April 3, 2024 • 25 mins
Discover pivotal lessons from the heart-rending bridge disaster in Baltimore as Clem Miller and Steve Davenport consider the urgent call to action it represents for infrastructure investment and maintenance. In the wake of this calamity, we delve into the development of essential systems such as harbors and examine the economic and safety consequences of neglecting such critical structures. As we seek out potential solutions, our conversation serves as a homage to the lives lost and a stark reminder of the pressing need for strategic, proactive investment to safeguard our future.
We survey the complex landscape of non-traditional infrastructure and real estate investments, including public-private partnerships and companies with secondary real estate businesses. Listen as Clem and Steve together the puzzle of how private investment can intersect with public infrastructure to foster not just growth, but a durable legacy of safety and innovation.
Straight Talk for All - Nonsense for None
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Clem Miller (00:02):
Hello everybody and welcome to Skeptic's Guide to
Investing with Clem Miller andSteve Davenport.
This is Clem, and today we'regoing to be talking about
infrastructure.
And the reason we're talkingabout infrastructure today is
because we recently had thebridge catastrophe in Baltimore.
(00:24):
I just happened to live in theBaltimore area, about 15 miles
away from where that bridgecalamity happened, and so it
really leads Steve and I tothink about infrastructure and
where we stand and the role ofinfrastructure as an investment.
(00:45):
You know it was an unfortunateaccident.
It happened in a major artery,it was on the Baltimore Beltway,
and you know it was a calamity,a catastrophe that sort of
linked.
You know two different issues.
(01:07):
One is the aging infrastructurein America really capable
(01:29):
enough of handling these giantships, with these giant
container ships which have onlygotten bigger and bigger and
bigger over the years?
So, steve, why don't you tellus what your thoughts are on
infrastructure?
Steve Davenport (01:41):
Well, I always look at these events and people
say, well, this is a one in ahundred year event, because
this shouldn't have happened.
I just kind of wonder why wekeep having so many issues.
First, I'd say we've gotharbors and ports which were
developed in the 16 and 1700s.
(02:02):
I realize they've been updated,but if I look at us as a
country, it feels like we justhave trouble spending money on
infrastructure.
We should feel like we've gotone of the most advanced highway
systems in the world, we've gota great train network, we're
now adding to our fiber networkand some of the other things.
(02:25):
I just feel there's a real needfor us to constantly be
improving our infrastructure andtherefore making, keep making
and making our systems and ourstructures last for the future.
Structures last for the future.
(02:49):
When I look at Boston Harbor, Ilook at Baltimore and I think
about all of the East Coast andhow those harbors and those
assets to me have beenunderappreciated and
undermaintained, and I worryabout how that is going to
ultimately lead to.
You know, look at the trainsystem in New York.
It's a piece of infrastructurethat millions of people use
(03:11):
every day and it's goingbankrupt and it's not properly
maintained.
They've got water problems,they've got different problems
with the maintenance of thoseassets and if you don't take
care of those assets, I can tellyou what happens they break
down.
And so I think it hopefullywhat we can look for.
(03:33):
And I hate to see what happenedto those people who were on the
bridge when it collapsed and Ihate to see what happens to the
whole area around Baltimore andhow it will affect them
economically, because they'rethe number one transport point
for transportation in thecountry.
So those vehicles coming in theauto industry has enough
(03:55):
challenges with EVs and carbonrules and different things going
on, that you take away theirport of entry and you start to
make them transmit to otherassets.
This gets back to that point Ihad about friction.
Right, we want the systems inour country to have as little
(04:16):
friction so that if a personsays, hey, I want to transmit
these 50 vehicles over car, Ican do it, over train, I can do
it, over boat, I can do it.
And I think that the more wecan adjust and maintain these
different systems, I think thestronger our economy gets,
because we can take an eventlike this, which is tragic, and
(04:38):
then say, hey, we have theseother methods and we can switch
over for a period of time.
I think that's really where youcan differentiate why American
capitalism might be better thanothers, because people are going
to step forward with ideas andways to solve this problem that
(05:01):
I think ultimately could be verygood for us on the whole, for
the economy.
So I think it's tragic thatlives were lost.
I think that as an asset.
I've heard there were two mainsolutions that people talk about
.
One is to put some type of abarrier and design all these
(05:22):
critical posts for these bridgeswith barriers such that they
could maintain a much harder pit.
And then I've heard others saythat you need to have tugs
pulling these boats throughinstead of letting them go under
their own power, and I thinkthat it would be great for the
tugboat people if we ruled onoption number two.
(05:45):
I think it will be great forthe cement and steel producers
if we ruled on option number one.
I think there's probably somecombination of things that we
need to do to make the travel inthese waters safer for everyone
.
I think it's a very interestingdiscussion because I think,
(06:07):
when we look, there's really noclear way for us to know what
the future holds for watertransport.
Clem Miller (06:16):
Yeah, I agree, you mentioned tugs and I was just
thinking that downtown Baltimore, I was just thinking that, you
know, downtown Baltimore, fellsPoint, there were a lot of,
there's a lot of tugs that aretugboats that are stationed down
(06:37):
there and I'm just wonderingwhy they weren't used to take
this ship out and through thechannel.
Steve Davenport (06:41):
So it comes down to money.
Clem Miller (06:42):
Yeah, it might.
It might just be that it wasjust too expensive to use that.
Steve Davenport (06:50):
Obviously it takes a lot of fuel to move a
ship, but yeah, I also wonder ,when you get that large and I
don't remember exactly thedimensions of the ship, but when
you get that large it needslike eight tugs, right, it
doesn't just get tugged by onelittle boat.
And so I think the expansion inthe economics of transit over
(07:13):
the sea is that these boats aregetting bigger and bigger and
therefore we need to say, okay,for this size boat.
I know that the Panama Canal isa gating point because so many
need to use the Panama Canal andthey can't get larger than they
could to fit through there.
(07:34):
But I feel there's a lesson forus here, and whether it's
bridge, whether it's roads,whether it's-speed internet, we
need to always be thinking.
If I look at our government andour system in the United States,
I think short-termism is ourbiggest enemy.
(07:56):
We have people who thinkshort-term and don't think
longer-term.
Our energy policy is short-term.
Everybody's focused on justgetting elected.
The presidential election willtake all energy away from any
new ideas for the next ninemonths.
What if we just said always,you know, in our budget we need
(08:17):
to have a component that is thefuture and infrastructure and
said instead of classifying itas military expense or road
expense or banking expense, wejust classify it as future and
we take that allocation and weallocate it every year.
We take 1% of the budget and weput it into those different
(08:40):
areas, because I don'tunderstand how we can expect the
people in those sectors to beable to make the decisions that
benefit everyone if they'reultimately profit-seeking.
Somehow the government needs tohelp prescribe a different
(09:00):
equation that sort of equationthat considers resources like
this as critical.
Clem Miller (09:15):
It requires a mindset of thinking about the
budget as the federal budget, ashaving two parts, one being
current expenditure and theother one being capital
expenditure, and thinking aboutcapital expenditure in terms of
the return, the overallall-inclusive economic return on
that investment.
And I think the government, thefederal government, has made
some moves in that direction byfunding roads and bridges and
(09:40):
whatnot from the Federal HighwayTrust Fund.
But the only problem with theFederal Highway Trust Fund is
it's funded from gasoline taxes,from fuel taxes, and the rates
of taxation on those have notbeen increased or have not been
increased to the degree thatthey are actually sufficient to
(10:03):
fund some of these projects.
So I know the Bidenadministration has done some
work in terms of infrastructureacts, increasing infrastructure
spending, but at the same time Iknow that some of that spending
has gone more into renewableenergy.
So I don't know to what extentthere, I don't know to what
(10:23):
extent you know there's enoughin terms of resources to to
direct toward repairing all ofthe bridges and roads that need
repairing.
Just saying you're going tofinance the reconstruction of
the of the key bridge inBaltimore.
You know, yeah, sure, there'senough resources to do one
(10:45):
bridge, but there are lots ofbridges in the US that need
repair.
And where is the money for that?
Steve Davenport (10:52):
Well, I read somewhere that the annual income
from that bridge is millionsand millions of dollars that
come into the economy to helpthe bridge has been paid for, I
think right.
So I believe that when you geta toll like that, it's a source
(11:12):
of income instead of looking atit as an investment in the
community, right?
And I think that politicianscan look at something and say,
look at the money it generates,and then other people will look
at it and say, ok, but as a partof our economy, it helps this,
this and this, and therefore itinvolves more support or it
(11:34):
needs more attention from ourleaders.
I mean, I think the questionabout infrastructure is really a
much broader topic than thebridge.
I think the bridge is, similarto the tip of the iceberg, and
when we get into all of theother pieces of infrastructure
(11:55):
and you talked about in one ofthe prior podcasts about income
for the future, and you look atsome roads and you look at
bridges, and you look at bridgesand you look at these different
assets airlines, airport leases, all these different types of
assets all over the world,utilities they're part of that
(12:15):
infrastructure that we have tofigure out.
You know, how do thoseinvestments fit?
Are they, you know?
Are they quasi-fixed income?
The utilities, are they reallygrowth opportunities with solar
and hydro and, you know, windfarms?
(12:36):
Those assets, to me are a wayfor us to think about
alternatives without having togo into the private space, and I
like them, you know, as anotherway to think about that middle.
You know that messy middle ofpeople's portfolio between
equities who are focused ongrowth, bonds that are focused
(12:58):
on stability and safety, andthen there's this stuff in the
middle.
Clem Miller (13:07):
I think a lot of our listeners or at least some
of our listeners might not evenbe aware, uh, that you can
invest in an asset class or youknow a sub asset class called
infrastructure, uh, but youcertainly can, uh, or you can
invest in certain you knowindustries, like you mentioned,
uh, utilities, uh that utilitiesthat focus on infrastructure,
(13:42):
but you can invest in, that,will invest in the private what
I would call the privateportions of a public-private
partnership.
So you've got government puttingin some money and then you've
got some private investment thatcomes in.
And then that privateinvestment, then it either is
(14:05):
invested in the private marketsor it's put into funds and is
available in a liquid form toinvestors on stock exchanges.
So yeah, I mean you cancertainly invest in
infrastructure andinfrastructure tends to be good
(14:26):
in terms of an income provider.
So yeah, back to your point,steve.
It sort of sits in an areabetween equities, which may or
may not have good income streams, and fixed income.
It's more of an income providerand I think a lot of investment
(14:50):
firms that do offerinfrastructure-related products
cite income as a major benefitof investing in these
infrastructure projects.
That and the fact that they seea lot of growth opportunities
in the future for infrastructure.
Steve Davenport (15:24):
So I think we've underspent on it and
therefore it's going to.
Could think of them alongsideinfrastructure, or you could
look at them as different from,but I think there's a lot of
similarities in that there's ahard asset that is producing
some function for the benefit ofthe economy, aka a retail
(15:46):
distribution point, a retail, ora storage unit, or a hotel,
motel, or apartment buildingsfor housing.
They are providing something totheir community that the person
is being compensated for, andit's a little bit different than
how do you run a technologycompany and coming up with the
(16:10):
latest three nanometer chip.
They're running theseorganizations that manage these
assets in a way that producesincome and by being in the REIT
structure, 90% of the income isgiven back to the shareholders.
I like it when somebody has togive me back income.
(16:32):
Because I like income, I'm notafraid to say it, I'm not
ashamed of it either.
No matter how much you ridiculeand laugh at me, I will always
like income Just because you'restarting to look at it now in
your twilight years.
I've liked income my whole life.
I like somebody taking moneyout of their pocket and giving
(16:55):
me cash.
So these things in this messymiddle infrastructure, real
estate, even this idea of youknow commodities or gold and
silver producers or you know,there's something to be said for
assets that are operating in adifferent part of the economy.
(17:15):
One of the best classes I hadin investing was by this
Professor Kane at Austin Collegeand he told us.
He said look, all of this studyby all of these Markowitz and
all of these great economicspeople was, he says, they made
an assumption that the marketwas available and total, that
(17:37):
you could invest in all of themarket, but in reality, real
estate is the biggest asset inthe world and most real estate
is not investable.
So therefore, you've gotforests throughout the US that
are controlled by the national,you know government and you've
got all these other assetsaround the world and you know
(17:59):
real estate as an asset is sobig as an asset class that it
dwarfs what is, you know, otherinvestable assets.
So, yes, we own a home and yes,but if we really wanted to have
a market portfolio, we wouldneed to have a lot more real
estate, and I think thatinfrastructure as a part of the
(18:20):
economy is a huge part, butbecause we don't look at it the
same, because it's run orcontrolled by local communities,
states or federal government,we tend to put it in the bucket
of well, that's over theresomewhere in the fixed area and
in reality, there areopportunities here for us.
(18:42):
So I like the idea of this topicand I'd like us to start to
think about you know, how do wetake liquid opportunities in
these areas and think about themin terms of you know, when do
we?
If we have hyperinflation, doesit make sense to add gold?
Does it make sense to add REITs?
I think the higher rates.
(19:03):
If we are going down in ratesand rates are going to go down,
then the cost to borrow for allthese REITs is going to improve
and there's going to be anopportunity there at some point
for us and, I think, theinfrastructure.
Similarly, if rates come down,they'll borrow at lower rates,
so they'll likely invest more insome of these projects.
Clem Miller (19:24):
I want to add two things to what you said.
First of all, I think there'ssomething to learn, you know,
from the Europeans and also fromfolks in Latin America about,
about private involvement ininfrastructure, and because
there are some firms based inEurope and and in Latin America
(19:45):
that are very involved indeveloping toll roads and other
things that are private, thatare infrastructure.
So they work in a partnershipwhere the infrastructure itself
might be publicly owned but it'soperated in private.
(20:05):
Then the other thing I wantedto mention is that sometimes
there are, is that sometimesthere are companies that are
really real estate companiesthat are masked as other
industries.
So, for example, one of thelargest owners of real estate in
(20:28):
this company and maybe you somuch real estate that it's
really a big component of therevenue generation in terms of
in terms of being able to sellparcels.
Steve Davenport (20:53):
Roadhouse and some of the other.
You know restaurant companies,because there was a time in New
England where you know certaincompanies that were on Route 128
, which goes around the city.
You know the underlyingbusiness was some kind of a
measurement company but thewhole operation the factory and
the offices occupied the space.
That made them worth hundredsof millions of dollars even
(21:13):
though they didn't make anymoney, because the underlying
asset I mean I love buyinginvestments where I know there's
a floor under it because itowns some of its own plants and
equipment.
So I believe that internationalyour point about international
was right on I believe that whenwe look at infrastructure, we
(21:35):
should look at it as aninternational or global asset
type.
I don't think we should look atdomestic, because part of the
reason you're adding is lesscorrelation.
Therefore, if you can get lesscorrelation even more by having
international real estate, Ithink there are some risks in
some of these countries, but Ithink that most of them are
(21:56):
worth taking, given the factthat these companies have been
around for years and I thinkthat some of the real estate and
infrastructure companies offera great opportunity for us.
How would you sum upinfrastructure and the key
bridge.
Clem Miller (22:14):
Okay, so I think it certainly highlights the need
for the development ofinfrastructure, for the
improvement of infrastructure,for the development of new
infrastructure.
I think that, as far as ourpodcast episodes are concerned,
I think it leads to all sorts ofnew ideas for future discussion
(22:35):
on this podcast.
I think that we can beeducational for a lot of our
listeners who simply may not beaware that infrastructure is an
asset class, and we can beeducational about that as we've
(22:56):
been educational about otherthings on this podcast.
So, like you said, it's veryunfortunate that this bridge
episode happened.
We feel very bad for thefamilies of those who were
killed in this accident.
We hope that repairs are doneto the bridge are expeditious,
(23:23):
so that the port can more fullyreopen.
So I would sort of leave it atthat, that we hope that there's
a lesson here for the future,that government steps up and
that there are plenty of futureopportunities for private
investors in the publicinfrastructure space.
Steve Davenport (23:46):
Thanks.
Well said, clem.
Thank you everybody forlistening and please like and
share Again.
This is Stephen Clem checkingout for another episode.
Bye.
Hello everybody and welcome to Skeptic's Guide to
Investing with Clem Miller andSteve Davenport.
This is Clem, and today we'regoing to be talking about
infrastructure.
And the reason we're talkingabout infrastructure today is
because we recently had thebridge catastrophe in Baltimore.
(00:24):
I just happened to live in theBaltimore area, about 15 miles
away from where that bridgecalamity happened, and so it
really leads Steve and I tothink about infrastructure and
where we stand and the role ofinfrastructure as an investment.
(00:45):
You know it was an unfortunateaccident.
It happened in a major artery,it was on the Baltimore Beltway,
and you know it was a calamity,a catastrophe that sort of
linked.
You know two different issues.
(01:07):
One is the aging infrastructurein America really capable
(01:29):
enough of handling these giantships, with these giant
container ships which have onlygotten bigger and bigger and
bigger over the years?
So, steve, why don't you tellus what your thoughts are on
infrastructure?
Steve Davenport (01:41):
Well, I always look at these events and people
say, well, this is a one in ahundred year event, because
this shouldn't have happened.
I just kind of wonder why wekeep having so many issues.
First, I'd say we've gotharbors and ports which were
developed in the 16 and 1700s.
(02:02):
I realize they've been updated,but if I look at us as a
country, it feels like we justhave trouble spending money on
infrastructure.
We should feel like we've gotone of the most advanced highway
systems in the world, we've gota great train network, we're
now adding to our fiber networkand some of the other things.
(02:25):
I just feel there's a real needfor us to constantly be
improving our infrastructure andtherefore making, keep making
and making our systems and ourstructures last for the future.
Structures last for the future.
(02:49):
When I look at Boston Harbor, Ilook at Baltimore and I think
about all of the East Coast andhow those harbors and those
assets to me have beenunderappreciated and
undermaintained, and I worryabout how that is going to
ultimately lead to.
You know, look at the trainsystem in New York.
It's a piece of infrastructurethat millions of people use
(03:11):
every day and it's goingbankrupt and it's not properly
maintained.
They've got water problems,they've got different problems
with the maintenance of thoseassets and if you don't take
care of those assets, I can tellyou what happens they break
down.
And so I think it hopefullywhat we can look for.
(03:33):
And I hate to see what happenedto those people who were on the
bridge when it collapsed and Ihate to see what happens to the
whole area around Baltimore andhow it will affect them
economically, because they'rethe number one transport point
for transportation in thecountry.
So those vehicles coming in theauto industry has enough
(03:55):
challenges with EVs and carbonrules and different things going
on, that you take away theirport of entry and you start to
make them transmit to otherassets.
This gets back to that point Ihad about friction.
Right, we want the systems inour country to have as little
(04:16):
friction so that if a personsays, hey, I want to transmit
these 50 vehicles over car, Ican do it, over train, I can do
it, over boat, I can do it.
And I think that the more wecan adjust and maintain these
different systems, I think thestronger our economy gets,
because we can take an eventlike this, which is tragic, and
(04:38):
then say, hey, we have theseother methods and we can switch
over for a period of time.
I think that's really where youcan differentiate why American
capitalism might be better thanothers, because people are going
to step forward with ideas andways to solve this problem that
(05:01):
I think ultimately could be verygood for us on the whole, for
the economy.
So I think it's tragic thatlives were lost.
I think that as an asset.
I've heard there were two mainsolutions that people talk about
.
One is to put some type of abarrier and design all these
(05:22):
critical posts for these bridgeswith barriers such that they
could maintain a much harder pit.
And then I've heard others saythat you need to have tugs
pulling these boats throughinstead of letting them go under
their own power, and I thinkthat it would be great for the
tugboat people if we ruled onoption number two.
(05:45):
I think it will be great forthe cement and steel producers
if we ruled on option number one.
I think there's probably somecombination of things that we
need to do to make the travel inthese waters safer for everyone
.
I think it's a very interestingdiscussion because I think,
(06:07):
when we look, there's really noclear way for us to know what
the future holds for watertransport.
Clem Miller (06:16):
Yeah, I agree, you mentioned tugs and I was just
thinking that downtown Baltimore, I was just thinking that, you
know, downtown Baltimore, fellsPoint, there were a lot of,
there's a lot of tugs that aretugboats that are stationed down
(06:37):
there and I'm just wonderingwhy they weren't used to take
this ship out and through thechannel.
Steve Davenport (06:41):
So it comes down to money.
Clem Miller (06:42):
Yeah, it might.
It might just be that it wasjust too expensive to use that.
Steve Davenport (06:50):
Obviously it takes a lot of fuel to move a
ship, but yeah, I also wonder ,when you get that large and I
don't remember exactly thedimensions of the ship, but when
you get that large it needslike eight tugs, right, it
doesn't just get tugged by onelittle boat.
And so I think the expansion inthe economics of transit over
(07:13):
the sea is that these boats aregetting bigger and bigger and
therefore we need to say, okay,for this size boat.
I know that the Panama Canal isa gating point because so many
need to use the Panama Canal andthey can't get larger than they
could to fit through there.
(07:34):
But I feel there's a lesson forus here, and whether it's
bridge, whether it's roads,whether it's-speed internet, we
need to always be thinking.
If I look at our government andour system in the United States,
I think short-termism is ourbiggest enemy.
(07:56):
We have people who thinkshort-term and don't think
longer-term.
Our energy policy is short-term.
Everybody's focused on justgetting elected.
The presidential election willtake all energy away from any
new ideas for the next ninemonths.
What if we just said always,you know, in our budget we need
(08:17):
to have a component that is thefuture and infrastructure and
said instead of classifying itas military expense or road
expense or banking expense, wejust classify it as future and
we take that allocation and weallocate it every year.
We take 1% of the budget and weput it into those different
(08:40):
areas, because I don'tunderstand how we can expect the
people in those sectors to beable to make the decisions that
benefit everyone if they'reultimately profit-seeking.
Somehow the government needs tohelp prescribe a different
(09:00):
equation that sort of equationthat considers resources like
this as critical.
Clem Miller (09:15):
It requires a mindset of thinking about the
budget as the federal budget, ashaving two parts, one being
current expenditure and theother one being capital
expenditure, and thinking aboutcapital expenditure in terms of
the return, the overallall-inclusive economic return on
that investment.
And I think the government, thefederal government, has made
some moves in that direction byfunding roads and bridges and
(09:40):
whatnot from the Federal HighwayTrust Fund.
But the only problem with theFederal Highway Trust Fund is
it's funded from gasoline taxes,from fuel taxes, and the rates
of taxation on those have notbeen increased or have not been
increased to the degree thatthey are actually sufficient to
(10:03):
fund some of these projects.
So I know the Bidenadministration has done some
work in terms of infrastructureacts, increasing infrastructure
spending, but at the same time Iknow that some of that spending
has gone more into renewableenergy.
So I don't know to what extentthere, I don't know to what
(10:23):
extent you know there's enoughin terms of resources to to
direct toward repairing all ofthe bridges and roads that need
repairing.
Just saying you're going tofinance the reconstruction of
the of the key bridge inBaltimore.
You know, yeah, sure, there'senough resources to do one
(10:45):
bridge, but there are lots ofbridges in the US that need
repair.
And where is the money for that?
Steve Davenport (10:52):
Well, I read somewhere that the annual income
from that bridge is millionsand millions of dollars that
come into the economy to helpthe bridge has been paid for, I
think right.
So I believe that when you geta toll like that, it's a source
(11:12):
of income instead of looking atit as an investment in the
community, right?
And I think that politicianscan look at something and say,
look at the money it generates,and then other people will look
at it and say, ok, but as a partof our economy, it helps this,
this and this, and therefore itinvolves more support or it
(11:34):
needs more attention from ourleaders.
I mean, I think the questionabout infrastructure is really a
much broader topic than thebridge.
I think the bridge is, similarto the tip of the iceberg, and
when we get into all of theother pieces of infrastructure
(11:55):
and you talked about in one ofthe prior podcasts about income
for the future, and you look atsome roads and you look at
bridges, and you look at bridgesand you look at these different
assets airlines, airport leases, all these different types of
assets all over the world,utilities they're part of that
(12:15):
infrastructure that we have tofigure out.
You know, how do thoseinvestments fit?
Are they, you know?
Are they quasi-fixed income?
The utilities, are they reallygrowth opportunities with solar
and hydro and, you know, windfarms?
(12:36):
Those assets, to me are a wayfor us to think about
alternatives without having togo into the private space, and I
like them, you know, as anotherway to think about that middle.
You know that messy middle ofpeople's portfolio between
equities who are focused ongrowth, bonds that are focused
(12:58):
on stability and safety, andthen there's this stuff in the
middle.
Clem Miller (13:07):
I think a lot of our listeners or at least some
of our listeners might not evenbe aware, uh, that you can
invest in an asset class or youknow a sub asset class called
infrastructure, uh, but youcertainly can, uh, or you can
invest in certain you knowindustries, like you mentioned,
uh, utilities, uh that utilitiesthat focus on infrastructure,
(13:42):
but you can invest in, that,will invest in the private what
I would call the privateportions of a public-private
partnership.
So you've got government puttingin some money and then you've
got some private investment thatcomes in.
And then that privateinvestment, then it either is
(14:05):
invested in the private marketsor it's put into funds and is
available in a liquid form toinvestors on stock exchanges.
So yeah, I mean you cancertainly invest in
infrastructure andinfrastructure tends to be good
(14:26):
in terms of an income provider.
So yeah, back to your point,steve.
It sort of sits in an areabetween equities, which may or
may not have good income streams, and fixed income.
It's more of an income providerand I think a lot of investment
(14:50):
firms that do offerinfrastructure-related products
cite income as a major benefitof investing in these
infrastructure projects.
That and the fact that they seea lot of growth opportunities
in the future for infrastructure.
Steve Davenport (15:24):
So I think we've underspent on it and
therefore it's going to.
Could think of them alongsideinfrastructure, or you could
look at them as different from,but I think there's a lot of
similarities in that there's ahard asset that is producing
some function for the benefit ofthe economy, aka a retail
(15:46):
distribution point, a retail, ora storage unit, or a hotel,
motel, or apartment buildingsfor housing.
They are providing something totheir community that the person
is being compensated for, andit's a little bit different than
how do you run a technologycompany and coming up with the
(16:10):
latest three nanometer chip.
They're running theseorganizations that manage these
assets in a way that producesincome and by being in the REIT
structure, 90% of the income isgiven back to the shareholders.
I like it when somebody has togive me back income.
(16:32):
Because I like income, I'm notafraid to say it, I'm not
ashamed of it either.
No matter how much you ridiculeand laugh at me, I will always
like income Just because you'restarting to look at it now in
your twilight years.
I've liked income my whole life.
I like somebody taking moneyout of their pocket and giving
(16:55):
me cash.
So these things in this messymiddle infrastructure, real
estate, even this idea of youknow commodities or gold and
silver producers or you know,there's something to be said for
assets that are operating in adifferent part of the economy.
(17:15):
One of the best classes I hadin investing was by this
Professor Kane at Austin Collegeand he told us.
He said look, all of this studyby all of these Markowitz and
all of these great economicspeople was, he says, they made
an assumption that the marketwas available and total, that
(17:37):
you could invest in all of themarket, but in reality, real
estate is the biggest asset inthe world and most real estate
is not investable.
So therefore, you've gotforests throughout the US that
are controlled by the national,you know government and you've
got all these other assetsaround the world and you know
(17:59):
real estate as an asset is sobig as an asset class that it
dwarfs what is, you know, otherinvestable assets.
So, yes, we own a home and yes,but if we really wanted to have
a market portfolio, we wouldneed to have a lot more real
estate, and I think thatinfrastructure as a part of the
(18:20):
economy is a huge part, butbecause we don't look at it the
same, because it's run orcontrolled by local communities,
states or federal government,we tend to put it in the bucket
of well, that's over theresomewhere in the fixed area and
in reality, there areopportunities here for us.
(18:42):
So I like the idea of this topicand I'd like us to start to
think about you know, how do wetake liquid opportunities in
these areas and think about themin terms of you know, when do
we?
If we have hyperinflation, doesit make sense to add gold?
Does it make sense to add REITs?
I think the higher rates.
(19:03):
If we are going down in ratesand rates are going to go down,
then the cost to borrow for allthese REITs is going to improve
and there's going to be anopportunity there at some point
for us and, I think, theinfrastructure.
Similarly, if rates come down,they'll borrow at lower rates,
so they'll likely invest more insome of these projects.
Clem Miller (19:24):
I want to add two things to what you said.
First of all, I think there'ssomething to learn, you know,
from the Europeans and also fromfolks in Latin America about,
about private involvement ininfrastructure, and because
there are some firms based inEurope and and in Latin America
(19:45):
that are very involved indeveloping toll roads and other
things that are private, thatare infrastructure.
So they work in a partnershipwhere the infrastructure itself
might be publicly owned but it'soperated in private.
(20:05):
Then the other thing I wantedto mention is that sometimes
there are, is that sometimesthere are companies that are
really real estate companiesthat are masked as other
industries.
So, for example, one of thelargest owners of real estate in
(20:28):
this company and maybe you somuch real estate that it's
really a big component of therevenue generation in terms of
in terms of being able to sellparcels.
Steve Davenport (20:53):
Roadhouse and some of the other.
You know restaurant companies,because there was a time in New
England where you know certaincompanies that were on Route 128
, which goes around the city.
You know the underlyingbusiness was some kind of a
measurement company but thewhole operation the factory and
the offices occupied the space.
That made them worth hundredsof millions of dollars even
(21:13):
though they didn't make anymoney, because the underlying
asset I mean I love buyinginvestments where I know there's
a floor under it because itowns some of its own plants and
equipment.
So I believe that internationalyour point about international
was right on I believe that whenwe look at infrastructure, we
(21:35):
should look at it as aninternational or global asset
type.
I don't think we should look atdomestic, because part of the
reason you're adding is lesscorrelation.
Therefore, if you can get lesscorrelation even more by having
international real estate, Ithink there are some risks in
some of these countries, but Ithink that most of them are
(21:56):
worth taking, given the factthat these companies have been
around for years and I thinkthat some of the real estate and
infrastructure companies offera great opportunity for us.
How would you sum upinfrastructure and the key
bridge.
Clem Miller (22:14):
Okay, so I think it certainly highlights the need
for the development ofinfrastructure, for the
improvement of infrastructure,for the development of new
infrastructure.
I think that, as far as ourpodcast episodes are concerned,
I think it leads to all sorts ofnew ideas for future discussion
(22:35):
on this podcast.
I think that we can beeducational for a lot of our
listeners who simply may not beaware that infrastructure is an
asset class, and we can beeducational about that as we've
(22:56):
been educational about otherthings on this podcast.
So, like you said, it's veryunfortunate that this bridge
episode happened.
We feel very bad for thefamilies of those who were
killed in this accident.
We hope that repairs are doneto the bridge are expeditious,
(23:23):
so that the port can more fullyreopen.
So I would sort of leave it atthat, that we hope that there's
a lesson here for the future,that government steps up and
that there are plenty of futureopportunities for private
investors in the publicinfrastructure space.
Steve Davenport (23:46):
Thanks.
Well said, clem.
Thank you everybody forlistening and please like and
share Again.
This is Stephen Clem checkingout for another episode.
Bye.
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