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Tyson Turns to Vegan Foods As It Seeks to Disrupt Itself · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg pim L Podcast. I'm pim Fox.
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  Speaker 1: In the news today, Tyson food There poultry subsidiary has
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  Speaker 1: been ordered to pay a two million dollar fine for
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  Speaker 1: discharges from a Southwest Missouri plant that caused a fish
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  Speaker 1: kill um and the company. The Arkansas based company said
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  Speaker 1: that it was taking full responsibility for what it described
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  Speaker 1: as an unfortunate mistake. And here to tell us more
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  Speaker 1: about the company right now is Tom Hayes. He is
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  Speaker 1: the president and the chief executive of Tyson Foods and
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  Speaker 1: he joins us here in our eleven three studios. Tom,
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  Speaker 1: thank you very much for being with us. I referenced
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  Speaker 1: that that news item, but I also wanted to reference
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  Speaker 1: the fact that you actually took responsibility for the mistake.
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  Speaker 1: That may not be something that major corporations do. They
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  Speaker 1: typically will pay a fine, and that's the last to
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  Speaker 1: hear of it. I want if you could describe this
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  Speaker 1: but also in the context of taking responsibility, because I
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  Speaker 1: also want to note that you have taken on the
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  Speaker 1: pledge to cut greenhouse gas emissions by thirty percent by sure. Yeah,
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  Speaker 1: thanks for having me. You know, our strategy of Tyson
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  Speaker 1: is sustainably feed the world with the fastest growing protein brands.
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  Speaker 1: But with that comes a lot of responsibility. We know
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  Speaker 1: that the population is going to be you know whatever,
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  Speaker 1: the estimates are nine and a half billion people by
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  Speaker 1: and we have to be a part of the solution.
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  Speaker 1: So absolutely, when there are things that go wrong in
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  Speaker 1: our system, we will own them. We don't want them
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  Speaker 1: to go wrong, but sometimes we will. Got a big
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  Speaker 1: system and we are focused on how we can do better.
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  Speaker 1: So we've got a big continue improvement program. You know,
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  Speaker 1: we're transitioning from a company that has a heritage and
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  Speaker 1: poultry to really a modern food company, so that comes
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  Speaker 1: with a lot of agility changes and things that are
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  Speaker 1: focused on sustainability, making sure that we can, you know,
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  Speaker 1: not only do the things we can do for our
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  Speaker 1: shareholders to make money, but also do in a way
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  Speaker 1: that everybody on our team can be proud of. And
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  Speaker 1: we can have a positive impact Tom modern food company.
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  Speaker 1: What exactly does that mean? I mean, what's sort of
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  Speaker 1: the next step for Tyson? So I think of four
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  Speaker 1: things when I think of modern food company. Firstly that
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  Speaker 1: I mentioned is sustainability. The second is transparency. You know,
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  Speaker 1: there's not a lot of trust with big food and
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  Speaker 1: so we need to become more transparent. Uh. Certainly, as
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  Speaker 1: it relates to agility that I talked about, it's hard
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  Speaker 1: for big companies and necessarily move quickly. A lot of
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  Speaker 1: small food companies are really good at that. We are
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  Speaker 1: working that agility into everything that we're doing. And then finally,
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  Speaker 1: just the whole idea of being relevant that is something
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  Speaker 1: that we have to consistently be with our consumers. So
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  Speaker 1: we do spend a lot of money on brand building innovation.
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  Speaker 1: We've got business models that are large, big brands three
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  Speaker 1: billion dollars, three one billion dollar brands, and we have
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  Speaker 1: small brands were really cultivating to be more relevant for
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  Speaker 1: consumers today. All right, just to put it into some numbers, right,
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  Speaker 1: thirty five million chickens, nearly half a million pigs, a
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  Speaker 1: hundred and thirty thousand cattle a week. Right, this is big.
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  Speaker 1: You also have stopped using the antibiotics and chickens. You've
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  Speaker 1: also said that you've got this line of antibiotic free pork,
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  Speaker 1: but you've also made an investment in a company that's
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  Speaker 1: based in Memphis, and I wonder if you could tell
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  Speaker 1: us about this because this is not anything really to
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  Speaker 1: do with what you think of when you think of meat.
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  Speaker 1: So excellent question. Those business models. I talked about one
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  Speaker 1: of our ways that we are going to grow the
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  Speaker 1: companies by investing in some new emerging models, uh, and
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  Speaker 1: simultaneously thinking about ways that we can disrupt ourselves. So
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  Speaker 1: there are plenty of opportunities for companies to be disrupted.
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  Speaker 1: We want to disrupt ourselves. So that investment you're talking
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  Speaker 1: about is Memphis Meats actually based in Chicago, but they
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  Speaker 1: have the Memphis Meats brand, and what they are doing
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  Speaker 1: is taking cells from animals, so not raising and then
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  Speaker 1: harvesting animals, taking cells and essentially culturing those into a
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  Speaker 1: meat alternative. So it's very interesting technology. It's still very nascent.
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  Speaker 1: But we're also investing in companies like Beyond Meat so
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  Speaker 1: plant based protein, introducing our own lines of plant based protein.
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  Speaker 1: So it requires a lot of different solutions to be
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  Speaker 1: sustainably feeding the world. And those are just some of
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  Speaker 1: the examples that we're entering into. Tom You also said
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  Speaker 1: in a presentation last week UH that Tyson is planning
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  Speaker 1: to cut greenhouse gas emissions by thirty So if you
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  Speaker 1: think about the stages UH in one and two, those
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  Speaker 1: areas of our food production, what we control within our house, basically,
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  Speaker 1: those are pretty easy for us to get to. The
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  Speaker 1: things that are different culled are the things that are
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  Speaker 1: really what are UM phase three, which is we're not
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  Speaker 1: vertically integrated and cattle and not vertically integrated but for
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  Speaker 1: a small amount on pork or hugs. So we have
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  Speaker 1: to work with cattleman and you know, producers to make
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  Speaker 1: a big change in the system. And so that's where
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  Speaker 1: the majority that will come from is sort of getting
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  Speaker 1: after those those UM emissions, and particularly i'd say as
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  Speaker 1: it relates to cattle. You have also been kind of
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  Speaker 1: reshaping the company when it comes to what businesses you
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  Speaker 1: want to be in and what businesses you don't want
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  Speaker 1: to be in. For example, I believe like frozen some
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  Speaker 1: of the frozen food businesses are you going to sell
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  Speaker 1: some give us an idea of the kinds of lines
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  Speaker 1: that you'd like to sell. Maybe it's the what is
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  Speaker 1: it the frozen I can't remember frozen food assets. It
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  Speaker 1: has to do with the at some of it's on
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  Speaker 1: the block, right, this is the Van's Foods that business.
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  Speaker 1: But you want to buy others? What what kinds of
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  Speaker 1: bolt on acquisitions are you're looking for? So we're looking
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  Speaker 1: for any time we can a new brand. That's again
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  Speaker 1: going back to protein. So the protein is a tail
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  Speaker 1: one that we're taking advantage of. Consumers are actively trying
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  Speaker 1: to get into their diet more and more. So it
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  Speaker 1: would be assets that either have a brand that we
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  Speaker 1: can take advantage of, a new capability, Uh do they
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  Speaker 1: move us into a new geography, whether it's internationally or
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  Speaker 1: here domestically, and so those are the that's the sort
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  Speaker 1: of filters we have. And so it would be companies
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  Speaker 1: like we bought with Advanced Pierre, very Protein Centrick. Not
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  Speaker 1: necessarily you know a lot of consumer brands, but they
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  Speaker 1: have a very strong culture of driving profitable foods in
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  Speaker 1: the marketplace, whether it's branded or unbranded. And so assets
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  Speaker 1: like that the ones that we can continue to build
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  Speaker 1: our brand portfolio. Those are the important ones. Thank you
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  Speaker 1: so much. For joining us. Fascinating to hear how you're
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  Speaker 1: trying to disrupt yourselves. Uh, fascinating concept. As the world
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  Speaker 1: expands and as more people look to protein filled meat alternatives.
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  Speaker 1: Tom Hayes, president and executive officer of Tyson Foods, which
• 7:02
  Speaker 1: is based in Springdale, Arizona, but he joins us here
• 7:06
  Speaker 1: in our eleven three oh studios. Medical marijuana has been
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  Speaker 1: one of the hotter bets in the past few years,
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  Speaker 1: and a company that specializes in it is filing the
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  Speaker 1: first cannabis related US initial public offering, that is Chronos Group,
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  Speaker 1: and the chief executive officer joins us now, Michael Gorenstein.
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  Speaker 1: Thank you so much for being here. Michael, can you
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  Speaker 1: just give us a sense of why you decided to
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  Speaker 1: file this I p O, how much you plan to raise,
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  Speaker 1: and what brought you to the US. Sure, thanks for
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  Speaker 1: having me so A big driver was spreading awareness. We've
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  Speaker 1: actually been publicly traded in Canada for some time and
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  Speaker 1: a lot of American investors have questions about the legality.
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  Speaker 1: Everyone's very surprised to hear that there are legal ways
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  Speaker 1: to get exposure of the industry and by going through
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  Speaker 1: the process with the NASDAC and and starting the trading yesterday.
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  Speaker 1: You know, a big big thing for US as being
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  Speaker 1: able to help advance things, help explain to people that
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  Speaker 1: there there is a market. There are federally legal avenues
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  Speaker 1: where you're able to to invest in the companies that
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  Speaker 1: are developing the intellectual property, that are building brands and
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  Speaker 1: are are spreading global distribution without having the legal risk
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  Speaker 1: that you would otherwise have in the US to find
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  Speaker 1: for people what your company does. So really we we
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  Speaker 1: do a number of things we look at as a
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  Speaker 1: virtual cycle, but ultimately what we're doing is developing global distribution.
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  Speaker 1: So right now we're across Germany, Israel, Canada, Australia, in
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  Speaker 1: the Cayman Islands. UH disruptive intellectual property and unlocking the
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  Speaker 1: science behind cannabis that really hasn't been there because when
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  Speaker 1: you hang on when you say distribution, distribution of what
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  Speaker 1: like if I was to go to your company, what
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  Speaker 1: exactly how's your company divide it up? In what products
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  Speaker 1: or services do you provide? So we directly will ship
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  Speaker 1: a number productly of forty three different skews that would
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  Speaker 1: be available if you were to come to us. UH
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  Speaker 1: varying ratios of cannabinoids, flower derivative products. We offer a
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  Speaker 1: wide range depending on on what the therapeutic areas that
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  Speaker 1: you're looking for for helping. So why list in the US?
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  Speaker 1: You know, I think a big part of it is
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  Speaker 1: accessing US capital, being able to uh, you know, to
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  Speaker 1: get a foothold here, and ultimately we do believe that
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  Speaker 1: the US will be federally legal, and for US, it
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  Speaker 1: makes a lot of sense to give American investors a
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  Speaker 1: chance to get in early because when we come here,
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  Speaker 1: we do want that support and we don't want to
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  Speaker 1: be sort of the foreign conquerors. We I grew up
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  Speaker 1: in the US. Uh. Much much of our management team
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  Speaker 1: moved to Canada from the US, and we certainly hope
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  Speaker 1: to keep more people from the US involved. You know,
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  Speaker 1: I guess it's sort of hard to distinguish, uh, you know,
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  Speaker 1: sort of the legal aspects of marijuana and how it
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  Speaker 1: relates to medical versus recreational. And you know, we were
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  Speaker 1: talking before about how you focus on medical and yet
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  Speaker 1: do you get a lot of investors coming to you
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  Speaker 1: and sort of treating you in tandem with alcohol companies
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  Speaker 1: and trying to get in on the ground floor, uh
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  Speaker 1: for something that will take off on a recreational level,
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  Speaker 1: and how do you sort of deal with that? So
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  Speaker 1: we do you know, we have we do have a
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  Speaker 1: wholely owned license in British Columbia that will focus exclusively
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  Speaker 1: on the recreational market. But we do try to educate
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  Speaker 1: people on though, is the medical opportunity is huge and
• 10:39
  Speaker 1: if you look at a few things that might not
• 10:42
  Speaker 1: necessarily come top of mind, you start to understand that.
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  Speaker 1: So first, the countries are much more likely to legalize
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  Speaker 1: medical before they are recreational. It's just it's a much
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  Speaker 1: easier argument. It's from policy perspective, makes more sense. Uh.
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  Speaker 1: And so you've got a global medical market versus just
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  Speaker 1: the Canadian recreational market and just off sheer numbers, that's
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  Speaker 1: a very big difference. Uh. The second is thematically, there
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  Speaker 1: are people that are moving away from from alcohol for
• 11:08
  Speaker 1: some health reasons, but it's not very drastic. And you've
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  Speaker 1: seen in states where cannabis and legalized there's a trend.
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  Speaker 1: But a much bigger trend is what's going on with opioids.
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  Speaker 1: The opioid epidemic. It's ripping across North America and really
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  Speaker 1: across the world. And chronic pain is one of the
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  Speaker 1: largest indications that we see for cannabis. So being able
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  Speaker 1: to provide UH medicine that doesn't have the same harmful
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  Speaker 1: effects is something that we see as a as a
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  Speaker 1: big catalyst. And finally, UH insurance coverage is something that
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  Speaker 1: we haven't seen in the US. Everyone looked at Colorado
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  Speaker 1: to say, well, this wasn't a real industry. UH companies
• 11:44
  Speaker 1: gonna be profitable until recreational. How are you going to
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  Speaker 1: compete with the guy on the corner that's just gonna
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  Speaker 1: sell you a bag. If you've got to go to
• 11:51
  Speaker 1: a doctor. Well, Germany there is full insurance coverage and
• 11:56
  Speaker 1: so you're able to go to your doctor and reimburse
• 11:58
  Speaker 1: like a true medicine. So that's part of why our
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  Speaker 1: strategy is UH, you know, is being able to target
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  Speaker 1: European markets. We have an exclusive distribution agreement with a
• 12:08
  Speaker 1: h three year old pharmaceutical company in Germany and gives
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  Speaker 1: us access to twelve thousand pharmacies. I think the medicinal
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  Speaker 1: market is is a very very great opportunity, and we
• 12:18
  Speaker 1: try to educate people and it's a form of social entrepreneurship.
• 12:21
  Speaker 1: You're also doing good. Can you also just educate us
• 12:25
  Speaker 1: and our listeners in you know maybe thirty seconds that
• 12:28
  Speaker 1: there is a very a wide variation of what is
• 12:32
  Speaker 1: available from cannabis. So for example, th HC is one,
• 12:37
  Speaker 1: c b D is another. A lot of acronyms here
• 12:40
  Speaker 1: at th h c V, which is what you're focused on.
• 12:43
  Speaker 1: Just describe if you cantata top leve level of you
• 12:45
  Speaker 1: what people need them to understand. Yeah, so a lot
• 12:49
  Speaker 1: of the misconception about cannabis. You do hear people always
• 12:52
  Speaker 1: tell you they've had different effects that you know, makes
• 12:54
  Speaker 1: them tired, it wakes them up and makes them laugh,
• 12:56
  Speaker 1: makes them scared, cures cancer, cure as headaches. The analogy
• 13:02
  Speaker 1: there would be if I were to tell you, hey,
• 13:04
  Speaker 1: you know pills are really good for making you sleep well?
• 13:07
  Speaker 1: What's inside of the pill. So cannabis is you can
• 13:09
  Speaker 1: think of it as a vessel. But depending on the
• 13:11
  Speaker 1: different genetics, there over a hundred different cannabinoids. There are
• 13:14
  Speaker 1: thousands of turpenes, and these work together synergistically to create
• 13:17
  Speaker 1: an entourage effect. So what the actual type of cannabis is,
• 13:21
  Speaker 1: what the cannabinoids are, is very very important to what
• 13:23
  Speaker 1: effect you'll get. Just really really really quick. Our opioids
• 13:28
  Speaker 1: more expensive that are used for pain killing than be cannaboid, uh,
• 13:33
  Speaker 1: than the cannabis product in general. Yes, they are. I
• 13:37
  Speaker 1: just say that there's a recent study we were talking
• 13:39
  Speaker 1: about this offtline that was just published in the European
• 13:42
  Speaker 1: Journal of Internal Medicine that the Israeli researchers have said
• 13:47
  Speaker 1: that the efficacy of cannabis for cancer patients helps those
• 13:52
  Speaker 1: avoid their opioid dependency even before it starts. Thanks very
• 13:56
  Speaker 1: much for being with us. Michael Gorenstein is the chief
• 13:58
  Speaker 1: executive of a Chrono, a group, and yes they are
• 14:01
  Speaker 1: trading in the United States. We got some data overnight
• 14:19
  Speaker 1: out of China showing that a gauge of demand for
• 14:22
  Speaker 1: factory made goods in the nation fell the most in
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  Speaker 1: five years, much more than any economist survey by Bloomberg
• 14:31
  Speaker 1: had expected. Here to help us understand how much we
• 14:33
  Speaker 1: ought to pay attention to this is Leland Miller, chief
• 14:35
  Speaker 1: executive officer of China beige Book International in New York,
• 14:39
  Speaker 1: and he joins us here in the studios. Leland, thank
• 14:42
  Speaker 1: you so much for being here. So what did you
• 14:43
  Speaker 1: make of this read? Well, not much uh February data.
• 14:47
  Speaker 1: When you when you're talking about January in February and
• 14:49
  Speaker 1: China you've got the lunar New year, which means that
• 14:53
  Speaker 1: any comparison either between those two months or between January
• 14:56
  Speaker 1: February and the years before are are hard and any
• 15:00
  Speaker 1: any real conclusions about so we don't think that February
• 15:03
  Speaker 1: means much. Is there some expectation of a slowdown particularly
• 15:07
  Speaker 1: in manufacturing this year? Sure was the fifty one to
• 15:10
  Speaker 1: fifty uh noticeable drop? Not really should be worried about
• 15:14
  Speaker 1: February data regardless, Not really so. I think people have
• 15:17
  Speaker 1: been watching for a slowdown in China and so they
• 15:21
  Speaker 1: took note of this. But this is the trepidation the
• 15:24
  Speaker 1: market seems to be seemed to be feeling that that's
• 15:26
  Speaker 1: not warranted yet Leland, what's the big deal right now
• 15:29
  Speaker 1: with China? Is it tariffs on things like aluminum foil?
• 15:33
  Speaker 1: Is it steal tariffs? What's going on and what should
• 15:36
  Speaker 1: investors really be paying attention to? That's see, that's a
• 15:39
  Speaker 1: great question, and I don't think people are asking this enough.
• 15:42
  Speaker 1: They see the headlines on stealing aluminium tariffs and I think, well,
• 15:45
  Speaker 1: this this is gonna just crush China. Well, it won't
• 15:47
  Speaker 1: be good for China. But but while we will be
• 15:50
  Speaker 1: dealing in the coming weeks with stealing aluminium tariffs and
• 15:53
  Speaker 1: whether President Trump is really gonna go big on them,
• 15:55
  Speaker 1: the real question for China is the intellectual property theft
• 15:59
  Speaker 1: UH investor gaistion Section three oh one and whatever tariffs
• 16:02
  Speaker 1: they do on that. Now that's been backtracked a little
• 16:06
  Speaker 1: bit behind the scenes. It's still moving through UH the
• 16:08
  Speaker 1: inter agency process. But if scenario worst worst case scenario
• 16:14
  Speaker 1: is that President Trump decides he's gonna he's gonna make
• 16:17
  Speaker 1: a big move before the midterms, puts sectoral tariffs on
• 16:20
  Speaker 1: say consumer electronics, something giant like that, and you have
• 16:25
  Speaker 1: absolutely justifiable use of the term trade war. That is
• 16:28
  Speaker 1: a big, big deal. It doesn't mean it's gonna happen,
• 16:30
  Speaker 1: but the worst case scenario is an all out, big
• 16:33
  Speaker 1: time trade war. What do you hear from people who
• 16:35
  Speaker 1: are close to who are involved in these negotiations, Well,
• 16:39
  Speaker 1: that the administration is having a very very difficult time
• 16:42
  Speaker 1: coming to consensus on this um. You know, you read
• 16:44
  Speaker 1: this in the media, but it's the reality behind the scenes.
• 16:46
  Speaker 1: So one of the reasons that you don't have a
• 16:48
  Speaker 1: two thirty two announcement yet is that there's the president
• 16:52
  Speaker 1: wants to do something big on stealing aluminium being the
• 16:55
  Speaker 1: stealings to steal it aluminium tariffs, right, he wants to
• 16:58
  Speaker 1: do something big. Uh. But at the same time, almost
• 17:01
  Speaker 1: everyone's administration, every cabin official except a few uh as,
• 17:05
  Speaker 1: entire National Economic Council think that this this the still
• 17:07
  Speaker 1: aluminum tariffs, these global tariffs in a non targeted way
• 17:10
  Speaker 1: would be an awful idea. Similarly, section three oh one,
• 17:13
  Speaker 1: the president wants to go big. Other people are saying, look,
• 17:16
  Speaker 1: this is potentially problematic. Sorry, that's the intellectual property theft
• 17:19
  Speaker 1: uh tariffs uh. And and so there's this desire by
• 17:22
  Speaker 1: the president to go big, and his even inside the
• 17:25
  Speaker 1: Trump White House, there's a desire to tamp this down
• 17:27
  Speaker 1: because they realize that this could get out of control.
• 17:29
  Speaker 1: And as a result, you've had this in action because
• 17:32
  Speaker 1: there's an inability to come to consensus. This will end
• 17:35
  Speaker 1: sometime soon because you have deadlines on some of these
• 17:37
  Speaker 1: endings soon the steel aluminum terrorists, for instance, had to
• 17:40
  Speaker 1: be done by mid April or the authority goes away
• 17:44
  Speaker 1: just to go back to this intellectual property thing. In
• 17:46
  Speaker 1: the worst case scenario for consumer how does this show up.
• 17:50
  Speaker 1: Does this mean someone's iPhone becomes more expensive? Does this
• 17:53
  Speaker 1: mean you can't afford the via television? Tell us the
• 17:56
  Speaker 1: detail right, So you have first order effects and then
• 18:00
  Speaker 1: you have second and third order effects. So the first
• 18:02
  Speaker 1: order effect. In the worst case scenario, which of course
• 18:04
  Speaker 1: is not our baseline scenario right now, the President decides
• 18:08
  Speaker 1: to go big on consumer electronics and says We're going
• 18:10
  Speaker 1: to put a large tariff on everything coming out of China. Yes,
• 18:15
  Speaker 1: consumers will feel the brunt to that, but I think
• 18:17
  Speaker 1: the bigger brunt will be the second thord or effects.
• 18:21
  Speaker 1: First of all, China will retaliate. They'll start nail, you know,
• 18:23
  Speaker 1: hammering our farmers, soybean exports, et cetera. At the same time,
• 18:27
  Speaker 1: businesses operating in China will have a very difficult time.
• 18:30
  Speaker 1: So if you're Bowing, if your Apple, if you're any
• 18:32
  Speaker 1: of these other companies that are trying to make inroads,
• 18:34
  Speaker 1: you're in big trouble because the Chinese will either react
• 18:36
  Speaker 1: immediately or you will have this cloud of uncertainty hanging
• 18:39
  Speaker 1: over you for the for the foreseeable future. Are there
• 18:43
  Speaker 1: any estimates for how much China's GDP will get reduced
• 18:48
  Speaker 1: if there is some sort of trade war, the question
• 18:52
  Speaker 1: is is will will any reduction GDP ever get acknowledged
• 18:56
  Speaker 1: by the government. So maybe this will be without any
• 18:58
  Speaker 1: loss of GDP for the all right, fair enough. But
• 19:01
  Speaker 1: the reason why I asked, though, is because people say,
• 19:03
  Speaker 1: you know, if China catches a cold, the emerging markets
• 19:05
  Speaker 1: get the flu. UH. People look at this as a
• 19:07
  Speaker 1: bell weather of one of the hottest trades UH, you know,
• 19:10
  Speaker 1: in the past few years. So you know what's going
• 19:13
  Speaker 1: to be the bleed out effect of a trade war.
• 19:16
  Speaker 1: So again, if you have this worst case scenario, UM,
• 19:19
  Speaker 1: you will have a substantial drop in GDP UM the
• 19:23
  Speaker 1: Chinese UH. You can talk about the Chinese economy being
• 19:26
  Speaker 1: more and more reliant on its own consumers internally, but
• 19:29
  Speaker 1: that just hasn't happened yet. You know, you're still seeing
• 19:31
  Speaker 1: these enormous trade flows UM and and and that's the
• 19:35
  Speaker 1: way they wanted. And so if you have a problem
• 19:37
  Speaker 1: with UH, with with trade, and you have the US
• 19:40
  Speaker 1: clamping down and China clamping down back, you will have
• 19:42
  Speaker 1: a problem in China. You will have a problem in
• 19:44
  Speaker 1: emerging markets. And UM's it's a little bit hard hard
• 19:47
  Speaker 1: to quantify because you can't believe the GDP figures, but
• 19:50
  Speaker 1: you would certainly have something at least as serious as
• 19:52
  Speaker 1: what happened at the end of two fifteen early in
• 19:56
  Speaker 1: terms of in terms of an economic crisis, Leland, what
• 20:01
  Speaker 1: books or journals would you recommend that people read if
• 20:05
  Speaker 1: they want to educate themselves more deeply in how China
• 20:08
  Speaker 1: really works. You know, it's getting harder and harder because
• 20:12
  Speaker 1: if you if you saw the the announcement the Chinese
• 20:16
  Speaker 1: are banning like the letter N, the words shameless and
• 20:18
  Speaker 1: all these other other things. Um, you know, it's it's
• 20:22
  Speaker 1: getting hold hold. Maybe people don't know about Hell's help,
• 20:25
  Speaker 1: what happened well, and and and the other. The last
• 20:27
  Speaker 1: few weeks, the censorship has been ramping up even more
• 20:30
  Speaker 1: than in the norm. And if you're seeing these almost
• 20:33
  Speaker 1: comical censorship of words from shameless was one of them.
• 20:37
  Speaker 1: There was a handful of other words that are hominem's
• 20:40
  Speaker 1: with leaders names. But the word the letter N was
• 20:43
  Speaker 1: was actually banned because that was supposed to signify uh
• 20:46
  Speaker 1: n is greater than two, which means she's terms were
• 20:50
  Speaker 1: she's new term, lifelong term is is greater than two,
• 20:53
  Speaker 1: it's any equals infinity, whatever it might be. The Chinese
• 20:57
  Speaker 1: were going overboard with that. It's got a lot of
• 20:59
  Speaker 1: media coverage lately, and it just shows you that getting
• 21:01
  Speaker 1: information out of China is much more difficult now than
• 21:05
  Speaker 1: it was in past years. But I mean, is there
• 21:07
  Speaker 1: something that you could recommend, because I mean, even just
• 21:09
  Speaker 1: to understand the structure of the of the country's politics,
• 21:13
  Speaker 1: the party is actually above the government, right, not anymore
• 21:18
  Speaker 1: now it's all the same, right. Well, that's that's the idea.
• 21:21
  Speaker 1: I mean, the party, the theory, the party above all.
• 21:23
  Speaker 1: But the more these these things are all merging into
• 21:26
  Speaker 1: this monolithic chi jin Ping uh force. Uh. That's that's
• 21:31
  Speaker 1: what China is now. You know. The mantra is China is,
• 21:34
  Speaker 1: the party is chi Jinping. Is there any economic data
• 21:37
  Speaker 1: that you rely upon that is actually an accurate number
• 21:40
  Speaker 1: coming out of China? We look at everything because everything,
• 21:44
  Speaker 1: uh put some shades, some some flavor into the overall picture.
• 21:48
  Speaker 1: But the reason we started China Bejing book back in
• 21:51
  Speaker 1: two thousand and ten is we didn't believe this stuff.
• 21:53
  Speaker 1: We thought we had to get it ourselves. So not really,
• 21:56
  Speaker 1: I want to thank you very much for coming in
• 21:58
  Speaker 1: and joining us. Leland Miller Chief exec gtive of China
• 22:01
  Speaker 1: beige Book International. Go ahead and follow them on Twitter
• 22:05
  Speaker 1: at China beige Book. Seems like an increasing number of
• 22:22
  Speaker 1: equity investors have sounded the all clear bell have dived
• 22:26
  Speaker 1: back into equities after the minor hiccup over the past
• 22:31
  Speaker 1: few weeks. Here to take stock of what investors are
• 22:34
  Speaker 1: looking to do in their stock portfolios. As Scott Wren,
• 22:37
  Speaker 1: senior Global Equity Strategist for the Wells Fargo Investment Institute
• 22:41
  Speaker 1: in St. Louis, he joins us here in our eleven
• 22:44
  Speaker 1: three studios in New York. Scott, thank you so much
• 22:47
  Speaker 1: for being here. I was just this morning looking at
• 22:50
  Speaker 1: twelve months tea bells and looking at how you can
• 22:52
  Speaker 1: now get two percent yields on that, and I'm wondering,
• 22:55
  Speaker 1: what do you tell your equity investors, your clients with
• 23:00
  Speaker 1: respect to how much money they should be holding in
• 23:02
  Speaker 1: cash right now. Well, Lisa, first of all, it's great
• 23:05
  Speaker 1: to be here. It's been a while since I've been
• 23:06
  Speaker 1: in studio. But you know, as far as our investors
• 23:10
  Speaker 1: and and I think you can generalize this to most
• 23:13
  Speaker 1: retail investors who that's That's who I'm dealing with. Most
• 23:16
  Speaker 1: of the time, UM, they've been under invested in stocks,
• 23:19
  Speaker 1: they've been sitting on too much cash. Would they love
• 23:21
  Speaker 1: to see five percent CE deals? Sure they would, We
• 23:24
  Speaker 1: probably all would, but you know that's probably not going
• 23:26
  Speaker 1: to happen anytime soon. These these interest rates are a
• 23:30
  Speaker 1: little higher, UM, but when we look out over the
• 23:33
  Speaker 1: course of the next few years, I still think that
• 23:36
  Speaker 1: stocks are going to be the outperformers there. So UM,
• 23:41
  Speaker 1: you know, our fixed income um UH team has not
• 23:45
  Speaker 1: really started to recommend getting locked in here with these
• 23:48
  Speaker 1: slightly higher rates, but UM, we like stocks order bonds,
• 23:52
  Speaker 1: all right, So do you sell bonds in order to
• 23:55
  Speaker 1: deploy the cash that you might have into equities? Well,
• 23:59
  Speaker 1: I think that that UM for one thing, PIM most
• 24:03
  Speaker 1: of our clients still have cash, so they could just
• 24:05
  Speaker 1: step in and not do anything with their bond portfolio.
• 24:07
  Speaker 1: But I think, you know, you could argue that if
• 24:10
  Speaker 1: you're locked in in an intermediate type of duration and
• 24:12
  Speaker 1: you don't have any cash, you know, we want to
• 24:15
  Speaker 1: be in stock. So I mean, if if that's your
• 24:17
  Speaker 1: only choice and you do not have any cash, UM,
• 24:20
  Speaker 1: you know, we wouldn't mind lightning up on let's say,
• 24:23
  Speaker 1: high yield bonds. Something like that, and and moving some
• 24:27
  Speaker 1: of that money into stocks. So, Scott, have you changed
• 24:31
  Speaker 1: any of your preferences within the equity universe over the
• 24:35
  Speaker 1: past few weeks, just as we kind of reassessed the
• 24:39
  Speaker 1: growth picture the yield picture. Well, I would like to
• 24:43
  Speaker 1: say that, you know, this was all skilled, but it
• 24:46
  Speaker 1: was probably a little luck to in the sectors that
• 24:48
  Speaker 1: we have been really leaning toward. UM. In terms of
• 24:51
  Speaker 1: domestic we've been leaning towards industrials and consumer discretionary and
• 24:56
  Speaker 1: financials and healthcare, and we like those. We had in
• 25:00
  Speaker 1: those for a while, but we like them prior to
• 25:03
  Speaker 1: the change in the tax code, and then when the
• 25:05
  Speaker 1: tax code was changed, we even like them more. So.
• 25:09
  Speaker 1: You know, what we want our clients doing is being assertive.
• 25:12
  Speaker 1: We want them leaning towards these sectors that are going
• 25:14
  Speaker 1: to benefit from a continuation of this expansion, which I
• 25:18
  Speaker 1: think was probably UM drawn out for maybe another year
• 25:23
  Speaker 1: or two couple of years based on the new tax
• 25:26
  Speaker 1: uh tax reform. But what we don't want our clients
• 25:29
  Speaker 1: doing is getting defensive. There will be some time at
• 25:33
  Speaker 1: some point in the future to get defensive, but we've
• 25:35
  Speaker 1: been underweight staples, underweight utilities. We we like those positions. Um,
• 25:40
  Speaker 1: and we like them more since the new tax code
• 25:43
  Speaker 1: went into effect. Scott. It's interesting that you say we
• 25:45
  Speaker 1: we don't want them to get defensive. It suggests to
• 25:48
  Speaker 1: me that a number of clients have called you saying
• 25:51
  Speaker 1: is it time to get defensive? Is that the case?
• 25:53
  Speaker 1: That is the case? Lee, So you know, and I
• 25:55
  Speaker 1: think it's safe to say that. Um. You know, when
• 25:58
  Speaker 1: the when the market steadily goes up like it did
• 26:00
  Speaker 1: last year, my phone does not ring frequently. But when
• 26:03
  Speaker 1: the market drops in you know, five or six trading days,
• 26:07
  Speaker 1: my phone rings constantly. And so, um, you know they're
• 26:13
  Speaker 1: they're um, uh, they're concerned. Um, they're fearful. Uh. Initially
• 26:20
  Speaker 1: they were a little fearful that they missed out. Some
• 26:22
  Speaker 1: of them stepped in maybe a little closer to the
• 26:24
  Speaker 1: top than what they would like. But for the most part,
• 26:27
  Speaker 1: there are clients at on their side, on their hands. So, um,
• 26:31
  Speaker 1: some want to get defensive. We're trying to encourage them
• 26:33
  Speaker 1: not to do that. Scott. I want to steal something
• 26:36
  Speaker 1: from our colleague Tom Keane. The other day he talked
• 26:39
  Speaker 1: about the amount of time that investors spend worrying about
• 26:42
  Speaker 1: whether to get into a market can be something like
• 26:46
  Speaker 1: but when they pushed the panic button to get out,
• 26:50
  Speaker 1: that's something that maybe they spend five or ten percent
• 26:52
  Speaker 1: at the time. How do you educate someone to flip
• 26:55
  Speaker 1: that equation. I think what we try to do him
• 26:58
  Speaker 1: is is we try to look forward, of course, and
• 27:01
  Speaker 1: we're trying to say, what is the economy going to do?
• 27:04
  Speaker 1: What is inflation going to do? What is the federal
• 27:06
  Speaker 1: Reserve going to do? That's certainly we're focused on those
• 27:09
  Speaker 1: things right now. What are wages going to do? Because
• 27:12
  Speaker 1: I think that's been a worry for the market. Um So,
• 27:15
  Speaker 1: if the forward outlook is good and and valuations are
• 27:19
  Speaker 1: not stretched, which I don't believe that they are right now,
• 27:22
  Speaker 1: then we want our clients taking advantage of this volatility
• 27:26
  Speaker 1: and and I think you're going to see more downside
• 27:29
  Speaker 1: volatility now do I think we're going to see the
• 27:31
  Speaker 1: two hun day moving average again? And the SMP fund
• 27:34
  Speaker 1: probably not certainly not impossible, but I think we will
• 27:36
  Speaker 1: probably test a little lower here. You know, we've wanted
• 27:39
  Speaker 1: our clients to have a plan to put the cash
• 27:43
  Speaker 1: to work, and then when you have the opportunity, and
• 27:46
  Speaker 1: one of the hardest things to do is then to
• 27:48
  Speaker 1: get them to pull the trigger and jump in there.
• 27:51
  Speaker 1: You know, it's amazing to me that you've got that
• 27:53
  Speaker 1: many calls because of volatility. Wasn't that extreme, I mean,
• 27:56
  Speaker 1: aside from the VIX, but equities didn't sell off that much,
• 28:00
  Speaker 1: just really quickly. Does this concern you with respect to
• 28:04
  Speaker 1: investors sentiment and just how judy people could get if say,
• 28:07
  Speaker 1: the market does decline for an extended period of time.
• 28:11
  Speaker 1: It does. And you know, Lisa, when you look back
• 28:13
  Speaker 1: and and uh um, and you say, well gee um.
• 28:16
  Speaker 1: Over the over the last ninety years, the S and
• 28:19
  Speaker 1: P s had a ten percent pullback on average every
• 28:22
  Speaker 1: eleven months. We hadn't had one for two years. It
• 28:25
  Speaker 1: all happened in the course of a very short period
• 28:27
  Speaker 1: of time. That does uh. That does scare people. And
• 28:32
  Speaker 1: it is a concern because we had a number of
• 28:35
  Speaker 1: clients who were posing up to you know, better things
• 28:41
  Speaker 1: happening in the stock market. We dropped ten percent very quickly,
• 28:45
  Speaker 1: they back away. It makes them nervous. I want to
• 28:47
  Speaker 1: thank you very much for being with us as always.
• 28:49
  Speaker 1: Scott Wren is senior Global equity strategist for Wells Fargo
• 28:53
  Speaker 1: Investment Institute. Thanks for listening to the Bloomberg P and
• 29:00
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 29:03
  Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm
• 29:07
  Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on
• 29:11
  Speaker 1: Twitter at Lisa Abramo wits one. Before the podcast, you
• 29:14
  Speaker 1: can always catch us worldwide on Bloomberg Radio