WEBVTT - Markets, Cyberthreats, And Real Estate 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 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.479 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.320 at Bloomberg dot com slash podcast. I want to bring 0:00:21.320 --> 0:00:24.480 in Cole Smead as a president in portfolio manager Smead 0:00:24.520 --> 0:00:28.680 Capital Management. Col thanks so much for joining us here. 0:00:28.720 --> 0:00:31.760 I'd love to get your thoughts um from a value 0:00:32.120 --> 0:00:35.400 investor perspective of this market right here. How are you 0:00:35.400 --> 0:00:38.080 guys positioned here as we finished up the first quarter 0:00:38.159 --> 0:00:42.760 of well, thanks for having me, Paul, Uh. This is 0:00:42.840 --> 0:00:44.519 just quite a fun world to be living in, to 0:00:44.600 --> 0:00:48.960 be downright honest for investors like us. Where As you 0:00:49.040 --> 0:00:51.560 pointed out, the dynamics of the oil market have people 0:00:51.760 --> 0:00:54.560 really caught off guard and and on the wrong foot. 0:00:55.080 --> 0:00:57.800 And at the same time, we have Warren Buffett out 0:00:57.800 --> 0:01:01.639 there being as aggressive as he ever is in an 0:01:01.640 --> 0:01:05.560 open market common stock investment decision like he's doing with 0:01:05.560 --> 0:01:10.600 Oxidal Petroleum, and we feel great about that because we 0:01:10.680 --> 0:01:13.840 have lower cost basis, and we agree with everything he's seeing. 0:01:14.040 --> 0:01:16.720 I think the big difference though, is two years ago 0:01:16.880 --> 0:01:19.800 investors had to look directly into the teeth of hell 0:01:20.240 --> 0:01:23.280 in that business and bet that things weren't going to 0:01:23.360 --> 0:01:25.000 be as bad, but you didn't have a lot of 0:01:25.000 --> 0:01:30.520 information to know that. Versus today, Buffett's looking at um 0:01:30.600 --> 0:01:33.280 in effect, the return on equity, the business exploding, the 0:01:33.319 --> 0:01:37.399 capital structure being far better towards the probability success is higher. 0:01:37.880 --> 0:01:39.920 Therefore he's willing to pay a lot higher prices, and 0:01:40.000 --> 0:01:43.520 the oddity is investors are not willing to follow him. 0:01:43.560 --> 0:01:46.560 How are you thinking about sort of the value trade 0:01:46.760 --> 0:01:50.200 in the place in the face of rates moving higher, 0:01:50.280 --> 0:01:54.000 and is there sort of that correlation or causation factor. 0:01:55.080 --> 0:01:57.440 It's a great question, Taylor. Um. Just so you know 0:01:57.680 --> 0:02:00.000 I think about this is this is the opportunity of 0:02:00.000 --> 0:02:03.120 a lifetime. I'm thirty eight years old. Um. There's very 0:02:03.160 --> 0:02:05.440 few people that are thirty eight that actually believe that 0:02:05.560 --> 0:02:08.320 value investing works, or that you know, buying something cheap 0:02:08.440 --> 0:02:10.600 enough because the economics are so good, or are of 0:02:10.639 --> 0:02:12.880 any merit um. They all want to think about it 0:02:12.960 --> 0:02:14.360 or talk about it, but they all want to go 0:02:14.440 --> 0:02:16.360 do what the rest of the market participants want to do. 0:02:16.440 --> 0:02:19.680 So to your point about higher rates, there's no question 0:02:19.760 --> 0:02:23.320 whether higher rates will hurt stocks. The question is who 0:02:23.320 --> 0:02:26.000 benefits from it, Okay, and it was the average stock 0:02:26.000 --> 0:02:28.960 will get hurt by that. Multiples will contract. But I 0:02:28.960 --> 0:02:31.679 would argue that the oddity of the last ten years 0:02:31.760 --> 0:02:33.760 versus the next tent is that as the cost of 0:02:33.800 --> 0:02:39.120 capital rises, capital intensive businesses will succeed because yes, their 0:02:39.160 --> 0:02:42.160 cost the capital is rising, but fewer will enter those 0:02:42.160 --> 0:02:45.440 types of businesses versus if you're in capital light industry 0:02:45.480 --> 0:02:48.480 or an asset light business, people can enter all the 0:02:48.560 --> 0:02:51.960 while the cost cost the capital rises. So the question is, 0:02:52.000 --> 0:02:54.720 you know, to save margins, you want to lack a competition, 0:02:55.280 --> 0:02:58.800 and we think there's just a huge price disparity between 0:02:58.840 --> 0:03:00.919 what the opportunity is is in what people are paying 0:03:00.919 --> 0:03:03.480 in the open market, and we own things like malls 0:03:03.480 --> 0:03:06.240 home builders outside the energy are our biggest sector in 0:03:06.360 --> 0:03:09.240 either of our international fund. Our US fund is energy 0:03:09.639 --> 0:03:12.520 um at over both of those, so we're incredibly bullush 0:03:12.520 --> 0:03:15.320 on energy. But like I said, cyclical assets that are 0:03:15.440 --> 0:03:18.600 terribly miss priced are completely under the service of the 0:03:18.680 --> 0:03:20.720 S and P or as you go abroad. All right, 0:03:20.720 --> 0:03:23.440 I'm glad you brought up energy because it has had 0:03:23.480 --> 0:03:26.600 a very good run here. And I guess the question 0:03:26.600 --> 0:03:29.040 for a lot of folks who maybe weren't there early, 0:03:29.960 --> 0:03:33.560 is the room left in this trade? Yeah, so let's 0:03:33.600 --> 0:03:36.280 go back to Occidental because and it's so timely with Buffett. 0:03:36.360 --> 0:03:40.400 So I would argue to be your listeners that occidentals 0:03:40.440 --> 0:03:44.920 producing about roughly fifty return on equity. Okay as we speak. 0:03:45.520 --> 0:03:47.640 Now if you think about I mean, that's crazy, that's 0:03:47.720 --> 0:03:50.160 tech like r O E. Now, some of that's just 0:03:50.200 --> 0:03:52.480 the accounting Paul, just so you know, they wrote down 0:03:52.480 --> 0:03:55.440 the good will from Anna Darko Okay, which means the 0:03:55.440 --> 0:03:57.840 book equity is lower than it really should be. Because 0:03:57.880 --> 0:03:59.720 now that we know we've hunted all the oil, that 0:03:59.720 --> 0:04:02.400 book equity that got written down you know probably shouldn't have. 0:04:02.760 --> 0:04:04.640 With that's done, it's made the return of equity go 0:04:04.760 --> 0:04:07.000 a lot higher. So if you go in out and said, hey, 0:04:07.080 --> 0:04:09.280 let's go look at companies that are producing fifty return 0:04:09.320 --> 0:04:11.840 and equity and trade at two times book, we just 0:04:11.880 --> 0:04:15.520 won't find them, um, except in the energy business. Right, So, 0:04:15.720 --> 0:04:18.080 like like Graham said, you know, Ben Ben Graham is 0:04:18.120 --> 0:04:20.400 mentor said, prices what you pay values what you get. 0:04:21.000 --> 0:04:23.760 Coca Cola was producing the same return in equity and 0:04:23.800 --> 0:04:26.479 eighty eight when Buffett stepped into it and did that 0:04:26.520 --> 0:04:29.080 for about ten years to follow that. And what ends 0:04:29.120 --> 0:04:30.760 up happening is you can comp on book at that 0:04:30.839 --> 0:04:33.960 level for five, seven, or even ten years. You make 0:04:34.160 --> 0:04:37.599 so much book value per share you don't really care 0:04:37.640 --> 0:04:40.280 what the book multiples in the end because the book 0:04:40.320 --> 0:04:43.360 grows so much. And that's exactly what's going on. Oxy. 0:04:43.480 --> 0:04:45.800 If they can buy back shares, that just enhances they've 0:04:45.880 --> 0:04:47.800 laid out most of their capital turns are gonna happen 0:04:47.800 --> 0:04:50.200 by buy back that just enhances that book value per 0:04:50.200 --> 0:04:52.920 share idea. Are your klins so asking you at all 0:04:52.960 --> 0:04:57.200 about the bad word here, the R word recession and 0:04:57.440 --> 0:05:00.240 sort of how you think about some of these big 0:05:00.320 --> 0:05:03.720 value performers in the face of that. Yeah, it's a 0:05:03.800 --> 0:05:07.280 it's a great question, Taylor. Um, so you got to 0:05:07.320 --> 0:05:10.359 remember the said is augmenting the curve still right that 0:05:10.440 --> 0:05:12.640 you know that we have not stopped buying on the 0:05:12.680 --> 0:05:15.560 long end. Um, so they're still subduing the long end. 0:05:15.600 --> 0:05:17.880 So the question I would be asking is if the 0:05:17.920 --> 0:05:19.719 FEDS not present in a year, what does the long 0:05:19.839 --> 0:05:23.320 end look like versus they're completely controlling the short end, 0:05:23.520 --> 0:05:25.359 And we know that that's got to go up, And 0:05:25.400 --> 0:05:26.719 the question is does it got to go up to 0:05:26.760 --> 0:05:29.680 two and a half or is Larry Summer's right and 0:05:29.680 --> 0:05:32.080 we're going to four and that's the only way to 0:05:32.160 --> 0:05:34.839 quell this. And then the question is where does the 0:05:34.880 --> 0:05:37.800 market end up taking the tenure on the long end 0:05:37.839 --> 0:05:39.920 of the curve. So we we don't see it as 0:05:39.920 --> 0:05:42.840 a recession because if you look at prior instances of 0:05:42.880 --> 0:05:46.080 like oil spiking back in oh a percentage of wallet 0:05:46.120 --> 0:05:49.680 that was going towards gas was way higher than at 0:05:49.720 --> 0:05:52.000 those prices than we are now at the numbers we 0:05:52.040 --> 0:05:54.039 looked at, I think this came from fund strat four 0:05:54.080 --> 0:05:56.680 point seven percent back then a percentage of wallet it's 0:05:56.720 --> 0:05:59.040 at three today. At these current prices, we'd have to 0:05:59.040 --> 0:06:02.040 go to hundred fifty two dollar prices to really get 0:06:02.080 --> 0:06:04.880 back to a crimp like that. And we're a moonshot 0:06:04.880 --> 0:06:07.000 according to the Biden administration, you know, away from that 0:06:07.040 --> 0:06:09.720 as they released reserves today. So um, so we don't 0:06:09.760 --> 0:06:11.400 look at it like that. Also, if you look at 0:06:11.440 --> 0:06:14.040 debt service ratios, they've never been lower since nineteen eight. 0:06:14.160 --> 0:06:16.760 So the American household, with their savings rates coming off 0:06:16.880 --> 0:06:20.760 the pandemic and their low debt service ratios, we've never 0:06:20.839 --> 0:06:25.240 been so ready to spend our way directly in deflation inflation. Hey, Cole, 0:06:25.279 --> 0:06:28.560 thanks so much for joining us. Always appreciate getting your perspective. 0:06:28.920 --> 0:06:38.520 Cole Smead, President, portfolio manager of SMED Capital Management. Looking 0:06:38.560 --> 0:06:41.240 at the t l c O function on the Bloomberg 0:06:41.320 --> 0:06:44.200 terminal gets all the global commodities. Looking at the medals 0:06:44.200 --> 0:06:46.760 in particular, I'm seeing year to day gains of ten 0:06:47.960 --> 0:06:50.400 even before you look at Nickel up fifty six percent 0:06:50.600 --> 0:06:52.800 year to day. Where do we go from here? Obviously 0:06:52.880 --> 0:06:56.520 reflecting a lot of geopolitical tensions in Europe, Let's bring 0:06:56.520 --> 0:06:59.600 in Everett Millman, chief market analyst for Gainesville Coins. Everett, 0:06:59.640 --> 0:07:03.720 which your big call here for medals? Here you highlighted 0:07:03.760 --> 0:07:05.080 the last time you're on that this was gonna be 0:07:05.160 --> 0:07:07.800 an issue. We're gonna get some supply change, some supply 0:07:07.880 --> 0:07:13.240 issues coming out of Russia. Where do we go from here? Absolutely, 0:07:13.280 --> 0:07:17.040 Paul Um and I believe the Biden administration invoking the 0:07:17.040 --> 0:07:20.320 Defense Production Act is not just a significant move with 0:07:20.360 --> 0:07:23.640 respect to Russia. UM, it goes beyond that. Many of 0:07:23.680 --> 0:07:27.080 the sources for some of those EV medals, those battery 0:07:27.120 --> 0:07:30.720 medals that we're talking about, like nickel and lithium and cobalt, 0:07:31.240 --> 0:07:35.480 they are mined in uh not particularly well regulated jurisdictions 0:07:35.960 --> 0:07:39.080 UM and also not particularly friendly trading partners for the 0:07:39.160 --> 0:07:43.120 United States. So, for instance, about two thirds of global 0:07:43.160 --> 0:07:46.960 cobalt is mined in the Democratic Republic of Congo. UM. 0:07:47.000 --> 0:07:50.280 You have a major nickel operation in Indonesia, and the 0:07:50.280 --> 0:07:55.360 Indonesian government has been become increasingly protectionists with its nickel 0:07:55.440 --> 0:07:58.680 and copper exports. And then of course Beijing is on 0:07:58.800 --> 0:08:02.120 both sides of dominating consumption and production of a lot 0:08:02.120 --> 0:08:04.880 of those key commodities. So really this is a move 0:08:04.960 --> 0:08:08.840 to bring those supply chains to the United States, to 0:08:09.080 --> 0:08:12.840 North America a bit more secure. But of course I 0:08:12.880 --> 0:08:17.600 believe this process is going to be fairly gradual and constrained. UM. 0:08:17.640 --> 0:08:20.000 It takes many years for for these types of minds 0:08:20.000 --> 0:08:23.960 to become operational. That doesn't even mention the infrastructure needed 0:08:24.000 --> 0:08:27.200 for charging stations, and the d p A doesn't clear 0:08:27.200 --> 0:08:30.560 away any potential regulations on the mining UM. So the 0:08:30.600 --> 0:08:35.120 Biden administration has been fairly careful to keep environmental concerns 0:08:35.160 --> 0:08:37.680 at top of mind. Um, all of this means that 0:08:37.720 --> 0:08:39.560 it will not be quite so easy to ramp up 0:08:39.559 --> 0:08:42.520 production of That sort of brings me to my next question. 0:08:42.559 --> 0:08:45.000 When we think about domestic production of some of these 0:08:45.080 --> 0:08:49.320 raw materials, is it clean? We've spoken a lot of 0:08:49.320 --> 0:08:51.720 companies that say, look, we can do it cleaner, but 0:08:52.040 --> 0:08:55.640 I think there is maybe some concern around that, right, 0:08:55.880 --> 0:08:58.720 A major concern um, not just for E s G reasons, 0:08:58.760 --> 0:09:02.040 but from a feasibility standpoint. And that's one of the 0:09:02.080 --> 0:09:04.640 main things that invoking the d p A does is 0:09:04.960 --> 0:09:07.640 it at least gets the ball rolling on some feasibility 0:09:07.679 --> 0:09:11.040 studies to see what is the what kind of costs 0:09:11.080 --> 0:09:13.680 can we expect, what kind of profitability can we expect? Because, 0:09:13.920 --> 0:09:17.960 as you mentioned, if environmental regulations are ignored, as they 0:09:18.000 --> 0:09:20.880 are in some jurisdictions, then um, you can mind these 0:09:20.880 --> 0:09:23.720 metals much more cheaply. But that is obviously not going 0:09:23.800 --> 0:09:25.920 to fly in the United States. What are you telling 0:09:25.960 --> 0:09:28.640 your clients about metals just broadly definders there are still 0:09:28.720 --> 0:09:31.840 room to grow, or do we kind of it's had 0:09:31.880 --> 0:09:36.920 its run up, it's a fascinating question because although I 0:09:36.960 --> 0:09:39.319 think we do still have room to grow, the high 0:09:39.440 --> 0:09:42.480 level of volatility we've seen across the metal space. You 0:09:42.480 --> 0:09:45.800 mentioned nicol that's probably the biggest example, but even with gold, 0:09:45.840 --> 0:09:48.840 we've seen quite a bit of intra day volatility going 0:09:48.880 --> 0:09:52.680 back and forth UM that is leading to some liquidity issues. 0:09:53.040 --> 0:09:56.360 It's pushing some traders and participants out of the market. 0:09:56.840 --> 0:09:59.719 And now we do have the fresh set of lockdowns 0:09:59.720 --> 0:10:02.880 and SHA high, so that could potentially curb some of 0:10:02.880 --> 0:10:05.319 the demand for copper and gold in these other medals, 0:10:05.600 --> 0:10:08.880 it's just right now, it's a big, big pale of 0:10:09.240 --> 0:10:12.240 uncertainty that's hanging over this market. How does this sort 0:10:12.240 --> 0:10:15.560 of help relieve some of the volatility within this market, 0:10:15.640 --> 0:10:20.240 if at all? It may not. I think that it's 0:10:20.280 --> 0:10:23.160 going to take um many months for this to play out, 0:10:23.480 --> 0:10:27.240 especially given the geopolitical conflicts that are continuing to rage. 0:10:27.240 --> 0:10:31.920 I think volatility and um some impaired liquidity is probably 0:10:31.920 --> 0:10:34.000 what we should expect for the next at least the 0:10:34.040 --> 0:10:37.800 next quarter across the commodity space. All right, ever, thank 0:10:37.840 --> 0:10:40.640 you so much for joining us. Really appreciate getting your 0:10:40.679 --> 0:10:47.480 perspective on all things metals. All right, let's talk about 0:10:47.559 --> 0:10:50.240 we'll continue our discussion of energy, this time focusing on 0:10:50.520 --> 0:10:53.679 security of the energy grid. To do that, we welcome 0:10:53.760 --> 0:10:57.319 Daniel McGann, CEO of American Superconductor. Daniel, thanks much for 0:10:57.400 --> 0:10:59.920 joining us here. I know you guys at American semi 0:11:00.000 --> 0:11:04.200 Conductor provide wind turbine electronic controls and systems that gives 0:11:04.200 --> 0:11:06.800 you a good sense of kind of how our system 0:11:06.960 --> 0:11:09.120 is kind of wired here in terms of our electrical 0:11:09.240 --> 0:11:14.040 grid here, how secure or how insecure from your perspective 0:11:14.200 --> 0:11:19.000 is the electric grid in the United States. Thanks for 0:11:19.040 --> 0:11:21.959 having me. Um. Yeah, at American super Conductor, we focused 0:11:22.000 --> 0:11:24.280 not only on wind but on resiliency of the grid. 0:11:24.640 --> 0:11:27.360 And what we're seeing is this is a challenge that's 0:11:27.360 --> 0:11:30.959 going to continue to exacerbate over the coming years. The 0:11:31.040 --> 0:11:33.400 types of things that we're going to rely upon the 0:11:33.480 --> 0:11:37.760 grid for, um, from you know, powering different neighborhoods with 0:11:37.760 --> 0:11:39.880 with the change and how people are working and working 0:11:39.920 --> 0:11:44.000 from home, to the electrification of transportation and specifically vehicles, 0:11:44.040 --> 0:11:46.280 and the grid is going to be asked to do 0:11:46.320 --> 0:11:49.280 a lot of things it's not designed to do. UM. 0:11:49.320 --> 0:11:54.079 So we've developed some solutions to help the system providers 0:11:54.120 --> 0:11:57.760 be able to in a cost advantageous way be able 0:11:57.760 --> 0:12:01.160 to provide more capacity and more resilience either the overall system. 0:12:01.600 --> 0:12:03.760 Talk to us about sort of that transition in the 0:12:03.760 --> 0:12:06.760 way that renewables can play a part. A lot of people, 0:12:07.200 --> 0:12:10.080 of course want the transition to renewables, but they just 0:12:10.160 --> 0:12:13.959 wanted in a reliable way. How are you thinking about 0:12:13.960 --> 0:12:18.160 the role that renewables can play in that? But we 0:12:18.200 --> 0:12:21.120 want to make sure that renewables can be UM a 0:12:21.160 --> 0:12:24.800 cross competitive UM. We work across the globe in wind 0:12:24.840 --> 0:12:28.320 and also in large scare solar UM. A lot of 0:12:28.320 --> 0:12:31.040 what our most recent focus has been on is on 0:12:31.640 --> 0:12:34.080 hardening the grid, allowing the grid to be able to 0:12:34.120 --> 0:12:38.160 do more. Are we separate our business into a wind 0:12:38.559 --> 0:12:42.199 segment and a grid segment. Our grid segment now is 0:12:42.240 --> 0:12:44.560 at record levels in the history of the company. We 0:12:44.559 --> 0:12:48.080 actually grew the grid segment, but more against a year 0:12:48.080 --> 0:12:52.400 ago quarter. So we see that, you know, the renewables 0:12:52.440 --> 0:12:54.400 in many way and the electric vehicles are going to 0:12:54.559 --> 0:12:57.600 drive dramatic changes to the grid to bring be able 0:12:57.600 --> 0:13:01.360 to bring this power to market, to to where it's 0:13:01.400 --> 0:13:04.559 needed when it's needed. UM and one of the solutions 0:13:04.600 --> 0:13:07.400 that we recently made some news around US our resilient 0:13:07.480 --> 0:13:12.559 electric grid solution. I actually Taylor did read a book 0:13:12.600 --> 0:13:16.240 that was a recommendation from Keith Grossman simply called The Grid, 0:13:17.240 --> 0:13:19.719 and it's a history of kind of electrification of the 0:13:19.800 --> 0:13:21.200 United States and kind of where we are. So if 0:13:21.200 --> 0:13:23.960 you want to learn about the electric grid United States, 0:13:24.000 --> 0:13:29.120 and it is a fascinating development story, I recommend that. Um, Daniel, 0:13:29.360 --> 0:13:31.120 you know, we had a guest on from the petroleum 0:13:31.160 --> 0:13:34.280 industry just earlier today and she's making a pretty strong argument, 0:13:34.320 --> 0:13:37.280 not surprisingly given her from you know, the group. She 0:13:37.360 --> 0:13:41.319 represents that there is still a need for oil and 0:13:41.360 --> 0:13:43.800 gas in this country. Can't just all be renewables, and 0:13:43.840 --> 0:13:46.800 we're seeing that now with the price of energy, given 0:13:46.840 --> 0:13:49.240 some of the geopolitical concerns. How do you think that 0:13:49.880 --> 0:13:52.360 think about the future of you know, kind of just 0:13:52.559 --> 0:13:55.880 energy development. Is nuclear does that have a role? Uh, 0:13:55.960 --> 0:13:58.000 fossil fuels, where do they fit in? And then of 0:13:58.240 --> 0:14:01.840 course renewables, how do you think about that. I think 0:14:01.840 --> 0:14:05.600 there's a diverse need for energy sources and you can see, um, 0:14:05.640 --> 0:14:09.760 you know, the world changes can change pretty dramatically. Um. 0:14:09.800 --> 0:14:11.800 You know, not too many years ago we were talking 0:14:11.840 --> 0:14:14.480 about a move to natural gas um, you know, and 0:14:14.800 --> 0:14:18.720 now Europe's waking up realizing that, you know, they have 0:14:18.800 --> 0:14:22.240 their challenges with with supply from Russia given everything that's 0:14:22.240 --> 0:14:25.120 going on over there. So I think as long as 0:14:25.160 --> 0:14:29.000 the world keeps moving towards cleaner sources and creating a 0:14:29.040 --> 0:14:32.360 network that can allow you know, green power to move 0:14:32.400 --> 0:14:35.800 as easy as other types of power, that I think 0:14:36.280 --> 0:14:39.080 net net, the consumer is at an advantage and and 0:14:39.240 --> 0:14:42.720 the you know, the planet and the climate are taking 0:14:42.800 --> 0:14:45.360 better care of. How do you think with renewable some 0:14:45.440 --> 0:14:48.200 of the big question has been the storage of that. 0:14:49.160 --> 0:14:53.120 Are you thinking about how to better store renewables that 0:14:53.200 --> 0:14:56.800 when we need it, we have it. I think that 0:14:56.960 --> 0:15:00.440 that's that's certainly I'll say maybe a mid a longer 0:15:00.560 --> 0:15:04.040 term problem where we've focused a lot on is is 0:15:04.080 --> 0:15:07.440 there's need for kind of instantaneous manage of power within 0:15:07.480 --> 0:15:11.320 the grid because of these disparate sources, because we're asking 0:15:11.320 --> 0:15:14.400 the distribution grid to do more and more. So a 0:15:14.440 --> 0:15:17.000 lot of our solutions are really trying to deal at 0:15:17.080 --> 0:15:22.200 kind of the middlesecond microsecond management of voltage, current or 0:15:22.240 --> 0:15:26.440 some combination thereof in different parts of the grid, be 0:15:26.520 --> 0:15:30.640 it trying to bring more rooftop solar onto a grid 0:15:30.840 --> 0:15:35.280 using the existing system, be it trying to interconnect nodes 0:15:35.320 --> 0:15:40.480 on the network, these transmission distribution substations to allow the 0:15:40.560 --> 0:15:45.200 grid to untrapped existing capacity that's already there. We looked 0:15:45.200 --> 0:15:47.960 at certain cities where we could double the quadruple the 0:15:48.040 --> 0:15:51.920 level of resiliency in the urban core by turning the 0:15:51.960 --> 0:15:56.560 distribution system into a true network where every point on 0:15:56.600 --> 0:16:01.720 the grid talks to every other point allow actrically. UH. Today, 0:16:01.760 --> 0:16:04.320 the distribution grid it's kind of like an aqueduct to 0:16:04.360 --> 0:16:06.440 your home, you know that if you think of power 0:16:06.480 --> 0:16:09.680 as water, everything rolls in that direction to you, and 0:16:09.720 --> 0:16:12.000 once you get into the last mile or so, there's 0:16:12.000 --> 0:16:14.760 no way really to be able to move power to 0:16:14.880 --> 0:16:17.360 other parts of the grid. So we've developed this thing 0:16:17.400 --> 0:16:20.640 called Brazilian Electric Grid that we UH just lit up 0:16:20.640 --> 0:16:23.520 our first installation with the City of Chicago in the summer, 0:16:23.960 --> 0:16:28.520 which enables the interconnection of these existing assets in a 0:16:28.640 --> 0:16:32.040 very new and unique way. Right, Hey, Dan, thanks so 0:16:32.120 --> 0:16:34.280 much for joining us. Really appreciate it. You know, we're 0:16:34.360 --> 0:16:37.040 talking about energy here today and that includes they the 0:16:37.080 --> 0:16:40.520 security of our energy grid as well. Daniel McGann, CEO 0:16:41.040 --> 0:16:44.160 of American a super Conductor that's a NASTAC traded stock. 0:16:44.320 --> 0:16:52.640 A m SC is the symbol for that one. I'm 0:16:52.680 --> 0:16:54.760 want to get to our next guest right now, Kevin 0:16:54.840 --> 0:16:57.880 Kelly Good Irish name Kevin Kelly, CEO and founder of 0:16:57.960 --> 0:17:00.760 Kelly E. T F joins us. Kelly, thanks so much 0:17:00.800 --> 0:17:02.440 for taking the time here because I just wonder a 0:17:02.520 --> 0:17:06.080 story about mortgage rates really starting to tick up um 0:17:06.119 --> 0:17:08.359 and I'm wondering if this is kind of the first, 0:17:09.280 --> 0:17:12.159 you know, break maybe and what's been a very strong 0:17:12.400 --> 0:17:16.080 commercial and residential real estate market, particularly the residential side 0:17:16.359 --> 0:17:18.680 over the last couple of years. What's your view of 0:17:18.720 --> 0:17:22.720 the residential real estate market. Well, I'm glad we're talking 0:17:22.720 --> 0:17:27.480 about mortgage rates and its impact on, uh, the the 0:17:27.520 --> 0:17:30.960 overall housing market because the problem we're having now is 0:17:31.000 --> 0:17:34.840 that there's very limited inventory, so that led the prices 0:17:34.920 --> 0:17:37.720 going up, and with mortgage rates going up, it's going 0:17:37.800 --> 0:17:42.639 to lead to less inventory because people that have purchased 0:17:42.640 --> 0:17:46.400 homes or refinanced homes last year are going to stay 0:17:46.400 --> 0:17:48.520 in their homes for longer because they won't want to 0:17:48.520 --> 0:17:50.720 give that interest rate up, and so it's going to 0:17:50.880 --> 0:17:56.080 further exacerbate the housing inventory shortage we already have. So 0:17:56.600 --> 0:18:00.600 it's going to really reverberate through markets, and I especially 0:18:00.600 --> 0:18:03.560 when we're talking about inflation, is on top of everybody's mind. 0:18:03.880 --> 0:18:08.320 This leads to higher structural inflation, and the set is 0:18:08.400 --> 0:18:10.280 very conscientious about it. I mean, you've seen the San 0:18:10.320 --> 0:18:14.960 Francisco Fed even talk about how these persistent increases in 0:18:15.160 --> 0:18:19.120 asking rents because of the low housing inventory is actually 0:18:19.160 --> 0:18:23.480 feeding into uh, the rent component in the consumer price indexes. 0:18:24.160 --> 0:18:26.480 How do you think about when you think about inflation 0:18:26.600 --> 0:18:29.159 and some of the impacts on the equity markets, the 0:18:29.280 --> 0:18:33.080 power of dividend growers where at least you're getting some 0:18:33.160 --> 0:18:39.280 inflation protection via dividend. Yeah. I think that's a great 0:18:39.359 --> 0:18:42.400 point to bring up, because you want to be positioned 0:18:42.440 --> 0:18:46.120 with companies that have pricing power, and so when I 0:18:46.200 --> 0:18:50.040 look at that, they have to have unique business models 0:18:50.080 --> 0:18:53.800 that will be impervious to the inflationary shocks that are 0:18:54.000 --> 0:18:57.560 seeing bouts and fits that that are happening across the board, 0:18:57.640 --> 0:19:01.639 especially with oil. And so a lot of dividend companies 0:19:01.680 --> 0:19:05.920 and in income companies have proven their the sustainability of 0:19:05.960 --> 0:19:10.399 their models over time, and so That's why investors can 0:19:10.440 --> 0:19:15.080 get really comfortable even in some residential publicly traded reads 0:19:15.119 --> 0:19:19.480 that are out there because of the structural inflation that 0:19:19.520 --> 0:19:22.840 we're seeing, and rents are only for a year, so 0:19:22.880 --> 0:19:26.360 then they can reset higher. So just take for example apartments, right, 0:19:26.520 --> 0:19:29.959 Apartment has had a really tough time in one especially 0:19:30.000 --> 0:19:33.600 in the coastal markets, and we've now seen them completely 0:19:33.600 --> 0:19:38.080 rebound and so they've seen about rent increases from their 0:19:39.040 --> 0:19:42.520 levels which were impacted from the pandemic. And so when 0:19:42.520 --> 0:19:45.399 you're thinking about income and trying to generate it, you 0:19:45.440 --> 0:19:49.080 want to go to those companies that are uh that 0:19:49.200 --> 0:19:51.639 the key part of their business model and objective is 0:19:51.680 --> 0:19:55.040 to generate income. All right, let's stick with the residential 0:19:55.080 --> 0:19:58.800 rule state. I gotta admit I don't get it. Housing 0:19:58.840 --> 0:20:01.760 prices are just ripping through the roof. And I was 0:20:01.800 --> 0:20:05.199 a recent seller, so I benefited from that. People are 0:20:05.200 --> 0:20:07.520 telling me that rents are going crazy, and they certainly 0:20:07.520 --> 0:20:11.439 are here in New York City where if if if 0:20:11.480 --> 0:20:13.800 those markets are up, what markets are down, there's there 0:20:13.840 --> 0:20:16.040 aren't more people that need to be housed in the 0:20:16.119 --> 0:20:21.000 United States. So where is the other side of that trade? Yeah, 0:20:21.080 --> 0:20:24.240 the other side of that trade, uh started to happen 0:20:24.280 --> 0:20:30.080 in where we decided to build less. And you've had 0:20:30.520 --> 0:20:33.600 real estate is very locals, as you know, you just sold, right, 0:20:33.680 --> 0:20:35.960 and so you're focused on your local market. Well, what 0:20:36.040 --> 0:20:38.439 happens is is you have a lot of state and 0:20:38.520 --> 0:20:44.560 local municipalities that have zoning restrictions and it's the ultimate nimby, right, 0:20:44.600 --> 0:20:47.200 not in my backyard. I don't want this big residential 0:20:47.200 --> 0:20:50.360 development going here. I don't want you know, I don't 0:20:50.400 --> 0:20:53.800 want zoning to be this and that. So since we've 0:20:53.800 --> 0:21:00.880 actually seen fewer total housing units being produced in household formation, 0:21:01.400 --> 0:21:04.880 So what is the driver behind that? Millennials? Right, Millennials 0:21:04.880 --> 0:21:08.480 got in the last bust and so they were living 0:21:08.520 --> 0:21:10.520 with their parents, they were trying to save money. It 0:21:10.560 --> 0:21:13.440 was a tough economy. Now they're coming out and forming 0:21:13.520 --> 0:21:16.479 a lot more households, and we have you were almost 0:21:16.560 --> 0:21:19.960 a third fewer housing units available. So it's just simple 0:21:20.000 --> 0:21:23.080 supply and demand, you know. So I am so sick 0:21:23.240 --> 0:21:27.119 of millennials getting blamed for everything, Kevin. I was getting 0:21:27.200 --> 0:21:31.360 blamed because I wasn't forming households. I was the one 0:21:31.440 --> 0:21:33.840 not doing it. Now we're all doing it, and that's 0:21:33.840 --> 0:21:37.760 for the cause of all the supply jacking issues. It's unbelievable. 0:21:38.520 --> 0:21:42.359 When can we blame gen Z for something? Yes, so, Taylor, 0:21:42.400 --> 0:21:44.720 you're right, I mean, I'm I'm I'm in an older 0:21:44.800 --> 0:21:48.240 millennial myself, right, and so I bought my first house 0:21:48.359 --> 0:21:53.359 at the age of thirty six, and so you're blamed. Yeah, yeah, 0:21:53.440 --> 0:21:56.320 it's totally my fault. Right, Um, we can blame gen 0:21:56.440 --> 0:21:59.760 Z for the for the last mortgage or sorry, we 0:21:59.800 --> 0:22:02.280 can blame the we can blame the older generations for 0:22:02.320 --> 0:22:04.920 the last mortgage crisis. So that's how we differ and 0:22:05.000 --> 0:22:07.639 deflect as millennials because we had to go into the 0:22:07.720 --> 0:22:11.560 job market and it was a tough time for us 0:22:12.440 --> 0:22:14.720 when we were trying to do our household formations because 0:22:14.840 --> 0:22:17.200