WEBVTT - Lots More With Stinson Dean on Crashing Lumber Prices 0:00:03.120 --> 0:00:08.840 Bloomberg Audio Studios, podcasts, radio news. 0:00:10.119 --> 0:00:12.360 Are you guys doing anything interesting for fourth of July? 0:00:13.440 --> 0:00:13.840 Nope? 0:00:15.600 --> 0:00:17.480 Well it was nice talking to you. 0:00:17.480 --> 0:00:17.680 You know. 0:00:17.800 --> 0:00:20.400 Uh out in Easthampton, they don't do fireworks. 0:00:20.280 --> 0:00:22.799 It's a good thing we're not having a conversational podcast 0:00:23.000 --> 0:00:26.000 or anything. Tom says, you've got to watch the puck 0:00:26.079 --> 0:00:28.600 when you're on the bench, Tom Keene, and I'm not. 0:00:28.720 --> 0:00:30.840 Is that an insult? What does that mean? I don't 0:00:30.920 --> 0:00:33.600 understand hockey. When you're not playing, you have to watch 0:00:33.760 --> 0:00:34.160 the game? 0:00:34.680 --> 0:00:38.080 Is this about your face? I don't know why I 0:00:38.159 --> 0:00:40.080 use on the bench, but yeah, why am I on? 0:00:41.280 --> 0:00:41.560 Yeah? 0:00:41.600 --> 0:00:43.680 Well maybe if you're on the oh yeah, the ice, 0:00:43.680 --> 0:00:46.360 you would have been paying closer attention. Yeah, you can't 0:00:46.680 --> 0:00:48.600 in hockey. When you're on the bench, you're exposed. So 0:00:48.600 --> 0:00:50.120 if you're not paying attention, you could get hit in 0:00:50.159 --> 0:00:50.640 the face. 0:00:50.440 --> 0:00:50.840 Of the puck. 0:00:52.600 --> 0:00:56.160 Why don't they just build like a little protection thing 0:00:56.480 --> 0:00:58.040 like in baseballs, like a dugout. 0:00:58.560 --> 0:01:00.360 They get on and off the ice by jump over 0:01:00.400 --> 0:01:00.720 the wall. 0:01:04.480 --> 0:01:05.520 And I hate sports. 0:01:08.319 --> 0:01:11.559 I did a deadlift one two, okay? 0:01:13.240 --> 0:01:13.479 Many? 0:01:14.560 --> 0:01:15.360 Uh barges. 0:01:15.520 --> 0:01:17.679 This isn't after school special, except. 0:01:17.280 --> 0:01:19.840 I've decided I'm going to base my entire personality going 0:01:19.840 --> 0:01:23.080 forward on campaigning for a strategic pork reserve in the US. 0:01:23.200 --> 0:01:24.920 Where's the best with imposta? 0:01:25.080 --> 0:01:27.679 These are the important question. Is it robots taking over 0:01:27.680 --> 0:01:28.040 the world? 0:01:28.120 --> 0:01:28.280 No. 0:01:28.360 --> 0:01:31.240 I think that like in a couple of years, the 0:01:31.319 --> 0:01:33.520 AI will do a really good job of making the 0:01:33.520 --> 0:01:37.000 Odd Lots podcast, And people say, I don't really need 0:01:37.040 --> 0:01:39.600 to listen to Joe and Tracy anymore. We do have 0:01:41.240 --> 0:01:45.080 the perfect welcome to lots More when we catch up 0:01:45.120 --> 0:01:47.480 with friends about what's going on right now. 0:01:47.560 --> 0:01:50.840 Because even when Odd Lots is over, there's always lots 0:01:50.880 --> 0:01:51.960 more and. 0:01:51.880 --> 0:01:57.200 We really do have the perfect guest. So for those 0:01:57.280 --> 0:01:59.720 who don't follow Tracy on Twitter, which you should all be, 0:02:00.080 --> 0:02:03.600 she posted this freaky photo that two in the morning 0:02:03.960 --> 0:02:07.560 that looked everyone thought was like Halloween or like costume 0:02:07.560 --> 0:02:09.280 makeup because you have this big gash in your face. 0:02:09.320 --> 0:02:10.079 What's the story there? 0:02:10.800 --> 0:02:11.560 Uh? 0:02:11.600 --> 0:02:13.840 Someone said the Dow was a better index than the 0:02:13.880 --> 0:02:15.960 S and P five hundred, so I had to fight that. 0:02:15.960 --> 0:02:16.280 That's me. 0:02:16.440 --> 0:02:17.040 Yeah, that's right. 0:02:17.520 --> 0:02:18.520 You should see the other guy. 0:02:18.560 --> 0:02:19.399 Everyone look at Joe. 0:02:19.520 --> 0:02:19.560 No. 0:02:19.800 --> 0:02:22.960 Uh, you know, someone threw a large platinum coin at 0:02:22.960 --> 0:02:24.840 my head and then ran off and I heard them 0:02:24.840 --> 0:02:27.360 say something about a trillion dollars. I'm not sure what 0:02:27.360 --> 0:02:27.720 that was. 0:02:27.639 --> 0:02:29.840 About, because that's interesting because I thought it sort of 0:02:29.880 --> 0:02:31.400 looked like you got hit by a two by four. 0:02:32.240 --> 0:02:35.320 I thought you got hit by like someone like slammed 0:02:35.360 --> 0:02:36.640 a big piece of lumber. 0:02:36.400 --> 0:02:36.880 In your face. 0:02:37.360 --> 0:02:39.960 Actually, you know, I think that that's what it was. 0:02:40.760 --> 0:02:44.360 So unfortunately, I wish I had a dramatic story to 0:02:44.440 --> 0:02:46.720 tell about how I ended up with this like four 0:02:46.800 --> 0:02:50.400 inch gash on my forehead. But basically, I was trying 0:02:50.400 --> 0:02:53.359 to hang a frame while standing on my bed and 0:02:53.400 --> 0:02:56.000 I fell off the bed and I'm pretty sure my 0:02:56.120 --> 0:02:58.519 face hit the frame, so like kind of a two 0:02:58.520 --> 0:02:58.880 by four. 0:02:58.960 --> 0:03:01.440 Yeah, sure, photo. I think you should make it your 0:03:01.480 --> 0:03:02.120 Twitter profile. 0:03:02.200 --> 0:03:02.359 Yeah. 0:03:02.480 --> 0:03:04.040 Might actually actually pretty. 0:03:03.800 --> 0:03:04.840 Bad, thank you. 0:03:05.600 --> 0:03:10.560 The stitches themselves aren't quite as glamorous, but I'm willing 0:03:10.600 --> 0:03:12.600 to live with them. But anyway, I'm glad you mentioned 0:03:12.600 --> 0:03:14.960 to you by fours because there are some interesting things 0:03:15.040 --> 0:03:17.960 going on in the lumber market at the moment, and 0:03:18.680 --> 0:03:21.600 we really do have the perfect person to talk to 0:03:21.960 --> 0:03:25.800 Stinson Dean, president and owner of Deacon Lumber Company, who've 0:03:25.800 --> 0:03:29.440 spoken to him many times before about what happens in lumber. 0:03:29.760 --> 0:03:32.400 Yeah. The one piece of advice I've gotten in lumber 0:03:32.440 --> 0:03:34.559 trading is don't try to catch it falling. 0:03:34.240 --> 0:03:37.680 To by four classic classic. 0:03:37.800 --> 0:03:39.800 Yes, yeah, we're in that now. 0:03:40.000 --> 0:03:42.520 And Tracy's living proof was that. Now. 0:03:42.640 --> 0:03:46.119 You know how I know lumber prices are falling. It's 0:03:46.160 --> 0:03:49.240 because I just bought like all the lumber that we 0:03:49.320 --> 0:03:52.400 need for that giant shed. It's because I've finished my 0:03:52.560 --> 0:03:56.200 acquisition and so inevitably prices start coming down. 0:03:57.000 --> 0:03:59.520 You bought the top, Yeah. 0:03:59.080 --> 0:03:59.920 It's always the case. 0:04:00.080 --> 0:04:02.200 Wait, okay, so prices are falling. 0:04:02.760 --> 0:04:03.520 What's going on? 0:04:03.560 --> 0:04:07.200 Because you know, would lumber it's not exactly a monolith. 0:04:07.240 --> 0:04:09.920 There's different types of it, as we've learned a number 0:04:09.960 --> 0:04:12.520 of times at this point. But like, how bad has 0:04:12.560 --> 0:04:13.480 the price action been? 0:04:13.720 --> 0:04:18.159 It's been pretty bad, Like lower than I thought we 0:04:18.240 --> 0:04:23.560 would go. There's this kind of age old philosophy in 0:04:23.920 --> 0:04:27.039 lumber trading that we won't trade below the break even, 0:04:27.680 --> 0:04:32.160 specifically the break even of British Columbia two by four 0:04:32.200 --> 0:04:38.040 producers and coming out of COVID, there's so much issues 0:04:38.080 --> 0:04:41.760 getting product that folks switched species. The cheaper, more available 0:04:41.800 --> 0:04:44.719 spech species from the US South and I started to 0:04:44.760 --> 0:04:48.000 think maybe British Columbia lost what I call it's peg, 0:04:48.160 --> 0:04:52.360 like everyone would peg like to the BC break even. 0:04:52.480 --> 0:04:55.120 While we've been well below that. It's kind of a 0:04:55.160 --> 0:04:57.360 mystery what it actually is. Maybe it's a little bit 0:04:57.360 --> 0:05:01.039 lower than we all thought, and we've been trading well 0:05:01.080 --> 0:05:04.359 below it. Now we're trading below even the Southern yellow pine, 0:05:04.480 --> 0:05:09.800 the cheap species break even. So we're just way cheaper 0:05:09.839 --> 0:05:13.000 than anyone thought we could go because hey, you can't 0:05:13.000 --> 0:05:15.599 trade below the break even for too long. But here 0:05:15.600 --> 0:05:19.159 we are, I don't know, six plus months probably trading 0:05:19.279 --> 0:05:20.040 below that number. 0:05:20.680 --> 0:05:22.880 So just to be clear, when we talk about the 0:05:22.920 --> 0:05:28.200 break even price, this is the cost basically of the 0:05:28.279 --> 0:05:33.280 various mills to acquire raw timber and then process it 0:05:33.400 --> 0:05:35.320 into usable wood. 0:05:36.040 --> 0:05:38.520 Exactly cost of the log, the labor. 0:05:38.800 --> 0:05:41.839 Yeah, inflation plays a big part of that. So you know, 0:05:41.920 --> 0:05:46.880 break evens have leg taken a step up since pre COVID. 0:05:47.240 --> 0:05:50.000 And I assume, okay, so no one wants to lose money. 0:05:50.040 --> 0:05:52.520 Have we seen the supply response yet? Have any of 0:05:52.560 --> 0:05:56.000 the mills been idled or anything like that in response 0:05:56.040 --> 0:05:57.279 to lower prices? 0:05:57.960 --> 0:05:58.520 Yeah? 0:05:58.760 --> 0:06:03.640 So slow, but surely we call them curtailments. Those curtailments 0:06:03.640 --> 0:06:06.840 have started started to add up. I think we're over a. 0:06:06.800 --> 0:06:08.479 Billion board feet in British Columbia. 0:06:08.560 --> 0:06:12.719 Again, everyone's looking towards them as that peg, but now 0:06:12.760 --> 0:06:16.000 we're looking at like do we need to to curtail, 0:06:16.839 --> 0:06:20.359 which is different than closing, And I think personally we 0:06:20.400 --> 0:06:24.880 need to close a lot of like permanently shut mills 0:06:24.880 --> 0:06:28.039 and burst Columbia. And then now there's talk of like 0:06:28.080 --> 0:06:31.000 what do we need to do to reduce supply coming 0:06:31.040 --> 0:06:34.080 out of the Southeast United States with Sonyella pines. So 0:06:34.320 --> 0:06:37.880 there is an accumulative effect happening, but it's not all 0:06:37.920 --> 0:06:40.880 at once, so it's not really headline grabbing. It's kind 0:06:40.880 --> 0:06:44.400 of onesie twosies. This is happening, And then people don't 0:06:44.440 --> 0:06:47.000 believe it, And is it a curtailment meaning they're going 0:06:47.080 --> 0:06:50.680 to turn it back on later if prices respond? Is 0:06:50.680 --> 0:06:54.719 it a closure? We close these mills and you're not 0:06:54.760 --> 0:06:59.080 opening them back up. But there's a fear when you curtail, 0:06:59.200 --> 0:07:03.920 whether that's reducing from three shifts the two shifts, something 0:07:04.000 --> 0:07:07.240 like that, you're going to lose your workforce in the 0:07:07.400 --> 0:07:11.000 US South, that's the biggest fear if you cut shifts, 0:07:11.000 --> 0:07:13.360 like they're going to go work for Amazons, And there's 0:07:13.360 --> 0:07:15.240 a lot of investment in the US South, So there's 0:07:15.280 --> 0:07:19.320 a very tough decision to be made. Do we retail 0:07:19.480 --> 0:07:21.960 and risk losing our workforce that we work so hard 0:07:22.200 --> 0:07:25.080 to get over the last several years. It's kind of 0:07:25.120 --> 0:07:26.800 a race to the bottom at the moment. 0:07:27.320 --> 0:07:28.360 That's really interesting. 0:07:28.400 --> 0:07:31.760 It also just seems bad to curtail a bunch of 0:07:31.800 --> 0:07:34.120 mills and lumber supply at a time when we're still 0:07:34.120 --> 0:07:37.040 talking about structural undersupply in the housing market. 0:07:37.320 --> 0:07:40.000 No, this is really interesting because we've talked about labor 0:07:40.000 --> 0:07:42.360 hoarding in the past, and all these companies they're anxious 0:07:42.360 --> 0:07:44.720 about losing workers. And maybe it's the first time for 0:07:44.880 --> 0:07:46.960 many of these managers and CEOs where they had a 0:07:47.000 --> 0:07:49.240 hard time working or they had a hard time hiring. 0:07:49.640 --> 0:07:53.440 But it's interesting dynamic to say, well, maybe there are 0:07:53.720 --> 0:07:57.920 aspects of that are disinflationary or deflationary for certain prices, 0:07:58.120 --> 0:08:02.760 because it implicitly means continuing to run the operation at 0:08:02.800 --> 0:08:08.000 a loss, contributing to oversupply of the key commodity. Because 0:08:08.040 --> 0:08:10.560 the alternative is that libor loss I hadn't really thought 0:08:10.560 --> 0:08:11.360 about that aspect. 0:08:11.440 --> 0:08:14.320 No, wait, Stintson, is the market is it? 0:08:14.400 --> 0:08:14.480 So? 0:08:14.640 --> 0:08:19.120 Normally lumber futures are in contango, so the spot prices 0:08:19.200 --> 0:08:22.160 are lower than prices further out. Is that still the case. 0:08:22.280 --> 0:08:24.240 I'm starting to wonder whether or not I should be 0:08:24.240 --> 0:08:27.400 stockpiling umber and you know, just wait a year or two. 0:08:28.520 --> 0:08:29.680 Yes, yeah, it is. 0:08:29.800 --> 0:08:33.520 I don't know what the definition of a super contango is, 0:08:34.160 --> 0:08:37.959 but I think we're we're in it or approaching it, 0:08:38.040 --> 0:08:42.320 meaning the futures market is paying you above and beyond 0:08:42.400 --> 0:08:44.840 what it actually costs the store for sixty days or 0:08:44.880 --> 0:08:48.360 sixty days in between each of our contracts, and we 0:08:48.480 --> 0:08:50.960 have a deep carry. I always like to say the 0:08:51.000 --> 0:08:54.880 futures they don't have to be right until you get 0:08:54.880 --> 0:08:56.480 into expiration. 0:08:56.080 --> 0:08:58.160 Which is where we're in July. Second. 0:08:58.240 --> 0:09:02.199 Our July contract expiresly fifteenth. Typically all the speculators and 0:09:02.240 --> 0:09:06.080 outside money is long gone before the spot month comes 0:09:06.080 --> 0:09:09.880 into the calendar month, and we're seeing the spread the 0:09:09.960 --> 0:09:14.560 July losing a tremendous amount of value relative to the 0:09:14.600 --> 0:09:15.840 next month in September. 0:09:16.120 --> 0:09:17.880 So yeah, huge carries in the market. 0:09:17.920 --> 0:09:22.480 The market is begging participants to store lumber, don't put 0:09:22.480 --> 0:09:24.960 it on the market. Don't put it up for sale. 0:09:25.440 --> 0:09:29.480 The market will pay you above and beyond your interest, 0:09:29.679 --> 0:09:32.640 insurance and storage costs to keep it till September fifteenth, 0:09:32.720 --> 0:09:36.599 and at this pace, January will probably pay you to 0:09:37.000 --> 0:09:39.560 not sell it until January fifteenth, and we'll kind of 0:09:39.559 --> 0:09:40.120 go from there. 0:09:40.559 --> 0:09:43.720 You have storage, right, so you're you're a lumber trader, 0:09:43.720 --> 0:09:45.960 but you're not just like one of these guys who 0:09:46.120 --> 0:09:51.640 looks at his computer screen all day. You actually have capacity, right, Yeah. 0:09:51.720 --> 0:09:54.880 Yeah, that's one of the things we invested in coming 0:09:54.880 --> 0:09:58.960 out of kind of the windfall of COVID volatility is storage, 0:09:59.120 --> 0:10:02.400 indoor Storageecifically, you have to be able to keep lumber 0:10:03.120 --> 0:10:06.640 out of the weather and dry, and so we invested 0:10:06.720 --> 0:10:09.160 in a lot of storage options for us so we 0:10:09.200 --> 0:10:12.400 can take advantage of these carries in the market. And yeah, 0:10:12.480 --> 0:10:16.120 my day job is buying physical railcars a lumber, shipping 0:10:16.200 --> 0:10:19.560 it right now, shipping it into the storage facilities, and 0:10:19.600 --> 0:10:22.240 putting a hedge on it, and then going fishing waiting 0:10:22.280 --> 0:10:23.400 for the market to come back. 0:10:23.240 --> 0:10:28.479 To Ustinton Lumber. The Stintson Lumber Reserve is what basically. 0:10:28.200 --> 0:10:29.160 Is a strategic extense. 0:10:29.280 --> 0:10:32.640 The strategic Extenson Lumber Reserve. I like that SSLR. 0:10:33.160 --> 0:10:36.400 So you touched on the unemployment aspect just then. But 0:10:36.480 --> 0:10:39.520 of course when people think about lumber prices, I think 0:10:39.679 --> 0:10:42.200 the first thing they think is that this is a 0:10:42.280 --> 0:10:47.200 traditional arbiter of economic activities. So if lumber prices are 0:10:47.240 --> 0:10:50.240 going down, it's probably because people aren't building that much, 0:10:50.320 --> 0:10:54.080 and that suggests that something bad is happening to economic growth, 0:10:54.160 --> 0:10:56.880 or at the very least it's starting to slow. Is 0:10:56.880 --> 0:10:59.079 that the basic read through here. 0:10:59.400 --> 0:10:59.800 I think. 0:11:00.160 --> 0:11:04.319 So, I think you look at lumber was kind of 0:11:04.360 --> 0:11:07.559 the first thing to hit headlines and set new all 0:11:07.640 --> 0:11:10.520 time highs back in twenty twenty and then and really 0:11:11.080 --> 0:11:14.480 became a popular thing to talk about in twenty twenty one. 0:11:15.080 --> 0:11:17.280 You know, at the time, I'm like, hey, this is fundamental, 0:11:17.360 --> 0:11:19.920 and we got COVID supply chain shutdowns and they can't 0:11:19.960 --> 0:11:22.040 get their workforce back, and you know, if you get 0:11:22.080 --> 0:11:25.280 test positive, you got to sit down, is stay away 0:11:25.280 --> 0:11:28.400 from work, and we couldn't get caught up. All that's fixed, 0:11:28.440 --> 0:11:31.920 and so we're at very have very efficient supply lines 0:11:32.480 --> 0:11:36.000 now in at the same time we're looking at housing 0:11:36.080 --> 0:11:41.160 starts really showing what the lumber industry has seen since January, 0:11:41.400 --> 0:11:44.520 which is really weak demand. As a lumber trader, I 0:11:44.559 --> 0:11:48.760 would say lumber supply chain is too fixed. Like it 0:11:48.840 --> 0:11:52.640 is very smooth. Rail cars are getting from British Columbia 0:11:52.640 --> 0:11:57.600 to Atlanta and record time, record speeds, and lumbers getting 0:11:57.640 --> 0:12:00.520 produced as much as you could ever want. Everyone has it. 0:12:01.000 --> 0:12:04.640 There's no fear of a shortage. The end user lumberyard 0:12:04.800 --> 0:12:08.400 is able to run kind of a lean, just in 0:12:08.480 --> 0:12:13.840 time inventory model again, and it's so the supply chain 0:12:13.880 --> 0:12:17.040 side is very fixed. But then now we have kind 0:12:17.040 --> 0:12:21.120 of a broken housing starts world where you know, the 0:12:21.320 --> 0:12:25.520 the number one demand a lumber is repairing to model, 0:12:25.559 --> 0:12:27.920 and just behind that a single family, and then way 0:12:27.960 --> 0:12:30.559 down the list is multifamily. Multi family is less than 0:12:30.559 --> 0:12:32.600 ten percent of lumber demand. 0:12:33.200 --> 0:12:37.079 Wait, sorry, what's first again? Single family or repair? Oh okay, okay, 0:12:37.080 --> 0:12:37.720 this is interesting. 0:12:37.880 --> 0:12:42.079 Repair and renovation, yes, repair and remodel this. 0:12:43.800 --> 0:12:44.120 Yes. 0:12:45.400 --> 0:12:48.560 So on that note, is it possible that like in 0:12:48.600 --> 0:12:52.440 the post uh the immediate post twenty twenty period, we 0:12:52.600 --> 0:12:56.200 just had everyone remodeling their homes and so you know, 0:12:56.240 --> 0:13:00.199 that sort of took care of demand further out, or 0:13:00.360 --> 0:13:03.520 that maybe because lumber prices went up so much, you 0:13:03.640 --> 0:13:08.160 had this huge supply response from the mills, and so 0:13:08.320 --> 0:13:10.959 there's just over supply, Like, is it possible that this 0:13:11.040 --> 0:13:14.840 is something that's still very pandemic specific versus something that's 0:13:14.880 --> 0:13:15.960 about slowing growth. 0:13:16.559 --> 0:13:18.840 Well, Tracy, that's a good way to frame it, because 0:13:19.160 --> 0:13:22.040 I'm thinking, you know, my initial thought is like, oh, 0:13:22.080 --> 0:13:24.600 this is a very is an economic indicator slow and growth. 0:13:25.200 --> 0:13:28.760 But also I want to say we clearly now I 0:13:28.800 --> 0:13:31.960 think undisputed can say we had pulled forward demand of 0:13:32.120 --> 0:13:35.680 repair and remodel, so projects that would have been spread 0:13:35.679 --> 0:13:38.000 out over five years got crunched into twenty four months, 0:13:38.559 --> 0:13:40.680 and now we're on the back half of that five years, 0:13:40.679 --> 0:13:43.640 and there's not much business to kind of float and 0:13:43.679 --> 0:13:45.640 handle the supply that we have. So I don't know, 0:13:45.760 --> 0:13:49.200 is that the definition of slowing economic growth is pull forward? 0:13:49.679 --> 0:13:51.960 I don't know that's over my pay grade, but I 0:13:51.960 --> 0:13:56.120 think it's clearly what happened is there is a repair 0:13:56.320 --> 0:14:01.079 model boom that has really one of your housing and 0:14:01.160 --> 0:14:05.040 lumber guests, Dustin Jolbert, has tweeted about it. Repairing the 0:14:05.080 --> 0:14:07.600 models kind of flatted down and dead in the water. 0:14:07.640 --> 0:14:11.000 That's a lot of big box home depot lows monards business, 0:14:11.840 --> 0:14:15.440 and that's fifty percent of lumber that's produced goes to 0:14:15.480 --> 0:14:18.839 that that sector, and it's it's down, and then we 0:14:18.920 --> 0:14:22.640 all know, single families down just in time her supply 0:14:22.880 --> 0:14:26.200 to be as efficient as it's ever been. And lastly, 0:14:26.240 --> 0:14:30.120 I haven't been able to mention pre COVID eighteen nineteen, 0:14:30.720 --> 0:14:34.040 there's a ton of cap X to invest in the US. 0:14:34.720 --> 0:14:40.960 Sorry eighteen nineteen or nineteen eighteen nineteen, I'm sorry, sorry, was. 0:14:46.040 --> 0:14:47.560 Technically sorry. 0:14:48.520 --> 0:14:49.200 I'll restated. 0:14:49.240 --> 0:14:52.520 No, No, it's fine, it's uh did I mention? I've 0:14:52.680 --> 0:14:57.600 bumped my head, so my my numerical understanding is not 0:14:57.720 --> 0:14:59.120 as great as it might normally be. 0:15:00.320 --> 0:15:04.400 Well, in twenty eighteen and twenty nineteen, their plans announced 0:15:04.520 --> 0:15:08.720 and enacted to build new production sawmills in the US 0:15:08.760 --> 0:15:12.640 South to take advantage of the larger fiber basket forest 0:15:12.840 --> 0:15:17.240 logs down there versus the Canadian fiber basket. And it 0:15:17.960 --> 0:15:20.760 was and is the Canadians who are doing that investment. 0:15:20.800 --> 0:15:23.520 They own over fifty percent of the US South production 0:15:24.240 --> 0:15:28.080 and a lot of those projects got delayed and for 0:15:28.240 --> 0:15:30.680 COVID reasons, they couldn't get their saw mills built. They 0:15:30.720 --> 0:15:33.720 couldn't get them staffed, but now they can't. So a 0:15:33.760 --> 0:15:36.440 lot of those projects are now online and they are 0:15:36.480 --> 0:15:38.880 not going to get shut down. There's debt to service, 0:15:38.920 --> 0:15:42.000 there's cash flow motivations to just run. Who cares what 0:15:42.040 --> 0:15:44.440 the break even is. So we have that, we have 0:15:44.600 --> 0:15:48.360 repaired supply chains, and we have the hangover of the 0:15:48.400 --> 0:15:51.000 pull forward demand of repairing the model, and then you 0:15:51.000 --> 0:15:54.120 know the single family stories at this point. 0:15:54.280 --> 0:15:57.680 So when Stinson first mentioned, when you said repair and 0:15:57.720 --> 0:16:00.040 remodel is actually the biggest category, Like at first, I 0:16:00.120 --> 0:16:02.200 was kind of surprised by that, but you know, I 0:16:02.200 --> 0:16:04.840 would have thought single family was a bigger source of demand. 0:16:05.000 --> 0:16:07.360 But it occurred to me that there is a connection 0:16:07.480 --> 0:16:10.600 here between what we've talked about in some our recent 0:16:10.640 --> 0:16:13.400 conversation with Brad Jacobs, where he made the point that 0:16:13.480 --> 0:16:16.520 like the US housing stock is really old right now, 0:16:16.600 --> 0:16:19.000 and there is just and houses have to be repaired. 0:16:19.000 --> 0:16:21.560 They're like any other asset, especially the moment you buy 0:16:21.600 --> 0:16:23.760 a house that starts to fall apart. And so if 0:16:23.800 --> 0:16:27.200 we have this historically old housing market, that is just 0:16:27.280 --> 0:16:31.240 a big source of ongoing structural demand right just to 0:16:31.320 --> 0:16:34.880 keep those homes in existence for all kinds of materials 0:16:34.880 --> 0:16:36.920 they might need, So that actually sort of makes sense 0:16:36.920 --> 0:16:37.120 to me. 0:16:37.240 --> 0:16:39.680 I feel like this is something you internalize as soon 0:16:39.720 --> 0:16:41.280 as you actually buy. 0:16:41.480 --> 0:16:45.480 Oh no, no, no, for real, I bought my apartment 0:16:45.600 --> 0:16:48.280 in Manhattan and it never had any issues and then 0:16:48.400 --> 0:16:52.960 literally like a window started leaking. They like literally that week. 0:16:53.000 --> 0:17:05.800 It was so perfect. 0:17:07.440 --> 0:17:10.600 Wait, so Stintent, you mentioned something interesting, which is this 0:17:10.720 --> 0:17:16.200 idea of the mills kind of hoarding workers first of all, 0:17:16.240 --> 0:17:20.159 but then also just trying to withstand the lower prices 0:17:20.200 --> 0:17:23.520 and maybe operating at a loss for as long as 0:17:23.560 --> 0:17:25.679 they can and just sort of waiting to see if 0:17:25.720 --> 0:17:28.720 they can beat out others who are forced to shut down. 0:17:29.160 --> 0:17:33.119 What's the sort of differentiating factor in survival for some 0:17:33.200 --> 0:17:36.399 of these mills. Is it just whoever has access to 0:17:37.080 --> 0:17:41.399 like extra cash laying around for a rainy day, or 0:17:41.520 --> 0:17:45.199 is it mills that maybe have supply agreements with like 0:17:45.359 --> 0:17:48.760 big builders and big box companies and that sort of thing. 0:17:49.960 --> 0:17:53.280 You know, I would say, and I'm not honestly the 0:17:53.320 --> 0:17:55.720 best to speak to this, but I would guess it's 0:17:55.840 --> 0:17:59.000 these newer steady dart mills have the advantage they're going 0:17:59.040 --> 0:18:03.560 to have been located strategically closer to a fiber supply 0:18:03.720 --> 0:18:06.800 for trees and logs, they are going to have a 0:18:06.800 --> 0:18:10.320 lot of investment. They're largely public companies that have built these, 0:18:10.359 --> 0:18:12.960 so they have access to the cash to kind of 0:18:12.960 --> 0:18:17.000 see to get to the other side. In the South, 0:18:17.080 --> 0:18:21.160 it's still it's much more fragmented as far as they're smaller, 0:18:21.280 --> 0:18:25.480 single location, mom and pop type locations. Those folks are 0:18:25.480 --> 0:18:30.280 going to struggle. But then those folks have probably more 0:18:30.280 --> 0:18:33.359 discipline and have saved some cash over the last several years. 0:18:34.200 --> 0:18:36.120 And there's no way to know, but you would think 0:18:36.240 --> 0:18:38.399 they've made it this far. They knew twenty one to 0:18:38.440 --> 0:18:41.280 twenty two wasn't going to be around forever, so they 0:18:41.320 --> 0:18:44.400 save some cash. Where the publics, you know, have to 0:18:44.440 --> 0:18:48.840 disperse their cash. They pay down debt and then pay dividends, YadA, YadA, YadA. 0:18:48.920 --> 0:18:51.040 So you know, I think the advantage is just the 0:18:51.080 --> 0:18:54.560 newness of the mill because of the state of the art, 0:18:54.640 --> 0:18:57.960 state of the art, less manpower, higher yields out of logs, 0:18:58.040 --> 0:19:01.400 and then its strategic location where the old mills are 0:19:02.000 --> 0:19:03.919 naturally going to be further away. They're going to have 0:19:04.119 --> 0:19:06.760 logged everything within their radius and they're having to go 0:19:06.800 --> 0:19:09.280 further and further away to get their logs. That's the 0:19:09.280 --> 0:19:15.200 only thing I can think of. And this the structural 0:19:15.200 --> 0:19:20.000 housing shortage that we all know by evidence by home 0:19:20.040 --> 0:19:23.360 prices have not crashed in the phase of eight percent morgages. 0:19:24.040 --> 0:19:26.440 We know that, the mills know that, and it's just like, well, 0:19:26.440 --> 0:19:28.359 it's just going to turn and rate cuts. We got 0:19:28.440 --> 0:19:30.679 to wait for rate cuts. And here we are and 0:19:30.880 --> 0:19:34.000 I don't know, and I haven't heard, like how long 0:19:34.080 --> 0:19:36.719 is this runway? Like how long can they bleed? And 0:19:36.960 --> 0:19:39.520 I don't I don't know, but it's clearly been longer 0:19:40.359 --> 0:19:42.600 than most traders had anticipated. 0:19:42.960 --> 0:19:46.480 Wait, I have a total curveball question actually, and if 0:19:46.480 --> 0:19:48.560 you don't want to answer it, that's fine. But we 0:19:48.640 --> 0:19:51.560 actually this week we did publish that interview with Brad Jacobs, 0:19:51.560 --> 0:19:54.199 who is trying to do a roll up of the 0:19:54.440 --> 0:19:59.240 what he calls a highly fragmented building supply industry, and 0:19:59.440 --> 0:20:01.119 lumber is a building supply though I don't know if 0:20:01.160 --> 0:20:02.920 he's going to get into lumber, though maybe he will 0:20:03.160 --> 0:20:06.000 a from your perspective, is it really is it? Does 0:20:06.000 --> 0:20:08.920 it seem very fragmented to you? And b let's say 0:20:09.000 --> 0:20:11.800 Brad listens to odd lives and he hears this, smart 0:20:11.840 --> 0:20:14.760 Stinson fellow, and he calls you up. What kind of 0:20:14.800 --> 0:20:19.800 asset would you buy to create a platform for consolidating 0:20:19.840 --> 0:20:21.960 this industry? A few had billions of dollars four and 0:20:21.960 --> 0:20:22.879 a half billion dollars. 0:20:23.480 --> 0:20:27.840 Yeah, storage, storing, storage, Yeah, I think, I think the 0:20:27.880 --> 0:20:30.639 sawmill production business. I learned this when I start. I 0:20:30.680 --> 0:20:34.560 started out in grains. Yeah, it's just so tough and 0:20:34.600 --> 0:20:38.040 you just rather have someone else. But with that, and 0:20:38.480 --> 0:20:42.040 when they are over produced, you become a You've become 0:20:42.080 --> 0:20:45.119 their liquidity provider. You give them cash, they give you lumber, 0:20:45.520 --> 0:20:47.760