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Markets, Cyberthreats, And Real Estate · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast
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Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. I want to bring
0:21
Speaker 1: in Cole Smead as a president in portfolio manager Smead
0:24
Speaker 1: Capital Management. Col thanks so much for joining us here.
0:28
Speaker 1: I'd love to get your thoughts um from a value
0:32
Speaker 1: investor perspective of this market right here. How are you
0:35
Speaker 1: guys positioned here as we finished up the first quarter
0:38
Speaker 1: of well, thanks for having me, Paul, Uh. This is
0:42
Speaker 1: just quite a fun world to be living in, to
0:44
Speaker 1: be downright honest for investors like us. Where As you
0:49
Speaker 1: pointed out, the dynamics of the oil market have people
0:51
Speaker 1: really caught off guard and and on the wrong foot.
0:55
Speaker 1: And at the same time, we have Warren Buffett out
0:57
Speaker 1: there being as aggressive as he ever is in an
1:01
Speaker 1: open market common stock investment decision like he's doing with
1:05
Speaker 1: Oxidal Petroleum, and we feel great about that because we
1:10
Speaker 1: have lower cost basis, and we agree with everything he's seeing.
1:14
Speaker 1: I think the big difference though, is two years ago
1:16
Speaker 1: investors had to look directly into the teeth of hell
1:20
Speaker 1: in that business and bet that things weren't going to
1:23
Speaker 1: be as bad, but you didn't have a lot of
1:25
Speaker 1: information to know that. Versus today, Buffett's looking at um
1:30
Speaker 1: in effect, the return on equity, the business exploding, the
1:33
Speaker 1: capital structure being far better towards the probability success is higher.
1:37
Speaker 1: Therefore he's willing to pay a lot higher prices, and
1:40
Speaker 1: the oddity is investors are not willing to follow him.
1:43
Speaker 1: How are you thinking about sort of the value trade
1:46
Speaker 1: in the place in the face of rates moving higher,
1:50
Speaker 1: and is there sort of that correlation or causation factor.
1:55
Speaker 1: It's a great question, Taylor. Um. Just so you know
1:57
Speaker 1: I think about this is this is the opportunity of
2:00
Speaker 1: a lifetime. I'm thirty eight years old. Um. There's very
2:03
Speaker 1: few people that are thirty eight that actually believe that
2:05
Speaker 1: value investing works, or that you know, buying something cheap
2:08
Speaker 1: enough because the economics are so good, or are of
2:10
Speaker 1: any merit um. They all want to think about it
2:12
Speaker 1: or talk about it, but they all want to go
2:14
Speaker 1: do what the rest of the market participants want to do.
2:16
Speaker 1: So to your point about higher rates, there's no question
2:19
Speaker 1: whether higher rates will hurt stocks. The question is who
2:23
Speaker 1: benefits from it, Okay, and it was the average stock
2:26
Speaker 1: will get hurt by that. Multiples will contract. But I
2:28
Speaker 1: would argue that the oddity of the last ten years
2:31
Speaker 1: versus the next tent is that as the cost of
2:33
Speaker 1: capital rises, capital intensive businesses will succeed because yes, their
2:39
Speaker 1: cost the capital is rising, but fewer will enter those
2:42
Speaker 1: types of businesses versus if you're in capital light industry
2:45
Speaker 1: or an asset light business, people can enter all the
2:48
Speaker 1: while the cost cost the capital rises. So the question is,
2:52
Speaker 1: you know, to save margins, you want to lack a competition,
2:55
Speaker 1: and we think there's just a huge price disparity between
2:58
Speaker 1: what the opportunity is is in what people are paying
3:00
Speaker 1: in the open market, and we own things like malls
3:03
Speaker 1: home builders outside the energy are our biggest sector in
3:06
Speaker 1: either of our international fund. Our US fund is energy
3:09
Speaker 1: um at over both of those, so we're incredibly bullush
3:12
Speaker 1: on energy. But like I said, cyclical assets that are
3:15
Speaker 1: terribly miss priced are completely under the service of the
3:18
Speaker 1: S and P or as you go abroad. All right,
3:20
Speaker 1: I'm glad you brought up energy because it has had
3:23
Speaker 1: a very good run here. And I guess the question
3:26
Speaker 1: for a lot of folks who maybe weren't there early,
3:29
Speaker 1: is the room left in this trade? Yeah, so let's
3:33
Speaker 1: go back to Occidental because and it's so timely with Buffett.
3:36
Speaker 1: So I would argue to be your listeners that occidentals
3:40
Speaker 1: producing about roughly fifty return on equity. Okay as we speak.
3:45
Speaker 1: Now if you think about I mean, that's crazy, that's
3:47
Speaker 1: tech like r O E. Now, some of that's just
3:50
Speaker 1: the accounting Paul, just so you know, they wrote down
3:52
Speaker 1: the good will from Anna Darko Okay, which means the
3:55
Speaker 1: book equity is lower than it really should be. Because
3:57
Speaker 1: now that we know we've hunted all the oil, that
3:59
Speaker 1: book equity that got written down you know probably shouldn't have.
4:02
Speaker 1: With that's done, it's made the return of equity go
4:04
Speaker 1: a lot higher. So if you go in out and said, hey,
4:07
Speaker 1: let's go look at companies that are producing fifty return
4:09
Speaker 1: and equity and trade at two times book, we just
4:11
Speaker 1: won't find them, um, except in the energy business. Right, So,
4:15
Speaker 1: like like Graham said, you know, Ben Ben Graham is
4:18
Speaker 1: mentor said, prices what you pay values what you get.
4:21
Speaker 1: Coca Cola was producing the same return in equity and
4:23
Speaker 1: eighty eight when Buffett stepped into it and did that
4:26
Speaker 1: for about ten years to follow that. And what ends
4:29
Speaker 1: up happening is you can comp on book at that
4:30
Speaker 1: level for five, seven, or even ten years. You make
4:34
Speaker 1: so much book value per share you don't really care
4:37
Speaker 1: what the book multiples in the end because the book
4:40
Speaker 1: grows so much. And that's exactly what's going on. Oxy.
4:43
Speaker 1: If they can buy back shares, that just enhances they've
4:45
Speaker 1: laid out most of their capital turns are gonna happen
4:47
Speaker 1: by buy back that just enhances that book value per
4:50
Speaker 1: share idea. Are your klins so asking you at all
4:52
Speaker 1: about the bad word here, the R word recession and
4:57
Speaker 1: sort of how you think about some of these big
5:00
Speaker 1: value performers in the face of that. Yeah, it's a
5:03
Speaker 1: it's a great question, Taylor. Um, so you got to
5:07
Speaker 1: remember the said is augmenting the curve still right that
5:10
Speaker 1: you know that we have not stopped buying on the
5:12
Speaker 1: long end. Um, so they're still subduing the long end.
5:15
Speaker 1: So the question I would be asking is if the
5:17
Speaker 1: FEDS not present in a year, what does the long
5:19
Speaker 1: end look like versus they're completely controlling the short end,
5:23
Speaker 1: And we know that that's got to go up, And
5:25
Speaker 1: the question is does it got to go up to
5:26
Speaker 1: two and a half or is Larry Summer's right and
5:29
Speaker 1: we're going to four and that's the only way to
5:32
Speaker 1: quell this. And then the question is where does the
5:34
Speaker 1: market end up taking the tenure on the long end
5:37
Speaker 1: of the curve. So we we don't see it as
5:39
Speaker 1: a recession because if you look at prior instances of
5:42
Speaker 1: like oil spiking back in oh a percentage of wallet
5:46
Speaker 1: that was going towards gas was way higher than at
5:49
Speaker 1: those prices than we are now at the numbers we
5:52
Speaker 1: looked at, I think this came from fund strat four
5:54
Speaker 1: point seven percent back then a percentage of wallet it's
5:56
Speaker 1: at three today. At these current prices, we'd have to
5:59
Speaker 1: go to hundred fifty two dollar prices to really get
6:02
Speaker 1: back to a crimp like that. And we're a moonshot
6:04
Speaker 1: according to the Biden administration, you know, away from that
6:07
Speaker 1: as they released reserves today. So um, so we don't
6:09
Speaker 1: look at it like that. Also, if you look at
6:11
Speaker 1: debt service ratios, they've never been lower since nineteen eight.
6:14
Speaker 1: So the American household, with their savings rates coming off
6:16
Speaker 1: the pandemic and their low debt service ratios, we've never
6:20
Speaker 1: been so ready to spend our way directly in deflation inflation. Hey, Cole,
6:25
Speaker 1: thanks so much for joining us. Always appreciate getting your perspective.
6:28
Speaker 1: Cole Smead, President, portfolio manager of SMED Capital Management. Looking
6:38
Speaker 1: at the t l c O function on the Bloomberg
6:41
Speaker 1: terminal gets all the global commodities. Looking at the medals
6:44
Speaker 1: in particular, I'm seeing year to day gains of ten
6:47
Speaker 1: even before you look at Nickel up fifty six percent
6:50
Speaker 1: year to day. Where do we go from here? Obviously
6:52
Speaker 1: reflecting a lot of geopolitical tensions in Europe, Let's bring
6:56
Speaker 1: in Everett Millman, chief market analyst for Gainesville Coins. Everett,
6:59
Speaker 1: which your big call here for medals? Here you highlighted
7:03
Speaker 1: the last time you're on that this was gonna be
7:05
Speaker 1: an issue. We're gonna get some supply change, some supply
7:07
Speaker 1: issues coming out of Russia. Where do we go from here? Absolutely,
7:13
Speaker 1: Paul Um and I believe the Biden administration invoking the
7:17
Speaker 1: Defense Production Act is not just a significant move with
7:20
Speaker 1: respect to Russia. UM, it goes beyond that. Many of
7:23
Speaker 1: the sources for some of those EV medals, those battery
7:27
Speaker 1: medals that we're talking about, like nickel and lithium and cobalt,
7:31
Speaker 1: they are mined in uh not particularly well regulated jurisdictions
7:35
Speaker 1: UM and also not particularly friendly trading partners for the
7:39
Speaker 1: United States. So, for instance, about two thirds of global
7:43
Speaker 1: cobalt is mined in the Democratic Republic of Congo. UM.
7:47
Speaker 1: You have a major nickel operation in Indonesia, and the
7:50
Speaker 1: Indonesian government has been become increasingly protectionists with its nickel
7:55
Speaker 1: and copper exports. And then of course Beijing is on
7:58
Speaker 1: both sides of dominating consumption and production of a lot
8:02
Speaker 1: of those key commodities. So really this is a move
8:04
Speaker 1: to bring those supply chains to the United States, to
8:09
Speaker 1: North America a bit more secure. But of course I
8:12
Speaker 1: believe this process is going to be fairly gradual and constrained. UM.
8:17
Speaker 1: It takes many years for for these types of minds
8:20
Speaker 1: to become operational. That doesn't even mention the infrastructure needed
8:24
Speaker 1: for charging stations, and the d p A doesn't clear
8:27
Speaker 1: away any potential regulations on the mining UM. So the
8:30
Speaker 1: Biden administration has been fairly careful to keep environmental concerns
8:35
Speaker 1: at top of mind. Um, all of this means that
8:37
Speaker 1: it will not be quite so easy to ramp up
8:39
Speaker 1: production of That sort of brings me to my next question.
8:42
Speaker 1: When we think about domestic production of some of these
8:45
Speaker 1: raw materials, is it clean? We've spoken a lot of
8:49
Speaker 1: companies that say, look, we can do it cleaner, but
8:52
Speaker 1: I think there is maybe some concern around that, right,
8:55
Speaker 1: A major concern um, not just for E s G reasons,
8:58
Speaker 1: but from a feasibility standpoint. And that's one of the
9:02
Speaker 1: main things that invoking the d p A does is
9:04
Speaker 1: it at least gets the ball rolling on some feasibility
9:07
Speaker 1: studies to see what is the what kind of costs
9:11
Speaker 1: can we expect, what kind of profitability can we expect? Because,
9:13
Speaker 1: as you mentioned, if environmental regulations are ignored, as they
9:18
Speaker 1: are in some jurisdictions, then um, you can mind these
9:20
Speaker 1: metals much more cheaply. But that is obviously not going
9:23
Speaker 1: to fly in the United States. What are you telling
9:25
Speaker 1: your clients about metals just broadly definders there are still
9:28
Speaker 1: room to grow, or do we kind of it's had
9:31
Speaker 1: its run up, it's a fascinating question because although I
9:36
Speaker 1: think we do still have room to grow, the high
9:39
Speaker 1: level of volatility we've seen across the metal space. You
9:42
Speaker 1: mentioned nicol that's probably the biggest example, but even with gold,
9:45
Speaker 1: we've seen quite a bit of intra day volatility going
9:48
Speaker 1: back and forth UM that is leading to some liquidity issues.
9:53
Speaker 1: It's pushing some traders and participants out of the market.
9:56
Speaker 1: And now we do have the fresh set of lockdowns
9:59
Speaker 1: and SHA high, so that could potentially curb some of
10:02
Speaker 1: the demand for copper and gold in these other medals,
10:05
Speaker 1: it's just right now, it's a big, big pale of
10:09
Speaker 1: uncertainty that's hanging over this market. How does this sort
10:12
Speaker 1: of help relieve some of the volatility within this market,
10:15
Speaker 1: if at all? It may not. I think that it's
10:20
Speaker 1: going to take um many months for this to play out,
10:23
Speaker 1: especially given the geopolitical conflicts that are continuing to rage.
10:27
Speaker 1: I think volatility and um some impaired liquidity is probably
10:31
Speaker 1: what we should expect for the next at least the
10:34
Speaker 1: next quarter across the commodity space. All right, ever, thank
10:37
Speaker 1: you so much for joining us. Really appreciate getting your
10:40
Speaker 1: perspective on all things metals. All right, let's talk about
10:47
Speaker 1: we'll continue our discussion of energy, this time focusing on
10:50
Speaker 1: security of the energy grid. To do that, we welcome
10:53
Speaker 1: Daniel McGann, CEO of American Superconductor. Daniel, thanks much for
10:57
Speaker 1: joining us here. I know you guys at American semi
11:00
Speaker 1: Conductor provide wind turbine electronic controls and systems that gives
11:04
Speaker 1: you a good sense of kind of how our system
11:06
Speaker 1: is kind of wired here in terms of our electrical
11:09
Speaker 1: grid here, how secure or how insecure from your perspective
11:14
Speaker 1: is the electric grid in the United States. Thanks for
11:19
Speaker 1: having me. Um. Yeah, at American super Conductor, we focused
11:22
Speaker 1: not only on wind but on resiliency of the grid.
11:24
Speaker 1: And what we're seeing is this is a challenge that's
11:27
Speaker 1: going to continue to exacerbate over the coming years. The
11:31
Speaker 1: types of things that we're going to rely upon the
11:33
Speaker 1: grid for, um, from you know, powering different neighborhoods with
11:37
Speaker 1: with the change and how people are working and working
11:39
Speaker 1: from home, to the electrification of transportation and specifically vehicles,
11:44
Speaker 1: and the grid is going to be asked to do
11:46
Speaker 1: a lot of things it's not designed to do. UM.
11:49
Speaker 1: So we've developed some solutions to help the system providers
11:54
Speaker 1: be able to in a cost advantageous way be able
11:57
Speaker 1: to provide more capacity and more resilience either the overall system.
12:01
Speaker 1: Talk to us about sort of that transition in the
12:03
Speaker 1: way that renewables can play a part. A lot of people,
12:07
Speaker 1: of course want the transition to renewables, but they just
12:10
Speaker 1: wanted in a reliable way. How are you thinking about
12:13
Speaker 1: the role that renewables can play in that? But we
12:18
Speaker 1: want to make sure that renewables can be UM a
12:21
Speaker 1: cross competitive UM. We work across the globe in wind
12:24
Speaker 1: and also in large scare solar UM. A lot of
12:28
Speaker 1: what our most recent focus has been on is on
12:31
Speaker 1: hardening the grid, allowing the grid to be able to
12:34
Speaker 1: do more. Are we separate our business into a wind
12:38
Speaker 1: segment and a grid segment. Our grid segment now is
12:42
Speaker 1: at record levels in the history of the company. We
12:44
Speaker 1: actually grew the grid segment, but more against a year
12:48
Speaker 1: ago quarter. So we see that, you know, the renewables
12:52
Speaker 1: in many way and the electric vehicles are going to
12:54
Speaker 1: drive dramatic changes to the grid to bring be able
12:57
Speaker 1: to bring this power to market, to to where it's
13:01
Speaker 1: needed when it's needed. UM and one of the solutions
13:04
Speaker 1: that we recently made some news around US our resilient
13:07
Speaker 1: electric grid solution. I actually Taylor did read a book
13:12
Speaker 1: that was a recommendation from Keith Grossman simply called The Grid,
13:17
Speaker 1: and it's a history of kind of electrification of the
13:19
Speaker 1: United States and kind of where we are. So if
13:21
Speaker 1: you want to learn about the electric grid United States,
13:24
Speaker 1: and it is a fascinating development story, I recommend that. Um, Daniel,
13:29
Speaker 1: you know, we had a guest on from the petroleum
13:31
Speaker 1: industry just earlier today and she's making a pretty strong argument,
13:34
Speaker 1: not surprisingly given her from you know, the group. She
13:37
Speaker 1: represents that there is still a need for oil and
13:41
Speaker 1: gas in this country. Can't just all be renewables, and
13:43
Speaker 1: we're seeing that now with the price of energy, given
13:46
Speaker 1: some of the geopolitical concerns. How do you think that
13:49
Speaker 1: think about the future of you know, kind of just
13:52
Speaker 1: energy development. Is nuclear does that have a role? Uh,
13:55
Speaker 1: fossil fuels, where do they fit in? And then of
13:58
Speaker 1: course renewables, how do you think about that. I think
14:01
Speaker 1: there's a diverse need for energy sources and you can see, um,
14:05
Speaker 1: you know, the world changes can change pretty dramatically. Um.
14:09
Speaker 1: You know, not too many years ago we were talking
14:11
Speaker 1: about a move to natural gas um, you know, and
14:14
Speaker 1: now Europe's waking up realizing that, you know, they have
14:18
Speaker 1: their challenges with with supply from Russia given everything that's
14:22
Speaker 1: going on over there. So I think as long as
14:25
Speaker 1: the world keeps moving towards cleaner sources and creating a
14:29
Speaker 1: network that can allow you know, green power to move
14:32
Speaker 1: as easy as other types of power, that I think
14:36
Speaker 1: net net, the consumer is at an advantage and and
14:39
Speaker 1: the you know, the planet and the climate are taking
14:42
Speaker 1: better care of. How do you think with renewable some
14:45
Speaker 1: of the big question has been the storage of that.
14:49
Speaker 1: Are you thinking about how to better store renewables that
14:53
Speaker 1: when we need it, we have it. I think that
14:56
Speaker 1: that's that's certainly I'll say maybe a mid a longer
15:00
Speaker 1: term problem where we've focused a lot on is is
15:04
Speaker 1: there's need for kind of instantaneous manage of power within
15:07
Speaker 1: the grid because of these disparate sources, because we're asking
15:11
Speaker 1: the distribution grid to do more and more. So a
15:14
Speaker 1: lot of our solutions are really trying to deal at
15:17
Speaker 1: kind of the middlesecond microsecond management of voltage, current or
15:22
Speaker 1: some combination thereof in different parts of the grid, be
15:26
Speaker 1: it trying to bring more rooftop solar onto a grid
15:30
Speaker 1: using the existing system, be it trying to interconnect nodes
15:35
Speaker 1: on the network, these transmission distribution substations to allow the
15:40
Speaker 1: grid to untrapped existing capacity that's already there. We looked
15:45
Speaker 1: at certain cities where we could double the quadruple the
15:48
Speaker 1: level of resiliency in the urban core by turning the
15:51
Speaker 1: distribution system into a true network where every point on
15:56
Speaker 1: the grid talks to every other point allow actrically. UH. Today,
16:01
Speaker 1: the distribution grid it's kind of like an aqueduct to
16:04
Speaker 1: your home, you know that if you think of power
16:06
Speaker 1: as water, everything rolls in that direction to you, and
16:09
Speaker 1: once you get into the last mile or so, there's
16:12
Speaker 1: no way really to be able to move power to
16:14
Speaker 1: other parts of the grid. So we've developed this thing
16:17
Speaker 1: called Brazilian Electric Grid that we UH just lit up
16:20
Speaker 1: our first installation with the City of Chicago in the summer,
16:23
Speaker 1: which enables the interconnection of these existing assets in a
16:28
Speaker 1: very new and unique way. Right, Hey, Dan, thanks so
16:32
Speaker 1: much for joining us. Really appreciate it. You know, we're
16:34
Speaker 1: talking about energy here today and that includes they the
16:37
Speaker 1: security of our energy grid as well. Daniel McGann, CEO
16:41
Speaker 1: of American a super Conductor that's a NASTAC traded stock.
16:44
Speaker 1: A m SC is the symbol for that one. I'm
16:52
Speaker 1: want to get to our next guest right now, Kevin
16:54
Speaker 1: Kelly Good Irish name Kevin Kelly, CEO and founder of
16:57
Speaker 1: Kelly E. T F joins us. Kelly, thanks so much
17:00
Speaker 1: for taking the time here because I just wonder a
17:02
Speaker 1: story about mortgage rates really starting to tick up um
17:06
Speaker 1: and I'm wondering if this is kind of the first,
17:09
Speaker 1: you know, break maybe and what's been a very strong
17:12
Speaker 1: commercial and residential real estate market, particularly the residential side
17:16
Speaker 1: over the last couple of years. What's your view of
17:18
Speaker 1: the residential real estate market. Well, I'm glad we're talking
17:22
Speaker 1: about mortgage rates and its impact on, uh, the the
17:27
Speaker 1: overall housing market because the problem we're having now is
17:31
Speaker 1: that there's very limited inventory, so that led the prices
17:34
Speaker 1: going up, and with mortgage rates going up, it's going
17:37
Speaker 1: to lead to less inventory because people that have purchased
17:42
Speaker 1: homes or refinanced homes last year are going to stay
17:46
Speaker 1: in their homes for longer because they won't want to
17:48
Speaker 1: give that interest rate up, and so it's going to
17:50
Speaker 1: further exacerbate the housing inventory shortage we already have. So
17:56
Speaker 1: it's going to really reverberate through markets, and I especially
18:00
Speaker 1: when we're talking about inflation, is on top of everybody's mind.
18:03
Speaker 1: This leads to higher structural inflation, and the set is
18:08
Speaker 1: very conscientious about it. I mean, you've seen the San
18:10
Speaker 1: Francisco Fed even talk about how these persistent increases in
18:15
Speaker 1: asking rents because of the low housing inventory is actually
18:19
Speaker 1: feeding into uh, the rent component in the consumer price indexes.
18:24
Speaker 1: How do you think about when you think about inflation
18:26
Speaker 1: and some of the impacts on the equity markets, the
18:29
Speaker 1: power of dividend growers where at least you're getting some
18:33
Speaker 1: inflation protection via dividend. Yeah. I think that's a great
18:39
Speaker 1: point to bring up, because you want to be positioned
18:42
Speaker 1: with companies that have pricing power, and so when I
18:46
Speaker 1: look at that, they have to have unique business models
18:50
Speaker 1: that will be impervious to the inflationary shocks that are
18:54
Speaker 1: seeing bouts and fits that that are happening across the board,
18:57
Speaker 1: especially with oil. And so a lot of dividend companies
19:01
Speaker 1: and in income companies have proven their the sustainability of
19:05
Speaker 1: their models over time, and so That's why investors can
19:10
Speaker 1: get really comfortable even in some residential publicly traded reads
19:15
Speaker 1: that are out there because of the structural inflation that
19:19
Speaker 1: we're seeing, and rents are only for a year, so
19:22
Speaker 1: then they can reset higher. So just take for example apartments, right,
19:26
Speaker 1: Apartment has had a really tough time in one especially
19:30
Speaker 1: in the coastal markets, and we've now seen them completely
19:33
Speaker 1: rebound and so they've seen about rent increases from their
19:39
Speaker 1: levels which were impacted from the pandemic. And so when
19:42
Speaker 1: you're thinking about income and trying to generate it, you
19:45
Speaker 1: want to go to those companies that are uh that
19:49
Speaker 1: the key part of their business model and objective is
19:51
Speaker 1: to generate income. All right, let's stick with the residential
19:55
Speaker 1: rule state. I gotta admit I don't get it. Housing
19:58
Speaker 1: prices are just ripping through the roof. And I was
20:01
Speaker 1: a recent seller, so I benefited from that. People are
20:05
Speaker 1: telling me that rents are going crazy, and they certainly
20:07
Speaker 1: are here in New York City where if if if
20:11
Speaker 1: those markets are up, what markets are down, there's there
20:13
Speaker 1: aren't more people that need to be housed in the
20:16
Speaker 1: United States. So where is the other side of that trade? Yeah,
20:21
Speaker 1: the other side of that trade, uh started to happen
20:24
Speaker 1: in where we decided to build less. And you've had
20:30
Speaker 1: real estate is very locals, as you know, you just sold, right,
20:33
Speaker 1: and so you're focused on your local market. Well, what
20:36
Speaker 1: happens is is you have a lot of state and
20:38
Speaker 1: local municipalities that have zoning restrictions and it's the ultimate nimby, right,
20:44
Speaker 1: not in my backyard. I don't want this big residential
20:47
Speaker 1: development going here. I don't want you know, I don't
20:50
Speaker 1: want zoning to be this and that. So since we've
20:53
Speaker 1: actually seen fewer total housing units being produced in household formation,
21:01
Speaker 1: So what is the driver behind that? Millennials? Right, Millennials
21:04
Speaker 1: got in the last bust and so they were living
21:08
Speaker 1: with their parents, they were trying to save money. It
21:10
Speaker 1: was a tough economy. Now they're coming out and forming
21:13
Speaker 1: a lot more households, and we have you were almost
21:16
Speaker 1: a third fewer housing units available. So it's just simple
21:20
Speaker 1: supply and demand, you know. So I am so sick
21:23
Speaker 1: of millennials getting blamed for everything, Kevin. I was getting
21:27
Speaker 1: blamed because I wasn't forming households. I was the one
21:31
Speaker 1: not doing it. Now we're all doing it, and that's
21:33
Speaker 1: for the cause of all the supply jacking issues. It's unbelievable.
21:38
Speaker 1: When can we blame gen Z for something? Yes, so, Taylor,
21:42
Speaker 1: you're right, I mean, I'm I'm I'm in an older
21:44
Speaker 1: millennial myself, right, and so I bought my first house
21:48
Speaker 1: at the age of thirty six, and so you're blamed. Yeah, yeah,
21:53
Speaker 1: it's totally my fault. Right, Um, we can blame gen
21:56
Speaker 1: Z for the for the last mortgage or sorry, we
21:59
Speaker 1: can blame the we can blame the older generations for
22:02
Speaker 1: the last mortgage crisis. So that's how we differ and
22:05
Speaker 1: deflect as millennials because we had to go into the
22:07
Speaker 1: job market and it was a tough time for us
22:12
Speaker 1: when we were trying to do our household formations because
22:14
Speaker 1: look at all the costs that went up. Think about
22:17
Speaker 1: what people have to spend money on every day. Education.
22:20
Speaker 1: Education has gone through the room, right, So we're paying
22:22
Speaker 1: more in education costs, we're paying more in energy costs,
22:25
Speaker 1: we're paying more in housing costs. What generations are are
22:28
Speaker 1: to blame for that? I'll leave that up to you guys.
22:30
Speaker 1: All right, I think I know where this is coming
22:32
Speaker 1: coming back. Yeah, you may, you may. Yeah, I'm in
22:35
Speaker 1: the tail tale and literally the last year or two
22:38
Speaker 1: of the baby boomers. But Kevin, he gets points for
22:40
Speaker 1: explaining to me this housing cost issue. I hadn't. I
22:43
Speaker 1: haven't gotten that. So we had supply over the last
22:46
Speaker 1: ten twelve years going down, and then you had some
22:48
Speaker 1: demand spike heres the millennials get out of the basement.
22:51
Speaker 1: So Kevin Kelly, good job there, CEO and founder of
22:54
Speaker 1: Kelly E. T S talking about the rental market, the
22:57
Speaker 1: real estate market way way hot, even during the whole pandemic.
23:03
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
23:06
Speaker 1: subscribe and listen to interviews of Apple Podcasts or whatever
23:10
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
23:14
Speaker 1: at Matt Miller three. On Fall Sweeney, I'm on Twitter
23:18
Speaker 1: at pt Sweeney. Before the podcast, you can always catch
23:21
Speaker 1: us worldwide at Bloomberg Radio.