1 00:00:00,080 --> 00:00:13,040 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:29,280 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg I'm 5 00:00:29,320 --> 00:00:31,200 Speaker 1: britty pleased to say that. Joining us around the table 6 00:00:31,240 --> 00:00:34,839 Speaker 1: here in New York, Lindsay Pianka, stay Folk, chief economist, 7 00:00:34,920 --> 00:00:37,200 Speaker 1: the head of a FED decision tomorrow. Lindsay, good morning. 8 00:00:37,320 --> 00:00:39,960 Speaker 1: What are you talan clients at the moment? Well, right now, 9 00:00:40,000 --> 00:00:42,800 Speaker 1: the rate cut is pretty much baked into the market. 10 00:00:42,920 --> 00:00:45,120 Speaker 1: But the big question is what are we going to 11 00:00:45,159 --> 00:00:48,040 Speaker 1: see in the aftermath of the July rate cut. Will 12 00:00:48,080 --> 00:00:51,160 Speaker 1: the FED position for a near term second round cut 13 00:00:51,320 --> 00:00:53,720 Speaker 1: or will they take more of a neutral stand saying 14 00:00:54,080 --> 00:00:57,080 Speaker 1: we'll continue to watch the data as it evolves without 15 00:00:57,120 --> 00:01:01,200 Speaker 1: any sort of specific tea up for a September rate reduction. So, lindsay, 16 00:01:01,240 --> 00:01:03,640 Speaker 1: are you in the camp that says you know this 17 00:01:03,720 --> 00:01:06,360 Speaker 1: is this FED is prepared to cut maybe four times 18 00:01:06,400 --> 00:01:08,559 Speaker 1: by mid next year. Get us a full und basis 19 00:01:08,560 --> 00:01:11,880 Speaker 1: points Well, right now, our forecast is for a basis 20 00:01:11,880 --> 00:01:15,280 Speaker 1: point cut later this week, an additional in September, and 21 00:01:15,280 --> 00:01:17,560 Speaker 1: then we could actually see the FED take a pause 22 00:01:17,600 --> 00:01:20,360 Speaker 1: depending on whether or not that initial policy reduction of 23 00:01:20,400 --> 00:01:24,800 Speaker 1: fifty basis points cumulative does stabilize the economy. Of course, 24 00:01:24,840 --> 00:01:28,759 Speaker 1: there's other variables going into that, international variables as such 25 00:01:28,800 --> 00:01:32,039 Speaker 1: as slower global growth if we see their stabilization there, 26 00:01:32,360 --> 00:01:35,080 Speaker 1: if we see progress in terms of trade talks. So 27 00:01:35,120 --> 00:01:38,039 Speaker 1: there are a number of uncertainties still weighing on the outlook. 28 00:01:38,080 --> 00:01:41,360 Speaker 1: But if in fact we do see domestic growth stabilized 29 00:01:41,680 --> 00:01:46,679 Speaker 1: by fifty basis points and international certainties, excuse me, uncertainties abate, 30 00:01:47,120 --> 00:01:48,880 Speaker 1: and then the FED could sit on the sideline for 31 00:01:48,920 --> 00:01:51,400 Speaker 1: some time. Lindsay, what is the dividing line between an 32 00:01:51,400 --> 00:01:55,760 Speaker 1: insurance right cup and a right counting cycle. It's a 33 00:01:55,880 --> 00:01:58,680 Speaker 1: very thin line. I think it really comes down to 34 00:01:58,760 --> 00:02:01,760 Speaker 1: a pause and a surance style rate cut would be 35 00:02:02,160 --> 00:02:04,720 Speaker 1: somewhere in the ballpark of one to two rate cuts, 36 00:02:04,760 --> 00:02:08,920 Speaker 1: and then sitting on the sideline for a number of meetings. 37 00:02:08,919 --> 00:02:14,520 Speaker 1: So essentially pleased with the initial policy adjustment to stabilize 38 00:02:14,560 --> 00:02:18,160 Speaker 1: the economy, entering into an outright easing cyclele at least 39 00:02:18,200 --> 00:02:21,360 Speaker 1: from historical standpoint, would be a number of rate cuts 40 00:02:21,600 --> 00:02:23,960 Speaker 1: in a rapid time frame. Do you think the Chapman 41 00:02:24,000 --> 00:02:26,040 Speaker 1: poun will be happy that he won't have to have 42 00:02:26,240 --> 00:02:29,359 Speaker 1: a summary of economic projections with him tomorrow and he 43 00:02:29,400 --> 00:02:31,480 Speaker 1: won't have the Dolt plot to be thrown at him 44 00:02:31,520 --> 00:02:34,079 Speaker 1: in the news conference. Well, there won't be an official forecast, 45 00:02:34,160 --> 00:02:36,359 Speaker 1: but I do suspect that he will be asked about 46 00:02:36,400 --> 00:02:39,080 Speaker 1: any sort of change in the forecast, Which is interesting 47 00:02:39,080 --> 00:02:41,399 Speaker 1: because if you look at the June Summary of Economic 48 00:02:41,440 --> 00:02:44,919 Speaker 1: Projections or the step the FETE is still very optimistic 49 00:02:45,040 --> 00:02:48,360 Speaker 1: in terms of growth and inflation. And so again this 50 00:02:48,400 --> 00:02:50,919 Speaker 1: supports the notion that the FETE is not concerned about 51 00:02:50,919 --> 00:02:54,119 Speaker 1: the economy falling off a cliff, but they're simply offering 52 00:02:54,200 --> 00:02:58,280 Speaker 1: that preventative policy measure to help stabilize the economy against 53 00:02:58,280 --> 00:03:01,480 Speaker 1: potential headwinds. So lends some folks that come in here 54 00:03:01,480 --> 00:03:04,280 Speaker 1: talking about the likelihood of a recession in the U. 55 00:03:04,360 --> 00:03:07,680 Speaker 1: S economy, UH sometime mid to late in that camp, 56 00:03:07,880 --> 00:03:10,840 Speaker 1: I do think the risk of recession is around fifty, 57 00:03:12,280 --> 00:03:15,600 Speaker 1: so rapidly rising in my opinion. Now you can certainly 58 00:03:15,600 --> 00:03:18,920 Speaker 1: point a second quarter GDP that was above expectations, but 59 00:03:19,639 --> 00:03:22,040 Speaker 1: noticeably reduced from the pace we saw at the start 60 00:03:22,040 --> 00:03:24,720 Speaker 1: of the year, and if you look at the composition 61 00:03:24,760 --> 00:03:29,040 Speaker 1: of growth, it was very isolated. Predominantly the consumer helped 62 00:03:29,080 --> 00:03:31,880 Speaker 1: stabilize the economy in the second quarter going into the 63 00:03:31,919 --> 00:03:34,720 Speaker 1: second half. However, if we don't see a pickup in housing, 64 00:03:34,960 --> 00:03:38,760 Speaker 1: business investment, manufacturing, it's going to be very difficult to 65 00:03:38,800 --> 00:03:42,400 Speaker 1: even maintain this reduced two percent growth level. And if 66 00:03:42,440 --> 00:03:45,440 Speaker 1: we continue to see this slow slide or the slow 67 00:03:45,480 --> 00:03:50,119 Speaker 1: deterioration of growth, we could easily easily be in recessionary territory. 68 00:03:50,160 --> 00:03:53,040 Speaker 1: By lindsay, do you think the birth for the slowdown 69 00:03:53,160 --> 00:03:56,120 Speaker 1: next year comes from abroad or within the United States? 70 00:03:56,160 --> 00:03:58,160 Speaker 1: What do you think this is coming from. I think both. 71 00:03:58,360 --> 00:04:01,560 Speaker 1: I think it's very difficult to pinpoint point the slowdown 72 00:04:01,560 --> 00:04:04,400 Speaker 1: as a result of international headwinds which are acting as 73 00:04:04,440 --> 00:04:08,200 Speaker 1: contagion to the domestic economy and domestic weakness. I think 74 00:04:08,200 --> 00:04:11,080 Speaker 1: we are seeing both variables come into play here. Many 75 00:04:11,080 --> 00:04:13,880 Speaker 1: people think the easing cycle that has commenced worldwide will 76 00:04:14,120 --> 00:04:16,920 Speaker 1: offset some of these difficulties. I think a question that 77 00:04:17,000 --> 00:04:19,799 Speaker 1: Chairman Pan will face again tomorrow, perhaps from our colleague 78 00:04:19,800 --> 00:04:22,599 Speaker 1: Michael McKee, who has asked this question before, why will 79 00:04:22,640 --> 00:04:25,880 Speaker 1: an interest rate cut help? Do we have an answer, 80 00:04:25,960 --> 00:04:28,480 Speaker 1: a really good answer to that as to why a 81 00:04:28,680 --> 00:04:31,359 Speaker 1: rate cut from the Federal Reserve actually helps given the 82 00:04:31,360 --> 00:04:33,240 Speaker 1: conditions we have at the moment. Well, that's one of 83 00:04:33,279 --> 00:04:36,120 Speaker 1: the biggest questions, because right now you're talking about traditionally 84 00:04:36,160 --> 00:04:40,479 Speaker 1: providing easier money policy or additional accommodation to the credit markets. 85 00:04:40,839 --> 00:04:45,120 Speaker 1: Rates are already historically very low. So on the one hand, 86 00:04:45,200 --> 00:04:47,600 Speaker 1: the FETE is saying the economy is in a good place. Well, 87 00:04:47,600 --> 00:04:49,880 Speaker 1: if the economy is in such a good place, why 88 00:04:49,960 --> 00:04:53,320 Speaker 1: do we need even more accommodative policy than we already have? 89 00:04:53,839 --> 00:04:56,080 Speaker 1: And to your point, will the Fed be able to 90 00:04:56,080 --> 00:04:59,760 Speaker 1: stabilize the economy. They have very little wiggle room to 91 00:05:00,080 --> 00:05:02,359 Speaker 1: vide additional stimulus if you think back to oh seven, 92 00:05:02,360 --> 00:05:04,560 Speaker 1: If you think back to oh one, the Fed cut 93 00:05:04,640 --> 00:05:07,960 Speaker 1: rates around four hundred, five hundred basis points. This time around, 94 00:05:08,000 --> 00:05:10,720 Speaker 1: we only have to fifty And in fact, looking at 95 00:05:10,720 --> 00:05:13,400 Speaker 1: the partial inversion of the yield curve, if we give 96 00:05:13,440 --> 00:05:16,440 Speaker 1: back fifty basis points just to write the curve, that 97 00:05:16,560 --> 00:05:19,080 Speaker 1: leaves the Fed with only two hundred basis points to 98 00:05:19,160 --> 00:05:22,479 Speaker 1: provide organic stimulus. So if in fact, the economy does 99 00:05:22,560 --> 00:05:27,240 Speaker 1: begin to significantly lose momentum towards those recessionary conditions or 100 00:05:27,360 --> 00:05:30,919 Speaker 1: non accelerating period of expansion, the Fed is going to 101 00:05:30,960 --> 00:05:34,400 Speaker 1: have a very difficult time relying on rate reductions alone 102 00:05:34,720 --> 00:05:37,839 Speaker 1: to bully the economy back into positive territory. So, Lindsay, 103 00:05:37,839 --> 00:05:39,960 Speaker 1: you mentioned that the obviously the consumer has been very 104 00:05:40,000 --> 00:05:43,520 Speaker 1: strong supporting this, uh the late stages of this economic cycle. 105 00:05:43,560 --> 00:05:45,160 Speaker 1: What do you expect to see in the jobs report 106 00:05:45,360 --> 00:05:48,159 Speaker 1: on Friday, Well, first off, I think the consumer is 107 00:05:48,200 --> 00:05:50,440 Speaker 1: stronger than they were in the first quarter, but I 108 00:05:50,440 --> 00:05:53,359 Speaker 1: wouldn't say they're outright strong. There's still a lot of 109 00:05:53,480 --> 00:05:56,200 Speaker 1: uneven activity that we've been seeing in the consumer sector. 110 00:05:56,560 --> 00:05:59,839 Speaker 1: But as it translates into the the upcoming employment report, 111 00:06:00,360 --> 00:06:03,640 Speaker 1: we saw very strong June, we saw a very week May. 112 00:06:03,680 --> 00:06:06,040 Speaker 1: I think July it comes right down and splits the 113 00:06:06,040 --> 00:06:08,800 Speaker 1: difference around a hundred and fifty thousand. So certainly we're 114 00:06:08,839 --> 00:06:11,440 Speaker 1: still seeing Americans put back to work on a month 115 00:06:11,440 --> 00:06:14,960 Speaker 1: and month basis, but at a noticeably reduced level, certainly 116 00:06:14,960 --> 00:06:17,799 Speaker 1: compared to the more robust levels we saw in years pass. Lindsay, 117 00:06:17,839 --> 00:06:20,640 Speaker 1: no real signs of stress. Looking at initial jobless claims. 118 00:06:20,640 --> 00:06:22,559 Speaker 1: Though some people have come on this program and pointed 119 00:06:22,560 --> 00:06:25,200 Speaker 1: out what is happening with the ADP report, the smallest 120 00:06:25,200 --> 00:06:29,400 Speaker 1: sized companies actually shedding jobs. How are you framing that 121 00:06:29,440 --> 00:06:31,400 Speaker 1: for clients at the moment? What are you telling them? Well, 122 00:06:31,440 --> 00:06:34,240 Speaker 1: when we talk to businesses big and small, many are 123 00:06:34,240 --> 00:06:37,560 Speaker 1: complaining about the already heightened level of labor costs and 124 00:06:37,720 --> 00:06:40,640 Speaker 1: the expectation that labor costs are going to continue to rise. 125 00:06:40,960 --> 00:06:43,320 Speaker 1: So in fact, when we look at the breakdown of 126 00:06:43,360 --> 00:06:47,880 Speaker 1: business investment, businesses remain very hesitant to invest in further 127 00:06:48,000 --> 00:06:50,840 Speaker 1: new employees as we've seen very tepid hiring. As we 128 00:06:50,960 --> 00:06:54,080 Speaker 1: just discussed, the one area that where businesses are willing 129 00:06:54,120 --> 00:06:56,800 Speaker 1: to invest is technology, So in fact, they're willing to 130 00:06:56,800 --> 00:07:00,919 Speaker 1: eat that upfront cost, but also potent to replace that 131 00:07:01,080 --> 00:07:03,920 Speaker 1: rapidly rising labor cost. So on the one hand, yes, 132 00:07:03,960 --> 00:07:07,159 Speaker 1: we could be driving higher productivity and keeping costs of 133 00:07:07,240 --> 00:07:10,880 Speaker 1: production lower, but that will in fact replace many of 134 00:07:10,920 --> 00:07:13,560 Speaker 1: these payroll numbers that we're expecting to see. So lindsay, 135 00:07:13,600 --> 00:07:15,720 Speaker 1: are you surprised that given that we are at or 136 00:07:15,840 --> 00:07:17,840 Speaker 1: near full employment? And I'm not sure how we want 137 00:07:17,880 --> 00:07:20,920 Speaker 1: to define that, but we haven't seen more wage inflation. 138 00:07:21,480 --> 00:07:23,640 Speaker 1: I'm not surprised because when we're looking at the civilian 139 00:07:23,640 --> 00:07:27,320 Speaker 1: calculation of three point seven percent, that sounds pretty impressive. Certainly, 140 00:07:27,360 --> 00:07:30,160 Speaker 1: that's a vast improvement from ten percent in the aftermath 141 00:07:30,160 --> 00:07:32,960 Speaker 1: of the Great Recession. But three point seven percent doesn't 142 00:07:32,960 --> 00:07:35,600 Speaker 1: tell the whole story. It doesn't include the millions of 143 00:07:35,640 --> 00:07:38,000 Speaker 1: Americans that are sitting on the sideline and have been 144 00:07:38,000 --> 00:07:41,480 Speaker 1: sitting on the sideline for years, not actively participating in 145 00:07:41,480 --> 00:07:43,880 Speaker 1: the labor force. When we add them back in, that 146 00:07:43,960 --> 00:07:47,840 Speaker 1: unemployment rate doubles, which more closely coincides with the lack 147 00:07:47,880 --> 00:07:50,120 Speaker 1: of wage pressure that we have seen on the aggregate. 148 00:07:51,040 --> 00:07:52,880 Speaker 1: To catch up with you ahead of a really important 149 00:07:52,920 --> 00:07:54,920 Speaker 1: fedmates and coming up tomorrow, Lindsay p X of that 150 00:07:55,040 --> 00:08:15,320 Speaker 1: STATEFLE chief economist Jordan Rochester, otherwise known as Mr Brooke, 151 00:08:15,400 --> 00:08:19,239 Speaker 1: said he joins us now the moreg ten f A strategist. Jordan, 152 00:08:19,280 --> 00:08:23,520 Speaker 1: Good morning to here, Good morning, John Hayden. I'm very well, 153 00:08:23,640 --> 00:08:25,720 Speaker 1: Just tell me what you're telling clients at the moment 154 00:08:25,920 --> 00:08:30,240 Speaker 1: about this relentless move lower in sterling. It really has 155 00:08:30,280 --> 00:08:32,800 Speaker 1: been relentless, and I guess for someone who follows the 156 00:08:32,800 --> 00:08:36,199 Speaker 1: ins and outs of the Boris Johnson leadership campaign. I mean, 157 00:08:36,360 --> 00:08:39,640 Speaker 1: none of the actual politics so far has been surprising. 158 00:08:39,800 --> 00:08:43,640 Speaker 1: We've seen a Brexit here champion who led the Brexit campaign, 159 00:08:44,000 --> 00:08:47,079 Speaker 1: who has pushed for a more tougher stance on the 160 00:08:47,080 --> 00:08:50,000 Speaker 1: EU when it comes to the withdrawal agreement. He has 161 00:08:50,040 --> 00:08:53,200 Speaker 1: consistently said, get rid of the Irish max stop and 162 00:08:53,240 --> 00:08:57,240 Speaker 1: we won't negotiate until the EU admits to that. And 163 00:08:57,280 --> 00:08:59,400 Speaker 1: now he's Prime Minister and guess what he's saying the 164 00:08:59,400 --> 00:09:02,719 Speaker 1: exact thing. But I guess the market was just a 165 00:09:02,760 --> 00:09:05,839 Speaker 1: bit asleep at the wheel. Um. I guess folks were 166 00:09:05,880 --> 00:09:08,480 Speaker 1: looking for him to be less of a campaigner and 167 00:09:08,520 --> 00:09:10,560 Speaker 1: more of a Prime minister when he came in, and 168 00:09:10,559 --> 00:09:13,839 Speaker 1: to maybe soften his tone whatever it is that draw things. 169 00:09:14,000 --> 00:09:18,640 Speaker 1: It was perhaps the headline from US now Michael Gove, 170 00:09:18,800 --> 00:09:21,840 Speaker 1: who is essentially the guy who was in charge of 171 00:09:21,880 --> 00:09:25,040 Speaker 1: the no deal preparations, and he has said he said 172 00:09:25,040 --> 00:09:27,840 Speaker 1: on the weekend the working assumption of the government is 173 00:09:27,840 --> 00:09:30,560 Speaker 1: a no deal Brexit. Now he would say that he 174 00:09:30,720 --> 00:09:32,640 Speaker 1: his his role is to plan for a no deal 175 00:09:33,200 --> 00:09:35,480 Speaker 1: in the event of that, and that's what kind of 176 00:09:35,600 --> 00:09:39,600 Speaker 1: change things for the market. Where we suddenly stopped treating 177 00:09:39,640 --> 00:09:42,120 Speaker 1: it like a tail risk and more of a base case. 178 00:09:42,559 --> 00:09:45,560 Speaker 1: And the pound it's fallen the lot we're talking two 179 00:09:45,559 --> 00:09:48,319 Speaker 1: to three over the past month. But if you told 180 00:09:48,360 --> 00:09:51,960 Speaker 1: me with a hundred certainty, Jordan's there's gonna be a 181 00:09:51,960 --> 00:09:55,320 Speaker 1: hard brexit at the end of October, whereas the pound 182 00:09:55,360 --> 00:09:59,480 Speaker 1: trade you're talking one fifteen to one eighteen against the dollar, 183 00:10:00,400 --> 00:10:06,040 Speaker 1: talking cents to against the euro. So Jordan, what could 184 00:10:06,040 --> 00:10:09,240 Speaker 1: turn around this doomsday scenario that we're seeing just here 185 00:10:09,280 --> 00:10:12,760 Speaker 1: in the Sterling. It's the question I asked myself with 186 00:10:12,880 --> 00:10:15,839 Speaker 1: on those calls of clients today and yesterday. There's a 187 00:10:15,880 --> 00:10:18,640 Speaker 1: few things that could turn things around. The problem is 188 00:10:18,679 --> 00:10:22,040 Speaker 1: it's very unpredictable because politics is a slippery animal to 189 00:10:22,120 --> 00:10:25,320 Speaker 1: deal with um and also I struggle to find a 190 00:10:25,440 --> 00:10:28,920 Speaker 1: date in the diary until we get to September before 191 00:10:28,960 --> 00:10:31,560 Speaker 1: those positives could happen. So what are they? So the 192 00:10:31,559 --> 00:10:35,880 Speaker 1: main thing that keeps everybody, allows everyone to sleep at night, 193 00:10:35,920 --> 00:10:40,160 Speaker 1: I guess is Parliament does have a majority against a 194 00:10:40,240 --> 00:10:43,720 Speaker 1: no deal brexit. The problem I have is Parliament can't 195 00:10:43,760 --> 00:10:46,880 Speaker 1: do much right now because they're on their summer holidays 196 00:10:47,360 --> 00:10:49,840 Speaker 1: in recess and they do not come back until the 197 00:10:49,920 --> 00:10:52,920 Speaker 1: third of September, and when they do come back, it's 198 00:10:52,960 --> 00:10:55,920 Speaker 1: more likely we're going to be dealing with negatives rather 199 00:10:55,960 --> 00:11:00,160 Speaker 1: than positives. So Parliament that could perhaps stop no all, 200 00:11:00,200 --> 00:11:02,720 Speaker 1: but it's hard in the short term to provide a 201 00:11:02,760 --> 00:11:06,760 Speaker 1: positive positive go on just quickly the EU offer us something. 202 00:11:07,080 --> 00:11:09,960 Speaker 1: So if the EU gives US and Olive Branch to 203 00:11:10,000 --> 00:11:14,120 Speaker 1: work with, maybe talking about reopening the mandate for Michelle 204 00:11:14,160 --> 00:11:17,280 Speaker 1: Barnier and discussing the Irish border, that could be a 205 00:11:17,320 --> 00:11:20,040 Speaker 1: headline that moves Sterling higher. Jordan great to catch up 206 00:11:20,040 --> 00:11:23,760 Speaker 1: with you, Jordan Rochester and Mora GTNIC strategists, otherwise known 207 00:11:23,800 --> 00:11:40,160 Speaker 1: in the City of London as Mr Brexit trade talks 208 00:11:40,480 --> 00:11:42,800 Speaker 1: they begin or resume, however you want to frame it 209 00:11:42,880 --> 00:11:45,400 Speaker 1: over In Shankai today, between the United States and China, 210 00:11:45,679 --> 00:11:48,280 Speaker 1: the President out on Twitter today saying that the Chinese 211 00:11:48,280 --> 00:11:52,440 Speaker 1: have not restarted buying agricultural commodities in the quantities that 212 00:11:52,480 --> 00:11:56,360 Speaker 1: they were promising the United States. The Huawei chairman out 213 00:11:56,400 --> 00:11:58,719 Speaker 1: today saying that the supply of critical components from the 214 00:11:58,760 --> 00:12:03,040 Speaker 1: United States has not resumed either, despite the President's proclamation 215 00:12:03,080 --> 00:12:04,880 Speaker 1: in June that the company would be able to buy 216 00:12:04,880 --> 00:12:08,199 Speaker 1: some American technology once again. So what does it mean 217 00:12:08,240 --> 00:12:10,160 Speaker 1: for trade talks and what are the chances of a 218 00:12:10,240 --> 00:12:13,760 Speaker 1: breakthrough this week? Jennifer Hillman joining US now CFR Senior 219 00:12:13,800 --> 00:12:18,040 Speaker 1: Fellow for Trade and International Political Economy. So, Jennifer, help 220 00:12:18,080 --> 00:12:20,400 Speaker 1: us understand just how hard it will be to have 221 00:12:20,440 --> 00:12:22,839 Speaker 1: a breakthrough this week. I think it's going to be 222 00:12:22,920 --> 00:12:25,360 Speaker 1: extremely hard to see how you get a deal this week. 223 00:12:25,920 --> 00:12:28,400 Speaker 1: Partly that's because there have been a lot of things 224 00:12:28,480 --> 00:12:31,880 Speaker 1: added into these discussions that weren't there before. As you mentioned, 225 00:12:31,920 --> 00:12:34,760 Speaker 1: the Huawei kind of tech war um is making it 226 00:12:34,880 --> 00:12:37,160 Speaker 1: much harder to get a deal. And added to all 227 00:12:37,200 --> 00:12:40,560 Speaker 1: of that is China blaming the United States for inflaming 228 00:12:40,600 --> 00:12:43,439 Speaker 1: the tensions and riling up the protesters in Hong Kong. 229 00:12:43,800 --> 00:12:46,160 Speaker 1: So the atmosphere for getting a deal right now is 230 00:12:46,200 --> 00:12:49,679 Speaker 1: really tough. So, Jennifer, you're a former commissioner at the 231 00:12:49,760 --> 00:12:52,760 Speaker 1: United States International Trade Commission. You've got some experience with 232 00:12:52,880 --> 00:12:55,000 Speaker 1: this type of thing. Is it your sense that the 233 00:12:55,000 --> 00:12:59,800 Speaker 1: Trump administration's policy of pursuing a unilateral tariff based appro 234 00:13:00,120 --> 00:13:02,640 Speaker 1: two negotiations is the way to go with the Chinese 235 00:13:02,679 --> 00:13:05,280 Speaker 1: at this point? No, I don't think it is um 236 00:13:05,320 --> 00:13:07,680 Speaker 1: and that's because what we really need, I mean, to 237 00:13:07,720 --> 00:13:09,720 Speaker 1: make it a good deal with China, you need to 238 00:13:09,760 --> 00:13:12,800 Speaker 1: deal with a lot of structural issues. The major problem 239 00:13:12,840 --> 00:13:16,280 Speaker 1: that we really have is China's use of subsidies and 240 00:13:16,360 --> 00:13:20,280 Speaker 1: the huge number of state owned enterprises where the and 241 00:13:20,360 --> 00:13:23,480 Speaker 1: the party and the state are controlling it are directing 242 00:13:23,520 --> 00:13:27,520 Speaker 1: the resources. Those are very hard structural issues to get at. 243 00:13:27,840 --> 00:13:31,000 Speaker 1: China won't change those just because of pressure from the 244 00:13:31,080 --> 00:13:34,320 Speaker 1: United States. If we're going to get a serious structural deal, 245 00:13:34,360 --> 00:13:37,079 Speaker 1: we're going to need our allies to be there with us. 246 00:13:37,760 --> 00:13:40,240 Speaker 1: And the trouble for us is that our allies share 247 00:13:40,320 --> 00:13:42,520 Speaker 1: a lot of our concerns and a lot of our 248 00:13:43,120 --> 00:13:46,680 Speaker 1: worries about China, but do not share the idea that 249 00:13:46,720 --> 00:13:49,400 Speaker 1: we should go at all of this unilaterally or use 250 00:13:49,480 --> 00:13:53,160 Speaker 1: illegal tariffs to do it. So given that backdrop, what 251 00:13:53,480 --> 00:13:58,480 Speaker 1: is a realistic outcome for trade negotiations between the US 252 00:13:58,600 --> 00:14:01,000 Speaker 1: and China? Is it this can be some type of 253 00:14:01,040 --> 00:14:04,600 Speaker 1: headline deal or perhaps even nothing at all. Well, I 254 00:14:04,600 --> 00:14:07,800 Speaker 1: think there there is a realistic prospect. China has already 255 00:14:07,800 --> 00:14:10,120 Speaker 1: agreed to quite a lot of things in the course 256 00:14:10,160 --> 00:14:13,400 Speaker 1: of these negotiations, and there is already a lot of 257 00:14:13,440 --> 00:14:16,880 Speaker 1: text agreements worked out. So I do think you could 258 00:14:16,880 --> 00:14:20,120 Speaker 1: see something happening where China would agree to get rid 259 00:14:20,120 --> 00:14:23,520 Speaker 1: of their current limits on how much foreign investment can 260 00:14:23,560 --> 00:14:26,760 Speaker 1: go into certain sectors. Right now, many sectors you can 261 00:14:26,800 --> 00:14:30,600 Speaker 1: only have forty nine percent foreign ownership, which means, again 262 00:14:30,680 --> 00:14:34,240 Speaker 1: China remains in control. Those limits can be clearly agreed to. 263 00:14:34,560 --> 00:14:37,040 Speaker 1: China will agree, I think, to increase the level of 264 00:14:37,040 --> 00:14:40,680 Speaker 1: its intellectual property protection. China, I think, will agree to 265 00:14:40,880 --> 00:14:44,760 Speaker 1: restraints on the forced technology transfers. So there is a 266 00:14:44,800 --> 00:14:48,320 Speaker 1: lot that is already on the table and is achievable. 267 00:14:48,840 --> 00:14:50,640 Speaker 1: The problem is going to be the rest of it, 268 00:14:50,720 --> 00:14:53,720 Speaker 1: the hard things, the structural things about how much Communist 269 00:14:53,720 --> 00:14:56,600 Speaker 1: party control there is, the subsidies, et cetera. I do 270 00:14:56,680 --> 00:14:59,640 Speaker 1: not see how you're going to get an agreement on that. Uh. 271 00:14:59,680 --> 00:15:02,200 Speaker 1: The other of thing where you may see is again 272 00:15:02,280 --> 00:15:06,720 Speaker 1: commitments by China to buy more American stuff, whether that's 273 00:15:06,920 --> 00:15:10,720 Speaker 1: agricultural products or whether that's other manufactured goods. I can 274 00:15:10,760 --> 00:15:13,920 Speaker 1: see that agreement, and the question will always come down 275 00:15:13,920 --> 00:15:18,000 Speaker 1: to is this an enforceable agreement? Jennifer's we get closer 276 00:15:18,040 --> 00:15:23,320 Speaker 1: to does that change things? Just in the President is 277 00:15:23,360 --> 00:15:28,040 Speaker 1: currently already saying, um, maybe China would be better off 278 00:15:28,160 --> 00:15:31,640 Speaker 1: waiting until after the election to get an agreement. Uh. 279 00:15:31,760 --> 00:15:35,560 Speaker 1: He's he's obviously arguing that UM, if a Democrat were 280 00:15:35,600 --> 00:15:38,360 Speaker 1: to be elected, that China could get an easy um 281 00:15:38,400 --> 00:15:41,040 Speaker 1: and quick deal that would be less tough. I don't 282 00:15:41,080 --> 00:15:43,960 Speaker 1: agree with that, but it's clear that the President is 283 00:15:44,000 --> 00:15:48,320 Speaker 1: already seeing this playing into the presidential politics. But it 284 00:15:48,440 --> 00:15:51,920 Speaker 1: cuts both ways. Already we are seeing that the US 285 00:15:52,000 --> 00:15:55,560 Speaker 1: tariffs are first of all, not bringing jobs back to 286 00:15:55,640 --> 00:15:57,960 Speaker 1: the United States, and that was one of the clear 287 00:15:58,000 --> 00:16:00,880 Speaker 1: promises that the President made that this whole trade war 288 00:16:00,920 --> 00:16:03,400 Speaker 1: with China was going to be bringing jobs back to 289 00:16:03,440 --> 00:16:05,680 Speaker 1: the U S. That's not where the jobs are going. 290 00:16:05,880 --> 00:16:08,320 Speaker 1: They're going to Vietnam, they're going to Mexico, they're going 291 00:16:08,320 --> 00:16:11,120 Speaker 1: to Cambodia, they're going to Thailand. But they're not coming 292 00:16:11,120 --> 00:16:13,760 Speaker 1: back to the United States. And the second thing that 293 00:16:13,800 --> 00:16:18,400 Speaker 1: you're clearly seeing is that the trade uncertainty that all 294 00:16:18,440 --> 00:16:21,400 Speaker 1: of this trade war with China is doing is dragging 295 00:16:21,400 --> 00:16:24,400 Speaker 1: down the US economy, and you're seeing that very clearly 296 00:16:24,440 --> 00:16:27,000 Speaker 1: in the lower growth um in the second quarter of 297 00:16:27,520 --> 00:16:31,240 Speaker 1: nineteen and in the lack of private investment in the 298 00:16:31,320 --> 00:16:33,880 Speaker 1: United States is very much key to the fact that 299 00:16:33,920 --> 00:16:37,360 Speaker 1: everybody doesn't know where this whole trade war is headed. 300 00:16:37,640 --> 00:16:40,960 Speaker 1: The longer it goes, the more it continues, I think, 301 00:16:41,000 --> 00:16:43,040 Speaker 1: the more of a drag this trade war is going 302 00:16:43,080 --> 00:16:45,760 Speaker 1: to be on the US economy. So Jennifer, just give 303 00:16:45,840 --> 00:16:48,600 Speaker 1: us a sense from your experience what you think China 304 00:16:48,800 --> 00:16:50,840 Speaker 1: really wants here. What do you think would be an 305 00:16:50,880 --> 00:16:55,080 Speaker 1: acceptable deal for China, knowing that some hard concessions are 306 00:16:55,080 --> 00:16:57,560 Speaker 1: gonna have to be made on both sides. What China 307 00:16:57,640 --> 00:16:59,600 Speaker 1: needs to see a deal that is a win win 308 00:16:59,680 --> 00:17:02,280 Speaker 1: for sides. In other words, I don't think you can 309 00:17:02,280 --> 00:17:06,000 Speaker 1: see China making major concessions that are just perceived as 310 00:17:06,000 --> 00:17:09,119 Speaker 1: a unilateral concession to the United States because of this. 311 00:17:09,880 --> 00:17:12,879 Speaker 1: Certainly there are many of the reformers in China that 312 00:17:13,040 --> 00:17:17,919 Speaker 1: understand the China needs to reform, that the increase in 313 00:17:17,920 --> 00:17:20,480 Speaker 1: the amount of state owned enterprises that are not doing 314 00:17:20,480 --> 00:17:25,080 Speaker 1: well financially, that the increased demand in China has so 315 00:17:25,680 --> 00:17:28,120 Speaker 1: China needs to see a deal that works in China's 316 00:17:28,160 --> 00:17:30,440 Speaker 1: interest as well as well, and they need to see 317 00:17:30,440 --> 00:17:33,119 Speaker 1: that this agreement is one that is pushing China to 318 00:17:33,160 --> 00:17:36,120 Speaker 1: do some things that would be better for the Chinese economy. 319 00:17:36,240 --> 00:17:39,480 Speaker 1: It's not clear yet where that deal lies, where China 320 00:17:39,520 --> 00:17:42,399 Speaker 1: can say that it's also done some things that either 321 00:17:42,520 --> 00:17:44,800 Speaker 1: it was going to do anyway or that are clearly 322 00:17:44,840 --> 00:17:47,560 Speaker 1: in China's interest, and that's I think where a lot 323 00:17:47,600 --> 00:17:49,000 Speaker 1: of the focus of the talks is going to have 324 00:17:49,080 --> 00:17:51,560 Speaker 1: to be going forward. And Jennifer, how much clarity at 325 00:17:51,600 --> 00:17:53,520 Speaker 1: the moment do you have on how much pain the 326 00:17:53,600 --> 00:17:56,679 Speaker 1: Chinese economy and the Chinese government is going through at 327 00:17:56,760 --> 00:17:59,680 Speaker 1: the moment. It's difficult sometimes from the outside looking in, 328 00:17:59,720 --> 00:18:02,240 Speaker 1: some some of the data points look weaker. But what's 329 00:18:02,240 --> 00:18:05,040 Speaker 1: your take on that? Well, again, part of it is, yes, 330 00:18:05,119 --> 00:18:07,359 Speaker 1: China's growth rate has come down, but you have to 331 00:18:07,359 --> 00:18:09,800 Speaker 1: remember it's come down from very high levels. I mean, 332 00:18:09,840 --> 00:18:13,840 Speaker 1: the Chinese economy has been growing eight nine So the 333 00:18:13,840 --> 00:18:15,639 Speaker 1: fact that it's come down to a growth rate in 334 00:18:15,680 --> 00:18:19,399 Speaker 1: the order of six percent, yes, is a significant slowing 335 00:18:19,920 --> 00:18:22,639 Speaker 1: of the growth rate in the Chinese economy, but it 336 00:18:22,760 --> 00:18:25,840 Speaker 1: is still growing at a very substantial rate. And again 337 00:18:25,880 --> 00:18:28,359 Speaker 1: we have to remember that the Chinese economy, when you 338 00:18:28,400 --> 00:18:30,439 Speaker 1: think of it from a g d P on a 339 00:18:30,520 --> 00:18:34,800 Speaker 1: purchasing power parity basis, is larger than our economy twenty 340 00:18:34,840 --> 00:18:38,840 Speaker 1: three trillion dollar economy UM on a purchasing power basis, 341 00:18:39,480 --> 00:18:43,040 Speaker 1: again growing at even a six percent rate a year, 342 00:18:43,200 --> 00:18:47,159 Speaker 1: is still you know, again an extraordinarily large and dynamic 343 00:18:47,240 --> 00:18:50,160 Speaker 1: economy in China. The reason our standard fruits because many 344 00:18:50,160 --> 00:18:53,639 Speaker 1: people listening to this program mark participants investors are like 345 00:18:53,760 --> 00:18:56,800 Speaker 1: economists trying to work out whether China is gradually going 346 00:18:56,880 --> 00:18:59,600 Speaker 1: to move into full stimulus mode. We've seen them reluctant 347 00:18:59,640 --> 00:19:01,280 Speaker 1: so far or over the last year has been very 348 00:19:01,280 --> 00:19:03,960 Speaker 1: gradual and very incremental. How do you see that panic 349 00:19:04,000 --> 00:19:06,239 Speaker 1: gout in the next year or so. It's harder to 350 00:19:06,280 --> 00:19:09,600 Speaker 1: read it now. When you add in, if you will, 351 00:19:09,680 --> 00:19:12,560 Speaker 1: the tech war on top of the trade war UM 352 00:19:12,600 --> 00:19:15,280 Speaker 1: when it was just focused on goods and services, I 353 00:19:15,320 --> 00:19:17,679 Speaker 1: think there was a there was a clear strategy, I 354 00:19:17,720 --> 00:19:21,159 Speaker 1: think for China. But when you add in the sanctions 355 00:19:21,160 --> 00:19:24,200 Speaker 1: on Huawei and you know the previous ones on Zte 356 00:19:24,920 --> 00:19:27,080 Speaker 1: and and the tech war issues, I think it makes 357 00:19:27,080 --> 00:19:30,040 Speaker 1: it much harder to see exactly where this is going 358 00:19:30,119 --> 00:19:33,159 Speaker 1: to play out. Uh, If you listen to what is 359 00:19:33,200 --> 00:19:35,679 Speaker 1: being said in China, I think China is prepared to 360 00:19:35,800 --> 00:19:37,800 Speaker 1: lose if you will, or to give up a fair 361 00:19:37,840 --> 00:19:42,119 Speaker 1: amount in the light manufacturing sector, in other words, in 362 00:19:42,160 --> 00:19:44,920 Speaker 1: a number of the products where the tariffs are. Right now, 363 00:19:45,320 --> 00:19:47,959 Speaker 1: you are starting to see companies move out of China 364 00:19:48,359 --> 00:19:51,800 Speaker 1: and into Vietnam and other places in Asia and into Mexico, 365 00:19:52,160 --> 00:19:55,160 Speaker 1: and I think China concedes that that may have to go. 366 00:19:55,600 --> 00:19:57,920 Speaker 1: Where China now wants to win is on the tech 367 00:19:58,000 --> 00:20:00,359 Speaker 1: war UM, and they want to create an in hire, 368 00:20:00,720 --> 00:20:03,919 Speaker 1: you know, information and communication system that is geared around 369 00:20:03,960 --> 00:20:08,119 Speaker 1: their technology, their wahwei sort of strategy UM, and to 370 00:20:08,200 --> 00:20:13,160 Speaker 1: pull as many countries into their network and their communications technology, 371 00:20:13,800 --> 00:20:16,720 Speaker 1: their artificial intelligence, et cetera. So I think China is 372 00:20:16,760 --> 00:20:20,119 Speaker 1: putting a lot of it's it's you know, ammunition if 373 00:20:20,160 --> 00:20:24,600 Speaker 1: you will into winning the tech war uh, if you will, UM. 374 00:20:24,600 --> 00:20:26,919 Speaker 1: And that is a different set of players and a 375 00:20:26,920 --> 00:20:29,200 Speaker 1: different set of investments that China would need to make. 376 00:20:29,800 --> 00:20:31,400 Speaker 1: Jennifer great a cat show with you to get your 377 00:20:31,400 --> 00:20:34,200 Speaker 1: insight and a little bit more clarity on trade talks 378 00:20:34,240 --> 00:20:37,240 Speaker 1: as they begin once more over in Shanghai today between 379 00:20:37,240 --> 00:20:39,840 Speaker 1: the Chinese and the United States. Jennifer Hillman that CF 380 00:20:40,000 --> 00:20:44,720 Speaker 1: A Senior Fellow and Trade and International Political economy over 381 00:20:44,760 --> 00:20:47,840 Speaker 1: at CFR, the former commissioner at the United States International 382 00:20:47,880 --> 00:21:05,359 Speaker 1: Trade Commission, I'm looking at beyond Meat. In the pre market, 383 00:21:05,400 --> 00:21:10,119 Speaker 1: trading stocks down about fifteen, about eight dollars a share, 384 00:21:10,800 --> 00:21:13,040 Speaker 1: but remember the I p O was at twenty dollars 385 00:21:13,040 --> 00:21:15,960 Speaker 1: a share, so still well in the money. The company 386 00:21:15,960 --> 00:21:18,879 Speaker 1: reported earnings last night. They also announced that they are 387 00:21:18,920 --> 00:21:21,359 Speaker 1: going to be selling some stock, mostly secondary shares. So 388 00:21:21,440 --> 00:21:24,720 Speaker 1: let's get the latest. We welcome our good friend, Jennifer Bartashes. 389 00:21:25,240 --> 00:21:28,280 Speaker 1: She's a senior analyst for Bloomberg Intelligence covering all things 390 00:21:28,359 --> 00:21:30,480 Speaker 1: food retails. She joins us on the phone from Princeton, 391 00:21:30,520 --> 00:21:32,840 Speaker 1: New Jersey. Jen, thanks so much for joining us. Let's 392 00:21:32,840 --> 00:21:35,440 Speaker 1: start first with the earnings. Looks like they had some 393 00:21:35,480 --> 00:21:39,000 Speaker 1: pretty good numbers and guidance. Yeah, good morning, Paul. Um. Yes, Actually, 394 00:21:39,040 --> 00:21:41,880 Speaker 1: the earnings report itself there was all good news UM. 395 00:21:41,920 --> 00:21:44,960 Speaker 1: The revenue was higher than consensus expected. They actually raised 396 00:21:44,960 --> 00:21:47,040 Speaker 1: their guidance and forecast for the rest of the year 397 00:21:47,520 --> 00:21:50,720 Speaker 1: UM pretty substantially UM. And in addition, with regards to 398 00:21:50,760 --> 00:21:53,480 Speaker 1: adjusted EVADA, they also raised their guidance UM and that 399 00:21:53,520 --> 00:21:55,919 Speaker 1: they expected to turn positive this year as opposed to 400 00:21:56,000 --> 00:21:59,040 Speaker 1: just breaking even. So all things considered, it was really 401 00:21:59,160 --> 00:22:02,040 Speaker 1: a very very solid quarter for the company. But it 402 00:22:02,119 --> 00:22:04,840 Speaker 1: was really the announcement about the additional share issuance that 403 00:22:04,960 --> 00:22:07,439 Speaker 1: has been pulling the stock down, right, So this is 404 00:22:07,520 --> 00:22:11,320 Speaker 1: a surprise that share issuance for certainly not the least 405 00:22:11,320 --> 00:22:14,560 Speaker 1: reason that they're still subject to the lock up here, 406 00:22:14,640 --> 00:22:16,520 Speaker 1: So how is this all taking place? How are they 407 00:22:16,520 --> 00:22:20,239 Speaker 1: getting approval to do this? Yeah? So so originally there 408 00:22:20,320 --> 00:22:22,000 Speaker 1: was a six month lock up period from when the 409 00:22:22,160 --> 00:22:25,199 Speaker 1: stock I pod in May, but the underwriters UM have 410 00:22:25,320 --> 00:22:27,520 Speaker 1: made an exception UM and that's really all there is 411 00:22:27,560 --> 00:22:30,840 Speaker 1: to it, and that they're allowing some of these early investors, 412 00:22:30,880 --> 00:22:34,760 Speaker 1: which include obvious ventures Kleiner Perkins and then even uh 413 00:22:34,800 --> 00:22:37,240 Speaker 1: the CEO Ethan Brown and the CFO Mark Nelson to 414 00:22:37,880 --> 00:22:40,439 Speaker 1: UM to sell some of their shares UM. And I 415 00:22:40,480 --> 00:22:42,480 Speaker 1: think the bigger part of this is that it's really 416 00:22:42,520 --> 00:22:45,320 Speaker 1: the bulk of this additional issuance is these insiders and 417 00:22:45,440 --> 00:22:48,560 Speaker 1: only a very small amount and fifty shares is coming 418 00:22:48,600 --> 00:22:50,840 Speaker 1: from the company will generate revenue that can be plugged 419 00:22:50,840 --> 00:22:54,639 Speaker 1: back into their company for growth purposes. Yeah. I've been 420 00:22:54,800 --> 00:22:57,879 Speaker 1: following stocks for a long time and I really can't 421 00:22:57,880 --> 00:23:01,120 Speaker 1: recall too many instances, if any were you had an 422 00:23:01,119 --> 00:23:03,040 Speaker 1: early you know, the waiver of the early lock up. 423 00:23:03,119 --> 00:23:04,800 Speaker 1: I'm sure sure it happens, a waiver of the early 424 00:23:04,880 --> 00:23:06,639 Speaker 1: lock up and then having you know, so much of 425 00:23:06,680 --> 00:23:09,560 Speaker 1: that inside or selling. What was their pushback on the 426 00:23:09,600 --> 00:23:13,960 Speaker 1: conference call with Analyston investors. Yeah, it's actually very interesting 427 00:23:13,960 --> 00:23:16,800 Speaker 1: because it is very rare UM and and basically the 428 00:23:16,800 --> 00:23:20,240 Speaker 1: company shot down any opportunity for investors to ask about 429 00:23:20,280 --> 00:23:22,120 Speaker 1: it because they said they would not take any calls 430 00:23:22,200 --> 00:23:25,800 Speaker 1: or field any questions regarding the the share issue ince 431 00:23:25,800 --> 00:23:30,119 Speaker 1: citing regulatory um concerns UM. So there's really not any 432 00:23:30,119 --> 00:23:33,240 Speaker 1: commentary from the company themselves about why they decided to 433 00:23:33,240 --> 00:23:35,320 Speaker 1: do this as uns at this time. Well, I guess 434 00:23:35,320 --> 00:23:37,800 Speaker 1: the price action today will be uh will show how 435 00:23:38,119 --> 00:23:40,720 Speaker 1: investors feel about that. Going back to the to the 436 00:23:40,760 --> 00:23:43,080 Speaker 1: operations here, I mean, what is really are you getting 437 00:23:43,160 --> 00:23:45,760 Speaker 1: mentioned that they had better than expected numbers, they raised 438 00:23:45,800 --> 00:23:49,320 Speaker 1: their guidance. What's driving the growth for this company? What 439 00:23:49,359 --> 00:23:51,639 Speaker 1: do you expect to be the key growth drivers? Well, really, 440 00:23:51,680 --> 00:23:54,000 Speaker 1: for beyond me, part of the reason they can continue 441 00:23:54,040 --> 00:23:56,639 Speaker 1: to keep growing their raising their guidance is that they 442 00:23:56,720 --> 00:23:59,840 Speaker 1: keep signing on new partnerships, especially in the restaurant space. 443 00:24:00,280 --> 00:24:03,000 Speaker 1: So the guidance that they that they issued yesterday doesn't 444 00:24:03,000 --> 00:24:05,639 Speaker 1: even include newest partnerships that they've announced, such as with 445 00:24:05,720 --> 00:24:08,400 Speaker 1: Dunkin Donuts UM. And so you know, it's it's sort 446 00:24:08,440 --> 00:24:10,720 Speaker 1: of an ever moving target as they as they bring 447 00:24:10,760 --> 00:24:13,000 Speaker 1: these partners on and these are these are companies that 448 00:24:13,000 --> 00:24:16,760 Speaker 1: will help raise the exposure and the visibility of the 449 00:24:16,800 --> 00:24:20,200 Speaker 1: beyond meat products with a greater consumer audience. UM. It 450 00:24:20,280 --> 00:24:22,800 Speaker 1: leads to it leads to trial, it leads to additional 451 00:24:22,840 --> 00:24:25,880 Speaker 1: sales UM, and it just kind of keeps that cycle 452 00:24:25,960 --> 00:24:29,840 Speaker 1: burning forward. If I'm an investor, do I care, um 453 00:24:29,880 --> 00:24:33,560 Speaker 1: whether they grow their sales through you know, selling beyond 454 00:24:33,600 --> 00:24:36,400 Speaker 1: meat in grocery stores or in restaurants as a matter 455 00:24:36,400 --> 00:24:39,119 Speaker 1: to me, Well, in the short term, probably not, But 456 00:24:39,160 --> 00:24:41,520 Speaker 1: in the long term, I think it does become a consideration. 457 00:24:42,200 --> 00:24:45,520 Speaker 1: Generally speaking, sales to restaurants are lower margin sales than 458 00:24:45,560 --> 00:24:48,240 Speaker 1: those two retail outlets. So that is one thing to 459 00:24:48,280 --> 00:24:51,359 Speaker 1: consider because right now the revenue is almost evenly split 460 00:24:51,680 --> 00:24:56,120 Speaker 1: between the between restaurants and between retail for beyond meat UM. 461 00:24:56,720 --> 00:24:59,560 Speaker 1: In addition, going further UM, right now we're in an 462 00:24:59,600 --> 00:25:01,880 Speaker 1: economic cycle where people are eating out and they are 463 00:25:01,960 --> 00:25:04,879 Speaker 1: frequenting restaurants and they are spending um. But should that 464 00:25:04,920 --> 00:25:07,440 Speaker 1: pull back, you really need to have a very solid 465 00:25:07,480 --> 00:25:10,200 Speaker 1: retail base where people who are preparing food at home 466 00:25:10,520 --> 00:25:12,639 Speaker 1: are ready to buy that product and bring it to 467 00:25:12,680 --> 00:25:14,960 Speaker 1: their house and prepare it themselves. And so a long 468 00:25:15,080 --> 00:25:17,920 Speaker 1: term um A focus that you know is excuse a 469 00:25:17,960 --> 00:25:21,240 Speaker 1: little bit more heavily to retail to to to create 470 00:25:21,240 --> 00:25:24,520 Speaker 1: the sustainability of consumer reliance on the product may be 471 00:25:25,040 --> 00:25:27,320 Speaker 1: a very good strategy. So one of the things that 472 00:25:27,320 --> 00:25:29,840 Speaker 1: I hear a lot from Annalson investors when you think 473 00:25:29,840 --> 00:25:32,879 Speaker 1: about this story is competition. It seems like, you know, 474 00:25:32,920 --> 00:25:35,480 Speaker 1: beyond me to such a small company. Yes, yes, it 475 00:25:35,560 --> 00:25:37,840 Speaker 1: is growing very quickly and they have a great product 476 00:25:37,920 --> 00:25:40,199 Speaker 1: in the marketplace, but it just seems like, you know, 477 00:25:40,240 --> 00:25:42,840 Speaker 1: some of the big food companies at any time could 478 00:25:42,880 --> 00:25:45,680 Speaker 1: just kind of flood the market with product as well, 479 00:25:45,880 --> 00:25:48,199 Speaker 1: and they of course with big marketing budgets and so on. 480 00:25:48,240 --> 00:25:52,440 Speaker 1: What is management saying about competition, Well, right now, management 481 00:25:52,480 --> 00:25:55,080 Speaker 1: is saying that, you know, although they view competition and 482 00:25:55,119 --> 00:25:59,000 Speaker 1: that they welcome competition, they don't seem overly concerned about 483 00:25:59,000 --> 00:26:02,199 Speaker 1: competition UM, and in part in honesty, they kind of 484 00:26:02,280 --> 00:26:05,080 Speaker 1: have to say that because they are, you know, enjoying 485 00:26:05,480 --> 00:26:08,560 Speaker 1: a great growth period with their company. UM. But when 486 00:26:08,560 --> 00:26:11,400 Speaker 1: you look at companies like Tyson is a great example. 487 00:26:11,560 --> 00:26:14,200 Speaker 1: Tyson has started rolling out their own product this summer 488 00:26:14,640 --> 00:26:17,600 Speaker 1: UM and they've got products that are completely plant based, 489 00:26:17,640 --> 00:26:19,359 Speaker 1: and they also have some of that are half and half, 490 00:26:19,359 --> 00:26:22,320 Speaker 1: so half beef and half planned UM. But Tyson has 491 00:26:22,359 --> 00:26:25,760 Speaker 1: a huge relationship, for example, with Walmart UM. They're both 492 00:26:25,840 --> 00:26:29,439 Speaker 1: Arkansas based companies. UM. Walmart is a huge customer of 493 00:26:29,480 --> 00:26:32,439 Speaker 1: Tyson UM. And so when it comes to distribution and 494 00:26:32,480 --> 00:26:35,399 Speaker 1: getting products on the shelves, you can't can't. You can't 495 00:26:35,440 --> 00:26:38,560 Speaker 1: count out these really large packet food companies because of 496 00:26:38,600 --> 00:26:40,919 Speaker 1: the scale that they have and the networks that they 497 00:26:40,920 --> 00:26:42,520 Speaker 1: have with their supply chain to be able to get 498 00:26:42,560 --> 00:26:46,480 Speaker 1: products to consumers very quickly. Interesting, just amazing. So with 499 00:26:46,600 --> 00:26:49,679 Speaker 1: the story again, just the stock is just done extraordinary well. 500 00:26:49,760 --> 00:26:52,320 Speaker 1: Jen Bartashes, thanks so much for joining us. Jen covers 501 00:26:52,359 --> 00:26:55,920 Speaker 1: all things retail on the food side for Bloomberg Intelligence, 502 00:26:55,960 --> 00:26:59,160 Speaker 1: including beyond meat, is it food? Is it fake food? 503 00:26:59,200 --> 00:27:02,760 Speaker 1: Who knows? But it's certainly a big new force in 504 00:27:02,960 --> 00:27:07,840 Speaker 1: the our big A trend in the food business. Thanks 505 00:27:07,880 --> 00:27:12,119 Speaker 1: for listening to the Bloomberg Surveillance Podcast. Subscribe and listen 506 00:27:12,359 --> 00:27:17,680 Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform 507 00:27:17,800 --> 00:27:22,080 Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast. 508 00:27:22,160 --> 00:27:25,639 Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio.