Hello, and welcome to What Goes Up, a weekly markets podcast. My name is Mike Reagan. I'm a senior editor at Bloomberg.
And I'm Moldona Hier, Across asset reporter with Bloomberg.
And this week on the show, Well, we hope you had a good meal before you hit play on this podcast, because we're going to be talking about food a lot about food, but namely the opportunities and risks on the investing table amid a swiftly changing global food supply chain. Our guest is an executive at a major asset management firm who recently helped write an in depth report on
this exact subject. But felt before we bring them in, I have to ask the big buzz I think on this topic lately cultivated.
Meat, cultivated meat, grown meat.
You're not a meat eater?
Correct, No, I'm not, and just the idea really, but it excites you like well, I would feel like if I were you, it would excite me. Has anybody had lab grown meat?
Someone somewhere has one person? And I think so maybe our guest knows the real answer.
Maybe he has had it.
We'll see.
I want to bring him in time or hightt he's the chief operating officer for Pigeum. Thank you so much for joining us.
It's a pleasure to be here.
Have you had lab grown meat?
I have not had lab grown meat, but very recently, the FTA just announced that two companies are allowed to start producing lab grown meat in the US and it's safe. Until then, the only place you could get lab grown meat was Singapore, where they introduced chicken nuggets a couple of years ago. So Mike, you may be able to have your wish sooner than you think.
But timer from reading your report, I don't get the sense that you and your team are very bullish on the concept of cultivated cultivated meat. Talk to us a little bit about where you see that space going.
He said, it's more sizzle than steak.
That's pretty good.
Yeah, that's really good.
That is a podcast worthy pun. Yeah, their whole variety. I mean, there are lots of areas we excited about investing in, but they're definitely a bit like bitcoin and other cryptocurrencies in the crypto space, there are definitely some bubbles in the food chain as well, and cultivated meat is maybe not a bubble. I think our main issue
as an investor is it's too early to invest. There are literally hundreds of companies around the world that are trying to do different kinds of cultivated meat, and it's pretty much impossible at this stage to know which one's going to win and which one's going to lose. So we would say even as a venture capitalist, it's too early to go in. There will be some winners over time. They're the ones who are going to solve the scale problem.
It is just so expensive to get that chicken nugget or that beef steak cultivated at this point that it's just not feasible for it to become a mainstream in food item around the world.
It actually costs some multiple of the real thing at this point right way more.
And the only place where we see progress at this point is actually not in that actual finish good where you will want those charm marks on your steak and you'll want all that flavor, and you won't get that in cultivated meat yet. But they are taking things like egg whites which go into cakes and pastries or way, which is part of how they make yogurt in Israel and other places, and that's where cultivated versions of those products could be could get cheaper, quicker. So that's why
we're keeping an eye on first. That's where the first investment opportunities will arise. But it's too early. It's not a bad opportunity. You just don't want to be ten years too early to something.
I'm already hungry with ol donna.
I've had the eggless mayonnaise or whatever. It's pretty good, is it. Yeah? I know that's slightly different, but you know, I can see trends evolving from all of the you know, different branches.
There's a lot of changes in how consumers are behaving around the world, and that's actually one of the big drivers customent opportunities, including things that are more humane and things that are more healthy. So eggless mail would definitely fit that category.
Well.
Before we talk about all of this and the investment implications, I actually want to ask you what made you look into food as a topic, especially an investment topic.
I mean, beyond the fact that I'm a big foodie. The reasons we as PGM went into this were a couple. We think, first of all, that food is not just ten percent of GDP, but forty percent of the labor force. So a lot of people work in this industry, and we're defining food as from farm to fork and everything in between, processing, packaging, preparing the seeds all the way to kind of end retail. So it's a big part of the labor force, and there's been a lot of
focus on labor and inflation and so on. So that was one driver. But the second one to really write this report and to think about its investment implications was that we think food is where the energy and this whole talk about energy transition was about ten years ago. We're like ten years behind in the thinking and it's going to catch up because the current food system is simply not fit for purpose. It is not going to
work for our planet. It's not going to work for our consumption needs for a variety of reasons that we can get into, and that debate on how do we transition this, even if it takes twenty thirty years to the new food system of the future, has happened their carbon transition funds, there's renewable energy, there are opportunities, there's Inflation Reduction Act and lots of money going there. It hasn't happened to food yet, but we think it's about to.
And that's why we thought it was an interesting time to write about it.
Yeah, absolutely fascinating topic, and I wonder if that making that transition. It's one thing to get people to stop driving gasoline cars if you can give them an electric car that's just as fast, just as reliable. But food, I feel like will be a little bit trickier. And one pustion of this report that really caught my interest was you talk about when a society becomes more app when per capet income goes up, people's diets change, and
I've found that fascinating. Can you talk to us a little bit about what changes in a diet as a society sort of gains more income. Yeah.
Historically, the main reason we needed more food for the span it was that there were just more people on it. Population grows, everybody needs galleries, more food has to be created. But an important shift is happening in one you hit mic, which is now we have as perhaps an increasing influence is the fact that particularly Asia is developing a new emerging middle class and they have the same wants and
needs and desires as people in develop markets do. And that means a not just more calories, but more protein and more calories that are increasingly converging with what we call the Western diet. So there's more more meat in it, there's more chicken in it, there's more more pork in that diet. And those are galleries that need to be exported. You can't just all get them in via Knam or in Thailand or in China. There's much more export supply chains,
ironically where everybody's trying to simplify them. After COVID are going to get more complicated because people want the same food in more and more countries of the world rather than just the local food, and be that food itself has a bigger climate footprint because of all the methane and greenhouse gas emissions that come from the farming system, and now more people want livestock, which is the key creator of greenhouse gases, and see it means much more
pressures on the governments in these countries to provide the resources, to provide the infrastructure so that people can get these new forms of Western diets that are frankly maybe a little less healthy for them as well definitely more costly, require much more importing of things from around the world than you did before.
So it's a pretty radical change.
And finally it does mean the food system doesn't just need to cope with more population, it needs to provide many more calories even to each person on the planet.
So you have all of these different fine one of them is that climate change is causing a twelve percent of climb and crop yields. So this is just I make this point to show that there's really a lot of geopolitical implications for this as well.
Right, Yeah, So the climate interlinkage is actually quite interesting and complex because it goes both ways. First of all, the fact that climate is changing is changing our food supply chains. You know, you have less fish in the ocean when oceans are warming up. You have new kinds of fungi. Even if we haven't seen the HBO TV.
Series watching it right now, it's so scary.
Then new kinds of fungi, the new kinds of insects, and that require new pesticides. Because of warming climate change and with heat, it's harder for labor to work in conditions in many kind of parts of the world where you do have manual labor, eighty percent of Indian farms, for example, and crop yields have declined. So, first of all, you've got this effect from a change in climate. A more stream climate, reduces crop yields, creates more variability, adds
new threats and risks. And then second you've got the fact that the food system as we have it today it self changes the climate. Something like thirty percent of greenhouse gas emissions which cause global heating come from the food system. Seventy percent of freshwater consumption. Is not all of us drinking waters to you know, have our two to six liters a day, but it is because the food system needs it to grow crops and so on
and so forth. So you've got a very complicated inter relationship and frankly, it's one that's unsustainable and need some new ways to thinking about food to create a food system that can meet our needs for the future.
So talk to us about some of the new ways what's on the horizon that will alleviate some of these issues that you're talking about.
So one that comes to mind is how agricultures change what we call ag tech, And there's precision agriculture, which is about how can you really take sensors and and data from satellites and information on what's happening in the roots of crops and make that available to farmers around the world so that they can grow crops more quickly, more productively at a higher level. Frankly, there hasn't really been a revolution outside of the US and Latin America.
So in the big grain baskets of Ukraine and Asia and Africa since the Green Revolution of the nineteen sixties, that was when a lot of new seeds were introduced. As long as you had a lot of irrigation, you could really raise your crop output.
But in those parts of the world you.
Still have very manual, small farm holdings, and there really hasn't been another revolution. The mechanization hasn't happened, and this next generation technology hasn't come there. So you now have this sort of world where US and Latin American farms are taking all this new precision agriculture. You have seed throwing, you have plantation, you have knowledge about when you need to water, plants available at the fingertips of farmers in these markets. And then you've got this like massive gulf
and another universe where things are still very basic. It's manu labor. They may be like bullock drawn guards that are kind of harvesting fields, and there is where there's a massive opportunity to take all this data, take all this information, get in on mobile phones because people don't have fancy computers in emerging markets, and really revolutionize agriculture and create much more food and galleries for the world.
Okay, so you said investing in the food system provides opportunities for investors to further ESG goals and have a measurable impact. So maybe can you talk about the ESG aspect of this.
Sure.
So again, it's a great analogy to energy ten years ago, where the first sort of reaction to energy was we're going to stay away from the oil and gas sect and we're just going to focus on solar and renewables
and hydro electrics. And then it became clear that solar and wind and hydrop on its own wasn't going to meet our need for the next twenty thirty forty years, and so the carbon transition required investors not to just separate and disengage from all the oil and gas producers, but find what I like to call kind of the the not the greenest of the green only, but stay away from the brownest of the brown and kind of
find the in between. Khaki renewable and fuel providers, including Shell and BP and the big companies, to encourage them
to make the transition. And the opportunity for the ESG investor is not to move away from beef, not to move away from livestock cultivation, but recognize that the livelihoods of billions of people around the world and the calorie needs of a rising Asia that does need its middle class to be fed, requires that for a while, we will need all these forms of production to be maximized. But find better ways of doing that, find greener ways
of doing that. So engage rather than disage, but really find Okay, if they're nitrogen visk fertilizers, which are not particularly good for the environment, what's the next best option. If somebody is using up too much water for their farmland because they don't have modern technology, how do we get modern technology there? And that requires ESG to engage in all these sectors, not stay away. Another great example
is packaging, Like you still need packaging. People in developing countries in emerging frontier markets want their food to be as safe as we have in the US, and to do that you need various kinds of safe modern packaging. How do you invest in that in greener packaging, less packaging, not withdraw from the sector. So we think there's a huge role for the ESG sector, and I would say even bigger data gap than exists in the energy world. There's very little data on what's good what's bad. We
all confused as consumers. Investors are equally confused because the data doesn't exist, and we really need to ask all the food companies to start providing the same data that the energy sector is now providing that people can make informed decisions and investors can make informed decisions on ESG good.
I want to get back to that notion of geopolitics as well, and obviously, from time to time, food security can be a major geopolitical issue, you know, I'm thinking of the Arab Spring a decade ago, even just more recently with the war in Ukraine. Ukraine obviously a major grain producer and there were all sorts of questions about supplies from Ukraine. Do you see this sort of geopolitical
deglobalization that's happening in a lot of industries. Is that going to hit the food the global food industry as well, or is this sort of hunger for meat and protein enough to allow the world to kind of stick closer together when it comes to food, if not semiconductors and other industries. You know, how do you see it going as far as geopolitics and food is Is it going to be a local market more so, or is there potential for sort of multinational dominance from some multi na corporations.
So maybe a good chance to step back, and I'd say we found four reasons why investors should care about this food system, even if they're not foodies. And the first one is if they care about ESG.
And many, many, many do.
There's a real connection between climate change and the food system and their ways to help make it a better food system. The second factor was simply the incredible investment opportunities in the food sector, and we can talk about a few of them that investors, regardless of their motivations, may want to capture the risk return opportunities that are
available to them. There The third, which we haven't talked about yet, is just how inextricably linked food prices and inflation have become and therefore food supply and food demand, what it means for food prices and therefore what it means for inflation and all the headlines and all the monetary policy decisions as you try and bring back inflation in Europe, in the US and many countries around the world, and you've got to figure out the food equation piece
of that. And the fourth is the one you mentioned, Mike, which is if you want to understand geopolitics, both within a country and between countries, you've got to understand food because it's such a sort of primal important necessity that everybody wants, and across borders, it's driven things. I think it's come to like for two reasons. One, COVID and everybody recognized that their food supply chains were too scattered and too far away. And since COVID, I think food
security has become national security. And you've seen, for example, in Congress lots of discussions around, for example, should Chinese companies own US agricultural land, And that same debate is being echoed around Latin America and Africa and Asia and other parts where they're Chinese owners of the land system.
And then you're seeing it also playing out domestically. You see it in Peru, you see it in India, you see it in France, where farmers are a very important lobby, and when you hit farms cities, which are massive in some of these countries, you really get a massive political reaction. So it's a big domestic stabilizing or destabilizing food potatoes go up twenty percent in India, you could have a new government at your hands, so it really makes a difference.
And then geopolitically, I think between COVID and Ukraine, there's been a recognition that we need to figure out where these supply chains are because we've got to get food security for our own populations.
What is it about the food space as an investment topic? Is it that there are these opportunities there or is it that it's a space that not very many investors have been thinking about. Hence you can maybe find some hidden companies or investment opportunities.
It's probably a little bit of both.
Fieldane and I think they're definitely opportunities and I think compared to certain other sectors that probably underrecognized and underappreciated, which is one of the reasons Pijeum wrote this report. And the unique ability because we have a big realistic team private credit, we do fundamental equity, we do bonds, so we kind of approach the topic from four to five different anglesing where's the opportunity. So, for example, one
opportunity is cold storage. Everybody thinks of real estate and the first thing that comes to mind is offices, and nobody is going to offices any longer in the US and Europe, and there's a crisis in the office sector,
and I think the are pressure is there. But cold storage and the logistics and distribution that you need around cold storage is a very significant opportunity with very high growth rates in the real estate sector, that entire ecosystem of real assets and then the storage for them is a big opportunity. And it's really linked to the fact that forty percent of food around the world is just wasted.
In the US, in Europe, it's wasted at the end the end consumers all of us are probably not as efficient with food as we should be, and in emerging in frontier markets, it's all happening in production. Getting it from the farm to the retail storefront is where you lose all the food, and cold storage can absolutely be critical in changing that. So we see that as very much as a global opportunity. On the other end of the spectrum, for debt holders, for bonds. There's some really
safe spaces. The consumption of energy, drinks and alcohol in Kansas going up. You've seen all those apple sauce and baby food things, and those pouchers that are openable and sealable, so plastic manufacturers of these fairly specialized food equipments that you really can't get other people to make very quickly
are a very safe place to be. Another good example of a safe place to be where there's lots of long term opportunity is all the franchise holders in developing countries, the pepsicola butlers, the people who are making well recognized foods and big emerging markets. Everybody's gearing towards them that don't want to take a risk with smaller, less known brands. And then we started this discussion with meat, and it's probably worth mentioning it again again. As a dethold, you're
not going to get like equity like returns. Don't look for cryptocurrency type returns, which by the way, don't exist in cryptocurrency.
Don't look for them. Heyah.
But in meat production and the more humane, the more esg friendly end of meat production, there's definitely another opportunity because we've seen with plant based meats. If somebodep talked about impossible burger, we've seen with cultivated meats at the beginning of this discussion, they're either not going to succeed based on demand and appetite, or they're going to be a long way away, and therefore these core opportunities in those sectors exist.
Yeah, there was so much hype about plant based meat for a while. They're impossible burgers.
I like them, do you? Yeah?
I think you're in the minority, though, I don't think they're really really touching on it. Seems like for a while everyone was willing to try it. You know, the whopper had an impossible whopper. What are you supposed to happen there time? Or is it? Are they not quite there yet where regular meat eaters will swap in an impossible burger? What is sort of the headwind to plant based meat that sort of didn't allow it to live up to the hype.
I'd agreeved it did not live up to the hype. There was all the headline, all the headlines around burggging and McDonald's and everybody introducing plant based meats on their menu, and I think some of them have silently retired that offering, But in any case, the market is still a minuscule portion of the meat market. It hasn't taken off, and the stock prices of these companies have not lived up to the hopes that some people had pinned on them.
And I think it comes down to something very simple, which is people like the taste and the flavor and the consistency of actual products right, and plant based meat doesn't quite do it. And frankly, there might be more opportunity in cultivated meat again not a vestment opportunity now in the long term there And I'll tell you but another thing that I think got a little overhype, which is vertical farming. This is farming that doesn't happen in a big field in Kansas, but is happening in an
urban center. Could be outside New York City, could be outside Jakarta and Indonesia. Imagine an urban center, and you're farming in a building where all the kind of factors of production, all the things that create the end and farm produce, is being provided by mechanically or digitally. So you've got lighting and water that's fed to a vertical farm that's grown in a small space in a peri urban or urban location, and there was lots of hope that this would change both food shortages and create a
new way of growing that was more sustainable. And the honest truth is, while you know, I think it's still a worthy social endeavor, it simply means that when the most expensive factor of production in farming, which is light, doesn't come for free as it does on big farms or small farms around the world, but has to be created by using up energy, it's no longer cost efficient to create it that way, and therefore impossibly hard to scale it. And that makes vertical farming not a great
investment opportunity at scale for investors. Of course, if they're only looking for ESG goals, it might be, but from a risk return perspective, like plant based meat, it hasn't quite lived up.
To the hype.
I think I read a story they were trying to grow strawberries this way in Newark, I think in New Jersey. Yeah, but they were super expensive, right, they were really expensive.
Some of the stuff.
I've had a lot, and we have some very good vertical farms in Newark because PGUM is headquartered there in New Jersey. Some of the produce is really really good and fresh, and it gets to consumers much quicker than you know, your whole foods might if it's coming from you know, three thousand miles away. But simply the cost per unit isn't isn't there yet?
Yeah, you threw out a number there, and I remember reading this and you report that is kind of mind boggling to me. And that is forty percent of food is wasted at some point in the supply chain between production and getting to your refrigerator. I suppose to me, if you believe in efficient markets, that seems like, wow, there seems to be an opportunity just in reclaiming that lost food. Am I crazy to think that? Is there any sort of effort to say, hey, wait a minute,
where's all this food going? How do we reduce that forty percent? Or how do we capitalize on that?
There are the one I feel has most promises. What's happening in countries mainly emerging markets, frontier markets, But a lot of food has grown where the food is lost, and that wastage happens in trying to get it to you,
the end consumer. Yeah, and somewhere in that chain, either at the farm, or in the storage at that farm, or in the road transportation to get it to the city, to move it from the warehouse in the city to the end retail consum A lot of food gets wasted in the process, and a lot of work is happening, whether it's the World Bank and the development institutions or venture capitalists, but the big food companies are really trying to cut down that waste. And that's about the kinds
of seeds you use. It's about cold storage and the opportunities in cold storage. It's quicker transportation, better retail packaging, and I think there is hope for all of us that we'll cut food wastage. There and eight hundred million people who don't have enough food to eat as their need every day. So there's a big opportunity not just for investors, but probably also to create a better planet we can be.
Proud of if you attack that absolutely.
The second piece is in the US, in our market, in Europe, in develop markets where most of the food is wasted at the restaurants or in the end household, and that I think MIC is much harder to change. That's changing end consumer behaviors. You are seeing an attempt to take food waste and turn it into process food. And you are seeing companies with names like misfit or imperfect in it who are trying to take all the
food that is not considered. The tomato is not well shaped enough for somebody to buy it and actually package that, And I think there is some opportunity there, but I think changing consumer behaviors is much harder than introducing cold storage and improving the transportation chains and emerging markets to counter food waste.
I'm doing my share. This is the dad in me speaking.
L don if you eat the ugly tomatoes, well, no.
If my kids leave forty percent of their dinner on the table, I always end up eating it.
Yeah, I finished all and then I.
Add three kids. You do the math. I end up eating that's one hundred and twenty percent of Yeah.
Yeah, for sure. But you mentioned emerging markets, and I am one, and this is a big question, But like, what are the implications for emerging countries or which ones are you thinking about.
I think some of them are really around the fact that emerging market consumers want fresher food and safer food, and increasingly people both men and women in emerging market households are not working at the home. They're working in
urban centers. Women are increasingly part of the workforce, so they're not able to cook food from scratch, so ready to make food not necessarily the ghost kitchens that we talk about in the US, which is just for delivery, but definitely prepackaged safe things that they know that their kids can eat, ugly or beautiful tomatoes that they can eat and be healthy with, has become a much bigger part of the food industry there. They're absolutely investment opportunities
in that area. I think the second one is the supply chains and making available to people the diets that now crave, which includes for better or for worse, you know, more sugar, more dairy products, and more meat. And how do we get to the rising middle class in Asia access to these foods, And how do you create a food system which at the moment is not fit for purpose, that will harm the environment, that doesn't create enough galleries,
that doesn't get it to the right people. How do we kind of shape the supply chains in ways that these people get the glories they need while still fighting the obesity epidemic.
While we do all the nutritional education and so on.
So the big opportunities actually for international growth of foods that are increasingly being demanded by rising middle classes in Asia. I'm show in the next twenty years in Africa as well as kind of the young population their rises, and then ready an opportunity in convenience and branded packaging of foods which at the moment are informal, unpackaged and increasingly people in emerging markets a little shy about going there.
And I assume when you're talking about a rising affluence in emerging some emerging markets, does your focus tend to be more on food at home or is there a restaurant segment there that is also going to increase in demand in those economies.
We haven't seen a big up opportunity in the restaurant sectors investors. It's very fragmented margins. It's a tough business to be in. Of course, you've seen some venture capital in ghost kitchens and so on, but we haven't seen that identified as an investment opportunity. I should say, as we look at the investment university at our company, at PGUM, we only look at opportunities we would consider in one of our portfolios or already investing it in one of
our portfolios. Maybe the bigger opportunity we see, which again is I think underinvested in even by institutional investors, by pension plans and so on, and Sertney, I think individual investors, and we need to find better ways for them to access it. But that's agricultural debt and equity farmland investing, both in the equity side and debt side. And I know and both of you have talked about that in the past, but that is definitely an area which is
a good inflation heads which everybody's thinking about now. It's pretty uncorrelated with stock markets and bond markets, particularly if you're on the permanent end of the row crops rather than the ones that are not. You can find some parts of the world California as a good example, Mexico's and other one parts of Australia are a third where you can really find investment opportunities and also support sustainable farmland techniques as well. And we still see that as
a pretty small percentage of people's allocations. I don't think it's ever going to be ten percent, but everybody should probably think about should there be one to three percent in farmland.
You read my mind because I was interested in If somebody calls you and says I'm interested in farmland as an investment, what you would tell them more where you would tell them to look.
So we have one of the big investors in farmland, but not not even talking our own book, it's very clear over thirty forty fifty years, through multiple market cycles that that farmland has shown good inflation characteristics and be What a lot of institutional investors are trying to do is not just trying to earn that extra point of return.
They're trying to diversify their portfolio and create more stability for their end beneficiaries, the people they need to pay out, and farmland has worked really well as a way of diversifying your holdings. So our key questions is do you want to be on the death side, which is more yield and it's not just the commodity returns which are quite can be quite volatile, but actually just the farmland ownership, or do you want to be on the equity side,
but both are pretty safe. We mainly invest in develop markets. We don't take the risk of owning emerging markets farmland, so we don't have investments, say in China and so on, whether regulatory and ownership risks become much higher than say the US or Australia.
I wanted to go back to that notion you were talking about cold storage, and that to me makes a lot of sense as an avenue of growth, especially in emerging markets and whatnot, but as a real estate plate just how do the particulars of that work or their cold storage reates that that I'm unfamiliar with, or is it is that you buy a warehouse and rent it out to What are the sort of details of how that works in as an investment?
So the way I investors invest in it is still in a more diversified real estate investment.
I haven't checked on the on the.
Cold storage rates, but probably somebody should google that and then reach for everything.
Yeah, if not, we can start it.
Might be it might be at another business opportunity spawned by spawn spawned here. But within those portfolios absolutely their buildings and warehouses that are designed with all the cooling facilities and refrigeration that's needed for modern produce to be at the optimal temperature to be in good condition when it gets to the end houses. And that's a very specialized kind of facility and we very much look to those in terms of investment opportunities. There's a good parallel
with biotech right to actually house a biotech lab. There's actually a big opportunity in real estate because you need very specialized buildings to put all the machinery and equipment and the temperatures you need for that as well. So these kind of specialized places is where a lot of
the realistic opportunity is. I might put it in the broader opportunity because online shopping is growing, right and maybe pre COVID we all bought I don't know, stapless online, But now more and more people were willing to buy even their their their tomatoes and their apples and their and their chicken online and the logistics required for that and the distribution facilities in warehousing is massive. So that's a bigger realistic opportunity as well. Linked to this food system.
All right time are fascinating stuff on the global food supply chain. But before we let you go, I'd love to just get your sense of the overall markets right now. You know, we saw this tremendous rally in US equities, especially that growth and tech side interest rates are high. What's the opportunity set look like to you from sort of a a macro level. Are you risk on still after that first half? Are you a little more cautious?
How are you thinking about the opportunity set in the market right now?
Over the short term.
We are definitely thinking the next six months is more risk off than a risk on environment. We feel the markets in generally, particularly equity markets, are probably undervaluing the amount of risk to the global economy that exists between geopolitical conflicts, between how does the Fed and other central banks kind of manage this very fine line between inflation and recession risk. So we and many of us sophisticated
investors are still in risk off mode. Having said that, I think somewhere in the next eighteen months, and I know that's a broad period, it will be one of the best investment opportunities in our lives as markets correct, But we don't think we are there. Second, I'd say
we remain very humble. We think this is a very different, difficult macroeconomic environment to navigate, and we are quite scenario based in I think we haven't put all our bets on one scenario, but you've got to look at what are the range of outcomes that can happen between a soft landing and a deeper recession, And we planned our portfolio to kind of manage across multiples of those different
settings at this point. And third, we think that returns and rates don't come down as quickly as markets assume. Once central banks set the rate at a certain level, they wait their pors, their see before they move again. And markets have sort of assumed that we're at the top of the hill and we immediately marching down again.
And I think in reality we'll stay at a steady state, whether it's twenty five or fifty basis points from where we are now, who knows, but we're going to stay at that level for a little longer, and the signals for a recession will have to be deeper than they are now before central banks act, and markets and investors are under investing against that idea.
Well that's Timer Hyatt, he's the chief operating officer at PGM. A pleasure to hear all your thoughts. He talks about more than food, it turns out, Yeah, going on, I like this, No, I love the food topic as we do in farming. Really interesting, so wildon and I are both secretly wished to run a farmer.
Yeah, farmers to be one day in New Jersey.
But can't let you go just yet. Timer. We do have a tradition here the craziest things we saw in markets this week? Have you seen anything crazy in markets recently?
My crazy story is maybe not about markets now, but it's about what markets don't look at but ultimately will and should. And we had a colleague who just took a flight from Singapore to London and British Airways this was in the headlines and the British newspapers hit massive turbulence.
Five people on the plane were injured. And the University of Reading in England has done research that between nineteen seventy and twenty two, twenty twenty two, there's been a fifty five percent increase in severe turbulence on Atlantic flights and it's because the jet streams, because of climate change, are fifteen percent more shear happens in the wind patterns, wow,
and that raises the cost of plane maintenance. It actually means in the future because they expect a three to six times fold increase over the next thirty years in the amount of turbulence that pilots will have to take
new routes that might be more expensive. And to me, it's just a classic example of the fact that much as I love markets, and much as markets capture many things, there are externalities, things one step ahead of markets, such as these weird nonlinear tail wrists that happen from climate change that ultimately will come into market pricing, and savvy
investors are one to sort of figure out what's going to. Yeah, and turbulence and all its second order impacts, and probably none of us will be able to have a class of champagne if we ever get into business class without bouncing up and down is one of them.
That's wild, Yeah, because the Gulf streams actually got stronger, just more turbulent. Or is it it's shifting too right, isn't it shifting across the Atlantic a little bit? Right?
The temperature difference between the poles and the continents has gone down as the polls heat up, and theref for the jet streams that were very focused and targeted and you knew exactly how they went have gotten more erratic.
Less predictable, and you don't know wow, And so you would typically plan your route to sort of minimize it. And I guess now you can't do that.
Now you can't.
This is known as a cleaner turbulence, where you don't expect it when it hits, it always happens, but it's becoming much worse as a problem.
Wow, I'm so scared of this.
It is scary, that is. But you're right though, something to get ahead of as a as an investor when you think about this stuff all right. Mine has to do with pricing in the influencer economy. It's a story courtesy of the New York Post. Have you ever heard of someone named Olivia Dunn Soeldna, Never me neither. She is an influencer. She is a gymnast at LSU Louisiana State University. If you follow college athletics, there's this thing
called the nil. Now, the evaluation on hers is the second highest among all college athletes, second only to Lebron jameson Brownie James. So here's where it gets interesting. She was on This is the story New York Post wrote up about a podcast appearance she did, the Full Send podcast. She revealed the highest price she's ever received, the highest payday for a single post. Now, mind you, she has on Instagram, four point two million followers on Instagram and
seven point six on TikTok. They didn't say which one it was on. Maybe it was on both, I don't know. But the highest fee she's ever received for a single post from a college student who just happens to be on the LSU gymnastics team one hundred and nine one hundred and ninety six thousand. That's your guest. Yeah, Timer, what do you think highest price for a single post from a gymnast influencer three hundred and thirty thou closer? Five hundred grand? Wow, five hundred grand for a single post.
We should become influencers.
Yeah, and I'm very I can't influence anyone.
Influencers fake influence.
I post my food pictures on Instagram and I have sixty nine followers.
I'm very. What's the highest you've ever received?
Twenty seven likes.
That's a good ratio out of sixty seven followers. Yeah, so you're a foody? What cook at home yourself?
I cook at home. We spend half the time in the Hudson Valley. I have a grill there and then in a tiny city apartment. Kind of less grilling because of Gonda rules. But yeah, I cook a bunch. What's your best dish? My best dish is probably a braised leg of lamb, tomatoes and onions and shallotts and all that.
I'm swooning.
It melts in your mouth. It's spoonable. It's very very good.
It's guilty of Aldana. If they ever make lab grown lamb, you've got to try it, as guilty as I feel freeing them. It's so good. Wow, I need to go out immediately and eat something right now. This was a very hunger inducing episode of What Goes Up. But Timer Hyatt, chief operating Officer of Pechim, really a pleasure to catch up with you and hear about this report that you
guys have out on Food for Thought. I believe it's called the name of it aftely named about the global supply chain and food, how it's changing and what the opportunities are. Really fascinating stuff. Thank you for your time.
It's a pleasure to be a great, great conversation.
Thank you, What Goes Up. We'll be back next week. Until then, you can find us in the Bloomberg Terminal website and app or wherever you get your podcasts. We'd love it if you took the time to rate and review the show so more listeners can find us. You can find us on Twitter, follow me at Wildona Hirich. Mike Reagan is at Reaganonymous. You can also follow Boomer Podcasts at podcasts. What Goes Up is produced by Stacy Wong and our head of podcasts is Sage Bauman.
Thanks for listening. We'll see you next week.