Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg I'm
Speaker 1: britty pleased to say that. Joining us around the table
Speaker 1: here in New York, Lindsay Pianka, stay Folk, chief economist,
Speaker 1: the head of a FED decision tomorrow. Lindsay, good morning.
Speaker 1: What are you talan clients at the moment? Well, right now,
Speaker 1: the rate cut is pretty much baked into the market.
Speaker 1: But the big question is what are we going to
Speaker 1: see in the aftermath of the July rate cut. Will
Speaker 1: the FED position for a near term second round cut
Speaker 1: or will they take more of a neutral stand saying
Speaker 1: we'll continue to watch the data as it evolves without
Speaker 1: any sort of specific tea up for a September rate reduction. So, lindsay,
Speaker 1: are you in the camp that says you know this
Speaker 1: is this FED is prepared to cut maybe four times
Speaker 1: by mid next year. Get us a full und basis
Speaker 1: points Well, right now, our forecast is for a basis
Speaker 1: point cut later this week, an additional in September, and
Speaker 1: then we could actually see the FED take a pause
Speaker 1: depending on whether or not that initial policy reduction of
Speaker 1: fifty basis points cumulative does stabilize the economy. Of course,
Speaker 1: there's other variables going into that, international variables as such
Speaker 1: as slower global growth if we see their stabilization there,
Speaker 1: if we see progress in terms of trade talks. So
Speaker 1: there are a number of uncertainties still weighing on the outlook.
Speaker 1: But if in fact we do see domestic growth stabilized
Speaker 1: by fifty basis points and international certainties, excuse me, uncertainties abate,
Speaker 1: and then the FED could sit on the sideline for
Speaker 1: some time. Lindsay, what is the dividing line between an
Speaker 1: insurance right cup and a right counting cycle. It's a
Speaker 1: very thin line. I think it really comes down to
Speaker 1: a pause and a surance style rate cut would be
Speaker 1: somewhere in the ballpark of one to two rate cuts,
Speaker 1: and then sitting on the sideline for a number of meetings.
Speaker 1: So essentially pleased with the initial policy adjustment to stabilize
Speaker 1: the economy, entering into an outright easing cyclele at least
Speaker 1: from historical standpoint, would be a number of rate cuts
Speaker 1: in a rapid time frame. Do you think the Chapman
Speaker 1: poun will be happy that he won't have to have
Speaker 1: a summary of economic projections with him tomorrow and he
Speaker 1: won't have the Dolt plot to be thrown at him
Speaker 1: in the news conference. Well, there won't be an official forecast,
Speaker 1: but I do suspect that he will be asked about
Speaker 1: any sort of change in the forecast, Which is interesting
Speaker 1: because if you look at the June Summary of Economic
Speaker 1: Projections or the step the FETE is still very optimistic
Speaker 1: in terms of growth and inflation. And so again this
Speaker 1: supports the notion that the FETE is not concerned about
Speaker 1: the economy falling off a cliff, but they're simply offering
Speaker 1: that preventative policy measure to help stabilize the economy against
Speaker 1: potential headwinds. So lends some folks that come in here
Speaker 1: talking about the likelihood of a recession in the U.
Speaker 1: S economy, UH sometime mid to late in that camp,
Speaker 1: I do think the risk of recession is around fifty,
Speaker 1: so rapidly rising in my opinion. Now you can certainly
Speaker 1: point a second quarter GDP that was above expectations, but
Speaker 1: noticeably reduced from the pace we saw at the start
Speaker 1: of the year, and if you look at the composition
Speaker 1: of growth, it was very isolated. Predominantly the consumer helped
Speaker 1: stabilize the economy in the second quarter going into the
Speaker 1: second half. However, if we don't see a pickup in housing,
Speaker 1: business investment, manufacturing, it's going to be very difficult to
Speaker 1: even maintain this reduced two percent growth level. And if
Speaker 1: we continue to see this slow slide or the slow
Speaker 1: deterioration of growth, we could easily easily be in recessionary territory.
Speaker 1: By lindsay, do you think the birth for the slowdown
Speaker 1: next year comes from abroad or within the United States?
Speaker 1: What do you think this is coming from. I think both.
Speaker 1: I think it's very difficult to pinpoint point the slowdown
Speaker 1: as a result of international headwinds which are acting as
Speaker 1: contagion to the domestic economy and domestic weakness. I think
Speaker 1: we are seeing both variables come into play here. Many
Speaker 1: people think the easing cycle that has commenced worldwide will
Speaker 1: offset some of these difficulties. I think a question that
Speaker 1: Chairman Pan will face again tomorrow, perhaps from our colleague
Speaker 1: Michael McKee, who has asked this question before, why will
Speaker 1: an interest rate cut help? Do we have an answer,
Speaker 1: a really good answer to that as to why a
Speaker 1: rate cut from the Federal Reserve actually helps given the
Speaker 1: conditions we have at the moment. Well, that's one of
Speaker 1: the biggest questions, because right now you're talking about traditionally
Speaker 1: providing easier money policy or additional accommodation to the credit markets.
Speaker 1: Rates are already historically very low. So on the one hand,
Speaker 1: the FETE is saying the economy is in a good place. Well,
Speaker 1: if the economy is in such a good place, why
Speaker 1: do we need even more accommodative policy than we already have?
Speaker 1: And to your point, will the Fed be able to
Speaker 1: stabilize the economy. They have very little wiggle room to
Speaker 1: vide additional stimulus if you think back to oh seven,
Speaker 1: If you think back to oh one, the Fed cut
Speaker 1: rates around four hundred, five hundred basis points. This time around,
Speaker 1: we only have to fifty And in fact, looking at
Speaker 1: the partial inversion of the yield curve, if we give
Speaker 1: back fifty basis points just to write the curve, that
Speaker 1: leaves the Fed with only two hundred basis points to
Speaker 1: provide organic stimulus. So if in fact, the economy does
Speaker 1: begin to significantly lose momentum towards those recessionary conditions or
Speaker 1: non accelerating period of expansion, the Fed is going to
Speaker 1: have a very difficult time relying on rate reductions alone
Speaker 1: to bully the economy back into positive territory. So, Lindsay,
Speaker 1: you mentioned that the obviously the consumer has been very
Speaker 1: strong supporting this, uh the late stages of this economic cycle.
Speaker 1: What do you expect to see in the jobs report
Speaker 1: on Friday, Well, first off, I think the consumer is
Speaker 1: stronger than they were in the first quarter, but I
Speaker 1: wouldn't say they're outright strong. There's still a lot of
Speaker 1: uneven activity that we've been seeing in the consumer sector.
Speaker 1: But as it translates into the the upcoming employment report,
Speaker 1: we saw very strong June, we saw a very week May.
Speaker 1: I think July it comes right down and splits the
Speaker 1: difference around a hundred and fifty thousand. So certainly we're
Speaker 1: still seeing Americans put back to work on a month
Speaker 1: and month basis, but at a noticeably reduced level, certainly
Speaker 1: compared to the more robust levels we saw in years pass. Lindsay,
Speaker 1: no real signs of stress. Looking at initial jobless claims.
Speaker 1: Though some people have come on this program and pointed
Speaker 1: out what is happening with the ADP report, the smallest
Speaker 1: sized companies actually shedding jobs. How are you framing that
Speaker 1: for clients at the moment? What are you telling them? Well,
Speaker 1: when we talk to businesses big and small, many are
Speaker 1: complaining about the already heightened level of labor costs and
Speaker 1: the expectation that labor costs are going to continue to rise.
Speaker 1: So in fact, when we look at the breakdown of
Speaker 1: business investment, businesses remain very hesitant to invest in further
Speaker 1: new employees as we've seen very tepid hiring. As we
Speaker 1: just discussed, the one area that where businesses are willing
Speaker 1: to invest is technology, So in fact, they're willing to
Speaker 1: eat that upfront cost, but also potent to replace that
Speaker 1: rapidly rising labor cost. So on the one hand, yes,
Speaker 1: we could be driving higher productivity and keeping costs of
Speaker 1: production lower, but that will in fact replace many of
Speaker 1: these payroll numbers that we're expecting to see. So lindsay,
Speaker 1: are you surprised that given that we are at or
Speaker 1: near full employment? And I'm not sure how we want
Speaker 1: to define that, but we haven't seen more wage inflation.
Speaker 1: I'm not surprised because when we're looking at the civilian
Speaker 1: calculation of three point seven percent, that sounds pretty impressive. Certainly,
Speaker 1: that's a vast improvement from ten percent in the aftermath
Speaker 1: of the Great Recession. But three point seven percent doesn't
Speaker 1: tell the whole story. It doesn't include the millions of
Speaker 1: Americans that are sitting on the sideline and have been
Speaker 1: sitting on the sideline for years, not actively participating in
Speaker 1: the labor force. When we add them back in, that
Speaker 1: unemployment rate doubles, which more closely coincides with the lack
Speaker 1: of wage pressure that we have seen on the aggregate.
Speaker 1: To catch up with you ahead of a really important
Speaker 1: fedmates and coming up tomorrow, Lindsay p X of that
Speaker 1: STATEFLE chief economist Jordan Rochester, otherwise known as Mr Brooke,
Speaker 1: said he joins us now the moreg ten f A strategist. Jordan,
Speaker 1: Good morning to here, Good morning, John Hayden. I'm very well,
Speaker 1: Just tell me what you're telling clients at the moment
Speaker 1: about this relentless move lower in sterling. It really has
Speaker 1: been relentless, and I guess for someone who follows the
Speaker 1: ins and outs of the Boris Johnson leadership campaign. I mean,
Speaker 1: none of the actual politics so far has been surprising.
Speaker 1: We've seen a Brexit here champion who led the Brexit campaign,
Speaker 1: who has pushed for a more tougher stance on the
Speaker 1: EU when it comes to the withdrawal agreement. He has
Speaker 1: consistently said, get rid of the Irish max stop and
Speaker 1: we won't negotiate until the EU admits to that. And
Speaker 1: now he's Prime Minister and guess what he's saying the
Speaker 1: exact thing. But I guess the market was just a
Speaker 1: bit asleep at the wheel. Um. I guess folks were
Speaker 1: looking for him to be less of a campaigner and
Speaker 1: more of a Prime minister when he came in, and
Speaker 1: to maybe soften his tone whatever it is that draw things.
Speaker 1: It was perhaps the headline from US now Michael Gove,
Speaker 1: who is essentially the guy who was in charge of
Speaker 1: the no deal preparations, and he has said he said
Speaker 1: on the weekend the working assumption of the government is
Speaker 1: a no deal Brexit. Now he would say that he
Speaker 1: his his role is to plan for a no deal
Speaker 1: in the event of that, and that's what kind of
Speaker 1: change things for the market. Where we suddenly stopped treating
Speaker 1: it like a tail risk and more of a base case.
Speaker 1: And the pound it's fallen the lot we're talking two
Speaker 1: to three over the past month. But if you told
Speaker 1: me with a hundred certainty, Jordan's there's gonna be a
Speaker 1: hard brexit at the end of October, whereas the pound
Speaker 1: trade you're talking one fifteen to one eighteen against the dollar,
Speaker 1: talking cents to against the euro. So Jordan, what could
Speaker 1: turn around this doomsday scenario that we're seeing just here
Speaker 1: in the Sterling. It's the question I asked myself with
Speaker 1: on those calls of clients today and yesterday. There's a
Speaker 1: few things that could turn things around. The problem is
Speaker 1: it's very unpredictable because politics is a slippery animal to
Speaker 1: deal with um and also I struggle to find a
Speaker 1: date in the diary until we get to September before
Speaker 1: those positives could happen. So what are they? So the
Speaker 1: main thing that keeps everybody, allows everyone to sleep at night,
Speaker 1: I guess is Parliament does have a majority against a
Speaker 1: no deal brexit. The problem I have is Parliament can't
Speaker 1: do much right now because they're on their summer holidays
Speaker 1: in recess and they do not come back until the
Speaker 1: third of September, and when they do come back, it's
Speaker 1: more likely we're going to be dealing with negatives rather
Speaker 1: than positives. So Parliament that could perhaps stop no all,
Speaker 1: but it's hard in the short term to provide a
Speaker 1: positive positive go on just quickly the EU offer us something.
Speaker 1: So if the EU gives US and Olive Branch to
Speaker 1: work with, maybe talking about reopening the mandate for Michelle
Speaker 1: Barnier and discussing the Irish border, that could be a
Speaker 1: headline that moves Sterling higher. Jordan great to catch up
Speaker 1: with you, Jordan Rochester and Mora GTNIC strategists, otherwise known
Speaker 1: in the City of London as Mr Brexit trade talks
Speaker 1: they begin or resume, however you want to frame it
Speaker 1: over In Shankai today, between the United States and China,
Speaker 1: the President out on Twitter today saying that the Chinese
Speaker 1: have not restarted buying agricultural commodities in the quantities that
Speaker 1: they were promising the United States. The Huawei chairman out
Speaker 1: today saying that the supply of critical components from the
Speaker 1: United States has not resumed either, despite the President's proclamation
Speaker 1: in June that the company would be able to buy
Speaker 1: some American technology once again. So what does it mean
Speaker 1: for trade talks and what are the chances of a
Speaker 1: breakthrough this week? Jennifer Hillman joining US now CFR Senior
Speaker 1: Fellow for Trade and International Political Economy. So, Jennifer, help
Speaker 1: us understand just how hard it will be to have
Speaker 1: a breakthrough this week. I think it's going to be
Speaker 1: extremely hard to see how you get a deal this week.
Speaker 1: Partly that's because there have been a lot of things
Speaker 1: added into these discussions that weren't there before. As you mentioned,
Speaker 1: the Huawei kind of tech war um is making it
Speaker 1: much harder to get a deal. And added to all
Speaker 1: of that is China blaming the United States for inflaming
Speaker 1: the tensions and riling up the protesters in Hong Kong.
Speaker 1: So the atmosphere for getting a deal right now is
Speaker 1: really tough. So, Jennifer, you're a former commissioner at the
Speaker 1: United States International Trade Commission. You've got some experience with
Speaker 1: this type of thing. Is it your sense that the
Speaker 1: Trump administration's policy of pursuing a unilateral tariff based appro
Speaker 1: two negotiations is the way to go with the Chinese
Speaker 1: at this point? No, I don't think it is um
Speaker 1: and that's because what we really need, I mean, to
Speaker 1: make it a good deal with China, you need to
Speaker 1: deal with a lot of structural issues. The major problem
Speaker 1: that we really have is China's use of subsidies and
Speaker 1: the huge number of state owned enterprises where the and
Speaker 1: the party and the state are controlling it are directing
Speaker 1: the resources. Those are very hard structural issues to get at.
Speaker 1: China won't change those just because of pressure from the
Speaker 1: United States. If we're going to get a serious structural deal,
Speaker 1: we're going to need our allies to be there with us.
Speaker 1: And the trouble for us is that our allies share
Speaker 1: a lot of our concerns and a lot of our
Speaker 1: worries about China, but do not share the idea that
Speaker 1: we should go at all of this unilaterally or use
Speaker 1: illegal tariffs to do it. So given that backdrop, what
Speaker 1: is a realistic outcome for trade negotiations between the US
Speaker 1: and China? Is it this can be some type of
Speaker 1: headline deal or perhaps even nothing at all. Well, I
Speaker 1: think there there is a realistic prospect. China has already
Speaker 1: agreed to quite a lot of things in the course
Speaker 1: of these negotiations, and there is already a lot of
Speaker 1: text agreements worked out. So I do think you could
Speaker 1: see something happening where China would agree to get rid
Speaker 1: of their current limits on how much foreign investment can
Speaker 1: go into certain sectors. Right now, many sectors you can
Speaker 1: only have forty nine percent foreign ownership, which means, again
Speaker 1: China remains in control. Those limits can be clearly agreed to.
Speaker 1: China will agree, I think, to increase the level of
Speaker 1: its intellectual property protection. China, I think, will agree to
Speaker 1: restraints on the forced technology transfers. So there is a
Speaker 1: lot that is already on the table and is achievable.
Speaker 1: The problem is going to be the rest of it,
Speaker 1: the hard things, the structural things about how much Communist
Speaker 1: party control there is, the subsidies, et cetera. I do
Speaker 1: not see how you're going to get an agreement on that. Uh.
Speaker 1: The other of thing where you may see is again
Speaker 1: commitments by China to buy more American stuff, whether that's
Speaker 1: agricultural products or whether that's other manufactured goods. I can
Speaker 1: see that agreement, and the question will always come down
Speaker 1: to is this an enforceable agreement? Jennifer's we get closer
Speaker 1: to does that change things? Just in the President is
Speaker 1: currently already saying, um, maybe China would be better off
Speaker 1: waiting until after the election to get an agreement. Uh.
Speaker 1: He's he's obviously arguing that UM, if a Democrat were
Speaker 1: to be elected, that China could get an easy um
Speaker 1: and quick deal that would be less tough. I don't
Speaker 1: agree with that, but it's clear that the President is
Speaker 1: already seeing this playing into the presidential politics. But it
Speaker 1: cuts both ways. Already we are seeing that the US
Speaker 1: tariffs are first of all, not bringing jobs back to
Speaker 1: the United States, and that was one of the clear
Speaker 1: promises that the President made that this whole trade war
Speaker 1: with China was going to be bringing jobs back to
Speaker 1: the U S. That's not where the jobs are going.
Speaker 1: They're going to Vietnam, they're going to Mexico, they're going
Speaker 1: to Cambodia, they're going to Thailand. But they're not coming
Speaker 1: back to the United States. And the second thing that
Speaker 1: you're clearly seeing is that the trade uncertainty that all
Speaker 1: of this trade war with China is doing is dragging
Speaker 1: down the US economy, and you're seeing that very clearly
Speaker 1: in the lower growth um in the second quarter of
Speaker 1: nineteen and in the lack of private investment in the
Speaker 1: United States is very much key to the fact that
Speaker 1: everybody doesn't know where this whole trade war is headed.
Speaker 1: The longer it goes, the more it continues, I think,
Speaker 1: the more of a drag this trade war is going
Speaker 1: to be on the US economy. So Jennifer, just give
Speaker 1: us a sense from your experience what you think China
Speaker 1: really wants here. What do you think would be an
Speaker 1: acceptable deal for China, knowing that some hard concessions are
Speaker 1: gonna have to be made on both sides. What China
Speaker 1: needs to see a deal that is a win win
Speaker 1: for sides. In other words, I don't think you can
Speaker 1: see China making major concessions that are just perceived as
Speaker 1: a unilateral concession to the United States because of this.
Speaker 1: Certainly there are many of the reformers in China that
Speaker 1: understand the China needs to reform, that the increase in
Speaker 1: the amount of state owned enterprises that are not doing
Speaker 1: well financially, that the increased demand in China has so
Speaker 1: China needs to see a deal that works in China's
Speaker 1: interest as well as well, and they need to see
Speaker 1: that this agreement is one that is pushing China to
Speaker 1: do some things that would be better for the Chinese economy.
Speaker 1: It's not clear yet where that deal lies, where China
Speaker 1: can say that it's also done some things that either
Speaker 1: it was going to do anyway or that are clearly
Speaker 1: in China's interest, and that's I think where a lot
Speaker 1: of the focus of the talks is going to have
Speaker 1: to be going forward. And Jennifer, how much clarity at
Speaker 1: the moment do you have on how much pain the
Speaker 1: Chinese economy and the Chinese government is going through at
Speaker 1: the moment. It's difficult sometimes from the outside looking in,
Speaker 1: some some of the data points look weaker. But what's
Speaker 1: your take on that? Well, again, part of it is, yes,
Speaker 1: China's growth rate has come down, but you have to
Speaker 1: remember it's come down from very high levels. I mean,
Speaker 1: the Chinese economy has been growing eight nine So the
Speaker 1: fact that it's come down to a growth rate in
Speaker 1: the order of six percent, yes, is a significant slowing
Speaker 1: of the growth rate in the Chinese economy, but it
Speaker 1: is still growing at a very substantial rate. And again
Speaker 1: we have to remember that the Chinese economy, when you
Speaker 1: think of it from a g d P on a
Speaker 1: purchasing power parity basis, is larger than our economy twenty
Speaker 1: three trillion dollar economy UM on a purchasing power basis,
Speaker 1: again growing at even a six percent rate a year,
Speaker 1: is still you know, again an extraordinarily large and dynamic
Speaker 1: economy in China. The reason our standard fruits because many
Speaker 1: people listening to this program mark participants investors are like
Speaker 1: economists trying to work out whether China is gradually going
Speaker 1: to move into full stimulus mode. We've seen them reluctant
Speaker 1: so far or over the last year has been very
Speaker 1: gradual and very incremental. How do you see that panic
Speaker 1: gout in the next year or so. It's harder to
Speaker 1: read it now. When you add in, if you will,
Speaker 1: the tech war on top of the trade war UM
Speaker 1: when it was just focused on goods and services, I
Speaker 1: think there was a there was a clear strategy, I
Speaker 1: think for China. But when you add in the sanctions
Speaker 1: on Huawei and you know the previous ones on Zte
Speaker 1: and and the tech war issues, I think it makes
Speaker 1: it much harder to see exactly where this is going
Speaker 1: to play out. Uh, If you listen to what is
Speaker 1: being said in China, I think China is prepared to
Speaker 1: lose if you will, or to give up a fair
Speaker 1: amount in the light manufacturing sector, in other words, in
Speaker 1: a number of the products where the tariffs are. Right now,
Speaker 1: you are starting to see companies move out of China
Speaker 1: and into Vietnam and other places in Asia and into Mexico,
Speaker 1: and I think China concedes that that may have to go.
Speaker 1: Where China now wants to win is on the tech
Speaker 1: war UM, and they want to create an in hire,
Speaker 1: you know, information and communication system that is geared around
Speaker 1: their technology, their wahwei sort of strategy UM, and to
Speaker 1: pull as many countries into their network and their communications technology,
Speaker 1: their artificial intelligence, et cetera. So I think China is
Speaker 1: putting a lot of it's it's you know, ammunition if
Speaker 1: you will into winning the tech war uh, if you will, UM.
Speaker 1: And that is a different set of players and a
Speaker 1: different set of investments that China would need to make.
Speaker 1: Jennifer great a cat show with you to get your
Speaker 1: insight and a little bit more clarity on trade talks
Speaker 1: as they begin once more over in Shanghai today between
Speaker 1: the Chinese and the United States. Jennifer Hillman that CF
Speaker 1: A Senior Fellow and Trade and International Political economy over
Speaker 1: at CFR, the former commissioner at the United States International
Speaker 1: Trade Commission, I'm looking at beyond Meat. In the pre market,
Speaker 1: trading stocks down about fifteen, about eight dollars a share,
Speaker 1: but remember the I p O was at twenty dollars
Speaker 1: a share, so still well in the money. The company
Speaker 1: reported earnings last night. They also announced that they are
Speaker 1: going to be selling some stock, mostly secondary shares. So
Speaker 1: let's get the latest. We welcome our good friend, Jennifer Bartashes.
Speaker 1: She's a senior analyst for Bloomberg Intelligence covering all things
Speaker 1: food retails. She joins us on the phone from Princeton,
Speaker 1: New Jersey. Jen, thanks so much for joining us. Let's
Speaker 1: start first with the earnings. Looks like they had some
Speaker 1: pretty good numbers and guidance. Yeah, good morning, Paul. Um. Yes, Actually,
Speaker 1: the earnings report itself there was all good news UM.
Speaker 1: The revenue was higher than consensus expected. They actually raised
Speaker 1: their guidance and forecast for the rest of the year
Speaker 1: UM pretty substantially UM. And in addition, with regards to
Speaker 1: adjusted EVADA, they also raised their guidance UM and that
Speaker 1: they expected to turn positive this year as opposed to
Speaker 1: just breaking even. So all things considered, it was really
Speaker 1: a very very solid quarter for the company. But it
Speaker 1: was really the announcement about the additional share issuance that
Speaker 1: has been pulling the stock down, right, So this is
Speaker 1: a surprise that share issuance for certainly not the least
Speaker 1: reason that they're still subject to the lock up here,
Speaker 1: So how is this all taking place? How are they
Speaker 1: getting approval to do this? Yeah? So so originally there
Speaker 1: was a six month lock up period from when the
Speaker 1: stock I pod in May, but the underwriters UM have
Speaker 1: made an exception UM and that's really all there is
Speaker 1: to it, and that they're allowing some of these early investors,
Speaker 1: which include obvious ventures Kleiner Perkins and then even uh
Speaker 1: the CEO Ethan Brown and the CFO Mark Nelson to
Speaker 1: UM to sell some of their shares UM. And I
Speaker 1: think the bigger part of this is that it's really
Speaker 1: the bulk of this additional issuance is these insiders and
Speaker 1: only a very small amount and fifty shares is coming
Speaker 1: from the company will generate revenue that can be plugged
Speaker 1: back into their company for growth purposes. Yeah. I've been
Speaker 1: following stocks for a long time and I really can't
Speaker 1: recall too many instances, if any were you had an
Speaker 1: early you know, the waiver of the early lock up.
Speaker 1: I'm sure sure it happens, a waiver of the early
Speaker 1: lock up and then having you know, so much of
Speaker 1: that inside or selling. What was their pushback on the
Speaker 1: conference call with Analyston investors. Yeah, it's actually very interesting
Speaker 1: because it is very rare UM and and basically the
Speaker 1: company shot down any opportunity for investors to ask about
Speaker 1: it because they said they would not take any calls
Speaker 1: or field any questions regarding the the share issue ince
Speaker 1: citing regulatory um concerns UM. So there's really not any
Speaker 1: commentary from the company themselves about why they decided to
Speaker 1: do this as uns at this time. Well, I guess
Speaker 1: the price action today will be uh will show how
Speaker 1: investors feel about that. Going back to the to the
Speaker 1: operations here, I mean, what is really are you getting
Speaker 1: mentioned that they had better than expected numbers, they raised
Speaker 1: their guidance. What's driving the growth for this company? What
Speaker 1: do you expect to be the key growth drivers? Well, really,
Speaker 1: for beyond me, part of the reason they can continue
Speaker 1: to keep growing their raising their guidance is that they
Speaker 1: keep signing on new partnerships, especially in the restaurant space.
Speaker 1: So the guidance that they that they issued yesterday doesn't
Speaker 1: even include newest partnerships that they've announced, such as with
Speaker 1: Dunkin Donuts UM. And so you know, it's it's sort
Speaker 1: of an ever moving target as they as they bring
Speaker 1: these partners on and these are these are companies that
Speaker 1: will help raise the exposure and the visibility of the
Speaker 1: beyond meat products with a greater consumer audience. UM. It
Speaker 1: leads to it leads to trial, it leads to additional
Speaker 1: sales UM, and it just kind of keeps that cycle
Speaker 1: burning forward. If I'm an investor, do I care, um
Speaker 1: whether they grow their sales through you know, selling beyond
Speaker 1: meat in grocery stores or in restaurants as a matter
Speaker 1: to me, Well, in the short term, probably not, But
Speaker 1: in the long term, I think it does become a consideration.
Speaker 1: Generally speaking, sales to restaurants are lower margin sales than
Speaker 1: those two retail outlets. So that is one thing to
Speaker 1: consider because right now the revenue is almost evenly split
Speaker 1: between the between restaurants and between retail for beyond meat UM.
Speaker 1: In addition, going further UM, right now we're in an
Speaker 1: economic cycle where people are eating out and they are
Speaker 1: frequenting restaurants and they are spending um. But should that
Speaker 1: pull back, you really need to have a very solid
Speaker 1: retail base where people who are preparing food at home
Speaker 1: are ready to buy that product and bring it to
Speaker 1: their house and prepare it themselves. And so a long
Speaker 1: term um A focus that you know is excuse a
Speaker 1: little bit more heavily to retail to to to create
Speaker 1: the sustainability of consumer reliance on the product may be
Speaker 1: a very good strategy. So one of the things that
Speaker 1: I hear a lot from Annalson investors when you think
Speaker 1: about this story is competition. It seems like, you know,
Speaker 1: beyond me to such a small company. Yes, yes, it
Speaker 1: is growing very quickly and they have a great product
Speaker 1: in the marketplace, but it just seems like, you know,
Speaker 1: some of the big food companies at any time could
Speaker 1: just kind of flood the market with product as well,
Speaker 1: and they of course with big marketing budgets and so on.
Speaker 1: What is management saying about competition, Well, right now, management
Speaker 1: is saying that, you know, although they view competition and
Speaker 1: that they welcome competition, they don't seem overly concerned about
Speaker 1: competition UM, and in part in honesty, they kind of
Speaker 1: have to say that because they are, you know, enjoying
Speaker 1: a great growth period with their company. UM. But when
Speaker 1: you look at companies like Tyson is a great example.
Speaker 1: Tyson has started rolling out their own product this summer
Speaker 1: UM and they've got products that are completely plant based,
Speaker 1: and they also have some of that are half and half,
Speaker 1: so half beef and half planned UM. But Tyson has
Speaker 1: a huge relationship, for example, with Walmart UM. They're both
Speaker 1: Arkansas based companies. UM. Walmart is a huge customer of
Speaker 1: Tyson UM. And so when it comes to distribution and
Speaker 1: getting products on the shelves, you can't can't. You can't
Speaker 1: count out these really large packet food companies because of
Speaker 1: the scale that they have and the networks that they
Speaker 1: have with their supply chain to be able to get
Speaker 1: products to consumers very quickly. Interesting, just amazing. So with
Speaker 1: the story again, just the stock is just done extraordinary well.
Speaker 1: Jen Bartashes, thanks so much for joining us. Jen covers
Speaker 1: all things retail on the food side for Bloomberg Intelligence,
Speaker 1: including beyond meat, is it food? Is it fake food?
Speaker 1: Who knows? But it's certainly a big new force in
Speaker 1: the our big A trend in the food business. Thanks
Speaker 1: for listening to the Bloomberg Surveillance Podcast. Subscribe and listen
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform
Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio.