WEBVTT - Political Risk Not a Major Threat to Globalization, Datta Says 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.119 --> 0:00:11.200 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg P L Podcast on iTunes, 0:00:20.840 --> 0:00:29.960 SoundCloud and at Bloomberg dot com. Political risk in Europe 0:00:30.160 --> 0:00:33.559 and how fund managers account for this, I want to 0:00:33.560 --> 0:00:36.280 bring in tap On Data. He is global head of 0:00:36.320 --> 0:00:40.440 asked Allocation for and Hewitt in London and tap On 0:00:40.680 --> 0:00:43.880 I want to just sort of get a sense zooming out, 0:00:44.159 --> 0:00:46.640 how do you model for the political risks that we're 0:00:46.640 --> 0:00:51.280 experiencing or seeing, whether it's France's election or whether it's 0:00:51.320 --> 0:00:56.080 potential attacks that disrupt a feeling of colm among investors 0:00:56.080 --> 0:01:00.560 and residents alike. Yeah, well, to just to the chase. 0:01:00.600 --> 0:01:02.440 I don't think it can be. I don't think it's 0:01:02.720 --> 0:01:05.399 model able. But what you can do is do a 0:01:05.520 --> 0:01:11.240 range of scenarios which which capture the uncertainties that are involved. 0:01:11.360 --> 0:01:15.160 So you work on very rough rules of them in 0:01:15.240 --> 0:01:18.920 terms of probabilities of this or that's happening. Murray and 0:01:18.959 --> 0:01:22.480 the pen winning in France or losing, and you look 0:01:22.520 --> 0:01:26.400 at potential market outcomes from that stant point, it's not 0:01:26.640 --> 0:01:32.200 the best signs. What particular models are you creating right now? 0:01:32.240 --> 0:01:35.720 What scenarios are you forecasting that are maybe out of 0:01:35.760 --> 0:01:40.199 the mainstream consciousness, such as Alla pen Win. Yeah, Well, 0:01:40.400 --> 0:01:43.120 one of the scenarios we're working with is that the 0:01:43.640 --> 0:01:50.000 spopulous bandwagon essentially gathered steam, and we have a number 0:01:50.040 --> 0:01:56.559 of such political upset which essentially bring in a strong 0:01:57.000 --> 0:02:00.400 move towards what we call the integration in your that 0:02:00.560 --> 0:02:04.200 is a rollback of kind of European integration and more widely, 0:02:04.480 --> 0:02:07.840 you know, thinking about US developments as well. We work 0:02:08.000 --> 0:02:11.520 we're working on a scenario that rolls back globalization, you know, 0:02:11.600 --> 0:02:13.920 takes us back to a couple of decades, not necessarily 0:02:13.960 --> 0:02:16.519 back to the thirties, but certainly a rolled back, much 0:02:16.520 --> 0:02:20.239 more decisive rollback in globalization over and beyond what we've 0:02:20.240 --> 0:02:22.239 already seen over the last few years. I mean, there's 0:02:22.280 --> 0:02:25.000 already been some of that we shouldn't forget. But the 0:02:25.040 --> 0:02:28.639 scenario we're working with takes us back some way further. 0:02:29.240 --> 0:02:31.200 And that's what we're really talking about, and that is 0:02:31.240 --> 0:02:34.880 probably probably not a very good outcome for financial markets 0:02:34.919 --> 0:02:39.080 because generally speaking, asset prices have gained on the back 0:02:39.120 --> 0:02:43.680 of greater global integration, more trade, more foreign investment, more 0:02:43.720 --> 0:02:46.359 capital flows, all of that has generally been market positive, 0:02:46.800 --> 0:02:51.560 and a decisive set back to that potentially brings brings 0:02:51.600 --> 0:02:54.440 some harm to market conditions. I don't want to take 0:02:54.440 --> 0:02:56.800 you back decades happen. I want you to just go 0:02:56.919 --> 0:03:01.079 back to June of and the Brexit vote. Prior to that, 0:03:01.600 --> 0:03:04.640 what was your view as to what would happen in 0:03:04.680 --> 0:03:08.400 the United Kingdom. Well, we were working on the idea 0:03:08.480 --> 0:03:10.960 that it would be a close from things, but we 0:03:11.040 --> 0:03:14.680 hadn't in common with the consensus majority of view. We 0:03:14.760 --> 0:03:18.240 hadn't worked on the idea that that Brexit was actually 0:03:18.240 --> 0:03:21.160 going to happen. Okay, so you missed that one. We 0:03:21.400 --> 0:03:23.240 we definitely missed that all right. Now, if you what 0:03:23.280 --> 0:03:25.640 did you learn from that one that can be applied 0:03:26.280 --> 0:03:29.880 currently to people's actual portfolios rather than the big thing 0:03:30.000 --> 0:03:33.519 thirty foot view. Great, I know there's a lot of uncertainty. 0:03:33.639 --> 0:03:35.880 No one knows has a crystal ball. We got all that, 0:03:36.080 --> 0:03:39.240 but as a professional, you've got to make decisions. I 0:03:39.280 --> 0:03:41.880 think it's a matter of behavioral biases because we kind 0:03:41.880 --> 0:03:45.280 of take certain things to grant it and you you 0:03:45.800 --> 0:03:48.200 one of the things that's that's that that has done. 0:03:48.600 --> 0:03:52.880 It's really questioned the question the role of the hidden 0:03:52.880 --> 0:03:55.080 biases that you have in your pots. You think, well, 0:03:55.120 --> 0:03:58.800 this is this, this can't possibly be happening because you know, 0:03:59.120 --> 0:04:02.200 Brexit is going to make a lot of folks worse up, 0:04:02.280 --> 0:04:05.080 so it can't possibly be voting for it. But actually, 0:04:05.120 --> 0:04:07.960 as it happens, um they did vote for it despite 0:04:07.960 --> 0:04:09.920 the fact that that they were going to be worse 0:04:10.000 --> 0:04:14.560 off from the result. So right now happen a on Hewitt, 0:04:14.560 --> 0:04:17.240 what is your base case scenario and how are you 0:04:17.279 --> 0:04:20.760 advising people to allocate their money? Look, our base case 0:04:20.800 --> 0:04:25.039 scenarios that the world muddels through, that this populous bandwagon 0:04:25.200 --> 0:04:28.920 does not um as it were strengthened, but that it's 0:04:29.000 --> 0:04:31.159 they're out there and it is a risk that we 0:04:31.240 --> 0:04:34.960 face and periodically there will be setbacks. But we're not 0:04:35.040 --> 0:04:38.880 working on the view that the globalization is seriously threatened. 0:04:38.880 --> 0:04:42.200 I think as I I mean my earlier as aurom, 0:04:42.279 --> 0:04:45.960 my earlier mass. We think that globalizing, the basic globalization 0:04:45.960 --> 0:04:48.440 has clearly slowed, But we're not working on a big 0:04:48.440 --> 0:04:53.240 reversal U and on the back of that, UM, it's 0:04:53.360 --> 0:04:56.440 difficult at this point to argue that there are major, 0:04:56.720 --> 0:05:00.640 major risk to markets from that phenomenon, from the from 0:05:00.680 --> 0:05:03.680 the phenomenon of more political upset. Does that mean full 0:05:03.720 --> 0:05:09.400 and nonstocks and and and sort of sort of normal. Yeah, 0:05:09.480 --> 0:05:11.880 that tells us that the political risk is a factor, 0:05:12.360 --> 0:05:16.839 but it's not necessarily going to be a UM something 0:05:16.920 --> 0:05:19.520 that that really knocks the setting out of stocks, and 0:05:20.320 --> 0:05:22.719 stocks could be vulnerable for other reasons. You know, rising 0:05:22.760 --> 0:05:25.919 interest rates, UM. We can think of a number of 0:05:25.920 --> 0:05:28.599 other factors that could come into play. Well, they're always 0:05:28.640 --> 0:05:30.520 going to be a lot of factors, we know this, 0:05:30.640 --> 0:05:33.520 but it just look, can we just focus for just 0:05:33.560 --> 0:05:36.080 a second. What is the market that you see in 0:05:36.160 --> 0:05:40.680 Europe right now that is shunned by investors? The market 0:05:40.720 --> 0:05:45.000 that is shun by investors, Well, the markets that have 0:05:45.120 --> 0:05:49.240 been more recently shun by investors are European sovereign bombs, 0:05:49.400 --> 0:05:53.719 where essentially spreads with the safe haven play off Germany 0:05:53.760 --> 0:05:58.080 have risen because the market is concerned that Italy or 0:05:58.760 --> 0:06:03.040 or even France mike away and that the sell off 0:06:03.080 --> 0:06:06.599 has not been on a particularly large scale has to 0:06:06.640 --> 0:06:09.400 make them particularly attractive markets in terms of that play. 0:06:09.680 --> 0:06:11.800 But certainly those are markets that have been showing. Look, 0:06:11.960 --> 0:06:13.560 I think the issue is that I don't think that 0:06:13.640 --> 0:06:15.479 I think the markets working on a view that that 0:06:16.120 --> 0:06:19.760 this that European political upset are not a serious factor. 0:06:19.839 --> 0:06:21.560 So it depends which side of that debate you're on. 0:06:22.000 --> 0:06:25.200 We're on the on the side of that debate in 0:06:25.240 --> 0:06:28.840 such a way that we regard these political factors as 0:06:28.880 --> 0:06:31.800 being out there, but that they don't completely upset the 0:06:31.800 --> 0:06:35.840 apple tot. We're not working on what's going on. What's 0:06:36.120 --> 0:06:38.760 the number one most attractive asset class to you right now? 0:06:39.839 --> 0:06:43.320 The number one attractive asset classes in a broad market, 0:06:43.360 --> 0:06:47.200 tom text remains equity markets were in particular in in 0:06:47.200 --> 0:06:51.719 in England, in in the US, OH in a regional context, 0:06:51.800 --> 0:06:55.159 we we prefer the markets that that are that have 0:06:55.520 --> 0:06:59.839 more value, and there we were merging markets and merging 0:06:59.880 --> 0:07:03.520 my keets in Japan standouts as having long term value. 0:07:03.680 --> 0:07:06.640 Syncrisic value in terms of we we look at markets 0:07:07.000 --> 0:07:10.600 is strongest for those markets. Um, the US probably comes 0:07:10.640 --> 0:07:13.720 out at the bottom of the pile, simply because by 0:07:13.720 --> 0:07:18.520 by every valuation indicator that you use USS are simply expenses, 0:07:18.760 --> 0:07:21.480 which doesn't mean that it will roll over tomorrow, but 0:07:21.600 --> 0:07:24.160 it does mean that expect returns from the US market 0:07:24.200 --> 0:07:27.880 over the next few years are likely to disappoint. Whereas 0:07:27.920 --> 0:07:30.040 we look at em or, we look at Japan and 0:07:30.120 --> 0:07:33.120 to a degree in Europe, you know, taking into accounts 0:07:33.160 --> 0:07:35.560 local I'm certainly know a few other factors like Brexit 0:07:36.120 --> 0:07:39.080 into accounts, Europe doesn't look too bad either. The US 0:07:39.200 --> 0:07:42.320 comes off relatively poorly in this in this way of 0:07:42.360 --> 0:07:45.440 looking at markets. All right, thanks very much, it's happened. 0:07:45.520 --> 0:07:49.920 Data Global head of Asset Allocation a On Hewitt joining 0:07:50.040 --> 0:08:04.960 US from London him. You know, there's one big issue 0:08:05.040 --> 0:08:07.040 that a lot of people have been pointing to as 0:08:07.080 --> 0:08:12.400 evidence that consumer credit worthiness is deteriorating fairly rapidly. We 0:08:12.440 --> 0:08:17.640 have seen an increase in losses on UH subprime auto loans. 0:08:17.720 --> 0:08:21.480 We have seen an increase in lost provisions by some 0:08:21.600 --> 0:08:25.640 of the biggest consumer finance lenders. We're talking about Ally, 0:08:25.720 --> 0:08:28.720 We're talking about Santan Dair, We're talking about Capital One. 0:08:29.080 --> 0:08:31.440 A lot of these new a lot of these UH 0:08:32.120 --> 0:08:36.679 captive non captive finance arms have been definitely suffering, and 0:08:36.720 --> 0:08:39.240 we want to talk a little bit more about what 0:08:39.320 --> 0:08:44.080 this might mean for not only the banks and the 0:08:44.200 --> 0:08:46.840 lenders that are you know, extending credit to some of 0:08:46.880 --> 0:08:50.280 these UH companies, but also what this means for the 0:08:50.320 --> 0:08:54.040 broader economy and the auto industry. I want to bring 0:08:54.040 --> 0:08:58.040 in Ryan O'Connell. He's a senior analyst for financials covering 0:08:58.120 --> 0:09:01.640 the Allies of the world, the Capital Ones UH and UH. 0:09:01.880 --> 0:09:04.880 He is here with us. He's from Bloomberg Intelligence and 0:09:04.880 --> 0:09:06.800 he's with us in our Bloomberg eleven three oh studio 0:09:07.120 --> 0:09:10.160 in New York. Ryan, thank you so much for joining us. 0:09:10.200 --> 0:09:14.080 You know, I was struck by allies latest results where 0:09:14.120 --> 0:09:19.880 they increased their their expectation for loan losses. They also 0:09:20.040 --> 0:09:24.320 decrease their expectation for resale values of used cars. Can 0:09:24.360 --> 0:09:26.880 you tell us a little bit about the most notable 0:09:26.920 --> 0:09:30.479 aspects of this and how severe uh this could potentially 0:09:31.000 --> 0:09:33.440 crimp their earnings in this coming year. Oh great, Well, 0:09:33.559 --> 0:09:35.200 first of all, thanks for having me on the show, Lisa. 0:09:35.640 --> 0:09:38.320 Uh So with regard to Ally, and I'd say the 0:09:38.360 --> 0:09:41.880 read through is also for Capital one UH and other 0:09:41.920 --> 0:09:44.600 other owners like that. And i'd breaking into two parts, 0:09:45.200 --> 0:09:48.040 I think, starting back in about June, of last year, 0:09:48.520 --> 0:09:52.000 we started to see cracks in the market for subprime borrowers, 0:09:52.160 --> 0:09:54.319 and so that's what this is really all about. So 0:09:54.720 --> 0:09:57.240 no need to sound the alarm on prime borrowers. They're 0:09:57.280 --> 0:10:00.760 still fine, healthy economy, etcetera. The reason why Allies spooked 0:10:00.800 --> 0:10:03.760 people yesterday and they did is a couple of things. One, 0:10:03.800 --> 0:10:06.000 they keep jacking up their estimates of how much their 0:10:06.000 --> 0:10:08.319 credit losses are going to go up. And too, just 0:10:08.400 --> 0:10:11.840 as you mentioned, use car sales are plumbering much fast 0:10:11.840 --> 0:10:15.120 and people expected. Uh So people have been expecting about 0:10:15.160 --> 0:10:18.520 five percent, it's about seven heading in the wrong direction. 0:10:18.920 --> 0:10:21.560 So why is that important. A couple of things. One 0:10:21.760 --> 0:10:24.559 for people a big leasing portfolios, which by the way, 0:10:24.559 --> 0:10:27.760 is not allied. Obviously, if the prices of cars go 0:10:27.840 --> 0:10:30.200 down when it comes off lease and you want to 0:10:30.200 --> 0:10:34.960 resell the car, that can create some earnings hits. Uh, 0:10:35.000 --> 0:10:38.400 Well that would be more of the captives. Uh. Capital 0:10:38.400 --> 0:10:41.200 One actually has a fairly large leasing portfolio. I don't 0:10:41.240 --> 0:10:44.160 cover them. JP Morgan is also involved in leasing. Uh 0:10:44.200 --> 0:10:46.880 So those kind of companies could be looking at that. Uh. 0:10:46.920 --> 0:10:48.720 And then the other thing is that even if you 0:10:48.800 --> 0:10:51.680 don't have a big leasing portfolio, if you have to 0:10:51.920 --> 0:10:54.480 repossess a car, and every once in a while the 0:10:54.520 --> 0:10:57.360 allies of the world do. Then obviously it's the value 0:10:57.400 --> 0:11:00.720 of that falls that can increase your credit provisions. Has 0:11:00.760 --> 0:11:03.520 this all been can put into the context of the 0:11:03.559 --> 0:11:06.320 price either of the bonds or the stocks that in others, 0:11:06.320 --> 0:11:09.720 of the valuation that investors are seeking. Well, yeah, great question. 0:11:10.040 --> 0:11:13.040 So I covered things on the bond side. Uh uh, 0:11:13.160 --> 0:11:15.080 and there there has been a bit of a reaction. 0:11:15.480 --> 0:11:18.120 So if you look at say Capital One, you know, 0:11:18.200 --> 0:11:20.720 big large bank, all that kind of stuff, its bonds 0:11:20.720 --> 0:11:23.360 are trading let's say about twenty five bases points behind 0:11:23.480 --> 0:11:26.760 JP Morgan. They bounced around. Uh, you know, at the 0:11:26.760 --> 0:11:29.880 wides they were liking about seventy five. They've come in 0:11:29.920 --> 0:11:32.800 a bit. They've got squeaky clean on top of JP 0:11:32.960 --> 0:11:35.320 Morgan people who we thought about it, and and they've moved 0:11:35.320 --> 0:11:39.319 out allies below investment grade. So they trade about a 0:11:39.400 --> 0:11:44.199 hundred fifty oh behind JP Morgan. Uh. Those bounds of 0:11:44.280 --> 0:11:47.000 bounces around a lot. At the worst they're about two hundred. 0:11:47.040 --> 0:11:49.520 They squeaked into about US a hundred. Now we're back 0:11:49.559 --> 0:11:54.440 to hundred fifty. Can you put the increase in provisions 0:11:54.480 --> 0:11:57.280 for for loan losses into perspective. I mean, yes, they 0:11:57.280 --> 0:12:01.480 have increased, but how do they compare to historical periods, 0:12:01.600 --> 0:12:04.640 not you know, necessarily the best of credit times, like 0:12:04.640 --> 0:12:07.839 we've seen a great question. So I think, well, if 0:12:07.840 --> 0:12:11.560 we step back in two thousands fifteen Allies loan losses, 0:12:11.600 --> 0:12:14.400 we're running about fifty basis points a half a percentage 0:12:14.440 --> 0:12:17.000 point in the portfolo, so really pretty great. And then 0:12:17.120 --> 0:12:20.160 in June of last year, Allies started saying, well, you know, 0:12:20.440 --> 0:12:23.640 life is changing a little bit. And so they ended 0:12:23.679 --> 0:12:25.320 the year at a run rate of about let's call 0:12:25.360 --> 0:12:27.839 it a hundred basis points, so from about fifty to 0:12:27.880 --> 0:12:30.480 a hundred in one year. Uh. And then this year 0:12:30.520 --> 0:12:32.360 where they're saying, well, we thought it was gonna be 0:12:32.400 --> 0:12:34.640 one twenty, might actually be more like about one forty. 0:12:35.160 --> 0:12:37.160 So it is trying to ratch up a lot. What 0:12:37.320 --> 0:12:40.760 you say, one basis points, So it's like one point 0:12:40.760 --> 0:12:46.000 four percent of their overall loan books or what is that? 0:12:46.080 --> 0:12:49.480 What is that equal to? Is that? Sorry for the Lisa? 0:12:50.000 --> 0:12:52.439 So yeah, about one point four percent of their auto 0:12:52.520 --> 0:12:56.959 lease book auto loan book, which is really Ally's main business. 0:12:57.080 --> 0:12:59.560 They have some other businesses, but they're they're not really 0:12:59.559 --> 0:13:03.000 that important. Ryan, Is any of this connected with the 0:13:03.320 --> 0:13:07.800 very long duration loans that were available during the financial crisis? 0:13:08.440 --> 0:13:12.560 So I think what we're seeing here is that there 0:13:12.600 --> 0:13:15.800 has been more competition. They own a loan market, um 0:13:16.120 --> 0:13:18.960 and uh so they've been lengthening the terms of their loans. 0:13:19.520 --> 0:13:21.960 Uh So, for example, some cases they are going out 0:13:22.000 --> 0:13:24.679 to seven years. And bear in mind that a lot 0:13:24.720 --> 0:13:28.040 of these loans are on used cars. So an allies case, 0:13:28.080 --> 0:13:31.760 for example, about the loans are used cars. You start 0:13:31.760 --> 0:13:34.199 out with the car that's already been out for about 0:13:34.240 --> 0:13:37.320 three years, unless saying Ali does this and you tack 0:13:37.360 --> 0:13:40.280 on another seven years. That's a lot of lifespan for 0:13:40.320 --> 0:13:43.360 a car. And thanks very much for joining us my 0:13:43.400 --> 0:13:46.000 pleasure of giving us the detail. Ryan O'Connell is a 0:13:46.040 --> 0:13:50.520 senior analyst financials for Bloomberg Intelligence, telling us about the 0:13:50.520 --> 0:14:07.199 automobile credit market. Pim Fox. We were talking this morning 0:14:07.360 --> 0:14:11.199 about Beyond Meat and this is a plant based burger, 0:14:11.760 --> 0:14:13.520 and you had the great question. You look at me 0:14:13.559 --> 0:14:16.520 and you said, what is this? What is it meat? 0:14:16.520 --> 0:14:18.679 Out of Um? To answer that question, let's bring in 0:14:18.720 --> 0:14:21.480 the CEO of Beyond Meat, Ethan Brown. He comes to 0:14:21.560 --> 0:14:24.760 us from Los Angeles, Ethan, let's start with that. What 0:14:25.080 --> 0:14:27.920 is beyond meat? Well, first, thank you very much for 0:14:27.920 --> 0:14:30.080 having me on the show. I appreciate it. And um, 0:14:30.080 --> 0:14:32.720 it's a great question. So so what we're after, if 0:14:32.760 --> 0:14:36.920 beyond meat, is taking all the great things about animal 0:14:36.960 --> 0:14:39.600 protein or meat and building those directly from plants. And 0:14:39.600 --> 0:14:42.360 if so, if you think about what meat is, meat 0:14:42.400 --> 0:14:45.840 is essentially five things. It's amino acids, it's lipids, it's 0:14:46.000 --> 0:14:49.200 very small amount of carbodrates, it's minerals, and its water. 0:14:49.800 --> 0:14:51.920 None of those things are exclusive to the animal. They're 0:14:51.920 --> 0:14:54.600 all present throughout the plant kingdom. And so we're doing 0:14:54.720 --> 0:14:59.360 is essentially taking all of those resources from non animal sources, 0:14:59.680 --> 0:15:01.960 and then we're architect ing or building them in the 0:15:02.040 --> 0:15:05.720 same way that you would present animal protein. So we're 0:15:05.720 --> 0:15:09.320 basically bypassing the animal and delivering a piece of meat 0:15:09.400 --> 0:15:12.720 directly from plants. We're not suggesting it's a fake meat 0:15:12.880 --> 0:15:14.880 or something like that. It's simply a meat that's been 0:15:14.920 --> 0:15:17.480 built directly from plants. It has all the same parts, 0:15:17.560 --> 0:15:20.520 it presents in the same form, statiates in the same way. 0:15:20.560 --> 0:15:23.320 It provides the same interditional benefits well, eat and I'm 0:15:23.600 --> 0:15:28.800 maybe just like you could explain what plants are actually 0:15:29.000 --> 0:15:32.400 in this meat or this meat meat? What what's what 0:15:32.560 --> 0:15:35.640 is it made of? Sure? And so what's interesting about 0:15:35.640 --> 0:15:37.080 it is once you start to think of the plant 0:15:37.120 --> 0:15:39.360 kingdom as a source of direct protein, not as a 0:15:39.360 --> 0:15:43.160 source of feed for animals that then converted into protein. Uh, 0:15:43.360 --> 0:15:46.320 you can pick uh, and you can take amino acids 0:15:46.360 --> 0:15:50.280 or protein from a huge variety of plant sources. And 0:15:50.320 --> 0:15:52.440 so in this case we use P protein, but you 0:15:52.440 --> 0:15:56.080 could literally use hundreds, if not thousands, of different crops 0:15:56.200 --> 0:15:59.760 to pull the requisite set of amino acids that you 0:15:59.800 --> 0:16:01.560 need to create a piece of meat. All right, now 0:16:01.840 --> 0:16:06.000 you say you use P protein. Is this food engineering? 0:16:06.040 --> 0:16:08.800 Because isn't part of the whole reason to focus on 0:16:08.960 --> 0:16:13.680 vegetables and fruits is that it's natural state is what 0:16:13.920 --> 0:16:17.560 is important in terms of how it delivers the nutrients 0:16:17.600 --> 0:16:20.680 to your body. Sure, And so that's a really great question. 0:16:20.760 --> 0:16:22.400 And so the way I think about this is a 0:16:22.480 --> 0:16:26.160 tale of two processes. You can either take protein directly 0:16:26.200 --> 0:16:28.560 from a plant, and you can use what we do, 0:16:28.600 --> 0:16:31.400 which is heating, cooling, and pressure to essentially align it 0:16:31.440 --> 0:16:34.920 in the form of muscle or meat or you can 0:16:34.920 --> 0:16:36.960 take that same plant matter and run it to an 0:16:36.960 --> 0:16:38.840 animal and then that would be presented on the plate 0:16:38.880 --> 0:16:41.440 as a piece of meat. So we argue that's actually 0:16:41.480 --> 0:16:44.920 a more direct and less processed way of providing protein 0:16:44.960 --> 0:16:47.000 to the center of the plate. Now, it does take 0:16:47.040 --> 0:16:49.360 protein out of one form and put it another, but 0:16:49.480 --> 0:16:52.920 if you've had pasta, or if you've had any number 0:16:53.120 --> 0:16:56.120 of products like a snack bar or something like that, 0:16:56.200 --> 0:16:59.480 it's run through the same system. It's essentially applying heating, 0:16:59.640 --> 0:17:03.880 cool and pressure to align the proteins. They take on 0:17:04.040 --> 0:17:08.320 the same texture and presentation of of animal protein or meat. 0:17:08.640 --> 0:17:11.200 Even how much has your business expanded over the past 0:17:11.240 --> 0:17:13.760 few years, you know, it's been amazing. So when I 0:17:13.760 --> 0:17:16.919 started the business in two thousand nine, um, it was 0:17:17.440 --> 0:17:19.320 definitely a push, you know, it was something that we 0:17:19.359 --> 0:17:20.840 had to go out there and try to convince people 0:17:20.840 --> 0:17:23.720 of something has happened in the last i'd say even 0:17:23.760 --> 0:17:28.560 two to three years, whereby the American consumer is actively 0:17:28.640 --> 0:17:31.480 looking for the solution they wanted to work. And that's 0:17:31.520 --> 0:17:34.200 to our benefit because you know, we are not perfect yet, right, 0:17:34.200 --> 0:17:37.720 We still have miles to travel with respect to perfectly 0:17:37.760 --> 0:17:40.480 replicating a piece of animal protein or meat. But the 0:17:40.600 --> 0:17:43.160 consumer is hungry for the solution. They want to continue 0:17:43.200 --> 0:17:47.280 to enjoy uh, you know, burgers and hot dogs and steaks, 0:17:47.320 --> 0:17:50.320 et cetera. But they're beginning to understand that there may 0:17:50.359 --> 0:17:54.199 be a better way to produce uh those products. And 0:17:54.280 --> 0:17:57.960 so we see an amazing level of interesting what we're doing. 0:17:58.000 --> 0:18:01.160 And with every kind of senemy an improvement we make, 0:18:01.240 --> 0:18:03.879 we welcome in hundreds of thousands more people to the 0:18:03.880 --> 0:18:06.360 brand as a product get better and better, and so 0:18:06.480 --> 0:18:09.399 we're growing, you know, at a clip of you know, 0:18:09.480 --> 0:18:12.520 this year over last year. Um, we've had you know, 0:18:12.600 --> 0:18:15.679 consistently over the last year problems filling orders. So it's 0:18:15.720 --> 0:18:18.160 a wonderful position to be in and one that's very gratifying. 0:18:19.080 --> 0:18:23.480 Is there any evidence that suggests that the combination of 0:18:23.520 --> 0:18:27.160 amino acids, lipids, water, carbohydrates, and saw on the trace 0:18:27.440 --> 0:18:31.600 minerals that you're describing, is there any evidence that reconstituting 0:18:31.640 --> 0:18:34.920 them in this form of a processed food is any 0:18:35.040 --> 0:18:38.520 better for an individual, not the environment right now, but 0:18:38.560 --> 0:18:41.720 for the individual consuming the product and consuming the actual 0:18:41.800 --> 0:18:45.440 meat if that's what they choose. Sure, And and so 0:18:45.640 --> 0:18:49.239 the way I would look at that is, UM, what's missing, right, 0:18:49.240 --> 0:18:52.120 and so we can again, we know the blueprint of meat, 0:18:52.359 --> 0:18:54.960 we understand its composition, and we have access to those 0:18:55.000 --> 0:18:57.800 materials from the planet Kingdom. But what can we leave out? 0:18:58.080 --> 0:19:00.520 We can leave out cholesterol, for example, so products have 0:19:00.640 --> 0:19:03.960 no cholesterol, and I think there's a very well established 0:19:04.040 --> 0:19:08.560 medical literature around cholesterol and and uh. And so that's 0:19:08.560 --> 0:19:11.600 just one example. There are other examples of the ways 0:19:11.640 --> 0:19:13.960 which we feel we are are healthier than a piece 0:19:13.960 --> 0:19:17.200 of animal protein. But that's the most obvious ethan. One 0:19:17.200 --> 0:19:20.440 thing that I thought was notable is that Tyson, known 0:19:20.520 --> 0:19:25.440 for its chickens, have a five investment a minority stake 0:19:25.920 --> 0:19:29.840 in Beyond Meat. What was their reasoning when they when 0:19:29.840 --> 0:19:32.600 they made this investment? Why why do they want to 0:19:32.640 --> 0:19:35.800 go basically against the whole thesis of their company, which 0:19:35.840 --> 0:19:39.719 is the people like meat? Right? Um, So if if 0:19:39.720 --> 0:19:41.520 I can maybe offered just one comment on that, so 0:19:41.760 --> 0:19:44.920 I don't view it as going against their thesis. Um, 0:19:44.960 --> 0:19:47.000 their thesis is they're going to provide protein to the 0:19:47.000 --> 0:19:50.160 world and UH, and our thesis also that people love 0:19:50.240 --> 0:19:52.240 meat like so that we're not in conflict in either 0:19:52.320 --> 0:19:56.760 of those UH agendas. We just feel that just like 0:19:56.920 --> 0:20:00.760 you know, um, most people are using UM mobile phones 0:20:00.760 --> 0:20:03.919 over land lines today, that there can be a transition 0:20:03.960 --> 0:20:06.240 to a new form of meat, and Tyson sees that. 0:20:06.280 --> 0:20:07.679 I think they're excited about it, and I have to 0:20:07.680 --> 0:20:09.800 plaud them. I mean they are of all the companies 0:20:09.840 --> 0:20:12.680 out there, they are leaning in heavily too. We want 0:20:12.680 --> 0:20:15.000 to be a protein provider. We're not gonna get hung 0:20:15.119 --> 0:20:17.280 up on the fact that you know, they have to 0:20:17.320 --> 0:20:19.720 come from animals. It can come from directly from plants 0:20:19.720 --> 0:20:21.639 in the case of beyond meat. So they're making an 0:20:21.640 --> 0:20:24.359 investment and what I think they believe is a shift 0:20:24.400 --> 0:20:27.800 toward more plant based meat. How much does this cost 0:20:27.960 --> 0:20:32.159 compared to meat, traditional meat? Yeah, so it's an interesting questions. 0:20:32.200 --> 0:20:34.200 So you know, if you if you look at our 0:20:34.240 --> 0:20:38.520 production facilities, we are you know, extremely small relative to 0:20:38.840 --> 0:20:42.159 global meat processing right. So, um, you know we're going 0:20:42.200 --> 0:20:45.240 to have a premium because of that. But as we expand, 0:20:45.840 --> 0:20:48.760 there's nothing to stop us from lowering our prices to 0:20:48.800 --> 0:20:51.680 the point where we can compete and even be lower 0:20:51.720 --> 0:20:55.439 than the price of meat because we're taken out the middleman. 0:20:55.480 --> 0:20:59.080 If you've taken any economics course, which I'm sure you have, Uh, 0:20:59.119 --> 0:21:01.720 you know the number one thing they say in operations 0:21:01.840 --> 0:21:04.080 is you get rid of the bottleneck. Uh, you know, 0:21:04.160 --> 0:21:06.960 generate efficiencies and you can lower costs. And if you 0:21:07.000 --> 0:21:09.199 think about the animal as a bottleneck, we've taken out 0:21:09.240 --> 0:21:11.560 a pretty big bottleneck in the production of meeting. No, 0:21:11.640 --> 0:21:13.520 we're gonna have to leave it there, Thanks very much. 0:21:13.680 --> 0:21:17.879 Ethan Brown is the chief executive of Beyond Meat based 0:21:18.000 --> 0:21:33.639 in Los Angeles. Well, President Donald Trump, he was in 0:21:33.720 --> 0:21:36.800 Detroit this week. On Wednesday, he announced a rollback of 0:21:36.920 --> 0:21:40.800 fuel economy standards for cars and trucks and this was 0:21:40.840 --> 0:21:44.480 all put in place by the Obama administration. The goal 0:21:44.960 --> 0:21:49.960 fifty four and a half miles per gallon by twenty five. 0:21:50.320 --> 0:21:53.320 Here to tell us more about this is Dr Richard Newell. 0:21:53.359 --> 0:21:56.440 He is the president and the chief executive of Resources 0:21:56.520 --> 0:22:00.520 for the Future, based in Washington, d c U. Dr Neill, 0:22:00.560 --> 0:22:02.399 thank you very much for being with us. Maybe you 0:22:02.400 --> 0:22:06.399 could just lay out the cost connections related to these 0:22:06.560 --> 0:22:11.360 fuel economy standards and what is in your mind going 0:22:11.400 --> 0:22:15.960 to change now? Yes, well, fuel economy standards have been 0:22:16.040 --> 0:22:21.160 set for several decades now by the Department of Transportation 0:22:21.200 --> 0:22:25.480 in order to increase the energy efficiency or fuel economy 0:22:25.640 --> 0:22:29.720 of the US passenger fleet and UH In two thousand 0:22:29.720 --> 0:22:35.080 and eleven, the Obama administration combined these fuel economy standards 0:22:35.119 --> 0:22:41.720 with standards on carbon dioxide emissions, which were required by 0:22:41.840 --> 0:22:44.160 a you know, a judgment of the Supreme Court that 0:22:44.560 --> 0:22:47.480 these emissions needed to be regulated. And so since two 0:22:47.520 --> 0:22:51.280 thousand eleven, we've had joint actions by the Department of 0:22:51.320 --> 0:22:57.920 Transportation and the Environmental Protection Agency to reduce gasoline consumption 0:22:57.960 --> 0:23:02.080 from automobiles really for a few different purposes. One purpose 0:23:02.280 --> 0:23:07.399 is to simply save people money by requiring that the 0:23:07.400 --> 0:23:12.400