WEBVTT - Bloomberg Wall Street Week - November 15th, 2024 0:00:11.800 --> 0:00:14.960 This is Wall Street Week. I'm David Weston bringing you 0:00:15.200 --> 0:00:19.160 stories of capitalism this week, the world of coffee and 0:00:19.200 --> 0:00:22.200 what global demand and a changing climate may mean for 0:00:22.280 --> 0:00:26.280 our daily habit and creativity from a machine, what jenn 0:00:26.320 --> 0:00:29.600 of Ai means for the world of art and entertainment. 0:00:29.920 --> 0:00:33.120 But we start with a story about popularity, the sort 0:00:33.120 --> 0:00:36.760 of overnight popularity that comes when market players burst onto 0:00:36.760 --> 0:00:39.760 the scene because of big calls they make or new 0:00:39.800 --> 0:00:43.640 products they create, only some of which stand the test 0:00:43.840 --> 0:00:44.320 of time. 0:00:46.600 --> 0:00:49.760 In a world of stayd predictors of the stock market, 0:00:49.960 --> 0:00:53.760 Lane Garzawelli stands out after a series of orn target 0:00:53.840 --> 0:00:57.440 forecasts made her arguably the most widely followed Wall Street guru. 0:00:58.000 --> 0:01:00.840 She was fired last year by Lehman Bros. Reportedly for 0:01:00.880 --> 0:01:03.520 a combination of being bullish indeed a bit too much 0:01:03.560 --> 0:01:06.800 so when the firm was being bearish way too much so, 0:01:07.520 --> 0:01:09.000 and for being too expensive. 0:01:09.440 --> 0:01:13.080 Wall Street analyst Elaine Garzarelli became a superstar in the 0:01:13.080 --> 0:01:16.360 world of finance in nineteen eighty seven when she correctly 0:01:16.400 --> 0:01:19.640 predicted an imminent collapse of the US stock market, took 0:01:19.680 --> 0:01:22.600 her fund to cash, and was proven right just one 0:01:22.640 --> 0:01:25.880 week later. On Black Monday, when the Dow Jones Industrial 0:01:25.959 --> 0:01:29.400 Average dropped twenty two point six percent in a single 0:01:29.520 --> 0:01:30.720 trading session. 0:01:30.680 --> 0:01:33.880 No question about it. She called it absolutely spot on. 0:01:34.240 --> 0:01:37.880 Her fund actually went up quite considerably in value on 0:01:38.000 --> 0:01:41.040 Black Monday because she put on all these puts as protection. 0:01:41.200 --> 0:01:45.360 Bloomberg Senior editor for Markets and Opinion columnists John Authurs 0:01:45.680 --> 0:01:49.320 has been reporting on the markets and forecasters for four decades. 0:01:49.720 --> 0:01:54.360 Did it work out that well? Not really, because the 0:01:54.400 --> 0:01:58.960 whole point of getting one really big call spectacularly right 0:01:59.080 --> 0:02:02.080 like that is the n equals one. If you get 0:02:02.080 --> 0:02:05.680 what I mean. There are only so many opportunities in 0:02:05.720 --> 0:02:08.640 a lifetime to get to call a freak event like 0:02:09.160 --> 0:02:12.000 Black Monday. Having done it once, there wasn't going to 0:02:12.000 --> 0:02:13.000 be another Black Monday. 0:02:13.639 --> 0:02:16.880 In the decades since Black Monday, other investors and fund 0:02:16.919 --> 0:02:20.480 managers have made spectacular calls that have brought fame and 0:02:20.760 --> 0:02:24.640 yes often fortune, at least for a time. One investor 0:02:24.720 --> 0:02:27.280 stole the spotlight in twenty twenty thanks to the gold 0:02:27.360 --> 0:02:30.600 rush into big tech, once again showing the benefits of 0:02:30.639 --> 0:02:33.320 being in the right place at the right time. We 0:02:33.440 --> 0:02:37.120 have some funds, like for example, our investment Yes, which 0:02:37.200 --> 0:02:40.080 did extremely well for a period of time. 0:02:40.400 --> 0:02:45.160 And made Kathy Wood, its manager, probably the most famous 0:02:45.200 --> 0:02:47.760 investor for a couple of years at least. Yes, I 0:02:47.800 --> 0:02:50.120 think one of the points that you begin to grasp 0:02:50.360 --> 0:02:53.160 more and more of the years covering finance is that 0:02:53.200 --> 0:02:55.000 if you really want to make it big, if you 0:02:55.040 --> 0:02:56.919 really want to make a big return, you have to 0:02:57.000 --> 0:03:01.040 take a big risk. That's basically an inescapable fact. If 0:03:01.080 --> 0:03:03.240 you want to be safe, you can be safe, but 0:03:03.280 --> 0:03:05.960 you're not going to be as rich as somebody else 0:03:06.200 --> 0:03:08.560 is who has taken a chance and it's come off. 0:03:08.800 --> 0:03:12.800 In the case of ARC Investment, it very preciently was 0:03:12.840 --> 0:03:17.520 in early on Tesla. It was heavily into bitcoin, bitcoin 0:03:17.600 --> 0:03:21.320 related stocks, heavily into a number of very small companies 0:03:21.320 --> 0:03:26.440 that grew very fast in the exciting conditions during the pandemic. 0:03:26.840 --> 0:03:30.160 So ARC at one point, I think quadruples during the 0:03:30.200 --> 0:03:34.920 pandemic year. Some such astronomically strong performance. 0:03:35.800 --> 0:03:38.560 In recent years, a broad market rally has been good 0:03:38.680 --> 0:03:41.200 news for most investors, but that can come at the 0:03:41.280 --> 0:03:43.400 cost of specific fund performance. 0:03:43.760 --> 0:03:47.960 It looks like a rocket or trajectory that is zoomed 0:03:48.080 --> 0:03:52.640 up and zoomed back down again. If you stand back 0:03:52.680 --> 0:03:57.120 and think about whether you should treat somebody like Cathywood 0:03:57.120 --> 0:04:01.760 as an expert who can call the market liably every time. 0:04:02.520 --> 0:04:05.200 If you're going to have a return like that, it 0:04:05.280 --> 0:04:07.400 implies that you're very good at what you do, which 0:04:07.440 --> 0:04:09.800 in her case is tech investing. This is a person 0:04:09.800 --> 0:04:14.920 whose talents aligned perfectly with capturing this one moment. That 0:04:14.960 --> 0:04:17.400 doesn't mean that we should assume that they can guide 0:04:17.480 --> 0:04:19.039 us further in the future. 0:04:19.880 --> 0:04:23.400 Big contrarian calls can be very popular because of the 0:04:23.440 --> 0:04:26.159 attention they attract and because of the money they make 0:04:26.200 --> 0:04:28.960 for those who take the leap of faith. But betting 0:04:28.960 --> 0:04:32.279 against the markets also comes at a price, certainly when 0:04:32.279 --> 0:04:34.720 it comes to calls that, unlike those of a Lane 0:04:34.760 --> 0:04:38.359 Garzarelli and Kathy Wood, don't come true, but also in 0:04:38.400 --> 0:04:41.839 trading off drama for slow, more quiet progress. 0:04:42.320 --> 0:04:47.159 The people who do best tend to be contrarians. They 0:04:47.160 --> 0:04:50.160 have to be, and most of the time, by definition, 0:04:50.279 --> 0:04:54.360 contrarians don't do that well, otherwise they wouldn't be contrarian. 0:04:54.520 --> 0:04:57.720 And I think that's another fact that people tend to 0:04:57.800 --> 0:05:00.640 forget that if you're really going to make a lot 0:05:00.680 --> 0:05:05.600 of money, you probably do need to partic a contrarian bet. 0:05:06.320 --> 0:05:10.600 But generally speaking, people aren't stupid, the market isn't wildly 0:05:10.680 --> 0:05:15.600 wrong most of the time. Being very contrarian will often 0:05:15.680 --> 0:05:16.359 lose you money. 0:05:17.160 --> 0:05:20.279 It's not just individual market players who can gain enormous 0:05:20.279 --> 0:05:24.920 popularity relatively quickly. That popularity can also come to new 0:05:24.920 --> 0:05:29.320 ways of approaching investing overall, things like so called smart beta. 0:05:29.880 --> 0:05:33.520 This was a great idea that got people very excited 0:05:33.560 --> 0:05:37.640 for a while and has generally now become It's a 0:05:37.680 --> 0:05:39.600 phrase I almost never hear anymore. 0:05:40.120 --> 0:05:42.880 The term smart beta is said to have been coined 0:05:42.920 --> 0:05:45.719 by the consulting firm Willis Towers Watson in two thousand 0:05:45.760 --> 0:05:48.599 and six to describe funds that merge the benefits of 0:05:48.680 --> 0:05:52.599 active and passive management. Smart beta funds don't have a 0:05:52.640 --> 0:05:56.280 manager rebalancing holdings, but they have rules and factors that 0:05:56.320 --> 0:05:57.920 play the role of a manager. 0:05:58.560 --> 0:05:58.720 Well. 0:05:58.760 --> 0:06:03.279 Beta really just measures how much a strategy or a 0:06:03.320 --> 0:06:07.280 stock moves, and alpha is the performance of the stock 0:06:07.440 --> 0:06:10.400 relative to that sensitivity to market movements. 0:06:11.200 --> 0:06:14.440 Rob Arnett is the founder of Research Affiliates, which launched 0:06:14.480 --> 0:06:16.920 its Fundamental Index in two thousand and four. 0:06:17.400 --> 0:06:21.240 The inspiration for it was Fundamental Index, which was our 0:06:21.279 --> 0:06:25.719 idea back in two thousand and four, Fundamental Index simply says, 0:06:25.760 --> 0:06:29.400 why should we weight stocks according to how popular, beloved 0:06:29.400 --> 0:06:32.760 and expensive they are? Why not weight stocks according to 0:06:32.800 --> 0:06:36.000 how big they are in the economy. Now, what that 0:06:36.240 --> 0:06:39.200 does is several things. Firstly, if a stock is a 0:06:39.240 --> 0:06:42.719 growth stock priced at a premium multiple, it reweights it down. 0:06:43.279 --> 0:06:45.760 If it's a value stock priced at a deep discount, 0:06:45.880 --> 0:06:49.559 it rewaights it up. That's not because these aren't good 0:06:49.640 --> 0:06:53.440 companies and these aren't troubled companies. That's because the good 0:06:53.480 --> 0:06:55.920 news is already in the price. The bad news is 0:06:55.960 --> 0:06:58.560 already in the price, so it's harmless to reweight it. 0:06:59.320 --> 0:07:02.520 Because they folks on value stocks, Smart beta funds may 0:07:02.600 --> 0:07:04.960 have missed the moment for the tech stocks known as 0:07:04.960 --> 0:07:07.640 the Magnificent Seven, which have been driving the S and 0:07:07.680 --> 0:07:10.840 P five hundred higher recently. Of the more than nine 0:07:10.920 --> 0:07:14.960 hundred smart Beta ETFs, about six hundred have no exposure 0:07:15.000 --> 0:07:18.600 to the Magnificent seven stocks. According to Bloomberg Intelligence. 0:07:18.400 --> 0:07:25.480 Rules based strategies have had outflows. The genuinely smart forms 0:07:25.520 --> 0:07:27.800 of smart beta have been doing much better than that. 0:07:28.040 --> 0:07:31.760 It leans heavily towards cheap stocks, well cheap stocks have 0:07:31.840 --> 0:07:36.160 been out of favor for the last fifteen years. If 0:07:36.200 --> 0:07:41.120 you had a growth bias, you beat your value counterparts 0:07:41.240 --> 0:07:43.880 for the last fifteen years off and on. Not every year, 0:07:43.920 --> 0:07:47.640 of course, but over the fifteen years by a very 0:07:47.680 --> 0:07:51.880 wide margin. And so anything with a bias towards value 0:07:52.120 --> 0:07:55.400 will have had that headwind and will have struggled accordingly. 0:07:56.040 --> 0:07:59.720 While some trading strategies or financial instruments might go in 0:07:59.760 --> 0:08:02.520 and out of fashion, sometimes what we think of as 0:08:02.600 --> 0:08:05.360 new products in the market really aren't new at all, 0:08:05.640 --> 0:08:06.360 like SPACs. 0:08:07.040 --> 0:08:11.360 David in the early nineties, for those of us who 0:08:11.360 --> 0:08:15.440 are old enough to remember, the US had somewhat of 0:08:15.440 --> 0:08:19.880 the recession, and so there was a capital shortage, and 0:08:20.000 --> 0:08:25.320 two very smart lawyers who represented an industrial company that 0:08:25.480 --> 0:08:30.560 was short of capital and that needed to raise additional 0:08:30.600 --> 0:08:34.160 capital in the public markets came up with the device 0:08:34.720 --> 0:08:36.640 that we now know as the SPAC. 0:08:37.160 --> 0:08:40.679 Betsy Cohen is a financial technology pioneer who founded Internet 0:08:40.760 --> 0:08:44.560 banking for Bank Corp. In nineteen ninety nine and now 0:08:44.600 --> 0:08:47.160 serves as chairman of the Cohen Circle, which she co 0:08:47.240 --> 0:08:50.600 founded in twenty fifteen to bring more than ten SPACs 0:08:50.720 --> 0:08:51.800 to market. 0:08:51.640 --> 0:08:58.080 In a way, the SPAC format and structure has really 0:08:58.320 --> 0:09:02.000 always remained the same and is meeting the same needs, 0:09:03.040 --> 0:09:08.599 and those needs are a capital shortage within a particular area. 0:09:08.720 --> 0:09:11.600 The number of SPACs coming to market peaked in twenty 0:09:11.679 --> 0:09:14.440 twenty one, with six hundred and thirteen just that year, 0:09:14.960 --> 0:09:17.920 and dropped to just thirty one in twenty twenty three. 0:09:18.360 --> 0:09:21.800 If we go back two years twenty twenty two, it 0:09:21.880 --> 0:09:24.319 seemed that there were an awful lot of SPACs. It 0:09:24.440 --> 0:09:26.120 was really almost dominating the market. 0:09:26.240 --> 0:09:27.480 It seemed like a lot of fun. 0:09:29.160 --> 0:09:32.040 It's come down a fair amount since then. Why has 0:09:32.080 --> 0:09:32.720 it come down? 0:09:33.360 --> 0:09:39.360 I think there are several reasons. One of many of 0:09:39.360 --> 0:09:45.040 the SPACs did not find appropriate targets, and secondly, there 0:09:45.160 --> 0:09:48.719 was an excise tax that was imposed if you did 0:09:48.920 --> 0:09:53.160 close the spec, and so that was a financial liability 0:09:53.240 --> 0:09:58.280 that had not been thought of at the beginning of 0:09:58.320 --> 0:10:06.160 the process. So I think that there were enough cases 0:10:06.480 --> 0:10:11.240 of failure in the market that a company would come 0:10:11.280 --> 0:10:16.320 to market and then miss its first earnings projections that 0:10:16.559 --> 0:10:21.360 it became a much riskier vehicle to use. 0:10:21.840 --> 0:10:25.760 Whether it's the latest star investor or hot strategy. What 0:10:25.920 --> 0:10:29.839 draws us to these overnight success stories is just that 0:10:29.880 --> 0:10:32.840 they make for a good story, one that the financial 0:10:32.880 --> 0:10:35.680 media wants to tell and one that the audience wants 0:10:35.720 --> 0:10:36.000 to hear. 0:10:36.640 --> 0:10:40.920 We as journalists, you make a much better story when 0:10:40.960 --> 0:10:43.319 you really do tell tell it with a hero, with 0:10:43.400 --> 0:10:47.280 a person, with a with a with the beginning in 0:10:47.320 --> 0:10:49.160 the middle and an end. You want you want to 0:10:49.160 --> 0:10:51.040 be able to make it into a narrative. Then people 0:10:51.040 --> 0:10:53.400 will enjoy what you're showing them. Then people will understand 0:10:53.400 --> 0:10:57.720 the point you're making. But you might help people fall 0:10:57.760 --> 0:11:02.080 into a narrative fallacy we we the media maybe part 0:11:02.400 --> 0:11:07.720 of building up people only to then have to knock 0:11:07.760 --> 0:11:08.200 them down. 0:11:09.040 --> 0:11:12.480 Today, ETFs have become popular on Wall Street right now. 0:11:12.520 --> 0:11:15.240 They seem to be everyone's answer to just about everything. 0:11:15.760 --> 0:11:17.880 But how long will the love affair last? 0:11:18.440 --> 0:11:21.480 It would appear that they are in this country now. 0:11:21.520 --> 0:11:26.480 In many ways, the ETFs can be a superior product. 0:11:27.720 --> 0:11:28.120 You could. 0:11:28.160 --> 0:11:30.439 You know that they can be much more nimble, they 0:11:30.440 --> 0:11:33.160 can trade that much more rapidly, and therefore they can 0:11:33.200 --> 0:11:36.840 be of more different uses to people. But certainly my 0:11:37.920 --> 0:11:44.640 fear with exchange traded funds it's There's a line from 0:11:45.120 --> 0:11:47.800 one of David Bowe's albums begins with flees the size 0:11:47.800 --> 0:11:50.959 of rats, eats on rats, the size of cats, that 0:11:50.200 --> 0:11:54.120 that that ultimately they are Everybody is just taking a 0:11:54.160 --> 0:11:58.680 different bite of what's ultimately the same thing. That you're 0:11:58.760 --> 0:12:03.000 just churning these assets around in a different way without 0:12:03.200 --> 0:12:06.720 really little The complaints I was making about smart baits 0:12:06.760 --> 0:12:09.880 earlier that you without really adding anything. 0:12:12.080 --> 0:12:15.520 In a world of growing and rapidly changing markets, it's 0:12:15.559 --> 0:12:18.360 no surprise that new people and new ways of investing 0:12:18.440 --> 0:12:22.600 show up regularly, or that we eagerly welcome the next bright, 0:12:22.800 --> 0:12:26.040 shiny object. But it's one thing to rush to them. 0:12:26.320 --> 0:12:29.320 It's another to stay with them too long, because in 0:12:29.360 --> 0:12:32.199 the long run, we are always reminded that that which 0:12:32.280 --> 0:12:36.079 varies greatly from the mean shall eventually return to it. 0:12:36.960 --> 0:12:40.080 Coming up, the big business of hot bruise, we taught 0:12:40.120 --> 0:12:43.400 coffee supply and demand. Next on Wall Street Week. 0:12:44.400 --> 0:12:47.840 You're listening to Bloomberg Wall Straight Week with David Weston 0:12:47.960 --> 0:13:01.880 from Bloomberg Radio. This is Bloomberg Wall Street Week with 0:13:02.080 --> 0:13:08.360 David Weston from Bloomberg Radio. 0:13:11.000 --> 0:13:14.400 This is a story about our habits, those rituals we 0:13:14.440 --> 0:13:17.760 follow every day and come to take for granted, even 0:13:17.800 --> 0:13:21.480 as we start sharing those rituals with hundreds of millions 0:13:21.480 --> 0:13:22.200 of other people. 0:13:27.480 --> 0:13:32.000 This is a fine cup of coffee, Shannon Ravioli, not Roney. 0:13:32.240 --> 0:13:35.359 If you want the thing you loved, you did it. 0:13:35.520 --> 0:13:39.319 Congratulations, world's best cup of coffee. 0:13:40.480 --> 0:13:44.839 We are taking around the three billion cups every day 0:13:45.280 --> 0:13:50.080 in coffee. These means around one hundred and seventy two 0:13:50.400 --> 0:13:53.400 million bags of sixty kilos each bag. 0:13:54.240 --> 0:13:58.640 Venusian Naguera is executive director of the International Coffee Organization, 0:13:59.040 --> 0:14:01.000 a group created more more than a half a century 0:14:01.040 --> 0:14:04.560 ago to encourage trade between countries. She says, the trend 0:14:04.559 --> 0:14:07.160 in coffee consumption is moving in one direction. 0:14:07.640 --> 0:14:11.480 The demand is growing around the world, mainly in Asia 0:14:11.559 --> 0:14:15.560 and also in what we call to the producing countries, 0:14:15.920 --> 0:14:20.120 the producing countries that use it to drink a lot 0:14:20.160 --> 0:14:24.200 of coffee. In the past, where only Ethiopia and Brazil, 0:14:24.560 --> 0:14:29.040 now you have many other producing countries taking a lot 0:14:29.080 --> 0:14:35.520 of coffee. And additionally to that we have now China, Philippines, Vietnam, 0:14:35.800 --> 0:14:40.680 Indonesia taking a lot of coffee together with South Korea, 0:14:40.960 --> 0:14:42.920 Japan and other countries in Asia. 0:14:43.920 --> 0:14:48.240 Wock you All these habits being cultivated around the world 0:14:48.320 --> 0:14:51.480 add up to big business. According to the analysis from 0:14:51.600 --> 0:14:55.280 SMP Global. The annual revenue of the industry worldwide has 0:14:55.320 --> 0:14:58.160 soared from around two hundred billion dollars in twenty nineteen 0:14:58.480 --> 0:15:01.280 to know you four hundred and six billion dollars today. 0:15:01.920 --> 0:15:05.960 But as coffee demand continues to rise, production has been inconsistent. 0:15:06.400 --> 0:15:10.080 In the last two years. Consumption outstripped supply as bad 0:15:10.120 --> 0:15:13.440 weather took a toll on coffee farms that helped send 0:15:13.520 --> 0:15:17.120 prices of Arabica being futures surging more than eighty percent 0:15:17.400 --> 0:15:19.760 in the span of a year, from one hundred and 0:15:19.800 --> 0:15:22.520 forty six in September of twenty twenty three to a 0:15:22.600 --> 0:15:25.200 high of almost two hundred and seventy four this year. 0:15:29.040 --> 0:15:32.920 Coffee as an industry really starts in the late nineteenth century. 0:15:32.960 --> 0:15:35.000 That's really when we see the start of trading, so 0:15:35.040 --> 0:15:39.120 the New York Coffee Exchange opens in the eighteen eighties. 0:15:39.480 --> 0:15:42.440 Jonathan Morris is an expert in the field, dubbed the 0:15:42.520 --> 0:15:46.640 Coffee Historian. He's the author of Coffee, a Global History 0:15:46.840 --> 0:15:49.240 and a professor at the University of Hertfordshire. 0:15:49.880 --> 0:15:53.920 Now we have a much more expanded global market, so 0:15:54.000 --> 0:15:57.160 coffee consumption has been rising. A lot of emulation in 0:15:57.200 --> 0:16:02.360 that rise so essentially that's what we're seeing, and the 0:16:02.520 --> 0:16:05.520 demand for coffee in that sense is ever growing. 0:16:06.080 --> 0:16:08.560 A good part of their growth comes from the Starbucks 0:16:08.560 --> 0:16:11.200 of this world, a phenomenon that may have taken off 0:16:11.200 --> 0:16:15.160 in Seattle, Washington, but it is turned into an international trend. 0:16:16.480 --> 0:16:19.920 So what's really changed coffee in the last sort of 0:16:19.960 --> 0:16:23.600 thirty forty years is obviously the growth of the if 0:16:23.640 --> 0:16:28.000 you like, the international coffee shop chains, that kind of format. 0:16:28.560 --> 0:16:32.080 And I say it's changed it not because it's accounted 0:16:32.120 --> 0:16:35.640 for a huge proportion of consumption, although it's certainly driven 0:16:35.720 --> 0:16:38.840 that up, but rather because of the amount of emulation 0:16:38.920 --> 0:16:42.280 that that's created across the market. So coffee as a 0:16:42.320 --> 0:16:45.240 beverage has become much more popular across the globe. 0:16:45.320 --> 0:16:47.480 It's not just that more of us are spending more 0:16:47.520 --> 0:16:50.880 of our time in our favorite coffee shops. Increasingly, entire 0:16:50.960 --> 0:16:54.640 countries are getting into the game, quickly developing their own 0:16:54.760 --> 0:16:58.359 habits of turning to coffee instead of their traditional beverages. 0:16:58.720 --> 0:17:01.640 So China as a market alone is now probably something 0:17:01.760 --> 0:17:05.000 like in the seventh or sixth in the world in 0:17:05.119 --> 0:17:09.400 terms of volume, and of course the growth across particularly 0:17:09.440 --> 0:17:12.600 Southeast Asia as a whole has really driven the big 0:17:12.640 --> 0:17:14.679 expansion of coffee in the last few years. 0:17:17.600 --> 0:17:21.040 Steven Sutton's job is to meet that demand while strengthening 0:17:21.119 --> 0:17:25.040 the supply chain his New York coffee shops specializing getting 0:17:25.080 --> 0:17:28.920 beans to customers at breakneck speeds. It can take large 0:17:29.000 --> 0:17:31.439 chains up to a year to get coffee from farm 0:17:31.560 --> 0:17:35.040 to cup. Sutton's de Vosion sells beans that have been 0:17:35.080 --> 0:17:38.600 harvested less than a month before hitting shelves. To do that, 0:17:38.800 --> 0:17:42.200 he uses FedEx to overnight the beans straight from Bogata 0:17:42.240 --> 0:17:45.760 to Brooklyn, where he roasts around ten pounds of them 0:17:45.800 --> 0:17:50.280 every week. Within days, they're in cafes, executive dining rooms, 0:17:50.280 --> 0:17:53.000 and high end restaurants like eleven Madison Park. 0:17:53.600 --> 0:17:57.720 We actually opened doors in two thousand and six, and 0:17:57.800 --> 0:18:01.480 the whole idea was to do some different locally in 0:18:01.560 --> 0:18:06.399 Colombia for the farmers and finding absolutely the best coffees 0:18:06.960 --> 0:18:11.040 that were lost at that time because of the internal 0:18:11.080 --> 0:18:15.160 conflict of Colombia. So we decided very early on that 0:18:15.240 --> 0:18:18.240 we were to concentrate our efforts of understanding how to 0:18:18.359 --> 0:18:23.080 go to the farmer, how to say maneuver the territory 0:18:23.960 --> 0:18:27.960 and its difficulties at that time so we can get 0:18:28.000 --> 0:18:31.320 to the farmer pay them actually fair wages, because one 0:18:31.359 --> 0:18:35.040 thing is fair trade and one thing is fair money wages. 0:18:35.359 --> 0:18:38.840 Sun's direct relationship with farmers has been both good practice 0:18:38.880 --> 0:18:42.879 and good business. Better sourcing can mean better coffee, and 0:18:42.920 --> 0:18:44.840 that's been a staple of his success. 0:18:45.359 --> 0:18:49.720 Actually getting the taste that they got at origin, and 0:18:49.840 --> 0:18:52.440 that until now it's pretty much unheard of. So we 0:18:53.040 --> 0:18:57.639 averaged let's call it around fifteen days old coffees before roasting. 0:18:57.960 --> 0:19:01.280 So that sounds remarkable, but also sounds remark expensive. Potentially, 0:19:01.440 --> 0:19:05.600 what's the difference in the price of the fresh coffee, 0:19:05.640 --> 0:19:08.760 the freshly roasted and ground as opposed to things that 0:19:08.840 --> 0:19:09.879 take six months. 0:19:10.080 --> 0:19:14.119 So there's there is a difference, but it's not a 0:19:14.200 --> 0:19:16.360 huge difference. I mean, you're probably going to be paying 0:19:16.400 --> 0:19:18.720 a dollar more for our coffee. If you take out 0:19:18.800 --> 0:19:22.200 a lot of the middle people and a lot of 0:19:22.240 --> 0:19:25.679 the normal process of coffee, you'll end up finding that 0:19:25.840 --> 0:19:29.080 number one, the money can actually go to the farmer. 0:19:29.520 --> 0:19:32.280 Suton says that making sure everyone gets their fair share 0:19:32.320 --> 0:19:34.520 of the pie is one key piece of the puzzle, 0:19:34.960 --> 0:19:38.159 but another is protecting the supply chain. As the rising 0:19:38.240 --> 0:19:41.800 impact of climate change takes a toll on growing conditions. 0:19:44.320 --> 0:19:51.080 The coffee market has been suffering with supply trucks, especially 0:19:51.119 --> 0:19:56.199 giving weather, because of weather problems we had in Brazil. 0:19:56.560 --> 0:19:59.680 Carlos Costa is the chief commercial officer at Hedge Point 0:19:59.680 --> 0:20:04.200 Globe Markets and its spent years analyzing soft commodities like coffee, 0:20:04.520 --> 0:20:07.240 whose futures point to more confidence in the short term 0:20:07.280 --> 0:20:09.560 trade than in the long term investment. 0:20:10.119 --> 0:20:13.359 Cost of production all days in Brazil it's around seven 0:20:13.440 --> 0:20:16.720 hundred has per bag, seven hundred and fifty for Arabica, 0:20:17.320 --> 0:20:21.159 and the price is trading at fourteen hundred fifteen hundred, 0:20:21.680 --> 0:20:25.440 so they are making a quite good amount of profits 0:20:25.520 --> 0:20:29.040 if you compare cost of production and price of selling. 0:20:29.400 --> 0:20:32.280 So farmers are making good money out of that in 0:20:32.320 --> 0:20:38.280 the supply chain. If you see other participants, traders, the 0:20:38.320 --> 0:20:41.280 margin of the trading is not you know, for commodity 0:20:41.320 --> 0:20:44.480 trading is not that much. We're talking about three five 0:20:44.560 --> 0:20:48.120 percent bottom line. But looking ahead and look into the future, 0:20:48.320 --> 0:20:52.600 our sentiment, as is the volatility my continue to stay 0:20:52.640 --> 0:20:55.920 on the high level because of the supply and straints 0:20:55.960 --> 0:20:59.440 we have nowadays and also the lower level of inventories, 0:20:59.480 --> 0:21:02.199 which bring more concerns in the market as well. But 0:21:02.720 --> 0:21:06.160 the main history here is that the world has been 0:21:06.200 --> 0:21:10.840 consuming more coffee year over year, and supplies has not 0:21:10.960 --> 0:21:15.159 been following that growth in the men both because of 0:21:15.280 --> 0:21:21.000 weather situations that affected supplies, but because you also haven't 0:21:21.080 --> 0:21:25.080 saw so much growth in the majority of the origins 0:21:25.119 --> 0:21:26.439 in terms of area. 0:21:26.480 --> 0:21:30.000 Although production has rebounded this year, climate change means supply 0:21:30.160 --> 0:21:34.840 volatility isn't going away and demand will only continue to rise. 0:21:35.480 --> 0:21:38.320 For people like Steven Sutton, who see the whole process 0:21:38.359 --> 0:21:41.520 from start to finish, meeting that demand in the long 0:21:41.600 --> 0:21:44.119 term means investing in the next generation. 0:21:44.359 --> 0:21:47.359 We are very active in doing things for the community 0:21:47.440 --> 0:21:51.800 and the farmer to protect our stakeholders and where we're 0:21:51.800 --> 0:21:54.440 getting our coffee from us we go to a local 0:21:54.440 --> 0:21:59.840 school in Ghaccetta and we are teaching these kits about 0:22:00.480 --> 0:22:03.240 how to do better coffee, how to get better economics. 0:22:03.359 --> 0:22:06.879 We give them tools from a young age not only 0:22:06.960 --> 0:22:11.680 to help them create a business, but also to help us, 0:22:12.000 --> 0:22:16.600 as pretty much all the stakeholders inside of the coffee process, 0:22:16.760 --> 0:22:19.520 to protect where the source is coming from. We like 0:22:19.600 --> 0:22:23.080 to start building something that's more sustainable, and we think 0:22:23.240 --> 0:22:26.920 that not necessarily is what should be done. I think 0:22:26.920 --> 0:22:29.840 it's part of it, but I think it's also part 0:22:29.840 --> 0:22:33.400 of how we farm and how we teach these farmers 0:22:33.440 --> 0:22:36.439 how to protect their farm not only by having coffee 0:22:36.440 --> 0:22:39.440 but other things and protecting their environment. If we can 0:22:39.520 --> 0:22:43.639 do that in a large scale, then I think we 0:22:43.720 --> 0:22:47.000 will have a good future in the coffee world. If 0:22:47.040 --> 0:22:51.639 we can't, then I foreseeing twenty fifty coffee being a 0:22:51.720 --> 0:22:52.960 complete luxury. 0:22:53.880 --> 0:22:57.280 Up next, How artificial intelligence is changing the world of 0:22:57.440 --> 0:23:02.480 art and entertainment, the view from AI and artists themselves. 0:23:03.080 --> 0:23:04.640 Next on Wall Street Week. 0:23:13.840 --> 0:23:18.000 This is Bloomberg Wall Street Week with David Weston from 0:23:18.200 --> 0:23:19.119 Bloomberg Radio. 0:23:25.359 --> 0:23:29.240 This is a story about creativity, something we normally consider 0:23:29.280 --> 0:23:33.080 to be a quintessentially human trait, but something that machines 0:23:33.119 --> 0:23:39.679 increasingly seem to be encroaching on. You really think you 0:23:39.680 --> 0:23:43.240 can just walk away from all this? There's no other choice. 0:23:43.880 --> 0:23:45.200 There's always a choice. 0:23:45.720 --> 0:23:47.160 You just don't like the alternatives. 0:23:47.840 --> 0:23:48.680 What would you have me do? 0:23:48.800 --> 0:23:52.560 This video was made entirely by AI. It was generated 0:23:52.600 --> 0:23:56.879 by Runway, which builds AI tools from multimedia content. Crista 0:23:56.920 --> 0:23:59.880 Baal Bealezuela is the company's founder and CEE. 0:24:01.280 --> 0:24:05.200 You can think of generated AI as a version of CGI. 0:24:05.280 --> 0:24:06.919 It's a better version of the things we've done in 0:24:06.920 --> 0:24:09.760 the past. Imagine a world where you have a system 0:24:09.880 --> 0:24:13.119 that can create imagery on a real time basis. It 0:24:13.119 --> 0:24:15.040 feels like a video game, feels like a movie, but 0:24:15.080 --> 0:24:17.040 you're generating things that you've never seen. 0:24:16.840 --> 0:24:22.399 Before all over the world. Filmmakers, it's frightening on so 0:24:22.400 --> 0:24:28.960 many levels that so many people who will lose their jobs. Musicians, 0:24:29.240 --> 0:24:33.639 the way they are learning and the company is developing, 0:24:33.840 --> 0:24:37.040 it's going to be a threat visual artists. 0:24:37.720 --> 0:24:41.160 Every single professional artist I know has been affected by this, 0:24:41.680 --> 0:24:43.080 and not a good way. 0:24:43.960 --> 0:24:46.880 All worry about what generative AI could mean for their 0:24:46.960 --> 0:24:49.720 creative work, and it turns out that they have good 0:24:49.760 --> 0:24:53.400 reason to worry. A report from January twenty twenty three 0:24:53.520 --> 0:24:56.479 concludes that more than two hundred thousand people in the 0:24:56.600 --> 0:25:00.480