1 00:00:03,120 --> 00:00:08,840 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:10,119 --> 00:00:12,360 Speaker 2: Are you guys doing anything interesting for fourth of July? 3 00:00:13,440 --> 00:00:13,840 Speaker 3: Nope? 4 00:00:15,600 --> 00:00:17,480 Speaker 2: Well it was nice talking to you. 5 00:00:17,480 --> 00:00:17,680 Speaker 4: You know. 6 00:00:17,800 --> 00:00:20,400 Speaker 5: Uh out in Easthampton, they don't do fireworks. 7 00:00:20,280 --> 00:00:22,799 Speaker 1: It's a good thing we're not having a conversational podcast 8 00:00:23,000 --> 00:00:26,000 Speaker 1: or anything. Tom says, you've got to watch the puck 9 00:00:26,079 --> 00:00:28,600 Speaker 1: when you're on the bench, Tom Keene, and I'm not. 10 00:00:28,720 --> 00:00:30,840 Speaker 2: Is that an insult? What does that mean? I don't 11 00:00:30,920 --> 00:00:33,600 Speaker 2: understand hockey. When you're not playing, you have to watch 12 00:00:33,760 --> 00:00:34,160 Speaker 2: the game? 13 00:00:34,680 --> 00:00:38,080 Speaker 5: Is this about your face? I don't know why I 14 00:00:38,159 --> 00:00:40,080 Speaker 5: use on the bench, but yeah, why am I on? 15 00:00:41,280 --> 00:00:41,560 Speaker 6: Yeah? 16 00:00:41,600 --> 00:00:43,680 Speaker 5: Well maybe if you're on the oh yeah, the ice, 17 00:00:43,680 --> 00:00:46,360 Speaker 5: you would have been paying closer attention. Yeah, you can't 18 00:00:46,680 --> 00:00:48,600 Speaker 5: in hockey. When you're on the bench, you're exposed. So 19 00:00:48,600 --> 00:00:50,120 Speaker 5: if you're not paying attention, you could get hit in 20 00:00:50,159 --> 00:00:50,640 Speaker 5: the face. 21 00:00:50,440 --> 00:00:50,840 Speaker 4: Of the puck. 22 00:00:52,600 --> 00:00:56,160 Speaker 1: Why don't they just build like a little protection thing 23 00:00:56,480 --> 00:00:58,040 Speaker 1: like in baseballs, like a dugout. 24 00:00:58,560 --> 00:01:00,360 Speaker 5: They get on and off the ice by jump over 25 00:01:00,400 --> 00:01:00,720 Speaker 5: the wall. 26 00:01:04,480 --> 00:01:05,520 Speaker 2: And I hate sports. 27 00:01:08,319 --> 00:01:11,559 Speaker 5: I did a deadlift one two, okay? 28 00:01:13,240 --> 00:01:13,479 Speaker 3: Many? 29 00:01:14,560 --> 00:01:15,360 Speaker 2: Uh barges. 30 00:01:15,520 --> 00:01:17,679 Speaker 5: This isn't after school special, except. 31 00:01:17,280 --> 00:01:19,840 Speaker 1: I've decided I'm going to base my entire personality going 32 00:01:19,840 --> 00:01:23,080 Speaker 1: forward on campaigning for a strategic pork reserve in the US. 33 00:01:23,200 --> 00:01:24,920 Speaker 5: Where's the best with imposta? 34 00:01:25,080 --> 00:01:27,679 Speaker 2: These are the important question. Is it robots taking over 35 00:01:27,680 --> 00:01:28,040 Speaker 2: the world? 36 00:01:28,120 --> 00:01:28,280 Speaker 3: No. 37 00:01:28,360 --> 00:01:31,240 Speaker 5: I think that like in a couple of years, the 38 00:01:31,319 --> 00:01:33,520 Speaker 5: AI will do a really good job of making the 39 00:01:33,520 --> 00:01:37,000 Speaker 5: Odd Lots podcast, And people say, I don't really need 40 00:01:37,040 --> 00:01:39,600 Speaker 5: to listen to Joe and Tracy anymore. We do have 41 00:01:41,240 --> 00:01:45,080 Speaker 5: the perfect welcome to lots More when we catch up 42 00:01:45,120 --> 00:01:47,480 Speaker 5: with friends about what's going on right now. 43 00:01:47,560 --> 00:01:50,840 Speaker 1: Because even when Odd Lots is over, there's always lots 44 00:01:50,880 --> 00:01:51,960 Speaker 1: more and. 45 00:01:51,880 --> 00:01:57,200 Speaker 5: We really do have the perfect guest. So for those 46 00:01:57,280 --> 00:01:59,720 Speaker 5: who don't follow Tracy on Twitter, which you should all be, 47 00:02:00,080 --> 00:02:03,600 Speaker 5: she posted this freaky photo that two in the morning 48 00:02:03,960 --> 00:02:07,560 Speaker 5: that looked everyone thought was like Halloween or like costume 49 00:02:07,560 --> 00:02:09,280 Speaker 5: makeup because you have this big gash in your face. 50 00:02:09,320 --> 00:02:10,079 Speaker 5: What's the story there? 51 00:02:10,800 --> 00:02:11,560 Speaker 3: Uh? 52 00:02:11,600 --> 00:02:13,840 Speaker 1: Someone said the Dow was a better index than the 53 00:02:13,880 --> 00:02:15,960 Speaker 1: S and P five hundred, so I had to fight that. 54 00:02:15,960 --> 00:02:16,280 Speaker 3: That's me. 55 00:02:16,440 --> 00:02:17,040 Speaker 2: Yeah, that's right. 56 00:02:17,520 --> 00:02:18,520 Speaker 1: You should see the other guy. 57 00:02:18,560 --> 00:02:19,399 Speaker 2: Everyone look at Joe. 58 00:02:19,520 --> 00:02:19,560 Speaker 4: No. 59 00:02:19,800 --> 00:02:22,960 Speaker 1: Uh, you know, someone threw a large platinum coin at 60 00:02:22,960 --> 00:02:24,840 Speaker 1: my head and then ran off and I heard them 61 00:02:24,840 --> 00:02:27,360 Speaker 1: say something about a trillion dollars. I'm not sure what 62 00:02:27,360 --> 00:02:27,720 Speaker 1: that was. 63 00:02:27,639 --> 00:02:29,840 Speaker 5: About, because that's interesting because I thought it sort of 64 00:02:29,880 --> 00:02:31,400 Speaker 5: looked like you got hit by a two by four. 65 00:02:32,240 --> 00:02:35,320 Speaker 5: I thought you got hit by like someone like slammed 66 00:02:35,360 --> 00:02:36,640 Speaker 5: a big piece of lumber. 67 00:02:36,400 --> 00:02:36,880 Speaker 3: In your face. 68 00:02:37,360 --> 00:02:39,960 Speaker 1: Actually, you know, I think that that's what it was. 69 00:02:40,760 --> 00:02:44,360 Speaker 1: So unfortunately, I wish I had a dramatic story to 70 00:02:44,440 --> 00:02:46,720 Speaker 1: tell about how I ended up with this like four 71 00:02:46,800 --> 00:02:50,400 Speaker 1: inch gash on my forehead. But basically, I was trying 72 00:02:50,400 --> 00:02:53,359 Speaker 1: to hang a frame while standing on my bed and 73 00:02:53,400 --> 00:02:56,000 Speaker 1: I fell off the bed and I'm pretty sure my 74 00:02:56,120 --> 00:02:58,519 Speaker 1: face hit the frame, so like kind of a two 75 00:02:58,520 --> 00:02:58,880 Speaker 1: by four. 76 00:02:58,960 --> 00:03:01,440 Speaker 5: Yeah, sure, photo. I think you should make it your 77 00:03:01,480 --> 00:03:02,120 Speaker 5: Twitter profile. 78 00:03:02,200 --> 00:03:02,359 Speaker 3: Yeah. 79 00:03:02,480 --> 00:03:04,040 Speaker 5: Might actually actually pretty. 80 00:03:03,800 --> 00:03:04,840 Speaker 2: Bad, thank you. 81 00:03:05,600 --> 00:03:10,560 Speaker 1: The stitches themselves aren't quite as glamorous, but I'm willing 82 00:03:10,600 --> 00:03:12,600 Speaker 1: to live with them. But anyway, I'm glad you mentioned 83 00:03:12,600 --> 00:03:14,960 Speaker 1: to you by fours because there are some interesting things 84 00:03:15,040 --> 00:03:17,960 Speaker 1: going on in the lumber market at the moment, and 85 00:03:18,680 --> 00:03:21,600 Speaker 1: we really do have the perfect person to talk to 86 00:03:21,960 --> 00:03:25,800 Speaker 1: Stinson Dean, president and owner of Deacon Lumber Company, who've 87 00:03:25,800 --> 00:03:29,440 Speaker 1: spoken to him many times before about what happens in lumber. 88 00:03:29,760 --> 00:03:32,400 Speaker 4: Yeah. The one piece of advice I've gotten in lumber 89 00:03:32,440 --> 00:03:34,559 Speaker 4: trading is don't try to catch it falling. 90 00:03:34,240 --> 00:03:37,680 Speaker 5: To by four classic classic. 91 00:03:37,800 --> 00:03:39,800 Speaker 6: Yes, yeah, we're in that now. 92 00:03:40,000 --> 00:03:42,520 Speaker 4: And Tracy's living proof was that. Now. 93 00:03:42,640 --> 00:03:46,119 Speaker 1: You know how I know lumber prices are falling. It's 94 00:03:46,160 --> 00:03:49,240 Speaker 1: because I just bought like all the lumber that we 95 00:03:49,320 --> 00:03:52,400 Speaker 1: need for that giant shed. It's because I've finished my 96 00:03:52,560 --> 00:03:56,200 Speaker 1: acquisition and so inevitably prices start coming down. 97 00:03:57,000 --> 00:03:59,520 Speaker 5: You bought the top, Yeah. 98 00:03:59,080 --> 00:03:59,920 Speaker 2: It's always the case. 99 00:04:00,080 --> 00:04:02,200 Speaker 1: Wait, okay, so prices are falling. 100 00:04:02,760 --> 00:04:03,520 Speaker 2: What's going on? 101 00:04:03,560 --> 00:04:07,200 Speaker 1: Because you know, would lumber it's not exactly a monolith. 102 00:04:07,240 --> 00:04:09,920 Speaker 1: There's different types of it, as we've learned a number 103 00:04:09,960 --> 00:04:12,520 Speaker 1: of times at this point. But like, how bad has 104 00:04:12,560 --> 00:04:13,480 Speaker 1: the price action been? 105 00:04:13,720 --> 00:04:18,159 Speaker 4: It's been pretty bad, Like lower than I thought we 106 00:04:18,240 --> 00:04:23,560 Speaker 4: would go. There's this kind of age old philosophy in 107 00:04:23,920 --> 00:04:27,039 Speaker 4: lumber trading that we won't trade below the break even, 108 00:04:27,680 --> 00:04:32,160 Speaker 4: specifically the break even of British Columbia two by four 109 00:04:32,200 --> 00:04:38,040 Speaker 4: producers and coming out of COVID, there's so much issues 110 00:04:38,080 --> 00:04:41,760 Speaker 4: getting product that folks switched species. The cheaper, more available 111 00:04:41,800 --> 00:04:44,719 Speaker 4: spech species from the US South and I started to 112 00:04:44,760 --> 00:04:48,000 Speaker 4: think maybe British Columbia lost what I call it's peg, 113 00:04:48,160 --> 00:04:52,360 Speaker 4: like everyone would peg like to the BC break even. 114 00:04:52,480 --> 00:04:55,120 Speaker 4: While we've been well below that. It's kind of a 115 00:04:55,160 --> 00:04:57,360 Speaker 4: mystery what it actually is. Maybe it's a little bit 116 00:04:57,360 --> 00:05:01,039 Speaker 4: lower than we all thought, and we've been trading well 117 00:05:01,080 --> 00:05:04,359 Speaker 4: below it. Now we're trading below even the Southern yellow pine, 118 00:05:04,480 --> 00:05:09,800 Speaker 4: the cheap species break even. So we're just way cheaper 119 00:05:09,839 --> 00:05:13,000 Speaker 4: than anyone thought we could go because hey, you can't 120 00:05:13,000 --> 00:05:15,599 Speaker 4: trade below the break even for too long. But here 121 00:05:15,600 --> 00:05:19,159 Speaker 4: we are, I don't know, six plus months probably trading 122 00:05:19,279 --> 00:05:20,040 Speaker 4: below that number. 123 00:05:20,680 --> 00:05:22,880 Speaker 5: So just to be clear, when we talk about the 124 00:05:22,920 --> 00:05:28,200 Speaker 5: break even price, this is the cost basically of the 125 00:05:28,279 --> 00:05:33,280 Speaker 5: various mills to acquire raw timber and then process it 126 00:05:33,400 --> 00:05:35,320 Speaker 5: into usable wood. 127 00:05:36,040 --> 00:05:38,520 Speaker 6: Exactly cost of the log, the labor. 128 00:05:38,800 --> 00:05:41,839 Speaker 4: Yeah, inflation plays a big part of that. So you know, 129 00:05:41,920 --> 00:05:46,880 Speaker 4: break evens have leg taken a step up since pre COVID. 130 00:05:47,240 --> 00:05:50,000 Speaker 5: And I assume, okay, so no one wants to lose money. 131 00:05:50,040 --> 00:05:52,520 Speaker 5: Have we seen the supply response yet? Have any of 132 00:05:52,560 --> 00:05:56,000 Speaker 5: the mills been idled or anything like that in response 133 00:05:56,040 --> 00:05:57,279 Speaker 5: to lower prices? 134 00:05:57,960 --> 00:05:58,520 Speaker 6: Yeah? 135 00:05:58,760 --> 00:06:03,640 Speaker 4: So slow, but surely we call them curtailments. Those curtailments 136 00:06:03,640 --> 00:06:06,840 Speaker 4: have started started to add up. I think we're over a. 137 00:06:06,800 --> 00:06:08,479 Speaker 6: Billion board feet in British Columbia. 138 00:06:08,560 --> 00:06:12,719 Speaker 4: Again, everyone's looking towards them as that peg, but now 139 00:06:12,760 --> 00:06:16,000 Speaker 4: we're looking at like do we need to to curtail, 140 00:06:16,839 --> 00:06:20,359 Speaker 4: which is different than closing, And I think personally we 141 00:06:20,400 --> 00:06:24,880 Speaker 4: need to close a lot of like permanently shut mills 142 00:06:24,880 --> 00:06:28,039 Speaker 4: and burst Columbia. And then now there's talk of like 143 00:06:28,080 --> 00:06:31,000 Speaker 4: what do we need to do to reduce supply coming 144 00:06:31,040 --> 00:06:34,080 Speaker 4: out of the Southeast United States with Sonyella pines. So 145 00:06:34,320 --> 00:06:37,880 Speaker 4: there is an accumulative effect happening, but it's not all 146 00:06:37,920 --> 00:06:40,880 Speaker 4: at once, so it's not really headline grabbing. It's kind 147 00:06:40,880 --> 00:06:44,400 Speaker 4: of onesie twosies. This is happening, And then people don't 148 00:06:44,440 --> 00:06:47,000 Speaker 4: believe it, And is it a curtailment meaning they're going 149 00:06:47,080 --> 00:06:50,680 Speaker 4: to turn it back on later if prices respond? Is 150 00:06:50,680 --> 00:06:54,719 Speaker 4: it a closure? We close these mills and you're not 151 00:06:54,760 --> 00:06:59,080 Speaker 4: opening them back up. But there's a fear when you curtail, 152 00:06:59,200 --> 00:07:03,920 Speaker 4: whether that's reducing from three shifts the two shifts, something 153 00:07:04,000 --> 00:07:07,240 Speaker 4: like that, you're going to lose your workforce in the 154 00:07:07,400 --> 00:07:11,000 Speaker 4: US South, that's the biggest fear if you cut shifts, 155 00:07:11,000 --> 00:07:13,360 Speaker 4: like they're going to go work for Amazons, And there's 156 00:07:13,360 --> 00:07:15,240 Speaker 4: a lot of investment in the US South, So there's 157 00:07:15,280 --> 00:07:19,320 Speaker 4: a very tough decision to be made. Do we retail 158 00:07:19,480 --> 00:07:21,960 Speaker 4: and risk losing our workforce that we work so hard 159 00:07:22,200 --> 00:07:25,080 Speaker 4: to get over the last several years. It's kind of 160 00:07:25,120 --> 00:07:26,800 Speaker 4: a race to the bottom at the moment. 161 00:07:27,320 --> 00:07:28,360 Speaker 2: That's really interesting. 162 00:07:28,400 --> 00:07:31,760 Speaker 1: It also just seems bad to curtail a bunch of 163 00:07:31,800 --> 00:07:34,120 Speaker 1: mills and lumber supply at a time when we're still 164 00:07:34,120 --> 00:07:37,040 Speaker 1: talking about structural undersupply in the housing market. 165 00:07:37,320 --> 00:07:40,000 Speaker 5: No, this is really interesting because we've talked about labor 166 00:07:40,000 --> 00:07:42,360 Speaker 5: hoarding in the past, and all these companies they're anxious 167 00:07:42,360 --> 00:07:44,720 Speaker 5: about losing workers. And maybe it's the first time for 168 00:07:44,880 --> 00:07:46,960 Speaker 5: many of these managers and CEOs where they had a 169 00:07:47,000 --> 00:07:49,240 Speaker 5: hard time working or they had a hard time hiring. 170 00:07:49,640 --> 00:07:53,440 Speaker 5: But it's interesting dynamic to say, well, maybe there are 171 00:07:53,720 --> 00:07:57,920 Speaker 5: aspects of that are disinflationary or deflationary for certain prices, 172 00:07:58,120 --> 00:08:02,760 Speaker 5: because it implicitly means continuing to run the operation at 173 00:08:02,800 --> 00:08:08,000 Speaker 5: a loss, contributing to oversupply of the key commodity. Because 174 00:08:08,040 --> 00:08:10,560 Speaker 5: the alternative is that libor loss I hadn't really thought 175 00:08:10,560 --> 00:08:11,360 Speaker 5: about that aspect. 176 00:08:11,440 --> 00:08:14,320 Speaker 1: No, wait, Stintson, is the market is it? 177 00:08:14,400 --> 00:08:14,480 Speaker 4: So? 178 00:08:14,640 --> 00:08:19,120 Speaker 1: Normally lumber futures are in contango, so the spot prices 179 00:08:19,200 --> 00:08:22,160 Speaker 1: are lower than prices further out. Is that still the case. 180 00:08:22,280 --> 00:08:24,240 Speaker 1: I'm starting to wonder whether or not I should be 181 00:08:24,240 --> 00:08:27,400 Speaker 1: stockpiling umber and you know, just wait a year or two. 182 00:08:28,520 --> 00:08:29,680 Speaker 6: Yes, yeah, it is. 183 00:08:29,800 --> 00:08:33,520 Speaker 4: I don't know what the definition of a super contango is, 184 00:08:34,160 --> 00:08:37,959 Speaker 4: but I think we're we're in it or approaching it, 185 00:08:38,040 --> 00:08:42,320 Speaker 4: meaning the futures market is paying you above and beyond 186 00:08:42,400 --> 00:08:44,840 Speaker 4: what it actually costs the store for sixty days or 187 00:08:44,880 --> 00:08:48,360 Speaker 4: sixty days in between each of our contracts, and we 188 00:08:48,480 --> 00:08:50,960 Speaker 4: have a deep carry. I always like to say the 189 00:08:51,000 --> 00:08:54,880 Speaker 4: futures they don't have to be right until you get 190 00:08:54,880 --> 00:08:56,480 Speaker 4: into expiration. 191 00:08:56,080 --> 00:08:58,160 Speaker 6: Which is where we're in July. Second. 192 00:08:58,240 --> 00:09:02,199 Speaker 4: Our July contract expiresly fifteenth. Typically all the speculators and 193 00:09:02,240 --> 00:09:06,080 Speaker 4: outside money is long gone before the spot month comes 194 00:09:06,080 --> 00:09:09,880 Speaker 4: into the calendar month, and we're seeing the spread the 195 00:09:09,960 --> 00:09:14,560 Speaker 4: July losing a tremendous amount of value relative to the 196 00:09:14,600 --> 00:09:15,840 Speaker 4: next month in September. 197 00:09:16,120 --> 00:09:17,880 Speaker 6: So yeah, huge carries in the market. 198 00:09:17,920 --> 00:09:22,480 Speaker 4: The market is begging participants to store lumber, don't put 199 00:09:22,480 --> 00:09:24,960 Speaker 4: it on the market. Don't put it up for sale. 200 00:09:25,440 --> 00:09:29,480 Speaker 4: The market will pay you above and beyond your interest, 201 00:09:29,679 --> 00:09:32,640 Speaker 4: insurance and storage costs to keep it till September fifteenth, 202 00:09:32,720 --> 00:09:36,599 Speaker 4: and at this pace, January will probably pay you to 203 00:09:37,000 --> 00:09:39,560 Speaker 4: not sell it until January fifteenth, and we'll kind of 204 00:09:39,559 --> 00:09:40,120 Speaker 4: go from there. 205 00:09:40,559 --> 00:09:43,720 Speaker 5: You have storage, right, so you're you're a lumber trader, 206 00:09:43,720 --> 00:09:45,960 Speaker 5: but you're not just like one of these guys who 207 00:09:46,120 --> 00:09:51,640 Speaker 5: looks at his computer screen all day. You actually have capacity, right, Yeah. 208 00:09:51,720 --> 00:09:54,880 Speaker 4: Yeah, that's one of the things we invested in coming 209 00:09:54,880 --> 00:09:58,960 Speaker 4: out of kind of the windfall of COVID volatility is storage, 210 00:09:59,120 --> 00:10:02,400 Speaker 4: indoor Storageecifically, you have to be able to keep lumber 211 00:10:03,120 --> 00:10:06,640 Speaker 4: out of the weather and dry, and so we invested 212 00:10:06,720 --> 00:10:09,160 Speaker 4: in a lot of storage options for us so we 213 00:10:09,200 --> 00:10:12,400 Speaker 4: can take advantage of these carries in the market. And yeah, 214 00:10:12,480 --> 00:10:16,120 Speaker 4: my day job is buying physical railcars a lumber, shipping 215 00:10:16,200 --> 00:10:19,560 Speaker 4: it right now, shipping it into the storage facilities, and 216 00:10:19,600 --> 00:10:22,240 Speaker 4: putting a hedge on it, and then going fishing waiting 217 00:10:22,280 --> 00:10:23,400 Speaker 4: for the market to come back. 218 00:10:23,240 --> 00:10:28,479 Speaker 5: To Ustinton Lumber. The Stintson Lumber Reserve is what basically. 219 00:10:28,200 --> 00:10:29,160 Speaker 2: Is a strategic extense. 220 00:10:29,280 --> 00:10:32,640 Speaker 5: The strategic Extenson Lumber Reserve. I like that SSLR. 221 00:10:33,160 --> 00:10:36,400 Speaker 1: So you touched on the unemployment aspect just then. But 222 00:10:36,480 --> 00:10:39,520 Speaker 1: of course when people think about lumber prices, I think 223 00:10:39,679 --> 00:10:42,200 Speaker 1: the first thing they think is that this is a 224 00:10:42,280 --> 00:10:47,200 Speaker 1: traditional arbiter of economic activities. So if lumber prices are 225 00:10:47,240 --> 00:10:50,240 Speaker 1: going down, it's probably because people aren't building that much, 226 00:10:50,320 --> 00:10:54,080 Speaker 1: and that suggests that something bad is happening to economic growth, 227 00:10:54,160 --> 00:10:56,880 Speaker 1: or at the very least it's starting to slow. Is 228 00:10:56,880 --> 00:10:59,079 Speaker 1: that the basic read through here. 229 00:10:59,400 --> 00:10:59,800 Speaker 6: I think. 230 00:11:00,160 --> 00:11:04,319 Speaker 4: So, I think you look at lumber was kind of 231 00:11:04,360 --> 00:11:07,559 Speaker 4: the first thing to hit headlines and set new all 232 00:11:07,640 --> 00:11:10,520 Speaker 4: time highs back in twenty twenty and then and really 233 00:11:11,080 --> 00:11:14,480 Speaker 4: became a popular thing to talk about in twenty twenty one. 234 00:11:15,080 --> 00:11:17,280 Speaker 4: You know, at the time, I'm like, hey, this is fundamental, 235 00:11:17,360 --> 00:11:19,920 Speaker 4: and we got COVID supply chain shutdowns and they can't 236 00:11:19,960 --> 00:11:22,040 Speaker 4: get their workforce back, and you know, if you get 237 00:11:22,080 --> 00:11:25,280 Speaker 4: test positive, you got to sit down, is stay away 238 00:11:25,280 --> 00:11:28,400 Speaker 4: from work, and we couldn't get caught up. All that's fixed, 239 00:11:28,440 --> 00:11:31,920 Speaker 4: and so we're at very have very efficient supply lines 240 00:11:32,480 --> 00:11:36,000 Speaker 4: now in at the same time we're looking at housing 241 00:11:36,080 --> 00:11:41,160 Speaker 4: starts really showing what the lumber industry has seen since January, 242 00:11:41,400 --> 00:11:44,520 Speaker 4: which is really weak demand. As a lumber trader, I 243 00:11:44,559 --> 00:11:48,760 Speaker 4: would say lumber supply chain is too fixed. Like it 244 00:11:48,840 --> 00:11:52,640 Speaker 4: is very smooth. Rail cars are getting from British Columbia 245 00:11:52,640 --> 00:11:57,600 Speaker 4: to Atlanta and record time, record speeds, and lumbers getting 246 00:11:57,640 --> 00:12:00,520 Speaker 4: produced as much as you could ever want. Everyone has it. 247 00:12:01,000 --> 00:12:04,640 Speaker 4: There's no fear of a shortage. The end user lumberyard 248 00:12:04,800 --> 00:12:08,400 Speaker 4: is able to run kind of a lean, just in 249 00:12:08,480 --> 00:12:13,840 Speaker 4: time inventory model again, and it's so the supply chain 250 00:12:13,880 --> 00:12:17,040 Speaker 4: side is very fixed. But then now we have kind 251 00:12:17,040 --> 00:12:21,120 Speaker 4: of a broken housing starts world where you know, the 252 00:12:21,320 --> 00:12:25,520 Speaker 4: the number one demand a lumber is repairing to model, 253 00:12:25,559 --> 00:12:27,920 Speaker 4: and just behind that a single family, and then way 254 00:12:27,960 --> 00:12:30,559 Speaker 4: down the list is multifamily. Multi family is less than 255 00:12:30,559 --> 00:12:32,600 Speaker 4: ten percent of lumber demand. 256 00:12:33,200 --> 00:12:37,079 Speaker 5: Wait, sorry, what's first again? Single family or repair? Oh okay, okay, 257 00:12:37,080 --> 00:12:37,720 Speaker 5: this is interesting. 258 00:12:37,880 --> 00:12:42,079 Speaker 6: Repair and renovation, yes, repair and remodel this. 259 00:12:43,800 --> 00:12:44,120 Speaker 4: Yes. 260 00:12:45,400 --> 00:12:48,560 Speaker 1: So on that note, is it possible that like in 261 00:12:48,600 --> 00:12:52,440 Speaker 1: the post uh the immediate post twenty twenty period, we 262 00:12:52,600 --> 00:12:56,200 Speaker 1: just had everyone remodeling their homes and so you know, 263 00:12:56,240 --> 00:13:00,199 Speaker 1: that sort of took care of demand further out, or 264 00:13:00,360 --> 00:13:03,520 Speaker 1: that maybe because lumber prices went up so much, you 265 00:13:03,640 --> 00:13:08,160 Speaker 1: had this huge supply response from the mills, and so 266 00:13:08,320 --> 00:13:10,959 Speaker 1: there's just over supply, Like, is it possible that this 267 00:13:11,040 --> 00:13:14,840 Speaker 1: is something that's still very pandemic specific versus something that's 268 00:13:14,880 --> 00:13:15,960 Speaker 1: about slowing growth. 269 00:13:16,559 --> 00:13:18,840 Speaker 4: Well, Tracy, that's a good way to frame it, because 270 00:13:19,160 --> 00:13:22,040 Speaker 4: I'm thinking, you know, my initial thought is like, oh, 271 00:13:22,080 --> 00:13:24,600 Speaker 4: this is a very is an economic indicator slow and growth. 272 00:13:25,200 --> 00:13:28,760 Speaker 4: But also I want to say we clearly now I 273 00:13:28,800 --> 00:13:31,960 Speaker 4: think undisputed can say we had pulled forward demand of 274 00:13:32,120 --> 00:13:35,680 Speaker 4: repair and remodel, so projects that would have been spread 275 00:13:35,679 --> 00:13:38,000 Speaker 4: out over five years got crunched into twenty four months, 276 00:13:38,559 --> 00:13:40,680 Speaker 4: and now we're on the back half of that five years, 277 00:13:40,679 --> 00:13:43,640 Speaker 4: and there's not much business to kind of float and 278 00:13:43,679 --> 00:13:45,640 Speaker 4: handle the supply that we have. So I don't know, 279 00:13:45,760 --> 00:13:49,200 Speaker 4: is that the definition of slowing economic growth is pull forward? 280 00:13:49,679 --> 00:13:51,960 Speaker 4: I don't know that's over my pay grade, but I 281 00:13:51,960 --> 00:13:56,120 Speaker 4: think it's clearly what happened is there is a repair 282 00:13:56,320 --> 00:14:01,079 Speaker 4: model boom that has really one of your housing and 283 00:14:01,160 --> 00:14:05,040 Speaker 4: lumber guests, Dustin Jolbert, has tweeted about it. Repairing the 284 00:14:05,080 --> 00:14:07,600 Speaker 4: models kind of flatted down and dead in the water. 285 00:14:07,640 --> 00:14:11,000 Speaker 4: That's a lot of big box home depot lows monards business, 286 00:14:11,840 --> 00:14:15,440 Speaker 4: and that's fifty percent of lumber that's produced goes to 287 00:14:15,480 --> 00:14:18,839 Speaker 4: that that sector, and it's it's down, and then we 288 00:14:18,920 --> 00:14:22,640 Speaker 4: all know, single families down just in time her supply 289 00:14:22,880 --> 00:14:26,200 Speaker 4: to be as efficient as it's ever been. And lastly, 290 00:14:26,240 --> 00:14:30,120 Speaker 4: I haven't been able to mention pre COVID eighteen nineteen, 291 00:14:30,720 --> 00:14:34,040 Speaker 4: there's a ton of cap X to invest in the US. 292 00:14:34,720 --> 00:14:40,960 Speaker 1: Sorry eighteen nineteen or nineteen eighteen nineteen, I'm sorry, sorry, was. 293 00:14:46,040 --> 00:14:47,560 Speaker 5: Technically sorry. 294 00:14:48,520 --> 00:14:49,200 Speaker 4: I'll restated. 295 00:14:49,240 --> 00:14:52,520 Speaker 1: No, No, it's fine, it's uh did I mention? I've 296 00:14:52,680 --> 00:14:57,600 Speaker 1: bumped my head, so my my numerical understanding is not 297 00:14:57,720 --> 00:14:59,120 Speaker 1: as great as it might normally be. 298 00:15:00,320 --> 00:15:04,400 Speaker 4: Well, in twenty eighteen and twenty nineteen, their plans announced 299 00:15:04,520 --> 00:15:08,720 Speaker 4: and enacted to build new production sawmills in the US 300 00:15:08,760 --> 00:15:12,640 Speaker 4: South to take advantage of the larger fiber basket forest 301 00:15:12,840 --> 00:15:17,240 Speaker 4: logs down there versus the Canadian fiber basket. And it 302 00:15:17,960 --> 00:15:20,760 Speaker 4: was and is the Canadians who are doing that investment. 303 00:15:20,800 --> 00:15:23,520 Speaker 4: They own over fifty percent of the US South production 304 00:15:24,240 --> 00:15:28,080 Speaker 4: and a lot of those projects got delayed and for 305 00:15:28,240 --> 00:15:30,680 Speaker 4: COVID reasons, they couldn't get their saw mills built. They 306 00:15:30,720 --> 00:15:33,720 Speaker 4: couldn't get them staffed, but now they can't. So a 307 00:15:33,760 --> 00:15:36,440 Speaker 4: lot of those projects are now online and they are 308 00:15:36,480 --> 00:15:38,880 Speaker 4: not going to get shut down. There's debt to service, 309 00:15:38,920 --> 00:15:42,000 Speaker 4: there's cash flow motivations to just run. Who cares what 310 00:15:42,040 --> 00:15:44,440 Speaker 4: the break even is. So we have that, we have 311 00:15:44,600 --> 00:15:48,360 Speaker 4: repaired supply chains, and we have the hangover of the 312 00:15:48,400 --> 00:15:51,000 Speaker 4: pull forward demand of repairing the model, and then you 313 00:15:51,000 --> 00:15:54,120 Speaker 4: know the single family stories at this point. 314 00:15:54,280 --> 00:15:57,680 Speaker 5: So when Stinson first mentioned, when you said repair and 315 00:15:57,720 --> 00:16:00,040 Speaker 5: remodel is actually the biggest category, Like at first, I 316 00:16:00,120 --> 00:16:02,200 Speaker 5: was kind of surprised by that, but you know, I 317 00:16:02,200 --> 00:16:04,840 Speaker 5: would have thought single family was a bigger source of demand. 318 00:16:05,000 --> 00:16:07,360 Speaker 5: But it occurred to me that there is a connection 319 00:16:07,480 --> 00:16:10,600 Speaker 5: here between what we've talked about in some our recent 320 00:16:10,640 --> 00:16:13,400 Speaker 5: conversation with Brad Jacobs, where he made the point that 321 00:16:13,480 --> 00:16:16,520 Speaker 5: like the US housing stock is really old right now, 322 00:16:16,600 --> 00:16:19,000 Speaker 5: and there is just and houses have to be repaired. 323 00:16:19,000 --> 00:16:21,560 Speaker 5: They're like any other asset, especially the moment you buy 324 00:16:21,600 --> 00:16:23,760 Speaker 5: a house that starts to fall apart. And so if 325 00:16:23,800 --> 00:16:27,200 Speaker 5: we have this historically old housing market, that is just 326 00:16:27,280 --> 00:16:31,240 Speaker 5: a big source of ongoing structural demand right just to 327 00:16:31,320 --> 00:16:34,880 Speaker 5: keep those homes in existence for all kinds of materials 328 00:16:34,880 --> 00:16:36,920 Speaker 5: they might need, So that actually sort of makes sense 329 00:16:36,920 --> 00:16:37,120 Speaker 5: to me. 330 00:16:37,240 --> 00:16:39,680 Speaker 1: I feel like this is something you internalize as soon 331 00:16:39,720 --> 00:16:41,280 Speaker 1: as you actually buy. 332 00:16:41,480 --> 00:16:45,480 Speaker 5: Oh no, no, no, for real, I bought my apartment 333 00:16:45,600 --> 00:16:48,280 Speaker 5: in Manhattan and it never had any issues and then 334 00:16:48,400 --> 00:16:52,960 Speaker 5: literally like a window started leaking. They like literally that week. 335 00:16:53,000 --> 00:17:05,800 Speaker 3: It was so perfect. 336 00:17:07,440 --> 00:17:10,600 Speaker 1: Wait, so Stintent, you mentioned something interesting, which is this 337 00:17:10,720 --> 00:17:16,200 Speaker 1: idea of the mills kind of hoarding workers first of all, 338 00:17:16,240 --> 00:17:20,159 Speaker 1: but then also just trying to withstand the lower prices 339 00:17:20,200 --> 00:17:23,520 Speaker 1: and maybe operating at a loss for as long as 340 00:17:23,560 --> 00:17:25,679 Speaker 1: they can and just sort of waiting to see if 341 00:17:25,720 --> 00:17:28,720 Speaker 1: they can beat out others who are forced to shut down. 342 00:17:29,160 --> 00:17:33,119 Speaker 1: What's the sort of differentiating factor in survival for some 343 00:17:33,200 --> 00:17:36,399 Speaker 1: of these mills. Is it just whoever has access to 344 00:17:37,080 --> 00:17:41,399 Speaker 1: like extra cash laying around for a rainy day, or 345 00:17:41,520 --> 00:17:45,199 Speaker 1: is it mills that maybe have supply agreements with like 346 00:17:45,359 --> 00:17:48,760 Speaker 1: big builders and big box companies and that sort of thing. 347 00:17:49,960 --> 00:17:53,280 Speaker 4: You know, I would say, and I'm not honestly the 348 00:17:53,320 --> 00:17:55,720 Speaker 4: best to speak to this, but I would guess it's 349 00:17:55,840 --> 00:17:59,000 Speaker 4: these newer steady dart mills have the advantage they're going 350 00:17:59,040 --> 00:18:03,560 Speaker 4: to have been located strategically closer to a fiber supply 351 00:18:03,720 --> 00:18:06,800 Speaker 4: for trees and logs, they are going to have a 352 00:18:06,800 --> 00:18:10,320 Speaker 4: lot of investment. They're largely public companies that have built these, 353 00:18:10,359 --> 00:18:12,960 Speaker 4: so they have access to the cash to kind of 354 00:18:12,960 --> 00:18:17,000 Speaker 4: see to get to the other side. In the South, 355 00:18:17,080 --> 00:18:21,160 Speaker 4: it's still it's much more fragmented as far as they're smaller, 356 00:18:21,280 --> 00:18:25,480 Speaker 4: single location, mom and pop type locations. Those folks are 357 00:18:25,480 --> 00:18:30,280 Speaker 4: going to struggle. But then those folks have probably more 358 00:18:30,280 --> 00:18:33,359 Speaker 4: discipline and have saved some cash over the last several years. 359 00:18:34,200 --> 00:18:36,120 Speaker 4: And there's no way to know, but you would think 360 00:18:36,240 --> 00:18:38,399 Speaker 4: they've made it this far. They knew twenty one to 361 00:18:38,440 --> 00:18:41,280 Speaker 4: twenty two wasn't going to be around forever, so they 362 00:18:41,320 --> 00:18:44,400 Speaker 4: save some cash. Where the publics, you know, have to 363 00:18:44,440 --> 00:18:48,840 Speaker 4: disperse their cash. They pay down debt and then pay dividends, YadA, YadA, YadA. 364 00:18:48,920 --> 00:18:51,040 Speaker 4: So you know, I think the advantage is just the 365 00:18:51,080 --> 00:18:54,560 Speaker 4: newness of the mill because of the state of the art, 366 00:18:54,640 --> 00:18:57,960 Speaker 4: state of the art, less manpower, higher yields out of logs, 367 00:18:58,040 --> 00:19:01,400 Speaker 4: and then its strategic location where the old mills are 368 00:19:02,000 --> 00:19:03,919 Speaker 4: naturally going to be further away. They're going to have 369 00:19:04,119 --> 00:19:06,760 Speaker 4: logged everything within their radius and they're having to go 370 00:19:06,800 --> 00:19:09,280 Speaker 4: further and further away to get their logs. That's the 371 00:19:09,280 --> 00:19:15,200 Speaker 4: only thing I can think of. And this the structural 372 00:19:15,200 --> 00:19:20,000 Speaker 4: housing shortage that we all know by evidence by home 373 00:19:20,040 --> 00:19:23,360 Speaker 4: prices have not crashed in the phase of eight percent morgages. 374 00:19:24,040 --> 00:19:26,440 Speaker 4: We know that, the mills know that, and it's just like, well, 375 00:19:26,440 --> 00:19:28,359 Speaker 4: it's just going to turn and rate cuts. We got 376 00:19:28,440 --> 00:19:30,679 Speaker 4: to wait for rate cuts. And here we are and 377 00:19:30,880 --> 00:19:34,000 Speaker 4: I don't know, and I haven't heard, like how long 378 00:19:34,080 --> 00:19:36,719 Speaker 4: is this runway? Like how long can they bleed? And 379 00:19:36,960 --> 00:19:39,520 Speaker 4: I don't I don't know, but it's clearly been longer 380 00:19:40,359 --> 00:19:42,600 Speaker 4: than most traders had anticipated. 381 00:19:42,960 --> 00:19:46,480 Speaker 5: Wait, I have a total curveball question actually, and if 382 00:19:46,480 --> 00:19:48,560 Speaker 5: you don't want to answer it, that's fine. But we 383 00:19:48,640 --> 00:19:51,560 Speaker 5: actually this week we did publish that interview with Brad Jacobs, 384 00:19:51,560 --> 00:19:54,199 Speaker 5: who is trying to do a roll up of the 385 00:19:54,440 --> 00:19:59,240 Speaker 5: what he calls a highly fragmented building supply industry, and 386 00:19:59,440 --> 00:20:01,119 Speaker 5: lumber is a building supply though I don't know if 387 00:20:01,160 --> 00:20:02,920 Speaker 5: he's going to get into lumber, though maybe he will 388 00:20:03,160 --> 00:20:06,000 Speaker 5: a from your perspective, is it really is it? Does 389 00:20:06,000 --> 00:20:08,920 Speaker 5: it seem very fragmented to you? And b let's say 390 00:20:09,000 --> 00:20:11,800 Speaker 5: Brad listens to odd lives and he hears this, smart 391 00:20:11,840 --> 00:20:14,760 Speaker 5: Stinson fellow, and he calls you up. What kind of 392 00:20:14,800 --> 00:20:19,800 Speaker 5: asset would you buy to create a platform for consolidating 393 00:20:19,840 --> 00:20:21,960 Speaker 5: this industry? A few had billions of dollars four and 394 00:20:21,960 --> 00:20:22,879 Speaker 5: a half billion dollars. 395 00:20:23,480 --> 00:20:27,840 Speaker 4: Yeah, storage, storing, storage, Yeah, I think, I think the 396 00:20:27,880 --> 00:20:30,639 Speaker 4: sawmill production business. I learned this when I start. I 397 00:20:30,680 --> 00:20:34,560 Speaker 4: started out in grains. Yeah, it's just so tough and 398 00:20:34,600 --> 00:20:38,040 Speaker 4: you just rather have someone else. But with that, and 399 00:20:38,480 --> 00:20:42,040 Speaker 4: when they are over produced, you become a You've become 400 00:20:42,080 --> 00:20:45,119 Speaker 4: their liquidity provider. You give them cash, they give you lumber, 401 00:20:45,520 --> 00:20:47,760 Speaker 4: and you store it and wait for the supply response. 402 00:20:47,840 --> 00:20:51,840 Speaker 4: The crap and oil traders taught me this, I think. 403 00:20:51,880 --> 00:20:56,600 Speaker 4: And when I started in commodities in fourteen fifteen, there's 404 00:20:56,600 --> 00:20:59,800 Speaker 4: a big contango and the boats, the oil bart is 405 00:20:59,880 --> 00:21:02,280 Speaker 4: the just float around with no destination because they were 406 00:21:02,280 --> 00:21:05,000 Speaker 4: getting paid to store it. And if you have the 407 00:21:05,040 --> 00:21:08,639 Speaker 4: balance sheet to store your material when no one else 408 00:21:08,880 --> 00:21:11,880 Speaker 4: needs it, then you're the only one who has it 409 00:21:12,160 --> 00:21:14,560 Speaker 4: when when things change, and there's inevitably going to be 410 00:21:14,600 --> 00:21:16,600 Speaker 4: a supply response, and the lower we go, the more 411 00:21:16,640 --> 00:21:21,240 Speaker 4: violent it'll be. But for me, it's in my niche. 412 00:21:21,320 --> 00:21:24,439 Speaker 4: It's it's all about storage. I wouldn't be interested in 413 00:21:24,480 --> 00:21:27,680 Speaker 4: owning a producer. This is just a very, very tough business. 414 00:21:28,240 --> 00:21:31,639 Speaker 4: But if you if you can store, and the balance 415 00:21:31,640 --> 00:21:34,040 Speaker 4: sheet has a lot to do with that because your 416 00:21:34,040 --> 00:21:35,880 Speaker 4: liquidity is tied up in inventory. 417 00:21:36,520 --> 00:21:38,919 Speaker 6: You know that that's what I would be doing. But 418 00:21:39,560 --> 00:21:41,959 Speaker 6: I'm a and I we are doing it. 419 00:21:42,000 --> 00:21:46,040 Speaker 4: But the public the pressures that public companies have with 420 00:21:46,080 --> 00:21:49,080 Speaker 4: their lean balance sheets and their lean inventory models and 421 00:21:49,160 --> 00:21:53,000 Speaker 4: turning inventory terms with that, it's hard to execute. So 422 00:21:53,000 --> 00:21:56,439 Speaker 4: that's why folks like me exist where they can't execute. 423 00:21:56,560 --> 00:21:59,679 Speaker 4: I can, So I'll take on that risk. I'll warehouse it, 424 00:22:00,119 --> 00:22:02,600 Speaker 4: I'll hedge it and wait for things to shake out. 425 00:22:02,880 --> 00:22:05,879 Speaker 4: And it's not uncommon for me to sell the lumber 426 00:22:06,640 --> 00:22:08,359 Speaker 4: right back to the same people I bought it from. 427 00:22:08,560 --> 00:22:12,080 Speaker 4: And I'm just able to navigate slower inventory terms than anyone. 428 00:22:11,840 --> 00:22:12,840 Speaker 2: Else, huh. 429 00:22:13,160 --> 00:22:15,359 Speaker 1: I remember one of the first times we talked to 430 00:22:15,400 --> 00:22:19,359 Speaker 1: you ever, you spoke about how the industry was slow 431 00:22:19,480 --> 00:22:22,520 Speaker 1: to build out inventory because of the reasons that you 432 00:22:22,680 --> 00:22:26,000 Speaker 1: just explained. You know, the tendency towards efficiency and the 433 00:22:26,840 --> 00:22:30,720 Speaker 1: desire to be as streamlined as possible, and so when 434 00:22:31,000 --> 00:22:33,840 Speaker 1: demand starts picking up, it really takes people a lot 435 00:22:33,840 --> 00:22:36,639 Speaker 1: of time to get hold of the wood the lumber 436 00:22:36,720 --> 00:22:39,919 Speaker 1: that they need to actually match it. Is there any 437 00:22:39,960 --> 00:22:44,040 Speaker 1: sign that that behavior is kind of changing? So I 438 00:22:44,080 --> 00:22:47,200 Speaker 1: take the point that people like you exist to bridge 439 00:22:47,240 --> 00:22:50,840 Speaker 1: that gap. But do you see more and more industry 440 00:22:50,880 --> 00:22:55,119 Speaker 1: participants start to build out additional inventory or additional supply 441 00:22:55,400 --> 00:22:58,359 Speaker 1: just in case or is it still not really a reality. 442 00:22:59,880 --> 00:23:02,320 Speaker 4: I think they tried, and that was kind of the 443 00:23:02,320 --> 00:23:05,119 Speaker 4: top of the market, and it was kind of this 444 00:23:05,240 --> 00:23:08,560 Speaker 4: whipsaw like, oh, we need to build inventory. Everyone builds inventory, 445 00:23:08,560 --> 00:23:10,800 Speaker 4: price goes up, and then it crashes because I bought 446 00:23:11,880 --> 00:23:14,800 Speaker 4: three months worth of inventory. Is almost the same concept 447 00:23:14,800 --> 00:23:17,080 Speaker 4: to pull forward demand instead of spreading it out over 448 00:23:17,160 --> 00:23:19,040 Speaker 4: three months, they rushed in about it all over within 449 00:23:19,080 --> 00:23:23,600 Speaker 4: a few weeks. I think folks are back to just 450 00:23:23,680 --> 00:23:25,840 Speaker 4: in time lean inventories. I don't think they have an 451 00:23:25,840 --> 00:23:29,280 Speaker 4: interest in building inventory to cost to do so is 452 00:23:29,320 --> 00:23:33,679 Speaker 4: expensive with where interest rates are and there everyone's very 453 00:23:33,760 --> 00:23:37,760 Speaker 4: uncomfortable with having low inventory turns. So no, I don't 454 00:23:37,800 --> 00:23:42,400 Speaker 4: think there's been a lesson learned to have more inventory 455 00:23:42,520 --> 00:23:44,040 Speaker 4: just the case. I think they tried to learn it 456 00:23:44,040 --> 00:23:48,120 Speaker 4: in real time and didn't didn't work out, And more 457 00:23:48,160 --> 00:23:54,280 Speaker 4: than anything, the interest rates are painful to store inventory. Now, 458 00:23:54,920 --> 00:23:59,160 Speaker 4: Oh yeah, if they ran a grain elevator hedging model, 459 00:23:59,200 --> 00:24:02,000 Speaker 4: they would know Fature's contract is compensating you for the 460 00:24:02,040 --> 00:24:05,080 Speaker 4: cost of interest, but not everyone is able to execute 461 00:24:05,080 --> 00:24:05,280 Speaker 4: on that. 462 00:24:05,440 --> 00:24:08,640 Speaker 5: Yeah, this is an important point actually because just on 463 00:24:08,720 --> 00:24:12,800 Speaker 5: this point specifically, so right, it's easy enough to say, Okay, 464 00:24:12,800 --> 00:24:14,840 Speaker 5: you're going to buy when it's low and the future's 465 00:24:14,960 --> 00:24:18,359 Speaker 5: curve there's a higher price out there that you theoretically 466 00:24:18,400 --> 00:24:20,520 Speaker 5: be able to sell it at, but you do have 467 00:24:20,560 --> 00:24:23,080 Speaker 5: to match that against the interest rates. So it needs 468 00:24:23,119 --> 00:24:27,719 Speaker 5: to be sufficiently steep I guess that curve such that 469 00:24:27,800 --> 00:24:30,199 Speaker 5: it makes sense for you to hold rather than just 470 00:24:30,280 --> 00:24:31,639 Speaker 5: like buy treasuries or whatever. 471 00:24:32,800 --> 00:24:37,000 Speaker 4: Yes, yes, exactly, And there's a level of sophistication, yeah, 472 00:24:37,200 --> 00:24:39,359 Speaker 4: I mean is needed for that. And then you know, 473 00:24:39,400 --> 00:24:42,280 Speaker 4: the futures market's small, so the bigger players kind of like, 474 00:24:42,480 --> 00:24:46,760 Speaker 4: we can't really have a material impact on our risk 475 00:24:47,000 --> 00:24:49,120 Speaker 4: because we can't put on a big enough position. All 476 00:24:49,400 --> 00:24:52,920 Speaker 4: our little futures contract that we adjusted last year is 477 00:24:53,440 --> 00:24:56,240 Speaker 4: doing much better, but we still have some room to grow. 478 00:24:56,840 --> 00:24:58,560 Speaker 6: But you know, there's a reason. 479 00:24:59,480 --> 00:25:02,960 Speaker 4: Well I'm wait over my skis here, but I think 480 00:25:02,960 --> 00:25:06,359 Speaker 4: a Cargill, there's a reason they're they're private, you know, 481 00:25:06,520 --> 00:25:09,520 Speaker 4: and I think one of them is they can execute 482 00:25:09,560 --> 00:25:12,720 Speaker 4: on these fairly sophisticated storage strategies. And I really have 483 00:25:12,760 --> 00:25:16,080 Speaker 4: to explain to everyone like, this is a six month 484 00:25:16,240 --> 00:25:19,399 Speaker 4: plus ARB and we're going to pay a bunch of 485 00:25:19,400 --> 00:25:21,040 Speaker 4: margin call and pay a bunch of interests, but we're 486 00:25:21,040 --> 00:25:24,119 Speaker 4: making it up because our cost basis goes lower and 487 00:25:24,119 --> 00:25:26,960 Speaker 4: lower every time we roll into the next contract. That's 488 00:25:27,000 --> 00:25:29,879 Speaker 4: just a really hard thing to explain to public investors. 489 00:25:29,920 --> 00:25:31,920 Speaker 6: And and you. 490 00:25:31,840 --> 00:25:34,520 Speaker 4: Know, public commodity companies often tell me when I was 491 00:25:34,560 --> 00:25:37,920 Speaker 4: a consultant, you know, our investors pay us to have 492 00:25:38,400 --> 00:25:42,080 Speaker 4: pretty naked exposure to the underlying commodity, and that was 493 00:25:42,080 --> 00:25:43,639 Speaker 4: as an uphill battle as a consultant. 494 00:25:43,760 --> 00:25:45,840 Speaker 6: So I've said, I'll do it. 495 00:25:45,920 --> 00:25:47,960 Speaker 4: And I know if you're not hedging, someone's going to 496 00:25:48,040 --> 00:25:51,320 Speaker 4: hedge for you, and that that's me, that's your investors. 497 00:25:51,359 --> 00:25:54,560 Speaker 4: And there's a level of you just realities of hedging 498 00:25:54,560 --> 00:25:55,879 Speaker 4: that not everyone could take advantage of. 499 00:25:56,800 --> 00:25:59,000 Speaker 2: The secret to success is storage. 500 00:25:59,440 --> 00:25:59,919 Speaker 6: I love it. 501 00:26:00,080 --> 00:26:02,679 Speaker 5: Wait, just real quickly thirty second question, you have some 502 00:26:02,760 --> 00:26:05,400 Speaker 5: other businesses. I know, you have your hands all things 503 00:26:05,440 --> 00:26:08,159 Speaker 5: in other pods. You're out in the real world and 504 00:26:08,240 --> 00:26:11,320 Speaker 5: not like in Manhattan. You're like out in the real economy. 505 00:26:11,440 --> 00:26:15,160 Speaker 5: Do you think you see a slow down day to day? 506 00:26:15,680 --> 00:26:20,560 Speaker 6: Gosh, I'm so concentrated in the lumber, but I do. 507 00:26:21,119 --> 00:26:23,280 Speaker 6: I do. Yeah, it's just like it's a front and. 508 00:26:23,240 --> 00:26:25,760 Speaker 4: Center because you know, there's a reason on the show today. 509 00:26:25,760 --> 00:26:29,080 Speaker 4: But yeah, there's some other service businesses that are unrelated 510 00:26:29,080 --> 00:26:32,119 Speaker 4: and uncrrelated that I was in the middle of the 511 00:26:32,200 --> 00:26:35,639 Speaker 4: hiring when it was so tough to hire quality people 512 00:26:35,680 --> 00:26:38,159 Speaker 4: and we're just having to raise the wage. Yeah, to 513 00:26:38,200 --> 00:26:42,119 Speaker 4: find a clearing wage that has significantly cooled. We're able 514 00:26:42,200 --> 00:26:47,080 Speaker 4: to hire whenever we want and frankly let go of 515 00:26:47,160 --> 00:26:50,040 Speaker 4: folks without fear of being able to replace them. 516 00:26:50,760 --> 00:26:55,639 Speaker 6: Yes, that aspect, it's like, is it too easy? I 517 00:26:55,720 --> 00:26:56,120 Speaker 6: don't know. 518 00:26:56,359 --> 00:26:57,960 Speaker 4: This is it kind of feels like it used to 519 00:26:57,960 --> 00:27:00,840 Speaker 4: be where the employer had such an advantage over the employee, 520 00:27:01,280 --> 00:27:03,880 Speaker 4: like the employee really needed the job, and that's kind 521 00:27:03,880 --> 00:27:07,480 Speaker 4: of what we're getting. More professional follow ups and and 522 00:27:07,600 --> 00:27:11,200 Speaker 4: there's they're like they are vuying for the job. Versus 523 00:27:11,760 --> 00:27:14,520 Speaker 4: us buying for them. Like I think that dynamic has 524 00:27:14,720 --> 00:27:19,760 Speaker 4: has certainly changed, but I wouldn't say there's a material 525 00:27:20,640 --> 00:27:24,680 Speaker 4: drop off and activity in these businesses that would see. 526 00:27:24,680 --> 00:27:25,640 Speaker 4: Outside of Number. 527 00:27:30,200 --> 00:27:33,240 Speaker 1: Lots More is produced by Carmen Rodriguez and dash Ell Bennett, 528 00:27:33,280 --> 00:27:35,600 Speaker 1: with help from Moses Ondom and Cal Brooks. 529 00:27:36,000 --> 00:27:39,000 Speaker 5: Our sound engineer is Blake Maple's Sage Bouman is the 530 00:27:39,080 --> 00:27:40,359 Speaker 5: head of Bloomberg Podcasts. 531 00:27:40,640 --> 00:27:43,760 Speaker 1: Please rate, review, and subscribe to Odd Lots and Lots 532 00:27:43,800 --> 00:27:46,680 Speaker 1: More on your favorite podcast platforms. 533 00:27:46,560 --> 00:27:49,119 Speaker 5: And remember that Bloomberg subscribers can listen to all of 534 00:27:49,160 --> 00:27:52,440 Speaker 5: our podcasts and free by connecting through Apple Podcasts. 535 00:27:52,800 --> 00:27:53,560 Speaker 3: Thanks for listening.