JotCast | January 2025 Capitalist Times Live Chat | 1/30/2025

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January 2025 Capitalist Times Live Chat

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BobD

4:21

One observation about NEE/NEP is that for NEE, the yieldco model doesn't work now with high interest rates and high cost of raising money via equity or debt. Do you think the yieldco model is broken across the industry? Specifically, should owners of Clearway Energy like me, be dumping it before that shoe falls?

Roger Conrad

4:21

Hey Bob. I think I answered your question earlier in the chat. Gist of it is Clearway has much more conservative financing. including self funding CAPEX and dividends. So I don't see it falling victim to NEP-type challenges. BTW, there are only two yieldcos now remaining from the issuing boom in the previous decade: CWEN and the old NEP.

Victor

4:21

Elliott, it seems that oil prices came down right after President Trump's inauguration. He signed a number of EOs to cut regulations that the previous administration had imposed on the industry. Do you think that this trend will continue as red tape is removed and how does it translate to profits for the industry leaders like XOM CVX and others? Thanks.

Elliott Gue

4:21

I think you'll continue to see President Trump periodically talk down oil as he did in his WEF speech that sparked this last leg down for crude. That's only natural -- in my lifetime I don't recall a single President who did not try to talk down oil. Long-term removing regulations is good for the industry and will keep costs from rising as quickly as they might otherwise in periods of tight supply-demand. However, I don't think anything the President has done, or will do in the next several months, will have any substantive impact on supply. There are really only 2 ways to push oil prices down -- limit demand (recession/slow growth are the only ways to do that) or grow supply. Oil supply isn't going to grow at $75 or $80/bbl, at least not substantially. Removing red tape is good for industry profits longer term (lower costs theoretically) but it's not an immediate impact, more of a slow-but-steady tailwind over time.

Bonnie Beth

4:28

Hi Roger,

Happy to be here, better late than never!

I've read your replies on NEP. The two of us have NEP in our IRAs. I am down a lot in that stock (over 65%) and am considering selling half. I am turning 70 1/2 shortly and know I have to do withdrawals. Should NEP be considered for my first withdrawal as it is the worst performing in my portfolio? My concern is I can't take advantage of any LT capital losses up to $3,000 on this stock. As for my husband he is only 68 so he is just going to sit and wait. He is down 77%. Thoughts on this based upon our situation?

My other question is about WEC. I was on your website earlier and did a search, and notice you have not written anything since 12/2023 (from what I can find). What are your latest thoughts, recommendations and strategies for this stock, with a Trump presidencey and a new administration? Thank you for your guidance.

Roger Conrad

4:28

Hi Bonnie Beth

Thanks for coming on today.

I think if anyone needs the income they should probably unload NEP. Other than that, a better place to look for sales would probably be one of your winners that may have gotten ahead of itself--I do provide that guidance in Conrad's Utility Investor in the Portfolio section.

There's not much to report on WEC now and won't be until Feb 4 when they release Q4 results and update guidance. The stock has run a bit and is above where I'd enter it. But I view it as very much a core holding.

Regarding politics, I don't know if you read my weekly Substack column "Dividends with Roger Conrad." But politics has been a theme--mainly I think investors are giving too much weight to it at this point. True, this president is extremely loquacious. But the ability of US government policy to affect investment returns is historically limited. We have to wait and see what they do. But holding positions in high quality stocks is the way to go.

Susan P

4:29

You are both incredible and truly unique when it comes to investment advisory services. So, I can't say thanks enough.

Roger Conrad

4:29

Thank you Susan. We truly appreciate your business.

Susan P

4:31

My question relates to CA and the tragic situation for so many. Are there any companies or reits that might benefit from the rebuilding that will needed. Roger's been keeping us updated on the utility aspect, so wondering about the real estate and construction side of this sad situation for CA. Thanks

Roger Conrad

4:31

Hi Susan

That's a good question. Construction is obviously going to be in high demand to rebuild affected areas. Unfortunately, there's a question if it might be accompanied by mass deportation of available workers--which could really run up the cost of projects.

I think I'd rather wait here and see what happens at the end of wildfire season and just how hard Trump policies hit.

Bonnie Beth

4:34

Hi Roger,

I have a question on EPR Properties (EPR) from your REIT sheet. I received a free report from a newsletter that recommended EPR Properties for the current yield, which is 7.26%.

I see you have it as a hold for aggressive investors. What are your thoughts on buying this now, for the yield vs. risk?

Roger Conrad

4:34

EPR's fortunes are going to follow the economy, in the same way retail REITs do. When consumer activity is brisk, tenants are usually healthy and there's no risk to rents, occupancy and collection rates--or triple net leases, which are essentially a required payment every month.

EPR shares have performed well of late. And the 7% plus yield is still attractive. But at this point I still see them as a hold.

Victor

4:35

Elliott, the EUR/USD exchange hit new lows in January signaling a strong USD. Bessent the new Treasury Secretary supposedly prefers a weak Dollar to manage the fiscal deficit and the trade deficit a little better. What is your view on the USD and the issue of new debt to pay for the fiscal deficits. Thanks.

Elliott Gue

4:35

I think the dollar has likely peaked for now. I like to watch how markets react to news and we got a lot of dollar strength leading up to that January 10th non-farm payrolls print. It was a strong print and we "should" have seen a dollar rally/big break higher in yields. However, the break above the April high in yields failed and the Dollar Index then reversed lower and is close to breaking technical support. I continue to believe the Fed has limited scope to maneuver given the state of federal government finances. The longer rates remain elevated, the more the government has to spent to borrow and the more of the budget gets eaten up by interest. You could easily have a situation where the government's need to sell debt drains US bank reserves, leading to a rapid tightening in financial conditions. So, I expect the Fed will ultimately cut rates and end QT at the first sign of instability in the government bond market. And, just look at the latest Fund Manager's Survey from Bank of America -- one of the

Elliott Gue

4:35

largest dollar overweights in recent memory. That's a contrarian sell signal in my view. .

Eric F

4:37

Hey Roger, sometime ago you named some longer term buys and one was TKECF Tokyo Electric Power. When i look it up on Seeking Alpha, the data looks off. Its zero volume, the price is 2.65, is this the right stock symbol?

Roger Conrad

4:37

The TKECF symbol is basically an over the counter version of the Tokyo stock exchange traded shares. And as such, there's often mispricing. But in this case, I think you're getting a fairly accurate price--there is no dividend. The real trading is in Japan not the US--and the current price under the symbol 9501 is JPY424.60.

Hans

4:42

Elliott, Any suggestions on VG's IPO

Elliott Gue

4:42

They developed the Calcasieu Pass LNG export facility and Plaquemines due for start-up this year. They have a handful of expansion projects in the works as well. So, a quality developer of LNG export capacity. Certainly, names like Cheniere have been strong performers over the years. I think the weak IPO was probably a matter of unfortunate timing with the DeepSeek news. Generally, I liek to wait for IPOs to settle a bit before considering them as new recos, but we'll probably add to our coverage universe in the next few months. Right now, I see a lot of upside from the LNG export story in the producers like EXE and EQT, so that's how we're recommending playing that story.

Tommy

4:44

Roger: What is your perspective on AVA. Flat for the last year, even though a year ago you had it as your favorite for Energy Distribution?

Roger Conrad

4:44

Hi Tommy. Avista will announce Q4 results and update guidance on Feb 26. But with recent regulatory advances I expect a solid report that reaffirms guidance. The stock has returned about 12.6% the last 12 months. I expect further gains as the company reports solid results and raises the dividend--probably next month as well.

Guest

4:49

Roger, can you comment again on the HES merger status. Overall, the Trump admin has said they want to bring down oil prices. Will this be bad for the majors like CVX? Is this a time to get out of oils in general due to the political posture?

Roger Conrad

4:49

The Hess Corp merger has cleared all regulatory hurdles. What remains is the arbitration case scheduled later this year--with ExxonMobil still claiming a right of first refusal to buy Hess Corp's 30% ownership of the Stabroek properties off the Guyana coast. If XOM is victorious, I would expect this deal to come apart. My view is the deal will go through and they'll make some sort of deal.

As for the Trump Administration being bad for super majors, I don't think so. As Elliott mentioned just earlier in this chat, the new president like his predecessors can be expected to try to talk down oil prices. But at the end of the day, we don't have a national oil company and production decisions are made at the company level. I think these companies will benefit from less regulation. But the thinking drill baby drill will wreck the industry is far fetched.

Randy D

4:50

Hello Elliott, have you and Roger considered teaming up with a mutual fund company to set up a closed-end mutual fund that the two of you would manage? As an individual investor, it's difficult to decide when to buy & sell.

Roger Conrad

4:50

It's always a thought. The big problem for small guys in money management as you may know is the rulebook is written to favor the big boys--including passive investing companies like Vanguard. So to do this, we'd need pretty good assurance that our time would be spent managing funds--not filing paperwork and dealing with regulators.

Guest

4:51

Roger: Just as a reminder to you, Elliott and Sherry - we all value so much your wisdom, recommendations and relationship over all of these years that so many of us have been clients of your many advisory services. Thanks always, Barry

Roger Conrad

4:51

Thank you Barry. We truly appreciate it.

Hans

4:56

Roger: What is your opinion on the CVX-GEV partnership, does this hurt the Utilities. Thanks.

Roger Conrad

4:56

Hi Hans. I don't think so. GEV actually now has a partnership with NextEra Energy as well to build natural gas power plants. Nothing exclusive here. I would also look for Chevron to be more a supplier than a power producer in this dea--as that's not their core business.

Roger Conrad

4:57

Well that looks like all we have for today and from the email queue, which I've tried to answer ahead of the chat. Thank you everyone for participating today. And as a reminder, we will be sending you a link to the completed transcript of the Q&A tomorrow morning.

If for some reason your question was not fully answered, please drop us a line at service@capitalisttimes.com.

4:58

We do truly appreciate your business. Please let us know when can be of service.

Bonnie Beth

4:58

Roger, thank you for your guidance. I have subscribed for a long time and your recommendations have been very helpful for us through the years. Very grateful! Ty.

Roger Conrad

4:58

Thank you Bonnie Beth! Have a great evening everyone!

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