from the oil drilling?

• 12:09Speaker 05

  Yeah. Yeah. Well, gosh, there is a lot to be said about that.

• 12:17Speaker 05

  To address what you're doing with fracking and the risks that are associated is that you are essentially forcing kind of this liquid substance underground at high pressure. And you're doing it to break open rock essentially. So the risks that that would run and you know, there's things that are going to mitigate these risks. But just to tell you what they are, is that you could break open some underground passageway that would then lead to say a water table, underground aquifer, and that it would leak these chemicals into that. So that's one risk. And another risk is that you know, you might

• 12:58Speaker 05

  tap some methane or something down there, or even oil, and it's going to come to the surface and it's going to cause pollution or release of methane. So those are the primary.

• 13:08Speaker 03

  Concerns or risks.

• 13:09Speaker 05

  And another one, actually seismic activity. There's concerns. But really, the state did a study before the Newsom administration came in and then it did a de facto ban and then an actual ban, which has been tentatively overturned in local courts, and I mean the whole state law. The state undertook a years-long process of evaluating the risks and then looking at what mitigations should be done to cushion the potential impact. And among those is monitoring water quality before and after. You know, wells, if there's residential wells or drinking wells, you've got to check it before and after, make sure that there wasn't a problem.

• 13:52Speaker 05

  And they also had these processes for

• 13:58Speaker 05

  monitoring for seismic activity. And so that, you know, the state was very careful about this. And then when the Newsom administration came in, fracking still had such a, you know, it was the F-word for a long time. And they came in and decided, no, we're not going to do it, period. And it was not based upon technical aspects. It was based upon a concern that fracking is a threat to climate change or you know, could worsen, accelerate climate change. But that was really kind of based on this idea that nationally fracking has led to so much additional production of petroleum that that was the concern. Whereas in California, A, it uses a lot less water.

• 14:40Speaker 05

  We have different fracking concerns here and it's not the same concerns as there are elsewhere in the country. And so is it really dangerous? Well, you know, there's these, even in California still, there are these rules in place. And if you're going to do it, these concerns. And there's no, as far as I know, documented instances in California where it's different than Pennsylvania, for example, North Dakota, Texas. No evidence of contamination as a result, to the best of my knowledge.

• 15:09Speaker 03

  So is it by proxy that the decision was made because of these other states potentially had some things happen? And then we just made the decision? Or was it just politically driven so we can?

• 15:22Speaker 05

  Certainly there was a lot of political pressure. The environmental groups and environmental justice groups were sure, based upon reports from other states, that this was a threat. One funny kind of example is in Oklahoma, there was these seismic activities, but it wasn't fracking. It was disposal of produced water, the water that comes up when you're drilling. And that they were injecting into already high-pressure kind of over-capacity.

• 15:50Speaker 03

  Because they have to, right, to replace whatever they're taking out of the ground?

• 15:54Speaker 05

  They did more than replace it. They over-replaced it. And so the pressure is just so high and it caused some, so they were doing that, you know, that would never have flown in California.

• 16:04Speaker 03

  Because of the regulation, because of how we are regulated and how testing and?

• 16:09Speaker 05

  Pressures and testing, yeah. In California, it is far more regulated than Oklahoma. And it wasn't fracking. It was produced water disposal. We do that too in California and it can be done responsibly with every safety protection in place.

• 16:24Speaker 03

  That's the same message from Chad Hathaway. He was on the show yesterday and he's in the upstream and he's a producer. And he was talking about fracking. It was like, look, we're so highly regulated and testing is happening all the time that the risks get minimized. There is still risk. There's always risk, right? But it's minimized through a lot of these efforts to corral the operation through testing, through a lot of other things that both the state requires, federal, but just the operator himself or herself are doing.

• 16:55Speaker 05

  Yeah. So in California, if there's a concern or a problem, it's usually because of the regulatory body was not there. Or, you know, you have these small companies that are not, that don't have the budgets like the Chevron, the CRCs, the world, that can do things right. You've got these little guys who are just, you know, avoiding it. Maybe these, it could be even an orphan well, meaning that the company that owned it has gone belly up. And who's responsible now? Well, guess what? It's the taxpayer after a while. So certainly.

• 17:28Speaker 03

  So that's why in Texas, these orphan wells, I mean, I don't want to change the subject, but these orphan wells are basically, nobody's operating them. And they create, like Texas, there's processes in place to bring operators back, to operate them, create jobs.

• 17:45Speaker 05

  Wow.

• 17:47Speaker 03

  So in Texas is doing that, but we have these orphan wells in California and we just keep them orphaned because of our process, our, I don't know, political environment or just permitting process.

• 17:57Speaker 05

  Yeah. The state regulatory body on this, Calgem, used to be the DOG and they're taught as their job to make sure that the job is done, you know, in a responsible way. But also promoting production of petroleum is not the idea there anymore. Or it has been, the balance has changed under the Newsom administration. And we'll see what any new governor says about this. I have no clear view on that.

• 18:22Speaker 00

  Well, to overall, I mean, to answer the listener's question, I mean, is it much worse than drilling?

• 18:29Speaker 05

  So I would say no. No, it's not much worse. I mean, so in both cases, we have in California, a regulatory set of rules that tell us what has to be done to make sure they're safe. The question is, you know, are there other regulators there to make sure that these steps are followed? In most cases, yes. It's when the regulators are not there and there's been, you know, not enough visits, then you'll find some of these wells are, you know, leaking methane, for example.

• 18:59Speaker 00

  As long as they're, you know, regulated.

• 19:01Speaker 05

  If you're kept up to the rules that exist, yeah, if you hold it up. And they are for the most part. It's these small companies and you've got, you know, the regulators are not visiting as often as they should. That tends to be when we see the problem.

• 19:16Speaker 00

  I don't want to get all worked up. I don't want to get you all worked up.

• 19:19Speaker 03

  No, I'm just, I'm just thinking about the economic impact here for Kern County. Do we have a lot of fracking activity in Kern County? Or is it normally, is there's like, hey, we have steam and?

• 19:29Speaker 05

  Yeah. So steam and then there's steam fracking, by the way. It's a term that we use, by the way, it's not exactly fracking. We don't have fracking now.

• 19:39Speaker 00

  Sounds like a coffee drink.

• 19:40Speaker 05

  Right. Steam frack latte.

• 19:44Speaker 03

  Go get your steam fracking at Reverb.

• 19:50Speaker 05

  So we used, I've actually witnessed a frac job by Chevron. They invited me out to Lost Hills. Very informative, very carefully monitored. And so it used to happen, but no, there hasn't been fracking happen for, I don't know, since the early Newsom administration, really. There hasn't been any. There may soon be.

• 20:11Speaker 03

  Because there's a judge that came out and just reversed?

• 20:14Speaker 05

  Yeah. He came out with a tentative order that, you know, sort of, unless you can persuade me otherwise, the fracking ban has been lifted, California. And so.

• 20:26Speaker 03

  I mean, what I see here, I mean, since we started talking about oil, I mean, this is like three, four months ago. We started talking about this permitting process, the permits that we have now in California, rigs coming back. Now fracking has been lifted. It seems like good news to me for Kern County, for the state in general, but mainly for Kern County.

• 20:47Speaker 05

  One question that I have is, didn't Halliburton up and leave? And haven't so many oil field service, who are you going to hire? If you're going to do a frac job, which is going to increase your production, who is there left to do this work?

• 20:57Speaker 03

  And that's what Chad Hathaway said too. It's like the labor has left. It's going to take a lot, a lot, and especially the trust from these operators that, I'm going to bring all this stuff, I'm going to invest and in a couple of years, the state is going to come back and do something different again. We'll take our second break when we come back. There's a lot more with John Cox. Stay tuned. We'll be right back.

• 21:38Speaker 03

  Welcome back to the Money Wise Show. I'm Sammy B. I was Steven Nicholas, joined here with John Cox. And great conversation about about fracking. I want to move a little bit away from from that. Good news about the lift. I think I'm hoping that some great comes out of that. You wrote about the Maya Cinema's filing, Chapter 11.

• 22:01Speaker 05

  Locally, the Bakersfield subsidiary.

• 22:03Speaker 03

  And and and when I read what you sent to us, it made sense because I was at the movie theater a couple of weeks ago, watching the Brad Pitt movie with the dog. And it was a great movie. I loved it personally. I think the story was good. My wife and kid didn't care for it, but I loved it.

• 22:20Speaker 05

  Which theater?

• 22:21Speaker 03

  The Maya.

• 22:21Speaker 05

  Okay.

• 22:22Speaker 03

  That's our go to. It's either that or Studio Movie Grill, but I prefer Maya because they have better seats in my opinion. And I also always liked their story because the owner always invests in this low income areas, uses some of the federal funds in the in the form of tax credits and things like that. And now I hear Chapter 11 about this local one, and I'm like, what's going on? Is it just streaming services killing the?

• 22:51Speaker 05

  I think so. So they never really gave an explanation. Here's what's going on. You know, this is what's what's hurting our business. The company has not come out with that, based in Brea in Orange County. But certainly evidence is that this is not limited to Bakersfield. The company had to close its Fresno location. It closed its Salinas location and then agreed to open it right up after under a deal with the mayor there. And Delano also fell something like $150,000 behind on its property tax payments to the county. And then we found out that the Bakersfield location is $250,000 behind.

• 23:33Speaker 00

  I I've also seen I'm a big movie guy. I go to all the theaters and I know the one in Fresno, they it's also about upgrading these theaters, you know, Studio Movie Grill. When it first opened, it was the hot seat, you know, in town. Everybody was going. And, you know, recently Edwards has put some money into, you know, refurnishing all their their seats, the ones at the Reading Cinema, at the Valley Plaza, they just put in a new Titan Lux Theater. And I think it's one of those things where people like to go to the hot hot spot.

• 24:05Speaker 03

  Yes.

• 24:06Speaker 00

  And, you know, we used to go to the Maya because they had the D box where the shaking seats during the movie. And that one recently, I think they broke it and they ended up closing that part of it. They also have the MPX Theater down at the at the Maya, which is also broken. And I think it's one of those things. It's the upkeep and people that can stream movies and have to drop, you know, with money tight, dropping 30, 40 bucks to get in and another probably 60, 70 at the concession stands. I mean, that that one has got to hurt too. So I don't know if it's just the people that aren't going to the movies because there is a lot of movies that have been coming out and selling good tickets.

• 24:46Speaker 03

  Yeah.

• 24:47Speaker 00

  That was one of my questions is you think it's one of those businesses that you kind of have to keep the upkeep to?

• 24:55Speaker 05

  I wish the company would would would sort of tell us more about this. I have it on a pretty good authority that that was the top performing theater in the entire company. And they're they're in North Las Vegas. They have like, what is it? Eight? Eight? Something like that. Locations in the two states. And a question becomes which, you know, is does does each one stand on its own? Do the corporate costs get divided evenly? How do they? Are they able to sort of decide this one is is doing okay? We're going to close that one over there. And so I don't know.

• 25:32Speaker 05

  But it that the bankruptcy filing belonged to the one in Bakersfield, which just seemed odd, odd, given that it apparently is doing better than the other ones.

• 25:43Speaker 03

  Yeah. So it's a Chapter 11, John, right? Versus Chapter 7. The difference between the two is that they are going with Chapter 11. They are going through a reorg, reorganization. They are not liquidating their assets.

• 25:55Speaker 05

  Not closing.

• 25:56Speaker 03

  So through through this process, you have certain vendors or or debt or payments. So you're organizing. Now you're going to go back to negotiating with each one of these people to see if you can reduce that that load or that debt load, right?

• 26:13Speaker 05

  This could set them up for long term survival.

• 26:15Speaker 03

  Correct. That's that's my that's my point. I mean,

• 26:17Speaker 05

  You had years in banking. What's the difference between a Chapter 11 and a Chapter 7?

• 26:22Speaker 03

  So Chapter 11, you're going through a reorganization. The judge gives you time to go back and talk to your

• 26:30Speaker 05

  Shareholders or whatever.

• 26:31Speaker 03

  Well, your debt, especially your debt and your creditors. Okay. And and to come to come back with some type of a plan to still pay, but maybe maybe at a reduced. And then you go in through a reorganization in management, in in processes, in systems to to reduce your load or your cost as much as possible. Versus 7, 7 is just like you're giving up. You're throwing out the towel.

• 26:57Speaker 05

  You're done.

• 26:58Speaker 03

  And the, you know, and the judge has to approve that. And now it's a liquidation where the you the judge assigned a person to go through your balance sheet, especially your liability side to who's going to get paid first.

• 27:10Speaker 05

  Obviously.

• 27:11Speaker 03

  Okay. And is it is that's what the the main difference between the two. I really, really hope that they can find a way through this reorg and hopefully the city works with them because you walk in and you see a bunch of people working.

• 27:24Speaker 00

  Yeah.

• 27:24Speaker 05

  I mean, it's a perfect. It's a perfect location.

• 27:26Speaker 00

  Right.

• 27:27Speaker 03

  Yes. Plenty of parking. To me, seats are good. Food is good. Hopefully they do a better job with maybe reducing the prices at the concession because

• 27:38Speaker 00

  See, that's that's where you got. You got to talk the business because I have a friend that runs a movie theater and she's told me, you know, they don't. They make a penny on the dollar for ticket sales. That's why they I mean, that's what keeps the lights on is the concession stands.

• 27:51Speaker 05

  Turn off the lights.

• 27:53Speaker 00

  It's a movie.

• 27:54Speaker 03

  Yeah.

• 27:55Speaker 00

  And that's why they brought in, you know, more food and alcohol and stuff like that.

• 27:59Speaker 03

  I mean, I mean, if you pay $15 for a bucket of popcorn, that's 300, I don't know, 500% margin. Reduce that and give a chance to yourself for people to come back, attract people back. You've got to be creative because you're highly you're competing in a market where now you have streaming, you have AI, like invest in maybe, I don't know, can we do, can we use AI and maybe just just do certain things? And stuff, but give a chance to the company to survive.

• 28:32Speaker 00

  And I've been telling you for years, we we need a 4DX Theater because that's what is really blowing up in the big cities is it's like a roller coaster for two and a half hours.

• 28:41Speaker 05

  Wow.

• 28:42Speaker 00

  When it rains in the movie, it rains in the theater. It shakes. It's I mean, it's a whole roller coaster thing. But I mean, I I wish them the best because I I know a couple of guys that were the managers over there, people over at Maya were awesome. And it's a perfect location. I would hate to see just an empty big old lot right there by by the theater.

• 29:01Speaker 03

  And to me, I always look at the economic impact of closing something like that. First, you you lose the tax income, right? As a city, right? The second thing, you're losing the economic downstream economic impact of all these employees you have, losing their jobs. Now they don't have income. Now you're not collecting payroll taxes. You're not they're not buying. The purchase power goes down. There's like an economic, a negative economic impact on something as big as Maya and Bakersfield closing down.

• 29:32Speaker 05

  So there was a in Delano, there were concerns. There were rumors that it was going to close. And then there was a notice posted, you know, pay up 150,000. We're selling all the equipment. And the mayor there, Sal Solorio Ruiz, I'm not sure his last name. Sorry, Sal. He met with the CEO or at least communicated with the CEO and said, well, listen, we want you to stay. And the guy said, well, we want to stay too. And we're going to. And but the deal that they came to was that we're going to work together. We're going to we're going to work with the business community to have events here and we're going to do things and

• 30:07Speaker 03

  Yes.

• 30:08Speaker 05

  That was a good idea. You know, why not? Let's see what we can do to try to build some energy here. And, you know, it certainly, I mean, it looked kind of weird in retrospect after that that debt sort of showed up publicly. But that's a good idea. They're large gathering places.

• 30:26Speaker 03

  That's what it takes. It takes a community for something like this to survive, especially in the way and where we are today, because streaming is real. It's here. It's not going away. It's just getting stronger and stronger and stronger. And a lot of the people now are are streaming at house, but there's this great shows on, let's say, Paramount, for instance, where people can get glued to their screens for hours. You know, binging certain shows that are great. And that's what we are competing, what Maya or Maya is competing against. And they need to be a little bit more creative.

• 30:56Speaker 05

  So here, the the retail industry has gone through this, right? Amazon, you know, we started buying it and it was like, oh, well, that's the end of malls. But no, it wasn't the end of malls. What happened? Malls adjusted. They started to do, you know, the experiential things like this outdoor. We're going to have something event going on here. We're going to do some things that you take part in, not just I'm going to go buy the sweater or the shoes that I could have bought online for 10% less.

• 31:20Speaker 03

  Correct.

• 31:21Speaker 05

  No, maximize your asset, which is that physical asset. What can you do with it?

• 31:26Speaker 03

  Yes.

• 31:26Speaker 05

  And, you know, it sounds like that's what Sal wants to do in Delano. And certainly the CEO of the company wants to do that. So it'll be interesting to see if they're able to pull off what retail did.

• 31:34Speaker 03

  What I when I used to work for Mission Bank, our CEO back then, Asia Anton Giovanni, met with the CEO of Maya's just to because of the processes they use to take advantage of some of the tax credits and things like that are available in order for them to invest in low income areas. And he's a smart dude, according to to AJ. So I'm hoping he can find a way, especially for the theater. I really like that place. I personally really like that place. So I hope I hope it survives. I hope they can find a way. We'll take our last break. When we come back, there's a lot more with John. So stay tuned. We'll be right back.

• 32:16Speaker 03

  Stand up for your rights. Get up, stand up. King is here. Welcome back to the Money Wise Show. Sammy Abia, with Steve Nicholas and John Cox. John, welcome back. A great conversation. One of the things we wrote about is this drugstores. You know, a lot of Rite Aid's, well, Rite Aid's closed all across town, right?

• 32:37Speaker 05

  Everywhere across the country.

• 32:39Speaker 03

  And there's a bunch of them around that are just sitting empty. But I did see some construction happening in some of them, right? So what's going on there?

• 32:47Speaker 05

  Well, what it turns out, kind of the old adage in commercial real estate is that you may have a, you know, this is not, this is not the verbatim, but it'll be recycled. If you've got a tenant there that's not doing well, you know, it's not like their closure is going to ruin the property. It'll get reused. And one of the themes of the story that I wrote is that Rite Aid did an exceptionally good job at choosing its real estate.

• 33:14Speaker 03

  That's right.

• 33:15Speaker 05

  And prior to Rite Aid, all of the drugstores, not all of them, many of the drugstores from, I don't know, 70s, 80s on, were in line, meaning you had the supermarket and right next to it in the same building or next to the building was the drugstore.

• 33:32Speaker 03

  The long drugs.

• 33:34Speaker 05

  Yeah. They were all part of the sort of behind the parking lot. You parked and you'd walk further into the property and you go in and you get your prescription, whatever. Rite Aid saw it differently and it was kind of, well, I mean, you look at what happened to Rite Aid, right? I mean, they eventually collapsed, but they were on to something in that they put the property toward the corner, closer to the street. And so they were sort of their own thing. 17,000 square feet. Apparently, most if not all of them were the same size. Similar kind of thing. Ice cream, you know. But what happened, of course, prescriptions, drugs became less profitable and they were getting undercut by the discounters.

• 34:18Speaker 05

  And so at that point, you know, they just, they just weren't making it, which is a, it's a bummer because they had great beer prices.

• 34:24Speaker 03

  They had prices, good prices in almost everything.

• 34:28Speaker 05

  Yeah.

• 34:29Speaker 03

  And I loved, when I lived in the Northwest, I lived around Rite Aid. That was probably the only thing we had at that corner of Jueta and Olive Drive. That's the only store. Walmart and other things, we're not down. And it was convenient and it was close, it was quick. So when I saw them start closing, I felt sad because I financed these. When I was a banker, I financed the construction of Rite Aid's. Investors will come in, get the corner, build the store, right? Get the long-term lease, 20 years. Now the value of that corner just tripled four times. Then they put it back on the market and then they take advantage of the 1031 exchange

• 35:13Speaker 03

  rule and move into the next project and the next project. People got rich through these investments and there were some people that were preferred Rite Aid developers. Those are the ones you wanted to bank because you are secured in a sense, not just with the real estate piece, but also you're going to exit the loan within 12 months, 24 months, get paid back so you can, as a banker, I'll move to the next project and roll back the money, get more fees with the next loan. So it was a good, good investment up until I think their growth affected, but also the, just the brick and mortar experience COVID in a sense.

• 35:55Speaker 03

  Delivery options now for people that want their meds so they don't need to go to the store, right? But I think what kills them is the overhead. Okay? Both the location of the store, it was great, but also detriment because it costs more, right? The employee cost, labor cost, because when you walk into the Rite Aid, especially towards the latter part of their life here in Bakersfield, you would see two cashiers, three cashiers. Towards the latter part before they close, you only see one.

• 36:24Speaker 05

  You have the store empty.

• 36:26Speaker 03

  Correct, correct. So they were trying to catch up, but it was too late. Other things came up. CVS figured it out. Hey, I'm, I don't need the corner. I'm just going to go in into, you know, a target and just be part of that, right? So the quickness with which they needed to react to save the brand, in my opinion, is what was the detriment. So I, so there are changes though. These stores are empty. I've seen some of them on the market. Some of them are being talked about as potential gas stations where the store is between 15 to 20,000 square feet. You can cut that in half, put a canopy in the front and now you have the refrigeration,

• 37:10Speaker 03

  you have a drive-through. So the base of making it a cool gas station is there.

• 37:16Speaker 05

  Countryside just, just got one. Countryside, local chain and convenience stores, they just, I guess they're in the process of converting a former Rite Aid, I think it is. There was, there was a CVS store, because some of the CVS were those standalone properties. One of those became a shoe store. There's a former Rite Aid, this all Bakersfield, became a Goodwill store very recently.

• 37:39Speaker 00

  Is that why a lot of those Spirit Halloween stores pop up in all those?

• 37:43Speaker 05

  Yeah, Spirit is a holding. It's a holding pattern, you know, you want to make a little money.

• 37:49Speaker 00

  In and out type thing?

• 37:50Speaker 05

  Yeah.

• 37:51Speaker 03

  The store is empty, so you want to make money on the store while it's just sitting empty while you're hopefully looking for a long-term lease or another tenant or just to sell in this case.

• 38:01Speaker 00

  Well, I mean, on both sides, you were saying, you know, a couple of years back, it was a goldmine almost for bankers, but do you think now, do they need to lower maybe these lease prices and get some local vendors in here?

• 38:15Speaker 03

  It's tough. The economics won't work because the cost of construction is high. So when you invest in a long or an anchor tenant like Rite Aid, what, what needs to make sense is your net operating income coming from that and especially in a high interest rate environment like we're in, the cap rate is going to be higher. So the economics have to make sense. You have to come up with a certain value that translates in a good return in the form of both income, but also appreciation and value for the investor.

• 38:45Speaker 00

  Be able to work on both sides.

• 38:46Speaker 03

  Correct. And if you, if you don't have those economics, then it's not a good investment. So the bank looks at that, not just through projections, but also through an appraisal report where they have to do what they call an income approach and determine if there's enough income coming from this to service the debt. In the, in the case of Rite Aid, it was almost guaranteed income because the lease was there to back, to back it. But absence of that, then the bank will just think twice before making that, that loan, especially in the, in like what happened with Rite Aid, you know? But, but in the past, when I was, when I was like a young banker, this was gold for me. If I can get a deal like this, I'll hit my goals really quick and then it's just turn it.

• 39:31Speaker 00

  I can always hear Sammy and his goals.

• 39:33Speaker 03

  Yeah.

• 39:34Speaker 00

  I'm sure he was hitting those goals out of the park too, but I know we only got a couple of minutes left. Do you want to try to hit this home upgrades?

• 39:43Speaker 03

  Sure, let's do that. Go ahead, Stephen.

• 39:46Speaker 00

  Well, I know that, you know, you covered a story with, well, a lot of us are hurting, you know, check to check and a lot of it is home prices and home construction. I've been hit by two or three in the last week of people showing up at my house. Oh, we do pretty much anything and everything at our house, but is there a money wise way to kind of get these home upgrades without hurting you?

• 40:12Speaker 05

  So these, the upgrades that I wrote about recently are basically energy related. It is part of California's push for electrification, get away from the use of natural gas in homes. And one reason they say that is because it's a health issue. They say that when you're inside breathing combustion from methane from your stove, not good for indoor air quality. Okay. So there's that. And then there's, you know, decarbonization of the state. So there's a few different things going on here. There's been some money put into grants to be able to do this. So that's sort of, you know, the subsidies that are involved, but there is a program,

• 40:54Speaker 05

  and I'm trying to remember who, oh yes, the California Energy Commission has done a program where they are putting some money into this. And this is specifically for the de-electrification of the home. That can mean money toward a, an electric water heater or a heat pump.

• 41:13Speaker 00

  Going smart. Kind of going smart with a lot of it, yeah.

• 41:18Speaker 05

  There's a lot of things. One of the really cool things that this program I wrote about, this local sort of temporary company, is that they were putting in solar panels, they were putting in new electric panels and home batteries. Gosh, home batteries are so cool.

• 41:35Speaker 03

  Yeah, I have, I have, I have that. It makes me independent during, during the day, but during the heat of the summer, by 2:00 AM, I'm like tapping back into the grid and I have three batteries and I have a big system.

• 41:49Speaker 00

  I'm tapping the grid all day long, so I'm just unlucky.

• 41:51Speaker 03

  Great conversation, always great conversation with you, John. Thank you so much.

• 41:57Speaker 00

  And be sure, go to bakersfield.com, subscribe, get your local news stories written by the man, the myth, the legend, John Cox.

• 42:05Speaker 03

  Who do we have tomorrow, Stephen?

• 42:06Speaker 00

  We have Sherrod and Emily breaking down. We've got the guys from Linian coming in, a busy, busy show. Don't forget, you can call or text in 24 hours a day at 661-396-1000. Till then, be smart, be safe.

• 42:19Speaker 03

  Be money wise.

• 42:36Speaker 02

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