1 00:00:10,960 --> 00:00:14,560 Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast. 2 00:00:14,600 --> 00:00:19,639 Speaker 1: I'm Joe Wisenthal and I'm Tracy Allaway. So you know 3 00:00:19,800 --> 00:00:21,440 Speaker 1: you don't you know? One of the things I really 4 00:00:21,480 --> 00:00:30,760 Speaker 1: like about is about one yeah or um. I mean 5 00:00:30,800 --> 00:00:32,279 Speaker 1: I feel like I could take a guess, but why 6 00:00:32,280 --> 00:00:35,800 Speaker 1: don't you go ahead and tell me? Well, so obviously, like, okay, 7 00:00:35,880 --> 00:00:37,519 Speaker 1: it's you know, we've been doing a bunch of like 8 00:00:37,560 --> 00:00:41,879 Speaker 1: supply chains and commodities, but I feel like this is 9 00:00:41,920 --> 00:00:47,440 Speaker 1: a time for specialists, like people who know yes, yeah 10 00:00:47,720 --> 00:00:50,120 Speaker 1: it is. I feel like one of the themes of 11 00:00:50,240 --> 00:00:52,440 Speaker 1: kind of like this podcast but also in general, is 12 00:00:52,479 --> 00:00:56,000 Speaker 1: like I'm kind of like weirdly less interested in some 13 00:00:56,120 --> 00:00:58,840 Speaker 1: respects in some of like the pure macro stuff that 14 00:00:59,240 --> 00:01:01,680 Speaker 1: we've like I've covered for much of my careers, and 15 00:01:01,680 --> 00:01:04,120 Speaker 1: the people that I really yearned to talk about it, 16 00:01:04,160 --> 00:01:07,080 Speaker 1: like the people who just like no an industry really well, 17 00:01:07,120 --> 00:01:09,959 Speaker 1: I think it's like super fun. Yeah, I think we've 18 00:01:09,959 --> 00:01:13,120 Speaker 1: discovered the wonders of micro and just being able to 19 00:01:13,160 --> 00:01:18,440 Speaker 1: investigate these individual markets that we haven't necessarily been familiar 20 00:01:18,480 --> 00:01:21,720 Speaker 1: with before has been really really interesting. And also I 21 00:01:21,760 --> 00:01:23,760 Speaker 1: think I told you this once before, but when I 22 00:01:23,800 --> 00:01:26,240 Speaker 1: was going into financial journalism, I always really wanted to 23 00:01:26,280 --> 00:01:29,160 Speaker 1: be a commodities reporter because I was kind of interested 24 00:01:29,240 --> 00:01:33,280 Speaker 1: in things and like this idea of global trade and 25 00:01:34,120 --> 00:01:37,320 Speaker 1: has just been phenomenal from that perspective, like the actual 26 00:01:37,400 --> 00:01:41,319 Speaker 1: study of things, like how they're produced, how supply and 27 00:01:41,319 --> 00:01:44,600 Speaker 1: demand works for individual markets, the different players, plus the 28 00:01:44,640 --> 00:01:47,840 Speaker 1: logistics of actually moving them from A to B. No, 29 00:01:48,120 --> 00:01:52,560 Speaker 1: this is a year for granularity for specialists and the 30 00:01:52,600 --> 00:01:55,040 Speaker 1: degree you know, like if I want to understand what's 31 00:01:55,040 --> 00:01:56,520 Speaker 1: going on in a a commodity market, or I want to 32 00:01:56,520 --> 00:01:59,720 Speaker 1: go understand what some aspect of the labor market, I'm 33 00:01:59,760 --> 00:02:02,240 Speaker 1: not going to like ask some like you know, there 34 00:02:02,240 --> 00:02:04,840 Speaker 1: are certainly like macro economists who are useful, and we 35 00:02:04,840 --> 00:02:06,280 Speaker 1: talked to them all the time, and we had them 36 00:02:06,280 --> 00:02:09,679 Speaker 1: on recently. But we just spoke to Matt King, right, yeah, yeah, 37 00:02:09,840 --> 00:02:12,320 Speaker 1: So you know, I would not want to slag any 38 00:02:12,360 --> 00:02:15,600 Speaker 1: of our other guests, but I really like there's so 39 00:02:15,639 --> 00:02:17,280 Speaker 1: many things in that where it's like we got to 40 00:02:17,280 --> 00:02:20,679 Speaker 1: talk to someone who knows this thing, and that's sort 41 00:02:20,720 --> 00:02:23,079 Speaker 1: of been one of the fun things. I guess I 42 00:02:23,080 --> 00:02:26,360 Speaker 1: would say about learning, learning and talking to people in 43 00:02:27,000 --> 00:02:29,919 Speaker 1: one I mean what I will say, and Matt King 44 00:02:30,160 --> 00:02:32,560 Speaker 1: kind of brought this up on the recent episode, but 45 00:02:32,880 --> 00:02:37,360 Speaker 1: there are micro explanations for almost every move in the 46 00:02:37,400 --> 00:02:40,359 Speaker 1: price of something that people have been talking about recently. 47 00:02:40,480 --> 00:02:44,560 Speaker 1: So you know, we've been speaking a lot about individual commodities. 48 00:02:45,120 --> 00:02:47,600 Speaker 1: You know, we did like one on sinks. I remember 49 00:02:47,600 --> 00:02:50,800 Speaker 1: I wrote about mayonnaise. You can look at a particular 50 00:02:50,840 --> 00:02:53,960 Speaker 1: product or market and come up with an individual perspective, 51 00:02:54,400 --> 00:02:57,120 Speaker 1: but at the same time, like all of that are 52 00:02:57,160 --> 00:03:00,680 Speaker 1: feeding into this broader macro backdrop where well are worried 53 00:03:00,680 --> 00:03:03,480 Speaker 1: about inflation um and we've been talking about that but 54 00:03:03,600 --> 00:03:06,600 Speaker 1: a lot as well. Right, So one of the first 55 00:03:07,160 --> 00:03:08,880 Speaker 1: you know, we've had a bunch of these, but one 56 00:03:08,880 --> 00:03:11,400 Speaker 1: of the first episodes that was kind of like one 57 00:03:11,400 --> 00:03:15,400 Speaker 1: of the breakout for US episodes that was like really 58 00:03:15,440 --> 00:03:18,799 Speaker 1: extraordinary that we learned a ton about was back in 59 00:03:18,919 --> 00:03:22,440 Speaker 1: April and we talked to uh stincon Dean. He is 60 00:03:22,480 --> 00:03:25,240 Speaker 1: the founder and CEO of Deacon Lumber, which is a 61 00:03:25,360 --> 00:03:28,959 Speaker 1: lumber trading operation and if you were a call Lumber 62 00:03:29,040 --> 00:03:31,240 Speaker 1: was interesting because I guess it was kind of like 63 00:03:31,280 --> 00:03:33,079 Speaker 1: the canary in the coal mine in a way, because 64 00:03:33,080 --> 00:03:37,880 Speaker 1: we've now had there's a global, huge, global commodity run right, 65 00:03:38,000 --> 00:03:41,000 Speaker 1: like major bowl market and basically everything you can think of. 66 00:03:41,320 --> 00:03:44,120 Speaker 1: But at the time I think commodities were running, but 67 00:03:44,160 --> 00:03:45,960 Speaker 1: we did not, you know, Lumber was like this like 68 00:03:46,320 --> 00:03:48,960 Speaker 1: was like kind of like there's like parabolic move and 69 00:03:48,960 --> 00:03:51,120 Speaker 1: we're like, what's going on? There was this is kind 70 00:03:51,120 --> 00:03:53,960 Speaker 1: of weird. And now you've seen in tons of commodities 71 00:03:54,280 --> 00:03:57,040 Speaker 1: European energy and natural gas and call and stuff. Some 72 00:03:57,120 --> 00:03:59,440 Speaker 1: of it's cooled down, but lumber was kind of like 73 00:03:59,480 --> 00:04:03,400 Speaker 1: this canary in the coal mine. It's sword like crazy. 74 00:04:03,600 --> 00:04:06,240 Speaker 1: And since then it's actually one of the few commodities 75 00:04:06,280 --> 00:04:08,200 Speaker 1: of the last few months it's kind of been in 76 00:04:08,600 --> 00:04:11,200 Speaker 1: like a bear market. It almost feels like it's been 77 00:04:11,320 --> 00:04:14,440 Speaker 1: like a few months ahead of everything else. Right, So 78 00:04:14,520 --> 00:04:16,479 Speaker 1: if you look at lumber as this canary in the 79 00:04:16,520 --> 00:04:19,800 Speaker 1: coal mine or some sort of like mystical oracle when 80 00:04:19,839 --> 00:04:23,320 Speaker 1: it comes to other supply bottlenecks, it's kind of telling 81 00:04:23,320 --> 00:04:26,279 Speaker 1: you that, you know, some of those pressures might be easing. 82 00:04:26,320 --> 00:04:29,040 Speaker 1: I think we're down to around is it like six 83 00:04:29,120 --> 00:04:32,640 Speaker 1: hundred dollars a little over six hundred, down from a 84 00:04:32,760 --> 00:04:36,920 Speaker 1: peak that was like more than six hundred So that's 85 00:04:36,920 --> 00:04:40,480 Speaker 1: pretty exchange and it's something that you're interested in and 86 00:04:40,560 --> 00:04:42,280 Speaker 1: something you know that It's like this idea we talked 87 00:04:42,279 --> 00:04:44,920 Speaker 1: about the bull whip effect. It's like the question is 88 00:04:45,320 --> 00:04:49,520 Speaker 1: does major demand in right now, like could we you know, 89 00:04:49,560 --> 00:04:52,719 Speaker 1: people are talking about over One possibility is that we 90 00:04:52,760 --> 00:04:57,040 Speaker 1: see persistent inflation in another possibilities we just see like 91 00:04:57,120 --> 00:05:00,080 Speaker 1: major gluts of everything. If we have like major know, 92 00:05:00,279 --> 00:05:03,680 Speaker 1: it's like maybe the backside. This is crazy disiplation. Anyway, 93 00:05:04,240 --> 00:05:07,000 Speaker 1: I'm very excited because we have Stintson back, I said, 94 00:05:07,040 --> 00:05:09,440 Speaker 1: the founder and see of Decade Lumber, and so now 95 00:05:09,480 --> 00:05:13,080 Speaker 1: it is time to talk about perhaps the backside of 96 00:05:13,080 --> 00:05:15,760 Speaker 1: the boom and what happens after the huge run up. 97 00:05:15,960 --> 00:05:19,080 Speaker 1: So I'm very excited about this episode. Uh, Stintson, thank 98 00:05:19,080 --> 00:05:22,480 Speaker 1: you so much for coming on Odd Lots. Hey, y'all, 99 00:05:22,800 --> 00:05:25,760 Speaker 1: thanks for having me back. It's it's been a wildwide 100 00:05:25,800 --> 00:05:29,480 Speaker 1: since Odd Lots and then, uh, you know, we've come 101 00:05:29,480 --> 00:05:32,600 Speaker 1: a long way and yeah, we're trading it six d 102 00:05:32,800 --> 00:05:34,920 Speaker 1: on on the future screen. We got as low as 103 00:05:35,000 --> 00:05:40,120 Speaker 1: four fifty uh at a high high of seventeen thirty three. 104 00:05:40,600 --> 00:05:45,200 Speaker 1: You know, for those paying attention, you know, it fell 105 00:05:45,440 --> 00:05:47,719 Speaker 1: faster than it went up, which was hard to believe 106 00:05:47,800 --> 00:05:51,279 Speaker 1: that that was even possible. But yeah, it's a different 107 00:05:51,279 --> 00:05:53,800 Speaker 1: world than Lumber compared to what these other folks are 108 00:05:53,800 --> 00:05:55,839 Speaker 1: going through right now. Yeah, and it's kind of crazy. 109 00:05:55,880 --> 00:05:57,760 Speaker 1: I mean, it's a different world in Lumber, and I 110 00:05:57,800 --> 00:05:59,880 Speaker 1: can't I don't know whether it feels like ages ago 111 00:06:00,320 --> 00:06:02,359 Speaker 1: we talked to you or just yesterday. I hear what 112 00:06:02,360 --> 00:06:04,680 Speaker 1: I said, but it was in April and now it's November, 113 00:06:04,839 --> 00:06:07,040 Speaker 1: so I don't know. That's like six and a half 114 00:06:07,120 --> 00:06:09,640 Speaker 1: months or something since the last thing we talked to 115 00:06:09,960 --> 00:06:12,640 Speaker 1: kind of hard to believe, but like, why don't you 116 00:06:12,680 --> 00:06:15,840 Speaker 1: just sort of like get big picture, you know, and 117 00:06:15,839 --> 00:06:17,719 Speaker 1: we'll get into it more detailed, but give us like 118 00:06:17,720 --> 00:06:20,720 Speaker 1: this sort of like big picture of what happened. You know. 119 00:06:21,040 --> 00:06:24,320 Speaker 1: Lumber peaked about four weeks after we had spoken last time, 120 00:06:24,360 --> 00:06:26,799 Speaker 1: so we kind of time to peek. We'll see we're 121 00:06:26,800 --> 00:06:28,800 Speaker 1: time in the bottom here. But why don't you, uh, 122 00:06:29,120 --> 00:06:32,760 Speaker 1: sort of what have what happened after that? Yeah, I 123 00:06:32,760 --> 00:06:34,360 Speaker 1: I think that's good to kind of pick up where 124 00:06:34,400 --> 00:06:37,560 Speaker 1: we left off from from a price perspective. So when 125 00:06:37,560 --> 00:06:43,279 Speaker 1: we recorded late April May, the market peaked in late May, 126 00:06:43,600 --> 00:06:47,440 Speaker 1: but from mid April to late May the market had doubled. 127 00:06:48,040 --> 00:06:50,760 Speaker 1: It's not like it did some about face immediately, like 128 00:06:50,800 --> 00:06:53,800 Speaker 1: there was a lot of price action left. It is 129 00:06:53,800 --> 00:06:56,640 Speaker 1: all happened in a hurry. So it was a short squeeze. 130 00:06:57,160 --> 00:06:59,520 Speaker 1: And uh, I think we talked about last time, like 131 00:06:59,560 --> 00:07:02,359 Speaker 1: eventually people will get covered and then and then what? 132 00:07:03,279 --> 00:07:07,279 Speaker 1: And my argument was higher for longer for lumber specifically 133 00:07:07,279 --> 00:07:11,160 Speaker 1: because of a lot of structural bullish issues and and 134 00:07:11,160 --> 00:07:17,960 Speaker 1: and the log supply, manufacturing and demand, incredible wave of 135 00:07:18,000 --> 00:07:21,600 Speaker 1: demand as we all know. For housing, we squee definitely 136 00:07:21,640 --> 00:07:26,200 Speaker 1: squeezed from a thousand dollars to sevred. That was all 137 00:07:26,240 --> 00:07:30,600 Speaker 1: just short covering folks covering commitments that they had maybe 138 00:07:30,600 --> 00:07:33,800 Speaker 1: committed at six seven, eight hundred dollars and they were 139 00:07:33,840 --> 00:07:36,440 Speaker 1: just waiting for prices to come back down to normal 140 00:07:36,600 --> 00:07:39,640 Speaker 1: to cover that for hopefully a profit. None of them 141 00:07:39,680 --> 00:07:43,200 Speaker 1: thought about limiting their losses. There's gonna wait, wait, wait, well, 142 00:07:43,560 --> 00:07:45,280 Speaker 1: no one could wait any longer. They had to cover 143 00:07:45,880 --> 00:07:49,240 Speaker 1: and every seemingly everyone was in that boat. So it 144 00:07:49,320 --> 00:07:53,600 Speaker 1: squeezed us and we blew the top off at and 145 00:07:54,600 --> 00:07:57,560 Speaker 1: you know when when it turned, I felt pretty confident 146 00:07:57,760 --> 00:08:01,200 Speaker 1: that it was over, but a lot of people didn't. 147 00:08:01,280 --> 00:08:04,520 Speaker 1: And that that's what makes markets tops as folks who 148 00:08:04,600 --> 00:08:06,440 Speaker 1: thought we shouldn't be this high all of a sudden 149 00:08:06,440 --> 00:08:09,960 Speaker 1: start believing we're going to be two thousand dollars or higher, 150 00:08:10,600 --> 00:08:14,400 Speaker 1: including the producers themselves. So it was it was a 151 00:08:14,440 --> 00:08:19,480 Speaker 1: painful ride down for a lot of folks. And what 152 00:08:19,520 --> 00:08:22,240 Speaker 1: was interesting, and I tweeted about it through the summer, 153 00:08:23,080 --> 00:08:27,000 Speaker 1: we could watch lumber futures get cut in half and 154 00:08:27,040 --> 00:08:32,320 Speaker 1: go from sevent to eight hundred and fifty, and we 155 00:08:32,320 --> 00:08:36,679 Speaker 1: would see reports from builders or contractors going in and saying, 156 00:08:36,679 --> 00:08:40,240 Speaker 1: my my price is not half of my quote from 157 00:08:40,280 --> 00:08:45,040 Speaker 1: three months ago. Why why aren't I seeing price appreciation 158 00:08:45,160 --> 00:08:47,720 Speaker 1: that we're seeing in futures and all the things. And 159 00:08:47,720 --> 00:08:51,439 Speaker 1: to me, that was really telling because in a marketplace, 160 00:08:51,640 --> 00:08:56,480 Speaker 1: and certainly commodities, you should have enough players that all 161 00:08:56,520 --> 00:09:00,600 Speaker 1: have different trading strategies, different break even point points, that 162 00:09:01,600 --> 00:09:05,240 Speaker 1: one or two of them can offer lower prices, gobble 163 00:09:05,320 --> 00:09:07,800 Speaker 1: up all the market share and force their competitors to 164 00:09:07,880 --> 00:09:10,480 Speaker 1: meet the meat or beat their price. But we weren't 165 00:09:10,480 --> 00:09:16,520 Speaker 1: finding that this summer. It was bizarre and inefficient, and 166 00:09:17,360 --> 00:09:19,920 Speaker 1: I I couldn't really explain it. And then I started 167 00:09:19,960 --> 00:09:25,560 Speaker 1: to think maybe everyone was so upside down in their 168 00:09:25,600 --> 00:09:28,760 Speaker 1: inventory that they were they were selling on cost plus 169 00:09:29,360 --> 00:09:35,200 Speaker 1: with that cost being very high versus replacement cost. And 170 00:09:35,760 --> 00:09:39,600 Speaker 1: if your competitor down the road also has a high 171 00:09:39,600 --> 00:09:43,960 Speaker 1: break even and they could replace and buy more inventory 172 00:09:44,080 --> 00:09:48,800 Speaker 1: for a lower price, they're gonna try to blow out 173 00:09:48,840 --> 00:09:51,800 Speaker 1: their high price inventory before they lower their prices. But 174 00:09:51,880 --> 00:09:53,400 Speaker 1: you can only do that as so long as your 175 00:09:53,440 --> 00:09:56,760 Speaker 1: competitors are not lowering their prices. And it's seemingly all 176 00:09:56,840 --> 00:10:01,440 Speaker 1: summer that the cost savings seemingly we're not passed along 177 00:10:01,480 --> 00:10:03,480 Speaker 1: to the consumer. But the reality is they weren't cost 178 00:10:03,520 --> 00:10:09,360 Speaker 1: savings because the lumber yard hadn't rebought to lower their 179 00:10:09,920 --> 00:10:12,200 Speaker 1: break even price, so they were cost plus with their 180 00:10:12,200 --> 00:10:16,480 Speaker 1: costs being extremely high, and they were able to largely 181 00:10:16,559 --> 00:10:20,160 Speaker 1: as a group, pass along these higher costs and and 182 00:10:20,160 --> 00:10:24,520 Speaker 1: and escape somewhat unscathed. Um it was. It was quite 183 00:10:24,559 --> 00:10:28,600 Speaker 1: impressive and wild to think that there was no entity 184 00:10:28,640 --> 00:10:31,080 Speaker 1: out there that that could undercut and gobble up market 185 00:10:31,080 --> 00:10:35,000 Speaker 1: share because they had a lower break even costs. And 186 00:10:35,040 --> 00:10:37,160 Speaker 1: I was arguing, this will be kind of my final 187 00:10:37,200 --> 00:10:40,600 Speaker 1: point on that like lumber kept going down, certainly went 188 00:10:40,720 --> 00:10:43,439 Speaker 1: lower than I thought it would go, and I'm like, well, 189 00:10:43,480 --> 00:10:46,560 Speaker 1: I don't think it's going to bounce until folks step 190 00:10:46,600 --> 00:10:51,199 Speaker 1: back in and replenish her inventory. And if they bought it, 191 00:10:52,720 --> 00:10:56,400 Speaker 1: and they could buy it six hundred, their average would be, 192 00:10:56,600 --> 00:11:00,240 Speaker 1: you know, a thousand bucks or something, and then you'll 193 00:11:00,240 --> 00:11:04,600 Speaker 1: see lower prices pushed to consumers. So until it's stopped 194 00:11:04,600 --> 00:11:10,240 Speaker 1: going down, indicating buyers coming in at much lower prices, 195 00:11:10,400 --> 00:11:14,240 Speaker 1: until we saw that retail prices were gonna stay high. 196 00:11:14,280 --> 00:11:16,080 Speaker 1: And I think that's kind of how it played out. 197 00:11:16,240 --> 00:11:19,559 Speaker 1: Retail prices stayed high relative to replacement costs, and then 198 00:11:19,760 --> 00:11:23,240 Speaker 1: finally that that high price inventory got moved out and 199 00:11:23,480 --> 00:11:26,240 Speaker 1: prices have come down to the the end user. So 200 00:11:26,320 --> 00:11:30,480 Speaker 1: that was June July, a little bit of August. Then 201 00:11:30,600 --> 00:11:36,520 Speaker 1: something really interesting happened. I call it our negative oil moment. 202 00:11:37,400 --> 00:11:42,240 Speaker 1: So y'all remember oil went negative. The fundamental reason was 203 00:11:42,280 --> 00:11:47,120 Speaker 1: there was no place to store it, right, what's the number, Mr, 204 00:11:47,200 --> 00:11:50,400 Speaker 1: customer that you would buy at? Just give me a bit, 205 00:11:50,559 --> 00:11:53,600 Speaker 1: you know, and like there's like there is no number 206 00:11:54,559 --> 00:11:58,720 Speaker 1: because I have no place to put it. And maybe 207 00:11:58,720 --> 00:12:01,680 Speaker 1: this happened in oil, but certainly lumber. I had already 208 00:12:01,720 --> 00:12:04,840 Speaker 1: bought what I thought was cheap at the time, so 209 00:12:04,920 --> 00:12:08,400 Speaker 1: my cash is already my budget has already spent an inventory, 210 00:12:08,480 --> 00:12:12,800 Speaker 1: so I have no budget left to average down. And 211 00:12:12,840 --> 00:12:14,680 Speaker 1: if I did, I have no place to put it. 212 00:12:14,760 --> 00:12:16,920 Speaker 1: So it turned into a negative oil like we'll pay 213 00:12:16,960 --> 00:12:18,360 Speaker 1: you to take it from us because we don't have 214 00:12:18,360 --> 00:12:21,480 Speaker 1: any place to put it either kind of situation and 215 00:12:21,600 --> 00:12:24,960 Speaker 1: with lumber are negative oil. Moment was and this is 216 00:12:25,000 --> 00:12:31,200 Speaker 1: real geeky commodity trading verbiage, but the contango went to 217 00:12:31,280 --> 00:12:37,080 Speaker 1: a hundred dollar discount, which it was. The September contract 218 00:12:37,080 --> 00:12:42,160 Speaker 1: traded one hundred dollars below the November contract. It basically 219 00:12:42,200 --> 00:12:45,680 Speaker 1: means you could buy lumber for today and pre sell 220 00:12:45,760 --> 00:12:50,120 Speaker 1: it six days later for a hundred dollars more. You 221 00:12:50,240 --> 00:12:53,600 Speaker 1: just needed somewhere to store it, right, which is easier 222 00:12:53,640 --> 00:12:57,080 Speaker 1: than with oil. Yeah, you would think, you know, it's 223 00:12:57,120 --> 00:13:00,000 Speaker 1: certainly yes, Like you can stack lumber in a field, 224 00:13:00,080 --> 00:13:03,160 Speaker 1: then it's not gonna like contaminate anything. But like the 225 00:13:03,200 --> 00:13:09,760 Speaker 1: facilities that specialize in building materials handling were full, they're 226 00:13:09,800 --> 00:13:12,720 Speaker 1: still full, so that the market was paying you a 227 00:13:12,800 --> 00:13:18,040 Speaker 1: hundred dollars to store it for sixty days when the 228 00:13:18,240 --> 00:13:21,520 Speaker 1: hard costs to do that is like twelve bucks. So 229 00:13:22,200 --> 00:13:25,720 Speaker 1: the textbook calls it riskless profit. It's an eight eight 230 00:13:25,720 --> 00:13:29,160 Speaker 1: dollar profit, no brainer by today sell it for a 231 00:13:29,200 --> 00:13:31,520 Speaker 1: hundred dollars more to more us for on a futures 232 00:13:31,559 --> 00:13:33,719 Speaker 1: contract two months out. I mean it was a no 233 00:13:33,840 --> 00:13:36,840 Speaker 1: brainer when it was at and then they got the 234 00:13:36,880 --> 00:13:40,280 Speaker 1: thirty and forty and fifty. There was no bid because 235 00:13:40,800 --> 00:13:42,920 Speaker 1: no one had the money the budget left to buy 236 00:13:42,960 --> 00:13:46,400 Speaker 1: it because they you know, they had bought lumber what 237 00:13:46,440 --> 00:13:49,520 Speaker 1: they thought was cheap before and they had no place 238 00:13:49,520 --> 00:13:53,160 Speaker 1: to put it. So there it's like, yeah, hate, mr broker, 239 00:13:53,640 --> 00:13:55,800 Speaker 1: that sounds like a great deal. I agree with you, 240 00:13:55,880 --> 00:13:59,360 Speaker 1: this is great value, but I cannot take it. There 241 00:13:59,480 --> 00:14:02,240 Speaker 1: is no used to put it. So it certainly didn't 242 00:14:02,240 --> 00:14:04,200 Speaker 1: show up in flat price. We didn't go negative. But 243 00:14:04,800 --> 00:14:07,280 Speaker 1: the fact that we we had a hundred dollar discount 244 00:14:07,480 --> 00:14:10,760 Speaker 1: to carry lumber from one month to the next contract 245 00:14:10,800 --> 00:14:15,520 Speaker 1: month was insanity when I saw that happen, And we 246 00:14:15,559 --> 00:14:18,640 Speaker 1: had pretty large carries in the July contract too. We 247 00:14:18,679 --> 00:14:21,320 Speaker 1: got a while. There's a lot of lumber out there 248 00:14:21,480 --> 00:14:23,600 Speaker 1: that we got to chew through before we get back 249 00:14:23,640 --> 00:14:28,320 Speaker 1: to some kind of equilibrium. And we've been, you know, 250 00:14:28,800 --> 00:14:32,680 Speaker 1: for months and months, been trying to work through that 251 00:14:32,720 --> 00:14:35,520 Speaker 1: backlog of inventory that's in the pipeline. It's in different 252 00:14:36,080 --> 00:14:38,480 Speaker 1: in the hands of different players in the supply chain, 253 00:14:39,120 --> 00:14:41,800 Speaker 1: largely out of the mills hands. They've they've blown it out. 254 00:14:42,560 --> 00:14:47,760 Speaker 1: I own a lot of record breaking amount of lumber 255 00:14:47,800 --> 00:14:51,840 Speaker 1: for my little company and a lot of my counterparts 256 00:14:51,880 --> 00:14:53,880 Speaker 1: as well, and a lot of my customers. So there's 257 00:14:53,920 --> 00:14:56,480 Speaker 1: just a lot of lumber out there that needs to 258 00:14:56,520 --> 00:15:00,680 Speaker 1: get delivered end users and installed before we can see 259 00:15:00,680 --> 00:15:19,360 Speaker 1: you any kind of price appreciation. So, first of all, 260 00:15:19,440 --> 00:15:21,840 Speaker 1: I feel really bad that neither Joe nor I, I 261 00:15:21,880 --> 00:15:24,880 Speaker 1: think um wrote about the big contango moment in lumber 262 00:15:24,960 --> 00:15:28,840 Speaker 1: futures like that completely possibly by think did you? I'm sorry, 263 00:15:29,160 --> 00:15:33,120 Speaker 1: I think I think I wrote a piece about the contager. 264 00:15:33,160 --> 00:15:35,720 Speaker 1: I'm not sure. I'll have to go back. Well, it 265 00:15:35,800 --> 00:15:37,720 Speaker 1: was a big deal in my world, and to be 266 00:15:37,760 --> 00:15:39,680 Speaker 1: honest with you, there's only like six of us in 267 00:15:39,800 --> 00:15:42,480 Speaker 1: lumber who even paid attention to it anyway, But yeah, 268 00:15:42,560 --> 00:15:46,560 Speaker 1: it was pretty dramatic. Well, so secondly, can we dig 269 00:15:46,600 --> 00:15:48,880 Speaker 1: in a little bit more into that build up in 270 00:15:49,000 --> 00:15:51,640 Speaker 1: inventory because I seem to remember when we spoke to 271 00:15:51,680 --> 00:15:54,960 Speaker 1: you in April, like one of your thess for why 272 00:15:55,040 --> 00:15:58,440 Speaker 1: this might be um, you know, higher prices for longer. 273 00:15:59,400 --> 00:16:03,080 Speaker 1: Was this idea of the like lumber yards and lumber 274 00:16:03,080 --> 00:16:07,040 Speaker 1: producers having been scarred by what happened in UH two 275 00:16:07,040 --> 00:16:09,720 Speaker 1: thousand and eight with the bursting of the housing bubble, 276 00:16:09,840 --> 00:16:13,840 Speaker 1: and that you know, they had persistently underinvested incapacity because 277 00:16:13,840 --> 00:16:17,200 Speaker 1: they were always afraid of that happening again. And yet 278 00:16:17,400 --> 00:16:20,960 Speaker 1: you know, fast forward to the summer of one and 279 00:16:21,040 --> 00:16:25,000 Speaker 1: suddenly we're talking about a massive glut and inventory and 280 00:16:25,080 --> 00:16:28,680 Speaker 1: you know contango such that you can hold lumber um 281 00:16:28,720 --> 00:16:30,320 Speaker 1: you know, buy on the cheap and then sell it 282 00:16:30,360 --> 00:16:34,280 Speaker 1: forward and make a riskless profit. So what exactly happened? 283 00:16:35,480 --> 00:16:40,880 Speaker 1: The lack of capex includes storage capacity if if the 284 00:16:40,960 --> 00:16:44,360 Speaker 1: idea is gonna we're gonna run lean and mean turn 285 00:16:44,360 --> 00:16:47,080 Speaker 1: our inventory like you don't need a lot of space 286 00:16:47,320 --> 00:16:50,840 Speaker 1: to turn it like ideally did you buy just in 287 00:16:50,880 --> 00:16:53,920 Speaker 1: time inventory and you don't hold it very long? You 288 00:16:53,960 --> 00:16:55,680 Speaker 1: turn it in the a R, you turn it into 289 00:16:55,680 --> 00:16:58,080 Speaker 1: the cash. You do it over and over, and that's 290 00:16:58,120 --> 00:17:00,600 Speaker 1: been the model from the producer. Are all the way 291 00:17:00,600 --> 00:17:03,960 Speaker 1: down to the retail lumber yard. All of a sudden 292 00:17:04,440 --> 00:17:08,080 Speaker 1: what we call in the lumber industry outtake how much 293 00:17:08,160 --> 00:17:10,840 Speaker 1: lumbers leaving the lumber yard and getting installed in a 294 00:17:10,880 --> 00:17:14,879 Speaker 1: house or an apartment. I'll take grinded to a halt. 295 00:17:15,560 --> 00:17:19,240 Speaker 1: And this is I think the bullwhip effect if listening 296 00:17:19,280 --> 00:17:22,760 Speaker 1: to your last several podcasts comes into play in the 297 00:17:22,840 --> 00:17:28,560 Speaker 1: global supply chain crisis starting to peak right now affects lumber. 298 00:17:29,600 --> 00:17:32,399 Speaker 1: So a lot of the lumber that's piled up is 299 00:17:32,520 --> 00:17:38,280 Speaker 1: largely sold. It's committed to a job, but that job 300 00:17:38,680 --> 00:17:43,120 Speaker 1: is not ready to take the lumber yet because they're 301 00:17:43,160 --> 00:17:47,320 Speaker 1: still waiting on the windows and the appliances to finish 302 00:17:47,440 --> 00:17:52,000 Speaker 1: the house before. So they have a job on the books, 303 00:17:52,040 --> 00:17:56,439 Speaker 1: but they can't close out the previous house, and you know, 304 00:17:56,480 --> 00:18:00,320 Speaker 1: they get all the finished products in there that are 305 00:18:00,440 --> 00:18:05,640 Speaker 1: heavily related to the global supply chain. The biggest issue 306 00:18:06,800 --> 00:18:11,359 Speaker 1: for US was trust plates. Floor trust is roof trust 307 00:18:11,440 --> 00:18:13,600 Speaker 1: is the little butt plates that go on all the joints. 308 00:18:13,840 --> 00:18:19,040 Speaker 1: Metal trust plates. Two companies have eight of the market share, 309 00:18:20,000 --> 00:18:25,520 Speaker 1: and when these trusses are spect and approved by the 310 00:18:25,560 --> 00:18:27,680 Speaker 1: county and no, no, no no, no, like it's you can't 311 00:18:27,720 --> 00:18:30,520 Speaker 1: switch the plate to some other plate supplier, like it's 312 00:18:30,520 --> 00:18:34,640 Speaker 1: spect specific to some certain technology, and you couldn't get 313 00:18:34,680 --> 00:18:38,240 Speaker 1: trust plates. And this is just metal from Turkey or whatever, 314 00:18:38,800 --> 00:18:40,560 Speaker 1: not an expert in that supply chain, but it's not 315 00:18:40,840 --> 00:18:44,639 Speaker 1: domestically produced, so you couldn't get trust is. So it 316 00:18:44,680 --> 00:18:47,480 Speaker 1: was almost like if you envisioned building a house, no 317 00:18:47,520 --> 00:18:49,960 Speaker 1: one could get the lumber for the first floor. Then 318 00:18:50,000 --> 00:18:52,600 Speaker 1: they got the lumber. Now it's we need a floor. 319 00:18:52,640 --> 00:18:55,600 Speaker 1: Trust the wedding that goes between the first and second floor, 320 00:18:56,240 --> 00:18:59,840 Speaker 1: we can't get that. It's backlogged. We can't get the plates. 321 00:19:00,800 --> 00:19:03,240 Speaker 1: So I don't really need the lumber for the second 322 00:19:03,240 --> 00:19:06,520 Speaker 1: floor until I get my floor trusses in and those 323 00:19:06,520 --> 00:19:10,960 Speaker 1: are months out, months and months. So you had lumber 324 00:19:11,520 --> 00:19:14,280 Speaker 1: that was scheduled to deliver in July. Now it's on 325 00:19:14,400 --> 00:19:18,879 Speaker 1: indefinite hold, and you have lumber prices falling, falling, falling. 326 00:19:19,000 --> 00:19:22,760 Speaker 1: So speculators like myself, UM and and other folks in 327 00:19:22,800 --> 00:19:25,119 Speaker 1: the supply chain just kind of buy lumber because they 328 00:19:25,160 --> 00:19:30,320 Speaker 1: think it's cheap. UM not anticipating the inability to turn 329 00:19:30,320 --> 00:19:35,080 Speaker 1: your inventory because there's this bottleneck at the job site 330 00:19:35,119 --> 00:19:38,200 Speaker 1: of the apartment and of the house, the single family 331 00:19:38,240 --> 00:19:41,359 Speaker 1: home that is all held up. You can't get to 332 00:19:41,400 --> 00:19:43,840 Speaker 1: the second floor because you don't have trust plates, and 333 00:19:43,840 --> 00:19:45,919 Speaker 1: then you need the roof trusses, and and then it 334 00:19:45,960 --> 00:19:49,879 Speaker 1: became I gotta I can't fit. Like there's there's caring 335 00:19:49,880 --> 00:19:53,040 Speaker 1: costs for the builder and the construction loans and the draws, 336 00:19:53,040 --> 00:19:55,280 Speaker 1: like they have to close out and deliver the house 337 00:19:55,680 --> 00:19:58,760 Speaker 1: to get that last payment. Did that rollout into the 338 00:19:58,800 --> 00:20:01,719 Speaker 1: next you know, Jack, So it held up all these 339 00:20:01,760 --> 00:20:06,320 Speaker 1: other projects because I couldn't complete homes. This is so fascinating. 340 00:20:06,600 --> 00:20:09,399 Speaker 1: You know, we talked to uh Ellie Wolf you know 341 00:20:09,480 --> 00:20:11,840 Speaker 1: who monitors this stuff, I think a couple of months 342 00:20:11,880 --> 00:20:14,480 Speaker 1: after we talked to you. And so basically, you know, 343 00:20:15,160 --> 00:20:17,840 Speaker 1: we think about and again think about also the mat 344 00:20:18,040 --> 00:20:21,359 Speaker 1: King episode, just like the sheer like complexity of what 345 00:20:21,400 --> 00:20:23,480 Speaker 1: we're talking about. So it's like, okay, like we think 346 00:20:23,520 --> 00:20:26,560 Speaker 1: about supply and demand is you know, these two lines 347 00:20:26,600 --> 00:20:29,280 Speaker 1: that cross, and we know that there's a lot of 348 00:20:29,800 --> 00:20:33,560 Speaker 1: demand for homes and we're a bit of major housing boom. 349 00:20:33,560 --> 00:20:36,040 Speaker 1: Maybe there's a little bit of softening lately, but we've 350 00:20:36,040 --> 00:20:40,000 Speaker 1: had this huge demand boom. But it's something as simple, 351 00:20:40,119 --> 00:20:43,240 Speaker 1: and you know, Tracy has written a lot about this, like, okay, 352 00:20:43,280 --> 00:20:45,600 Speaker 1: one part doesn't come and the house doesn't work, Like 353 00:20:45,640 --> 00:20:48,120 Speaker 1: if you don't have faucet, you can't live in a house. 354 00:20:48,280 --> 00:20:51,280 Speaker 1: So you could have major demand four housing and lumber 355 00:20:51,359 --> 00:20:55,359 Speaker 1: and still no actual orders big placed because you're missing 356 00:20:55,400 --> 00:21:00,480 Speaker 1: apart right, And I've learned about trust play. I had 357 00:21:00,480 --> 00:21:03,679 Speaker 1: no idea that that was, Like, I'm gonna google trust 358 00:21:03,680 --> 00:21:05,560 Speaker 1: plates right now so i can see what they look 359 00:21:05,640 --> 00:21:09,520 Speaker 1: like while we're talking. I think we need a trust 360 00:21:09,560 --> 00:21:12,360 Speaker 1: plate episode. Now I see Okay, okay, I see, I see, 361 00:21:12,400 --> 00:21:15,400 Speaker 1: I see it. That just that little like four four 362 00:21:15,600 --> 00:21:19,359 Speaker 1: inch by six inch, a little nothing, you know, and 363 00:21:19,960 --> 00:21:26,080 Speaker 1: it is holding back an entire sector of of the economy. 364 00:21:26,359 --> 00:21:29,600 Speaker 1: And okay, you got the trust plates in and then 365 00:21:29,640 --> 00:21:35,639 Speaker 1: now you need faucets and toilets and refrigerators. So it 366 00:21:36,160 --> 00:21:39,800 Speaker 1: caught me off guard and just being so narrowly focused 367 00:21:39,800 --> 00:21:43,280 Speaker 1: on lumber. Now I'm like, I gotta think more macro 368 00:21:43,520 --> 00:21:47,160 Speaker 1: than I would y'all. Y'all were talking earlier about the specialists, 369 00:21:48,080 --> 00:21:53,000 Speaker 1: and I'm highly specialized in a two by fource. No 370 00:21:53,080 --> 00:21:56,440 Speaker 1: idea about metal, But now I'm kind of like there's indicators, 371 00:21:56,480 --> 00:21:59,960 Speaker 1: and I'm looking at and supply data and that now 372 00:22:00,080 --> 00:22:03,080 Speaker 1: kind of come into view. Um and largely just talking 373 00:22:03,119 --> 00:22:05,119 Speaker 1: to my customers and what they're hearing on lead times 374 00:22:05,119 --> 00:22:08,640 Speaker 1: on trustes. But didn't see that one coming. A lot 375 00:22:08,680 --> 00:22:11,600 Speaker 1: of us didn't, so Tracy, to tour round out your question, 376 00:22:12,480 --> 00:22:15,080 Speaker 1: we just kept seeing lumber prices fall and we saw 377 00:22:15,280 --> 00:22:19,960 Speaker 1: we know that customers are paying home builders extremely high 378 00:22:20,160 --> 00:22:23,840 Speaker 1: historical prices for the lumber. So every time I buy lumber, 379 00:22:23,920 --> 00:22:27,000 Speaker 1: I'm largely booking a profit because I know, not me, 380 00:22:27,080 --> 00:22:29,680 Speaker 1: but the retail lumber yard, they know that what their 381 00:22:29,720 --> 00:22:33,520 Speaker 1: home builders are paying. The problem was no one saw 382 00:22:34,480 --> 00:22:39,639 Speaker 1: just the backlog of uncompleted homes and it shows up 383 00:22:39,760 --> 00:22:42,760 Speaker 1: very clearly, and the housing starts data, the amount of 384 00:22:42,800 --> 00:22:46,040 Speaker 1: homes are completing is is decoupling from home starts in 385 00:22:46,040 --> 00:22:48,840 Speaker 1: a way that it's pretty glaring, and you know, it 386 00:22:48,880 --> 00:22:52,120 Speaker 1: all rounds out this, Uh, this whole point is we're 387 00:22:52,119 --> 00:22:55,320 Speaker 1: just not completing homes, so it's hard to roll over 388 00:22:55,400 --> 00:22:58,240 Speaker 1: and and your money and build the next one. So 389 00:22:58,359 --> 00:23:01,560 Speaker 1: it's just, you know, people saw value, they kept buying, buying, buying, 390 00:23:01,800 --> 00:23:05,639 Speaker 1: and then not being able to deliver. So for every 391 00:23:05,640 --> 00:23:08,880 Speaker 1: Reil car they bought five Reil cars, they maybe deliver one, 392 00:23:09,119 --> 00:23:12,240 Speaker 1: so every month they'd accumulate four rail cars. And that 393 00:23:12,320 --> 00:23:15,120 Speaker 1: happened over three or four or five months. And here 394 00:23:15,119 --> 00:23:19,520 Speaker 1: we are. Okay, so here's another very basic question. But 395 00:23:19,760 --> 00:23:22,600 Speaker 1: we're getting the sense that, you know, even if the 396 00:23:22,680 --> 00:23:27,120 Speaker 1: lumber market had reacted perfectly to supply demand changes, there 397 00:23:27,160 --> 00:23:30,440 Speaker 1: would be things outside of its external control, like what's 398 00:23:30,480 --> 00:23:32,840 Speaker 1: going on with trust plates or you know, sinks and 399 00:23:32,880 --> 00:23:37,359 Speaker 1: fawcets missing in a house that would affect the market. 400 00:23:37,480 --> 00:23:41,120 Speaker 1: So I guess my question is like what is needed 401 00:23:41,520 --> 00:23:45,080 Speaker 1: for prices to stop falling and for things to sort 402 00:23:45,119 --> 00:23:48,879 Speaker 1: of like come back into balance or is it just 403 00:23:48,960 --> 00:23:52,480 Speaker 1: like completely beyond the lumber market itself at this moment 404 00:23:52,480 --> 00:23:58,720 Speaker 1: in time. No. So it's it's the question the industry 405 00:23:58,880 --> 00:24:02,520 Speaker 1: is trying to answer, and to me, the answers simple 406 00:24:02,640 --> 00:24:06,399 Speaker 1: but not easy. It's we have to cut production and 407 00:24:06,840 --> 00:24:11,119 Speaker 1: we're just we're producing more than we're I call it 408 00:24:11,119 --> 00:24:15,040 Speaker 1: installing in homes, and that's a recipe for oversupply and 409 00:24:15,080 --> 00:24:19,320 Speaker 1: lower prices. And one contangoes you're we're just way out 410 00:24:19,359 --> 00:24:23,959 Speaker 1: producing the capacity to build homes, which is shocking because 411 00:24:24,400 --> 00:24:28,480 Speaker 1: just six months ago we're at seventeen d dollars and 412 00:24:28,520 --> 00:24:32,359 Speaker 1: if you if you didn't see the spike on a chart, 413 00:24:33,200 --> 00:24:36,160 Speaker 1: and here we are at six hundred bucks on futures, 414 00:24:36,760 --> 00:24:41,679 Speaker 1: that would be the record high price ever and lumber 415 00:24:41,720 --> 00:24:46,760 Speaker 1: prices and lumber futures going back thirty plus years. Six 416 00:24:46,840 --> 00:24:50,720 Speaker 1: hundred bucks has never been seen before outside of the 417 00:24:50,800 --> 00:24:54,040 Speaker 1: last eighteen months. But now we're talking about curtailing production. 418 00:24:55,359 --> 00:24:59,439 Speaker 1: So this idea of higher for longer I we're almost 419 00:24:59,520 --> 00:25:04,480 Speaker 1: double the five year average price. The mills used to 420 00:25:04,560 --> 00:25:09,560 Speaker 1: love four. Now we're we're oversupplied at six. And for 421 00:25:09,640 --> 00:25:11,639 Speaker 1: it to change, we need to produce less. But the 422 00:25:11,640 --> 00:25:15,240 Speaker 1: problem with that is the supply chains so out of whack. 423 00:25:15,600 --> 00:25:20,040 Speaker 1: The amount of inventory held by each player, the producer, 424 00:25:20,480 --> 00:25:24,600 Speaker 1: the secondary market, the retail lumber yard. Ideally everyone has 425 00:25:24,640 --> 00:25:26,720 Speaker 1: a little bit and it's all pretty smooth. Well, it 426 00:25:26,800 --> 00:25:28,720 Speaker 1: just became this thing where the mills had all of 427 00:25:28,760 --> 00:25:33,600 Speaker 1: it and then the secondary market now owns most of 428 00:25:33,600 --> 00:25:38,159 Speaker 1: it because the retail lumber yard, their whole goal this 429 00:25:38,240 --> 00:25:40,919 Speaker 1: summer was worked down that high price inventory. Like I 430 00:25:40,960 --> 00:25:45,879 Speaker 1: talked about earlier, don't re buy, don't add average in 431 00:25:46,720 --> 00:25:48,640 Speaker 1: get rid of the high price stuff and then we'll 432 00:25:48,640 --> 00:25:51,560 Speaker 1: deal with it. So what we're seeing now is that 433 00:25:51,640 --> 00:25:54,080 Speaker 1: big pile of lumber at the retail level is getting 434 00:25:54,080 --> 00:25:56,399 Speaker 1: lower and lower. But now there's this big pile at 435 00:25:56,400 --> 00:25:59,200 Speaker 1: the secondary level we've got to deal with. So that's 436 00:25:59,200 --> 00:26:03,359 Speaker 1: getting bought. But if a retail lumber yard is buying 437 00:26:03,359 --> 00:26:06,320 Speaker 1: from the secondary market, they're not buying from the sawmill. 438 00:26:06,880 --> 00:26:11,160 Speaker 1: So the sawmill is I think headed for a little 439 00:26:11,160 --> 00:26:15,400 Speaker 1: bit of pain here. Their break even prices are significantly 440 00:26:15,480 --> 00:26:19,120 Speaker 1: higher because log costs are up, lumber tiariffs are doubling 441 00:26:19,200 --> 00:26:23,080 Speaker 1: in a couple of weeks, and labor okay, so they 442 00:26:23,119 --> 00:26:24,520 Speaker 1: don't have the break even so that they did in 443 00:26:24,560 --> 00:26:27,800 Speaker 1: the past. So anything under six D the major sawmills 444 00:26:28,520 --> 00:26:32,160 Speaker 1: are losing money. And here we are at six and 445 00:26:32,200 --> 00:26:35,760 Speaker 1: they're not seeing the demand because the buyer can lean 446 00:26:35,880 --> 00:26:38,960 Speaker 1: on the secondary market, which has been painfully holding onto 447 00:26:39,000 --> 00:26:44,399 Speaker 1: lumber since Bucks and just trying to average average, average average, 448 00:26:44,880 --> 00:26:47,720 Speaker 1: and uh, now here's their moment to blow out their 449 00:26:47,760 --> 00:26:50,760 Speaker 1: pile and turn their inventory into cash. Everyone has held 450 00:26:50,840 --> 00:26:53,600 Speaker 1: lumber longer than they've ever felt comfortable with and a 451 00:26:53,760 --> 00:26:56,600 Speaker 1: much higher volumes. There's a big pile lumber we gotta 452 00:26:56,600 --> 00:27:01,000 Speaker 1: get through. So the producers need to reduce their output. 453 00:27:01,520 --> 00:27:06,200 Speaker 1: And I'm afraid when they figure that out and they 454 00:27:06,240 --> 00:27:09,200 Speaker 1: implement it and they reduced their own hand inventories, they 455 00:27:09,200 --> 00:27:12,600 Speaker 1: reduced their output, will be just around the time the 456 00:27:12,640 --> 00:27:17,800 Speaker 1: secondary market has been depleted and now the end user, 457 00:27:18,400 --> 00:27:21,639 Speaker 1: the retail lumber yard, will then turned to the mills 458 00:27:22,520 --> 00:27:25,240 Speaker 1: to get ready for Q one spring building season, the 459 00:27:25,320 --> 00:27:30,040 Speaker 1: seasonal lumber party that we have every year, and the 460 00:27:30,080 --> 00:27:33,680 Speaker 1: mills they are going to have tooled down because they 461 00:27:33,680 --> 00:27:36,879 Speaker 1: haven't seen demand in three months. So we have to 462 00:27:36,920 --> 00:27:40,920 Speaker 1: restrict supply to bring the contango in and work through 463 00:27:40,920 --> 00:27:43,160 Speaker 1: the pile a lumber we have. But I feel like, 464 00:27:43,240 --> 00:27:45,760 Speaker 1: because we're so out of whack and we're hitting these 465 00:27:45,800 --> 00:27:50,320 Speaker 1: extremes on the upside and the downside, that we're not done. 466 00:27:50,480 --> 00:27:54,560 Speaker 1: That pendulum is not done swinging. So I'm a little 467 00:27:54,560 --> 00:27:59,440 Speaker 1: nervous for really bullish Q one and not enough production 468 00:27:59,480 --> 00:28:03,120 Speaker 1: to meet it. So one of the interesting implications of this, 469 00:28:03,200 --> 00:28:05,280 Speaker 1: and you know, this was something that we talked a 470 00:28:05,320 --> 00:28:08,040 Speaker 1: lot about on the last time we talked with you, 471 00:28:08,080 --> 00:28:10,680 Speaker 1: and we've talked with other people, wouldn't examining this industry 472 00:28:10,760 --> 00:28:12,960 Speaker 1: but it's acute in housing. And that is of course 473 00:28:13,000 --> 00:28:17,520 Speaker 1: that after the Great Financial Crisis, so many actors within 474 00:28:17,640 --> 00:28:21,480 Speaker 1: anything related to housing were scarred. They stopped investing, maybe 475 00:28:21,520 --> 00:28:25,960 Speaker 1: they diminished capacity, and from what you're saying, and so that, 476 00:28:26,000 --> 00:28:27,400 Speaker 1: you know, you so we sort of pay the price 477 00:28:27,480 --> 00:28:30,280 Speaker 1: now because what you know, the diminished capacity then becomes 478 00:28:30,280 --> 00:28:31,960 Speaker 1: a bottleneck that we have to pay the price for 479 00:28:32,119 --> 00:28:34,760 Speaker 1: in a boom. You know what we're seeing now in 480 00:28:34,880 --> 00:28:37,399 Speaker 1: lumber with that price, It's like, I wouldn't want to 481 00:28:37,480 --> 00:28:40,480 Speaker 1: It does not sound like an environment in which there's 482 00:28:40,520 --> 00:28:44,840 Speaker 1: gonna be much appetite to increased sawmill capacity, or that 483 00:28:44,880 --> 00:28:47,520 Speaker 1: anyone is going to increase capacity or make a real 484 00:28:47,600 --> 00:28:51,280 Speaker 1: like long term capex environment. Because in a way, they 485 00:28:51,320 --> 00:28:53,120 Speaker 1: did just get burned again. And maybe it's not as 486 00:28:53,160 --> 00:28:55,640 Speaker 1: bad and as you say, prices are still well above 487 00:28:55,680 --> 00:28:58,440 Speaker 1: the five year average and so forth, but it did 488 00:28:58,480 --> 00:29:01,440 Speaker 1: sort of once again. And the homebuilders, of course, you know, 489 00:29:01,480 --> 00:29:03,680 Speaker 1: the bottom hasn't fallen out for them, but at least 490 00:29:03,680 --> 00:29:07,280 Speaker 1: for this one part of the market, they're sort of like, well, yeah, 491 00:29:07,320 --> 00:29:10,320 Speaker 1: this is like a good reason to like remain remain 492 00:29:10,400 --> 00:29:16,880 Speaker 1: hesitant about significantly adding adding capacity. Yeah, like I got 493 00:29:16,920 --> 00:29:20,680 Speaker 1: mocked for saying for implying this time is different, and 494 00:29:20,720 --> 00:29:23,800 Speaker 1: they were right, like shirt off, like we didn't stay 495 00:29:23,800 --> 00:29:27,000 Speaker 1: above a thousand and a little bit of my naivete 496 00:29:27,120 --> 00:29:32,120 Speaker 1: and inexperience and lack of macro appreciation for global supply 497 00:29:32,200 --> 00:29:35,960 Speaker 1: chain and trust plates um, but now I know, Yeah, 498 00:29:36,000 --> 00:29:39,720 Speaker 1: we gotta do a trust plates episode. There's a lot 499 00:29:39,840 --> 00:29:47,000 Speaker 1: of announced investment greenfield acquisition in southern in the southern 500 00:29:47,120 --> 00:29:50,840 Speaker 1: US to produce more Southern other Pine. Southern the other 501 00:29:50,880 --> 00:29:57,080 Speaker 1: Pine is incredibly profitable at these current prices, which are 502 00:29:57,120 --> 00:29:59,680 Speaker 1: at the low end of the last eighteen months, in 503 00:30:00,080 --> 00:30:03,800 Speaker 1: readibly profitable. Two by four's are going for over seven 504 00:30:03,840 --> 00:30:07,640 Speaker 1: hundred bucks for thousand and I don't know the southern 505 00:30:07,680 --> 00:30:09,920 Speaker 1: of the pine game as well, but I'm guessing their 506 00:30:09,960 --> 00:30:16,320 Speaker 1: production costs or maybe a little higher three fifty. So 507 00:30:16,360 --> 00:30:20,560 Speaker 1: there's a lot of announced investment into Southern Ola pine. 508 00:30:20,680 --> 00:30:23,760 Speaker 1: But this goes into the larger point of Canadian lumber 509 00:30:23,760 --> 00:30:27,800 Speaker 1: and southern alpine are different, used differently, are and you 510 00:30:27,920 --> 00:30:31,240 Speaker 1: can't unless we build homes differently. All that announced production 511 00:30:31,680 --> 00:30:36,040 Speaker 1: doesn't really alleviate the shortage of lumber in the way 512 00:30:36,040 --> 00:30:37,720 Speaker 1: we build homes now if we start building homes of 513 00:30:37,760 --> 00:30:41,080 Speaker 1: southern Ola Pine, that's different. But there is there is 514 00:30:41,880 --> 00:30:46,080 Speaker 1: capex in the South, but in Canada the finite log 515 00:30:46,160 --> 00:30:50,800 Speaker 1: supply that limits anyone from putting risk on on a 516 00:30:50,920 --> 00:30:54,080 Speaker 1: production basis up there. In fact, the Canadians are the 517 00:30:54,080 --> 00:30:57,160 Speaker 1: ones opening sawmills in the US South. So that that's 518 00:30:57,160 --> 00:31:00,880 Speaker 1: a really interesting dynamic. We actually we've talked about we 519 00:31:01,000 --> 00:31:03,320 Speaker 1: talked over the phone a couple of times, I think 520 00:31:03,360 --> 00:31:07,600 Speaker 1: between our last episodes, But you're mentioned of the trust 521 00:31:07,680 --> 00:31:11,200 Speaker 1: market and the market share that the two companies have. 522 00:31:11,920 --> 00:31:16,000 Speaker 1: Reminds me that one of the interesting dynamics in the 523 00:31:16,040 --> 00:31:19,520 Speaker 1: market right now, and it really relates to like who 524 00:31:19,560 --> 00:31:22,239 Speaker 1: has market power at any given time, And so if 525 00:31:22,240 --> 00:31:24,880 Speaker 1: you're trust seller, you probably have a lot of market 526 00:31:24,920 --> 00:31:28,280 Speaker 1: power because there's only one other competitor and you could 527 00:31:28,320 --> 00:31:31,840 Speaker 1: probably dictate terms. And if your own builder, you're probably 528 00:31:31,920 --> 00:31:34,240 Speaker 1: forced that you're like a yah, you're probably a price 529 00:31:34,280 --> 00:31:37,560 Speaker 1: taker on a lot of this stuff. Overall, in the 530 00:31:37,640 --> 00:31:41,560 Speaker 1: housing market, what is the position of the home builders 531 00:31:41,720 --> 00:31:43,800 Speaker 1: as it relates not just to their dealing with the 532 00:31:43,880 --> 00:31:47,120 Speaker 1: lumber market, but also with all of the other things 533 00:31:47,160 --> 00:31:51,000 Speaker 1: that they have to buy, Like how does like who 534 00:31:51,080 --> 00:31:54,640 Speaker 1: has market power right now to sort of dictate terms 535 00:31:54,640 --> 00:31:58,160 Speaker 1: both in terms of price and financing terms in housing 536 00:31:58,240 --> 00:32:00,720 Speaker 1: right now, and how did that play out over the 537 00:32:00,760 --> 00:32:04,840 Speaker 1: last six months. I'll speak briefly. I'll attempt to because 538 00:32:04,880 --> 00:32:07,480 Speaker 1: this is a little out of my scope, but from 539 00:32:07,520 --> 00:32:09,680 Speaker 1: because I'm further back in the supply chain, but from 540 00:32:09,680 --> 00:32:13,720 Speaker 1: what I can observe. Okay, the home builder has less 541 00:32:13,760 --> 00:32:16,520 Speaker 1: bargaining power and leverage than they've had this whole cycle 542 00:32:16,600 --> 00:32:20,640 Speaker 1: two thou eight onward because the supply chain is consolidated 543 00:32:20,680 --> 00:32:26,040 Speaker 1: around them. Their suppliers have consolidated, the suppliers suppliers have consolidated, 544 00:32:26,120 --> 00:32:29,200 Speaker 1: so they're not in a great position. And it's really 545 00:32:29,240 --> 00:32:33,720 Speaker 1: manifested in the last six months because on the lumber side, 546 00:32:33,760 --> 00:32:36,960 Speaker 1: it came down to risk. Who is going to warehouse 547 00:32:37,560 --> 00:32:41,600 Speaker 1: figuratively and literally the lumber price risk. And for twelve 548 00:32:41,640 --> 00:32:45,120 Speaker 1: plus years it's been the lumber yard has been committing 549 00:32:45,120 --> 00:32:49,080 Speaker 1: to prices over ninety days and buying the lumber second, 550 00:32:49,280 --> 00:32:51,560 Speaker 1: hoping to buy it cheaper. And that's what got us 551 00:32:51,560 --> 00:32:55,400 Speaker 1: in our squeeze. Now, coming out of that, the suppliers 552 00:32:55,440 --> 00:32:58,880 Speaker 1: who are bigger in scale than they were facing national 553 00:32:58,920 --> 00:33:01,640 Speaker 1: homebuilders are, yeah, we're not gonna do ninety day pricing. 554 00:33:02,120 --> 00:33:05,600 Speaker 1: So the home builder suddenly has to have expertise and 555 00:33:05,880 --> 00:33:08,520 Speaker 1: lumber price risk management, which they don't have. They never 556 00:33:08,680 --> 00:33:11,920 Speaker 1: had to have that because their supplier gave them a 557 00:33:11,960 --> 00:33:14,840 Speaker 1: fixed price and they moved on. Now the supplier has 558 00:33:14,880 --> 00:33:18,080 Speaker 1: given them a two to four week price and the 559 00:33:18,120 --> 00:33:21,560 Speaker 1: home builder needs to fix use to is accustomed to 560 00:33:21,800 --> 00:33:24,480 Speaker 1: a ninety day fixed price. So I you know, I've 561 00:33:24,480 --> 00:33:30,520 Speaker 1: seen homebuilders actually steal very talented buyers from from retail 562 00:33:30,560 --> 00:33:34,400 Speaker 1: lumber yards to come work in house. You hear stories 563 00:33:34,440 --> 00:33:40,440 Speaker 1: of home homebuilders warehousing their own materials, and I don't 564 00:33:40,440 --> 00:33:42,360 Speaker 1: think that's going to end well unless they bring in 565 00:33:42,440 --> 00:33:45,520 Speaker 1: some some talent. But they're just not tooled to handle 566 00:33:45,640 --> 00:33:49,720 Speaker 1: price risk. And then from the terms and negotiation standpoint, 567 00:33:50,160 --> 00:33:53,920 Speaker 1: there's less people for them to turn to in the 568 00:33:53,960 --> 00:33:57,320 Speaker 1: supply chain because the supply chain is consolidated considerably in 569 00:33:57,320 --> 00:34:00,760 Speaker 1: the last five years. You know, it is really interesting 570 00:34:00,880 --> 00:34:04,840 Speaker 1: this idea of at a commodity price can collapse, not 571 00:34:05,040 --> 00:34:09,400 Speaker 1: necessarily because there isn't demand for it, but because of 572 00:34:09,440 --> 00:34:11,839 Speaker 1: other things going on. There's just like no one can 573 00:34:11,840 --> 00:34:14,319 Speaker 1: take delivery even if there is still a lot of 574 00:34:14,360 --> 00:34:16,840 Speaker 1: demand to build homes, and so you mentioned the trust 575 00:34:16,920 --> 00:34:20,120 Speaker 1: is and windows and faucets. You know, we we we 576 00:34:20,239 --> 00:34:23,279 Speaker 1: raised this question in the beginning, this idea of like 577 00:34:23,360 --> 00:34:25,799 Speaker 1: lumber is kind of canary in the coal mine. We 578 00:34:25,840 --> 00:34:28,280 Speaker 1: have seen some big moves and other commodities down lately. 579 00:34:28,320 --> 00:34:29,960 Speaker 1: We've seen a lot up. But you know, if you 580 00:34:30,000 --> 00:34:33,280 Speaker 1: look at like say aluminum prices or coal prices in China, 581 00:34:33,440 --> 00:34:36,640 Speaker 1: or electric there's some there's some violent moves down even 582 00:34:36,800 --> 00:34:40,319 Speaker 1: in this is there a and you know we're all 583 00:34:40,360 --> 00:34:43,480 Speaker 1: just speculating here, but is what we've seen in lumber. 584 00:34:44,000 --> 00:34:48,080 Speaker 1: Could it be in your view that maybe we are 585 00:34:48,160 --> 00:34:52,239 Speaker 1: looking at not sort of persistent inflation, but sort of 586 00:34:52,239 --> 00:34:56,959 Speaker 1: like an age of gluts after well all that we've 587 00:34:56,960 --> 00:35:00,920 Speaker 1: seen in Yeah, I did to put a little bit 588 00:35:00,920 --> 00:35:04,680 Speaker 1: of context about around the lumber glut being is really 589 00:35:04,719 --> 00:35:08,120 Speaker 1: was exacerbated by the supply chain issues. But it was 590 00:35:08,160 --> 00:35:12,080 Speaker 1: happening before trustplates were an issue, before appliances were an issue. 591 00:35:12,520 --> 00:35:14,759 Speaker 1: To me a lumber it happened because of the price 592 00:35:14,920 --> 00:35:18,360 Speaker 1: risk transfer from supplier to homebuilder, and homebuilders didn't know 593 00:35:18,440 --> 00:35:21,560 Speaker 1: how to deal with it, so they just over ali 594 00:35:21,920 --> 00:35:25,120 Speaker 1: was on your show and she she tweets a lot 595 00:35:25,160 --> 00:35:30,799 Speaker 1: over and over limiting sales by design is wild that 596 00:35:30,920 --> 00:35:33,000 Speaker 1: a business would do that, but I get it. That's 597 00:35:33,000 --> 00:35:37,360 Speaker 1: how they're mitigating risk. So if if risk is getting 598 00:35:38,000 --> 00:35:40,200 Speaker 1: moved to a part of the supply chain, whether or 599 00:35:40,239 --> 00:35:44,120 Speaker 1: not used to handling it, like Costco chartering their own 600 00:35:44,280 --> 00:35:47,440 Speaker 1: boat or whatever. Right, you guys talked about that with 601 00:35:47,440 --> 00:35:50,479 Speaker 1: with one of your container folks and he he goes 602 00:35:50,920 --> 00:35:52,719 Speaker 1: it was reading between the lines. He was like, Yeah, 603 00:35:52,800 --> 00:35:55,400 Speaker 1: that's that's going to be an interesting one to watch 604 00:35:55,840 --> 00:35:58,719 Speaker 1: because they have no idea the I know a guy 605 00:35:58,800 --> 00:36:01,719 Speaker 1: commerce kind of how that works, and I think there's 606 00:36:01,800 --> 00:36:07,319 Speaker 1: gonna charter about and so so Costco or a home 607 00:36:07,360 --> 00:36:08,840 Speaker 1: builder all of a sudden has to deal with this 608 00:36:09,000 --> 00:36:11,160 Speaker 1: risk that they used to just easily lay off on 609 00:36:11,200 --> 00:36:15,720 Speaker 1: their vendor. That will limit their ability to to perform 610 00:36:15,920 --> 00:36:18,640 Speaker 1: their business because they're they're dabbling in something they have 611 00:36:18,680 --> 00:36:22,520 Speaker 1: no idea what they're doing, and so it just limits production. 612 00:36:22,600 --> 00:36:26,120 Speaker 1: If you're thinking like home homebuilding, because we're not sure 613 00:36:26,160 --> 00:36:29,040 Speaker 1: what we're doing, we're gonna roll. We're gonna pull back 614 00:36:29,040 --> 00:36:32,239 Speaker 1: on the risk and try to feel our way through 615 00:36:32,280 --> 00:36:37,480 Speaker 1: this market in which we find ourselves having more risk 616 00:36:38,200 --> 00:36:41,200 Speaker 1: and price fluctuations than we've had to deal with in 617 00:36:41,200 --> 00:36:44,480 Speaker 1: the past. So if that plays out, you know, on 618 00:36:44,520 --> 00:36:47,319 Speaker 1: the other end, uh, and I mean these are worldwide commodities, 619 00:36:47,400 --> 00:36:52,759 Speaker 1: metal oil, natural gas, Like, we don't have a structural 620 00:36:53,760 --> 00:36:57,680 Speaker 1: shortage of those raw commodities. You know that the line 621 00:36:57,719 --> 00:36:59,960 Speaker 1: of the cap X has been reduced because a green 622 00:37:00,360 --> 00:37:02,520 Speaker 1: I just like these things are a little bit easier 623 00:37:02,520 --> 00:37:05,360 Speaker 1: to switch on UM than I mean, we've seen it 624 00:37:05,400 --> 00:37:08,720 Speaker 1: over and over, so I'm not super cycle for multiple 625 00:37:08,800 --> 00:37:13,560 Speaker 1: years commodity guy, because I just think market forces will 626 00:37:13,719 --> 00:37:33,040 Speaker 1: work itself out. So one of the reasons we actually 627 00:37:33,280 --> 00:37:36,040 Speaker 1: UM wanted to invite you back on the show was 628 00:37:36,080 --> 00:37:38,839 Speaker 1: obviously we wanted to talk about what lumber prices were 629 00:37:38,880 --> 00:37:41,440 Speaker 1: doing and the drop that we've seen, but we had 630 00:37:41,480 --> 00:37:44,479 Speaker 1: a number of people looking at your Twitter feed who 631 00:37:44,680 --> 00:37:47,399 Speaker 1: saw some of your tweets on the labor market, and 632 00:37:47,440 --> 00:37:50,759 Speaker 1: we're really interested in getting your perspective on what's going 633 00:37:50,760 --> 00:37:53,279 Speaker 1: on at the moment because, of course, in addition to 634 00:37:53,880 --> 00:37:57,160 Speaker 1: physical shortages of various goods, one of the things that 635 00:37:57,239 --> 00:37:59,279 Speaker 1: people have been talking about over the past year or 636 00:37:59,280 --> 00:38:02,880 Speaker 1: so is this idea of an actual labor shortage, and 637 00:38:02,920 --> 00:38:05,600 Speaker 1: we've sort of gotten mixed messages on it with the 638 00:38:05,640 --> 00:38:08,040 Speaker 1: people that we've spoken to. You know, on the one hand, 639 00:38:08,040 --> 00:38:10,080 Speaker 1: there are those who say it's really hard to get 640 00:38:10,120 --> 00:38:11,839 Speaker 1: people at the moment, and then on the other hand, 641 00:38:11,880 --> 00:38:13,920 Speaker 1: there are people who say, well, you know, if you 642 00:38:14,480 --> 00:38:17,200 Speaker 1: have the right job and you pay the right wages, 643 00:38:17,280 --> 00:38:20,520 Speaker 1: it's actually not that difficult. So first of all, I'd 644 00:38:20,719 --> 00:38:22,600 Speaker 1: just be curious to get like more of a sense 645 00:38:22,680 --> 00:38:26,080 Speaker 1: of where you fit in here, like how many employees 646 00:38:26,120 --> 00:38:28,600 Speaker 1: do you actually have, um, what sort of business are 647 00:38:28,600 --> 00:38:31,640 Speaker 1: you running? And then secondly, what you've noticed in terms 648 00:38:31,640 --> 00:38:35,560 Speaker 1: of the labor market recently. Yes, Tracy, are you sure 649 00:38:36,280 --> 00:38:39,600 Speaker 1: you want to go down on this road? Yes, yes, 650 00:38:39,719 --> 00:38:42,000 Speaker 1: we totally do. This is going to be like a 651 00:38:42,000 --> 00:38:44,799 Speaker 1: two part episode all you know, all in one, let's 652 00:38:44,840 --> 00:38:46,560 Speaker 1: do it. I love to talk about it. And I 653 00:38:46,719 --> 00:38:48,960 Speaker 1: just for the record, I gave you like a head's 654 00:38:49,000 --> 00:38:53,000 Speaker 1: up that you asked me. So. Yeah. So I own 655 00:38:53,640 --> 00:38:59,760 Speaker 1: um several companies outside of Lumber and inside of Lumber 656 00:39:00,120 --> 00:39:03,279 Speaker 1: that I have a total headcount of about a hundred employees, 657 00:39:04,400 --> 00:39:08,560 Speaker 1: the vast majority of which drive a truck and makes 658 00:39:09,040 --> 00:39:12,600 Speaker 1: a year. So I just have been on the front 659 00:39:12,680 --> 00:39:23,000 Speaker 1: lines of hiring, staffing, paying, negotiating with the largely on 660 00:39:23,200 --> 00:39:30,479 Speaker 1: college educated a year laborer. So that that's where most 661 00:39:30,480 --> 00:39:33,960 Speaker 1: of my perspective has come from, is being on the 662 00:39:33,960 --> 00:39:37,040 Speaker 1: front lines of the labor market. And what have you 663 00:39:37,040 --> 00:39:41,640 Speaker 1: seen recently what a what works? And hiring? Yeah, so 664 00:39:41,719 --> 00:39:45,200 Speaker 1: if you pay people more, it works. I try to 665 00:39:45,280 --> 00:39:49,399 Speaker 1: keep things that I start from the very simplest explanation, 666 00:39:49,480 --> 00:39:51,800 Speaker 1: like you just it's the labor market. As a commodity 667 00:39:51,840 --> 00:39:54,840 Speaker 1: trader to the labor market, I don't want to like 668 00:39:55,000 --> 00:39:58,439 Speaker 1: in folks, two pieces of a lumber, but it's a 669 00:39:58,520 --> 00:40:03,279 Speaker 1: finite commodity at has fluctuations in supply. So as a 670 00:40:03,320 --> 00:40:07,560 Speaker 1: commodity trader, I looked at this market and said, we're 671 00:40:07,560 --> 00:40:12,560 Speaker 1: heading for a very tight labor market. And if you 672 00:40:12,600 --> 00:40:17,799 Speaker 1: are bullish on whatever commodity you start buying, you get long. 673 00:40:18,520 --> 00:40:22,480 Speaker 1: And so I told our our operators that we we 674 00:40:22,560 --> 00:40:26,680 Speaker 1: need to start locking in labor that we already have 675 00:40:27,560 --> 00:40:31,680 Speaker 1: and higher and build a bench and be overstaffed. If 676 00:40:31,719 --> 00:40:36,480 Speaker 1: you're overstaffed, that's the goal. Like, I'm not gonna be upset. 677 00:40:37,040 --> 00:40:39,480 Speaker 1: I'm not going to push back on budgets if it 678 00:40:39,760 --> 00:40:47,120 Speaker 1: revolves around labor. So we are overstaffed. We have a 679 00:40:47,239 --> 00:40:51,880 Speaker 1: very happy workforce, and we're not working everyone to death 680 00:40:52,239 --> 00:40:56,719 Speaker 1: because we refuse to pay higher wages. So what what 681 00:40:56,880 --> 00:41:01,560 Speaker 1: I see and what I've learned is the labor markets tight. 682 00:41:02,440 --> 00:41:06,200 Speaker 1: Why it's tight. As a business owner, I don't care. 683 00:41:06,840 --> 00:41:10,880 Speaker 1: I have opinions on it. My business partners have opinions 684 00:41:10,880 --> 00:41:14,120 Speaker 1: on it. We don't agree, but we do agree on 685 00:41:14,160 --> 00:41:17,680 Speaker 1: the reality that the lumber markets tight. And if you 686 00:41:17,719 --> 00:41:19,920 Speaker 1: sign up to be a business owner, you sign up 687 00:41:19,920 --> 00:41:24,719 Speaker 1: to be an entrepreneur. You don't have the luxury of complaining. 688 00:41:24,920 --> 00:41:27,640 Speaker 1: You have to deal with reality. And the reality is 689 00:41:27,680 --> 00:41:31,879 Speaker 1: if we're going to run a business and not at 690 00:41:31,960 --> 00:41:34,960 Speaker 1: scale and not be the ones having to drive the 691 00:41:34,960 --> 00:41:37,760 Speaker 1: trucks um, which isn't the best use of our time, 692 00:41:38,680 --> 00:41:41,759 Speaker 1: we're gonna have to pay the folks and find a 693 00:41:41,800 --> 00:41:47,279 Speaker 1: clearing wage UM. So we immediately raised our starting pay 694 00:41:47,400 --> 00:41:52,360 Speaker 1: two thousand dollars a year more benefits. We actually offered 695 00:41:52,800 --> 00:41:57,200 Speaker 1: uh college tuition Before Amazon I think made the headline, 696 00:41:57,719 --> 00:42:04,279 Speaker 1: and it's fascinating. Amazon has commercials on the radio during 697 00:42:04,320 --> 00:42:10,520 Speaker 1: football games promoting So this gal is a nurse and 698 00:42:10,640 --> 00:42:14,160 Speaker 1: she's inner scrubs, and she's like, I am a nurse now, 699 00:42:14,560 --> 00:42:17,360 Speaker 1: but it's because I worked at Amazon and they paid 700 00:42:17,400 --> 00:42:20,360 Speaker 1: for my tuition. And Amazon clearly was not a lifelong 701 00:42:20,440 --> 00:42:22,759 Speaker 1: career in the warehouse. But like I got to where 702 00:42:22,760 --> 00:42:24,879 Speaker 1: I wanted to go, and I look at that I'm 703 00:42:24,920 --> 00:42:28,600 Speaker 1: competing for the same exact employee, like we had minimum 704 00:42:28,960 --> 00:42:31,719 Speaker 1: need to pay with Amazon's paying fifteen bucks an hour 705 00:42:32,239 --> 00:42:35,359 Speaker 1: or more twenty bucks an hour, depending on where you are. 706 00:42:36,120 --> 00:42:38,799 Speaker 1: So the beautiful part from a commodity trading perspective, like 707 00:42:38,840 --> 00:42:42,000 Speaker 1: I know where everyone's bid is. It's there's no secret. 708 00:42:42,160 --> 00:42:44,560 Speaker 1: I know where I need to be. And then of 709 00:42:44,600 --> 00:42:47,400 Speaker 1: course we're dealing with human beings and we feel like 710 00:42:47,440 --> 00:42:51,799 Speaker 1: we can sell culture and a vision in a community 711 00:42:52,760 --> 00:42:56,840 Speaker 1: that can put us over the edge when you're doing 712 00:42:56,840 --> 00:42:59,560 Speaker 1: the bare minimum of just paying as much as Amazon. 713 00:43:00,800 --> 00:43:04,520 Speaker 1: And it's been I don't know what word to use, 714 00:43:04,920 --> 00:43:11,000 Speaker 1: enjoyable to watch business owners who are reliant on cheap 715 00:43:11,080 --> 00:43:16,600 Speaker 1: labor lose their minds because they have to work at 716 00:43:17,200 --> 00:43:21,759 Speaker 1: the staffing side and they think they're entitled to profits. 717 00:43:22,960 --> 00:43:25,920 Speaker 1: And we run our business with our eye businesses, I 718 00:43:25,920 --> 00:43:30,480 Speaker 1: should say, with our eyes wide open, saying again the 719 00:43:30,600 --> 00:43:35,400 Speaker 1: reasons are debatable, but at least I'll give you my perspective. 720 00:43:35,719 --> 00:43:40,840 Speaker 1: In Washington, the government didn't have to do a federal 721 00:43:40,880 --> 00:43:43,760 Speaker 1: minimum wage of fifteen an hour. There's a few levers 722 00:43:43,760 --> 00:43:47,480 Speaker 1: of the poll and guess what fifteen hours the clearing 723 00:43:47,520 --> 00:43:51,520 Speaker 1: wage and that like I was like, that's that's where 724 00:43:51,560 --> 00:43:53,600 Speaker 1: the rules of the game are going. So we just 725 00:43:53,640 --> 00:43:58,000 Speaker 1: need to get there first and accept it. And and 726 00:43:58,080 --> 00:44:01,680 Speaker 1: this is the one where to me I differentiate a lot, 727 00:44:01,719 --> 00:44:05,160 Speaker 1: because that's nothing I said is super rocket science. It's 728 00:44:05,200 --> 00:44:07,640 Speaker 1: just a market that you've got to pay to cover. 729 00:44:07,960 --> 00:44:12,399 Speaker 1: And we no longer have unlimited cheap labor. We our 730 00:44:12,440 --> 00:44:16,680 Speaker 1: companies are fully aware and willing to accept lower profit 731 00:44:16,719 --> 00:44:21,480 Speaker 1: margins to be in business. I we don't expect to 732 00:44:21,600 --> 00:44:24,680 Speaker 1: raise prices dollar for dollar for a wage increases. We 733 00:44:24,760 --> 00:44:27,839 Speaker 1: hope to raise them, you know, seventy cents for every 734 00:44:27,840 --> 00:44:31,480 Speaker 1: dollar and wage increase we get. I'm just making that 735 00:44:31,560 --> 00:44:33,960 Speaker 1: off top of my head, But we accept the fact 736 00:44:34,000 --> 00:44:38,920 Speaker 1: that this economy is pro employee and if you're not 737 00:44:39,000 --> 00:44:41,640 Speaker 1: good at that part, you just won't have a business, 738 00:44:42,000 --> 00:44:45,520 Speaker 1: or you'll be running every aspect of the business yourself. 739 00:44:45,560 --> 00:44:48,040 Speaker 1: Because no one want to work for you can you 740 00:44:48,080 --> 00:44:50,320 Speaker 1: actually expound I think you said something I want to 741 00:44:50,360 --> 00:44:53,960 Speaker 1: go back to before I forget the idea of essentially 742 00:44:54,400 --> 00:44:58,680 Speaker 1: not working your employees to the bone, because I guess 743 00:44:58,680 --> 00:45:00,960 Speaker 1: they're you know, the one approach could be right, you 744 00:45:01,080 --> 00:45:04,840 Speaker 1: hire people, but really hire the absolute minimum number of 745 00:45:04,880 --> 00:45:07,919 Speaker 1: people that you can hire. Yes, you pay them more, 746 00:45:08,400 --> 00:45:12,799 Speaker 1: but how much are these other factors not strictly pay. 747 00:45:12,880 --> 00:45:15,680 Speaker 1: But the idea of like you're not like running them 748 00:45:15,800 --> 00:45:21,480 Speaker 1: ragged helpful in the recruiting process. Yeah, it's such a 749 00:45:21,520 --> 00:45:26,799 Speaker 1: great point because the minimum is fifteen bucks to just 750 00:45:26,880 --> 00:45:30,040 Speaker 1: play the game. Okay, then what is it after that? 751 00:45:30,120 --> 00:45:32,480 Speaker 1: And we we like to sell like we have a community. 752 00:45:32,719 --> 00:45:35,840 Speaker 1: We're picking up for each other. If someone needs to 753 00:45:36,120 --> 00:45:39,840 Speaker 1: have time off or there's an emergency, folks are expected 754 00:45:39,880 --> 00:45:42,960 Speaker 1: and the culture is to pick up their slack, so 755 00:45:43,040 --> 00:45:46,879 Speaker 1: there's coverage there and everyone doesn't feel like they need 756 00:45:46,920 --> 00:45:49,319 Speaker 1: to come into work. And they'll let the team down 757 00:45:49,440 --> 00:45:52,640 Speaker 1: because they're so thinly staff. No one can do your 758 00:45:52,719 --> 00:45:56,880 Speaker 1: job and pay them well enough where they do you like, 759 00:45:56,920 --> 00:45:59,200 Speaker 1: they can take some time off and and not get 760 00:45:59,200 --> 00:46:01,960 Speaker 1: a full paycheck that week and and and be okay. 761 00:46:02,080 --> 00:46:04,719 Speaker 1: And I just think it's such a short sided and 762 00:46:05,000 --> 00:46:11,760 Speaker 1: stubborn practice by business owners two cry and complain about 763 00:46:11,800 --> 00:46:16,960 Speaker 1: the costs of labor and take their most loyal, longest tenure, 764 00:46:17,160 --> 00:46:20,600 Speaker 1: dedicated employees and work them down to the bone so 765 00:46:20,680 --> 00:46:24,000 Speaker 1: you can maintain your margin because it's just a matter 766 00:46:24,040 --> 00:46:26,840 Speaker 1: of time before they quit and you don't have a 767 00:46:26,880 --> 00:46:31,520 Speaker 1: business anymore. And you know, there's the altruistic side, which 768 00:46:31,520 --> 00:46:34,440 Speaker 1: I'm not arguing for, or that's not my point. My 769 00:46:34,520 --> 00:46:39,720 Speaker 1: point is it's it's great business practice to pay lower 770 00:46:39,800 --> 00:46:43,839 Speaker 1: level employees and treat them as if you know their 771 00:46:43,920 --> 00:46:48,359 Speaker 1: revenue producing high commission salespeople. It's it. They're they're just 772 00:46:48,440 --> 00:46:51,600 Speaker 1: as important, and now they're able to flex for the 773 00:46:51,640 --> 00:46:54,520 Speaker 1: first time. And I I think it's great. It's a 774 00:46:54,560 --> 00:46:58,160 Speaker 1: lot of fun. It's challenging, but it's very fulfilling to 775 00:46:58,280 --> 00:47:02,399 Speaker 1: know you pay equal to Amazon, but they come work 776 00:47:02,480 --> 00:47:05,799 Speaker 1: for you instead, and your turnover is lower than all 777 00:47:05,840 --> 00:47:10,280 Speaker 1: of your peers, and you're affecting lives and you're showing 778 00:47:10,360 --> 00:47:15,680 Speaker 1: folks what a work environment can be and could be 779 00:47:16,320 --> 00:47:20,680 Speaker 1: with folks who have a more communal mindset. And I 780 00:47:20,680 --> 00:47:22,520 Speaker 1: mean a lot of that, I tweeted, a lot of 781 00:47:22,520 --> 00:47:24,719 Speaker 1: that comes from my time as a football coach and 782 00:47:24,760 --> 00:47:27,120 Speaker 1: a football player. It's kind of like a locker room 783 00:47:27,239 --> 00:47:32,640 Speaker 1: vibe in that there's a brotherhood and a sisterhood of 784 00:47:32,680 --> 00:47:36,799 Speaker 1: hard work and accountability and we've all seen each other 785 00:47:36,920 --> 00:47:40,400 Speaker 1: struggle and per persevere and get promoted and have have 786 00:47:40,520 --> 00:47:45,480 Speaker 1: failures and building that culture. When we were recruiting athletes 787 00:47:46,200 --> 00:47:48,840 Speaker 1: like you, had to sell something beyond scholarships. Everyone has 788 00:47:48,840 --> 00:47:50,960 Speaker 1: a scholarship and that that's kind of the mentality we 789 00:47:51,040 --> 00:47:54,000 Speaker 1: brought to this is everyone's got a fifteen dollar wage. 790 00:47:54,680 --> 00:47:56,439 Speaker 1: Now let's go compete with the best of the best. 791 00:47:56,440 --> 00:47:59,800 Speaker 1: So we're trying to compete against Amazon by selling a 792 00:48:00,000 --> 00:48:03,480 Speaker 1: differentiating culture um and that starts with or a big 793 00:48:03,520 --> 00:48:08,200 Speaker 1: component I should say, is being overstaffed and accepting less 794 00:48:08,280 --> 00:48:13,040 Speaker 1: margins lower profits to be overstaffed. If if I wanted 795 00:48:13,040 --> 00:48:15,759 Speaker 1: to squeeze my margins out, I would have a terrible 796 00:48:16,800 --> 00:48:20,000 Speaker 1: business owner experience. I would be I would be complaining 797 00:48:20,080 --> 00:48:23,800 Speaker 1: all the time as well. But I'd rather make less 798 00:48:23,840 --> 00:48:28,520 Speaker 1: and empower others more and have a sustainable business rather 799 00:48:28,560 --> 00:48:33,400 Speaker 1: than being an employee at my own company. That's the 800 00:48:33,440 --> 00:48:36,759 Speaker 1: business side of it. There was something else that you 801 00:48:37,120 --> 00:48:39,720 Speaker 1: tweeted that caught my eye, and it was this idea 802 00:48:39,840 --> 00:48:44,000 Speaker 1: that one of the reasons it's difficult to find workers 803 00:48:44,160 --> 00:48:47,319 Speaker 1: is because someone else has already hired them. And you 804 00:48:47,400 --> 00:48:51,839 Speaker 1: made the point that, you know, expanded unemployment insurance might 805 00:48:51,880 --> 00:48:55,200 Speaker 1: have given people more time to find a job that 806 00:48:55,280 --> 00:48:58,080 Speaker 1: they really like, so instead of just taking the first 807 00:48:58,080 --> 00:49:01,320 Speaker 1: thing that comes up so they can pay their bills, 808 00:49:01,719 --> 00:49:03,920 Speaker 1: they have a little bit of extra time, a safety 809 00:49:03,920 --> 00:49:06,759 Speaker 1: net to actually wait and try to find something that 810 00:49:06,840 --> 00:49:09,319 Speaker 1: they really like and enjoy, or something that pays a 811 00:49:09,360 --> 00:49:12,200 Speaker 1: decent amount of money. And this is an idea that's 812 00:49:12,200 --> 00:49:17,320 Speaker 1: like actually showed up in some macro economic research recently. 813 00:49:17,360 --> 00:49:19,920 Speaker 1: So there's something called the beverage curve, which is basically 814 00:49:19,960 --> 00:49:24,040 Speaker 1: the relationship between job openings and the unemployment rate, and 815 00:49:24,120 --> 00:49:31,120 Speaker 1: it's just massively shifted post the pandemic. So it's taking many, many, 816 00:49:31,120 --> 00:49:34,880 Speaker 1: many more job openings um in order to bring down 817 00:49:35,160 --> 00:49:39,200 Speaker 1: the unemployment rate, so like it's taking employers much much 818 00:49:39,239 --> 00:49:43,640 Speaker 1: longer to find the right people to fill open jobs. 819 00:49:43,680 --> 00:49:46,320 Speaker 1: So I would just love to hear your perspective a 820 00:49:46,360 --> 00:49:48,879 Speaker 1: little bit, because like your experience seems to sort of 821 00:49:49,120 --> 00:49:52,440 Speaker 1: bear this out. It's not that people don't want to work. 822 00:49:52,760 --> 00:49:55,480 Speaker 1: And you know, it's not that wages necessarily have to 823 00:49:55,520 --> 00:49:58,960 Speaker 1: go up astronomically, but it's more there's a mismatch between 824 00:49:59,360 --> 00:50:02,800 Speaker 1: jobs and workers, and people are kind of waiting longer 825 00:50:02,840 --> 00:50:06,399 Speaker 1: to find the right thing for them in any other 826 00:50:06,480 --> 00:50:10,120 Speaker 1: job market. Like folks who have been without a job, 827 00:50:10,120 --> 00:50:12,160 Speaker 1: they have a gap in the resume, right, we've all 828 00:50:12,160 --> 00:50:14,640 Speaker 1: heard like, you don't want a gap in the resume. Well, 829 00:50:14,640 --> 00:50:19,239 Speaker 1: that the leverages shifted to EMPLO employees so hard. It's like, 830 00:50:19,280 --> 00:50:21,520 Speaker 1: we don't care if there's a cap. You know, we're 831 00:50:21,520 --> 00:50:24,080 Speaker 1: going to interview you and go trust our process and 832 00:50:24,080 --> 00:50:28,120 Speaker 1: see you're gonna be a good fit. And the extended 833 00:50:28,280 --> 00:50:32,800 Speaker 1: unemployment benefits allowed people who typically would be paycheck to 834 00:50:32,840 --> 00:50:36,480 Speaker 1: paycheck and I just hate my job. I'm gonna go 835 00:50:37,000 --> 00:50:39,720 Speaker 1: to the next job and hope I like it without 836 00:50:39,760 --> 00:50:41,640 Speaker 1: any time in between, without any time to do a 837 00:50:41,760 --> 00:50:44,080 Speaker 1: job search, because I you know, I don't have the 838 00:50:44,080 --> 00:50:48,239 Speaker 1: savings paycheck to paycheck. Well, unextended unemployment allowed folks like 839 00:50:48,280 --> 00:50:51,640 Speaker 1: that to take their time. They get their bills paid, 840 00:50:52,080 --> 00:50:56,359 Speaker 1: they don't have the there's a mortgage forbearance, the rent moratorium. 841 00:50:57,000 --> 00:50:59,280 Speaker 1: You know, they have a little bit of breathing room 842 00:50:59,320 --> 00:51:02,919 Speaker 1: to value eight what they want to do, where, what 843 00:51:02,960 --> 00:51:04,960 Speaker 1: the what kind of hours they want to have, and 844 00:51:05,040 --> 00:51:08,720 Speaker 1: pick the right job um instead of the next job. 845 00:51:09,719 --> 00:51:15,640 Speaker 1: And as a competitor and former athlete and coach like that, 846 00:51:15,640 --> 00:51:20,560 Speaker 1: that to me means you have to compete that much 847 00:51:21,120 --> 00:51:26,080 Speaker 1: harder for labor then before because folks are being very 848 00:51:26,120 --> 00:51:29,080 Speaker 1: picky and they don't have to come work. This idea 849 00:51:29,120 --> 00:51:32,600 Speaker 1: of unlimited cheap labor, it's not it's just not a 850 00:51:32,640 --> 00:51:36,200 Speaker 1: thing anymore. And folks who haven't experienced that market like 851 00:51:36,560 --> 00:51:38,960 Speaker 1: we did, my team did when we coached football and 852 00:51:39,000 --> 00:51:42,880 Speaker 1: recruited high school athletes with a very limited supply of talent, 853 00:51:43,800 --> 00:51:46,279 Speaker 1: Like it's weird to think that you really have to 854 00:51:46,560 --> 00:51:51,399 Speaker 1: cater to and sell something beyond the pay because these 855 00:51:51,440 --> 00:51:55,239 Speaker 1: folks like I've done the retail hours, and I've done 856 00:51:56,280 --> 00:52:00,160 Speaker 1: being a waitress. We're a waiter and getting cut as 857 00:52:00,280 --> 00:52:04,000 Speaker 1: we're slow, and the unpredicutled like I'm gonna take my time, 858 00:52:04,080 --> 00:52:06,880 Speaker 1: and I heard about my buddy who works here, and 859 00:52:06,880 --> 00:52:09,279 Speaker 1: and this is the kind of culture they have. But 860 00:52:09,480 --> 00:52:12,680 Speaker 1: it's like we're being interviewed just as much as the employee. 861 00:52:13,560 --> 00:52:17,000 Speaker 1: And when you're when you're making minimum wage, like you're 862 00:52:17,040 --> 00:52:20,080 Speaker 1: not typically in that bargaining position, but now they are, 863 00:52:20,280 --> 00:52:23,960 Speaker 1: so it just has exposed people. So the labor is 864 00:52:24,000 --> 00:52:25,880 Speaker 1: out there. And the point of that tweet why it was, 865 00:52:26,000 --> 00:52:29,480 Speaker 1: we're wealth, we're staffed, we're we're not having a problem 866 00:52:29,680 --> 00:52:32,480 Speaker 1: or also paying the paying the money to be in 867 00:52:32,520 --> 00:52:38,080 Speaker 1: the game, and we're investing heavily in the culture, which 868 00:52:39,040 --> 00:52:41,520 Speaker 1: you know is a thing. But that's not new. But 869 00:52:41,800 --> 00:52:44,480 Speaker 1: I do think it's new to emphasize the culture for 870 00:52:45,280 --> 00:52:49,040 Speaker 1: low wage blue collar work. That has never been an 871 00:52:49,040 --> 00:52:53,479 Speaker 1: emphasis to quote unquote retained talent, and we we leaned 872 00:52:53,520 --> 00:52:56,799 Speaker 1: into that is this condition And I think a lot 873 00:52:56,800 --> 00:53:00,560 Speaker 1: of people the people talk about a labor shortage, but 874 00:53:00,640 --> 00:53:03,640 Speaker 1: it seems to me that what they're really saying is 875 00:53:04,080 --> 00:53:08,920 Speaker 1: there is a labor shortage among managements expectation of what 876 00:53:09,040 --> 00:53:11,960 Speaker 1: labor markets were like in ten. So if you think 877 00:53:12,040 --> 00:53:16,000 Speaker 1: teen was like the right labor market, that that was 878 00:53:16,080 --> 00:53:18,279 Speaker 1: the right level of pay, that was the right level 879 00:53:18,320 --> 00:53:21,840 Speaker 1: of treatment, then yes it's going to be tougher, But 880 00:53:22,000 --> 00:53:24,440 Speaker 1: there's no reason to think twenty nineteen was right in 881 00:53:25,520 --> 00:53:29,319 Speaker 1: is wrong per se one is what it is in 882 00:53:29,400 --> 00:53:32,880 Speaker 1: your view? Can this be sustained. Could we be in 883 00:53:33,080 --> 00:53:38,120 Speaker 1: a structurally different era for labor bargaining power for this 884 00:53:38,200 --> 00:53:41,160 Speaker 1: idea that an interview really does go in both directions, 885 00:53:41,200 --> 00:53:44,400 Speaker 1: but the worker being interviewed but also the potential company 886 00:53:44,440 --> 00:53:47,800 Speaker 1: being interviewed. And could this be something that you see 887 00:53:47,840 --> 00:53:51,960 Speaker 1: sustained for a while or is this the kind of 888 00:53:52,000 --> 00:53:56,480 Speaker 1: thing kind of like seventeen d lumber where it's just 889 00:53:56,560 --> 00:54:01,440 Speaker 1: something weird post pandemic that can't that can't last. Yeah, 890 00:54:01,880 --> 00:54:05,520 Speaker 1: a piece of data that shocked me was early retirees 891 00:54:05,840 --> 00:54:09,879 Speaker 1: coming out of this pandemic. It was massive, like those 892 00:54:09,920 --> 00:54:12,440 Speaker 1: folks aren't coming back. They're they're at least not going 893 00:54:12,480 --> 00:54:15,560 Speaker 1: to come back forty hours a week and we're in 894 00:54:15,600 --> 00:54:21,000 Speaker 1: a different demographic patch that is incredibly bullish housing. But 895 00:54:21,800 --> 00:54:25,440 Speaker 1: the teenagers in the early twenties like that, that labor 896 00:54:25,480 --> 00:54:29,400 Speaker 1: force is small. So to me, we do have a 897 00:54:29,400 --> 00:54:35,719 Speaker 1: structural upshift forecasting five to ten years out. Certainly beyond that, 898 00:54:36,320 --> 00:54:42,480 Speaker 1: we we have a demographic cliff that's in plain site 899 00:54:42,640 --> 00:54:46,160 Speaker 1: and our productivity. We're gonna have to have a productivity 900 00:54:46,520 --> 00:54:52,440 Speaker 1: boom from automation two. All the technological advances that happened 901 00:54:52,440 --> 00:54:56,800 Speaker 1: in an economy, so I don't see labor being oversupplied 902 00:54:57,360 --> 00:55:03,080 Speaker 1: anytime soon. On top of the political vacations of all 903 00:55:03,120 --> 00:55:06,080 Speaker 1: of a sudden turning the tables back against the employee. 904 00:55:06,760 --> 00:55:08,840 Speaker 1: I don't know how you pull that off. So wages 905 00:55:08,840 --> 00:55:13,120 Speaker 1: are sticky in and of themselves. To me. To answer 906 00:55:13,160 --> 00:55:15,520 Speaker 1: your question, you gotta answer. You gotta ask yourself. How 907 00:55:15,560 --> 00:55:20,239 Speaker 1: does labor get oversupplied again? With all these retirees that 908 00:55:20,360 --> 00:55:24,400 Speaker 1: had early retirements and then just every year more and 909 00:55:24,440 --> 00:55:27,600 Speaker 1: more boomers are aging out. I don't know how we 910 00:55:27,680 --> 00:55:31,399 Speaker 1: get over supplied again. But I'm not an economist. But 911 00:55:31,840 --> 00:55:35,719 Speaker 1: well they didn't get anything right either, so yeah, yeah, 912 00:55:36,239 --> 00:55:40,759 Speaker 1: I largely I don't see how we increase our labor 913 00:55:40,800 --> 00:55:48,160 Speaker 1: pool outside of immigration. Stinson. This is, you know, once 914 00:55:48,239 --> 00:55:50,000 Speaker 1: to get in a real treat. Thank you so much 915 00:55:50,000 --> 00:56:09,520 Speaker 1: for coming on out lot. Thank you. See well, I 916 00:56:09,600 --> 00:56:12,719 Speaker 1: mean I think that that delivered. We gotta do. I'm 917 00:56:12,760 --> 00:56:15,800 Speaker 1: looking at these like trust plates and like the idea 918 00:56:15,920 --> 00:56:19,680 Speaker 1: that like these like just little pieces of metal, and 919 00:56:19,760 --> 00:56:23,200 Speaker 1: it's exactly like what you've been writing about and sort 920 00:56:23,239 --> 00:56:25,759 Speaker 1: of like the Mad King idea. It's like this is 921 00:56:25,880 --> 00:56:29,400 Speaker 1: not like just simple supply and demand, and this is 922 00:56:29,400 --> 00:56:32,319 Speaker 1: not simply just like, oh, we're gonna like tap back 923 00:56:32,440 --> 00:56:35,960 Speaker 1: on credit by raising rates or something like that. This 924 00:56:36,040 --> 00:56:39,200 Speaker 1: is just like a series of like interconnected things, and 925 00:56:39,280 --> 00:56:41,319 Speaker 1: you're like, Okay, here's like a two dollar piece of 926 00:56:41,360 --> 00:56:44,359 Speaker 1: metal that caused like a massive crash of the price 927 00:56:44,400 --> 00:56:49,280 Speaker 1: of lumber. It makes perfect sense, but it's also wild. Yeah. 928 00:56:49,320 --> 00:56:51,680 Speaker 1: So two things. One, I think we should not just 929 00:56:51,760 --> 00:56:54,279 Speaker 1: do a trustplate episode, but we need to like go 930 00:56:54,360 --> 00:56:57,480 Speaker 1: into the market and become the third trustplate company and 931 00:56:57,560 --> 00:57:00,280 Speaker 1: challenge the incumbents and see how that goes, because clearly 932 00:57:00,280 --> 00:57:04,160 Speaker 1: there's an opportunity here. And then secondly, yeah, this this 933 00:57:04,360 --> 00:57:06,840 Speaker 1: definitely has me thinking about that. Um. I mean I 934 00:57:06,920 --> 00:57:09,680 Speaker 1: called it whack inflation, which isn't I don't think it's 935 00:57:09,680 --> 00:57:11,040 Speaker 1: the best name, but it was the only one I 936 00:57:11,040 --> 00:57:13,000 Speaker 1: can think of for it. But this idea that like 937 00:57:13,120 --> 00:57:16,240 Speaker 1: it's not really that we have this out of control 938 00:57:16,560 --> 00:57:20,760 Speaker 1: runaway inflation for individual components, is that we have these 939 00:57:20,800 --> 00:57:24,720 Speaker 1: mini cycles of like boom busts in prices that are 940 00:57:24,800 --> 00:57:29,080 Speaker 1: basically a reflection of the boom bust in physical supply. 941 00:57:29,320 --> 00:57:32,480 Speaker 1: So you have the bull whip effect in commodities, and 942 00:57:32,560 --> 00:57:35,680 Speaker 1: lumber is turning into a really good example where you know, 943 00:57:35,720 --> 00:57:38,960 Speaker 1: we had a massive shortage, prices increased, and now we 944 00:57:39,040 --> 00:57:43,040 Speaker 1: have a glut and prices are going down, and it's 945 00:57:43,080 --> 00:57:46,680 Speaker 1: problematic because it makes the entire supply chain unpredictable. And 946 00:57:46,720 --> 00:57:50,200 Speaker 1: at the same time, lumber is being also impacted by 947 00:57:50,400 --> 00:57:53,520 Speaker 1: things like trustplates and other components of the supply chain, 948 00:57:53,640 --> 00:57:56,760 Speaker 1: and so you do end up having these like sharp 949 00:57:57,080 --> 00:58:00,760 Speaker 1: short cycles. And everyone's sort of focused on just the 950 00:58:00,800 --> 00:58:04,440 Speaker 1: idea of prices going up and transitory inflation. But I 951 00:58:04,480 --> 00:58:08,120 Speaker 1: feel like no one's talking as much about the prices 952 00:58:08,160 --> 00:58:10,080 Speaker 1: going down. And you're totally right. We've seen it now 953 00:58:10,120 --> 00:58:13,560 Speaker 1: in lumber, seen it in cole aluminum and a few 954 00:58:13,560 --> 00:58:16,080 Speaker 1: other things, and I don't know, like it feels to 955 00:58:16,080 --> 00:58:19,360 Speaker 1: me like that's probably the bigger danger here, is just 956 00:58:19,400 --> 00:58:23,560 Speaker 1: this like volatility that takes forever to right itself. It 957 00:58:23,600 --> 00:58:27,240 Speaker 1: feels like maybe the story is less inflation per se 958 00:58:27,920 --> 00:58:32,720 Speaker 1: in more inflation volatility. It's like the first of inflation, 959 00:58:33,080 --> 00:58:35,600 Speaker 1: so that you do have like and also just like 960 00:58:35,640 --> 00:58:39,000 Speaker 1: this sort of idea of like lots of things lumber 961 00:58:39,560 --> 00:58:42,520 Speaker 1: crashing while other things are surging, other things surging while 962 00:58:42,520 --> 00:58:46,640 Speaker 1: other things are crashing, and a very difficult process of 963 00:58:46,640 --> 00:58:50,960 Speaker 1: like getting something that resembles like the pre crisis smooth manner. 964 00:58:51,040 --> 00:58:54,320 Speaker 1: And the lumber story is just like a great I'm 965 00:58:54,320 --> 00:58:56,919 Speaker 1: sure it's you know, if we talk to someone else 966 00:58:56,960 --> 00:58:59,440 Speaker 1: in another commodity, they would probably also have like some 967 00:58:59,600 --> 00:59:01,680 Speaker 1: like weird part that they were missing. I think we're 968 00:59:01,680 --> 00:59:05,240 Speaker 1: gonna do a grains one soon. And the connection there 969 00:59:05,240 --> 00:59:09,800 Speaker 1: between fertilizer and fertilizer and energy all kinds of things. 970 00:59:10,280 --> 00:59:12,680 Speaker 1: So I think that there is a lot of this 971 00:59:12,880 --> 00:59:16,439 Speaker 1: going on. And again I speak, you know, go back 972 00:59:16,480 --> 00:59:19,440 Speaker 1: to the central Bank question. It's like, yeah, in flaship, okay, 973 00:59:20,440 --> 00:59:23,960 Speaker 1: raised rates, But what exactly does raising rates do when 974 00:59:24,000 --> 00:59:26,520 Speaker 1: the issue is like the two companies that make trust 975 00:59:26,520 --> 00:59:29,000 Speaker 1: plates can't get them in time. It's why it's a 976 00:59:29,040 --> 00:59:33,000 Speaker 1: it's a very difficult time to make forecasts. Yeah, and 977 00:59:33,000 --> 00:59:35,920 Speaker 1: also I mean imagine like if the Fed raised rates 978 00:59:35,960 --> 00:59:38,160 Speaker 1: because they thought the price of lumber was too high, 979 00:59:38,200 --> 00:59:41,080 Speaker 1: and then two months later it's crashing down because of 980 00:59:41,120 --> 00:59:44,120 Speaker 1: the trust plate issue. Yeah. All right, well, um plenty 981 00:59:44,200 --> 00:59:46,400 Speaker 1: to talk about for sure. Shall we leave it there? 982 00:59:47,040 --> 00:59:50,080 Speaker 1: Let's leave it there. Okay, this has been another episode 983 00:59:50,080 --> 00:59:52,640 Speaker 1: of the All Thoughts podcast. I'm Tracy Alloway. You can 984 00:59:52,640 --> 00:59:56,480 Speaker 1: follow me on Twitter at Tracy Alloway and I'm Joe Wisenthal. 985 00:59:56,600 --> 00:59:59,880 Speaker 1: You can follow me on Twitter at the Stalwart Deaf. 986 01:00:00,640 --> 01:00:04,040 Speaker 1: Follow our guest Stinson Dean on Twitter. He is the 987 01:00:04,080 --> 01:00:06,680 Speaker 1: CEO and founder of Deacon Lumber and his handle is 988 01:00:06,920 --> 01:00:11,200 Speaker 1: at Lumber Trading and Absolute Wealth of Information. Also just 989 01:00:11,240 --> 01:00:15,680 Speaker 1: a great guy. Follow our producer Laura Carlson at Laura M. Carlson. 990 01:00:15,960 --> 01:00:20,000 Speaker 1: Follow the Bloomberg had a podcast, Francesco Leave at Francesca Today, 991 01:00:20,480 --> 01:00:23,520 Speaker 1: and check out all of our podcasts at Bloomberg under 992 01:00:23,560 --> 01:00:26,280 Speaker 1: the handle at podcasts. Thanks for listening