Mixed Reactions to Powell Pivot Plan

Published Dec 18, 2023, 10:34 PM

Bloomberg Opinion Columnist John Authers and Bloomberg News Equity Markets Reporter Elena Popina share their thoughts on how the Federal Reserve's plan to come down from high rates will be perilous even as the pivot is making everyday a record breaker in the markets. Wendy Thomas, CEO at Secureworks, discusses the impact of new SEC cybersecurity regulations. Sam Darwish, Co-Founder and CEO at IHS Towers, explains the business of building connectivity in developing regions. Bloomberg Businessweek Editor Joel Weber and Bloomberg News Consumer Reporter Deena Shanker provide the details of the Businessweek Magazine story Lab-Grown Chicken Becomes Another Expensive Silicon Valley Mess. And we Drive to the Close with Jay Jacobs, US Head of Thematics and Active Equity ETFs at BlackRock.
Hosts: Tim Stenovec. Producer: Paul Brennan. 

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W As I mentioned stocks just keep going up, continuing the week on a positive note, or kicking the week off on a positive note, I should say booyed by a burst of deals, even as Fed officials are kind of it's been in a last few days, a little bit over the weekend, sowing doubts that aggressive interest rate cuts are going to materialize next year. Here are a few of them, Chicago Fed President Austin Goolsby, Cleveland Fed President Lorettamester. They were the latest to join a growing course of central make officials tempering market optimism after their New York counterpart, John Williams last week said bets on a March reduction were premature. The equity market and the bond market are kind of ignoring them. Hey, we got a great roundtable to kick off our program this afternoon. John Authors is a senior editor for Markets and a Bloomberg Opinion columnist. Elena Popina is equity markets reporter for Bloomberg News. Both of them are here in the Bloomberg Interactive Brokers studio. John, I want to start with you because your latest column talks about the really quick rally that we've seen and how you know, I don't want to use this throw out this term, but essentially the easy money has been made at this point and if you're if you're looking to buy right now, your big question is what's going to happen over the next decade.

Arguably yes, I mean at the moment, the Fed, if we believe the dot plot, thinks there's going to be three cuts next year, which is more than they were saying before, and the Fed funds futures markets thinks they're going to be six. So it's hard to see how you get lower rates than are currently being priced in unless something happens to shock the Fed into cutting farm more than it currently wants to. I if there's a recession, which messes up equities.

So what happens if there is a recession the Fed has to cut more aggressively. What do we see from equities?

One would imagine past experience has been that pivots tend not to be great for equities because they are pivoting for a reason, surprise, which is that now that the economy is in trouble, if you have a pivot, as in twenty eighteen after the Christmas Eve massacre when j. Powell stepped back from I remember that, and that was an unusual pivot in that that was at a time when the economy wasn't any particular trouble and it just loosed the dogs of war that you have this fantastic rarey the following year. That's obvious roughly what we've had again this time because the Fed is very unusually getting worried about whether it should be cutting rates soon with unemployed with sorry, with growth at over five percent and unemployment at less than four percent, which is, you know, unusual. I don't see myself how the current rate forecast is. Oh, the current implicit rate forecast is is fulfilled, turns out to be accurate unless the economy turns out to be much worse than is currently being predicted.

Elena Popina, come on in here. You are Equen Markets report of fort Plomberg News. You joined us at the end of last week to give us an idea of what we saw when it came to week seven of gains for the S and P five hundred. Since then, you've spoken to quite a few cellside analysts. What have they told you about how they're thinking about not just the next few days and the remainder of the year, but also what happens next year.

Yeah, thank you guy, it's the pleasure to be here.

We are seeing quite a number of sales side analysts boosting their target prices for twelve months from now. The ratio of upgrades to target prices to downgrades is now at the highest level.

Since at least January twenty twenty two.

That's the previous time the S and P five hundred reached is all time high. Now, whether or not, you know, analysts are just reacting to the stock market that's gone up quite a bit in November and has gone quite a bit in December so far, is yet.

An open question.

To John's point, there is quite a bit of a concern that there is a mismatch between what the dot plot shows and what markets are expecting in terms of the pace of rate cuts next year. But the positive sign is that the rally seems to be broaden out for.

Example, the equal weighted S.

And P five hundred index inven paced for its best year since April twenty twenty two relative to the CALCU weighted S and P five hints. So it's not just maybe seven anymore. The laggards, the relative laggards like value stocks, are trying to outperform, so we gives more momentum and more breadth to the rally. But then yes, again they can be argumently that the rally has become quite a bit of an overextended. So we could with you for some kind of pullback after New years?

What does history tell us about these types of pullbacks? John?

I mean, I know you're not a technical analyst here, but in your experience and I'm sure though, you're also a chief investment officer of Hindsight Capital, so you have an idea.

With whom I've been in contact Ques.

Okay, so we'll wait to hear about Hindsight Capital later this year. But yeah, but what has history told us about moves like this?

Generally speaking, when you get moves this dramatic, there is a risk actually of a melt up. I mean, in terms of what Elena was saying. The positive way to put it is that breadths widened, which is good. The negative way to put it is that there's a dash for trash. So the Meme Stock Index the last time I checked, was up forty in a month. Something silly like that.

Lots of Crystal has been high.

Yes, lot Kathy Woods, our innovation et office had a great.

And lots of small caps that really don't look in good financial shape in terms of their credit have rallied. Now that's that isn't a sign of breadth, but it's also a sign of Okay, let's just buy the really cheap stuff now because everything's going to rip. The scenario that worries me because again I might be over over applying what's happened in my in my experience my career is LTCM in ninety eight, yes, which was I think the significant the great era of monetary policy in you since Volka And for those who don't know, LTCN was this huge hedge fund that began to melt down and got caught on the wrong side of all its trades. After Russia defaulted in August of ninety eight, the Fed organized you know, more or less forced all its banks its creditors to agree a bailout which didn't actually involve public money, which matters a lot. At the time, the credit market stayed becalmed, and so Greenspan cut rates. And the most palpable turn in sentiments in a day I've ever witnessed was the day that green Span cut rates between meetings without warning on a Thursday afternoon, and I think you know, bank stocks were up more than ten percent in the subse hour and the Globe dot com went public. About two weeks later, the NASDAK more than doubled over the last year. At that point, it looked as though the great bullmarket connected to the dot COM's had just reached a natural peak and was beginning to slide down. And that faithful decision to pivots, which wasn't stupid, there were reasons to do it. That the faithful decisions pivot led to, you know, the greatest melt up of all time, whose consequences you could argue, we are still dealing with. That strikes me. Eric balcun has had this fascinating chart. Apparently Friday saw the biggest flows into spy.

Oh wow.

Ever, I've tried checking it in percentage terms, and there were a few bigger days during the real hurly burly of the GFC. But in terms of actual money, more people put money into or more money was put into spy on Friday than on any other day ever before. That's that has the signs as somebody who has arguably been too bearish and too conservative over the years. That instinctively bothers me. Okay, I mean, it might mean you should buy now on a short time period, because wouldn't it have been fantastic to own stocks through the whole of nineteen ninety nine and get outside And lots of people will make that calculation. But in terms of what that means for the economy and the health of the financial system over the next decade, that's concerning to me.

Helene.

I want to give you the last word here and talk a little bit about what the analysts and you speak to tell you in terms of their bearishness, because it's kind of hard to find the bearers out there right now, isn't it.

Is It is kind of hard to find you.

We are looking at an hour of south Side analysts being quite bolish on the next half a year, with a few exceptions like Mike Wilson, like a few other analysts. But what I wanted to mention is that the election year historically this century has so far seen some weakness in the middle of the year, in the second and third quarters of the year.

We saw that. In two thousand, we saw that.

Obviously in two thousand and eight, we saw quite a bit of that.

In twenty twenty.

Now sum our goodness were new, exceptional, new periods of time, And yes, I agree with that. But you know, if history is any indication at this point, and I don't know whether that's going to be the key, we could see some fullback and you know, with stops me a record, we would be live for fullback sometime.

In the second and fourth quarter.

Lena Popina equity market reporter for Bloomberg News, John Author, Senior editor for Markets and a Bloomberg Opinion columnist. Here in our Bloomberg Interactive Broker studio, we're just getting started on this Monday afternoon.

This is Bloomberg Business Week.

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Well, some public companies are still trying to figure out exactly how to comply with new rules from the US Securities and Exchange Commission requiring speedy disclosure of significant cyber attacks. Those rules, which kicked in Monday, require companies to report cyber incidents within four business days of determining that they are quote material to shareholders. The sec previously required firms to disclose major events that would be of shareholder interest, but didn't specify cyber events. We did speak earlier on our program about cyber attack herding orders for Vans, north Face, Dicky's Supreme Gen Sport, Timberland owner VF Corp. And the way that those can really bring a company offline, especially at a crucial time like during the holiday season. Well, next guest knows a thing or two about cybersecurity. Wendy Thomas is president and CEO of Cure Works, the cybersecurity company. She's back with us once again, joining us on Zoom from Atlanta, Georgia. Wendy, good to have you with us this afternoon. How are you well.

I'm doing well.

Thanks for having me Tim, Well, thanks for joining us once again on this It's a little different environment than when we last spoke to you just a few months ago. Specifically, when it comes to this new SEC requiring ruling that requires speedy disclosure of significant cyber attacks, it seems like there's a lot of confusion with what exactly companies now have to disclose to their shareholders when it comes to cyber attacks.

What can you tell us about it?

Sure, glad to share the emerging insights into the new regulations. I think about it in sort of the front end and the back end. On the back end, as you mentioned, public companies now have to report cyber incidents that are determined by the company themselves to be material, which is a discussion in and of itself within four business days the primary back end requirement. But on the front end, the disclosures around everything from policies governing cybersecurity risks, the companies risk management processes, processes whereby management is informed about cyber incidents, and the board's oversight of that. All of those are now required to be disclosed in annual ten K filings by public companies, and so the scrutiny of whether we are pre pairing sufficiently for cyber incidents as well as disclosure about them on the back end is significantly ramped up.

I want to talk about this just because this one's in the news, but I mean, you could just replace VF Corp. With any given company at any given time.

VF Corp.

Suffered this cyber attack at pretty much the worst possible time and the most important quarter of the company, and it has hurt orders for Vans, north Face and other brands that the company has. I'm wondering, you know, how this stuff continues to happen when we understand that the threats are out there and so many companies are spending so much money on keeping their network safe.

They are spending significant amounts of money. But as you can see, the cyber criminal only has to be right once, and we have to be right in and out every day. And that's why it's so important for companies to have a security expert partner to help them prepare for and navigate situations like this to minimize the damage. There's nothing worse for a company than their high season to be impacted by this type of a cyber attack. And to be frank, the reason these regulations are in place is that when things like this hit the headlines, regulators feel impelled to incent companies to protect themselves proactively and then to be straightforward with shareholders or investors around what may be impacting their business in terms of its operations or financial performance. And this is a case in point of why we see new regulations coming out around this.

In your opinion, do the regulations go far enough?

The regulations, I think are a good first step in many ways, and I have no doubt we'll continue to see them evolve like many other new forms of rulemaking over the years. But what I will tell you is these regulations are not intended to punish. They are really intended to create the right incentives. Look twenty twenty three, I think it's on track to be the most prolific year for ransomware ever and to have one of the highest economic costs of security breaches to day. This cybercrime is an ongoing, continual transfer of wealth to criminal enterprises, and so I think that the SEC feels compelled to provide guidance around how to better prepare for these types of situations going forward. And frankly, they've raised the bar for CEOs, CSOs and boards of directors around preparing for these types of incidents.

What, in your opinion, is the right amount of money for a company to actually spend on keeping their company secure from cyber attacks.

Not a.

Single figure, not a single figure, but a certain like a portion of revenues for example, or portion of expenses.

That does vary a bit, and I'm glad to provide some ranges there. It does vary a bit depending on whether the organization is in a highly attacked and frankly highly regulated industry eating like.

A healthcare or financial services for example, Exactly.

They have a much higher standard. Now what we see is damages to companies that are more in the manufacturing in the retail space. So it does matter from a business up time and financial performance perspective, But generally we expect to see companies spending somewhere in the four to five percent range. It can sort of merge into other technology spend a little bit, because you can have secure by design technology deployments, But somewhere between that and twelve to fifteen percent of your total technology spend is what we see typically in place. Again, for businesses that aren't necessarily in a highly regulated industry.

Do you see that portion moving up?

I do see that portion moving up, but I also see it moving in terms of mix. So while you want to invest in preventing as much as you possibly can, what these regulations are showing is that you have to invest in you aren't able to prevent everything. So you absolutely have to be able to detect quickly because with these regulations, the ability to assess the impact of an incident in terms of what it's going to do to your business operations and the financial outcomes of that. You absolutely cannot do that with humans alone. It requires technology investments and investments in awareness and preparation of your team. So I do think that the mix is going to shift quite a bit towards the detection and preparation aspect of this.

Wendy, we've talked a lot about AI and in the context of, you know, making companies more productive and being able to be more efficient. We've talked about it too in the concept of people being worried about AI, sort of like the way that Elon Musk gets concerned about AGI. I'm wondering how you've seen or how you could see threat actors use AI to pose as humans to actually gain access to networks. What's worst case scenario here that you guys are thinking about over at secure works.

Or as we've talked about before, the power in the peril of AI is very real for cybersecurity, and so while the power of it to be able to detect certain behavioral techniques of the adversary are are incredibly important for how we operate as secure works, we also see the adversary taking advantage of these tools and techniques as well. And I think the most near term one that we have seen and increasingly concerns us in terms of its accelerated use, is around deep fakes, with the ability to impersonate a CEO not just in an email, but in a video, and to do that at scale with large language models like chat, GPT, it just has put a pace of deployment and a fidelity of believability in what they're using to deceive, just taking it to another level, and that's the primary area where we're focused on the ability to detect.

Yeah, thing is you mean you have to remain sovid vigilant regardless of who's you know in your organization, from person with access to certain systems versus the person whose password or log in credentials could be compromised. Wendy, we love it when you join us. Wendy Thomas is President and chief executive officer of Secure Works. Back with us on Zoom from Atlanta, Georgia. You're listening to Bloomberg Business Week.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.

Well the next guest has made his living connecting people. Sam Darwish is the co founder, chairman, and CEO of one of the world's largest independent owners, operators and developers of towers, providing communication infrastructure in eleven markets, serving about seven hundred and seventy million people. He joins us on Zoom this afternoon. He's the CEO of IHS Towers. It's got nearly forty thousand towers across Africa, Latin America and the Middle East. Also the co founder and chairman of the company. Good to have you with us this afternoon. Sam, How are you good?

Good?

Thank you? How are you hey?

I'm doing really well. Hey, this is perfect timing for you to come on our program because we are our own tech Bloomberg Technology team that day and mad Day and team wrote a piece about Project Kuiper earlier today, about Amazon's for a into providing high speed internet, and he said, you know, Amazon's not just competing against the SpaceX and the SpaceX is Starlinks of the world. He's competing with anyone out there right now providing connectivity. And that's a company like yours that provides the infrastructure for connectivity. How are you seeing the landscape right now in the markets that you operate.

Look, we allperate, as you said, we own forty thousand towers roughly across and fiber in the tens of thousands of kilometers, covering eight or nine million homes across our markets. Our markets are we operate in eleven countries across the world, covering roughly eight hundred million people, as you said, So we kind of like see the trends, understand what's happening. The likes of Amazon and the likes of Google, the likes of Facebook do from time to time come to our markets trying to simulate basically demand for their own services. But we haven't come we haven't seen them come into our markets, kind of like with big statements or with big projects that could move the need. Now, having said that, at the end of the day, I get startling.

I get all the.

Projects or the ideas of trying to create connectivity using satellites or non terrestrial systems. But when it comes to basic propagation, basic wireless, there is no alternative to a tower on the ground.

Really, why is that?

Because you know, here I am thinking to myself, this could be a prime moment for you know what you guys in the industry called leap frogging. Here the technology, you know, this infrastructure technology is so expensive. I don't have to tell you. You guys own and operate forty thousand of these towers. These are very expensive things to build and to operate. And then you have this other technology coming in that essentially broadcast internet from the sky. Why is this not a serious concern to you at this point?

Because the technology has limitations. I'll list a few. The first is that as you're trying to penetrate a building or a structure sideways from a tower, it's much easier because you're kind of like going through windows and glass and this, and that if you try to do it from the satellite, you basically have to penetrate ceilings, like multiple ceilings. I mean that's a lot. Given that this is also from the satellite to Earth. The satellite may be able to protect the power, but the handset is kind of like small and it has limitations, and being able to penetrate back into into the satellite again is another issue. What kind of spectrum do you use? Most of the carriers on the spectrum when you start interfacing with people, The size of the battery, how long can it last? I mean, those are practical limitations. And then compile that or add to all of this the fact that that people need more and more and more capacity by the day, especially as as some of these apps like like drones, driverless cars kind of like start to proliferate, We're going to need more capacity rather than less capacity. I mean, these satellites will not be able to provide that capacity.

He said.

There are great solutions tem like offshore, rural urban mountains provide some bridge like like in the Ukraine situation for example, but they can't be a solution to the million of people using their phone, for example in Manhattan, or Los Angeles or London or a Legos.

Right, it's just too you know, apples and oranges. It certainly sounds like, Hey, Sam, I wanted to talk a little bit about the types of technology that these towers are providing. When you think about the different markets that you're in, is this are we talking four G? Here are we talking five G? I mean, what is the sort of standard in terms of the equipment that you provide or that the folks who lease and use your towers end up using.

Look, simply put, there is no difference in the aspirations of carriers and people in our markets to where the United States or Europe is. Everyone wants the fastest, cheapest pipe, everyone wants five G. Everyone wants fiber to the home. Now, having said that, we are definitely behind. Our markets are largely in the four G cycle. At the moment. Most of the four G deployments have happened on our towers. They're selling it now to customers to upgrade from some markets two G three G into four G. Many of our markets like Nigeria, South Africa, Brazil have also seen five G spectrum licensing recently, So we're beginning to see commercial tryers or commercial pilots into five G, but five G is still still not the standard, so it's largely four G.

You guys offer six different solutions including new sites in building solutions, fiber connectivity, small cell infrastructure in urban areas. Where are you most bullish for your company?

Look?

For us, we think about it from a deployment point of view. What does the wireless network that carries a four G or a five G or eventually a six G what does it require? Initially it used to require these macro towers, the big towers, you know, and that's what most of us US and some of our peers eight American tower crown SBA focused on. But as you as rollout starts to change, especially with five G, more small cells will be needed. The DAAs becomes very important. Fiber is critical as small cells start to kind of like cells, start to get closer to each other, so the fiber connection to those locations become important. Also, we're seeing now compute and cash becoming very important. At the end of the day, those towers are the closest really state possible to the eyeballs using a cell phone, so an element of computing could happen potentially some data center or edge data center on these locations. But what I'm trying to tell you here, there is no one size fit all, kind of like solution. You have to be ahead. You have to look at the technology of the time in that country and what kind of rollout does it require. It always will require micro towers in our view, because that's kind of like the basic the umbrella cannot coverage. But all these other types, like like small cells, like the m building, like the fiber will be required in different types and different instances.

Well, Sam, I could talk about this stuff all afternoon. I used to cover telecom, so I just love talking about connectivity and how people are getting connected around the world. I really appreciate you taking the time in joining us on Bloomberg Business Week this afternoon. Sam Darwish, co founder, chairman and CEO of IHS Towers.

Joining us on zoom this afternoon. This is Bloomberg Business Week.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch us live on YouTube.

The meats.

Then doing the chickets.

It's a good song for this, Paul Brandon's who is the Fuck You Chicken? I like it well, it all sounds pretty great. Meat that's grown in a lab taste exactly like chicken, beef, shrimp, pork, you name it, but without the downsides to raising livestock. No animals killed, no fisheries depleted, no harmful chemical climate emissions. So great that over the last few years, investors have poured nearly three billion dollars into cultivated meat companies. By the end of the year, there were one hundred and fifty six companies working on it, according to the Good Food Institute, it's a nonprofit think tank for alternative proteins. You've got big names, billionaires like Bill Gates and Jeff Bezos. You've got Ashton Kutcher, Leonardo DiCaprio, state owned investors pouring money in, and yet here we are. When families gather around the table this holiday season, the meat that many will eat will not have been grown in a lab. Dina Shanker and Pria Nod write all about the venture back startups such as Upside Foods that have promised cultivated chicken is the solution to the meat problem and yet the challenges they've faced. The story is in the new issue of A BusinessWeek Magazine's available on newstands now, online at Bloomberg dot com, slash business Week, and on the Bloomberg terminal. With more, We've got Dina Shanker, consumer reporter for Bloomberg News, joining us on zoom from New York. Also here the editor of Bloomberg BusinessWeek, Joe Webber. He's here in our Bloomberg Interactive Brokers studio. Joel is the famous election slogan goes a chicken growing bio reactor in every home.

Yeah, there you go.

So we've been really interested with sort of a line of reporting that Dina has done this year. Some of that was about fake meat, and that was a cover story or in this year, and then we also wanted to talk about and keep our eye on the lab grown.

Meat, not to be confused with fat. It's actual meat.

It's cell based meat that got FDA approval. So all of a sudden, we expected to see a ton of this stuff suddenly hitting the market, only not that much actually made it to consumers. So Dina rewind the clock a little bit and talk to US. We got that wind up from Tim about why we might want to be interested in cultivated meat, But how much money has gone into this space and what have we gotten for it so far?

So there's been nearly three billion dollars raised for companies that are growing meat and seafood from cells extracted from animals, and as Joel said, there have been government clearances two companies so far, Upside Foods and Eat just have received clearances from the FDA and the USDA. And the expectation that these companies set was once they had all their regulatory business in order, they were going to get stuff out to restaurants and we were just going to start seeing this build up and more and more of it coming. But instead, what we've seen is that Upside Foods is currently serving only one pound of chicken a month, and that's in one ounce portions to sixteen people each month. And Eat just was serving a bit more than that to one restaurant, but now they've actually stopped production, so they're not serving anything in the US.

Okay, So if I did want to try this, where would I go and what would it taste like?

You would go to Barcran in San Francisco.

You'd have to get a reservation, which last I checked, was not easy to do. You get your reservation and then you could get this very small one ounce portion. It's tempora and deep fried, and the reviews have generally agreed that it tastes like chicken. Some have said that it tastes like better than chicken they remember.

Others are like, it tastes chickeny enough.

So I think we could say the through line is it tastes like chicken, and you know you take that for what it's worth.

Why is it so well?

Why is it so difficult to do this at scale? If they can do one pound, why can't they do ten pounds or twenty pounds or one hundred pounds or a thousand pounds.

So if you think.

About, like say like a cupcake recipe, and you're going to make a cupcake recipe, or as I was just doing in my house potato lokas, you just double it, right, you just make every just put in twice as much, and then it takes you maybe a little longer than the original recipe to bake it all or to fry it all, depending on what you're making.

Right, It's just not the same with cell culture.

It's really tricky to get these cells to grow, and every time you increase the amount you're growing, you have to increase or you have to change other things, like what you're feeding the cells. And if you're changing the vessel, then that changes things too, and the cells might grow just fine in one kind of vessel and then not so fine in another.

For Upside foods.

They were having success growing very small amounts in these plastic one time.

Use roller bottles that have been part of.

The biopharmaceutical industry for decades and decades.

But when they tried to move.

Into their much larger steel tanks, they had a number of problems, including contamination issues, so they just couldn't get those tanks to work in any kind of reliable way, and they eventually just abandoned them and stuck with these very small roller bottles that we were told by former employees that for a single night at Barkren, for that one pound of meat would use more than one hundred of these one time used plastic bottles. And by the way, Barkren is a certified plastic free restaurant.

Some irony that Dina tell us more about Upside foods because this has been a multi year odyssey with millions of dollars invested in it. So here we are at this point, but who's behind it and what are they still hoping that they can accomplish.

So Upside was founded in twenty fifteen. They called themselves the first cultivated meat company. They made huge promises about what they were going to do. They said they were going to be in whole Foods by twenty twenty and costco by twenty twenty one.

They raised a lot of money.

They've raised more money than any other company in the space, more than six hundred million dollars on all of these promises. They've raised money from Tyson, They've gotten money from all kinds of investors, including you know, some of the more mission driven investors that are really looking for sustainable solutions. And instead what's happened is that they even as they were going through the motions of these FDA and USDA clearances and saying publicly that they were ready to scale, they are just not ready to scale. They have currently a pilot plant that they said when they opened it would be capable right off the bat of fifty thousand pounds a year as they are currently selling only about twelve pounds a year, but they're already talking about their next commercial plant that's going to be one hundred and eighty seven thousand square feet and capable they say millions of pounds production a year.

Dina Joel started off our interview by talking about the other stories that you've done about the faux meat companies impossible foods beyond meat. You've been covering this space for years, and one theme that's emerged in your reporting over the last couple of years is the alternatives to meat have not delivered on the promises that investors thought and that the companies communicated, and in the at the end of the day, it seems like people are going back to just regular old meat, and that is an issue for a lot of things, one for animal welfare and two for climate change. Can you talk a little bit about just big picture what you've learned with these stories in terms of the staying power of good old fashioned meat.

Yeah.

Well, I think there's a few things.

One is that we definitely see that there is tremendous interest in reducing meat consumption. There's interests from investors, there's interests from entrepreneurs and there is interest from consumers as well, so that's definitely there. But people are not willing to make sacrifices on their food experiences, on foods that they love, to do something that they think is better for the environment or better for animals, and so people, you know, people are willing to say, Okay, maybe i'll pay a little bit more for this, but they're not willing to pay a little.

Bit more if what they get is a little bit less than what they were trading it in for.

So people are open to reducing their meat consumption, but I think they just haven't really been offered anything that is as tasty as meat. I would just like to plug caviar lentils. They are so good. They don't take anything like meat, but they're really good, and they're cheaper than meat, and they're really great for the environment if you're looking to reduce your meat consumption.

I really like them, Okay soon. I am also curious the strategy that Upside decided to pursue, which was to do to make chicken.

Why chicken?

Because chickens already pretty affordable and from a planetary standpoint, and we know that that cattle have methane emissions and that are very intensive land used propositions. But like chicken, like why why make a better chicken without the chicken?

Well, you know, chicken in chicken in the industry is generally seen as significantly easier to cultivate those cells than say, beef cells. Uh So that's why we've seen a number of companies go with chicken. Some of them call it like a stepping stone to beef. Upside has not discussed it that way. Uma Valletti, the founder, told me years ago in an interview that a story involving his daughter loving fried chicken. People talk about chicken as you know, everybody loves chicken. It's it's a really you know, popular protein, but it just not only is it not a particularly environmentally destructive protein, especially from a climate perspective, but it's also just really cheap. So trying to make a product that's gonna compete with it on price is just really, really, really hard.

And so there's other efforts to do things other than chicken. How are those faring and what do those competitors have to say about upsides approach?

Well, for example, cultivated seafood company Wild Type is making a their focus first on salmon I will say I tried their salmon years ago, and I found it to be very impressive, And they said that they told me that they thought chicken was strategically a bad idea because it's so cheap.

Salmon is really expensive.

If you ever go to a restaurant like the salmon is one hundred percent guaranteed to cost more than the chicken. A lot more too, and so, and the oceans have their own have plenty of issues, including overfishing, including microplastics. Even farm salmon has its own set of issues. It can be tricky as a consumer to find a piece of salmon that you feel like lives up to your values if you care about where your food comes from.

So that's the way they're going.

But they've also said, listen, they're moving along. Wild Type told me they are encountering their own problems, but they feel like they're making steady progress.

Well, speaking of steady progress, do you know, based on your reporting and all the reporting that you've done in this space, when do you think it's a realistic time that consumers can expect cultivated fish, or cultivated poultry or cultivated meat to actually appear at scale.

He's asking for an interested party.

Yeah, I would eat this totally. I would totally eat this.

You know, a number of people have told me that they see an opportunity in this market. I've heard two different things that sound like feasible opportunities. One is these blended products. So maybe it's a mixture of animal fat which has a lot of flavor in it and with plant based proteins, and then by using just a little bit of those cultivated cells with more plant based proteins, you are really reducing costs and you are improving. So I think like a beyond Burger, but instead of tiny little dippin' dot style coconut fat coconut oil fat balls, they're like actually.

Be fat balls or something along those lines.

And that could I mean I haven't tried that, I can't speak to it, but that could theoretically taste a lot better and be available much sooner. And then other people have said that the opportunity is in like really high end meat, so like foie gras or something along those lines, where consumers are already expecting to.

Pay a ton of money, and the.

Amount that you have to produce to be considered widely available is significantly lower than you would have to produce for something like chicken or pork or beef.

Can't wait, can't wait to watch this space.

We did this whole interview Joel, and didn't talk about fetal bovine sirus here.

I mean we still have time we do or I could just run out the clock by speaking very slowly.

Let's just say that they're not completely animal free products at this point.

Well, and stay tuned for more great reporting from Dina Shinker.

Yeah, Dina, always love it when you join us. And even if the stories about lap grow and meet, I still get hungry when we talk about it. Tina Shaker, consumer reporter for Bloomberg News, joining us on soon from New York. Also here the editor of Bloomberg Business Week, Joel Webber, Joel, would you eat this stuff?

If ever there's more than the little bit that exists in the world, I would try it. I would try it per person. I don't think I'm going to be seeing anytime soon.

Okay, yeah, well we'll see, We'll see you're listening and watching it. Bloomberg Business Week on at Bloomberg Radio on serious XM Channel one twenty one, on Bloomberg Reginals, and on YouTube.

This is Bloomberg Bus this week, Brother Marca.

The journal.

Now about you?

Let me drive?

Oh no, no, no, no's.

Honey, please, I'll do the travels.

Excuse me, I want to drive.

It's good, question good.

This is the drive to the clothes.

We'll buy around each other down on Bloomberg Radio.

All right, well here we are less than eighteen minutes to go to the close of us trading here on this and Monday, December eighteenth.

Twenty twenty three. I'm Tim. Stand back.

Carol Master is out this afternoon. It is Bloomberg Business week. It's time for Drive to the clothes. For that, we go to Jay Jacob's US head of Thematics and Active Equity ETFs over at black Rock. He joins us on a Zoom from New York City. Jay, good to have you with us this afternoon. Full disclosure to our audience, you and I sat next to each other in a few classes business school, so that's how we know each other. And you're now at Blackrock and I'm here at Bloomberg, and we get to talk ETFs a little bit.

How are you?

I am great.

How are you doing? Tim?

Yeah?

Doing pretty well? Doing pretty well?

Hey, did this rally. You know, you just heard the numbers from Charlie Pellett. There did this rally over the last eight weeks? Did they to catch you off guard?

I think it caught a lot of investors off guard because we've seen six trillion dollars in money market funds in the United States this year, eight billion dollars globally, So a lot of people were looking at cash hields and thinking, I don't know what's happening in the markets. I don't like the risk out there of a recession or general volatility. I'm going to take four or five percent yield in cash and call it a day. And instead we've seen the SMPS now I've almost twenty five percent on the year. That's the risk of holding cash. We know over the long run, participating in markets is key to investor success. Trying to time it can be very difficult, though, So I think this's caught a lot of people off guard.

Yeah, trying to time it as a fool's Errand I mean, ask anyone who missed this this rally here, Jay. That's the thing though, there is still you know, trillions of dollars on the sidelines right now in these money market funds. In these cash funds, how do you see that getting deployed in twenty twenty four, I think.

The bar is high to bring that cash off the sidelines. Investers have voted with their dollars this year. They've said they like the yield. If you're going to take money out of cash, out of a yield, you know, a yielding a bank account, and put it into the markets, you need to have a really compelling reason why. And so we are looking at, really what are the specific areas that are exciting. I think the challenge him is if you look back over the last ten years or so, we call it the Great Moderation. You know, interest rates were following, growth was strong. It was really a great time to be in just a sixty forty portfolio. It almost didn't matter what you bought, almost all assets were rising. But now in this higher volatility, high interest rate environment, you really have to get more precise about honing in on where the growth areas are in the market. And I think that's where investors are going to have to do their homework of looking at I want to come out of cash, but what are the attractive areas. It's not just about broad benchmarks.

Okay, so let's talk about the thematic outlook that you guys have over at I Shares by Blackrock. You talk about this higher bar. I know you're also really interested in AI. And if we characterize twenty twenty three, and you know, really, if there's one way to describe twenty twenty three, it's certainly the year when investors started paying very close attention to AI, and we saw some big winners in Nvidia, Microsoft, and even some startups like open ai as well. How are you guys thinking about AI in twenty twenty four?

We see AI in twenty twenty three is really just the proof of concept year. Chat GPT burst onto the scene, a bunch of people played around with the technology, but not a lot of commercial adoption. You haven't seen billions of dollars in revenue coming to a lot of these AI companies yet. So twenty twenty four is going to be that year of commercial success where this technology is proven and you're going to start to see more enterprise applications for AI as well as more consumer applications. I think, just an example, you know, we've seen some companies already say they expect to save hundreds of millions of dollars in client service because now they can use AI to respond to basic questions, you know, how do I reset my password or do I find my account information? And they can you know, really use AI for kind of that low hanging through questions from clients, whereas using their more sophisticated human answers for the more sophisticated questions. So, in fact, about sixty percent of CEOs who intend to use more AI next year have said they want to do so for cost saving measures. So if we're in a tight economy and AI is looking really promising as a technology, I think we're going to see much more investment in it for companies to bring down their cost base.

So what are the types of companies that end up being the beneficiaries there. Let's say that you know, people are saying to themselves, well, wait a second. You know, we know that Nvidia has done really well this year, but now we're enter the part of the AI revolution where we start to see companies, as you mentioned, embrace this technology and lead to real cost savings. Which are the types of companies that are going to do that?

Yeah, we really have to look across the AI tech stack to find companies. So at the basic level, you look at the hardware. Those are the semiconductors that are really powering these AI systems that include some of the really powerful GPU manufacturers, but also includes several of the CPU manufacturers that can be really efficient for AI processing. One level above that, you can look at digital infrastructure. Where is all these semiconductors being housed. You know, AI doesn't just happen in the air in the cloud, it has a physical location where these calculations are happening. It's the data owners. Data is the fuel into AI. So the companies that own the most data, have the most valuable data, are sitting potentially on really valuable information there. And then finally at the highest order, these are the companies that are building applications using AI. So if we take a step back and look at the last decade or so, a platform technology that built many businesses was four G technology. It allowed us to get data faster on our cell phones anywhere where we were in the world. That allowed for things like mobile e commerce, mobile social media, so that we could stream videos and shop wherever we are are. The new platform technology for the next ten years is going to be AI. What is the next e commerce? What is the next social media that's going to be built on top of that technology?

Hey, what about when it comes to just geopolitical events and demographic changes that you see happening and that you guys are planning for in terms of your the products that you offer at I Shares by black Rock. Let's talk presidential election in the next year. I mean, how should investors be thinking about that?

Well, I actually think this goes beyond the presidential election. If you look at really from the end of World War Two through the global financial crisis, you saw globalization really in one direction, more and more globally integrated trade. But over the last few years you've started to see new industrial policy in the United States with things like the Infrastructure Investments and Jobs Act, the Chips and Science Act, the Inflation Reduction Act, always to build more critical industries in the United States, like sending conductors and electric vehicles, and that means that we need a lot more manufacturing, but we also need a lot more partner countries that can help us build all those things. Earlier this year, Mexico became the biggest trade partner of the United States. A huge landscape shift there, we've seen more trade with India and frankly reduced tariffs with India. As we're looking to diversify supply chains into other countries around South and Southeast Asia. So as we try to build more and really secure key industries in the United States, it also comes down to who are the partner countries that the United States wants to work with for these new supply chains.

Jay, we only have like twenty seconds left, but given that we're up almost twenty five percent in the s and P five hundred, are you bullish overall next year?

I am.

I think I'm very optimistic that a lot of the cash on the sidelines is going to find these attractive areas like AI, like geopolitical fragmentation and our aging populations.

All right, Jay, really appreciate you joining us. Happy holidays if we don't connect before now in the next couple of weeks. J Jacobs is US head of Thematics and Active Equity ETFs over at Blackrock. He joins us on Zoom from New York City.

This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcast. Listen live weekday afternoons from three to six Eastern on Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg Journey Alone

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