WEBVTT - Tyson Turns to Vegan Foods As It Seeks to Disrupt Itself 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg pim L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.680 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well. 0:00:32.720 --> 0:00:36.080 In the news today, Tyson food There poultry subsidiary has 0:00:36.080 --> 0:00:38.080 been ordered to pay a two million dollar fine for 0:00:38.240 --> 0:00:42.800 discharges from a Southwest Missouri plant that caused a fish 0:00:42.880 --> 0:00:46.720 kill um and the company. The Arkansas based company said 0:00:47.120 --> 0:00:49.839 that it was taking full responsibility for what it described 0:00:49.880 --> 0:00:52.720 as an unfortunate mistake. And here to tell us more 0:00:52.760 --> 0:00:55.240 about the company right now is Tom Hayes. He is 0:00:55.280 --> 0:00:58.280 the president and the chief executive of Tyson Foods and 0:00:58.320 --> 0:01:01.080 he joins us here in our eleven three studios. Tom, 0:01:01.120 --> 0:01:03.680 thank you very much for being with us. I referenced 0:01:03.680 --> 0:01:07.440 that that news item, but I also wanted to reference 0:01:07.480 --> 0:01:11.400 the fact that you actually took responsibility for the mistake. 0:01:11.480 --> 0:01:14.160 That may not be something that major corporations do. They 0:01:14.200 --> 0:01:16.200 typically will pay a fine, and that's the last to 0:01:16.319 --> 0:01:18.319 hear of it. I want if you could describe this 0:01:18.400 --> 0:01:21.600 but also in the context of taking responsibility, because I 0:01:21.640 --> 0:01:24.480 also want to note that you have taken on the 0:01:24.480 --> 0:01:30.400 pledge to cut greenhouse gas emissions by thirty percent by sure. Yeah, 0:01:30.440 --> 0:01:33.440 thanks for having me. You know, our strategy of Tyson 0:01:33.440 --> 0:01:36.880 is sustainably feed the world with the fastest growing protein brands. 0:01:36.920 --> 0:01:39.800 But with that comes a lot of responsibility. We know 0:01:39.880 --> 0:01:42.119 that the population is going to be you know whatever, 0:01:42.319 --> 0:01:45.800 the estimates are nine and a half billion people by 0:01:45.959 --> 0:01:48.800 and we have to be a part of the solution. 0:01:48.880 --> 0:01:51.640 So absolutely, when there are things that go wrong in 0:01:51.680 --> 0:01:54.200 our system, we will own them. We don't want them 0:01:54.240 --> 0:01:56.120 to go wrong, but sometimes we will. Got a big 0:01:56.160 --> 0:01:58.920 system and we are focused on how we can do better. 0:01:58.960 --> 0:02:01.840 So we've got a big continue improvement program. You know, 0:02:01.920 --> 0:02:04.920 we're transitioning from a company that has a heritage and 0:02:04.960 --> 0:02:08.120 poultry to really a modern food company, so that comes 0:02:08.760 --> 0:02:11.560 with a lot of agility changes and things that are 0:02:11.720 --> 0:02:15.200 focused on sustainability, making sure that we can, you know, 0:02:15.320 --> 0:02:17.080 not only do the things we can do for our 0:02:17.120 --> 0:02:19.320 shareholders to make money, but also do in a way 0:02:19.360 --> 0:02:21.680 that everybody on our team can be proud of. And 0:02:21.680 --> 0:02:25.440 we can have a positive impact Tom modern food company. 0:02:25.639 --> 0:02:27.280 What exactly does that mean? I mean, what's sort of 0:02:27.320 --> 0:02:30.239 the next step for Tyson? So I think of four 0:02:30.320 --> 0:02:32.480 things when I think of modern food company. Firstly that 0:02:32.520 --> 0:02:35.640 I mentioned is sustainability. The second is transparency. You know, 0:02:35.720 --> 0:02:38.440 there's not a lot of trust with big food and 0:02:38.480 --> 0:02:41.640 so we need to become more transparent. Uh. Certainly, as 0:02:41.680 --> 0:02:43.680 it relates to agility that I talked about, it's hard 0:02:43.720 --> 0:02:46.640 for big companies and necessarily move quickly. A lot of 0:02:46.680 --> 0:02:49.560 small food companies are really good at that. We are 0:02:49.600 --> 0:02:52.880 working that agility into everything that we're doing. And then finally, 0:02:52.960 --> 0:02:55.520 just the whole idea of being relevant that is something 0:02:55.560 --> 0:02:58.280 that we have to consistently be with our consumers. So 0:02:58.320 --> 0:03:01.279 we do spend a lot of money on brand building innovation. 0:03:01.440 --> 0:03:04.560 We've got business models that are large, big brands three 0:03:04.560 --> 0:03:07.560 billion dollars, three one billion dollar brands, and we have 0:03:07.680 --> 0:03:11.400 small brands were really cultivating to be more relevant for 0:03:11.440 --> 0:03:14.400 consumers today. All right, just to put it into some numbers, right, 0:03:14.480 --> 0:03:17.760 thirty five million chickens, nearly half a million pigs, a 0:03:17.800 --> 0:03:21.360 hundred and thirty thousand cattle a week. Right, this is big. 0:03:22.919 --> 0:03:26.480 You also have stopped using the antibiotics and chickens. You've 0:03:26.520 --> 0:03:29.480 also said that you've got this line of antibiotic free pork, 0:03:30.080 --> 0:03:32.359 but you've also made an investment in a company that's 0:03:32.360 --> 0:03:34.440 based in Memphis, and I wonder if you could tell 0:03:34.480 --> 0:03:37.480 us about this because this is not anything really to 0:03:37.560 --> 0:03:40.240 do with what you think of when you think of meat. 0:03:40.640 --> 0:03:44.040 So excellent question. Those business models. I talked about one 0:03:44.080 --> 0:03:45.440 of our ways that we are going to grow the 0:03:45.480 --> 0:03:50.320 companies by investing in some new emerging models, uh, and 0:03:50.680 --> 0:03:54.040 simultaneously thinking about ways that we can disrupt ourselves. So 0:03:54.080 --> 0:03:57.280 there are plenty of opportunities for companies to be disrupted. 0:03:57.360 --> 0:04:00.440 We want to disrupt ourselves. So that investment you're talking 0:04:00.440 --> 0:04:03.000 about is Memphis Meats actually based in Chicago, but they 0:04:03.000 --> 0:04:06.560 have the Memphis Meats brand, and what they are doing 0:04:06.880 --> 0:04:10.800 is taking cells from animals, so not raising and then 0:04:11.000 --> 0:04:15.839 harvesting animals, taking cells and essentially culturing those into a 0:04:15.840 --> 0:04:19.640 meat alternative. So it's very interesting technology. It's still very nascent. 0:04:20.080 --> 0:04:23.039 But we're also investing in companies like Beyond Meat so 0:04:23.120 --> 0:04:27.239 plant based protein, introducing our own lines of plant based protein. 0:04:27.760 --> 0:04:30.680 So it requires a lot of different solutions to be 0:04:30.920 --> 0:04:33.359 sustainably feeding the world. And those are just some of 0:04:33.360 --> 0:04:36.160 the examples that we're entering into. Tom You also said 0:04:36.440 --> 0:04:39.839 in a presentation last week UH that Tyson is planning 0:04:39.880 --> 0:04:47.320 to cut greenhouse gas emissions by thirty So if you 0:04:47.320 --> 0:04:51.800 think about the stages UH in one and two, those 0:04:51.920 --> 0:04:56.080 areas of our food production, what we control within our house, basically, 0:04:56.440 --> 0:04:58.960 those are pretty easy for us to get to. The 0:04:59.080 --> 0:05:01.800 things that are different culled are the things that are 0:05:02.000 --> 0:05:05.600 really what are UM phase three, which is we're not 0:05:05.720 --> 0:05:08.800 vertically integrated and cattle and not vertically integrated but for 0:05:08.839 --> 0:05:12.479 a small amount on pork or hugs. So we have 0:05:12.560 --> 0:05:16.920 to work with cattleman and you know, producers to make 0:05:16.960 --> 0:05:19.680 a big change in the system. And so that's where 0:05:19.680 --> 0:05:22.599 the majority that will come from is sort of getting 0:05:22.640 --> 0:05:26.560 after those those UM emissions, and particularly i'd say as 0:05:26.560 --> 0:05:31.400 it relates to cattle. You have also been kind of 0:05:31.440 --> 0:05:36.000 reshaping the company when it comes to what businesses you 0:05:36.040 --> 0:05:37.800 want to be in and what businesses you don't want 0:05:37.839 --> 0:05:40.159 to be in. For example, I believe like frozen some 0:05:40.240 --> 0:05:42.880 of the frozen food businesses are you going to sell 0:05:42.960 --> 0:05:44.840 some give us an idea of the kinds of lines 0:05:44.880 --> 0:05:47.320 that you'd like to sell. Maybe it's the what is 0:05:47.360 --> 0:05:51.039 it the frozen I can't remember frozen food assets. It 0:05:51.080 --> 0:05:53.520 has to do with the at some of it's on 0:05:53.560 --> 0:05:56.239 the block, right, this is the Van's Foods that business. 0:05:56.560 --> 0:05:58.279 But you want to buy others? What what kinds of 0:05:58.320 --> 0:06:00.600 bolt on acquisitions are you're looking for? So we're looking 0:06:00.640 --> 0:06:03.680 for any time we can a new brand. That's again 0:06:03.720 --> 0:06:05.760 going back to protein. So the protein is a tail 0:06:05.800 --> 0:06:10.160 one that we're taking advantage of. Consumers are actively trying 0:06:10.200 --> 0:06:11.920 to get into their diet more and more. So it 0:06:11.960 --> 0:06:14.560 would be assets that either have a brand that we 0:06:14.600 --> 0:06:17.480 can take advantage of, a new capability, Uh do they 0:06:17.520 --> 0:06:19.920 move us into a new geography, whether it's internationally or 0:06:19.960 --> 0:06:23.039 here domestically, and so those are the that's the sort 0:06:23.040 --> 0:06:26.240 of filters we have. And so it would be companies 0:06:26.279 --> 0:06:29.600 like we bought with Advanced Pierre, very Protein Centrick. Not 0:06:29.640 --> 0:06:32.600 necessarily you know a lot of consumer brands, but they 0:06:32.640 --> 0:06:36.919 have a very strong culture of driving profitable foods in 0:06:36.920 --> 0:06:40.520 the marketplace, whether it's branded or unbranded. And so assets 0:06:40.560 --> 0:06:42.559 like that the ones that we can continue to build 0:06:42.560 --> 0:06:45.760 our brand portfolio. Those are the important ones. Thank you 0:06:45.800 --> 0:06:48.880 so much. For joining us. Fascinating to hear how you're 0:06:48.920 --> 0:06:53.840 trying to disrupt yourselves. Uh, fascinating concept. As the world 0:06:53.880 --> 0:06:58.800 expands and as more people look to protein filled meat alternatives. 0:06:58.800 --> 0:07:02.880 Tom Hayes, president and executive officer of Tyson Foods, which 0:07:02.960 --> 0:07:05.680 is based in Springdale, Arizona, but he joins us here 0:07:06.040 --> 0:07:23.360 in our eleven three oh studios. Medical marijuana has been 0:07:23.560 --> 0:07:26.640 one of the hotter bets in the past few years, 0:07:27.000 --> 0:07:29.920 and a company that specializes in it is filing the 0:07:30.080 --> 0:07:35.600 first cannabis related US initial public offering, that is Chronos Group, 0:07:35.600 --> 0:07:38.360 and the chief executive officer joins us now, Michael Gorenstein. 0:07:38.600 --> 0:07:40.720 Thank you so much for being here. Michael, can you 0:07:40.760 --> 0:07:42.560 just give us a sense of why you decided to 0:07:42.560 --> 0:07:45.360 file this I p O, how much you plan to raise, 0:07:45.560 --> 0:07:48.480 and what brought you to the US. Sure, thanks for 0:07:48.560 --> 0:07:53.000 having me so A big driver was spreading awareness. We've 0:07:53.040 --> 0:07:57.560 actually been publicly traded in Canada for some time and 0:07:57.640 --> 0:08:00.520 a lot of American investors have questions about the legality. 0:08:00.560 --> 0:08:03.040 Everyone's very surprised to hear that there are legal ways 0:08:03.080 --> 0:08:05.840 to get exposure of the industry and by going through 0:08:05.840 --> 0:08:09.640 the process with the NASDAC and and starting the trading yesterday. 0:08:09.960 --> 0:08:11.840 You know, a big big thing for US as being 0:08:11.880 --> 0:08:14.840 able to help advance things, help explain to people that 0:08:14.920 --> 0:08:18.160 there there is a market. There are federally legal avenues 0:08:18.200 --> 0:08:21.000 where you're able to to invest in the companies that 0:08:21.040 --> 0:08:23.920 are developing the intellectual property, that are building brands and 0:08:23.960 --> 0:08:28.520 are are spreading global distribution without having the legal risk 0:08:28.560 --> 0:08:30.800 that you would otherwise have in the US to find 0:08:30.880 --> 0:08:35.560 for people what your company does. So really we we 0:08:35.640 --> 0:08:37.199 do a number of things we look at as a 0:08:37.280 --> 0:08:42.000 virtual cycle, but ultimately what we're doing is developing global distribution. 0:08:42.440 --> 0:08:46.360 So right now we're across Germany, Israel, Canada, Australia, in 0:08:46.360 --> 0:08:51.160 the Cayman Islands. UH disruptive intellectual property and unlocking the 0:08:51.200 --> 0:08:53.960 science behind cannabis that really hasn't been there because when 0:08:54.000 --> 0:08:57.160 you hang on when you say distribution, distribution of what 0:08:57.360 --> 0:08:58.920 like if I was to go to your company, what 0:08:59.080 --> 0:09:03.920 exactly how's your company divide it up? In what products 0:09:03.960 --> 0:09:07.880 or services do you provide? So we directly will ship 0:09:07.880 --> 0:09:10.600 a number productly of forty three different skews that would 0:09:10.600 --> 0:09:12.760 be available if you were to come to us. UH 0:09:13.559 --> 0:09:19.800 varying ratios of cannabinoids, flower derivative products. We offer a 0:09:19.840 --> 0:09:23.600 wide range depending on on what the therapeutic areas that 0:09:23.600 --> 0:09:26.720 you're looking for for helping. So why list in the US? 0:09:27.840 --> 0:09:29.880 You know, I think a big part of it is 0:09:29.960 --> 0:09:33.360 accessing US capital, being able to uh, you know, to 0:09:33.400 --> 0:09:35.920 get a foothold here, and ultimately we do believe that 0:09:35.960 --> 0:09:38.440 the US will be federally legal, and for US, it 0:09:38.480 --> 0:09:41.760 makes a lot of sense to give American investors a 0:09:41.840 --> 0:09:45.200 chance to get in early because when we come here, 0:09:45.240 --> 0:09:47.000 we do want that support and we don't want to 0:09:47.000 --> 0:09:49.640 be sort of the foreign conquerors. We I grew up 0:09:49.679 --> 0:09:52.480 in the US. Uh. Much much of our management team 0:09:52.520 --> 0:09:55.360 moved to Canada from the US, and we certainly hope 0:09:55.400 --> 0:09:57.360 to keep more people from the US involved. You know, 0:09:57.400 --> 0:10:02.440 I guess it's sort of hard to distinguish, uh, you know, 0:10:02.480 --> 0:10:06.240 sort of the legal aspects of marijuana and how it 0:10:06.280 --> 0:10:09.480 relates to medical versus recreational. And you know, we were 0:10:09.480 --> 0:10:13.319 talking before about how you focus on medical and yet 0:10:13.559 --> 0:10:16.000 do you get a lot of investors coming to you 0:10:16.160 --> 0:10:19.120 and sort of treating you in tandem with alcohol companies 0:10:19.120 --> 0:10:21.640 and trying to get in on the ground floor, uh 0:10:21.720 --> 0:10:24.400 for something that will take off on a recreational level, 0:10:24.400 --> 0:10:26.960 and how do you sort of deal with that? So 0:10:27.160 --> 0:10:29.720 we do you know, we have we do have a 0:10:29.720 --> 0:10:32.680 wholely owned license in British Columbia that will focus exclusively 0:10:32.720 --> 0:10:36.160 on the recreational market. But we do try to educate 0:10:36.200 --> 0:10:39.680 people on though, is the medical opportunity is huge and 0:10:39.720 --> 0:10:42.200 if you look at a few things that might not 0:10:42.400 --> 0:10:44.920 necessarily come top of mind, you start to understand that. 0:10:45.000 --> 0:10:49.080 So first, the countries are much more likely to legalize 0:10:49.160 --> 0:10:52.120 medical before they are recreational. It's just it's a much 0:10:52.120 --> 0:10:56.160 easier argument. It's from policy perspective, makes more sense. Uh. 0:10:56.200 --> 0:10:58.439 And so you've got a global medical market versus just 0:10:58.480 --> 0:11:01.240 the Canadian recreational market and just off sheer numbers, that's 0:11:01.280 --> 0:11:05.880 a very big difference. Uh. The second is thematically, there 0:11:05.880 --> 0:11:08.720 are people that are moving away from from alcohol for 0:11:08.800 --> 0:11:11.400 some health reasons, but it's not very drastic. And you've 0:11:11.440 --> 0:11:14.440 seen in states where cannabis and legalized there's a trend. 0:11:14.960 --> 0:11:18.000 But a much bigger trend is what's going on with opioids. 0:11:18.040 --> 0:11:20.920 The opioid epidemic. It's ripping across North America and really 0:11:20.960 --> 0:11:23.720 across the world. And chronic pain is one of the 0:11:23.760 --> 0:11:26.559 largest indications that we see for cannabis. So being able 0:11:26.600 --> 0:11:30.720 to provide UH medicine that doesn't have the same harmful 0:11:30.760 --> 0:11:33.640 effects is something that we see as a as a 0:11:33.640 --> 0:11:38.160 big catalyst. And finally, UH insurance coverage is something that 0:11:38.200 --> 0:11:40.679 we haven't seen in the US. Everyone looked at Colorado 0:11:40.760 --> 0:11:44.199 to say, well, this wasn't a real industry. UH companies 0:11:44.200 --> 0:11:48.240 gonna be profitable until recreational. How are you going to 0:11:48.280 --> 0:11:50.200 compete with the guy on the corner that's just gonna 0:11:50.240 --> 0:11:51.520 sell you a bag. If you've got to go to 0:11:51.520 --> 0:11:56.120 a doctor. Well, Germany there is full insurance coverage and 0:11:56.240 --> 0:11:58.800 so you're able to go to your doctor and reimburse 0:11:58.920 --> 0:12:02.000 like a true medicine. So that's part of why our 0:12:02.040 --> 0:12:05.600 strategy is UH, you know, is being able to target 0:12:05.640 --> 0:12:08.800 European markets. We have an exclusive distribution agreement with a 0:12:08.880 --> 0:12:11.480 h three year old pharmaceutical company in Germany and gives 0:12:11.520 --> 0:12:14.920 us access to twelve thousand pharmacies. I think the medicinal 0:12:15.000 --> 0:12:18.320 market is is a very very great opportunity, and we 0:12:18.400 --> 0:12:21.760 try to educate people and it's a form of social entrepreneurship. 0:12:21.800 --> 0:12:25.160 You're also doing good. Can you also just educate us 0:12:25.520 --> 0:12:28.600 and our listeners in you know maybe thirty seconds that 0:12:28.760 --> 0:12:32.800 there is a very a wide variation of what is 0:12:32.840 --> 0:12:37.320 available from cannabis. So for example, th HC is one, 0:12:37.960 --> 0:12:40.160 c b D is another. A lot of acronyms here 0:12:40.160 --> 0:12:43.000 at th h c V, which is what you're focused on. 0:12:43.320 --> 0:12:45.480 Just describe if you cantata top leve level of you 0:12:45.640 --> 0:12:49.400 what people need them to understand. Yeah, so a lot 0:12:49.400 --> 0:12:52.080 of the misconception about cannabis. You do hear people always 0:12:52.080 --> 0:12:54.319 tell you they've had different effects that you know, makes 0:12:54.360 --> 0:12:56.200 them tired, it wakes them up and makes them laugh, 0:12:56.280 --> 0:13:02.000 makes them scared, cures cancer, cure as headaches. The analogy 0:13:02.040 --> 0:13:03.880 there would be if I were to tell you, hey, 0:13:04.000 --> 0:13:07.000 you know pills are really good for making you sleep well? 0:13:07.040 --> 0:13:09.640 What's inside of the pill. So cannabis is you can 0:13:09.679 --> 0:13:11.600 think of it as a vessel. But depending on the 0:13:11.600 --> 0:13:14.720 different genetics, there over a hundred different cannabinoids. There are 0:13:14.760 --> 0:13:17.640 thousands of turpenes, and these work together synergistically to create 0:13:17.640 --> 0:13:21.000 an entourage effect. So what the actual type of cannabis is, 0:13:21.000 --> 0:13:23.600 what the cannabinoids are, is very very important to what 0:13:23.679 --> 0:13:28.880 effect you'll get. Just really really really quick. Our opioids 0:13:28.920 --> 0:13:33.319 more expensive that are used for pain killing than be cannaboid, uh, 0:13:33.520 --> 0:13:37.800 than the cannabis product in general. Yes, they are. I 0:13:37.920 --> 0:13:39.800 just say that there's a recent study we were talking 0:13:39.800 --> 0:13:42.560 about this offtline that was just published in the European 0:13:42.640 --> 0:13:47.520 Journal of Internal Medicine that the Israeli researchers have said 0:13:47.559 --> 0:13:52.080 that the efficacy of cannabis for cancer patients helps those 0:13:52.160 --> 0:13:56.200 avoid their opioid dependency even before it starts. Thanks very 0:13:56.280 --> 0:13:58.600 much for being with us. Michael Gorenstein is the chief 0:13:58.600 --> 0:14:01.880 executive of a Chrono, a group, and yes they are 0:14:01.960 --> 0:14:19.520 trading in the United States. We got some data overnight 0:14:19.640 --> 0:14:22.400 out of China showing that a gauge of demand for 0:14:22.520 --> 0:14:25.840 factory made goods in the nation fell the most in 0:14:26.160 --> 0:14:30.960 five years, much more than any economist survey by Bloomberg 0:14:31.000 --> 0:14:33.480 had expected. Here to help us understand how much we 0:14:33.480 --> 0:14:35.840 ought to pay attention to this is Leland Miller, chief 0:14:35.840 --> 0:14:39.080 executive officer of China beige Book International in New York, 0:14:39.480 --> 0:14:42.080 and he joins us here in the studios. Leland, thank 0:14:42.080 --> 0:14:43.760 you so much for being here. So what did you 0:14:43.800 --> 0:14:47.480 make of this read? Well, not much uh February data. 0:14:47.720 --> 0:14:49.600 When you when you're talking about January in February and 0:14:49.680 --> 0:14:52.160 China you've got the lunar New year, which means that 0:14:53.000 --> 0:14:56.600 any comparison either between those two months or between January 0:14:56.640 --> 0:15:00.360 February and the years before are are hard and any 0:15:00.440 --> 0:15:03.680 any real conclusions about so we don't think that February 0:15:03.760 --> 0:15:07.280 means much. Is there some expectation of a slowdown particularly 0:15:07.280 --> 0:15:10.840 in manufacturing this year? Sure was the fifty one to 0:15:10.960 --> 0:15:14.400 fifty uh noticeable drop? Not really should be worried about 0:15:14.440 --> 0:15:17.840 February data regardless, Not really so. I think people have 0:15:17.920 --> 0:15:21.240 been watching for a slowdown in China and so they 0:15:21.280 --> 0:15:24.120 took note of this. But this is the trepidation the 0:15:24.120 --> 0:15:26.080 market seems to be seemed to be feeling that that's 0:15:26.200 --> 0:15:29.440 not warranted yet Leland, what's the big deal right now 0:15:29.480 --> 0:15:33.080 with China? Is it tariffs on things like aluminum foil? 0:15:33.880 --> 0:15:36.320 Is it steal tariffs? What's going on and what should 0:15:36.360 --> 0:15:39.640 investors really be paying attention to? That's see, that's a 0:15:39.640 --> 0:15:42.200 great question, and I don't think people are asking this enough. 0:15:42.240 --> 0:15:45.320 They see the headlines on stealing aluminium tariffs and I think, well, 0:15:45.360 --> 0:15:47.880 this this is gonna just crush China. Well, it won't 0:15:47.880 --> 0:15:50.320 be good for China. But but while we will be 0:15:50.360 --> 0:15:53.000 dealing in the coming weeks with stealing aluminium tariffs and 0:15:53.000 --> 0:15:55.120 whether President Trump is really gonna go big on them, 0:15:55.560 --> 0:15:58.880 the real question for China is the intellectual property theft 0:15:59.400 --> 0:16:02.640 UH investor gaistion Section three oh one and whatever tariffs 0:16:02.760 --> 0:16:05.960 they do on that. Now that's been backtracked a little 0:16:06.000 --> 0:16:08.800 bit behind the scenes. It's still moving through UH the 0:16:08.800 --> 0:16:14.760 inter agency process. But if scenario worst worst case scenario 0:16:14.920 --> 0:16:17.120 is that President Trump decides he's gonna he's gonna make 0:16:17.120 --> 0:16:20.920 a big move before the midterms, puts sectoral tariffs on 0:16:20.960 --> 0:16:24.120 say consumer electronics, something giant like that, and you have 0:16:25.040 --> 0:16:28.280 absolutely justifiable use of the term trade war. That is 0:16:28.320 --> 0:16:30.760 a big, big deal. It doesn't mean it's gonna happen, 0:16:30.840 --> 0:16:33.040 but the worst case scenario is an all out, big 0:16:33.040 --> 0:16:35.600 time trade war. What do you hear from people who 0:16:35.640 --> 0:16:39.360 are close to who are involved in these negotiations, Well, 0:16:39.440 --> 0:16:42.000 that the administration is having a very very difficult time 0:16:42.040 --> 0:16:44.240 coming to consensus on this um. You know, you read 0:16:44.280 --> 0:16:46.600 this in the media, but it's the reality behind the scenes. 0:16:46.920 --> 0:16:48.640 So one of the reasons that you don't have a 0:16:48.680 --> 0:16:52.560 two thirty two announcement yet is that there's the president 0:16:52.680 --> 0:16:55.800 wants to do something big on stealing aluminium being the 0:16:55.800 --> 0:16:58.440 stealings to steal it aluminium tariffs, right, he wants to 0:16:58.440 --> 0:17:01.040 do something big. Uh. But at the same time, almost 0:17:01.080 --> 0:17:04.959 everyone's administration, every cabin official except a few uh as, 0:17:05.119 --> 0:17:07.640 entire National Economic Council think that this this the still 0:17:07.680 --> 0:17:10.640 aluminum tariffs, these global tariffs in a non targeted way 0:17:10.800 --> 0:17:13.720 would be an awful idea. Similarly, section three oh one, 0:17:13.760 --> 0:17:15.960 the president wants to go big. Other people are saying, look, 0:17:16.000 --> 0:17:18.920 this is potentially problematic. Sorry, that's the intellectual property theft 0:17:19.240 --> 0:17:22.760 uh tariffs uh. And and so there's this desire by 0:17:22.760 --> 0:17:25.359 the president to go big, and his even inside the 0:17:25.359 --> 0:17:27.720 Trump White House, there's a desire to tamp this down 0:17:27.760 --> 0:17:29.680 because they realize that this could get out of control. 0:17:29.920 --> 0:17:32.480 And as a result, you've had this in action because 0:17:32.520 --> 0:17:35.200 there's an inability to come to consensus. This will end 0:17:35.240 --> 0:17:37.760 sometime soon because you have deadlines on some of these 0:17:37.840 --> 0:17:40.639 endings soon the steel aluminum terrorists, for instance, had to 0:17:40.680 --> 0:17:43.880 be done by mid April or the authority goes away 0:17:44.040 --> 0:17:46.679 just to go back to this intellectual property thing. In 0:17:46.760 --> 0:17:50.239 the worst case scenario for consumer how does this show up. 0:17:50.280 --> 0:17:53.840 Does this mean someone's iPhone becomes more expensive? Does this 0:17:53.920 --> 0:17:56.679 mean you can't afford the via television? Tell us the 0:17:56.720 --> 0:18:00.199 detail right, So you have first order effects and then 0:18:00.200 --> 0:18:01.920 you have second and third order effects. So the first 0:18:02.000 --> 0:18:04.800 order effect. In the worst case scenario, which of course 0:18:04.880 --> 0:18:08.080 is not our baseline scenario right now, the President decides 0:18:08.119 --> 0:18:10.679 to go big on consumer electronics and says We're going 0:18:10.720 --> 0:18:15.640 to put a large tariff on everything coming out of China. Yes, 0:18:15.680 --> 0:18:17.720 consumers will feel the brunt to that, but I think 0:18:17.760 --> 0:18:20.160 the bigger brunt will be the second thord or effects. 0:18:21.040 --> 0:18:23.480 First of all, China will retaliate. They'll start nail, you know, 0:18:23.920 --> 0:18:27.560 hammering our farmers, soybean exports, et cetera. At the same time, 0:18:27.840 --> 0:18:30.360 businesses operating in China will have a very difficult time. 0:18:30.400 --> 0:18:32.280 So if you're Bowing, if your Apple, if you're any 0:18:32.280 --> 0:18:34.120 of these other companies that are trying to make inroads, 0:18:34.400 --> 0:18:36.600 you're in big trouble because the Chinese will either react 0:18:36.600 --> 0:18:39.800 immediately or you will have this cloud of uncertainty hanging 0:18:39.880 --> 0:18:43.719 over you for the for the foreseeable future. Are there 0:18:43.760 --> 0:18:48.560 any estimates for how much China's GDP will get reduced 0:18:48.880 --> 0:18:52.800 if there is some sort of trade war, the question 0:18:52.880 --> 0:18:56.160 is is will will any reduction GDP ever get acknowledged 0:18:56.160 --> 0:18:58.600 by the government. So maybe this will be without any 0:18:58.680 --> 0:19:01.240 loss of GDP for the all right, fair enough. But 0:19:01.280 --> 0:19:03.120 the reason why I asked, though, is because people say, 0:19:03.200 --> 0:19:05.600 you know, if China catches a cold, the emerging markets 0:19:05.600 --> 0:19:07.840 get the flu. UH. People look at this as a 0:19:07.840 --> 0:19:10.439 bell weather of one of the hottest trades UH, you know, 0:19:10.600 --> 0:19:13.760 in the past few years. So you know what's going 0:19:13.800 --> 0:19:16.080 to be the bleed out effect of a trade war. 0:19:16.280 --> 0:19:19.880 So again, if you have this worst case scenario, UM, 0:19:19.960 --> 0:19:23.359 you will have a substantial drop in GDP UM the 0:19:23.440 --> 0:19:26.440 Chinese UH. You can talk about the Chinese economy being 0:19:26.480 --> 0:19:29.000 more and more reliant on its own consumers internally, but 0:19:29.040 --> 0:19:31.720 that just hasn't happened yet. You know, you're still seeing 0:19:31.760 --> 0:19:35.240 these enormous trade flows UM and and and that's the 0:19:35.280 --> 0:19:37.280 way they wanted. And so if you have a problem 0:19:37.320 --> 0:19:40.119 with UH, with with trade, and you have the US 0:19:40.160 --> 0:19:42.600 clamping down and China clamping down back, you will have 0:19:42.640 --> 0:19:44.320 a problem in China. You will have a problem in 0:19:44.359 --> 0:19:47.960 emerging markets. And UM's it's a little bit hard hard 0:19:47.960 --> 0:19:50.200 to quantify because you can't believe the GDP figures, but 0:19:50.240 --> 0:19:52.919 you would certainly have something at least as serious as 0:19:52.960 --> 0:19:56.720 what happened at the end of two fifteen early in 0:19:56.840 --> 0:20:01.080 terms of in terms of an economic crisis, Leland, what 0:20:01.320 --> 0:20:05.360 books or journals would you recommend that people read if 0:20:05.359 --> 0:20:08.600 they want to educate themselves more deeply in how China 0:20:08.720 --> 0:20:12.399 really works. You know, it's getting harder and harder because 0:20:12.600 --> 0:20:15.560 if you if you saw the the announcement the Chinese 0:20:16.200 --> 0:20:18.919 are banning like the letter N, the words shameless and 0:20:18.920 --> 0:20:22.439 all these other other things. Um, you know, it's it's 0:20:22.440 --> 0:20:25.160 getting hold hold. Maybe people don't know about Hell's help, 0:20:25.240 --> 0:20:27.280 what happened well, and and and the other. The last 0:20:27.280 --> 0:20:30.360 few weeks, the censorship has been ramping up even more 0:20:30.400 --> 0:20:33.120 than in the norm. And if you're seeing these almost 0:20:33.440 --> 0:20:37.960 comical censorship of words from shameless was one of them. 0:20:37.960 --> 0:20:40.600 There was a handful of other words that are hominem's 0:20:40.640 --> 0:20:43.439 with leaders names. But the word the letter N was 0:20:43.440 --> 0:20:46.760 was actually banned because that was supposed to signify uh 0:20:46.960 --> 0:20:50.320 n is greater than two, which means she's terms were 0:20:50.560 --> 0:20:53.560 she's new term, lifelong term is is greater than two, 0:20:53.600 --> 0:20:57.080 it's any equals infinity, whatever it might be. The Chinese 0:20:57.119 --> 0:20:58.959 were going overboard with that. It's got a lot of 0:20:59.200 --> 0:21:01.560 media coverage lately, and it just shows you that getting 0:21:01.560 --> 0:21:05.320 information out of China is much more difficult now than 0:21:05.320 --> 0:21:07.719 it was in past years. But I mean, is there 0:21:07.800 --> 0:21:09.879 something that you could recommend, because I mean, even just 0:21:09.920 --> 0:21:13.080 to understand the structure of the of the country's politics, 0:21:13.160 --> 0:21:18.520 the party is actually above the government, right, not anymore 0:21:18.600 --> 0:21:21.320 now it's all the same, right. Well, that's that's the idea. 0:21:21.400 --> 0:21:23.920 I mean, the party, the theory, the party above all. 0:21:23.960 --> 0:21:26.160 But the more these these things are all merging into 0:21:26.200 --> 0:21:31.360 this monolithic chi jin Ping uh force. Uh. That's that's 0:21:31.400 --> 0:21:34.840 what China is now. You know. The mantra is China is, 0:21:34.880 --> 0:21:37.760 the party is chi Jinping. Is there any economic data 0:21:37.800 --> 0:21:40.359 that you rely upon that is actually an accurate number 0:21:40.440 --> 0:21:44.000 coming out of China? We look at everything because everything, 0:21:44.400 --> 0:21:48.679 uh put some shades, some some flavor into the overall picture. 0:21:48.760 --> 0:21:51.000 But the reason we started China Bejing book back in 0:21:51.000 --> 0:21:53.200