1
00:00:00,240 --> 00:00:05,519
And we're seeing that across the board
at lower level manufacturing. Everybody's got kind

2
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of in trouble with some manufacturing facilities
in China over at the pandemic and ran

3
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into shortages, ran out of stuff, couldn't get it, got tangled up

4
00:00:15,320 --> 00:00:20,160
in this transportation chaos that we had
and all under lesson then. And I

5
00:00:20,199 --> 00:00:25,719
think this is a major shift in
how the United States is now looking at

6
00:00:25,760 --> 00:00:32,079
globalization. Interesting. Interesting, So
we're deglobalizing before our very eyes here,

7
00:00:32,240 --> 00:00:36,320
right, And where does that leave
China? Where does that leave the world.

8
00:00:36,439 --> 00:00:41,799
You're listening to Carrie Letz's Financial Survival
Network where you get valuable information you

9
00:00:42,000 --> 00:00:47,240
just can't find anywhere else to thrive
in today's trying times. You need the

10
00:00:47,280 --> 00:00:53,799
Financial Survival Network now more than ever. Go to Financial Survivalnetwork dot com and

11
00:00:53,880 --> 00:01:00,359
get your free newsletter and gift.
Financial Survival Network now more than ever.

12
00:01:03,840 --> 00:01:08,439
And welcome you are listening to and
watching the Financial Survival Network. I'm your

13
00:01:08,439 --> 00:01:14,040
host, Carrie Lutz. Hey,
we got real pleasure with us today and

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00:01:14,159 --> 00:01:19,799
our good friend Wolf Richter from wolfstreet
dot com is with us now. Wilf.

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I avidly read your site because you
have a take on things that very

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few others really can approach. And
I know, like when you write an

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article, you've really thought it out. So first thing, we're talking pre

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call commercial real estate office buildings,
especially in major cities, kind of going

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the way of the dynosaur. Huh, thanks for having me carry Yeah,

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I mean, that's that's one of
the astonishing developments over the last few years.

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And it's too skating worse and worse
and worse that companies have learned during

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the pandemic that they don't really need
all this off space. So they have

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ordered office space before the pandemic as
soon as something came on the market,

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had they grabbed it to grow into. Because there was so little on the

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market. It was an office shortage
in cities and tech cities like San Francisco

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and Seacattle. I mean, people
were talking about the office shortage in Facebook

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and Google nab some office space,
and then the pandemic came and working from

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home took over. In companies realized
they number one, don't need all of

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this empty office space that they thought
that we'ld grow into. And then number

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two, they started trimming down there
the office attendance and would you even need

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less than what they already had.
So we have a gigantic mess on our

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hands with these office buildings, over
a third of them or on the market.

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Police in San Francisco and in some
other cities in Dallas and Houstons has

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been the same issue for many years
because of the order bust in twenty to

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sixteen, and so that has he's
very hard. But now it's spread across

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the country really and and there's no
good way out here. There's no good

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way out. So is the solution. Like the old buildings in New York,

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they were like perfectly set up to
convert to residential because they were certain

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distance the wall to the elevator core. And I saw numerous, you know,

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literally dozens and dozens of buildings in
New York City, converted buildings that

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were built like in the twenties,
thirties, early forties. But the newer

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buildings the emphasis was on, you
know, basically maximum floor to air ratio

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and the steel buildings, so that
they're not really practical to convert the space

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is too big. Yeah, that's
correct, Especially the buildings in the nineteen

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eighties and later there are there they're
depending on the foot printed the big square

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footprint. Uh, that they're very
expensive to convert. And then in that

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case, you're looking at the land
value. That's that's sort a building like

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that is worse. It's land value. It has to be torn down and

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redeveloped into residential and that's that's one
of the big steps. And there are

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some buildings that can be converted,
especially narrower buildings, uh, and that

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may be the cheaper route to go
than tearing it down, and so they're

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doing some of that. And the
suburban office buildings, of course, with

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big parking areas and the like a
four story office building a three story office

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building, they're very easy to tear
down. And it's like a shopping mall.

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You have several acres of land there
and not a lot of building,

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and so that's easy to tear down
and put a large residential development on it.

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But in these downtown office towns where
we have a relatively small lot and

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a huge building on top, Yeah, that's it's essentially land value what these

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buildings are the worst today. And
of course that's not the collateral value that

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was assumed when one of the loans
were taking out on these buildings. So

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yeah, there's this huge amount of
money that's now being lost in commercial real

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estate. So people aren't shopping anymore. They don't go to malls, they

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don't go to offices. What are
people doing now? Oh, there's no

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more retail therapy. Your retail therapy
is going to Amazon, and you don't

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need to go to the office anymore, so you just stay home and order

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stuff. I don't know what the
world's coming to here, wealth Yeah,

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I mean, I think the shopping
on your smartphone and on your laptop is

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still sort of a form of therapy
for a lot of people, and they're

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doing it and they're done lots of
it. And online retail has been booming,

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of course, and brick and mortar
stores aren't having trouble. I mean,

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like Walmart's online business is surging in
twenty percent plus growth rates here over

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here, or and grocery sales are
really doing well in brick and mortar stores.

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But yeah, the rest of it
is just really hard hit. And

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I don't know what people are doing. You know, we'll go out hiking

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on weekends, and we see lots
of people out hiking on weekends. I

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mean, they're doing stuff. It's
not like they're sitting it old. They're

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doing anything, and they're entertainment,
they're doing all kinds of stuff out and

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so yeah, I never thought personally
that shopping was anything I wanted to do.

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And even before the Internet I bought, we have catalogs. So I

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don't know, you got it.
Guess you just don't get the dopamine.

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If it must be a gene.
Some people are born to shop and others

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aren't, and those who are not
just get no gratification from all those shiny

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new objects. Speaking of shiny new
objects, so we have a building boom,

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factory boom taking place. I assume
a lot of it is AI generated

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because we need these huge data centers
right to basically house all the AI computing

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systems that are going up. But
there's more to it than that as well,

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isn't there. Yeah, So this
particular article I was writing about the

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manufacturing facilities that are being built at
at an extraordinary pace. You know,

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the data centers are in a category, and there's also a boom going on,

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but that's not particularly what I was
talking about. I was talking about

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manufacturing, actually actual factories. So
and I've listed a whole bunch of announcements

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that we're done last month, and
yeah, a lot of that is chip

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makers. And now we've got the
Chips Act that's starting to reshore chip manufacturing

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to the United States. And of
course the money has started flowing yet.

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The announcements have been made, but
the actual disbursements haven't happened yet, so

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that's still going to show up.
But the world's largest chip makers are setting

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up shop in the United States to
produce chips, and they're doing in Arizona,

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They're doing it in Texas, they're
doing it in Ohio, They're doing

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it all kinds of places. And
these are gigantic, very expensive production facilities

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or one of those factories. So
the construction itself is not that expensive.

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What's expensive what's going inside these chip
manufacturers And that's not even included in the

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numbers yet. We're just talking about
the building costs. And uh, yeah,

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our construction of factories is doubled and
tripled. So this is really a

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that's a good movement. I mean, factory construction has stalled for a decade

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more a decade, and manufacturing output
in the United States has stalled, and

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automakers are still heavily represented in the
United States and all the world's automakers are

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manufacturing in the United States, but
overall, yeah, the number two manufacturer

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behind China, where we should be
the number one manufacturer, and given the

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size of our economy, and uh
so I think it's it's it's a good

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thing to see that there is a
a sort of a reshoring going on.

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It's not that manufacturing is being brought
back. It's that new facilities are no

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longer building overseas that that built in
the United States. So it's not that

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these jobs are coming back, it's
that these new jobs are being created here.

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And of course the different jobs engineers
and advanced degrees and those kinds of

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people that are really highly qualified that
are needed for those plants, and and

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uh we're seeing that across the board
a lower level manufacturing. Everybody's got kind

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of in trouble with the manufacturing facilities
in China over the pandemic and ran into

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shortages, ran out of stuff,
couldn't get it, got tangled up in

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this transportation chaos that we had and
all under lesson then. And I think

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this is a a major shift in
how the United States is now looking at

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00:10:03,320 --> 00:10:09,600
globalization. Interesting. Interesting, So
we're deglobalizing before our very eyes here,

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right, And where does that leave
China? Where does that leave the world?

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I mean, there's a lot of
stuff that we get from other places,

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some more friendly than China. We
don't have to worry about IR theft

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as much. I think everybody does
IR theft, IP theft rather intellectual property

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theft. I think it's a global
epidemic. Everyone's stealing from everybody. The

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Chinese are just like that was the
price of admission for their market. But

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everybody steals everybody else's intellectual property,
right right, Yeah, and that's a

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big issue. It you have a
little bit better control over your IP when

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you manufacture in house manufacture in the
United States and in China, of course,

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the major manufacturers were set up,
all of them. Really we were

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00:11:03,039 --> 00:11:07,960
forced to share their IP with a
Chinese company, so that was part of

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the deal. And they didn't even
need to steal it. That's just which

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00:11:13,799 --> 00:11:18,840
is part of the deal. And
and yeah, you think that you stay

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ahead of the Chinese uh developments that
way because you're smarter and you can develop

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new things by the time they figured
it out here a few years ahead.

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But that turns out to have been
a miscalculation, and the Chinese have caught

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up. I mean, the European
train makers went through that, Japanese high

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00:11:35,039 --> 00:11:39,360
speed train makers, they all all
had uh these ip sharing agreements with China

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00:11:39,399 --> 00:11:43,840
make their trains over there to sell
to China. Now China's making its own

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00:11:43,879 --> 00:11:48,360
ice peed trains and he's selling them
over theseas in competition with the European and

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the Japanese makers. So this is
how it's happened. In that car Chinese

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00:11:52,799 --> 00:11:58,279
cars, they're showing up everyone and
the evs, especially the you know,

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00:11:58,759 --> 00:12:03,960
countries are trying to protect themselves from
this, this flood of cheap evs threatening

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00:12:03,000 --> 00:12:07,200
to come in. And so this
whole thing has turned around and and I

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think people manufacturers are seeing the risks
of exposing themselves to the supply changing China.

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It's just a very risky thing.
They have paid a huge price for

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00:12:18,200 --> 00:12:22,720
it during the pandemic. They've paid
they're still paying a huge price in terms

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00:12:22,799 --> 00:12:28,559
of loss of pipe. They're now
competing with companies that I helped form in

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China. So you know, that's
it doesn't come to cheeses moment here.

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00:12:33,679 --> 00:12:39,240
I think that we've had and and
it and it's a good thing. It

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happened probably ten years to white,
but it's a good thing to see that

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00:12:41,440 --> 00:12:48,200
happening. Yeah, I think so. And the EV thing. So if

154
00:12:48,200 --> 00:12:50,799
you read the paper, they would
have you believe or read the media,

155
00:12:50,879 --> 00:12:58,759
the legacy media that evs are flagging
and the sales are lagging. But not

156
00:13:00,080 --> 00:13:03,080
true, is it. No?
I mean Ford just came out with its

157
00:13:03,440 --> 00:13:09,600
May figures for sales, total sales, and it's EV sales up sixty five

158
00:13:09,639 --> 00:13:13,039
percent from a year ago. So
I mean it was everybody sided forward is

159
00:13:13,080 --> 00:13:16,399
backing off? Well, I mean
Ford made some miscalculations, they had some

160
00:13:16,440 --> 00:13:20,000
product problems, they had some supply
chain problems, they had all these issues

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00:13:20,000 --> 00:13:24,200
that Tesla had years ago, and
uh so they couldn't really do all the

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00:13:24,240 --> 00:13:28,200
things they wanted to do. And
they now they're there that can't get the

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00:13:28,279 --> 00:13:31,919
manufacturing costs down quick enough. But
they've got all these issues. But the

164
00:13:31,960 --> 00:13:35,639
sales are not backing off. You
know, the sales sales are up a

165
00:13:35,639 --> 00:13:41,279
bunch. And among all the legacy
automakers that got into v evs, Yeah,

166
00:13:41,279 --> 00:13:43,759
they're what whatever they can build they
can sell. It's it's not like

167
00:13:43,960 --> 00:13:46,919
that, you know, there's no
demand for them. There's plenty of demaind

168
00:13:46,960 --> 00:13:52,919
for these evs. Obviously, now
there's a lot of competition. Tesla has

169
00:13:52,960 --> 00:13:56,679
a lot of competition. I'm glad
to see that. So it's were we're

170
00:13:56,720 --> 00:14:01,240
not just one manufacturer anymore, so
everybody they're trying to do it. Your

171
00:14:01,279 --> 00:14:03,559
GM is coming out or has come
out with a bunch of new models and

172
00:14:03,559 --> 00:14:07,440
they're taking off. And they of
course they had the second best selling model

173
00:14:07,480 --> 00:14:11,919
to Bolt that killed that one.
But now they're coming out with the new

174
00:14:11,960 --> 00:14:16,240
models and their selling was supposed They
have those apply chain problems and they have

175
00:14:16,320 --> 00:14:20,279
the quality problems. They have all
these issues that yeah, when you start

176
00:14:20,360 --> 00:14:26,799
developing a brand new vehicle. But
the men's there for those vehicles, Yeah,

177
00:14:26,840 --> 00:14:31,279
definitely, and you know, you
just see it. You see more

178
00:14:31,320 --> 00:14:35,159
and more of them on the road. So what's your take though on what

179
00:14:35,240 --> 00:14:41,360
it does for you know, between
AI and between electrification, whether it's good

180
00:14:41,440 --> 00:14:46,559
or bad, it's irrelevant, it's
happening now. Personally, I think the

181
00:14:46,639 --> 00:14:50,120
cores are potentially a lot better if
they're electric, they do a lot more

182
00:14:50,320 --> 00:14:58,759
technologically or the self driving also kind
of overlaps with AI. But electrical generation

183
00:14:58,080 --> 00:15:03,159
in the country, the grid is
it up to the task here? And

184
00:15:03,960 --> 00:15:09,159
uh, what do you think it
means for utility? Uh companies profits and

185
00:15:09,200 --> 00:15:13,960
dividends. Yeah, so evd's are
really a good thing for utilities. I'm

186
00:15:13,960 --> 00:15:20,559
more worried about the data center,
the AI, UH data centers and and

187
00:15:20,679 --> 00:15:26,840
also some extent to cryptos, but
UH ebs genuinely charge. I'm usually are

188
00:15:26,879 --> 00:15:31,200
charged at home, and and that's
usually done at night off ours, especially

189
00:15:31,240 --> 00:15:37,799
if you have a time of use
pricing, so you do that after midnight,

190
00:15:37,240 --> 00:15:41,480
and that's when the grid has the
smallest loan. There's a lot of

191
00:15:41,519 --> 00:15:48,000
ivy capacity, and so utilities can
actually sell electricity during a time when they

192
00:15:48,000 --> 00:15:50,879
had to carry the grid without really
a lot of revenue. So that's really

193
00:15:50,919 --> 00:15:56,639
a good thing for utilities. Not
loving that. The problem is is AI

194
00:15:56,759 --> 00:16:00,840
data centers. They're guarding up a
huge amount of and that's during the day,

195
00:16:00,919 --> 00:16:06,240
that's at night, that's all the
time, And I'm not sure where

196
00:16:06,279 --> 00:16:10,000
all this electricity is going to come
from. Obviously, utilities like to be

197
00:16:10,080 --> 00:16:14,559
in a growth industry that like this. Electricity consumption in the United States has

198
00:16:14,559 --> 00:16:18,559
stagnated since about two thousand and seven, and so this is for for the

199
00:16:18,639 --> 00:16:22,639
companies that are doing this. This
is a good thing. They're now in

200
00:16:22,679 --> 00:16:29,600
a growth business. They they can
build power plants, they can build power

201
00:16:29,679 --> 00:16:33,639
lines, they can maintain them better
because now they're having growth revenues in revenues

202
00:16:34,159 --> 00:16:38,159
and growth in profits and electricity process
have been going on. I mean,

203
00:16:38,159 --> 00:16:42,000
because it was a bit thing about
that. But for the utilities, this

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is there's really a pretty good situation. When you add that kind of growth,

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then investment becomes easily justifiable. They
can issue bonds, thirty year bonds

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to uh TO to build a power
plant and to build out the grid,

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and they're doing that so they they
will be able to meet demand if they

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see this growth potential is there and
it makes financial sense to invest in it.

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And it's not going to be a
smooth past, but yeah, that

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will use that to build out the
capacity. Hey what do you think of

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the like Tesla battery centers, the
megapacts, you know, Jigundo stacks of

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LFP batteries that are used to kind
of equalize the load. So they n

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plus like they have the ability to
buy up all the cheap electricity Now in

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Florida here my rate's like thirteen cents
per kiloot hour but off peak. If

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I was to switch back again,
it would be seven cents per hour off

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peak and twenty five cents per killoout
hour peak. But in places like Georgia

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they let you buy the energy for
a penny per kiloout hour off peak,

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but obviously commercial industrial users get far
more preferential rates. Uh. You think

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that's going to be a vital part
of the electrical grid going forward. Wolf

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batteries, Yeah, yeah, And
that's an interesting thing. It does an

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arbitrage now as a motivation behind installing
these batteries, because you have power surges

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during which electricity becomes very very expensive, and so about demand surges and then

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they're brief that may only be an
hour day, and that despite or electricity

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on the whole sale market gets very
very expensive. And then you have periods

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where the excess potentially excess production of
electricity and especially from renewables that you don't

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really turn off, I mean as
you have to because there's no fuel costs

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involved. So you run them all
the time as long as there's in the

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sun, and you end up over
generating electricity and some of the power dry

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into the negative. You know,
they have the prices that have trouble.

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So you have a battery installed that
can charge up when the electricity costs very

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low, and they can sell the
electric it pays very little to get the

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electricity, and then it can sell
the electricity during the day when the demand

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is high and the price is so
high, and that's arbitrage. And so

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people are making lots of money doing
that. And so now because of this

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this huge prof profit motive behind it, battery in selicious are surging. They're

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going on all over the place.
And what they're doing, in effect,

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they're taking the spikes out of the
grid, and that's a really good thing.

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The grid has to be able to
handle the spikes. It has to

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be built big enough stry all the
spikes also collapses, and with batteries being

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able to take out the spikes,
that is a huge thing for the grid

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and it's I think it's a game
changer. Yeah, I agree. And

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you had plants that they call peakers, and they were just there. Their

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only purpose in life was for peak
demand. So now if you get enough

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of these batteries, you'll be able
to eliminate the peakers, which didn't really

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weren't really necessary and then you're cheap. You save for nighttime your cheapest electricity,

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which is by a large nuclear in
existing nuclear plants. New nuclear plants

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still through the moon. So it
sounds like it sounds like it's really going

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to be a major have a major
impact over time. They just can't quite

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build them quick enough right now.
Musk says that the megapacks could be like

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the major source of profits for the
company in the next few years, so

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it'll be interesting to see. Anyway. You find Wolf over at wolfstreet dot

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com. Link is in the show
notes. Questions of comments for Wolf or

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myself shoot me an email at Carrie
LUTs dot com. Hey, Welf,

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it's always a pleasure, always interesting
speaking with you. We'll have you on

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again soon. Thanks Carrie, Thanks
for listening to Carrie Letz's Financial Survival Network,

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your solution to today's trying times.
For the latest, go to Financial

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00:21:18,119 --> 00:21:22,720
Survivalnetwork dot com. Financial Survival Network
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