Developing multifamily in today’s environment w/ Scott Lawlor CEO of Waypoint Real Estate Investments

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Ryan Morfin:

Welcome to Non-Beta Alpha. I’m Ryan Morfin. Today’s episode, we have Scott Lawlor, CEO of Waypoint Real Estate Investments, talking to us about the benefits of developing multifamily in today’s environment. This is Non-Beta Alpha.

Ryan Morfin:

Scott, welcome to the show. Thank you for joining us. We appreciate you being on.

Scott Lawlor:

Thanks for having me.

Ryan Morfin:

So you’re at Waypoint Development and you guys are developing multifamily, and it’s an interesting time. Multifamily has been doing very well prior to the pandemic. And today, it’s one of the few asset classes that still has access to permanent financing, whether CMBS Market or HUD, or what have you. Would love to hear a little bit about your thoughts about where the multifamily market was, development sub sector was for that asset class prior to COVID? And how has it changed over the last few months?

Scott Lawlor:

So it sounds like we’re talking about development specifically now. So a couple of things. First, I think there’s a lot of misunderstanding in the market prior to COVID about where the apartment sector was with respect to new development. In particular, the new supply threat. We play primarily in the Sun Belt and really the most meaningful risk in the Sun Belt apartment sector, is new supply threat. Because it’s a part of the country where it’s relatively easy to build, and it’s a product that’s relatively easy to build.

Scott Lawlor:

So there started to be a lot of chatter the last few years about, “Is the party over? This city’s seeing a lot of new supply. That city’s seeing a lot of new supply.” And it was terribly, terribly misunderstood. Because people were latching on to a few headline bullet points. But the truth is, the new supply threat really … You have to drill down and segment your market by geography and by price point as well. And there were certain at metros that were heavily experiencing maybe a wave all at once, so those developers were given away a few months free.

Scott Lawlor:

Then from a price point perspective, because we’re developing or we’ve have developed a serious affordability issue in the US rental housing sector. And the vast, vast majority of new supply was at the top dollar price point. And develop were caught in the arms race, and developers and their institutional partners shooting to deliver the coolest, most tricked out product and get top dollar rents.

Scott Lawlor:

So my point is, so long as you can identify where the new supply threat is, you can navigate around it. And so I don’t think it was a threat everyone thought. And in particular, you also have to step back and at least understand it from a macro perspective. And if you think about, how much stock do we need just to accommodate growth in this country? You have to apply some factor for obsolescence and conversion. These are not securities. It’s a built environment, it doesn’t last forever. The fact is we weren’t building enough.

Scott Lawlor:

I won’t go on and on about it, but my world broadly, or across the country, about a 20 million unit world. If you want to say we grow at 1% a year, it’s a little high lately, but it’s not a bad, long term number. That’s 200,000 units just to keep up with growth. And if you want to say even 1% a year is lost to obsolescence and conversion, which is probably conservative. Because this stuff doesn’t last a hundred years, but let’s say it did. That’s 400,000 units a year to tread water. And we were building three, three and a quarter, maybe. And so the point is new supply from a macro perspective simply was not an issue. And so the reason that’s all… Sorry, long winded answer to your question is, those were the conditions heading into COVID.

Scott Lawlor:

We had very, very solid fundamentals, rent, rental growth, occupancy, and so on, modest new… manageable new supply. And of course we weren’t levered anything like we were last time, industry-wide nor at Waypoint. And so if you sail into a cycle, with modest new supply, with modest leverage in a sector that has solid fundamentals, and that is historically resilient and a much lower beta sector versus the others… Not to say COVID has been a positive in any way, but it certainly hasn’t caused the apartment sector to turn upside down at all. And particularly not in our geography. So sorry, long winded answer. But as you can tell, we live and breathe this. So it’s on our mind a lot.

Ryan Morfin:

Yeah. If you look at the consumers too, I guess the question would be, the health of a U S consumer, household income has taken a hit with the unemployment going up above 11%. How are you looking at the renter outlook? It seems like a lot of people are getting collections still, but do you see stress in the horizon?

Scott Lawlor:

Well, look, I’m not one to forecast politics. I don’t know that it’s doable, but if you asked me to guess, a few months out from an election, are Republicans going to vote to pull the rug out from under… We call it the $600 question because it’s been on everyone’s mind. And I know it’s very, very topical as even the minute. I don’t think they are. Are Democrats going to vote against extending benefits to people out of debt? I don’t think they are. So it would seem to me there’s a very, very high likelihood in some shape or form benefits are going to get extended. Clearly that’s a big part of why collections, frankly, are artificially high. Collections have been juiced. The consumer is on drugs a little bit, right now. Excuse the terminology. But the fact is that the trade we’re observing is the administration, Congress and the Fed doing what they can, finding every bullet in their gun to get us through the roughest part of the rough patch until the labor market heels and consumer stands on its own two feet.

Scott Lawlor:

It’s not there today, obviously, but I don’t think they’re going to pull the rug out from under. It’s been working so far. If you asked any guy in the apartment sector in March, would he forecast 96 cents on the dollar collections through 2Q, they’re lying if they say, “Yes.” We’re all very pleasantly surprised. And obviously the benefits are a big part of it. But the other part of it is obviously the impact is not the same across income levels, across price point of rent, across geography. And we’re playing in areas that have held up pretty well. So my guess is, the government’s going to keep doing what it’s doing in some shape or form. Really, because there’s not much other of a choice.

Ryan Morfin:

Yeah. No, I think the consumer is definitely being buoyed up and I think the political season’s upon us. So there’s no way they’re not going to give a stimulus package. I concur with you. One question is, so you’re focused on Sun Belt, talk to me maybe about some of the markets that you think are the strongest in the country and can those Sun Belt markets withstand the type of recession that we’re in? Will they play through or do you think this is going to be one of those macro wide events where all markets just have a level effect on?

Scott Lawlor:

No, I think we’ll play through okay. We’ll certainly see a hiccup and already have in market rental growth. We’ve not seen a hiccup in face rates. We’ve not seen a hiccup in occupancy. We’re still signing the same number of leases. What we’re not doing is bumping rates. So that’s not a win if you’d rather take a $1000 guy and roll them at a 1,030 or 40. But right now our view is with much chaos, let’s keep heads on beds. So we’re rolling our $1000 guy at a thousand and that’s been the case for a few months, might very well be for a few more. In the scheme of things, if you’re going to put 40 million people out of a job and all you’re doing is not getting your bumps, not such a bad trade.

Scott Lawlor:

But look, our bet has never, ever been cyclical. Our bet is longterm. We’re betting on trends that drive apartment demand around the country and in particular, in our geography. And so for instance, if you look at… We would broadly put 14 metros, basically the obvious 14 biggest metros from Florida to Arizona. They’ve grown by about 50%, this millennium. So about 36 or so million people to 54 or so million people. 50% growth in 20 years is serious stuff when you’re talking about big cities, not tiny little towns. That’s a trend that started way before 2000 and I think is going to continue way beyond 2020. If you look at the same… If you take the 14 biggest Metro’s Northeast Midwest, and the same 20 years, they’ve gone from about 65 million people to 75 million people, which is to say less than 10% aggregate growth in 20 years. The United States is growing in the Sun Belt.

Scott Lawlor:

It’s just what it is. Now, of course, we’re not so smart. A lot of other folks have figured it out and that’s where the developers are and all that stuff. So we have to contend with new supply. But as I said, we can navigate around that. But the trends that we’re betting on, whether it’s the growth we’re trying to capture, and all sorts of other cultural trends, as it relates to renting versus owning, age people are getting married, age they’re having kids and all this stuff, all of that represents structural tailwind that’s driving our business and I think well through COVID and then whatever comes after and whatever comes after that.

Ryan Morfin:

Why do you think younger people are not owning houses and continuing to rent longer? What do you think psychologically about our culture is changing?

Scott Lawlor:

Well, look, I think we had a historic event that we talked about a little bit earlier. 13 year… Really started in 2007 and then bottomed out in ’08. But the United States experienced 70 consecutive years of positive home price value, I think, right through ’07. Positive appreciation, 70 years in a row. And then we saw values collapse, whatever it was, 30 or so percent. So you have a generation of younger Americans that watched their parents get wiped out. So, it was a fundamental truth in American life. In multiple generations, you buy a house as soon as you can. And owning a home is a very, very important, life goal. And I think we have a generation now that just doesn’t see the world that way. They’re happy to rent.

Scott Lawlor:

That’s not everyone. It’s not to say 70% home ownership went to 50. It only went to about 63. Maybe it’s banging around 64 or so right now. But that’s a tremendous amount of demand at the margin. And I don’t [inaudible 00:10:44] balling anything, but I have not… I am a believer in getting my hands on every bit of data that’s out there, every forecast. And I’ve not seen anything to suggest that home ownership is bouncing back up. I think that was a structural change that occurred 12, 13 years ago, and that’s with us for a very long time. And it’s a psychological shift, I think, very clearly as a result of what happened.

Ryan Morfin:

Yeah. I do think you brought up some good points about folks saying, “You know what? I don’t want to buy because I saw, a decade ago, the volatility that could exist on a bubble.” Do you see that maybe single family, residential rentals are competitive and growing, competitive set against apartment buildings?

Scott Lawlor:

Yeah. We’re a very big fan of that strategy. And we’ve been looking at deals and we’ve got a couple lined up. And we think it’s an interesting angle because it’s one thing to say that the kids who were in middle school and high school when the crash hit, and now late twenties, early thirties, they saw their parents get crushed or not necessarily so excited that they don’t get why it should be the American dream per se. But that’s a conversation about own versus rent. The separate issue is having a backyard, living in a suburban environment and all this stuff. And as millennials get older and get married and have kids, I think it’s perfectly reasonable to assume, at least some of them, not all, but some of them are going to want the lifestyle, but it doesn’t mean they want the economic trade.

Scott Lawlor:

So the way you accommodate both those needs is you built single family [inaudible 00:12:22]. And it’s really not much of a speculative thesis because approximately half of the rental households in United States are rentals of single family homes. So there’s, 40 million give or take rental households in the U.S. Half are renting single family homes already. It’s just that before the last crash and the birth of some of the big companies that came out of the crash, we bought large pools and all that stuff. It was almost always historically an odds and ends mom and pop business. Someone buys a fixer upper and rents it out and does it as an investment. It’s become a bit of a business now. But the idea that people will move to the burbs and choose to rent instead of own in a single family home, has has been established, tens of millions for many, many years.

Scott Lawlor:

And so the thesis around single family rental from a development perspective, is creating the same product, but then bringing to bear some of what we bring to bear in a multifamily community, meaning amenities, services, all that stuff. So if you can move to the burbs, not cut a check for a down payment, not go on a mortgage, have the maintenance guy come fix stuff, have a gym, have a pool, have a club house. It might be a best of all worlds. So we really think there’s a business there.

Ryan Morfin:

Yeah, no. It is definitely an institutionalized asset class where like you mentioned earlier, but there’s bigger players, aggregating portfolios. And so it’s going to be an interesting, I think, a new sub-asset class of residential for investors in the future. So go going back to maybe just the development piece of multifamily. So how has the lending market shifted through COVID for new developments? How have you seen construction financing price out and gap up?

Scott Lawlor:

Well, for us, it has not been impacted quite as much because we’re a relatively low loan to value player anyway. So if you were in the business of trying to borrow every dollar you can, where you’ve been hurt, primarily is obviously lenders have haircut proceeds. So if you wanted to borrow 75 LTV before, that’s pretty tough to do now, but if you are 55 to 60 LTV player to begin with, then it’s really not been eventful and we’ve not seen meaningful price moving here.

Ryan Morfin:

Hmm. Interesting. Is there still the availability though? Is it widely available still to get loans for multifamily?

Scott Lawlor:

I would say it’s available maybe a little less frothy, a little less lenders tripping over each other fighting to get each loan, but it’s certainly available. We’re in the market for a couple of construction loans right now and we’re not having any problem.

Ryan Morfin:

That’s good. And so as you guys are delivering projects and thinking about, “Okay, maybe have to go back to underwrite.” What would be the entry price points for rental growth? How are you changing your underwriting models today? Are you underwriting just flat across the board rental growth? Or do you guys think it will… Eventually inflation, CPI will start to be underwritten again? Or do you look at it a declining, health of the consumer perhaps?

Scott Lawlor:

Well, we’ve always underwritten marketing rental growth very conservatively anyway. I was just never been a believer of putting spikes in the model in order to get to a number. It seems to me that we’re going to be in a low inflation environment for awhile. Eventually all this capital sloshing about it’s going to do something, but I don’t know that there’s clear agreement on that and exactly how it’s going to manifest itself and when. But for now we haven’t changed our underwriting that much simply because we never really underwrote much North of inflation, if any. And so for instance, the last 10 years, more or less from cycle to cycle, market rental growth on a national basis was in the ballpark of 2X inflation over that same period. So, a pretty strong statistic. And I think a lot of it as a result of some of the stuff I was saying before.

Scott Lawlor:

And so when we think about the world going forward, there’s not much to dial back. We might underwrite 2.5% market rental growth and 2% growth on the OPEX or something like that. A little bit of spread just because it’s reality. But the truth is that’s probably understating this credit. If you asked me, just making a fun bet, I would bet there’s going to be more than a 50 basis point spread for some stretch of years. And then the other thing is, don’t forget on development deals, we’re not underwriting rents tomorrow. If I buy a piece of dirt tomorrow, best case I’m trying to lease units 18 months from now. I’m stabilizing two and a half years from now and so on. And so we believe at least, we’ll be through the worst or COVID by the time we’re leasing units in any piece of dirt that we’re working on right now.

Ryan Morfin:

Has your view on exit cap rates shifted at all? Do you see the disparity between bid-ask and the market today? Do you underwrite and change that metric?

Scott Lawlor:

Well, first we never buy based on a single cap rate. I’m a big believer in sensitivity analysis and understanding a bell curve. Because anyone who thinks they really know what cap rates are going to be for apartment properties in Savannah, Georgia in 2024 is way smarter than me. But cap rates are a very, very interesting conversation right now. Because the single biggest question I’ve been getting the last several months from my investors is, “All right, well, when are we going to get started? When’s there going to be blood in the streets? When are we going to back up the truck wave and all these cheap assets?” And I’ve been engaging in a tremendous game of expectations management. Because a lot of what I said before, we’re in a sector that entered the crisis in very, very good shape. It’s historically resilient. And we just haven’t seen any real meaningful impact on fundamentals. That could change, but that’s so far.

Scott Lawlor:

So we live at the point of intersection of two arenas. There’s fundamentals and cap rates. We just talked about fundamentals. Cap rates, your initial instinct might be “Well, they’re going to gap out because how can they not gap out? Because it’s the worst crisis ever.” And we don’t know yet, because what there is now is a lot of chatter, a lot of price talk, a lot of noise, but not a lot of closed deals post COVID, obviously just yet. But it seems that the idea of a “post COVID discount” is simply not coming to life. Because one capitalist observing how we’ve done in the crisis and along with industrial, we get pretty good grades, not to say the other property types are bad or wrong or whatever, just more volatile.

Scott Lawlor:

And so we have held up very, very well. That’s caught people’s attention in the eyes of institutional capital. I think we might attract more capital into our space. And we were certainly in a very, very liquid place before. So you have a capital flow issue that’s going to impact cap rates. And of course you have a spread issue in the 70 or so basis point tenure treasury world, an industry that’s historically 2 to 250 over. So I don’t think cap rates are going to 275 or 3. But at 4.5… At 475 cap rates are 400 over. Near double the longterm average. What in the world is going to cause cap rates to go higher? So you have a spread issue and you have a capital flow issue. And I’m not saying this because it sounds too goofy to say, but I think at least you could reasonably construct an academic argument that says cap rates and multi could be going the other way. Obviously carving out certain metros where there’s no growth and a lot of new supply and all that stuff. But broadly speaking in our sector right now, we’ll see where the deals get done. But, class A Sun Belt multi is a sub five cap rate all day long.

Ryan Morfin:

And you’ve got a tremendous amount of experience in global gateway cities. How do you think New York’s going to play out in the medium term? You watch footage of what’s been going on in New York City. It’s still a great place to live, but it is changing. I don’t know what your thoughts are about Northern cities like Chicago, San Fran, New York as a livable place. What are your thoughts on that?

Scott Lawlor:

Well, look, I think you have to look short term/longterm. And in the short term clearly there’s been a change. I used to live in Fairfield County, Connecticut. So I’m familiar with the residential market there, have a lot of friends there. And it was horrendous for 15 years. 15 years going the wrong way. And just in the last 90 days, that’s flipped. You read stories, you hear about it, people lining up outside of open houses now around Fairfield County. And that’s a short term reaction, immediate reaction to what’s gone on. So the New York suburbs have gotten a jolt and we see it down here in South Florida. People are moving to Connecticut. They’re moving down here where I am. But that’s immediate.

Scott Lawlor:

Now you asked about longer term. And I believe, terms like forever are thrown around a little bit too much in the height of a crisis. So for instance, if you look at what happened immediately after 9-11, it was accepted conventional wisdom, New York will never be the same, businesses went locate their people and move their people and all this stuff. And travel is going to be impacted. And that lasted for a very short while. And within a few years, by 2004,5 or 6, New York was thriving like never before and on and on. And we can think of many other examples. New York is a special place. It always has been. It’s had its little bit of ebbs and flows, but too, I would not overstate the degree to which this is going to really crush New York in the long, long run. It’s got other things to play through. It’s getting a heck of a reputation as it relates to tax and all this stuff, but I don’t think COVID is going to flip it on its head permanently.

Ryan Morfin:

Yeah. I think new York’s resilient and maybe we’ll get a different mayor, maybe an Anthony Scaramucci administration or Eric Anton administration. But I do think it’s… I’m asking him to right now. I know sometimes he watches some of these episodes, but I tell you, it’s going to take a different mindset to go back and rebrand the city. Because I think that law enforcement is just fed up with some of the things that have been going on. Well, I’d tell you the Sun Belt argument makes a lot of sense. We know a ton of people who are leaving the North, coming down. We got the retirees. And so you’ve got all these folks moving down, building businesses, moving businesses. How has the labor market for construction and the cost structure for materials, given that there’s a trade war on the horizon… Have you seen issues getting access to home building supplies?

Scott Lawlor:

Well, look, that’s ebb and flowed quite a bit the last few years. We experienced a run up there for a while, which is, a difficulty when you have a deal under contract and you’re trying to make a budget work, but in the long run, it’s not a bad fact for the business to the extent that it constraints new supply a little bit. And if anything, what’s going on right now is certainly going to hit new supply further in the short run. Jobs are going to get pulled in all this stuff. And so we’re seeing a little bit of softening around cost, but not enough to really, really move the dial and I don’t think sustainable. Now these jobs are getting postponed. They’re not getting put to bed.

Ryan Morfin:

Are you seeing some of the contractors move to just straight cost plus? Or are you still getting min-max bids from folks as you guys are bidding out the work?

Scott Lawlor:

We’re usually do in GMX bids. We’ve actually started self performing as well. We’ve developed a contracting capability. We went live around one deal last year when we had a GC on one of our jobs go bankrupt. And I was advise that the best way to handle it was to step into the GC shoes as it relates to insurance as it relates to lender and as it related to the subs and not blowing up all the subcontracts. And so we created an entity and stepped into their shoes. Now that was a job that was already halfway out of the ground. But what it did is got us thinking about it. And we now have internalized that capability and selectively will self perform.

Ryan Morfin:

And do you see that there might be some development projects that the banks are going to grab from under-capitalized developers that folks like yourself that are better capitalized can go in and finish? Or do you look at a hole in the ground as something that you’re not as interested in grabbing, fixing other people’s problems?

Scott Lawlor:

I would love to do something. I don’t know that there’ll be a ton of it. Look, it’s real estate. So there’s always, anecdotally, there will always be some stuff here and there, but excuse me. Again, I don’t think we have a blood in the streets situation coming in class A and B, multifamily, Sun Belt U.S., Just it’s not going to be the case.

Ryan Morfin:

Yeah. Well, I think the takeaway is you said it and not a lot of people are saying it, is that there could be the perfect storm with low interest rates where cap rates can go further down and we become more like a Japanese style hard asset economy. Do you think rates ever go negative in the U.S. Just given your historical perspective?

Scott Lawlor:

I don’t know. It seems like the concept’s not very popular right now. I’m talking about the Fed and I guess the president would do it if he could. And the answer is, who knows. If you asked me to guess, I would guess no, but not with tremendous conviction.

Ryan Morfin:

Well, the takeaway is if there’s still people moving and there’s still population growth, they’re going to need a place to live. And I think one of the last things they’re going to stop paying is their phone bill and their rent. So I do think it is a pretty safe place and we’ve continued to invest in multifamily pretty aggressively. But how has the permanent financing of multifamily assets changed if at all, or has it remained very stable with some of the government supported entities?

Scott Lawlor:

Yeah. So similar to what I said about construction, we’ve been heavily an agency borrower and Freddie/Fannie, but probably even a little more Freddy, but we’re a low LTV borrower. So what’s gone on hasn’t impacted us very much. We’re not out looking for any perm loans right now. But we like to borrow at a low LTV where we’re able to get interest only, which permits us a little bit better debt coverage ratio, and a little bit better current return, at about 60 or so LTV, that’s our sweet spot loan. And I think that’s still out there. I think it’ll be conservative in their underwriting and all that stuff, but the agencies haven’t gone out of the market on that basis.

Ryan Morfin:

So given that we do have some clouds on the horizon, what are some macro silver linings you see for the U.S. Economy going forward?

Scott Lawlor:

Well, look, the main one is the big picture. It’s easy to talk about all the problems, but if you compare us to the other 200 countries around the world, whose hand of cards would you rather be holding. And sure there’s stuff, and we’re certainly going to be in for an interesting, three, four months. This will be an eventual election, if nothing else. But I’m 34 years in the business. This is my third cycle. I’m sorry, it’s my fourth cycle. In the early nineties, real estate had what everyone else had in ’08. We had a mild cycle around the .com crash in 2000. And of course we had ’08 and now we’re dealing with COVID.

Scott Lawlor:

And in the depth of a crisis, it’s always easy to feel like, man, this time it’s different. It’s going to last forever. And then, the U.S. economy finds a way. The U.S. economy is extraordinarily resilient. It’s extraordinarily dynamic. And you have 330 million people needing goods and services, and you have solid institutions and you have highly liquid capital markets. And it seems to me that obviously a vaccine will be like a switch flipping, but even ahead of a vaccine, a lot of the economic metrics are pretty strong right now. We got to get through this little bit of a spike we’re experiencing particularly down here in Florida and in Texas and so on, but we will, we will. Already, I think there’s some leveling in some of the curves. We don’t view this as a 1930 situation. We think we’re going to get through it.

Scott Lawlor:

I’m not a believer in forecasting. What’s GDP growth in 21? Anyone who thinks they can, I think is kidding themselves. But we think we’re moving the right way. And relative to the worst case scenario in March or April, that we might’ve talked about [inaudible 00:29:01] from an economic perspective, obviously despite this causing some trouble, but I don’t think we feel this spike represents… We’re not going to shut down. We’re not putting 40 million people out of a job [inaudible 00:29:15].

Ryan Morfin:

Are you reading any books of interest or following any podcasts or any news sources that you think helped shape your view?

Scott Lawlor:

Well, I’m reading a lot of books that are not necessarily related to what I do for a living. Longer term, bigger picture. We could talk about artificial intelligence and the impact on mankind over the next 50 years, but I’m not investing based on that. I track the basic economic and financial market news, same as anyone. But a little bit less from a perspective… I’m known among my friends and in the business, I’m just not a believer in forecasting. I think right now, we’re all inundated. There’s always a conference call or webinar or whatever about COVID and what’s going to happen with the economy. And you can make a list of half a dozen hall of fame name rock stars over here that think its the end of the world and half a dozen hall of fame rock stars over here that think it’s a V shape recovery.

Scott Lawlor:

And they’re all pretty smart. From every academic institution, government agency, eye bank, what have you. And I just don’t believe it’s knowable. I think the thing to do is to take a view that says… In fact, Jamie Diamond said the other day that the bell curve is as flat as he’s ever seen it. The range of outcomes in the next quarter or two is very wide. Again, thankfully in a development deal we’re not really worried until 2022, because we’re not going to be leasing units until then. But our job is to keep a finger closely on the pulse, know what’s going on. And most, most, most importantly, structure our deals so that they’re built to write out down cycles. The resilience of the position is how you ride out a down cycle. You ride out enough down cycles, all of a sudden you look like a genius in the long run.

Scott Lawlor:

And really the key is A, our sector, which is very low beta and resilient, all that stuff, and leverage. And in our operating properties we have a portfolio wide debt coverage ratio of greater than 2 to 1. In the apartment sector, that’s a lot of coverage between NOI and debt service. It would take something way, way worse than ’08, way, way worse than COVID before I had to worry about paying debt service. And so, we view that as our job is to know what’s going on and keep an eye on and structure to ride out the down cycles. But I never get on a call with investors and say, “Let me tell you what’s going to happen next year.”

Ryan Morfin:

Well, Scott, we appreciate you coming on and talking to us about the development market and concur with a lot of what you said. So thank you so much for joining us. And we look forward to inviting you back in a few months and talk about post-election, whose forecasts were really terrible. And maybe what the view looks like in 21.

Scott Lawlor:

Hopefully we’ll have a clear cut post election the day after. We’ll see.

Ryan Morfin:

Yeah. I’m hoping we know who’s president by January, 2021.

Scott Lawlor:

Well, thanks a lot for having me.

Ryan Morfin:

You got it. Thanks for coming on. Thanks for watching Non-Beta Alpha and before we go, please remember to like, and subscribe on Apple podcast or on YouTube Channel. This is Non-Beta Alpha and now you know.

 

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Ryan Morfin: Welcome to Non-Beta Alpha. I'm Ryan Morfin. On today's episode, we have Pini Althaus, CEO of USA Rare Earth, talking to us about the supply chain glut in rare earth minerals. This is Non-Beta Alpha.

Ryan MorfinPini, Welcome to the show. Thank you for coming on today.

Pini AlthausThank you for having me, Ryan. Good to be here.

Ryan Morfin: So you're an investor and a miner in rare earth minerals. Can you share with our listener base, what are rare earth minerals? Why are they important and why is there a geopolitical race going on globally?

Pini AlthausYeah, I mean, rare earths are an extremely ubiquitous part of all advanced manufacturing or technology manufacturing today's day and age. Several years ago, I had not heard too much about rare earths myself. I was not that familiar with it and being involved in this sector, in this company, for the past few years has given me an education of course. And I mean, I was sad to hear that 50% of all imports into the United States contain are earth elements and it runs the gamut from consumer electronic devices that we use every day. Our cell phones, our laptops, most communication devices, medical equipment. So there's a tie with COVID, which we can touch on at your discretion. Electric vehicles, defense equipment. So pretty much anything or everything high tech today has a rare earth element or critical minerals contained within them.

Ryan MorfinAnd what are some of the names of some of the more important rare earth? I know there's lithium for batteries, but what else is considered in this category, critical?

Pini Althaus: Yeah, so lithium is a separate category to battery material. The rare earths are 17 rare earths. The four, let's call it, key rare earths that we're focused on at our company, the four rare earths that go into the permanent magnets. And these are the magnets that are found, there are a number of them in your back of your cell phone or an iPad. But if you look at an F35 striker jet, you've got about a ton of rare earth magnets in those. And we've got two heavy rare earths and two light rare earths is part of the permanent magnets. You've got dysprosium, ytterbium are the heavies, and then you've got neodymium, praseodymium as the two light rare earths. So those would be key rare earths that are the focus.

Ryan MorfinAnd you use these in, I guess, in military applications as well, but historically, where has the United States sourced the rare earth for supply chain?

Pini AlthausYeah. And that's the shocking part. We've been securing those materials from China. So China controls the rare earth sector and has done so for the past 30 years or so. And it was a significant misstep on the part of the United States, allowing China to have this control. And actually this wasn't a question of China coming in and doing anything nefarious as far as stealing IP or anything. The US government made a conscious decision about 30 years ago to allow China to come to the United States and acquire the processing capabilities for rare earths. So just as part of some background, you've got the rare earth materials containing various mining projects, but once you extract them, you have to then process them and they go through certain phases before they get to the magnet phase. And China, the thought process was let China do the mining, let China do the processing.

Pini AlthausWe don't need to do that here. And we'll buy the materials from China cheaply and the premier of China at the time, Deng Xiaoping made the comment, he said, "The Middle East has oil. China has rare earths." And unfortunately we weren't smart enough to understand what he was saying. And the Chinese understood that the future of manufacturing is going to revolve around control of the rare earth and critical mineral supply chain. So if you think about it today, Ryan, we cannot build... Forget about consumer electronics and medical equipment. We cannot build the equipment that the US Pentagon or the US armed forces require, whether it's F35 fighter jet, Tomahawk cruise missile, communications equipment, without going to China and obtaining those materials. And it's obvious to all that this should be extremely alarming. We've seen China use this as a weapon, if you will, as far as how it interacts with other countries back in 2010, when there was a dispute between China and Japan on the East China Sea.

Pini AlthausSo China cut off rare earth exports from Japan for 40 days. Japan obviously being a significant user of rare earth elements for their high-tech manufacturing sector, that was stopped after 40 days. But in fact, it was President Obama that first made the United States aware of this, formed a division within the Department of Defense to handle this issue, but not much has happened. And we continue to be relying on China for these materials. And what has been made about trade war with China and whether the trade war is really the impetus for China withholding rare earth exports. And that is a huge misnomer. Whilst China had been talking or implying that they would cut off rare earth exports, the truth of the matter is that China, under it's made in China, 2025 mandate, its belt and road initiatives and others. And you seem to control the critical minerals and rare earth supply chain so that it can continue its dominance as a manufacturer or a global supplier of these materials and finished products.

Pini Althaus: It's the backbone of its economy. And in fact, China has become a net importer of rare earths from different countries like Miramar and others. So with that, they are decreasing the exports to countries like the United States, Japan and others.

Ryan Morfin: And was it ever a risk that the Chinese were going to turn off the exports of rare earth to the US during the trade war? How close were we to that? And was that ever some saber rattling that went down during trade negotiations?

Pini AlthausYeah, I think it was saber rattling. I think it would be paramount to an act of war. I can't say with any authority that that would not happen, but it would be probably, aside from war itself, it would be one of the most significant acts of war cutting the United States off from the ability to procure rare earths. But that being said, I mean, if you look at, as an analogy, the oil and gas sector and the reliance of the United States had for many, many years on OPEC countries to supply us with the oil. And we had embargoes and we had price manipulation by OPEC. This is far more significant given the ubiquity of where these rare earths go. And yes, we're always under the threat that China can cut off exports under the guise of a trade war or for any other nefarious reasons.

Pini AlthausBut I think even more importantly, to just as the natural run of the course of things with regards to their business and their desire to maintain themselves as the global leader in manufacturing and exporting of goods, China is in a position now where it actually requires these materials for their own domestic consumption and can legitimately cut off rare earth exports by stating that they need it for manufacturing and that would actually be somewhat correct. So we're in an extremely dangerous position here with this reliance on China. And it wouldn't just be China. If it was another country, it would be similar issues, not to the same extent, but reliance on one country for these materials is dangerous.

Ryan Morfin: And it's been mentioned in the past that in 2010, China flooded the market to really kill all the competitors in the rare earth mining industry. Where was the World Trade Organization during this period? And how did that play out and how does that set the chess board for China to run the tables?

Pini Althaus:

Yeah. So the WTO stepped in when China cut off rare earth exports from Japan, I think it lasted for about 40 days because the US and Japan protested the WTO, and they stepped in and China resumed exports. While I'm not an expert on these trade matters, one thing that I am aware of is that one of the reasons why China had to resume the export of rare earths was it did not legitimately need all the rare earths for domestic consumption. So therefore it was a nefarious act, if you will, to cut off rare earth exports. Now that has changed, which means China have to cut off rare earth exports today, they have a legitimate case to say that they require these materials. There's a shortage of these materials and they require them for their own domestic purposes. It is the backbone of their economy and there's very little we could do about this today, which is why it's becoming an even more urgent issue.

Ryan Morfin:

And the US government started stockpiling some of these after that incident. Can you talk a little bit about what DOD and DOE has done to start making sure that there's not a critical supply shortage going forward, and is it enough?

Pini Althaus:

Yeah, again, there is a national defense stock pile, and there are materials still that the United States needs to procure in order to shore up its stockpile. There are magnets, the finished magnet products as well, the United States government needs to stockpile. Again, there's a limited amount that the United States government has. It requires approval from Congress, whether it's in the NDAA or other approvals from Congress, to allocate monies for the national defense stock pile of these materials. That being said, there's no endless supply of these materials. And unfortunately, the apparatus, the way it's set up right now with the US government, it's going to continue to require having a secure supply chain of those materials for many, many years to come. So it's not a question of stockpiling for 10 or 20 years, and then this complacency and saying, we'll kick the can down the road. But keep in mind as well, Ryan, that US government accounts for low single digits of overall rare earth imports into the United States.

Pini Althaus:

We're talking about defense contractors, we're talking about the manufacturing sector. The direct impact this has on the economy, jobs, the automotive sector, and others is significant. So it's not just limited to the United States government. If you look at over the past couple of weeks, the sanctions that China have put on Raytheon, Boeing, Lockheed, et cetera. I mean, the question is where are they going to get those materials? And if we go beyond that, you need rare earths for the 5G network. Now that Huawei has been banned from installing the network, not only in the US but other countries, we have to have the ability to get a secure supply of these materials as well. Which currently, again, trying to control the hundred percent. So it runs across the board, both for government, defense and manufacturing in this country.

Ryan Morfin:

Well, and so help me paint a picture for our audience. Does China have all the mines for rare earth, or they're the only ones who started mining it? Or are their mines globally dispersed and nobody's been doing the actual infrastructure to do the mining?

Pini Althaus:

Yeah. So finding rare earth projects or rare earth elements is not the difficult part. It's finding them in significant quantities that makes a project economically viable. And part of that consideration are the environmental rigors that companies in the West have to adhere to. And China, even by their own admission, have had a complete disregard for mining these materials and even for processing these materials. And in fact, just the last week or so, the BBC did an expose on this, 60 Minutes has done an expose on this. But the Chinese have not denied this and have talked about cleaning up their act, but it has an effect on the bottom line for what the costs of mining and processing are if you have no environmental standards to adhere to. So China have exploited those rare earth projects they have, primarily in inner Mongolia, and have brought a number of projects online and quite quickly, and in a significant way, with a complete disregard for the environment.

Pini Althaus:

So it was seen as an environmental no-no in the West for many years. Now, what's happened over the past few years is you're starting to see rare earth projects in different parts of the world sprout up. You've got the Mountain World project in Australia owned by Linus, which is a producer of Nd and Pr, neodymium and praseodymium. So two of the light rare earths. They may have some heavy rare earths coming online at some point in time. And you've got Arafura, which is another company in Australia that we're working with to assist them with their processing so they don't have to send the materials to China for processing. But really these are a drop in the bucket for what the requirements are for the United States. And certainly what the requirements are for allied countries, the EU, et cetera. So there is a race, if you will, worldwide to start bringing projects online. The Chinese are very active in trying to secure assets outside of China.

Pini Althaus:

So in Africa. They have ownership of a project in Greenland. So there is somewhat of a race. The Australian government has stepped in and has started limiting the ability for China to own, or have ownership in, or off takes for the Australian rare earth projects. And that's part of the strategic Alliance between Australia and the US. Canada, similar thing as well. There are a number of projects that are looking to come alive, but these projects are, for the most part, will take many, many years to come online. We have to expedite the process. We have to assist with a [inaudible 00:14:41] supply chain and the domestic rare earth sector, because previously investors have been scared off by things like China flooding the market, which is not a possibility at this point in time, given that China can't actually afford to flood the market. They are already very heavily subsidizing their mine to magnet supply chain there.

Pini Althaus:

This is more now a case of being able to get production from non-Chinese sources so that the United States and allies have a viable, secure supply chain of these materials. And it's a concern worldwide. We speak to governments all over the world, and we're all facing the same issue. Some more than others, especially countries like Japan, that don't have their own rare earth projects there and are reliant on Australia where they've made some investments there. And in the United States, they've made an investment recently in Africa. So there is this race, if you will. And I think we've got a five-year window here to at least stand up a few projects worldwide. Otherwise we've lost this race and we will be dependent on China for many, many years to come. And Ryan, it's a bit of a hypocrisy. If you look at it where you've got materials going through clean, green energy applications, like electric vehicles, wind turbines, et cetera.

Pini Althaus:

That we're sourcing these materials from China, where they've, again by their own admission, has been complete environmental devastation to water bodies around these mines and processing facilities, to the communities. People have been getting sick around these projects yet we're putting these materials into our electric vehicles or wind turbines. It makes no sense at all. And people are starting to wake up to this. And that's why the sector is starting to see a lot of support come out of Congress and bi-partisan support. And in fact, it's one of the only bi-partisan issues right now in Washington. And it's good to see that some things decided to move in the right direction.

Ryan Morfin:

And is there a special process? You talk about the expense, is it really difficult to mine these? You have to go through a special chemical process to extract and clean and purify. Is it a lot harder than, say, gold or silver or some of the other, we'll call, more traditional elements?

Pini Althaus:

Yeah. It's all about the processing to some extent. So if you look at MP Materials in California, which used to be Molycorp before they went through their bankruptcy. They are a miner of Cerium and Lanthanum, which are two of the light rare earths, the lower valued light rare earths. Given that they do not currently have processing technology, they are sending those materials to China for processing where China is tariffing those heavily. Linus is also, they're doing their processing work in Malaysia and elsewhere. So it's really about the processing at this stage. One of the things that we've done, after we put out our PDA last year with our upgraded resource, which now includes a significant amount of lithium. We make a decision that, based on the test work that we had done around our processing methodology, that we were not going to send our materials to China. That it's paramount for us to do this work in the United States and in a collaborative effort as well.

Pini Althaus:

We've been asked by some of our investors, "Well, why would you be looking to help other projects with their processing?" And the answer is simple. There's no one project or one company that's going to put China out of business or make a dent, or somehow be able to take care of the overall demand worldwide for rare earths and critical minerals. And it's very important for us to have processing capability in the West. So that was the impetus for us opening up our own rare earth and critical minerals processing facility earlier this year, which we did in Wheatridge, Colorado. And in fact, we've made some significant progress on the method that we're using for this. And we're starting to collaborate with Australian companies, Canadian companies. We're currently talking to a group over in Europe as well, because this has to be a collaborative effort.

Ryan Morfin:

How does Europe solve for these problems? Do they have this better under control than the US?

Pini Althaus:

No, they're in a far worse position than we are. The EU commission recently put out a report, I think, a couple of months ago that the requirement for rare earths is going to increase tenfold within a short period of time. Lithium 18 times. They don't really have rare earth projects. Again, there are the Greenland projects, which people have heard in the news recently. Those need to further development work so they don't have rare earth projects ready to come online there. There are a couple of lithium projects that are spread around Europe, but for the most part, Europe is in an even more precarious position. If you look at Germany with the auto manufacturers, you look at the big companies like ThyssenKrupp and others, all these countries and companies are looking for alternatives to China, because we've already seen in the news about China withholding or reducing exports of some of these rare earths that are required for these industries.

Ryan Morfin:

And you mentioned earlier the regulatory posture of the US makes it difficult to mine. Is it becoming a more bi-partisan issue that we need to maybe relax some regulation around the mining exercise, to incentivize private sector to come in and start producing this? Or is the Republican party versus the Democratic party on two separate pages of music?

Pini Althaus:

Yeah. Good question, Ryan. I mean traditionally the Republican party is obviously being more pro-mining and in favor of less regulation when it comes to these things. With regards to our project, we're on Texas state land. So we don't trigger federal environmental permitting at this point in time. And obviously Texas being Texas, a mining state and oil and gas state, things are a lot easier in Texas than they are on projects on federal land where the Bureau of Land Management controls the environmental process around that. But the thing is here, and I don't want to step into what other companies are doing, et cetera, but we do need to be reasonable about allowing projects to come online if they're adhering to environmental standards that are acceptable worldwide. And what we do know, is that China is destroying the environment and cities and water bodies around their mines and processing facilities.

Pini Althaus:

We have standards here in the United States, and I think what we need to do is make it easier for companies to mine, while at the same time protecting the environment. And there are ways to do that. And we're definitely seeing buy-in from Congress, from both sides, with regards to looking how we can stand up a secure supply chain. And, obviously under the Obama administration, they had very strict regulations when it comes to mining. And that's changed under the Trump administration. Hopefully what we start to see is some normal middle ground that'll allow other projects to come online.

Ryan Morfin:

And typically in these rare earth mines, is it amalgamation of different minerals that are all consolidated together and you have to separate them out? Or do you ever find pure play, Europium, I can't even pronounce some of these. Gadolinium, Cerium. I mean, are they all mixed together and you've got to filter and sift them through, or are they pure play mines?

Pini Althaus:

No, they're generally they have a mix. So they're polymetallic projects. They have a number of different materials. Some projects, you more to what we call the light rare earths like MP in California or Linus in Australia. Our project is actually on the opposite end of the spectrum. We have a very high concentration of heavy rare earths. That being said, we do have to go through a process of separating these materials. But the case of our project where we've got 30 materials. We're not going to produce 30 materials. We're not going to market 30 materials. So what we're doing is we're focusing on the key materials that are marketable, that we need for permanent magnets, lithium as well, and working on the separation and the optimization of those materials in particular. But we're all faced with the same processing challenges and that is something that can't be set.

Pini Althaus:

There's no easy way to do this. There are different technologies that have been used in different parts of the world. So predominantly there's a process called solvent extraction, but it's big, it's bulky, it's not benign. It's a bespoke solution for one particular project. So it doesn't work for feedstock from other projects. What we've done is we're using a processing technology that's actually been around since the 1940s. It was part of the Manhattan Project. It's called continuous ion exchange. In fact, the Chinese use it to increase the purities from 99.99 to four nines, five nines, and even six nines. So for some applications you require higher purity levels. It's a far easier processing method to scale up and to take feedstock from other projects. In fact, we've demonstrated for the Department of Energy that we can take coal waste from Pennsylvania and do high purity separation of rare earths using our processing methods. So it's not a step that can be skipped unless one needs to send it to China for processing, which is not going to help us with our objectives here.

Ryan Morfin:

How many other, we'll call it, going concerns on any other businesses that are doing this, that are trying to, I guess, start the development of these mines. Are you guys one of a few or are you one of many? And is it an international or just a US game? Who's leading the charge at going after this?

Pini Althaus:

Yeah, well, I'd say the Australians are leading it outside of China right now. You've got some really good projects in Australia. Again, more skewed toward the light rare earths. There's one more heavy rare earth project in Australia, which is not yet producing. The United States, you've got MP Materials, you've got Ucore in Alaska, you've got the Bear Lodge project in Wyoming, which is also another light rare earth project. So as far as a heavy rare earth project that looks like it will come online in the near term, that would be our project. In Canada there are a couple of projects there as well, and again, more skewed toward the light rare earths. But we really need to get as many of these projects online as possible. Because again, I don't see it as competition. We all have a problem doing supply agreements or offtake agreements for our materials.

Pini Althaus:

In fact, one of the things that we're going to have to consider is looking at potentially scaling up our production, based on the demand that we're already starting to see. And I think other companies would find that as well. So it's all about the economics of the project. You have projects that were economically viable back in 2012 or rare earth prices with 35% or so higher than they are today, and are not necessarily viable today. So that's the challenge as well, economically viable projects. And we've got to get as many of them online as possible. It takes many, many years. I mean, our project has had over $70 million put into it to get to where we are today, and we're close to getting to the production scenario. It all revolves around processing at this point in time.

Pini Althaus:

We'd be very happy to see another couple of projects come online, because this is extremely important for national security and for the economy as well. I mean, if you think about it, Ryan, if you've got a billion dollars of rare earth materials, that translates into a trillion dollars or I should say trillions of dollars of finished product. So you've got a magnet in your phone there that's worth a couple of dollars and the cell phone's a thousand dollars. And electric vehicles and defense applications even more.

Ryan Morfin:

Yeah, everyone has one of these iPhones now, and there's tremendous amounts of rare earth on the circuit boards here. And I think people take it for granted that that supply chain is not secure right now. So one question for you, there's talk of this maybe medium term to longterm, but there's talk about mining in space. Do you think that's a feasible option in the longterm, medium term? What are your thoughts on that?

Pini Althaus:

No, that's just ridiculous. I mean, we're trying to find ways to make mining on earth economically viable. I think the cost of going up to space would be more than what our capex will be bringing our entire project into production. I mean, we've got about a 350 to $400 million capex to bring 130 year mine life into production. I'm not an aerospace expert, but I think sending a rocket, building a rocket ship and sending it up, I think maybe on the fuel alone, you could bring a couple of projects into production. So unless we have a fortunate situation or an asteroid lands on earth, and fortunate if it lands somewhere where we don't care, I don't see how that happens. And if it's big enough, it's a problem as well. It's nonsense. And even, options aside of the deep sea mining for rare earths, I mean, you've got all sorts of environmental issues around that as well. I think we need to look at projects that we can bring online, that can be done so in an economic way, that can be done so in an environmentally responsible way.

Pini Althaus:

I mean, one of the things that we've done at our project is we've got in excess of 60% of the materials that have come out around top, will have a clean green energy applicability to them. So we're using the benign processing method. We're going to be using renewable energy on site. In fact, we will likely be putting a solar farm on site as well. We've talked to a couple of companies that have approached us about that, and we'll be a net producer of power for the surrounding area. So there are ways to do it which don't affect the environment. Obviously if there's a project that's situated on a sensitive area, that's a unique situation for that specific project. We've seen it with the Pebble project, which is not a rare earth project. The Pebble project in Alaska where their environmental concerns is we've been recognized by both Republicans and Democrats, but we have to be reasonable about the projects that don't have environmental concerns.

Ryan Morfin:

So Pini, in season two, we ask all of our guests a series of six questions. They're usually, yes, no questions, but trying to take a survey of our conversations. And if you want to add a little context to the yes or no, feel free, but here goes the first question. If there was a COVID vaccine available today, would you take it?

Pini Althaus:

Yes.

Ryan Morfin:

Who do you think is going to win the election?

Pini Althaus:

Which election?

Ryan Morfin:

The US election.

Pini Althaus:

Well, I think it looks like Joe Biden's going to win it, but I think what happens, if we go past January six from my understanding is that the house will vote on it and it's one vote per state. But I don't know if I see it getting there at this point in time. I really don't have a crystal ball.

Ryan Morfin:

Third question. What type of economic recovery are we in? What type of shape is it taking? A V-shape, W, U, L?

Pini Althaus:

Yeah, I think 2021 is going to be challenging. I think we've been, and rightly so. I mean, we've had no choice as of almost every other country. We've been printing money for the past year because of COVID. And I think we've got to brace ourselves that, at some point in time, the chickens come home to roost. It was a necessary step. People needed it on an individual level. Businesses needed it as well, but I think we've got to do whatever we can to stimulate the economy, give people confidence to go out and work again, employ people. So I think we've got to watch ourselves, especially in 2021. And I have some concerns, but long-term, I think the approach in the United States is a healthy one.

Ryan Morfin:

During lockdown this summer and quarantine, was there anything in particular that you accomplished that you're particularly proud of?

Pini Althaus:

Yeah. A great amount of family time, which, if you would've asked me a few years ago if I could sit at home and be at home for six months, I would have told you absolutely not. I wouldn't be able to do it for six days, but it has... I'm sure it's done this with a lot of families as well. It's brought families together. We had a baby actually last year on Thanksgiving. So I was doing a lot of travel at the time and thought I wouldn't get to see my daughter in her first year or couple of years too often. And being home with her every day is actually been just the most amazing experience. So thankful at least for some silver lining in COVID.

Ryan Morfin:

Are there any silver linings that you see in the economy going into 2021?

Pini Althaus:

Yeah, I think we've gone through an absolute beating and it looks like we've got the ability to come out of it. And I think that's a testament to how strong the economy was built up in the years preceding COVID. So overall I remain an optimist. I mean, we are a country built on opportunity and going out and making it happen. And we're not a socialist country sitting and waiting for people to send us paychecks or wealth distribution or anything like that. I think the American dream still lives on. I think if you go out and you're willing to work and put your head to it and heart in it, I think we do have the ability to climb out of it. So if we look at what the economy is doing over the past few weeks, it looks like it's starting to rebound. And to me, that's assuring because it could go completely one way as well.

Ryan Morfin:

And the last question is, is there anything that you're watching, or listening to, or reading today that has been impactful on your thinking that you'd like to share with our audience?

Pini Althaus:

Yeah, that's a good question. I think it's been more personal stories. The news, I sort of take that in context or with more than a grain of salt. In some cases stay off the news channels for a number of days at a time, it became quite repetitive. But I think on the personal side, talking to friends, my family's all back home in Australia, they've just come out of 110 day lockdown, which we can't relate to that. It's been very trying on them and seeing the fortitude that they've had to come out of that and stay intact. I think the mental health issues that will come out of COVID are going to have a far longer effect than the economic issues. I think we're going to have to focus on mental health issues in this country for a long time to come.

Pini Althaus:

The impact on kids has been significant with regards to lockdown or remote schooling, et cetera. But to see people come through it. I think it's a testament to people in general and to the country and other countries as well, to see got that fortitude and survival instinct to try to get through whatever adversity we can. So hearing the personal stories, the challenges that people have gone through, I think it's made me a lot more aware of things that I have to be thankful for and where we can help out other people as well. I think we have to be united going forward because there are things...

Pini Althaus:

I think one of the things that COVID has shown us is we can get into this complacency and life goes on and we go one day to the next. And all of a sudden we get hit by something that affects everybody equally. I mean, COVID, whilst there were groups of people, whether it was the elderly or people with underlying health conditions, that got hit the worst. I mean, we all got hit in some form or another. So really, this should be something that unites us, not divides us.

Ryan Morfin:

Well, Pini, I appreciate you coming on today to talk to us a little bit about the supply chain crimp on rare earth and we'll definitely keep an eye on it and would love to have you back in the future.

Pini Althaus:

Thank you, Ryan. Thanks for having me.

Ryan Morfin:

Absolutely. Thank you. Bye-bye. Thanks for watching Non-Beta Alpha. And before we go, please remember to like, and subscribe on Apple podcasts and our YouTube channel. This is Non-Beta Alpha, and now you know.

 

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