RIA compliance trends leading up into the election in 2020 w/ Patrick J. Burns, Jr., P.C.

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Ryan Morfin:

Welcome to Non-Beta Alpha, I’m Ryan Morfin. On today’s episode, we have Patrick Burns from the Burns Law Firm, talking to us about compliance trends leading up into the election in 2020. This is Non-Beta Alpha. Pat, welcome to the show. Thanks for coming on.

Patrick Burns:

Thanks for having me, Ryan.

Ryan Morfin:

Well, Pat, so your law firm handles compliance for some of the biggest RIAs in the country. And you’re on the front lines of keeping RIAs and financial advisors in compliance, but also keeping them safe from some of the risks prevalent in our industry. But as we enter into this election season, maybe you can talk a little bit about, what are some trends that RIAs are facing today, and what’s your view of how they may change during or after the election?

Patrick Burns:

Absolutely. It’s a really good question. It’s a question that I get pretty often from our clients who are all investment advisors. I get this question from people that are thinking about making a move and are concerned about whether the election is going to have any consequences for them personally, in terms of the regulatory climate and running an investment advisor going forward. And I think with respect to the investment advisory space and the regulatory and legal climate, I think the election is certainly going to be something that’s going to be a heavy focus of everybody in the country over the next 50 days or so, but as far as our clients are concerned and having a lot of history in this space and working with advisors over the last two decades, I can tell you that any of the changes that might come about with regard to the election, I think are pretty nominal at first glance.

Patrick Burns:

And what I mean by that is, we’ve been through various administrations. We’ve been through the Bush years, the Obama years, the first Trump administration, and to tell you the truth, one of the things I’ve come to learn is that, once regulations are put in place, in many cases they’re there to stay and we adapt and we get used to the new regulatory environment. A lot of proposals that got implemented early on in the Trump administration were things that were already in the rulemaking process during the Obama years. And it just takes a while for things to work their way through the regulatory process. And right now I think one of the questions I most often get is, if let’s say the Democrats win, what does that mean in terms of FINRA and the SEC and who oversees advisors, it’s been a conversation for the last 10 years or so, whether or not Ben Rowe would step in and assume any role with respect to advisors.

Patrick Burns:

A lot of large broker dealers have been in favor of that idea just because of the startup nature of advisors over the years, but ultimately a lot of those discussions have ended up not really going anywhere. And I think that would be a monumental C shift if it was to take place. And I don’t think it’s something that could be done overnight, as a matter of fact, for the last couple of years, that type of conversation has been relatively on the back burner. And in the financial industry which is the only industry that I really have experience, and over the last two decades of my working career, I can tell you that new regulations typically don’t move forward very quickly. There’s lobbyists, there’s interest groups, there’s others that have conversations, meet with legislators, meet with their interest groups and constituents.

Patrick Burns:

And to the extent that the election has any consequences, I think that you probably wouldn’t be seeing anything significant for at least the first two or three years, unless it’s a complete sweep of the Republicans or Democrats, which is generally speaking not the case. The country is usually in favor of a split of the parties in terms of one branch controlling the executive branch and the other controlling at least part of the legislative branch. So I’m not foreseeing any radical changes in terms of new regulations or shedding old ones. So I think it’s going to be mostly status quo for the foreseeable future.

Ryan Morfin:

Well, and you’re based in California, you had Senator Kamala Harris as attorney general, how was she to the financial industry and to the business community when she was the AG and as a Senator for your state? I mean, some people are expecting the Biden administration turns into the Harris administration in short order. How would she act towards the wealth management space you think?

Patrick Burns:

Well, I think in terms of the wealth management space, when we have seen democratic administrations, the only experience that we have besides witnessing new rules and regulations is enforcement cases. And there might be some differences there where perhaps there’s some more unique or more aggressive positions that are taken, but neither party, whether it’s Republicans or Democrats is in favor of fraud. I mean, so fraud gets prosecuted and pursued under Republican and Democratic administration. So when clients are affected or when regulations are violated, we see cases coming down from either administration, whether it’s a Republican or Democrat, sometimes we may see some more unique interpretations if the other party wins the White House.

Patrick Burns:

But to tell you the truth in terms of actual important cases and the ones that are significant and come down from the SEC, while we look at them and we analyze those cases in our office, for the most part, maybe 98% of the time, we say it doesn’t matter who is in charge of the White House, that would have been a case that would have come regardless of whether it’s a Republican or Democrat in the White House. There may be only a small minority of cases that you go, gee, this one is kind of unique and is pushing the envelope of most of the cases when it involves a fraud or missing funds or some other type of outrageous behavior. And that’s a case that would have happened under a Republican or a democratic administration.

Ryan Morfin:

Yeah. Nobody has a monopoly on fraud, I agree. It’s a bipartisan issue. Well, as it relates to things like the DOL fiduciary rule, now the SEC pushed out Reg BI, do you think that the DOL may come back full circle and recalibrate or push back against the SECs Reg BI status?

Patrick Burns:

No, it’s quite possible. I think the greatest struggle that the industry has had over the last couple of years with the DOL role is just the stops and fits with the starts and stops or starts and fits with the rulemaking process. I think a couple of years ago the industry was by and large ready to adapt and roll out the rule, and then all of a sudden it was snatched away and done away with at the last minute after firms had spent great deals of time and money getting ready to comply with the rule. Although it wasn’t a popular role within the financial services community among people that I talked to, once the work had been done and the programming had been done, the money had been sped, it was almost a disappointment that the rule didn’t get rolled out at that point but the firms had spent the money and the resources to be ready for it.

Patrick Burns:

So a couple of years later, it’s hard for firms to just pick up and suddenly start again, especially not knowing whether or not this is another fruitless effort where they get all these resources, start spending a bunch of money, and aren’t quite sure whether the rule will actually roll out as they saw it originally going into place.

Ryan Morfin:

Well, it’s interesting, the DNC chairman, Tom Perez, is the former secretary of labor under Obama. So he’s got a legacy interest to make sure that in a Biden Harris administration they would go full tilt, I think, into leaning into the revival, if you will, of the Department of Labor fiduciary rule. In your opinion, what were the fault lines of that old rule? Because I think if Biden does pull this off, then there will be a renewed interest in the revival, if you will, the DOL. Who was on one side, who was on the other, it was like fintech and wirehouse on one side, and was an independent broker dealer and RIA on the other, who are the winners and losers in that DOL rule?

Patrick Burns:

I think fintech certainly would have been one of the winners because they could create all the technology to try to help firms comply with the new rulemaking, that would have been a significant windfall for the fintech firms. The big wirehouse firms or the big financial firms, they can afford to spend millions of dollars to comply with the rule, and that might be something that you’re pretty readily able to absorb. The independent broker dealers, I would say they would be squeezed with their margins because they operate on tight margins anyway in the independent broker dealer community, so adding possibly tens of millions of dollars in costs to some broker dealers, perhaps even more depending on the size of the independent broker dealer, that can come as a shock to the balance sheet to say the least, and those firms might be under a significant pressure.

Patrick Burns:

I think that’s kind of the winners and losers, or the firms that are on either side of the rule. Another thing I would say was an interesting takeaway that was something we personally experienced in this office, that I think was unhelpful towards the role moving forward was, when we deal with the SEC and quite frankly when we deal with FINRA, if there was a proposed rule or there was some type of regulatory issue, mostly those regulators are willing to get on the phone with us and engage in conversations because we have inroads to a large swath of the financial industry. So if we’re on board with a rule or we understand it, we can help educate thousands of advisors. I had a rather unique interaction with the DOL though, which was, they weren’t really used to receiving phone calls over there to work with outside influencers or outside law firms or partners that would help get their message out.

Patrick Burns:

So when I called and tried to get on their calendar, get some dialogue going and say, “Hey, I’m speaking to a bunch of people in the industry, we’ve done our homework, we’ve got study groups together of high level people, well, we have questions.” They weren’t really willing to engage or have those conversations, which I thought was kind of interesting. And I think that if they go back at looking to roll out, to roll again, that’s something that works well for the SEC, it works well with FINRA. It was just a strange experience. I would say that they weren’t really open to having that type of dialogue, either that or perhaps I just simply reached the wrong people at the DOL. But it was something that was interesting, and I think in order for some of these regulations to successfully move forward, there has to be some level of buy in, or at least some level of private sector, public sector partnership in order to be on the same page to know, so we’re all speaking to each other, that both sides are in full communication and that the government is not operating in a vacuum, which I think probably helped decrease support for the role, and ultimately it didn’t go into place. So I think that was something that they’d have to take a close look at, is that type of approach and whether or not it was really successful.

Ryan Morfin:

Yeah. Well, so we ended up with the SECs version, which is Reg BI, and really, I think a lot of the takeaway for me was that the removal of conflict of interest or the disclosure of it. And from your perspective, how does that change business models going forward? And I mean more about like RIAs who actually manage money, but also invest in third-party asset management products or affiliated products. How do you eliminate and resolve that removal of conflict of interest going forward?

Patrick Burns:

Well, I think our clientele, which is RIAs, do always balance by their fiduciary duty of best interest to their clients. They have to look out for their clients, they’ve got a duty of loyalty to do the best for their clients and operate as fiduciaries. Some of our clients are also CFPs or CFAs and adhere to different or higher levels of ethical guidelines and are bound by those voluntary credentials that they’ve signed on to. So there’s their side as well. But I think in terms of our investment advisor clients, it really just comes down to them acting as fiduciaries, making full and fair disclosure to their clients, and just continuing to operate by putting the client’s interests before their own and making sure that any type of actual or perceived conflict of interest is fully and fairly disclosed to clients.

Ryan Morfin:

Well, and do you think that there’s going to be more pressure from the SEC as these fiduciary definition start to get into focus where people are making investments into third party asset management products, where the RIA is not actually doing any of the work, but they’re charging 1% fee. Is there a risk that the SEC comes down later and says, “Listen, how do you charge a fee on these products where you have, say, just dimensional funds or XYZ firm actually doing the management?” Is there a risk in the future where that 1% fee plus all the fee structure for the product that’s loaded up becomes not in the best interest of the client?

Patrick Burns:

I certainly think it’s something that the SEC will look at probably from a couple of different angles. One is that there’s different variations of the SEC looking at overall expenses and fees to clients. So it all started with the whole 12b-1 fee, retail mutual funds being in investment advisory accounts. And the SEC was kind of beating that horse the last couple of years, and I think they’re going to move on to other related issues. So one might be overall level of fees for clients that are put into third party money manager programs, where the advisory firm may not do a whole lot after the initial handoff of the account to the third party.

Patrick Burns:

So the SEC could potentially look at that and say, well, what are you guys still doing? I mean, are you providing investment advice? Are you managing the portfolio? How do you justify the full on 1% fee, which is more akin to direct management and a whole level of responsibility versus a handoff type situation, which is really almost like being a solicitor for a third party, which raises another question is, if that’s what it is, is it really accurate and correct to call it a money management program of your firm? Maybe it’s really a solicitors program where you’re not doing a whole lot after you make the introduction, and it’s the wrong set of document presenting to the client, and you’re misdescribing the program, which gets you under further scrutiny with the SEC in terms of the level of fee that you’re charging.

Ryan Morfin:

Can you, this is a term I hadn’t really heard before until not too long ago, do you think reverse churning is going to be an issue going forward in the market with the additional volatility that we’re seeing?

Patrick Burns:

I definitely think that it is, as a matter of fact I can tell you that just dealing with advisors all across the country and in every SEC district, we’re starting to see a renewed focus on reverse churning. And the SEC comes up with their own parameters for accounts that they want to see, but if you have inactive accounts and you’re continuing to charge a full on fee and you’re not doing any level of trading, at some point, and this is subject to discretion by the examiner in a given exam, they will start to ask questions about what type of procedures you have in place for looking at a fee reduction or a fee waiver, whether or not they should be an advisory accounts all together, especially if you have a broker dealer relationship, because if you do have a BD relationship to compliment your RIA, the SEC will in extreme cases ask you the question of whether or not that should be a brokerage account not subject to an advisory fee if they’re just going to be a by an old client, not turnover any of the holdings in their portfolio.

Ryan Morfin:

And what about cyber, there’s a data point recently, cyber attacks are up 47% through the pandemic as everybody’s doing this work from home thing, how do you see cyber risk on the horizon for RIAs and financial advisors?

Patrick Burns:

Well, I think the biggest risk in the near term has been a lot of our clients, as a matter of fact, probably the vast majority of our clients just like every other industry in the United States, had some degree of working from home and the advisors and the principles of the RIAs themselves, they may have world class technology and a fully decked out home office, but the question becomes, well, that’s fine for the principles of the firm, but what about your staff? What about your admin? Are they logging in from their home computer? And they certainly don’t have the same level of encryption and technology and all the bells and whistles that the advisor’s office might have for cyber security purposes. So a lot of times when people have a home computer or a home laptop, the kids may play games on it, the kids, load it up with spyware and a bunch of other junk that accumulates on the computer.

Patrick Burns:

So if you’re logging into custodial accounts or doing other things from home, or your admin is, and you don’t have the same level of security, that’s where you could have a data breach, that’s where you could have client emails intercepted or spooked, asking for money market or money movement requests or checks, all kinds of other stuff. So I think it’s been a real concern of the SEC. We haven’t knocked on wood a type of a noticeable uptick in cybersecurity breaches with our clients. I like to think that the financial industry probably was better prepared for a pandemic and working from home and having disaster plans in place, probably much more so than the rest of the United States and the rest of the economy, just because it’s been a consistent theme that you have to be ready for a disaster. It’s been so since, really since 9/11 back in 2001, that was where a lot of financial firms had to operate remotely and they had to do so on no notice.

Patrick Burns:

And I know I was in New York City at the time at a financial firm, and overnight we were forced into a remote work environment, and we weren’t quite ready for that. But since that time, not only that firm, but others, learned lessons and certainly became much more prepared to roll out a remote work environment on short notice or no notice.

Ryan Morfin:

That’s a great point. I mean, financial advisory firms have been, by regulatory statute, prepared for some type of crazy event that is actually better suited us to bounce back. So I totally agree with that comment. So sometimes you have to thank your regulators for keeping us fine tuned. Let’s take a hypothetical, so I come into the office tomorrow and my server has been attacked or I’m locked out of my computer by a hacker, what should I do first? Call Pat Burns? What’s the first step once you’ve realized you’re locked out of your own network?

Patrick Burns:

Well, I think the first call is to your ITG or your IT professional, That’s probably even more important than reaching me. So I might be the second call, but I think the first call is making sure that the IT company that you use for [inaudible 00:23:49] or your internal IT professional is put on notice and is notified so that you can get your arms around the immediate issues. And then secondly, notifying your counsel and letting them know that you’ve got some type of issue at hand.

Ryan Morfin:

And is the issue more about notification of PPI, personal protected information, being breached, or where does the risk for a financial advisory firm if you have been breached? I guess you’d have to forensically take a look at what happened, but where dO most people get hurt given how they handle or not handle the situation correctly?

Patrick Burns:

Well, I think the first thing is to do an assessment and really try to understand where things are at. So what I mean by that is, getting an understanding of what’s been compromised. So obviously it’s bad to be locked out of your system, it creates at a minimum a vast inconvenience to the firm and its staff. With that said though, it’s tremendously hard or exponentially harder for a hacker to actually get into the client accounts and to breach the systems at your account custodian, which is usually a multi-billion dollar firm with different levels of encryption and password protections and other things that go well beyond what our advisory clients could ever put in place, because we’re worried about multi-billion dollar companies.

Patrick Burns:

So oftentimes the first fear is that client accounts have been compromised. Clients are going to lose all their money. That’s not often the case at all, as a matter of fact I don’t think I can really recall very many cases where I think that kind of stuff has happened. What may happen though is, you may be locked out of your emails. You can probably do without the emails for a little while. Your CRM system, I mean, if you’re using something like Salesforce or any of the cloud based systems, I mean, you can get on another computer, you can get on a personal computer, you can get your client’s phone numbers, you can start to recover. So things like your financials, QuickBooks, maybe that stuff is temporarily offline or out of order, but these are things that shouldn’t shut down your entire business.

Patrick Burns:

I mean, you won’t be able to pull up client documents and some other things, but you should still be able to place trades if need be, you should still be able to call up your account custodian and implement some type of a work around if needed. So I think it’s just a matter of getting your arms around what happened. And then if there are any clients that have been affected, any their data has been compromised, then there’s a conversation that’s had about whether our clients need to be notified and what measures you need to put in place, which is usually some type of credit monitoring or credit reporting that you paid for for a year or whatever the period of time is.

Ryan Morfin:

Yeah, I know, once your information is on the dark web, it’s pretty much there in perpetuity. Well, one question is, so what are one or two compliance issues that you see that should be keeping financial advisors up at night but they may not know about?

Patrick Burns:

Sure. So I think there is an issue that’s on the horizon for 2021 which hasn’t really received a whole lot of coverage in industry publications, it’s something that makes a lot of sense when you think about it, but it just hasn’t received a whole lot of attention in this crazy year, which is, the custodians eliminated the vast majority of transaction fees. And when they did that, that was a net win for advisors that were running wrap fee programs. That was a net win for underlying clients who no longer paid the vast majority of transaction fees. But for advisors that are running wrap fee programs, they need to take a serious look at their documents, because if you are running a wrap fee program or used to be running a wrap fee program, and there’s no longer a fee from the custodian that your firm is absorbing, you no longer have a wrap fee program.

Patrick Burns:

So if you’re still using those documents and you have a wrap fee brochure and you have a wrap fee client agreement, you’ve got the wrong set of documents in place. And at this point advisors could start to get cited on exams for having misleading and fraudulent documents if they’re saying that they’re providing a wrap fee program which no longer exists. So that’s the first thing. It could put them at risk of more draconian findings outside of just getting a deficiency notation in the SEC exam, but potentially down the road, if there’s enforcement cases, or if there’s SEC examiner that want to give an advisor a hard time, you could be talking about rebating fees and doing other things that could be quite costly. That’s the most extreme example.

Patrick Burns:

There’s other variations of that like, we’ve got some clients that may be 80 or 90% of the transaction fees they used to absorb and eliminate it, but maybe there’s some miscellaneous fixed income instrument that they occasionally still absorb. Even if it’s every once in a while, you should take a look at the appropriateness of whether or not a wrap fee program at your firm still makes sense, and whether it makes more sense to just eliminate that and just go to a straight asset management program, where whatever remaining transaction fees there are, you just pass those along to clients. That may be another area where the SEC [inaudible 00:30:41], I think issues like 12b-1 fees and mutual funds. That was going on for like five years. I think it’s going to be a new territory for next year. That’s one issue that I think is going to be a really hot topic.

Patrick Burns:

The SEC has not been a big fan of wrap fee programs for at least the last couple of years. They’ve been looking at levels of disclosure and whether the right things left out. So this is a prime area for examiners next year. I think other areas remain to be seen, but I would put that up there and probably the top one or two things that they’re going to look at next year. Other areas may remain to be seen, but I think that’s going to be a real hot topic.

Ryan Morfin:

Do you think it’s ever going to be, if rates go negative, not in the best interest to put people in fixed income programs, because if rates are negative it is better to be in cash. I mean, do you think we’ll ever get there? I mean, what’s your thoughts on that?

Patrick Burns:

It’s possible, I don’t know how deep the analysis will go on any given examination or the SEC will make that subjective call on exam and start questioning the underlying portfolio allocations. Unless it’s clearly agregious and it’s widespread across the whole firm, unless there is some type of systemic problem with the firm’s methodology, I think on a one off basis they’re not going to question, every client’s circumstances are different, so I think it would have to be more of a systemic problem in how they’re managing portfolios at the firm for the SEC to go that deep. It’s possible though, anything’s possible.

Ryan Morfin:

That is true. It was the Wild West. So I guess one question I have for you is, you’re very active on the front end of helping RIA set up when they leave the wirehouse, the proverbial breakaway broker. Question for you is, how has the trend been for breakaway brokers in 2020? Has the COVID environment slowed things down or is it busier than ever?

Patrick Burns:

Well, I think for our business, this is the only one I have insight into directly, but I can just tell you that, during the first quarter we were pretty busy. We kind of hit a hard stop at the tail end of March when the office was closed by the State of California, and we went remote for a couple of months, that was kind of the height of the pandemic across the country. And I would say the second quarter we saw a lot of advisors putting their moves on hold, but then the conversation with our clients and the conversation that our clients were having with custodians and broker dealers for hybrids, started to really change. Basically what changed was the fact that advisors were operating remotely, they were keeping in touch with their clients, and any type of fear factor that the advisors had about breaking away during the pandemic subsided over the course of a couple of months.

Patrick Burns:

And as clients got used to dealing with their advisor through Zoom calls or on the phone and not seeing them in person, they became more comfortable with the idea that, hey, I don’t actually have to return to the office to make this move happen. If I work with my account custodian and my broker dealer, and we can get the lion’s share of our documents onto DocuSign or another type of electronic document signing process, this has some advantages. First of all, if I’m operating remotely and I can just do all this in a paperless fashion, other advisors don’t have the opportunity to sit down and look my client in the eye. As a matter of fact, the index are coming down from the home office and all these big farms are, you’re not to come into the office and you’re not to meet with clients in person.

Patrick Burns:

So any of the advisors that are in the office that might normally call on reps clients, they’re pretty limited at this point, all they can do is call. I mean, they could offer to do a Zoom call, but a client’s not going to really want to jump on a Zoom call with somebody they haven’t ever met before. I don’t know how successful that would be, but I think there’s been a renewed boost of confidence by advisors in Q3. And we started to see an uptick, and part of it was just a natural uptick, I think as things started to settle down, but then we had some pent up transitions from Q2 that decided that this was a really good time to make the move. And we started to become busy again, thankfully.

Ryan Morfin:

Yeah, I think the word pent up is definitely pervasive, it’s getting very busy. I think as people started to realize that old school infrastructure isn’t as important as it used to be, now we’re living in a digital world. Well, we call this part of the show the human factor here. There’s six questions I’m going to ask you real quick. Whatever comes to your mind first as an answer. First question is, if there was a vaccine available today for COVID, would you take it?

Patrick Burns:

I think I’d probably would, I don’t see any reason why I wouldn’t.

Ryan Morfin:

Who wins the election in November?

Patrick Burns:

I think it’s going to be interesting, but the polls were really wrong four years ago, and I’m not sure that the polling process has been improved significantly, so without picking favorites, I do think that based on history with the stock market being at an all time high, I think it would be rather surprising if the incumbent is not reelected at this point. And all you really have to do is look at the economy and the stock market and where things are at, there are certainly issues with other parts of the economy not doing well, but I just think that when the stock market’s at an all time high, the electorate is not really usually in the mood to switch presidents and that is not history.

Ryan Morfin:

So what type of recovery are we in, do you believe in the V-shape recovery, or is this going to be a W where we come back up and then go back down again because there’s no stimulus package?

Patrick Burns:

I certainly think that the stimulus package was tremendously helpful and provided a big boost to the economy. I think that after the election that there’s going to have to be a serious look at another stimulus package. And if that’s not the case then we could run the risk of a recession or some type of market correction. So I think we’re not quite out of the woods yet. I mean, anybody that drives down the street of their hometown could see businesses struggling. I see spaces for rent and people out of work. So we’re not quite back yet. I think we need more stimulus to happen.

Ryan Morfin:

Yeah. I just saw an article today, two thirds of hotels are expected to close this year. They’re just not going to make it. So it’s going to be very interesting times in the hospitality industry. Anything that you achieved this summer that you’re particularly proud of while you’ve been in lockdown?

Patrick Burns:

Well, I would say that during the whole pandemic, at least on the business front, we managed to move our office and all of our equipment, all of our people, at the height of the pandemic, and that happened over the beginning of the summer, which was not easy because nobody really wanted to come in and out of the building during that period of time. So on the business front, we pulled off something during a very difficult period of time. On the personal front, myself and my wife and kids, we got to spend a lot more time together than we normally would. So a lot more time at home, a lot more things that we did around the house, a lot more ice cream runs and other things that sometimes in busier times we forget to take that time out. But we got to spend more family time this year in the summer than we did, even though we didn’t get to go away any place, we still spent more time together this summer, which was nice.

Ryan Morfin:

Yeah. The great pause had some definite silver linings. And speaking of silver linings, are there any silver linings you see today in the economy going into 2021?

Patrick Burns:

I would definitely say so. I think that financial services firms, our firm, a lot of other firms in this particular space, have certainly been tested on multiple fronts during this pandemic, hasn’t it been an easy year, but we’re very fortunate that we didn’t have to let any staff go. We kept everybody on at full salary and benefits. We were able to keep our team together 100% in tax. And I think that, part of the reasoning for me as the president of the firm is that, I’m still bullish on 2021 and beyond, so I’m not a person that gets rattled very easily, but we need our team to be a 100% intact. We need to actually build upon the team and add a couple of more quality people here, but I don’t expect there to be any downturn.

Patrick Burns:

I mean, to me, we were busy during the Obama years. We were busy during the Bush years. We’ll be busy regardless of who wins in November. We’ll still see people transitioning, we’ll still see people that need compliance assistance and help running their practices. It won’t be the end of the world regardless of who wins the presidency, walk into the office the next day and we’ll have work do. So we’re pretty bullish. I still think it’s going to be busy. We’re going to see a lot more people after the pandemic is over, and as people start to think about leaving their home offices and going back to a big office with 50 or 100 advisors saying, “I did pretty well operating from home, do I really need to be at XYZ firm? Do I need to take the train into the city every day? Maybe not, maybe I can just run my own business and do a hybrid RIA or feel the RIA.”

Patrick Burns:

It’s caused a lot of people to not only think about the economics of that affiliation, but think about their lifestyle. I mean, a lot of our advisors, it’s a lifestyle decision as well going independent. I mean, once they have the knowledge, once they have the clients, they just need the confidence and courage to make the move. And I think that’s significant.

Ryan Morfin:

Yeah, no, I think the next normal is going to be very different from an expectation set. Well, anything that you’re watching or listening to, podcasts, any books you’re reading today or over the summer that you’d like to share with our viewers?

Patrick Burns:

Actually, I do have one that I just started, so you may recognize this book.

Ryan Morfin:

Great book I hear.

Patrick Burns:

Got it days ago. So it’s here in my office, it’s on my desk. So I’m going to have to report back to you on my reading. But the Extreme Ownership book is something that I’m starting to quiet recover on.

Ryan Morfin:

Fantastic. Well, Pat, thanks so much for joining the show. I learned a lot and look forward to speaking with you. We’ll put a hyperlink in the episode so people can find your law firm’s website. Thank you so much, sir.

Patrick Burns:

Thanks for having me.

Ryan Morfin:

Bye, bye. Thanks for watching today’s episode. And before we go, please remember to like and subscribe on Apple podcast, our YouTube channel and Spotify. 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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