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Overdependence On Fed Cuts Stems From Uncertainty: Slok · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you
• 0:05
  Speaker 1: along with my co host Lisa Brahmas. Each day we
• 0:07
  Speaker 1: bring you the most noteworthy and useful interviews for you
• 0:10
  Speaker 1: and your money, whether at the grocery store or the
• 0:12
  Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast
• 0:16
  Speaker 1: or wherever you listen to podcasts, as well as at
• 0:18
  Speaker 1: Bloomberg dot com. Try to find a theme right now
• 0:23
  Speaker 1: in today's market. Good luck, it probably will change tomorrow.
• 0:26
  Speaker 1: Joining us now is an economist who puts out tremendous
• 0:29
  Speaker 1: research every day that shows just what people are focused on.
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  Speaker 1: His latest note shows that macro investing is just getting
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  Speaker 1: that much more challenging amid the changing political backdrop that
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  Speaker 1: we end up seeing every day. Let's bring in Torsten Slock,
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  Speaker 1: chief economist for Deutsche Bank. Thank you so much for
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  Speaker 1: being with us. Let's just talk about how challenging it
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  Speaker 1: is right now for macro investors and identifying a theme
• 0:56
  Speaker 1: that you can sink your teeth into and depend on. Yeah, no, highly,
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  Speaker 1: it's what art bank that I work. But it's true
• 1:01
  Speaker 1: that the environment at the moment has become much more
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  Speaker 1: difficult because central banks are basically not moving interest rates.
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  Speaker 1: So the thing we're pointing out here is that when
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  Speaker 1: interest rates basically don't go down or don't go up,
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  Speaker 1: then you have an environment where there's just no longer
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  Speaker 1: lasting trends in markets, and that just makes things difficult
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  Speaker 1: both for rates investors and also for excellent effects investors.
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  Speaker 1: So towards one of the issues I think that investors
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  Speaker 1: are trying to get a sense of now is you know,
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  Speaker 1: as we think about all the geopolitical issues, trade tensions
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  Speaker 1: with China and Mexico, do you believe the market is
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  Speaker 1: properly discounting some of these global trade tensions right now? Yeah,
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  Speaker 1: this is a really important question pulled because what we're
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  Speaker 1: all trying to do in the investing community is to
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  Speaker 1: try to quantify these risks. The first question is what
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  Speaker 1: has happened up to this point? How do we quantify that?
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  Speaker 1: Because we already know what has happened up to this point,
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  Speaker 1: but even figuring out what that means has been quite difficult.
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  Speaker 1: If you look at confidence in the CEO serve is
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  Speaker 1: I look at confidence in the CFO surveys, then you
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  Speaker 1: do see that there is some deterioration once the trade
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  Speaker 1: wall began to escalate in two thousand and eighteen, but
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  Speaker 1: at the same time the employment numbers have remained ready
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  Speaker 1: to be strong, at least up until the latest months here.
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  Speaker 1: So it still is a really difficult struggle. We just
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  Speaker 1: don't have anything in the toolbox that really will can
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  Speaker 1: quantify this trade risk, which then leads investors to say, well,
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  Speaker 1: it's a risk I can't quantify, so I should just
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  Speaker 1: ignore it. Or is it a risk I can't quantify
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  Speaker 1: so I really have to take it seriously. And this
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  Speaker 1: is where the debate is with the many investors that
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  Speaker 1: we have at the moment, name me, is this something
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  Speaker 1: that we should just brush aside and say, oh, the
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  Speaker 1: economy is still fine, or is this something that actually
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  Speaker 1: could end up being much more serious and have much
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  Speaker 1: more downside risk to the economy than what we are
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  Speaker 1: expecting at the moment. So, tourist, and from your perspective,
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  Speaker 1: do you think that as a result, people have become
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  Speaker 1: overly focused on the Federal Reserve a sort of the
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  Speaker 1: key body that can give some direction here? Yeah, because
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  Speaker 1: that if when when tetra banks mean the G seven
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  Speaker 1: central pranks essentially not moving interest rates much and they're
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  Speaker 1: moving much less than they did just ten twenty years ago.
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  Speaker 1: Of course, then people start looking around and saying, Okay,
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  Speaker 1: changing policy is no longer a changing interest rates, but
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  Speaker 1: it's now a change in communication about what are we
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  Speaker 1: doing And this is not only for the US, but
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  Speaker 1: what are we doing globally on unconventional monetary policy, everything
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  Speaker 1: from forward guidance to a queue, which of course is
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  Speaker 1: less of an issue now, but now where they're talking
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  Speaker 1: about you control other ways of stimulating the economy next
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  Speaker 1: time we have a slowdown, and the interpretation of these
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  Speaker 1: non conventional monetary policy tools and most importantly all these
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  Speaker 1: things that are not interest rates just makes things much
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  Speaker 1: more difficult. So to your good question, Lisa, it really
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  Speaker 1: is much more into the nitty gridy of what exactly
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  Speaker 1: is intended with this fait communication and should we interpret
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  Speaker 1: that as more easy is coming, or should we interpreted
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  Speaker 1: as hey, we're just looking at this and we will
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  Speaker 1: be doing something. We don't quite know exactly what it is,
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  Speaker 1: but we will be doing something if there is a
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  Speaker 1: sharper slowdown, And for the FED, of course it's lowering
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  Speaker 1: interest rates initially, but if we do have a global slowdown,
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  Speaker 1: then we will all be debating again, should we then
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  Speaker 1: do que forward guidance, should we raise the inflation target?
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  Speaker 1: Should it be you control? That's why it it becomes
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  Speaker 1: a much more messy debate about what reactions are coming
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  Speaker 1: from the central bank, which makes it so difficult from
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  Speaker 1: a macro perspective to identify with what trends is that
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  Speaker 1: going to create, both in rates and also in effects.
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  Speaker 1: So towardsten I think what we're hearing more and more,
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  Speaker 1: um you know, is the potential or perhaps even likelihood
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  Speaker 1: by mid recession in the US. Is that something you
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  Speaker 1: think is you ascribed to? So we still think that's unlikely.
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  Speaker 1: A We think that the Fed will begin to think
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  Speaker 1: about cutting rates here in July and September and December,
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  Speaker 1: and once those cuts come through, we do think also
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  Speaker 1: that that ultimately will be a preemptive strikes, if you will,
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  Speaker 1: that will be enough to basically soften the slowdown that
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  Speaker 1: we're seeing. But at the end of the day, the
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  Speaker 1: sharpness of the slowdown that we are experiencing in the
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  Speaker 1: data is absolutely critical. And this again is very very
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  Speaker 1: closely related to what is your outboo for when the
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  Speaker 1: trade wall will end? If you think the trade will
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  Speaker 1: will escalate from here, well, then the economy might slow
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  Speaker 1: a bit more. If you think the trade was really
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  Speaker 1: going to have a full blow out trade wall where
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  Speaker 1: you will see significant increases in sterios and significant disruptions
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  Speaker 1: and supply chains, it could potentially be a lot worse.
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  Speaker 1: But it's really difficult where we stand today to come
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  Speaker 1: with the forecast because these things could go away as
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  Speaker 1: quickly as they came. In other words, this is something
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  Speaker 1: that is essentially a political situation that came relatively suddenly,
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  Speaker 1: and now if we do have a resolution deal, for example,
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  Speaker 1: at the D twenty meeting, then this risk could go
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  Speaker 1: away recively quickly. Again, so from a forecasting perspective, when
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  Speaker 1: you think about the outdoor for consumption capics and GDP,
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  Speaker 1: it just continues to be really difficult what your assumptions
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  Speaker 1: are about what will be the end game to the
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  Speaker 1: trade wall, and is there an endgame or is discming
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  Speaker 1: to continue for a very long period. I guess the
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  Speaker 1: Tourson there's a question of how much the U S
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  Speaker 1: economy would be slowing down anyway even if it weren't
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  Speaker 1: for the trade tensions. What are the recession risks putting
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  Speaker 1: aside trade tensions if you can just based on in
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  Speaker 1: organic slowdown given how late we are in the cycle. Yeah,
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  Speaker 1: this is really important. I mean, as you know also well,
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  Speaker 1: the two key components of GDP are consumption and capics
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  Speaker 1: or investment. And if you are a consumption one problem
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  Speaker 1: is that interest rates on credit cards have started to
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  Speaker 1: move higher, interest rates on auto loans have started to
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  Speaker 1: move higher. You've also seen the linquency rates on consumer
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  Speaker 1: loans have started to move slowly higher, and most important
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  Speaker 1: in this context, in the linquagy rates on auto loans
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  Speaker 1: have also started to move higher. So the first answer
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  Speaker 1: to your question is that there there's some something brewing erosion,
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  Speaker 1: if you will, and the liquidity rate for consumers that's
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  Speaker 1: beginning to slowly move higher. And when interest rates also
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  Speaker 1: move higher on credit cards, auto loans and other consumer loans,
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  Speaker 1: you do begin to a bit about what are the
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  Speaker 1: consequences organically outside the trade war to the consumer outlook
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  Speaker 1: and for topics. Last year, of course, we got the
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  Speaker 1: huge tax cut from the administration. This was very helpful
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  Speaker 1: in boosting topics, and now those tax cuts are beginning
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  Speaker 1: to slowly run out of steam. So the positive effects
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  Speaker 1: of that organically are also becoming smaller and smaller, so
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  Speaker 1: that's also resulted in some slowdown in the CAPIC data.
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  Speaker 1: So the long answer to your question is that even
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  Speaker 1: outside the trade war, we are indeed, as you're pointing
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  Speaker 1: out least that we're indeed seeing already some signs of
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  Speaker 1: risks in particular topics slowing down, but also the additional
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  Speaker 1: risk here to consumption because of the modest increase in
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  Speaker 1: the liquacy rates and the modest increase that we're seeing
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  Speaker 1: in course of borrowing. So we are watching where we
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  Speaker 1: are in the cycle and what the implications are for
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  Speaker 1: the organic outlook above and beyond what's going on with
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  Speaker 1: the trade war. Torsten Slock, thank you so much for
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  Speaker 1: joining us in your comments. Torstens the chief economist for
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  Speaker 1: Deutsche Bank, joining us on the phone. He is based
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  Speaker 1: in New York. Well. Trade tensions between the US and
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  Speaker 1: Mexico appear to have abated, at least for the time being,
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  Speaker 1: but President Trump told reporters that he reached a secret
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  Speaker 1: immigration pack with Mexico that will take effect when he
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  Speaker 1: wants it to, despite the country's insistence that there are
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  Speaker 1: no secret components of an immigration deal struck last week.
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  Speaker 1: So see if you can get some clarification here, we
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  Speaker 1: welcome Duncan. Would Duncan is a director of the Mexico
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  Speaker 1: Institute at the Wilson Center that is based in Washington.
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  Speaker 1: D C. Duncan, thanks so much for joining us. So
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  Speaker 1: can you give us any enlightenment on what this secret
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  Speaker 1: immigration deal might be? The best guest that we have
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  Speaker 1: is that Mexico has agreed that if after either forty
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  Speaker 1: five or ninety days, depending on which deadline they choose,
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  Speaker 1: I want to say they it's probably going to be
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  Speaker 1: the United States. UM if if enough, if enough progress
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  Speaker 1: hasn't been made on reducing the flow of Central Americans
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  Speaker 1: through Mexico to the US southwest border, that Mexico would
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  Speaker 1: consider becoming a safe third country. In other words, that
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  Speaker 1: Mexico would be a place in which refugees or asylum
• 9:16
  Speaker 1: seekers rather could could or should seek asylum after leaving
• 9:23
  Speaker 1: their home country. So, in other words, Guatemalan's, Honduran Salvadorians
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  Speaker 1: who are coming up through Mexico would have to seek
• 9:31
  Speaker 1: refugee status asylum in Mexico rather than in the United States.
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  Speaker 1: And that's something that Mexico has resisted for a long
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  Speaker 1: long time. UM it greatly reduces the burden on the
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  Speaker 1: United States because if anybody does make it up to
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  Speaker 1: the United States border, then they would be immediately returned
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  Speaker 1: to Mexico and they would have to apply for asylum there.
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  Speaker 1: So that's really what I think that we're we're probably
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  Speaker 1: looking at um. It's gonna cause a huge to go
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  Speaker 1: stink in Mexico if that's what the deal is, because
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  Speaker 1: a lot of people are going to say, once again,
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  Speaker 1: Mexico is essentially rolling over for the United States. Already,
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  Speaker 1: there are so many op eds being written in Mexico
• 10:12
  Speaker 1: and commentaries on on television that Mexico has essentially become
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  Speaker 1: the wall for the United States. Rather than following through
• 10:19
  Speaker 1: on Donald Trump's promised to make Mexico pay for the wall,
• 10:22
  Speaker 1: Mexico is the wall for the United States, and that
• 10:25
  Speaker 1: it will essentially stop migrants from coming up through the country.
• 10:29
  Speaker 1: So I think that this is a it's politically explosive
• 10:31
  Speaker 1: for the President Lopezo Brodord, but it may be the
• 10:35
  Speaker 1: only way that they see to avoid the application or
• 10:37
  Speaker 1: in position of tariffs at this point in time. So
• 10:39
  Speaker 1: does that mean that the implement implementation of tariffs is
• 10:43
  Speaker 1: more likely than people are realizing at this point. My
• 10:47
  Speaker 1: reading of what the President has said. President Trump has
• 10:51
  Speaker 1: said is that they have been suspended. Yes, he said indefinitely,
• 10:55
  Speaker 1: and people tend to interpret indefinitely is being long term.
• 10:58
  Speaker 1: I don't see it that way at all. I see
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  Speaker 1: it at You know, if Mexico does not succeed in
• 11:02
  Speaker 1: stopping the flow of Central Americans, then the five percent
• 11:04
  Speaker 1: tariff can be pulled out of the toolbox again and
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  Speaker 1: slapped on Mexico, And of course that creates huge uncertainty
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  Speaker 1: for Mexico UM at a time when the Mexican economy
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  Speaker 1: is not doing well, at a time when President Lopez
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  Speaker 1: overdoors economic plans are not going well, and investor confidences
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  Speaker 1: is disappearing in Mexico. So this is absolutely um. You know,
• 11:27
  Speaker 1: it's terrible timing for Mexico UM and therefore makes President
• 11:31
  Speaker 1: Trump's threat that much more effective. So, duncan, do you
• 11:35
  Speaker 1: think that Mexico has the capabilities to meaningfully stem illegal immigration?
• 11:41
  Speaker 1: I don't. I have to say that. You know, Mexico
• 11:44
  Speaker 1: has been working exceptionally hard over the last five years,
• 11:48
  Speaker 1: essentially since two thousand and fourteen, to to detain and
• 11:51
  Speaker 1: deport hundreds of thousands of Central Americans. In fact, if
• 11:55
  Speaker 1: you look at the last five years as a whole,
• 11:58
  Speaker 1: Central Mexico has parted more Central Americans than the United
• 12:01
  Speaker 1: States has um And you know, Mexico has been doing
• 12:05
  Speaker 1: an incredible job. The problem is that the crisis is
• 12:07
  Speaker 1: so huge now that Mexican authorities are overwhelmed. US authorities
• 12:12
  Speaker 1: and agencies are overwhelmed, and it would require a massive
• 12:16
  Speaker 1: injection of resources financial, human, technical, and technological to actually
• 12:22
  Speaker 1: begin to stem the flow. The gambit here is that
• 12:25
  Speaker 1: if you had Mexico adopting safe third country status, then
• 12:30
  Speaker 1: the migrants would choose not to come. And I think
• 12:34
  Speaker 1: that's a pretty big gamble if you ask me, I
• 12:36
  Speaker 1: don't think that. I think that people are leaving because
• 12:39
  Speaker 1: conditions are terrible. They're desperate to get to the United States.
• 12:41
  Speaker 1: Let's say they do land in in Mexico and you
• 12:45
  Speaker 1: know they're they're forced to seek asylum there. That doesn't
• 12:48
  Speaker 1: mean they'll stop moving. Once they have asylum in Mexico,
• 12:50
  Speaker 1: they can still move up to the United States. We're
• 12:52
  Speaker 1: still going to see massive levels of illegal migration across
• 12:56
  Speaker 1: the Southwest border, so duncan One key question here is
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  Speaker 1: President and Trump is sort of using his executive power
• 13:03
  Speaker 1: to threaten these tariffs and possibly impose them on Mexico.
• 13:08
  Speaker 1: UH in an unusual way. It's the first time, at
• 13:11
  Speaker 1: least in modern history, that a president has used them
• 13:13
  Speaker 1: this way. And I'm wondering whether they'll be challenges to that.
• 13:17
  Speaker 1: In other words, is this something that could face opposition
• 13:22
  Speaker 1: internally or is it totally a go. Sorry, when you
• 13:27
  Speaker 1: mean internally, do you mean internally in the United States?
• 13:29
  Speaker 1: In the United States. No. I think that we've already
• 13:31
  Speaker 1: seen opposition in the United States. We've seen business associations, UM,
• 13:36
  Speaker 1: We've seen members of Congress stating that this is a
• 13:39
  Speaker 1: dangerous path to go down. But what's what I think
• 13:42
  Speaker 1: is is telling is that we haven't seen any really
• 13:45
  Speaker 1: well coordinated opposition, nobody standing up in Congress and saying
• 13:49
  Speaker 1: that they will seek legal means of restraining the president
• 13:54
  Speaker 1: from from applying these kind of tariffs UM. And I
• 13:57
  Speaker 1: think part of it is that you know, the the
• 13:59
  Speaker 1: E p a UM, the powers under which he would
• 14:02
  Speaker 1: he would apply these tariffs. I think it's it's quite
• 14:04
  Speaker 1: I mean, it's it hasn't really been properly explored. UM.
• 14:08
  Speaker 1: And so we'd we'd all be hanging on tenter hooks
• 14:11
  Speaker 1: waiting to see what a court would rule on this.
• 14:14
  Speaker 1: UM and I think that you know, most people have
• 14:17
  Speaker 1: accepted that if it was just a five percent tariff,
• 14:19
  Speaker 1: then we could probably live with that. There would be
• 14:21
  Speaker 1: a depreciation of the Mexican paco to compensate for some
• 14:24
  Speaker 1: of that five percent UM, and you know, the trade
• 14:27
  Speaker 1: would continue. But once you get up beyond a ten
• 14:30
  Speaker 1: percent escalating tariff, and let's say you did get to
• 14:33
  Speaker 1: which was the original threat that by October it would
• 14:36
  Speaker 1: be a twenty percent tariff, then that's disastrous. That's disastrous
• 14:39
  Speaker 1: for integrated UM manufacturing platform in North America, it's disastrous
• 14:43
  Speaker 1: for supply chains, and it would cause a real crisis
• 14:46
  Speaker 1: in the Mexican economy. Don't get just real quickly twenty seconds.
• 14:49
  Speaker 1: What do the Mexican people feel right now? Are they
• 14:52
  Speaker 1: really coming up in arms against the tariff threat? So UM,
• 14:56
  Speaker 1: we've seen maximum public opinion of the United States fall
• 14:59
  Speaker 1: to historic lows. UM. We have seen overall support for
• 15:04
  Speaker 1: President Lopez Obrador UM and the fact that his his
• 15:07
  Speaker 1: overall attitude in negotiating with the United States essentially trying
• 15:10
  Speaker 1: to be as calm and moderate as possible. Um and
• 15:13
  Speaker 1: Mexicans do not believe that their country should become a
• 15:16
  Speaker 1: war for the United States. But at the same time,
• 15:17
  Speaker 1: their astues towards migrants is changing. They're becoming less welcoming,
• 15:21
  Speaker 1: less friendly towards Central American migrants than they ever have before.
• 15:24
  Speaker 1: So as we've seen in many countries around the world
• 15:26
  Speaker 1: that are overwhelmed with migration crises, unfortunately Mexico is is
• 15:30
  Speaker 1: going down the same path and that I think it
• 15:32
  Speaker 1: will become a less friendly country for migrants. Duncan would
• 15:35
  Speaker 1: thank you so much for being with us. Duncan Wood,
• 15:38
  Speaker 1: director of the Mexico Institute at the Wilson Center, joining
• 15:41
  Speaker 1: us from Washington, d C. A relatively quiet morning of
• 16:01
  Speaker 1: trading in the US equity indusseries. Not a big move
• 16:05
  Speaker 1: in either of the indusseries. First, let's go see where
• 16:07
  Speaker 1: there's some movement, maybe in a small cap world with
• 16:10
  Speaker 1: bloomer stocks. Editor Dave Wilson date, Well, you're definitely seeing
• 16:12
  Speaker 1: smaller companies down more than larger ones, that's for sure.
• 16:15
  Speaker 1: The Russell two thousand index down a half a percent,
• 16:18
  Speaker 1: in the SMP five hundreds only lowered by two tenths
• 16:21
  Speaker 1: of a percent. The russell steepest drop belongs to Sarah's Therapeutics,
• 16:25
  Speaker 1: whose ticker is mc RB. The drug developers fall in
• 16:29
  Speaker 1: twenty four percent after raising sixty million dollars in a
• 16:33
  Speaker 1: share sale. Ashford Hospitality Trust ticker a HT has lost
• 16:38
  Speaker 1: fifteen percent. The luxury hotel owner reduced its quarterly dividend
• 16:42
  Speaker 1: by half to six cents to share. Ashford's cut was
• 16:45
  Speaker 1: the first two thousand and eight when the payout was
• 16:48
  Speaker 1: eliminated entirely. And Meat Group ticker m e ET has
• 16:53
  Speaker 1: slipped almost nine percent. The social meeting app company was
• 16:57
  Speaker 1: the subject of a critical report by a short selling
• 17:00
  Speaker 1: firm called The Friendly Bear. Now the Russell's biggest game
• 17:03
  Speaker 1: belongs to our Quel ticker a r q L. The
• 17:07
  Speaker 1: developer of cancer treatments, is up thirty five and a
• 17:11
  Speaker 1: half percent. Early stage studied data on a proposed blood
• 17:15
  Speaker 1: cancer drug was favorable, and Blue Green Vacations ticker b
• 17:19
  Speaker 1: x G has risen almost twenty nine percent the time
• 17:22
  Speaker 1: share owners settled the dispute with retailer Bass Pro Shops.
• 17:26
  Speaker 1: The deal will let Blue Green resume marketing at Bass
• 17:29
  Speaker 1: stores and expand into the country. The company's sister chain, Cabella's.
• 17:33
  Speaker 1: And we should know bb X capital ticker bb X
• 17:36
  Speaker 1: has a steak in blue Green and that stock is
• 17:38
  Speaker 1: up six and you see the headline, just Matt Chili. Yeah,
• 17:43
  Speaker 1: opening at thirty six dollars after initial public offering at
• 17:47
  Speaker 1: twenty two dollars a share. So this is one lucrative, uh,
• 17:52
  Speaker 1: pet food operation, you're not kidding. And pet Smart is
• 17:56
  Speaker 1: the seller of most of those shares that to We're
• 18:01
  Speaker 1: we're distributed, you might say, to investors in the initial
• 18:04
  Speaker 1: public offerings. So they're they're definitely a winner on this deal. Yeah,
• 18:07
  Speaker 1: losers are the people who are the debt investors because
• 18:10
  Speaker 1: they could have evidently raised more money to pay back
• 18:13
  Speaker 1: said dead investors. We'll get into that another time. Dave Wilson,
• 18:15
  Speaker 1: Bluebrick Sock seditor, thank you so much for that. It
• 18:18
  Speaker 1: is getting to be close to lunchtime on Wall Street
• 18:21
  Speaker 1: about I don't know, fifty five minutes if you have
• 18:23
  Speaker 1: at twelve o'clock exact kind of clock. And what I
• 18:26
  Speaker 1: feel like is a big, juicy plant based protein product
• 18:31
  Speaker 1: in a bun joining us now to talk about that.
• 18:33
  Speaker 1: Dina Shanker, she's a consumer reporter for Bloomberg News. Um,
• 18:37
  Speaker 1: I'm talking about the Impossible Burger because evidently it's incredibly
• 18:40
  Speaker 1: popular as it gets rolled out to what it says
• 18:43
  Speaker 1: is nine thousand stores, perhaps a little too popular. Can
• 18:46
  Speaker 1: you give us a sense of what's going on here? Yes, definitely,
• 18:49
  Speaker 1: So Impossible is having a lot of trouble supplying its
• 18:52
  Speaker 1: customers specifically, uh even White Castle and Red Robin, these
• 18:57
  Speaker 1: are major fast food chains, are not able to get
• 19:00
  Speaker 1: their hands on the product at the same time impossible
• 19:03
  Speaker 1: as rolling out into more and more burger Kings. So
• 19:06
  Speaker 1: whether there's a cause and effect there, that's that's a
• 19:09
  Speaker 1: good question. So I mean, as you mentioned, I mean
• 19:11
  Speaker 1: these are not just organic stores, organic outlets. They're bringing
• 19:16
  Speaker 1: these synthetic burgers to Burger King, right, that's right. The
• 19:21
  Speaker 1: plant based burger mania is widespread. It's gone way beyond
• 19:26
  Speaker 1: the vegans and the vegetarians and is fully mainstream. So
• 19:31
  Speaker 1: these companies, these big restaurant companies, are really trying to
• 19:34
  Speaker 1: get their hands on these products, and they do bring
• 19:37
  Speaker 1: new customers into the stores. So Impossible Foods is leaving
• 19:41
  Speaker 1: some of these restaurants in a tough spot. Well, so
• 19:44
  Speaker 1: I guess I'm wondering are we are we seeing a
• 19:46
  Speaker 1: sort of a Tesla moment here with respect to Beyond Meat.
• 19:49
  Speaker 1: I'm talking about Beyond Me because their I p O
• 19:51
  Speaker 1: has been just absolutely unbelievable, astronomical types of gains and
• 19:57
  Speaker 1: impossible foods also attracting a lot of attention. But is
• 20:01
  Speaker 1: it an issue where they can't kind of fulfill in
• 20:03
  Speaker 1: the promise of the supplies. So that's the big question
• 20:09
  Speaker 1: right now for what it's worth. Beyond Meat said that
• 20:12
  Speaker 1: they learned a lot from their shortages in eighteen and
• 20:15
  Speaker 1: that they don't see that really happening again. But at
• 20:18
  Speaker 1: the same time, Free Birds as a burrito chain in Texas,
• 20:22
  Speaker 1: and they reported that they don't have their Beyond Meat products.
• 20:26
  Speaker 1: So I think we're going to have to wait and
• 20:29
  Speaker 1: see how long these shortages last and how widespread they are.
• 20:32
  Speaker 1: But it does seem like keeping up with demand is
• 20:35
  Speaker 1: one of the biggest, if not the biggest challenges that
• 20:37
  Speaker 1: these companies have. So that raises the question for me
• 20:40
  Speaker 1: barriers to entry um, Why can't any existing food company
• 20:45
  Speaker 1: come out with their own synthetic kind of thing and
• 20:48
  Speaker 1: just kind of take over the market and push some
• 20:49
  Speaker 1: of these smaller companies out like Tyson Tyson. So actually
• 20:53
  Speaker 1: there are a lot of companies in this space, and
• 20:55
  Speaker 1: they are big and small. Tyson just unveiled its own Uh.
• 21:01
  Speaker 1: Some would call it a competitor to the Beyond and
• 21:03
  Speaker 1: the Impossible Burger, but it's actually a half beef half
• 21:06
  Speaker 1: p protein blend. So whether or not you get the
• 21:10
  Speaker 1: same customer is a question that will remain to be answered. Um.
• 21:16
  Speaker 1: And then you have other smaller companies that you've probably
• 21:19
  Speaker 1: never heard of, that are pushing out their own versions
• 21:22
  Speaker 1: um quietly, carefully to make sure that they can meet
• 21:25
  Speaker 1: the demand when it's there. Yeah, I didn't know that
• 21:27
  Speaker 1: flexitarian was a thing, but evidently that's a thing, and
• 21:30
  Speaker 1: Tyson's gonna cater to those flexitarians. But I'm wondering, Dina,
• 21:35
  Speaker 1: have you had an Impossible Burger and Beyond meat products
• 21:39
  Speaker 1: if you tried all these? So I've had both of them,
• 21:42
  Speaker 1: but I have not had an Impossible Burger recently. That
• 21:45
  Speaker 1: was actually how we figured out this shortage was happening
• 21:48
  Speaker 1: was because I went to a white castle near my apartment.
• 21:51
  Speaker 1: It said impossible sliders right outside on the sign, and
• 21:54
  Speaker 1: turned out they were all out. So do you think
• 21:56
  Speaker 1: that they are as good as the meat version. I
• 22:00
  Speaker 1: don't need meet I'm not the target customer. Actually, you're
• 22:05
  Speaker 1: exactly teustomer. But we actually did have a Dave Wilson
• 22:09
  Speaker 1: kind of review of several days ago, and Dave Wilson,
• 22:12
  Speaker 1: Bloomberg Stocks editor, is a Hamburger eater by his own admission,
• 22:17
  Speaker 1: and he said it was okay. He said it was okay.
• 22:19
  Speaker 1: So that's that's a win, I think, Yeah, But I
• 22:21
  Speaker 1: think it's kind of our journalistic duty. At some point
• 22:23
  Speaker 1: over the next week, I think we have to go
• 22:24
  Speaker 1: have a beyond meat Burger just to have some some
• 22:27
  Speaker 1: primary research on it. Amen, let's go make a lunch date.
• 22:31
  Speaker 1: Thank you so much. Gina Shanker, consumer reporter for Bloomberg News.
• 22:35
  Speaker 1: Really really great reporting and interesting to sort of see
• 22:37
  Speaker 1: how this supply issue is sort of emerging in some
• 22:41
  Speaker 1: of these very hot startups and less more than startups. Right,
• 22:45
  Speaker 1: But I'm thinking about Tesla, and I said Tesla moment,
• 22:47
  Speaker 1: because you know, when demand so outstripping supply and some
• 22:51
  Speaker 1: of these fat companies or more than fad uh see
• 22:55
  Speaker 1: change companies, it can become a serious headwind to the business. Yeah, exactly,
• 22:59
  Speaker 1: And it kind of goes to the issue of you know,
• 23:01
  Speaker 1: when are some of these you know, big mainstream food companies,
• 23:04
  Speaker 1: you know that can really get product out there in scale,
• 23:07
  Speaker 1: and have they have the relationships with all the retailers.
• 23:09
  Speaker 1: They can really take over the market, but we haven't
• 23:11
  Speaker 1: seen that yet. We are so lucky to have with
• 23:25
  Speaker 1: us someone who has been watching the markets for decades
• 23:29
  Speaker 1: and looking for the accurate indicators to foretell the future.
• 23:33
  Speaker 1: Nicolas Co, founder of Data Trek Research, joining us here
• 23:37
  Speaker 1: in our Bloomberg Interactive Broker Studios. I want to start
• 23:40
  Speaker 1: with oil because it has been a big conundrum frankly
• 23:44
  Speaker 1: for people, especially given the fact that right now we're
• 23:46
  Speaker 1: seeing escalating tensions in the Middle East, which should lead
• 23:50
  Speaker 1: to price gains, which we saw briefly yesterday. Today we're
• 23:54
  Speaker 1: struggling to hold onto those What do you make I mean,
• 23:57
  Speaker 1: the larger takeaway, what do you make of the fact
• 23:59
  Speaker 1: that oil prices have really actually declined this year despite uh,
• 24:04
  Speaker 1: some of the ongoing growth that we're seeing. Yeah. No,
• 24:07
  Speaker 1: it's a great point. If you look back at the
• 24:09
  Speaker 1: chart from year to day to now, you're looking at
• 24:11
  Speaker 1: a peak back in April. It's down since then. Oil
• 24:14
  Speaker 1: is in a bear market as we speak, and you
• 24:17
  Speaker 1: have some little geopolitical riffs that kind of helped it yesterday.
• 24:20
  Speaker 1: But the bottom line is economic worries. Global economic worries
• 24:23
  Speaker 1: are clearly in the driver's seat when it comes to
• 24:25
  Speaker 1: oil prices, and that's negative because it's the bad sign
• 24:28
  Speaker 1: for the global economy. But on the plus side, you've
• 24:30
  Speaker 1: never had a recession at least since nineteen seventy in
• 24:33
  Speaker 1: the US without oil prices first doubling. It's the only
• 24:36
  Speaker 1: kind of clear recessionary indicator you can look at to
• 24:39
  Speaker 1: say we're in trouble. And the good news is we're
• 24:41
  Speaker 1: not on that point. So a lot of guests that
• 24:44
  Speaker 1: Lisa and I have been interviewing over the last really
• 24:46
  Speaker 1: several a couple of months have been suggesting that a
• 24:48
  Speaker 1: recession is increasingly likely by mid Is that something you
• 24:52
  Speaker 1: think that is reasonable? I get the fear. The fixed
• 24:56
  Speaker 1: income market tells you that's a fear of the Fed
• 24:58
  Speaker 1: funds futures market tells you that's a fear. So at
• 25:00
  Speaker 1: this point I think that's probably that's sort of default
• 25:03
  Speaker 1: value in people's minds. But you know, the oil price
• 25:06
  Speaker 1: thing is some measure of help and a federal reserve
• 25:09
  Speaker 1: that seems more inclined to cut rates might let us
• 25:12
  Speaker 1: sort of scape by a recession. But it certainly is
• 25:15
  Speaker 1: a low growth one one and a half percent growth
• 25:17
  Speaker 1: kind of environment for at least the next four quarters.
• 25:20
  Speaker 1: So I don't want to become that person who says
• 25:22
  Speaker 1: this time is different and everybody laughs at them when
• 25:24
  Speaker 1: it's not in about a year. But I guess I'm
• 25:27
  Speaker 1: wondering whether the dynamics in oil have changed to such
• 25:31
  Speaker 1: a degree given the shale output from the United States, Uh,
• 25:34
  Speaker 1: that that sort of the necessity for oil prices to
• 25:37
  Speaker 1: double ahead of a recession kind of loses it's it's
• 25:41
  Speaker 1: it's gravitas. It may well, I'd say. The other side
• 25:45
  Speaker 1: of it, though, is there's still a lot of oil
• 25:47
  Speaker 1: that goes through, you know, through the streights of four moves,
• 25:49
  Speaker 1: which is sort of the flash point right now. And typically,
• 25:52
  Speaker 1: you know, if you think back the seventy three and
• 25:54
  Speaker 1: seventy nine, access to oil has been as critical as
• 25:57
  Speaker 1: the price of it itself. You know, we had actual
• 25:59
  Speaker 1: short pages in both seven three and seventy nine here
• 26:02
  Speaker 1: in the US. It may not come to pass that
• 26:04
  Speaker 1: way because of national output, domestic output now, But I'd
• 26:07
  Speaker 1: say you'd want to see some bounce in oil prices
• 26:10
  Speaker 1: to think that we were at the cosp of seeing
• 26:12
  Speaker 1: a consumer and business environment that was going to be
• 26:15
  Speaker 1: worse than the next twelve months. In the prior. Lower
• 26:17
  Speaker 1: oil prices absolutely helps and provides a bit of a
• 26:20
  Speaker 1: tail wind. So, Nick, whether or not we have a
• 26:22
  Speaker 1: recession in is it time to get defensive in a portfolio?
• 26:27
  Speaker 1: That's the number one question I get from clients right
• 26:29
  Speaker 1: now is if if so? When the answer is, look,
• 26:32
  Speaker 1: I mean, the way I think about being defensive is
• 26:34
  Speaker 1: if you think it's not to be defensive, then be defensive. Um. Yeah,
• 26:37
  Speaker 1: there's no point in second guessing that ten years into
• 26:39
  Speaker 1: a recovery with you know, a fairly dicey global picture
• 26:43
  Speaker 1: both in terms of sovereign debt and corporate debt, both
• 26:46
  Speaker 1: obviously all time highs. And so the short answer is yes,
• 26:49
  Speaker 1: if you feel that way, absolutely, Our favorite defensive sectors
• 26:51
  Speaker 1: in the US market at least are real estate, a
• 26:55
  Speaker 1: lot of her hidden tech exposure that makes a little
• 26:57
  Speaker 1: growth through the utilities and consumer stables because as even
• 27:00
  Speaker 1: though there's been under a lot of attack, fundamentally they
• 27:03
  Speaker 1: do pay very good dividends, and they are relatively safe,
• 27:05
  Speaker 1: and they're big enough part of the SMP to actually
• 27:07
  Speaker 1: allow you to play defensive without having to double overweight
• 27:10
  Speaker 1: something like utilities. So rates you're saying, basically, yeah, reas
• 27:13
  Speaker 1: reach are kind of a misnomer. Now, if you look
• 27:15
  Speaker 1: at the top ten holdings in the xl r E,
• 27:17
  Speaker 1: for example, you're looking at things like cell phone towers,
• 27:20
  Speaker 1: and they've they've made reets into you mentioned cellphone tower
• 27:24
  Speaker 1: billboard companies. It's just amazing how they've used that reach
• 27:27
  Speaker 1: structure for lots of different insectors. Yeah, it's it's a
• 27:29
  Speaker 1: really a misnomer. It's not realisted anymore. It's it's structured
• 27:32
  Speaker 1: cash flows. That's what allows you to be a reat
• 27:34
  Speaker 1: um just by definition. And so that's I think a
• 27:37
  Speaker 1: hidden positive behind the real estate sector in the SMP.
• 27:40
  Speaker 1: The downside is it's small at three or three and
• 27:42
  Speaker 1: a half percent of the SMP. You can't double weight
• 27:44
  Speaker 1: that as a portfolio manager and still hold to a benchmark.
• 27:47
  Speaker 1: So you have to look at bigger structors like staples.
• 27:50
  Speaker 1: So why not just be super aggressive if you think
• 27:53
  Speaker 1: that we're not going to see recession? You know the
• 27:56
  Speaker 1: way to be super aggressive historically has been to be
• 27:58
  Speaker 1: really long tech. That's kind of a spicy play going
• 28:02
  Speaker 1: to back half of the year because if you read
• 28:04
  Speaker 1: you know the comments from the Deputy Assistant d g
• 28:06
  Speaker 1: earlier in the week and the speech and tele Aviv
• 28:08
  Speaker 1: talking about his thought process of regulating tech to anti trust,
• 28:11
  Speaker 1: it's very aggressive. Same thing on the House side of
• 28:14
  Speaker 1: these new Justice investigations. So I think it's a little
• 28:17
  Speaker 1: bit hard to be super long tech as a way
• 28:20
  Speaker 1: to be aggressive in the market. That's kind of what
• 28:22
  Speaker 1: I think what holds back gains for the back half
• 28:24
  Speaker 1: of the year. We're not going down if you really,
• 28:25
  Speaker 1: I don't think, but these regulations and issues with tech
• 28:28
  Speaker 1: are definitely gonna cap the tech upside that SMP. That's
• 28:32
  Speaker 1: interesting because it's a it's a topic that we've been
• 28:34
  Speaker 1: discussing for a while. Here has I guess asking the question,
• 28:37
  Speaker 1: has the worm really turned in terms of US regulation
• 28:41
  Speaker 1: of tech historically a very light touch. Has that fundamentally changed?
• 28:45
  Speaker 1: And I guess in your mind perhaps it might be
• 28:47
  Speaker 1: changing a little bit. My worry is that even if
• 28:49
  Speaker 1: nothing happens in the next year, you're gonna hear so
• 28:51
  Speaker 1: much about it because We're going into a very important
• 28:53
  Speaker 1: political year, and there's a very popular topic. We hear
• 28:56
  Speaker 1: it from clients and I hear it on social media
• 28:59
  Speaker 1: all the time. There's a lot of concern the tech
• 29:01
  Speaker 1: has gotten too big and there is some desire to
• 29:03
  Speaker 1: see some incremental regulation, perhaps not a full break up,
• 29:06
  Speaker 1: but regulation absolutely, and that is gonna cap sentiment. Yeah,
• 29:10
  Speaker 1: that's it's interesting. I think you're exactly right. I think
• 29:12
  Speaker 1: because I mean talk to UH institutional investors who are really,
• 29:16
  Speaker 1: you know, historically been in the tech space. One of
• 29:18
  Speaker 1: their big risks has been is that day ever going
• 29:21
  Speaker 1: to come when uh U S regulators will really take
• 29:24
  Speaker 1: a hard look at this industry. Historically it's just kind
• 29:26
  Speaker 1: of been the Europeans, you know, taking a look, whether
• 29:28
  Speaker 1: it's Microsoft years ago and UH. But the big, the
• 29:31
  Speaker 1: big downside scenario for a tech long story is US
• 29:35
  Speaker 1: regulatory risk. Nicholas thanks so much for joining us. Nika's
• 29:38
  Speaker 1: co founder of Data Trek Research, and he joins us
• 29:42
  Speaker 1: here in Bloomberg Interactor Broker Studio. Nick is also a
• 29:45
  Speaker 1: Bloomberg opinion columnist, taking a look at how to get
• 29:48
  Speaker 1: positioned in this market where ten plus years into this
• 29:52
  Speaker 1: economic cycle, we have rising trade uncertainties with two of
• 29:56
  Speaker 1: our biggest trading partners. Yet on the other side, we
• 29:59
  Speaker 1: have a very benign Federal Reserve who appears willing and
• 30:03
  Speaker 1: able to step in and support the market. So investors
• 30:07
  Speaker 1: are weighing those across the board. Thanks for listening to
• 30:10
  Speaker 1: the Bloomberg pen L podcast. You can subscribe and listen
• 30:13
  Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.
• 30:16
  Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa
• 30:19
  Speaker 1: abram Woy. It's I'm on Twitter at Lisa abram wits
• 30:22
  Speaker 1: one Before the podcast, you can always catch us worldwide.
• 30:24
  Speaker 1: I'm Bloomberg Radio