1
00:00:00,800 --> 00:00:04,040
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

2
00:00:04,040 --> 00:00:06,920
Speaker 1: my co host Matt Miller. Every business day we bring

3
00:00:06,960 --> 00:00:11,520
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

4
00:00:11,560 --> 00:00:15,600
Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast

5
00:00:15,560 --> 00:00:18,479
Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and

6
00:00:18,480 --> 00:00:21,320
Speaker 1: at Bloomberg dot com slash podcast. I want to bring

7
00:00:21,320 --> 00:00:24,480
Speaker 1: in Cole Smead as a president in portfolio manager Smead

8
00:00:24,520 --> 00:00:28,680
Speaker 1: Capital Management. Col thanks so much for joining us here.

9
00:00:28,720 --> 00:00:31,760
Speaker 1: I'd love to get your thoughts um from a value

10
00:00:32,120 --> 00:00:35,400
Speaker 1: investor perspective of this market right here. How are you

11
00:00:35,400 --> 00:00:38,080
Speaker 1: guys positioned here as we finished up the first quarter

12
00:00:38,159 --> 00:00:42,760
Speaker 1: of well, thanks for having me, Paul, Uh. This is

13
00:00:42,840 --> 00:00:44,519
Speaker 1: just quite a fun world to be living in, to

14
00:00:44,600 --> 00:00:48,960
Speaker 1: be downright honest for investors like us. Where As you

15
00:00:49,040 --> 00:00:51,560
Speaker 1: pointed out, the dynamics of the oil market have people

16
00:00:51,760 --> 00:00:54,560
Speaker 1: really caught off guard and and on the wrong foot.

17
00:00:55,080 --> 00:00:57,800
Speaker 1: And at the same time, we have Warren Buffett out

18
00:00:57,800 --> 00:01:01,639
Speaker 1: there being as aggressive as he ever is in an

19
00:01:01,640 --> 00:01:05,560
Speaker 1: open market common stock investment decision like he's doing with

20
00:01:05,560 --> 00:01:10,600
Speaker 1: Oxidal Petroleum, and we feel great about that because we

21
00:01:10,680 --> 00:01:13,840
Speaker 1: have lower cost basis, and we agree with everything he's seeing.

22
00:01:14,040 --> 00:01:16,720
Speaker 1: I think the big difference though, is two years ago

23
00:01:16,880 --> 00:01:19,800
Speaker 1: investors had to look directly into the teeth of hell

24
00:01:20,240 --> 00:01:23,280
Speaker 1: in that business and bet that things weren't going to

25
00:01:23,360 --> 00:01:25,000
Speaker 1: be as bad, but you didn't have a lot of

26
00:01:25,000 --> 00:01:30,520
Speaker 1: information to know that. Versus today, Buffett's looking at um

27
00:01:30,600 --> 00:01:33,280
Speaker 1: in effect, the return on equity, the business exploding, the

28
00:01:33,319 --> 00:01:37,399
Speaker 1: capital structure being far better towards the probability success is higher.

29
00:01:37,880 --> 00:01:39,920
Speaker 1: Therefore he's willing to pay a lot higher prices, and

30
00:01:40,000 --> 00:01:43,520
Speaker 1: the oddity is investors are not willing to follow him.

31
00:01:43,560 --> 00:01:46,560
Speaker 1: How are you thinking about sort of the value trade

32
00:01:46,760 --> 00:01:50,200
Speaker 1: in the place in the face of rates moving higher,

33
00:01:50,280 --> 00:01:54,000
Speaker 1: and is there sort of that correlation or causation factor.

34
00:01:55,080 --> 00:01:57,440
Speaker 1: It's a great question, Taylor. Um. Just so you know

35
00:01:57,680 --> 00:02:00,000
Speaker 1: I think about this is this is the opportunity of

36
00:02:00,000 --> 00:02:03,120
Speaker 1: a lifetime. I'm thirty eight years old. Um. There's very

37
00:02:03,160 --> 00:02:05,440
Speaker 1: few people that are thirty eight that actually believe that

38
00:02:05,560 --> 00:02:08,320
Speaker 1: value investing works, or that you know, buying something cheap

39
00:02:08,440 --> 00:02:10,600
Speaker 1: enough because the economics are so good, or are of

40
00:02:10,639 --> 00:02:12,880
Speaker 1: any merit um. They all want to think about it

41
00:02:12,960 --> 00:02:14,360
Speaker 1: or talk about it, but they all want to go

42
00:02:14,440 --> 00:02:16,360
Speaker 1: do what the rest of the market participants want to do.

43
00:02:16,440 --> 00:02:19,680
Speaker 1: So to your point about higher rates, there's no question

44
00:02:19,760 --> 00:02:23,320
Speaker 1: whether higher rates will hurt stocks. The question is who

45
00:02:23,320 --> 00:02:26,000
Speaker 1: benefits from it, Okay, and it was the average stock

46
00:02:26,000 --> 00:02:28,960
Speaker 1: will get hurt by that. Multiples will contract. But I

47
00:02:28,960 --> 00:02:31,679
Speaker 1: would argue that the oddity of the last ten years

48
00:02:31,760 --> 00:02:33,760
Speaker 1: versus the next tent is that as the cost of

49
00:02:33,800 --> 00:02:39,120
Speaker 1: capital rises, capital intensive businesses will succeed because yes, their

50
00:02:39,160 --> 00:02:42,160
Speaker 1: cost the capital is rising, but fewer will enter those

51
00:02:42,160 --> 00:02:45,440
Speaker 1: types of businesses versus if you're in capital light industry

52
00:02:45,480 --> 00:02:48,480
Speaker 1: or an asset light business, people can enter all the

53
00:02:48,560 --> 00:02:51,960
Speaker 1: while the cost cost the capital rises. So the question is,

54
00:02:52,000 --> 00:02:54,720
Speaker 1: you know, to save margins, you want to lack a competition,

55
00:02:55,280 --> 00:02:58,800
Speaker 1: and we think there's just a huge price disparity between

56
00:02:58,840 --> 00:03:00,919
Speaker 1: what the opportunity is is in what people are paying

57
00:03:00,919 --> 00:03:03,480
Speaker 1: in the open market, and we own things like malls

58
00:03:03,480 --> 00:03:06,240
Speaker 1: home builders outside the energy are our biggest sector in

59
00:03:06,360 --> 00:03:09,240
Speaker 1: either of our international fund. Our US fund is energy

60
00:03:09,639 --> 00:03:12,520
Speaker 1: um at over both of those, so we're incredibly bullush

61
00:03:12,520 --> 00:03:15,320
Speaker 1: on energy. But like I said, cyclical assets that are

62
00:03:15,440 --> 00:03:18,600
Speaker 1: terribly miss priced are completely under the service of the

63
00:03:18,680 --> 00:03:20,720
Speaker 1: S and P or as you go abroad. All right,

64
00:03:20,720 --> 00:03:23,440
Speaker 1: I'm glad you brought up energy because it has had

65
00:03:23,480 --> 00:03:26,600
Speaker 1: a very good run here. And I guess the question

66
00:03:26,600 --> 00:03:29,040
Speaker 1: for a lot of folks who maybe weren't there early,

67
00:03:29,960 --> 00:03:33,560
Speaker 1: is the room left in this trade? Yeah, so let's

68
00:03:33,600 --> 00:03:36,280
Speaker 1: go back to Occidental because and it's so timely with Buffett.

69
00:03:36,360 --> 00:03:40,400
Speaker 1: So I would argue to be your listeners that occidentals

70
00:03:40,440 --> 00:03:44,920
Speaker 1: producing about roughly fifty return on equity. Okay as we speak.

71
00:03:45,520 --> 00:03:47,640
Speaker 1: Now if you think about I mean, that's crazy, that's

72
00:03:47,720 --> 00:03:50,160
Speaker 1: tech like r O E. Now, some of that's just

73
00:03:50,200 --> 00:03:52,480
Speaker 1: the accounting Paul, just so you know, they wrote down

74
00:03:52,480 --> 00:03:55,440
Speaker 1: the good will from Anna Darko Okay, which means the

75
00:03:55,440 --> 00:03:57,840
Speaker 1: book equity is lower than it really should be. Because

76
00:03:57,880 --> 00:03:59,720
Speaker 1: now that we know we've hunted all the oil, that

77
00:03:59,720 --> 00:04:02,400
Speaker 1: book equity that got written down you know probably shouldn't have.

78
00:04:02,760 --> 00:04:04,640
Speaker 1: With that's done, it's made the return of equity go

79
00:04:04,760 --> 00:04:07,000
Speaker 1: a lot higher. So if you go in out and said, hey,

80
00:04:07,080 --> 00:04:09,280
Speaker 1: let's go look at companies that are producing fifty return

81
00:04:09,320 --> 00:04:11,840
Speaker 1: and equity and trade at two times book, we just

82
00:04:11,880 --> 00:04:15,520
Speaker 1: won't find them, um, except in the energy business. Right, So,

83
00:04:15,720 --> 00:04:18,080
Speaker 1: like like Graham said, you know, Ben Ben Graham is

84
00:04:18,120 --> 00:04:20,400
Speaker 1: mentor said, prices what you pay values what you get.

85
00:04:21,000 --> 00:04:23,760
Speaker 1: Coca Cola was producing the same return in equity and

86
00:04:23,800 --> 00:04:26,479
Speaker 1: eighty eight when Buffett stepped into it and did that

87
00:04:26,520 --> 00:04:29,080
Speaker 1: for about ten years to follow that. And what ends

88
00:04:29,120 --> 00:04:30,760
Speaker 1: up happening is you can comp on book at that

89
00:04:30,839 --> 00:04:33,960
Speaker 1: level for five, seven, or even ten years. You make

90
00:04:34,160 --> 00:04:37,599
Speaker 1: so much book value per share you don't really care

91
00:04:37,640 --> 00:04:40,280
Speaker 1: what the book multiples in the end because the book

92
00:04:40,320 --> 00:04:43,360
Speaker 1: grows so much. And that's exactly what's going on. Oxy.

93
00:04:43,480 --> 00:04:45,800
Speaker 1: If they can buy back shares, that just enhances they've

94
00:04:45,880 --> 00:04:47,800
Speaker 1: laid out most of their capital turns are gonna happen

95
00:04:47,800 --> 00:04:50,200
Speaker 1: by buy back that just enhances that book value per

96
00:04:50,200 --> 00:04:52,920
Speaker 1: share idea. Are your klins so asking you at all

97
00:04:52,960 --> 00:04:57,200
Speaker 1: about the bad word here, the R word recession and

98
00:04:57,440 --> 00:05:00,240
Speaker 1: sort of how you think about some of these big

99
00:05:00,320 --> 00:05:03,720
Speaker 1: value performers in the face of that. Yeah, it's a

100
00:05:03,800 --> 00:05:07,280
Speaker 1: it's a great question, Taylor. Um, so you got to

101
00:05:07,320 --> 00:05:10,359
Speaker 1: remember the said is augmenting the curve still right that

102
00:05:10,440 --> 00:05:12,640
Speaker 1: you know that we have not stopped buying on the

103
00:05:12,680 --> 00:05:15,560
Speaker 1: long end. Um, so they're still subduing the long end.

104
00:05:15,600 --> 00:05:17,880
Speaker 1: So the question I would be asking is if the

105
00:05:17,920 --> 00:05:19,719
Speaker 1: FEDS not present in a year, what does the long

106
00:05:19,839 --> 00:05:23,320
Speaker 1: end look like versus they're completely controlling the short end,

107
00:05:23,520 --> 00:05:25,359
Speaker 1: And we know that that's got to go up, And

108
00:05:25,400 --> 00:05:26,719
Speaker 1: the question is does it got to go up to

109
00:05:26,760 --> 00:05:29,680
Speaker 1: two and a half or is Larry Summer's right and

110
00:05:29,680 --> 00:05:32,080
Speaker 1: we're going to four and that's the only way to

111
00:05:32,160 --> 00:05:34,839
Speaker 1: quell this. And then the question is where does the

112
00:05:34,880 --> 00:05:37,800
Speaker 1: market end up taking the tenure on the long end

113
00:05:37,839 --> 00:05:39,920
Speaker 1: of the curve. So we we don't see it as

114
00:05:39,920 --> 00:05:42,840
Speaker 1: a recession because if you look at prior instances of

115
00:05:42,880 --> 00:05:46,080
Speaker 1: like oil spiking back in oh a percentage of wallet

116
00:05:46,120 --> 00:05:49,680
Speaker 1: that was going towards gas was way higher than at

117
00:05:49,720 --> 00:05:52,000
Speaker 1: those prices than we are now at the numbers we

118
00:05:52,040 --> 00:05:54,039
Speaker 1: looked at, I think this came from fund strat four

119
00:05:54,080 --> 00:05:56,680
Speaker 1: point seven percent back then a percentage of wallet it's

120
00:05:56,720 --> 00:05:59,040
Speaker 1: at three today. At these current prices, we'd have to

121
00:05:59,040 --> 00:06:02,040
Speaker 1: go to hundred fifty two dollar prices to really get

122
00:06:02,080 --> 00:06:04,880
Speaker 1: back to a crimp like that. And we're a moonshot

123
00:06:04,880 --> 00:06:07,000
Speaker 1: according to the Biden administration, you know, away from that

124
00:06:07,040 --> 00:06:09,720
Speaker 1: as they released reserves today. So um, so we don't

125
00:06:09,760 --> 00:06:11,400
Speaker 1: look at it like that. Also, if you look at

126
00:06:11,440 --> 00:06:14,040
Speaker 1: debt service ratios, they've never been lower since nineteen eight.

127
00:06:14,160 --> 00:06:16,760
Speaker 1: So the American household, with their savings rates coming off

128
00:06:16,880 --> 00:06:20,760
Speaker 1: the pandemic and their low debt service ratios, we've never

129
00:06:20,839 --> 00:06:25,240
Speaker 1: been so ready to spend our way directly in deflation inflation. Hey, Cole,

130
00:06:25,279 --> 00:06:28,560
Speaker 1: thanks so much for joining us. Always appreciate getting your perspective.

131
00:06:28,920 --> 00:06:38,520
Speaker 1: Cole Smead, President, portfolio manager of SMED Capital Management. Looking

132
00:06:38,560 --> 00:06:41,240
Speaker 1: at the t l c O function on the Bloomberg

133
00:06:41,320 --> 00:06:44,200
Speaker 1: terminal gets all the global commodities. Looking at the medals

134
00:06:44,200 --> 00:06:46,760
Speaker 1: in particular, I'm seeing year to day gains of ten

135
00:06:47,960 --> 00:06:50,400
Speaker 1: even before you look at Nickel up fifty six percent

136
00:06:50,600 --> 00:06:52,800
Speaker 1: year to day. Where do we go from here? Obviously

137
00:06:52,880 --> 00:06:56,520
Speaker 1: reflecting a lot of geopolitical tensions in Europe, Let's bring

138
00:06:56,520 --> 00:06:59,600
Speaker 1: in Everett Millman, chief market analyst for Gainesville Coins. Everett,

139
00:06:59,640 --> 00:07:03,720
Speaker 1: which your big call here for medals? Here you highlighted

140
00:07:03,760 --> 00:07:05,080
Speaker 1: the last time you're on that this was gonna be

141
00:07:05,160 --> 00:07:07,800
Speaker 1: an issue. We're gonna get some supply change, some supply

142
00:07:07,880 --> 00:07:13,240
Speaker 1: issues coming out of Russia. Where do we go from here? Absolutely,

143
00:07:13,280 --> 00:07:17,040
Speaker 1: Paul Um and I believe the Biden administration invoking the

144
00:07:17,040 --> 00:07:20,320
Speaker 1: Defense Production Act is not just a significant move with

145
00:07:20,360 --> 00:07:23,640
Speaker 1: respect to Russia. UM, it goes beyond that. Many of

146
00:07:23,680 --> 00:07:27,080
Speaker 1: the sources for some of those EV medals, those battery

147
00:07:27,120 --> 00:07:30,720
Speaker 1: medals that we're talking about, like nickel and lithium and cobalt,

148
00:07:31,240 --> 00:07:35,480
Speaker 1: they are mined in uh not particularly well regulated jurisdictions

149
00:07:35,960 --> 00:07:39,080
Speaker 1: UM and also not particularly friendly trading partners for the

150
00:07:39,160 --> 00:07:43,120
Speaker 1: United States. So, for instance, about two thirds of global

151
00:07:43,160 --> 00:07:46,960
Speaker 1: cobalt is mined in the Democratic Republic of Congo. UM.

152
00:07:47,000 --> 00:07:50,280
Speaker 1: You have a major nickel operation in Indonesia, and the

153
00:07:50,280 --> 00:07:55,360
Speaker 1: Indonesian government has been become increasingly protectionists with its nickel

154
00:07:55,440 --> 00:07:58,680
Speaker 1: and copper exports. And then of course Beijing is on

155
00:07:58,800 --> 00:08:02,120
Speaker 1: both sides of dominating consumption and production of a lot

156
00:08:02,120 --> 00:08:04,880
Speaker 1: of those key commodities. So really this is a move

157
00:08:04,960 --> 00:08:08,840
Speaker 1: to bring those supply chains to the United States, to

158
00:08:09,080 --> 00:08:12,840
Speaker 1: North America a bit more secure. But of course I

159
00:08:12,880 --> 00:08:17,600
Speaker 1: believe this process is going to be fairly gradual and constrained. UM.

160
00:08:17,640 --> 00:08:20,000
Speaker 1: It takes many years for for these types of minds

161
00:08:20,000 --> 00:08:23,960
Speaker 1: to become operational. That doesn't even mention the infrastructure needed

162
00:08:24,000 --> 00:08:27,200
Speaker 1: for charging stations, and the d p A doesn't clear

163
00:08:27,200 --> 00:08:30,560
Speaker 1: away any potential regulations on the mining UM. So the

164
00:08:30,600 --> 00:08:35,120
Speaker 1: Biden administration has been fairly careful to keep environmental concerns

165
00:08:35,160 --> 00:08:37,680
Speaker 1: at top of mind. Um, all of this means that

166
00:08:37,720 --> 00:08:39,560
Speaker 1: it will not be quite so easy to ramp up

167
00:08:39,559 --> 00:08:42,520
Speaker 1: production of That sort of brings me to my next question.

168
00:08:42,559 --> 00:08:45,000
Speaker 1: When we think about domestic production of some of these

169
00:08:45,080 --> 00:08:49,320
Speaker 1: raw materials, is it clean? We've spoken a lot of

170
00:08:49,320 --> 00:08:51,720
Speaker 1: companies that say, look, we can do it cleaner, but

171
00:08:52,040 --> 00:08:55,640
Speaker 1: I think there is maybe some concern around that, right,

172
00:08:55,880 --> 00:08:58,720
Speaker 1: A major concern um, not just for E s G reasons,

173
00:08:58,760 --> 00:09:02,040
Speaker 1: but from a feasibility standpoint. And that's one of the

174
00:09:02,080 --> 00:09:04,640
Speaker 1: main things that invoking the d p A does is

175
00:09:04,960 --> 00:09:07,640
Speaker 1: it at least gets the ball rolling on some feasibility

176
00:09:07,679 --> 00:09:11,040
Speaker 1: studies to see what is the what kind of costs

177
00:09:11,080 --> 00:09:13,680
Speaker 1: can we expect, what kind of profitability can we expect? Because,

178
00:09:13,920 --> 00:09:17,960
Speaker 1: as you mentioned, if environmental regulations are ignored, as they

179
00:09:18,000 --> 00:09:20,880
Speaker 1: are in some jurisdictions, then um, you can mind these

180
00:09:20,880 --> 00:09:23,720
Speaker 1: metals much more cheaply. But that is obviously not going

181
00:09:23,800 --> 00:09:25,920
Speaker 1: to fly in the United States. What are you telling

182
00:09:25,960 --> 00:09:28,640
Speaker 1: your clients about metals just broadly definders there are still

183
00:09:28,720 --> 00:09:31,840
Speaker 1: room to grow, or do we kind of it's had

184
00:09:31,880 --> 00:09:36,920
Speaker 1: its run up, it's a fascinating question because although I

185
00:09:36,960 --> 00:09:39,319
Speaker 1: think we do still have room to grow, the high

186
00:09:39,440 --> 00:09:42,480
Speaker 1: level of volatility we've seen across the metal space. You

187
00:09:42,480 --> 00:09:45,800
Speaker 1: mentioned nicol that's probably the biggest example, but even with gold,

188
00:09:45,840 --> 00:09:48,840
Speaker 1: we've seen quite a bit of intra day volatility going

189
00:09:48,880 --> 00:09:52,680
Speaker 1: back and forth UM that is leading to some liquidity issues.

190
00:09:53,040 --> 00:09:56,360
Speaker 1: It's pushing some traders and participants out of the market.

191
00:09:56,840 --> 00:09:59,719
Speaker 1: And now we do have the fresh set of lockdowns

192
00:09:59,720 --> 00:10:02,880
Speaker 1: and SHA high, so that could potentially curb some of

193
00:10:02,880 --> 00:10:05,319
Speaker 1: the demand for copper and gold in these other medals,

194
00:10:05,600 --> 00:10:08,880
Speaker 1: it's just right now, it's a big, big pale of

195
00:10:09,240 --> 00:10:12,240
Speaker 1: uncertainty that's hanging over this market. How does this sort

196
00:10:12,240 --> 00:10:15,560
Speaker 1: of help relieve some of the volatility within this market,

197
00:10:15,640 --> 00:10:20,240
Speaker 1: if at all? It may not. I think that it's

198
00:10:20,280 --> 00:10:23,160
Speaker 1: going to take um many months for this to play out,

199
00:10:23,480 --> 00:10:27,240
Speaker 1: especially given the geopolitical conflicts that are continuing to rage.

200
00:10:27,240 --> 00:10:31,920
Speaker 1: I think volatility and um some impaired liquidity is probably

201
00:10:31,920 --> 00:10:34,000
Speaker 1: what we should expect for the next at least the

202
00:10:34,040 --> 00:10:37,800
Speaker 1: next quarter across the commodity space. All right, ever, thank

203
00:10:37,840 --> 00:10:40,640
Speaker 1: you so much for joining us. Really appreciate getting your

204
00:10:40,679 --> 00:10:47,480
Speaker 1: perspective on all things metals. All right, let's talk about

205
00:10:47,559 --> 00:10:50,240
Speaker 1: we'll continue our discussion of energy, this time focusing on

206
00:10:50,520 --> 00:10:53,679
Speaker 1: security of the energy grid. To do that, we welcome

207
00:10:53,760 --> 00:10:57,319
Speaker 1: Daniel McGann, CEO of American Superconductor. Daniel, thanks much for

208
00:10:57,400 --> 00:10:59,920
Speaker 1: joining us here. I know you guys at American semi

209
00:11:00,000 --> 00:11:04,200
Speaker 1: Conductor provide wind turbine electronic controls and systems that gives

210
00:11:04,200 --> 00:11:06,800
Speaker 1: you a good sense of kind of how our system

211
00:11:06,960 --> 00:11:09,120
Speaker 1: is kind of wired here in terms of our electrical

212
00:11:09,240 --> 00:11:14,040
Speaker 1: grid here, how secure or how insecure from your perspective

213
00:11:14,200 --> 00:11:19,000
Speaker 1: is the electric grid in the United States. Thanks for

214
00:11:19,040 --> 00:11:21,959
Speaker 1: having me. Um. Yeah, at American super Conductor, we focused

215
00:11:22,000 --> 00:11:24,280
Speaker 1: not only on wind but on resiliency of the grid.

216
00:11:24,640 --> 00:11:27,360
Speaker 1: And what we're seeing is this is a challenge that's

217
00:11:27,360 --> 00:11:30,959
Speaker 1: going to continue to exacerbate over the coming years. The

218
00:11:31,040 --> 00:11:33,400
Speaker 1: types of things that we're going to rely upon the

219
00:11:33,480 --> 00:11:37,760
Speaker 1: grid for, um, from you know, powering different neighborhoods with

220
00:11:37,760 --> 00:11:39,880
Speaker 1: with the change and how people are working and working

221
00:11:39,920 --> 00:11:44,000
Speaker 1: from home, to the electrification of transportation and specifically vehicles,

222
00:11:44,040 --> 00:11:46,280
Speaker 1: and the grid is going to be asked to do

223
00:11:46,320 --> 00:11:49,280
Speaker 1: a lot of things it's not designed to do. UM.

224
00:11:49,320 --> 00:11:54,079
Speaker 1: So we've developed some solutions to help the system providers

225
00:11:54,120 --> 00:11:57,760
Speaker 1: be able to in a cost advantageous way be able

226
00:11:57,760 --> 00:12:01,160
Speaker 1: to provide more capacity and more resilience either the overall system.

227
00:12:01,600 --> 00:12:03,760
Speaker 1: Talk to us about sort of that transition in the

228
00:12:03,760 --> 00:12:06,760
Speaker 1: way that renewables can play a part. A lot of people,

229
00:12:07,200 --> 00:12:10,080
Speaker 1: of course want the transition to renewables, but they just

230
00:12:10,160 --> 00:12:13,959
Speaker 1: wanted in a reliable way. How are you thinking about

231
00:12:13,960 --> 00:12:18,160
Speaker 1: the role that renewables can play in that? But we

232
00:12:18,200 --> 00:12:21,120
Speaker 1: want to make sure that renewables can be UM a

233
00:12:21,160 --> 00:12:24,800
Speaker 1: cross competitive UM. We work across the globe in wind

234
00:12:24,840 --> 00:12:28,320
Speaker 1: and also in large scare solar UM. A lot of

235
00:12:28,320 --> 00:12:31,040
Speaker 1: what our most recent focus has been on is on

236
00:12:31,640 --> 00:12:34,080
Speaker 1: hardening the grid, allowing the grid to be able to

237
00:12:34,120 --> 00:12:38,160
Speaker 1: do more. Are we separate our business into a wind

238
00:12:38,559 --> 00:12:42,199
Speaker 1: segment and a grid segment. Our grid segment now is

239
00:12:42,240 --> 00:12:44,560
Speaker 1: at record levels in the history of the company. We

240
00:12:44,559 --> 00:12:48,080
Speaker 1: actually grew the grid segment, but more against a year

241
00:12:48,080 --> 00:12:52,400
Speaker 1: ago quarter. So we see that, you know, the renewables

242
00:12:52,440 --> 00:12:54,400
Speaker 1: in many way and the electric vehicles are going to

243
00:12:54,559 --> 00:12:57,600
Speaker 1: drive dramatic changes to the grid to bring be able

244
00:12:57,600 --> 00:13:01,360
Speaker 1: to bring this power to market, to to where it's

245
00:13:01,400 --> 00:13:04,559
Speaker 1: needed when it's needed. UM and one of the solutions

246
00:13:04,600 --> 00:13:07,400
Speaker 1: that we recently made some news around US our resilient

247
00:13:07,480 --> 00:13:12,559
Speaker 1: electric grid solution. I actually Taylor did read a book

248
00:13:12,600 --> 00:13:16,240
Speaker 1: that was a recommendation from Keith Grossman simply called The Grid,

249
00:13:17,240 --> 00:13:19,719
Speaker 1: and it's a history of kind of electrification of the

250
00:13:19,800 --> 00:13:21,200
Speaker 1: United States and kind of where we are. So if

251
00:13:21,200 --> 00:13:23,960
Speaker 1: you want to learn about the electric grid United States,

252
00:13:24,000 --> 00:13:29,120
Speaker 1: and it is a fascinating development story, I recommend that. Um, Daniel,

253
00:13:29,360 --> 00:13:31,120
Speaker 1: you know, we had a guest on from the petroleum

254
00:13:31,160 --> 00:13:34,280
Speaker 1: industry just earlier today and she's making a pretty strong argument,

255
00:13:34,320 --> 00:13:37,280
Speaker 1: not surprisingly given her from you know, the group. She

256
00:13:37,360 --> 00:13:41,319
Speaker 1: represents that there is still a need for oil and

257
00:13:41,360 --> 00:13:43,800
Speaker 1: gas in this country. Can't just all be renewables, and

258
00:13:43,840 --> 00:13:46,800
Speaker 1: we're seeing that now with the price of energy, given

259
00:13:46,840 --> 00:13:49,240
Speaker 1: some of the geopolitical concerns. How do you think that

260
00:13:49,880 --> 00:13:52,360
Speaker 1: think about the future of you know, kind of just

261
00:13:52,559 --> 00:13:55,880
Speaker 1: energy development. Is nuclear does that have a role? Uh,

262
00:13:55,960 --> 00:13:58,000
Speaker 1: fossil fuels, where do they fit in? And then of

263
00:13:58,240 --> 00:14:01,840
Speaker 1: course renewables, how do you think about that. I think

264
00:14:01,840 --> 00:14:05,600
Speaker 1: there's a diverse need for energy sources and you can see, um,

265
00:14:05,640 --> 00:14:09,760
Speaker 1: you know, the world changes can change pretty dramatically. Um.

266
00:14:09,800 --> 00:14:11,800
Speaker 1: You know, not too many years ago we were talking

267
00:14:11,840 --> 00:14:14,480
Speaker 1: about a move to natural gas um, you know, and

268
00:14:14,800 --> 00:14:18,720
Speaker 1: now Europe's waking up realizing that, you know, they have

269
00:14:18,800 --> 00:14:22,240
Speaker 1: their challenges with with supply from Russia given everything that's

270
00:14:22,240 --> 00:14:25,120
Speaker 1: going on over there. So I think as long as

271
00:14:25,160 --> 00:14:29,000
Speaker 1: the world keeps moving towards cleaner sources and creating a

272
00:14:29,040 --> 00:14:32,360
Speaker 1: network that can allow you know, green power to move

273
00:14:32,400 --> 00:14:35,800
Speaker 1: as easy as other types of power, that I think

274
00:14:36,280 --> 00:14:39,080
Speaker 1: net net, the consumer is at an advantage and and

275
00:14:39,240 --> 00:14:42,720
Speaker 1: the you know, the planet and the climate are taking

276
00:14:42,800 --> 00:14:45,360
Speaker 1: better care of. How do you think with renewable some

277
00:14:45,440 --> 00:14:48,200
Speaker 1: of the big question has been the storage of that.

278
00:14:49,160 --> 00:14:53,120
Speaker 1: Are you thinking about how to better store renewables that

279
00:14:53,200 --> 00:14:56,800
Speaker 1: when we need it, we have it. I think that

280
00:14:56,960 --> 00:15:00,440
Speaker 1: that's that's certainly I'll say maybe a mid a longer

281
00:15:00,560 --> 00:15:04,040
Speaker 1: term problem where we've focused a lot on is is

282
00:15:04,080 --> 00:15:07,440
Speaker 1: there's need for kind of instantaneous manage of power within

283
00:15:07,480 --> 00:15:11,320
Speaker 1: the grid because of these disparate sources, because we're asking

284
00:15:11,320 --> 00:15:14,400
Speaker 1: the distribution grid to do more and more. So a

285
00:15:14,440 --> 00:15:17,000
Speaker 1: lot of our solutions are really trying to deal at

286
00:15:17,080 --> 00:15:22,200
Speaker 1: kind of the middlesecond microsecond management of voltage, current or

287
00:15:22,240 --> 00:15:26,440
Speaker 1: some combination thereof in different parts of the grid, be

288
00:15:26,520 --> 00:15:30,640
Speaker 1: it trying to bring more rooftop solar onto a grid

289
00:15:30,840 --> 00:15:35,280
Speaker 1: using the existing system, be it trying to interconnect nodes

290
00:15:35,320 --> 00:15:40,480
Speaker 1: on the network, these transmission distribution substations to allow the

291
00:15:40,560 --> 00:15:45,200
Speaker 1: grid to untrapped existing capacity that's already there. We looked

292
00:15:45,200 --> 00:15:47,960
Speaker 1: at certain cities where we could double the quadruple the

293
00:15:48,040 --> 00:15:51,920
Speaker 1: level of resiliency in the urban core by turning the

294
00:15:51,960 --> 00:15:56,560
Speaker 1: distribution system into a true network where every point on

295
00:15:56,600 --> 00:16:01,720
Speaker 1: the grid talks to every other point allow actrically. UH. Today,

296
00:16:01,760 --> 00:16:04,320
Speaker 1: the distribution grid it's kind of like an aqueduct to

297
00:16:04,360 --> 00:16:06,440
Speaker 1: your home, you know that if you think of power

298
00:16:06,480 --> 00:16:09,680
Speaker 1: as water, everything rolls in that direction to you, and

299
00:16:09,720 --> 00:16:12,000
Speaker 1: once you get into the last mile or so, there's

300
00:16:12,000 --> 00:16:14,760
Speaker 1: no way really to be able to move power to

301
00:16:14,880 --> 00:16:17,360
Speaker 1: other parts of the grid. So we've developed this thing

302
00:16:17,400 --> 00:16:20,640
Speaker 1: called Brazilian Electric Grid that we UH just lit up

303
00:16:20,640 --> 00:16:23,520
Speaker 1: our first installation with the City of Chicago in the summer,

304
00:16:23,960 --> 00:16:28,520
Speaker 1: which enables the interconnection of these existing assets in a

305
00:16:28,640 --> 00:16:32,040
Speaker 1: very new and unique way. Right, Hey, Dan, thanks so

306
00:16:32,120 --> 00:16:34,280
Speaker 1: much for joining us. Really appreciate it. You know, we're

307
00:16:34,360 --> 00:16:37,040
Speaker 1: talking about energy here today and that includes they the

308
00:16:37,080 --> 00:16:40,520
Speaker 1: security of our energy grid as well. Daniel McGann, CEO

309
00:16:41,040 --> 00:16:44,160
Speaker 1: of American a super Conductor that's a NASTAC traded stock.

310
00:16:44,320 --> 00:16:52,640
Speaker 1: A m SC is the symbol for that one. I'm

311
00:16:52,680 --> 00:16:54,760
Speaker 1: want to get to our next guest right now, Kevin

312
00:16:54,840 --> 00:16:57,880
Speaker 1: Kelly Good Irish name Kevin Kelly, CEO and founder of

313
00:16:57,960 --> 00:17:00,760
Speaker 1: Kelly E. T F joins us. Kelly, thanks so much

314
00:17:00,800 --> 00:17:02,440
Speaker 1: for taking the time here because I just wonder a

315
00:17:02,520 --> 00:17:06,080
Speaker 1: story about mortgage rates really starting to tick up um

316
00:17:06,119 --> 00:17:08,359
Speaker 1: and I'm wondering if this is kind of the first,

317
00:17:09,280 --> 00:17:12,159
Speaker 1: you know, break maybe and what's been a very strong

318
00:17:12,400 --> 00:17:16,080
Speaker 1: commercial and residential real estate market, particularly the residential side

319
00:17:16,359 --> 00:17:18,680
Speaker 1: over the last couple of years. What's your view of

320
00:17:18,720 --> 00:17:22,720
Speaker 1: the residential real estate market. Well, I'm glad we're talking

321
00:17:22,720 --> 00:17:27,480
Speaker 1: about mortgage rates and its impact on, uh, the the

322
00:17:27,520 --> 00:17:30,960
Speaker 1: overall housing market because the problem we're having now is

323
00:17:31,000 --> 00:17:34,840
Speaker 1: that there's very limited inventory, so that led the prices

324
00:17:34,920 --> 00:17:37,720
Speaker 1: going up, and with mortgage rates going up, it's going

325
00:17:37,800 --> 00:17:42,639
Speaker 1: to lead to less inventory because people that have purchased

326
00:17:42,640 --> 00:17:46,400
Speaker 1: homes or refinanced homes last year are going to stay

327
00:17:46,400 --> 00:17:48,520
Speaker 1: in their homes for longer because they won't want to

328
00:17:48,520 --> 00:17:50,720
Speaker 1: give that interest rate up, and so it's going to

329
00:17:50,880 --> 00:17:56,080
Speaker 1: further exacerbate the housing inventory shortage we already have. So

330
00:17:56,600 --> 00:18:00,600
Speaker 1: it's going to really reverberate through markets, and I especially

331
00:18:00,600 --> 00:18:03,560
Speaker 1: when we're talking about inflation, is on top of everybody's mind.

332
00:18:03,880 --> 00:18:08,320
Speaker 1: This leads to higher structural inflation, and the set is

333
00:18:08,400 --> 00:18:10,280
Speaker 1: very conscientious about it. I mean, you've seen the San

334
00:18:10,320 --> 00:18:14,960
Speaker 1: Francisco Fed even talk about how these persistent increases in

335
00:18:15,160 --> 00:18:19,120
Speaker 1: asking rents because of the low housing inventory is actually

336
00:18:19,160 --> 00:18:23,480
Speaker 1: feeding into uh, the rent component in the consumer price indexes.

337
00:18:24,160 --> 00:18:26,480
Speaker 1: How do you think about when you think about inflation

338
00:18:26,600 --> 00:18:29,159
Speaker 1: and some of the impacts on the equity markets, the

339
00:18:29,280 --> 00:18:33,080
Speaker 1: power of dividend growers where at least you're getting some

340
00:18:33,160 --> 00:18:39,280
Speaker 1: inflation protection via dividend. Yeah. I think that's a great

341
00:18:39,359 --> 00:18:42,400
Speaker 1: point to bring up, because you want to be positioned

342
00:18:42,440 --> 00:18:46,120
Speaker 1: with companies that have pricing power, and so when I

343
00:18:46,200 --> 00:18:50,040
Speaker 1: look at that, they have to have unique business models

344
00:18:50,080 --> 00:18:53,800
Speaker 1: that will be impervious to the inflationary shocks that are

345
00:18:54,000 --> 00:18:57,560
Speaker 1: seeing bouts and fits that that are happening across the board,

346
00:18:57,640 --> 00:19:01,639
Speaker 1: especially with oil. And so a lot of dividend companies

347
00:19:01,680 --> 00:19:05,920
Speaker 1: and in income companies have proven their the sustainability of

348
00:19:05,960 --> 00:19:10,399
Speaker 1: their models over time, and so That's why investors can

349
00:19:10,440 --> 00:19:15,080
Speaker 1: get really comfortable even in some residential publicly traded reads

350
00:19:15,119 --> 00:19:19,480
Speaker 1: that are out there because of the structural inflation that

351
00:19:19,520 --> 00:19:22,840
Speaker 1: we're seeing, and rents are only for a year, so

352
00:19:22,880 --> 00:19:26,360
Speaker 1: then they can reset higher. So just take for example apartments, right,

353
00:19:26,520 --> 00:19:29,959
Speaker 1: Apartment has had a really tough time in one especially

354
00:19:30,000 --> 00:19:33,600
Speaker 1: in the coastal markets, and we've now seen them completely

355
00:19:33,600 --> 00:19:38,080
Speaker 1: rebound and so they've seen about rent increases from their

356
00:19:39,040 --> 00:19:42,520
Speaker 1: levels which were impacted from the pandemic. And so when

357
00:19:42,520 --> 00:19:45,399
Speaker 1: you're thinking about income and trying to generate it, you

358
00:19:45,440 --> 00:19:49,080
Speaker 1: want to go to those companies that are uh that

359
00:19:49,200 --> 00:19:51,639
Speaker 1: the key part of their business model and objective is

360
00:19:51,680 --> 00:19:55,040
Speaker 1: to generate income. All right, let's stick with the residential

361
00:19:55,080 --> 00:19:58,800
Speaker 1: rule state. I gotta admit I don't get it. Housing

362
00:19:58,840 --> 00:20:01,760
Speaker 1: prices are just ripping through the roof. And I was

363
00:20:01,800 --> 00:20:05,199
Speaker 1: a recent seller, so I benefited from that. People are

364
00:20:05,200 --> 00:20:07,520
Speaker 1: telling me that rents are going crazy, and they certainly

365
00:20:07,520 --> 00:20:11,439
Speaker 1: are here in New York City where if if if

366
00:20:11,480 --> 00:20:13,800
Speaker 1: those markets are up, what markets are down, there's there

367
00:20:13,840 --> 00:20:16,040
Speaker 1: aren't more people that need to be housed in the

368
00:20:16,119 --> 00:20:21,000
Speaker 1: United States. So where is the other side of that trade? Yeah,

369
00:20:21,080 --> 00:20:24,240
Speaker 1: the other side of that trade, uh started to happen

370
00:20:24,280 --> 00:20:30,080
Speaker 1: in where we decided to build less. And you've had

371
00:20:30,520 --> 00:20:33,600
Speaker 1: real estate is very locals, as you know, you just sold, right,

372
00:20:33,680 --> 00:20:35,960
Speaker 1: and so you're focused on your local market. Well, what

373
00:20:36,040 --> 00:20:38,439
Speaker 1: happens is is you have a lot of state and

374
00:20:38,520 --> 00:20:44,560
Speaker 1: local municipalities that have zoning restrictions and it's the ultimate nimby, right,

375
00:20:44,600 --> 00:20:47,200
Speaker 1: not in my backyard. I don't want this big residential

376
00:20:47,200 --> 00:20:50,360
Speaker 1: development going here. I don't want you know, I don't

377
00:20:50,400 --> 00:20:53,800
Speaker 1: want zoning to be this and that. So since we've

378
00:20:53,800 --> 00:21:00,880
Speaker 1: actually seen fewer total housing units being produced in household formation,

379
00:21:01,400 --> 00:21:04,880
Speaker 1: So what is the driver behind that? Millennials? Right, Millennials

380
00:21:04,880 --> 00:21:08,480
Speaker 1: got in the last bust and so they were living

381
00:21:08,520 --> 00:21:10,520
Speaker 1: with their parents, they were trying to save money. It

382
00:21:10,560 --> 00:21:13,440
Speaker 1: was a tough economy. Now they're coming out and forming

383
00:21:13,520 --> 00:21:16,479
Speaker 1: a lot more households, and we have you were almost

384
00:21:16,560 --> 00:21:19,960
Speaker 1: a third fewer housing units available. So it's just simple

385
00:21:20,000 --> 00:21:23,080
Speaker 1: supply and demand, you know. So I am so sick

386
00:21:23,240 --> 00:21:27,119
Speaker 1: of millennials getting blamed for everything, Kevin. I was getting

387
00:21:27,200 --> 00:21:31,360
Speaker 1: blamed because I wasn't forming households. I was the one

388
00:21:31,440 --> 00:21:33,840
Speaker 1: not doing it. Now we're all doing it, and that's

389
00:21:33,840 --> 00:21:37,760
Speaker 1: for the cause of all the supply jacking issues. It's unbelievable.

390
00:21:38,520 --> 00:21:42,359
Speaker 1: When can we blame gen Z for something? Yes, so, Taylor,

391
00:21:42,400 --> 00:21:44,720
Speaker 1: you're right, I mean, I'm I'm I'm in an older

392
00:21:44,800 --> 00:21:48,240
Speaker 1: millennial myself, right, and so I bought my first house

393
00:21:48,359 --> 00:21:53,359
Speaker 1: at the age of thirty six, and so you're blamed. Yeah, yeah,

394
00:21:53,440 --> 00:21:56,320
Speaker 1: it's totally my fault. Right, Um, we can blame gen

395
00:21:56,440 --> 00:21:59,760
Speaker 1: Z for the for the last mortgage or sorry, we

396
00:21:59,800 --> 00:22:02,280
Speaker 1: can blame the we can blame the older generations for

397
00:22:02,320 --> 00:22:04,920
Speaker 1: the last mortgage crisis. So that's how we differ and

398
00:22:05,000 --> 00:22:07,639
Speaker 1: deflect as millennials because we had to go into the

399
00:22:07,720 --> 00:22:11,560
Speaker 1: job market and it was a tough time for us

400
00:22:12,440 --> 00:22:14,720
Speaker 1: when we were trying to do our household formations because

401
00:22:14,840 --> 00:22:17,200
Speaker 1: look at all the costs that went up. Think about

402
00:22:17,240 --> 00:22:19,879
Speaker 1: what people have to spend money on every day. Education.

403
00:22:20,040 --> 00:22:22,840
Speaker 1: Education has gone through the room, right, So we're paying

404
00:22:22,840 --> 00:22:25,359
Speaker 1: more in education costs, we're paying more in energy costs,

405
00:22:25,400 --> 00:22:28,239
Speaker 1: we're paying more in housing costs. What generations are are

406
00:22:28,320 --> 00:22:30,280
Speaker 1: to blame for that? I'll leave that up to you guys.

407
00:22:30,440 --> 00:22:32,320
Speaker 1: All right, I think I know where this is coming

408
00:22:32,440 --> 00:22:35,280
Speaker 1: coming back. Yeah, you may, you may. Yeah, I'm in

409
00:22:35,280 --> 00:22:37,920
Speaker 1: the tail tale and literally the last year or two

410
00:22:38,280 --> 00:22:40,720
Speaker 1: of the baby boomers. But Kevin, he gets points for

411
00:22:40,760 --> 00:22:43,600
Speaker 1: explaining to me this housing cost issue. I hadn't. I

412
00:22:43,600 --> 00:22:46,120
Speaker 1: haven't gotten that. So we had supply over the last

413
00:22:46,240 --> 00:22:48,320
Speaker 1: ten twelve years going down, and then you had some

414
00:22:48,359 --> 00:22:51,119
Speaker 1: demand spike heres the millennials get out of the basement.

415
00:22:51,160 --> 00:22:54,240
Speaker 1: So Kevin Kelly, good job there, CEO and founder of

416
00:22:54,600 --> 00:22:57,320
Speaker 1: Kelly E. T S talking about the rental market, the

417
00:22:57,320 --> 00:23:00,960
Speaker 1: real estate market way way hot, even during the whole pandemic.

418
00:23:03,280 --> 00:23:06,359
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can

419
00:23:06,400 --> 00:23:10,200
Speaker 1: subscribe and listen to interviews of Apple Podcasts or whatever

420
00:23:10,280 --> 00:23:13,919
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

421
00:23:14,200 --> 00:23:18,040
Speaker 1: at Matt Miller three. On Fall Sweeney, I'm on Twitter

422
00:23:18,080 --> 00:23:20,920
Speaker 1: at pt Sweeney. Before the podcast, you can always catch

423
00:23:21,000 --> 00:23:22,800
Speaker 1: us worldwide at Bloomberg Radio.