Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am
Speaker 1: easterne on Apple, Coarclay, and Android Auto with the Bloomberg
Speaker 1: Business App. Listen on demand wherever you get your podcasts,
Speaker 1: or watch us live on YouTube.
Speaker 2: Let's switch gears to the housing market. Lenar, one of
Speaker 2: the big home builders out there, reported some numbers. We're
Speaker 2: going to break that down and get a better sense
Speaker 2: of what's happening out there in the US housing market.
Speaker 2: To do that, we check with Drew Reddink. He covers
Speaker 2: all the housing stuff for Bloomberg Intelligence. He's safely asconced
Speaker 2: down there in Princeton, New Jersey. You forgot that there's
Speaker 2: a train into New York City from Princeton, but we'll
Speaker 2: get to that later. Drew, talk to us about Leonar.
Speaker 2: What did you hear from our folks there.
Speaker 3: Yeah, it was a pretty tough quarter for Lenar. Orders
Speaker 3: were actually pretty solid there of twelve percent from last year.
Speaker 3: But what management said is that they can see continued
Speaker 3: pressure in the house market and that they had increased
Speaker 3: their use of sales incentives to drive traffic and demand.
Speaker 3: Now for a little bit of context last quarter, and
Speaker 3: we'll wait to see how three Q ultimately shapes out.
Speaker 3: But last quarter, incentives represented thirteen percent of the average
Speaker 3: selling price at home. By comparison, in a normal market
Speaker 3: that's about five to six percent, and some of the
Speaker 3: most important markets Florida, Texas, it's as high as seventeen
Speaker 3: to eighteen percent. So you could see, you know, just
Speaker 3: the extent of how much they're having incentivized to drive
Speaker 3: traffic through the doors, and we saw that ultimately play
Speaker 3: out in the results. Their average order price is down
Speaker 3: about twelve percent, and their guidance for next year, I
Speaker 3: excuse me for four Q was a little soft on
Speaker 3: the orders and delivery side of the business. Now, if
Speaker 3: Lenard comes out and tells us that they intentionally pull
Speaker 3: are intentionally pulling back on deliveries because they think they
Speaker 3: could capture some margin upside, I think that could be
Speaker 3: well received. But at the same time, their four Q
Speaker 3: margin guide is still weaker than ex So they did
Speaker 3: say they have some optimism with rates coming down in
Speaker 3: the FED cutting rates, but we'll be listening on the
Speaker 3: call to see if that's actually materializing.
Speaker 4: So, Drew, do you see this as isolated to Lenar
Speaker 4: or a broader theme here in the housing market. I mean,
Speaker 4: of course, we have luxury home builder Toll Brothers reporting
Speaker 4: about a month ago today.
Speaker 3: Yeah, so Lenar is a little bit of a different
Speaker 3: animal within the public space. You have to remember, they're
Speaker 3: primarily focused on driving higher sales volumes, and what they've
Speaker 3: said consistently over the last couple of years is that
Speaker 3: they're willing to sacrifice gross margin to drive volumes. So
Speaker 3: when you see a weakness in demand for Lenar, you're
Speaker 3: going to see it show up primarily in their gross margin.
Speaker 3: That being said, the issues that they're facing are really
Speaker 3: across the spectrum. I mean, no builder can get away
Speaker 3: from the fact that affordability continues to hover near the
Speaker 3: lowest levels of all time. I think that the recent
Speaker 3: pullback in rates will help a little bit, but in
Speaker 3: terms of it being you know, the silver bowl for
Speaker 3: the broader housing market and getting us back to normalized
Speaker 3: levels of demand, you know, I think I think there's
Speaker 3: other factors at play that prevent that from happening immediately.
Speaker 4: So drew rates remain incredibly high, especially for the average
Speaker 4: home buyers. So what do you make of the fact
Speaker 4: that the S one to five home The index at
Speaker 4: tract home builders is up thirteen percent.
Speaker 2: You're today, Yeah, great question.
Speaker 3: And if you look at how the stocks have behaved
Speaker 3: really since mid June, they're up over thirty percent, and
Speaker 3: that was really the stocks moving in anticipation of rates
Speaker 3: coming down. In the FED cutting rates, you could also
Speaker 3: see that and how mortgage rates have responded. They moved
Speaker 3: up ahead of the rate cut, and if you look
Speaker 3: at where rates are today, actually they're up twenty five
Speaker 3: basis points since the FED cut. It's kind of reminiscent
Speaker 3: of the last time they cut when rates, you know,
Speaker 3: rallied pretty low ahead of the rate cut and then
Speaker 3: after that actually came in, you saw rates move back higher.
Speaker 3: So I certainly think that, you know, builder stocks are
Speaker 3: always going to react to rates. The group right now
Speaker 3: is trading at about one point nine times book. There's
Speaker 3: an old rule of thumb in the industry that you
Speaker 3: buy the builders at one one times, you sell them
Speaker 3: at two times. Certainly, there have been cases where they've
Speaker 3: traded outside those ranges over the last twenty years or so,
Speaker 3: but what has been pretty consistent is that once they
Speaker 3: get to that kind of two point two to and
Speaker 3: a quarter times book, there has been resistance from evaluation perspective,
Speaker 3: so it's something to keep an eye on.
Speaker 2: Drew talk to us about the existing home market today.
Speaker 2: How's that is? Are people that are sitting on their homes?
Speaker 2: Are they any incentive to get out?
Speaker 3: Yeah? Great question. I mean, the existing home market is
Speaker 3: still pretty much frozen. Volumes are twenty to twenty five
Speaker 3: percent below what would be considered normal, And you're right,
Speaker 3: the incentive just isn't there. You have, you know, fifty
Speaker 3: to seventy five percent of mortgages are below four and
Speaker 3: a half percent, So even as the headline rate comes
Speaker 3: down to six and a quarter, we're still talking about
Speaker 3: a pretty big delta. When you layer on top of
Speaker 3: that that, you know, it's not just the rate they're
Speaker 3: trading in, but home prices are up fifty percent from
Speaker 3: twenty nineteen. So when you look at the total cost
Speaker 3: of ownership, factoring in property taxes and higher insurance costs,
Speaker 3: that monthly payment is significantly higher.
Speaker 2: I mean, so, I mean, I'm going to speak for
Speaker 2: the normal lenders of the world, the Sebastians of the world.
Speaker 2: How are young people getting into the ownership these days?
Speaker 2: You get about thirty second Street to fix this problem
Speaker 2: for us.
Speaker 3: Yeah, a great question, and afraid to kick. Can't be
Speaker 3: fixed that quick. But what we're actually seeing is a
Speaker 3: significant shift towards the rental market. If you look at
Speaker 3: household formations over the last quarter, household growth was exclusively
Speaker 3: driven by renner occupied units. So it has become increasingly challenging,
Speaker 3: and we see that the rental market has been the beneficiary.
Speaker 2: I don't know, man, I mean, Sebastian Nora. I feel
Speaker 2: for you, guys. I don't know how the young folks
Speaker 2: today take forever are going to do it. If you're
Speaker 2: reading a home building analyst of Bloomberg Intelligence, thanks so
Speaker 2: much for joining us. He's down there in Prince of
Speaker 2: New Jersey again, Leonora fill the effects of kind of
Speaker 2: a little bit of a tougher market at their rates
Speaker 2: come down a little bit, but they're still, you know,
Speaker 2: higher than a lot of people want them to be.
Speaker 2: And still these new homebuilders have to, you know, supply
Speaker 2: a lot of incentives just to get people into the homes.
Speaker 2: So we'll stay on top of that. Stay with us.
Speaker 2: More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Applecarclay, and Android Auto
Speaker 1: with the Bloomberg Business app. Listen on demand wherever you
Speaker 1: get your podcasts, or watch us live on YouTube.
Speaker 2: So obviously some big news out there in Hollywood. ABC
Speaker 2: pulling Jimmy Kimmel's show, I guess indefinitely. I'm not sure
Speaker 2: what that means over some content that some folks found objectionable.
Speaker 2: And this feature the chairman of the FCC, the Federal
Speaker 2: Communications Commission, which is responsible for licensing television stations across
Speaker 2: the country, mister Brendan Carr playing a pretty big role,
Speaker 2: getting the support also of President Trump. Let's see how
Speaker 2: this plays out from a regultary perspective. Matthew Shechittenhelm, He's
Speaker 2: immediate litigation analyst for Bloomberg Intelligence. Matt talk to us
Speaker 2: about the role that the FCC and the chairman, mister Carr,
Speaker 2: are playing in what appears to be, I guess a
Speaker 2: free speech issue with the ABC television network.
Speaker 5: Yeah, that's right, Paul Win.
Speaker 6: When you saw Brendan Carr go on that podcast the
Speaker 6: other day, he was stressing the FCC's role as the
Speaker 6: regulator of the broadcast TV stations that are all across
Speaker 6: the country that have to get a license to carry
Speaker 6: their content, and the law says that they have to
Speaker 6: act in the public interest. And Brendan Carr has been
Speaker 6: taking a very aggressive approach to the meaning of what
Speaker 6: is in the public interest. We have a long history
Speaker 6: under that provision of the law goes back.
Speaker 5: To Nixon, the Reagan era.
Speaker 6: Historically, the FCC used to look at whether broadcasters were
Speaker 6: being fair or not and whether they were being balanced.
Speaker 6: They've largely gotten out of that business. Brendan Carr seems
Speaker 6: to be reinvigorating the push to get into broadcast content
Speaker 6: decisions that you know, and and so this was a
Speaker 6: threat to Disney that this is this is potentially a
Speaker 6: distortion of the news by broadcasting these comments on on
Speaker 6: on Jimmy Kimmel's show that sort of triggered action first
Speaker 6: from smaller companies Next Star and Sinclair, and then Disney
Speaker 6: followed along.
Speaker 4: So, I know you mentioned that the FCC likely couldn't
Speaker 4: have found a news distortion violation by Disney or any
Speaker 4: of the other broadcasters based specifically on Kimmel's comments. Do
Speaker 4: you mind expanding a bit there?
Speaker 6: Yeah, so I'm really skeptical that that would have gone anywhere.
Speaker 6: That the FCC's news distortion rule is extremely narrow. First
Speaker 6: of all, it applies to news. Uh, there's there's a
Speaker 6: direct FCC decision that says, look, we're not going to
Speaker 6: apply this to an entertainment program. And then even with
Speaker 6: respect to news, it's very limited to the FCC needs
Speaker 6: to see evidence that management of the station knew what
Speaker 6: it was saying was false and ran the story anyway. Otherwise,
Speaker 6: the FCC has said, look, we need to get out
Speaker 6: of the way of editorial decisions, leave breathing room for
Speaker 6: news to do their job. That's historically been the approach,
Speaker 6: and Brendan Carr is working against that precedent. What this
Speaker 6: was really about, though, is these companies need to stay
Speaker 6: in the good graces of the FCC. It's not so
Speaker 6: much the threat that the FCC is going to win
Speaker 6: on a case like this. These companies need the FCC
Speaker 6: to finish a couple rulemakings that are deregulating the whole sector,
Speaker 6: and so if the FCC asked them to do something,
Speaker 6: they have a strong incentive to do it because they
Speaker 6: want other actions from this FCC that will help their business.
Speaker 2: Does that partially explain to some degree the actions from
Speaker 2: Next Star, which is one of the largest owners of
Speaker 2: TV stations in the country, and they have a pending
Speaker 2: acquisition of Tegna, which is a TV broadcasting company that's
Speaker 2: in front of the FCC.
Speaker 5: Right now, that's exactly right.
Speaker 6: And so that's a six billion dollar deal, and it
Speaker 6: depends on the FCC easing a rule.
Speaker 5: Right now, there's an.
Speaker 6: FCC rule on the book that says you can only
Speaker 6: reach about thirty nine percent of US households. This deal
Speaker 6: would reach seventy percent or eighty percent of US households.
Speaker 6: They need the FCC not only to approve the deal,
Speaker 6: but to scrap that rule first.
Speaker 5: If they don't do that, the deal's going nowhere.
Speaker 6: And so when Brendan Carr goes on this podcast and
Speaker 6: says local stations, would you please do this? You saw
Speaker 6: an almost immediate response from Next Star and Sinclair, followed
Speaker 6: by a thank you from Brendan Carr.
Speaker 4: I mean, what's the likelihood of this deal being approved?
Speaker 4: I mean, of course that would be massive to have
Speaker 4: that amount of way ownership there.
Speaker 6: Yeah, all signals are that this deregulation will move ahead
Speaker 6: at the FCC. This has been a priority for Republicans
Speaker 6: in FCC circles for a long time, and I think
Speaker 6: it will advance. There is a very difficult legal question
Speaker 6: looming as to whether the FCC can change that thirty
Speaker 6: nine percent cap. There's a strong argument on the other
Speaker 6: side that Congress must do it, and I think we're
Speaker 6: going to have a tough court fight on exactly that issue.
Speaker 6: I think the FCC probably can win that fight, but
Speaker 6: it might depend on what court ends up hearing it,
Speaker 6: what set of three judges ends up hearing it first.
Speaker 2: All right, Matt, thanks so much for joining us. Appreciate
Speaker 2: it as always. Matt Chuttenholm, he's media litigation analyst. He's
Speaker 2: kind of really the litigation and the regulatory guye that
Speaker 2: we chat with when it comes to all things related
Speaker 2: to the media and the regulation of the media. And
Speaker 2: clearly this is a big issue for the ABC Television network,
Speaker 2: for Walt Disney in general, and of course other parties
Speaker 2: involved there, whether it be next to our Sinclaarence, some others.
Speaker 2: So we'll keep an eye on that, but it's certainly
Speaker 2: a big news, a big piece of news in the
Speaker 2: TV business. Stay with us. More from Bloomberg Intelligence coming
Speaker 2: up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Applecarclay, and Android Auto
Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
Speaker 1: get your podcasts, or watch us live on YouTube.
Speaker 2: All my personal take on energy and where we get
Speaker 2: energy going forward is I think we're just gonna need
Speaker 2: pretty much everything. If fossil fuels, guess oil and gas,
Speaker 2: the renewable stuff, the water, the wind, whatever, I think
Speaker 2: we're gonna need at all, and that includes nuclear as well.
Speaker 2: And I've been really fascinated by some of the new
Speaker 2: technologies in the nuclear I don't think we're talking about
Speaker 2: building a new three mile island or anything. But James Walker.
Speaker 2: He's the CEO and board member of a company called
Speaker 2: Nano Nuclear Energy. It is a publica traded company on Nasdaq.
Speaker 2: NNE is the ticker. He'sat there in Salt Lake Sea,
Speaker 2: the Utah, which I've been to a million times, but
Speaker 2: quite frankly, I just go to the airport and then
Speaker 2: I hop in a car and drive up to one.
Speaker 5: Of the ski resorts.
Speaker 2: That's my asied that's ideal assault. Like, James, thanks so
Speaker 2: much for joining us here. Talk to us about your
Speaker 2: company and kind of this whole technology around micro reactors.
Speaker 2: Talk to us of what that technology is and is
Speaker 2: it a thing.
Speaker 7: Sure, it's it's definitely a thing. It's it should be
Speaker 7: the next big thing because there's a there's a big
Speaker 7: sort of energy bottleneck coming in the country. There's huge
Speaker 7: energy demands reindustrialization, electrification, but also significant demands from the
Speaker 7: tech industry. They need gigawatts and gigawats of power and
Speaker 7: they need that a lot of the time to be
Speaker 7: off grid, to be co located with them and need
Speaker 7: to be output power consistently over decades, and like that's
Speaker 7: put them in bed with nuclear and that's it's kind
Speaker 7: of why there's this hot space at the moment in
Speaker 7: the nuclear industry and you're seeing so much investment go
Speaker 7: into it. The new the US is trying to build
Speaker 7: back nuclear infrastructure as fast as it can just to
Speaker 7: enable this sort of massive scale up of new clear power.
Speaker 7: So our company is obviously involved in that. We make
Speaker 7: advanced reactor systems. They're lots smaller than the conventional ones.
Speaker 7: But the idea here is that you can. You can
Speaker 7: maduce these things and sort of roll them out like
Speaker 7: products and deploy them and assemble them and output power anywhere.
Speaker 4: Meta, Amazon, Google, Microsoft, all these big names seem to
Speaker 4: be going nuclear. And in your own words, it seems
Speaker 4: as though we're in the middle of a nuclear renaissance.
Speaker 4: What do you make of this, in particular in regards
Speaker 4: to the tech sector.
Speaker 7: Well, I would say this is a pretty unprecedented time.
Speaker 7: Like previously with nuclear, everyone always thought of renaissance was
Speaker 7: coming with it because theoretically it should be the cheapest
Speaker 7: and easiest form of power in the world, but it
Speaker 7: never really came. But what's happened now is that it's say,
Speaker 7: for instance, if you're a big data center, if you
Speaker 7: are the Googles or the Microsoft's of the world, you
Speaker 7: need you need a lot of power. But even if
Speaker 7: you were to have all the gas and coal that
Speaker 7: you needed or with anything like that, you would still
Speaker 7: need to massively upgrade the national grid to a point
Speaker 7: where it could begin outputting the power that you require,
Speaker 7: and the infrastructure of costs that will be involved upgrading
Speaker 7: the grid might be five trillion dollars something like that.
Speaker 7: So they're not in the business of doing that, but
Speaker 7: they need the power. So with a with nuclear you
Speaker 7: don't need to be on the grid. You could be
Speaker 7: off grid and you could just build a reactor wherever
Speaker 7: you want and use a micro grid and then outlay
Speaker 7: the power through that system to a data center or
Speaker 7: an AI center, anything like that. So the tech industry
Speaker 7: has sort of settled on this as the solution, the
Speaker 7: long term solution. And then in the interim, you know,
Speaker 7: they'll yield do anything. It'll be geothermal, they'll use gas'll
Speaker 7: they'll use wind and solar as much as they can.
Speaker 7: But like in their long term strategy, they realize that
Speaker 7: for what they actually need, the large scale of it,
Speaker 7: nuclear is gonna have to be a major component, if
Speaker 7: not the largest, component of that solution.
Speaker 2: All right, your company, Nano nuclear Energy, it's got a
Speaker 2: market cap of one point eight billion. Stock is up
Speaker 2: three hundred percent of the trailing twelve months. It's up
Speaker 2: seventy three percent year to dat, it's up thirteen percent today.
Speaker 2: I think you sold some technology to somebody. I go
Speaker 2: to your P and L. You don't have a nickel
Speaker 2: of revenue. What is going on with your stock? Explain
Speaker 2: to me what the investment theme is out there in
Speaker 2: the marketplace for your company.
Speaker 7: It's it's the same with every advanced reactor company at
Speaker 7: the moment, they're all in the same boat. We're all
Speaker 7: building things. But the reason why Nano has particular interest
Speaker 7: is that we have construction projects already scheduled. We have
Speaker 7: a big project. They've been building the first the US's
Speaker 7: first microrector at the University of Illinois, and we actually
Speaker 7: should be building Canada's first microrector at the same time
Speaker 7: up at Chalk River on Canadian Nuclear Laboratory land. So
Speaker 7: there's huge interest in what we're doing, and so we're
Speaker 7: getting an enormous amount of support. And what the institutional
Speaker 7: investment is doing now is that they're hedging their bets.
Speaker 7: They know that nuclear is going to take off, and
Speaker 7: now they're beginning to bet on companies. And there's already
Speaker 7: a sort of a convergence of you know, in a
Speaker 7: hot sector, you'll have twenty companies come out of the woodwork,
Speaker 7: but already they're sort of being squeezed down to a
Speaker 7: handful of leading companies and we're one of them. And
Speaker 7: that's why you're seeing like this huge market interest in
Speaker 7: US because it's it's positioning. Everyone's positioning themselves for essentially
Speaker 7: the future.
Speaker 4: Well, we definitely touched on your stock performance. Here, tell
Speaker 4: me what sets you apart from your competitors though.
Speaker 7: So, I mean, we've kept things very simple. We know
Speaker 7: that the technology we're utilizing is going to work. High
Speaker 7: temperature gas reactors have been used for decades. All we're
Speaker 7: doing is scaling them down. But on top of that,
Speaker 7: we're actually utilizing a special form of fuel which eliminates
Speaker 7: the necessity the necessity to have all these redundant safety
Speaker 7: systems you can co locate with. If it was a
Speaker 7: data center in AI, you could be pressed right up
Speaker 7: against them. You could even be sited in the middle
Speaker 7: of a population center. There's no risk to anybody around
Speaker 7: you because the reactor has no chance of having a meltdown,
Speaker 7: and conventional civil nuclear power plant can. So it's a
Speaker 7: very different kind of tech and so and already more
Speaker 7: novel techs I think having a bit of a struggle, whereas,
Speaker 7: for instance, high temperature gas reactors that utilize try so
Speaker 7: that seems to be almost the most popular model amongst
Speaker 7: developers at the moment. And so we've got that, but
Speaker 7: our key One of our better strategies is that we've
Speaker 7: made a reactor as big as you can possibly make
Speaker 7: it and still move all the components by road, and
Speaker 7: that means we will be able to have factory level
Speaker 7: processes that just continuously manufacture these things. We can ship
Speaker 7: everything by road, assemble it there, and then we don't
Speaker 7: need to have big construction as big construction projects at
Speaker 7: the site itself with individual licensing processes. So we're simplifying
Speaker 7: things as much as we possibly can. That's why we've
Speaker 7: proven to be pretty popular.
Speaker 2: I'm just looking at kind of what's moving your stock here.
Speaker 2: I know that you guys recently signed a letter of
Speaker 2: intent for the proposed sale of its odin low pressure
Speaker 2: currant micro designed to Cambridge adam Or, a UK based
Speaker 2: company talked to us about that deal.
Speaker 7: So that we were streamlining the company. We have a
Speaker 7: reactor called the Kronos reactor. That's our that's our flagship product.
Speaker 7: That's the one we'll be building at University of Illinois
Speaker 7: and at Chalk River in Canada. And the other reactors
Speaker 7: that we were developing, like the low Key reactor and
Speaker 7: the Zeus reactor, they were also high temperature gas reactors.
Speaker 7: So the Odium reactor, it's a fantastic system, but we
Speaker 7: we let the team, the technical team take that on
Speaker 7: to develop themselves so we can concentrate fully on that
Speaker 7: Kronos reactor, so that that streamlining of the organization is
Speaker 7: obviously very important. We're scaling up very quickly, but we're
Speaker 7: going to need, you know, ninety five percent of our
Speaker 7: technical personnel working on this Kronos reactor. And when you're
Speaker 7: focused like that and building, you know, it does have
Speaker 7: a positive market influence.
Speaker 2: All right. James A is a former investment banker. I
Speaker 2: would say take advantage of the stock price and sell
Speaker 2: some stock, but I see you have been selling stock periodically,
Speaker 2: so good for you. Good source of capital here. James Walker,
Speaker 2: CEO on board matter of a Nano Nuclear Energy. It
Speaker 2: is a puply traded company NNE. I'm kind of one
Speaker 2: of those folks to say, I think nuclear has got
Speaker 2: to be part of the energy solution because all I
Speaker 2: hear from these data centers, there are gonna be tons
Speaker 2: and tons of energy going forward, and I guess nuclear
Speaker 2: is going to be a part of that to some extent.
Speaker 1: This is the Bloomberg Intelligence podcast available on Apple Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: ten am to noon Eastern on Bloomberg dot Com, the
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You
Speaker 1: can also watch us live every weekday on YouTube and
Speaker 1: always on the Bloomberg terminal