WEBVTT - Real Estate, Markets, and Energy (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.520 with essential market moving news. Find a Bloomberg Markets podcast 0:00:15.600 --> 0:00:18.439 on Apple podcast or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.680 at Bloomberg dot com slash podcast. Overall, we are seeing 0:00:22.680 --> 0:00:25.599 the continuing contrast contractions in the housing market. We know 0:00:25.640 --> 0:00:28.240 why interest rates going up, mortgage rates therefore going up, 0:00:28.240 --> 0:00:30.560 more expensive to be buying your homes. But really, this 0:00:30.640 --> 0:00:33.360 is the sixth straight month and remember this is a 0:00:33.400 --> 0:00:35.400 November number, so it is quite backward looking, but it's 0:00:35.400 --> 0:00:37.720 a sixth straight month. The US penning home sales have 0:00:37.800 --> 0:00:40.400 indeed fallen. And we've got a great guest to dig into, 0:00:40.479 --> 0:00:43.279 really where the housing markets going overall, Paul, because one 0:00:43.320 --> 0:00:45.920 of one, Rich Hill is with us, were pleased to 0:00:45.960 --> 0:00:48.440 welcome of course, his head of real estate strategy and 0:00:48.520 --> 0:00:53.080 research coming in stairs. Rich once again move music on 0:00:53.120 --> 0:00:55.520 manufacturing actually looking a little bit bit better, it would 0:00:55.520 --> 0:00:58.560 seem for the data, but the housing data once again 0:00:58.920 --> 0:01:02.600 really painful. Where are we in the cycle? Yeah, sure, look, 0:01:02.720 --> 0:01:05.959 um uh this was an undeniably challenging year for real 0:01:06.040 --> 0:01:09.240 estate investment trust known as rates. They were down around 0:01:10.360 --> 0:01:12.560 through the close of business at the end of last week. 0:01:13.040 --> 0:01:15.640 Um Uh. Inflation is usually pretty good for real estate, 0:01:15.920 --> 0:01:18.280 but what is challenging for real estate is stagflation. So 0:01:18.319 --> 0:01:21.080 what is stagflation. It's it's an environment where interest rates 0:01:21.080 --> 0:01:24.120 are rising and growth is slowing. That's exactly what played 0:01:24.120 --> 0:01:26.680 out for most of two thousand and twenty two, where 0:01:26.680 --> 0:01:29.600 the Fed had to raise interest rates to uh combat 0:01:29.640 --> 0:01:32.319 inflation that was at its highest level since nineteen eighty. 0:01:32.720 --> 0:01:35.640 Um So it was really a backdrop of higher interest rates, 0:01:35.680 --> 0:01:38.520 widening credit spread, and exceling growth that is pressured up 0:01:38.560 --> 0:01:42.200 the real estate backdrop. So rich, I mean, there's there's 0:01:42.880 --> 0:01:44.960 folks out there that watched the Fed thinks that, you know, 0:01:45.840 --> 0:01:47.319 we're gonna see a peak and rates, and we in 0:01:47.360 --> 0:01:49.800 fact may see some rates come down toward the back 0:01:49.800 --> 0:01:53.600 half of the year. What's the real outlook for three 0:01:53.720 --> 0:01:55.600 after what was is you just mentioned was a really 0:01:55.680 --> 0:02:00.680 challenging Yeah. Sure, Look, we believe that there is potential 0:02:00.680 --> 0:02:04.080 for low double digit returns in the year ahead. Um Uh. 0:02:04.280 --> 0:02:07.080 That's pretty good compared to the negative that we had 0:02:07.600 --> 0:02:10.120 so far this year. What is driving that view? I 0:02:10.120 --> 0:02:12.239 think there's really three things that we would point out. 0:02:12.560 --> 0:02:15.640 First of all, growth will undeniably slow in our view 0:02:16.160 --> 0:02:19.359 UM given recessionary pressures, but it will be well above 0:02:19.440 --> 0:02:23.600 trend versus prior recessionary environments. So that's point number one. 0:02:23.919 --> 0:02:26.920 Point number two is that we actually do see a 0:02:26.960 --> 0:02:30.600 better inflationary backdrop. I mentioned that stagflation where interest rates 0:02:30.600 --> 0:02:33.040 are rising and growth is slowing, is really challenging for 0:02:33.120 --> 0:02:35.680 real estate. But we see a backdrop where growth is 0:02:35.720 --> 0:02:38.240 slowing still in two thousand twenty three, but rates are 0:02:38.280 --> 0:02:40.440 beginning to come down, So we would call that a 0:02:40.440 --> 0:02:44.680 stagnationary backdrop. As you transition from stagflation to stagnation, that's 0:02:44.680 --> 0:02:47.680 a much better backdrop for for for real estate in general. 0:02:47.960 --> 0:02:50.959 The third point I would make UM is that when 0:02:50.960 --> 0:02:53.280 the Fed stops raising interest rates, and and that will 0:02:53.840 --> 0:02:56.600 likely occur at some point over the next up about 0:02:56.639 --> 0:03:00.120 twelve to eighteen months UM, reeds usually do very well. 0:03:00.320 --> 0:03:02.560 So to summarize all of that, we think growth is 0:03:02.560 --> 0:03:05.640 on solid footing. It was slow, but still in solid footing. UM. 0:03:05.720 --> 0:03:08.720 We think a backdrop of transitioning from stagflation to stagnation 0:03:08.800 --> 0:03:11.360 is really good for real estate. And the number three 0:03:11.600 --> 0:03:15.040 as the FED stops raising interstrates, that's historically environment where 0:03:15.040 --> 0:03:18.880 red produce plus sixteen percent returns historically six months after 0:03:18.919 --> 0:03:21.600 the FED stops raising interstrates. So altogether we see a 0:03:21.600 --> 0:03:24.919 better backdrop, which not all real estate is created equal, 0:03:25.160 --> 0:03:27.480 as I know you know more than anyone. Of course, 0:03:27.520 --> 0:03:30.400 with your focus on rates, we were breaking, of course, 0:03:30.520 --> 0:03:33.440 depending home sales. We're talking about a consumer about where 0:03:33.440 --> 0:03:36.320 one wants to live. But from your perspective, talk to 0:03:36.360 --> 0:03:38.640 us about the most appetizing parts of the markets that 0:03:38.640 --> 0:03:40.840 have aren and re recovering the bits that you're still 0:03:40.880 --> 0:03:43.480 not tempted to be going into at the moment. Yeah. Sure, 0:03:44.040 --> 0:03:45.800 So what are the selectors of the market that we 0:03:45.840 --> 0:03:48.960 do like? Um, we like multifamily, particularly in the stun Belt. 0:03:49.200 --> 0:03:51.560 We like single family rental. I think your point about 0:03:51.840 --> 0:03:54.120 what's happened to the housing market really speaks to the 0:03:54.120 --> 0:03:57.320 strength of the single family rental market. It's, uh, buying 0:03:57.360 --> 0:03:59.680 homes is really unaffordable right now. But if you can 0:03:59.680 --> 0:04:01.960 sort of rent the American dream, so to speak, through 0:04:02.000 --> 0:04:05.480 single family rentals, we think that's compelling population migrations to 0:04:05.560 --> 0:04:08.880 the Sunbelt are continuing to support multi family trends. Again, 0:04:09.000 --> 0:04:10.920 if you can't buy at home, you have to live somewhere. 0:04:11.440 --> 0:04:13.840 We do like data centers, um uh. And we like 0:04:13.920 --> 0:04:16.799 healthcare as well. On the other end of the spectrum, 0:04:17.200 --> 0:04:19.280 maybe sectors that were a little bit more cautious on, 0:04:19.480 --> 0:04:21.760 I would say, I would say first and foremost office sector. 0:04:21.920 --> 0:04:24.159 Maybe that doesn't come as too much of a surprise 0:04:24.240 --> 0:04:26.560 from from anyone, but as we figure out work from 0:04:26.560 --> 0:04:29.200 home trends and other trends, it is still a sector 0:04:29.279 --> 0:04:31.960 that's pressured, umh. And then hotels were a little bit 0:04:31.960 --> 0:04:34.719 more cautious on as well. So Rich, Caroline and I 0:04:34.800 --> 0:04:38.520 were asconced here in Bloomberg's headquarters in Midtown Manhattan, and 0:04:38.520 --> 0:04:41.320 as we yes in the office, thank you. And as 0:04:41.320 --> 0:04:44.080 we look around we see a lot of empty office 0:04:44.080 --> 0:04:48.160 buildings in midtown Manhattan. If I'm an office rate manager, 0:04:48.400 --> 0:04:51.479 what do I do? I mean, it's not just New 0:04:51.560 --> 0:04:54.560 York at San Francisco, it's other major markets. Is there 0:04:54.600 --> 0:04:58.200 a solution? Yeah, So let me make a couple of comments. 0:04:58.240 --> 0:05:00.839 First and foremost, I think we paint office with maybe 0:05:00.880 --> 0:05:03.640 too big of a proof, too broad of a brush new, 0:05:03.680 --> 0:05:06.599 clean and green office we think is very well positioned, 0:05:06.640 --> 0:05:08.720 and I think you can probably look outside your headquarters 0:05:08.720 --> 0:05:10.800 and see that some of the newer buildings are doing 0:05:10.880 --> 0:05:14.799 quite well. We think, um uh it's called suburban office 0:05:15.160 --> 0:05:17.400 is well positioned, particularly in the sun Belt. But where 0:05:17.440 --> 0:05:19.480 there's really much more of a challenge is Class B 0:05:19.600 --> 0:05:22.240 and C office properties. Those are properties that will built 0:05:22.240 --> 0:05:24.360 in the nineteen seventies of the nineteen eighties, and there 0:05:24.360 --> 0:05:26.760 hasn't been a lot of money put into them. So 0:05:26.800 --> 0:05:28.320 what do you have to do. But you have to 0:05:28.560 --> 0:05:31.400 find a way to reposition them, redevelop them. Uh, there's 0:05:31.440 --> 0:05:33.720 not an easy, one fit all solution. We've started to 0:05:33.760 --> 0:05:37.000 see some friends of redeveloping them into multi family properties, 0:05:37.200 --> 0:05:38.880 but I think it's going to take down a little 0:05:38.880 --> 0:05:41.839 bit of a combination for entrepreneurs coming in, existing owners 0:05:41.920 --> 0:05:44.680 working together to find a solution. The easiest one that 0:05:44.720 --> 0:05:47.440 people are talking about is redeveloping them in a multifamily 0:05:48.000 --> 0:05:53.200 um like. That's that's not easy, very very very hard. 0:05:53.480 --> 0:05:56.760 The good news is the land underneath most of these properties, 0:05:56.800 --> 0:05:59.720 particularly in New York City San Francisco, is pretty valuable, 0:06:00.120 --> 0:06:02.120 So I do think we'll find a solution, but it's 0:06:02.160 --> 0:06:04.800 really a question of where's the net operating income growth growing? 0:06:04.839 --> 0:06:07.159 How much capexs do you have to spend? Uh, And 0:06:07.279 --> 0:06:09.760 that's why the sector continues to be under pressure. Rich, 0:06:10.160 --> 0:06:12.600 I'm kind of interesting. Also, you didn't just mention offices 0:06:12.680 --> 0:06:14.800 that we've prided you with, but also the hotel sector. 0:06:14.839 --> 0:06:18.960 Why are you worried about the hotel sector? Yeah? Look, um, 0:06:19.040 --> 0:06:21.400 I think there. I think the easy solution is that 0:06:22.040 --> 0:06:24.599 maybe travel is coming down from peak levels that we 0:06:24.640 --> 0:06:28.600 saw in two thousand and twenty one two two. Um. Yes, 0:06:28.600 --> 0:06:31.200 business travels coming back up. But one of the major 0:06:31.320 --> 0:06:33.279 issues that I don't think a lot of people maybe 0:06:33.880 --> 0:06:37.200 unpack enough is how much labor costs are rising. Um uh. 0:06:37.279 --> 0:06:39.280 And to run a hotel it is it does require 0:06:39.279 --> 0:06:41.040 a lot of labor. So that's one of the things 0:06:41.120 --> 0:06:43.640 that keeps us maybe a little bit more on the sidelines. 0:06:43.920 --> 0:06:47.000 Growth is beginning to slow. That's pressuring revenue at a 0:06:47.080 --> 0:06:50.200 time that expenses and labor costs are going up. Hey, Rich, 0:06:50.320 --> 0:06:52.640 As I drive down to the Jersey Shore on the 0:06:52.680 --> 0:06:57.360 Parkway or the term Pike, I see tons and tons 0:06:57.480 --> 0:07:00.000 of you know, just kind of warehouse space. I'm guests 0:07:00.000 --> 0:07:01.880 sing it's all Amazon dot Com and all that kind 0:07:01.880 --> 0:07:04.919 of stuff. Is that business overbuilt? Is that still a 0:07:04.960 --> 0:07:10.040 good growth story? Um Uh, Some aspects of of industrial 0:07:10.120 --> 0:07:12.200 are still a very very good growth story. I think 0:07:12.200 --> 0:07:15.640 if you can find infill locations, um that are new 0:07:15.680 --> 0:07:18.800 properties that's very well positioned. But look, there has been 0:07:18.800 --> 0:07:21.040 a significant amount of supply that has come in the 0:07:21.360 --> 0:07:24.520 logistics space, the warehouse space over the past call it 0:07:24.560 --> 0:07:27.040 five to ten years, and so if you own an 0:07:27.040 --> 0:07:30.679 older property in a high supply market, that the growth 0:07:30.760 --> 0:07:32.720 is probably going to slow. Um. So it is not 0:07:32.760 --> 0:07:35.920 a one size fits all market anymore. We're still very 0:07:35.960 --> 0:07:39.920 bullish on the call it the high growth, high barriers 0:07:39.920 --> 0:07:43.120 to entry infil locations, and I think investors should be 0:07:43.160 --> 0:07:46.600 aware that that maybe some of the older properties and 0:07:46.680 --> 0:07:49.160 not well positioned markets with high supply, those could fit 0:07:49.280 --> 0:07:52.160 based on growth type challengers. Rich, I'm looking at your 0:07:52.440 --> 0:07:55.480 eight four billion dollars firm wide assets and management. That's 0:07:55.520 --> 0:07:57.960 not just us, is it? Because we're a global network. 0:07:57.960 --> 0:08:00.200 We've got European audience with us at the moment as 0:08:00.200 --> 0:08:02.120 well as or maybe some Asian few are staying up 0:08:02.120 --> 0:08:04.640 pretty late. Talk to us about why you're thinking globally 0:08:05.040 --> 0:08:09.280 is attractive in rates. Yeah, yeah, Well, look, I would 0:08:09.280 --> 0:08:11.920 say we think the best opportunities are certainly in the 0:08:11.960 --> 0:08:14.320 United States right now. But as you start to think 0:08:14.360 --> 0:08:16.800 about other opportunities, whether it be uh and some of 0:08:16.840 --> 0:08:18.920 the Chinese locations that are beginning to open up, I 0:08:18.920 --> 0:08:21.360 think that's interesting. Some of the major markets in Europe 0:08:21.360 --> 0:08:23.560 are interesting, but I think we do see the best 0:08:23.600 --> 0:08:26.240 value in the United States right now. Hey, rich, Let's 0:08:26.240 --> 0:08:28.680 say I'm an entrepreneur in the real estate business. I 0:08:28.680 --> 0:08:30.600 want to go buy one of those empty office towers 0:08:30.600 --> 0:08:33.120 in Midtown Manhattan. Where do I get the money? Do 0:08:33.200 --> 0:08:38.439 I go over to JP Morgan and borrow some money? Yeah? Uh, 0:08:38.600 --> 0:08:41.600 So you're you're asking a really interesting question. The debt 0:08:41.679 --> 0:08:45.440 markets are I would say, um, not frozen by any 0:08:45.440 --> 0:08:48.400 means um, but they're not. They're not wide open. I 0:08:48.720 --> 0:08:51.600 do think there is capital debt capital available for a 0:08:51.679 --> 0:08:56.080 high for a high quality property with a well, well, uh, well, 0:08:56.520 --> 0:08:59.600 a good sponsor. But there's also a tremendous amount of 0:08:59.600 --> 0:09:02.079 money on sidelines that's been raised not yet deployed in 0:09:02.120 --> 0:09:05.600 commercial real estate. Around three hundred billion maybe that's about 0:09:05.600 --> 0:09:08.440 a call it nine hundred billion, A trillion dollars of 0:09:08.440 --> 0:09:10.760 buying power once you put some leverage on it. Um. 0:09:10.800 --> 0:09:13.839 So the debt markets are there. Um, they're not wide open. 0:09:14.000 --> 0:09:16.200 Easy money has been gone. But I think it's a 0:09:16.240 --> 0:09:19.880 combination of U finding a cheap debt capital where you 0:09:19.960 --> 0:09:21.720 can find it, and cheap is all on a relative 0:09:21.760 --> 0:09:24.280 basis at this point, plus some additional equity from the 0:09:24.320 --> 0:09:26.880 amount of money on the sidelines. So UM. I think 0:09:26.960 --> 0:09:28.960 lenders are being much more selective right now than they 0:09:28.960 --> 0:09:31.360 have been in the past. They're being very focused on 0:09:31.360 --> 0:09:34.200 what property types they lend to, but more importantly making 0:09:34.240 --> 0:09:36.599 sure that the sponsor is well capitalized. All right, So 0:09:36.720 --> 0:09:41.400 my lunch break, I'll walk over to the local, yeah, 0:09:41.520 --> 0:09:42.960 private bank, or see if I can raise some money 0:09:42.960 --> 0:09:45.559 here and go buy a midten Manhattan skyscraper. Rich Hill 0:09:45.559 --> 0:09:48.199 ahead of real Estate Strategy and Research at Cohen and 0:09:48.240 --> 0:09:51.319 Steers again eighty four billion with a B assets under management. 0:09:51.320 --> 0:09:53.080 They know what they're doing in the in the reach space, 0:09:53.080 --> 0:09:57.880 so we love to check in with them. A lot 0:09:57.880 --> 0:10:00.600 of people are just saying I'm looking for I cannot 0:10:00.640 --> 0:10:02.760 afford to look back. It was an ugly year. I 0:10:02.800 --> 0:10:05.479 want to look forward to and see what the opportunities 0:10:05.559 --> 0:10:09.880 might be bringing Kim Forest Boca Capital Partners, uh founder 0:10:09.960 --> 0:10:13.560 and c I O Kim again. I think a lot 0:10:13.600 --> 0:10:15.560 of investors are like me when they just say, uh, 0:10:16.720 --> 0:10:19.719 in my rearview mirror, I'm looking ahead here. How are 0:10:19.760 --> 0:10:23.240 you viewing here? After what was just a brutal year 0:10:23.280 --> 0:10:27.199 in stocks and bonds? Sure? Well, I mean it was 0:10:27.240 --> 0:10:31.319 a remarkable year, We'll give you that, right, And especially 0:10:31.520 --> 0:10:36.400 if you had any of the former Fang stocks they 0:10:36.400 --> 0:10:40.319 did not do well, or if you were into technology, 0:10:40.440 --> 0:10:45.000 especially semiconductors. These are areas that just have gotten hit. 0:10:45.400 --> 0:10:48.480 And that's for many reasons, but mostly at least here 0:10:48.480 --> 0:10:50.920 in the US, it's because of the FEDS quick rais 0:10:51.600 --> 0:10:54.280 So I guess COVID makes you do things quickly. Your 0:10:54.400 --> 0:10:58.040 last segment talked about China opening quickly when we tried 0:10:58.120 --> 0:11:01.720 to get a handle on inflation, and any kind of 0:11:01.760 --> 0:11:06.520 growth oriented stocks just got killed. But should you care? 0:11:06.880 --> 0:11:10.439 Should you care if you need the money this year? Yeah, 0:11:10.440 --> 0:11:12.760 and you had to and you were forced to sell. Yeah, 0:11:12.760 --> 0:11:15.559 you probably do care, but you really shouldn't if you're 0:11:15.600 --> 0:11:19.800 a long term investor, because we know growth will come 0:11:19.840 --> 0:11:23.160 back at some point, and computers really aren't a fad, 0:11:23.200 --> 0:11:27.360 and semiconductors are going to be something that companies turn 0:11:27.440 --> 0:11:31.040 to in the future to give them enhanced productivity. And 0:11:31.080 --> 0:11:37.240 people find UM computers entertaining too, so it's not end 0:11:37.360 --> 0:11:42.280 game for technology. Kim though, dovetailing those two ideas the FED, 0:11:42.320 --> 0:11:44.679 but also China. An awful lot of what hit the 0:11:44.679 --> 0:11:48.120 semiconductor industry was geopolitics. Was the tension between China and 0:11:48.160 --> 0:11:49.920 the US. The fact that you know, an awful lot 0:11:49.920 --> 0:11:52.080 of business colpi downe between the two. Now, how are 0:11:52.080 --> 0:11:56.160 you looking towards that as well? Well? I think it 0:11:56.280 --> 0:11:59.959 was the natural outcome, not necessarily the disagreement between China 0:12:00.520 --> 0:12:03.640 and UH, the US. But I think a lot of 0:12:03.840 --> 0:12:08.000 companies are rethinking their supply chain, and I don't know 0:12:08.120 --> 0:12:10.720 that everything's going to end up in the US. I 0:12:10.760 --> 0:12:15.520 think it's really smart to make a more distributed supply 0:12:15.679 --> 0:12:20.360 chain because what happens if a continent does UM get 0:12:20.400 --> 0:12:26.679 shut down for whatever reason geopolitical disagreement, UM, you know, UH, 0:12:27.040 --> 0:12:29.880 I don't know, a large earthquake. I mean, it just 0:12:29.920 --> 0:12:33.600 seems crazy to have a whole lot of manufacturing in 0:12:33.679 --> 0:12:37.160 one and only one spot in the world. Hey, Kim, 0:12:37.160 --> 0:12:41.560 you know, really since the Great Financial Crisis, technology has 0:12:41.679 --> 0:12:45.040 really led the market Fang stocks, for example, but just 0:12:45.120 --> 0:12:48.360 big tech in general has led the market both up 0:12:48.400 --> 0:12:52.360 and down since a you know, two nine. There's a 0:12:52.440 --> 0:12:55.439 concern here that as maybe this market begins to take off, 0:12:55.440 --> 0:12:58.439 maybe in the back calf of that that might not 0:12:58.520 --> 0:13:01.199 be the case. How do you think about big tech 0:13:01.280 --> 0:13:05.880 and its leadership role? Sure, well, I think a couple 0:13:05.920 --> 0:13:10.240 of things. First of all, UM, the low interest rate 0:13:10.320 --> 0:13:12.880 environment that we find ourselves in the world, not just 0:13:12.920 --> 0:13:15.920 in the US, but in the world, really has driven 0:13:16.360 --> 0:13:20.160 growth companies. And by that I mean companies that traditionally 0:13:20.200 --> 0:13:22.880 didn't have to have a super strong balance sheet, were 0:13:22.960 --> 0:13:26.480 newer in the marketplace, and people were buying them on 0:13:26.559 --> 0:13:29.600 the prospect that they would one day grow into their 0:13:30.040 --> 0:13:33.320 valuation right that the cash flow would keep catch up. 0:13:33.920 --> 0:13:36.920 But a lot of these companies now are big enough 0:13:36.960 --> 0:13:41.640 to actually have profitable cash flow UM, and I think 0:13:41.760 --> 0:13:45.520 some of them will come back because they've done great 0:13:45.559 --> 0:13:49.600 convincing customers to use them, like I don't know, Amazon, 0:13:50.200 --> 0:13:54.679 But others will probably never reach that peak because people 0:13:54.720 --> 0:13:58.760 have moved on. UM. Technology is best looked at, in 0:13:58.800 --> 0:14:03.000 my opinion, as a product of item, right, that increases productivity. 0:14:03.280 --> 0:14:07.920 It's hard to understand what will catch anybody's imagination online. 0:14:08.120 --> 0:14:11.440 It just is the metaverse, right yeah, I mean, well, 0:14:11.520 --> 0:14:13.720 well we could go down the metaverse discussion for a 0:14:13.720 --> 0:14:16.000 long time. I quickly want to really on the news 0:14:16.080 --> 0:14:19.120 has been well, the pressure that's been felt by another 0:14:19.200 --> 0:14:21.200 key celic and Valley leader and indeed want to move 0:14:21.200 --> 0:14:23.760 to Austin and has perhaps been more distracted by social 0:14:23.760 --> 0:14:26.960 media than perhaps his car company. Talked us about Tesla 0:14:27.040 --> 0:14:28.560 and about whether you've been keeping an eye on that 0:14:28.600 --> 0:14:30.760 stock at tool we actually finally get a reprieve after 0:14:30.800 --> 0:14:33.160 seven days of selling, which was the longest dressing streak 0:14:33.200 --> 0:14:37.760 since sure. I mean Elon Musk is one of the 0:14:37.800 --> 0:14:41.440 most fascinating, fascinating people on Earth, right, Like, let's just 0:14:41.960 --> 0:14:45.000 shortcut that he's in space, he's in the next wave 0:14:45.040 --> 0:14:48.760 of cars, and now he is turning his attention towards Twitter. 0:14:49.320 --> 0:14:50.920 And I don't think we're going to be able to 0:14:51.080 --> 0:14:54.800 escape that. But it is a concern for Tesla. Are 0:14:54.840 --> 0:14:57.800 they a car company or are they a technology company? 0:14:57.880 --> 0:15:00.160 And I would say the valuation has to refer like 0:15:00.440 --> 0:15:05.440 whatever it is that you believe, Um, I personally think 0:15:05.480 --> 0:15:09.480 that it will come back that whatever he's doing politically 0:15:09.800 --> 0:15:13.440 through Twitter is tarnishing his image and causing a lot 0:15:13.480 --> 0:15:16.200 of people not to want to buyas cars. But also 0:15:16.320 --> 0:15:19.080 the US, as you mentioned, is kind of in a 0:15:19.120 --> 0:15:22.760 contentious space with China, and a lot of his revenue 0:15:22.920 --> 0:15:25.680 has come from that, and it looks like that tiff 0:15:25.760 --> 0:15:30.240 between the US is affecting um Tesla as well. I 0:15:30.280 --> 0:15:33.480 wouldn't look for a quick rebound, but I wouldn't count 0:15:33.520 --> 0:15:36.600 them out either. Always great to have some time if you, Kim, 0:15:36.640 --> 0:15:38.880 you go back when you're looking at the software and 0:15:39.040 --> 0:15:41.360 tech Stalks were number two software analysts back at the 0:15:41.360 --> 0:15:43.240 Wall Street Journal's Best on the Street ranking back in 0:15:43.560 --> 0:15:46.280 two too, So looking at the space a while good, 0:15:46.800 --> 0:15:49.040 much the most history in the space, as you Paul, 0:15:49.120 --> 0:15:51.160 thank you so much. Always great to have Kim Forest 0:15:51.680 --> 0:16:00.000 Capital Partners founder and CIO talking about the record outputs 0:16:00.160 --> 0:16:01.960 that we saw in the top Us gas basin, in 0:16:01.960 --> 0:16:04.400 particular how that antagonized a lot of the power cat 0:16:04.800 --> 0:16:07.520 chaos that we saw throughout the Christmas period deadly winter 0:16:07.560 --> 0:16:10.320 storm as well, really perhaps exposing some of the flaws, 0:16:10.360 --> 0:16:12.480 whether it be the infrastructure, whether it be the provision 0:16:12.520 --> 0:16:15.440 of energy here in the United States. And well, one 0:16:15.440 --> 0:16:17.240 man that might well have been exposed to an awful 0:16:17.280 --> 0:16:19.480 lot of what's just been occurring is one at Toby 0:16:19.560 --> 0:16:22.600 Rice's presidency of EQT, one of the largest natural gas 0:16:22.600 --> 0:16:25.600 producers here in the country. And Toby, we know, and 0:16:25.640 --> 0:16:28.520 you've come on Bloomberg TV and Radio before to really 0:16:28.560 --> 0:16:30.800 discuss the fact that you feel more infrastructure is needed, 0:16:30.800 --> 0:16:33.240 particularly the pipeline side of things. But let's just take 0:16:33.280 --> 0:16:36.560 a step back. During this period, we've just seen wells freeze, 0:16:36.600 --> 0:16:40.720 pipelines fail, we've seen gas pipe supplies therefore completely plunged, 0:16:40.760 --> 0:16:45.200 and course this driving up prices. How was EQT hit 0:16:45.320 --> 0:16:48.760 in the last few days. Well, what we've seen across 0:16:48.760 --> 0:16:54.560 the country is natural gas production fell about ten due 0:16:54.600 --> 0:16:58.080 to these freeze offs, which is which is normal. UM 0:16:58.080 --> 0:17:02.080 in the industry responds very quickly. One thing I would note, though, 0:17:02.640 --> 0:17:05.280 is that the reliability of natural gas and the share 0:17:05.280 --> 0:17:09.359 of power generation natural gas performs in the cold weather 0:17:10.040 --> 0:17:13.760 and specifically compared to renewables where they just don't show up. 0:17:13.800 --> 0:17:17.520 So thank thank goodness that we've got UM natural gas 0:17:17.600 --> 0:17:20.680 flowing and keeping the lights. It didn't but it didn't float. 0:17:20.760 --> 0:17:22.959 I mean to be perfectly frank, it also frows their 0:17:23.000 --> 0:17:25.840 work and can you know, freeze off how are common 0:17:25.840 --> 0:17:27.800 as you say, they're normal, But I'm interested to be 0:17:27.840 --> 0:17:31.480 how you particularly were affected, How was EQT particularly affected? 0:17:31.480 --> 0:17:34.200 Were you benefiting this this situation, did you have wells 0:17:34.240 --> 0:17:38.800 freeze what? What was your experience? Yeah, So in Appalachia, UM, 0:17:38.880 --> 0:17:42.800 we saw about about four bcf a day, which is 0:17:42.840 --> 0:17:45.320 a little bit over ten percent of our production for 0:17:45.359 --> 0:17:47.960 the base on EQT specifically was around one to one 0:17:47.960 --> 0:17:50.920 and a half bcf a day freasons. UM. Those issues 0:17:50.960 --> 0:17:53.240 are going are scheduled to be resolved by you know, 0:17:53.280 --> 0:17:55.560 the next couple of days. Uh. This is all part 0:17:55.600 --> 0:17:58.359 of the winterization preparation plans that we were able to 0:17:58.359 --> 0:18:03.400 put out. UM. But you know clearly the solution here 0:18:03.440 --> 0:18:06.320 is to produce more natural gas and have a greater abundance. 0:18:06.680 --> 0:18:08.080 And the key for us to be able to do 0:18:08.119 --> 0:18:10.399 that so that we can have some cushion in the 0:18:10.440 --> 0:18:13.480 systems when things do hit, like whether we know what's 0:18:13.480 --> 0:18:15.600 going to show up every year. The key is to 0:18:15.880 --> 0:18:18.280 is to get more natural gas production, and we need 0:18:18.320 --> 0:18:21.600 more pipeline infrastructure so that we can create the industrial 0:18:21.640 --> 0:18:25.440 capacity that this country needs to run, because what you're 0:18:25.440 --> 0:18:28.880 seeing across the board is our industry is pretty much 0:18:28.920 --> 0:18:33.159 redlining the limited infrastructure that we have right now, and 0:18:33.200 --> 0:18:37.560 that's really making performance absolutely critical. It would be great 0:18:37.600 --> 0:18:39.879 if we could have some some relief, and that relief 0:18:39.920 --> 0:18:43.000 will come from building more pipeline infrastructure, all right, So, Toby, 0:18:43.040 --> 0:18:45.600 in addition to building more capacity, there are a lot 0:18:45.640 --> 0:18:48.359 of folks saying more investment needs to be done to 0:18:48.400 --> 0:18:52.960 improve the weatherization of the existing infrastructure if we assume 0:18:53.040 --> 0:18:55.840 that we're going to have more extreme weather events going forward, 0:18:55.880 --> 0:18:58.680 so it's not just more production, but it's better more 0:18:58.840 --> 0:19:04.360 robust suction and infrastructure. How do you respond to that, Well, 0:19:04.400 --> 0:19:06.719 I think the I think you can look at places 0:19:06.760 --> 0:19:09.160 like New England, which is a really great example of 0:19:09.640 --> 0:19:12.160 the shortfalls that we have with our energy systems here 0:19:12.200 --> 0:19:15.920 in America. You know, we have the biggest gas field 0:19:15.920 --> 0:19:19.040 in the world, literally a couple hundred miles away from 0:19:19.040 --> 0:19:22.159 New England. But they are burning, you know, oil to 0:19:22.280 --> 0:19:25.560 generate their electricity. About thirty percent of their electricity past 0:19:25.600 --> 0:19:29.639 few days has come from oil um and only of 0:19:29.640 --> 0:19:32.120 that electricity is coming from natural gas. The solution there 0:19:32.520 --> 0:19:34.800 is very simple. It's build more pipeline infrastructure so we 0:19:34.800 --> 0:19:38.840 can connect you know, are low costs, very responsibly produced 0:19:38.920 --> 0:19:43.399 natural gas with the demand centers, and you see the 0:19:43.480 --> 0:19:46.400 lack of infrastructure is the reason why you have prices 0:19:46.720 --> 0:19:49.040 in different parts of the country like New England, where 0:19:49.080 --> 0:19:51.840 their energy prices are going to be over twenty dollars 0:19:51.840 --> 0:19:54.440 this winter, and we'll be selling that same gas here 0:19:54.440 --> 0:19:57.800 in Appalachia for a cost of five dollars um. These 0:19:57.840 --> 0:19:59.960 are the really remarkable things. If you want to focus 0:20:00.040 --> 0:20:03.640 on correcting the issue, it's getting more pipeline infrastructure, and 0:20:03.760 --> 0:20:06.120 this industry will continue to find ways to make our 0:20:06.200 --> 0:20:09.680 energy that we produce more reliable through the winterization efforts 0:20:09.720 --> 0:20:12.439 that are largely already in place. All Right, Given the 0:20:12.480 --> 0:20:15.320 pipeline issue is an ongoing issue we see with between 0:20:15.320 --> 0:20:19.120 the government and industry and the marketplace in general, give 0:20:19.200 --> 0:20:21.760 us a sense where we are now to be with 0:20:22.000 --> 0:20:25.080 that argument. Here is there a better Do you have 0:20:25.119 --> 0:20:27.920 a better platform to go to certain regulators in certain 0:20:27.960 --> 0:20:33.040 states to say we really need more investment here. Here's 0:20:33.080 --> 0:20:37.080 what's changed with the conversation in um you know, the 0:20:37.840 --> 0:20:41.720 heading into two. The when people think about energy, the 0:20:41.800 --> 0:20:43.800 number one thing that people are thinking about is the 0:20:43.840 --> 0:20:47.119 impact on emissions UM. You know, EQT we put on 0:20:47.200 --> 0:20:50.280 our plan to Unleash us Energy, which will be the 0:20:50.280 --> 0:20:54.200 biggest green initiative on the planet. But what has really 0:20:54.240 --> 0:20:58.080 shown us is that energy security is absolutely critical, just 0:20:58.280 --> 0:21:00.560 as important. And you can look at what is happening 0:21:00.880 --> 0:21:03.280 in Europe as an example of what happens when energy 0:21:03.320 --> 0:21:11.040