WEBVTT - Deere Plunges as Struggling Farmers Delay Machinery Rebound 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.640 --> 0:00:14.600 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:17.920 Eastern on Apple, Coarclay, and Android Auto with the Bloomberg 0:00:17.960 --> 0:00:21.080 Business App. Listen on demand wherever you get your podcasts, 0:00:21.400 --> 0:00:23.120 or watch us live on YouTube. 0:00:24.200 --> 0:00:28.200 Looking at Deer, they reported numbers guidance a little bit 0:00:28.200 --> 0:00:30.720 weaker than expected, but it's still up about eleven twelve 0:00:30.760 --> 0:00:35.280 percent year to dates. Checking Chris Chiolino Bloomberg Intelligence, he 0:00:35.320 --> 0:00:38.120 covers all the big machinery companies. Chris, what's the takeaway 0:00:38.159 --> 0:00:42.000 from from Deer today? They called out the US farmers 0:00:42.159 --> 0:00:45.559 facing some economic challenges here that guess that's impacting their businesses? 0:00:45.720 --> 0:00:46.280 Would you learn? 0:00:47.200 --> 0:00:50.320 Yeah, listen, I mean this really wasn't a particularly great quarter. 0:00:50.880 --> 0:00:54.160 Three key results were mixed at best. It was really 0:00:54.360 --> 0:00:57.880 a low quality earnings beat, primarily driven by a lower 0:00:57.920 --> 0:01:00.240 tax rate. And as you alluded to, they did cut 0:01:00.320 --> 0:01:03.480 their twenty to twenty five guidance. But to be honest, 0:01:03.520 --> 0:01:06.400 I don't think that really changes the investment thesis here. 0:01:06.760 --> 0:01:09.120 You know, we still expect earnings to bottom this year. 0:01:09.400 --> 0:01:12.160 We're still looking at a very you know, gradual recovery. 0:01:12.160 --> 0:01:15.400 As twenty twenty six unfolds, the reduction in the outlook 0:01:15.440 --> 0:01:18.920 was really driven by weakness in their construction business, and 0:01:18.959 --> 0:01:20.520 it appears to us that it was really more of 0:01:20.560 --> 0:01:23.399 a function of some of the higher tariffs and costs 0:01:23.480 --> 0:01:26.480 coming through. We knew that construction forestry was really going 0:01:26.520 --> 0:01:28.800 to bear the brunt of the tariff impact, but this 0:01:28.880 --> 0:01:30.640 court just came in, you know, a little bit more 0:01:30.680 --> 0:01:33.560 of a headwind than we anticipated. It doesn't appear to 0:01:33.560 --> 0:01:35.360 be that there's been much of a change in terms 0:01:35.400 --> 0:01:38.360 of you know, farm fundamentals and their appetite to go 0:01:38.360 --> 0:01:39.280 out and buy equipment. 0:01:39.520 --> 0:01:42.040 Hey, Chrich, can you get more into the struggle that 0:01:42.040 --> 0:01:44.560 that farmers are facing. That's that's impacting dear. 0:01:46.160 --> 0:01:48.680 Sure, you know, we've been in this kind of prolonged 0:01:48.720 --> 0:01:52.440 downturn in the ag economy. Crop prices continued to deteriorate, 0:01:53.000 --> 0:01:56.080 farm fundamentals remain weak, interest rates remain high. We have 0:01:56.200 --> 0:01:58.720 the you know, the overhanger, the uncertainty around the trade 0:01:58.800 --> 0:02:02.800 environment and export market access. Really there's really no signs 0:02:02.880 --> 0:02:05.080 or i would you know, say, green shoots yet that 0:02:05.120 --> 0:02:08.560 we're at this inflection point. I think the positive takeaway 0:02:08.680 --> 0:02:12.480 is that you know, inventories are coming down, Deer's not 0:02:12.520 --> 0:02:15.120 going to have to massively underproduce retail demand next year. 0:02:15.160 --> 0:02:17.320 So even if we're looking at a flatish type of 0:02:17.400 --> 0:02:21.480 environment in terms of underlying retail demand, we're still looking 0:02:21.480 --> 0:02:24.720 at probably higher production and some pricing coming through, which 0:02:24.720 --> 0:02:27.160 should still generate some operating leverage in the business. 0:02:28.080 --> 0:02:32.920 So, Chris, when demand is down from for their core 0:02:33.000 --> 0:02:35.320 farm equipment, what does Deer typically do? Do they let 0:02:35.360 --> 0:02:38.560 inventories build, do they get promotional to move inventory out 0:02:38.600 --> 0:02:40.160 the door? How did they usually manage that? 0:02:41.320 --> 0:02:43.840 Yeah, so this is it's a delicate balancing act, right, 0:02:43.880 --> 0:02:47.799 I mean, it's almost impossible to time the cycle. And 0:02:47.919 --> 0:02:50.000 what they've been doing, you know, for the better part 0:02:50.040 --> 0:02:51.720 of this year, and even at the end of last 0:02:51.800 --> 0:02:54.959 year they had been underproducing retail demand to bring down 0:02:55.000 --> 0:02:58.560 those elevated inventories. They've done really a commendable job on 0:02:58.639 --> 0:03:01.760 new equipment. Issue right now is still on the used 0:03:01.760 --> 0:03:05.680 equipment inventory side, particularly on tractors, which are still quite elevated. 0:03:06.240 --> 0:03:09.760 And you're right, they are allocating more merchandising programs and 0:03:09.800 --> 0:03:13.200 pool funds to help address that issue and move the equipment. 0:03:13.520 --> 0:03:15.720 And I think you see that partly reflected in their 0:03:15.960 --> 0:03:19.800 production precision agg business this quarter, and pricing actually flip negative, 0:03:19.800 --> 0:03:22.560 which was a surprise to us. It does appear that 0:03:22.639 --> 0:03:25.880 this is you know, relatively transitory. We should expect pricing 0:03:25.919 --> 0:03:29.080 to bounce back next quarter. But yeah, it's been a 0:03:29.200 --> 0:03:31.480 you know, they've done a real good job of managing inventories. 0:03:31.520 --> 0:03:33.359 It's just you know, when you're slogging along through the 0:03:33.639 --> 0:03:37.120 bottom of the cycle here, it does become quite challenging. 0:03:37.280 --> 0:03:38.640 So then I got to follo up, are you still 0:03:38.640 --> 0:03:40.960 cautious about the pace of their recovery? 0:03:42.280 --> 0:03:45.920 Yes, you know, I would say signs of recovery are 0:03:45.960 --> 0:03:48.400 still you know, pretty elusive to us. And if you 0:03:48.520 --> 0:03:50.160 just look over the last couple of months, you know, 0:03:50.240 --> 0:03:53.120 you continue to see further downward pressure on crop prices, 0:03:53.160 --> 0:03:54.400 which at the end of the day is one of 0:03:54.400 --> 0:03:58.000 the bigger drivers of deer's business and farmer cash receipts. 0:03:58.400 --> 0:04:00.920 We had a pretty ugly Wady report this week. You know, 0:04:01.000 --> 0:04:02.720 it looks like we're going to get another year of 0:04:02.760 --> 0:04:07.880 record corn production, so those stockpiles continue to build, which 0:04:07.920 --> 0:04:09.360 is really going to keep you know, somewhat of a 0:04:09.440 --> 0:04:11.920 stealing on crop prices here in the near term. So 0:04:11.960 --> 0:04:14.640 we think this recovery is going to look much more 0:04:14.680 --> 0:04:17.520 modest or subdued than what we typically see during a 0:04:17.560 --> 0:04:20.760 normal cycle. Right now, we're still anticipating you know, a 0:04:20.960 --> 0:04:23.520 modest you know, flat to up five percent next year 0:04:23.560 --> 0:04:26.960 in terms of underlying retail demand for lar Jag, particularly 0:04:27.000 --> 0:04:27.799 in North America. 0:04:28.640 --> 0:04:31.800 Stay with us. More from Bloomberg Intelligence coming up after this. 0:04:33.960 --> 0:04:37.640 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:04:37.720 --> 0:04:41.119 weekdays at ten am Eastern on Applecarclay, and Android Auto 0:04:41.240 --> 0:04:44.279 with the Bloomberg Business App. Listen on demand wherever you 0:04:44.320 --> 0:04:47.760 get your podcasts, or watch us live on YouTube. 0:04:48.680 --> 0:04:51.400 Let's go to earnings. We want to talk about Cisco Systems. 0:04:51.680 --> 0:04:54.039 So you had sales from its AI projects, right they're 0:04:54.080 --> 0:04:56.720 beginning to pick up. But the problem was that it's 0:04:56.760 --> 0:04:59.039 forecast for the current fiscal year. Well it was a 0:04:59.040 --> 0:05:02.200 little bit on the concern side, and that didn't Investors 0:05:02.240 --> 0:05:04.440 didn't like that very much. Let's find out why. So 0:05:04.520 --> 0:05:08.440 let's go to wou Jinhoi's Bloomberg Intelligence. Senior technology analysts 0:05:08.480 --> 0:05:11.200 joining us from Princeton. Wujin, thanks for joining us. I 0:05:11.240 --> 0:05:12.760 got to ask you right after the bad What did 0:05:12.800 --> 0:05:15.480 investors did? They just think that they should be benefiting 0:05:15.520 --> 0:05:17.800 more from AI spending? What was the issue? 0:05:18.560 --> 0:05:22.040 Yeah, I think a couple of things. AI wasn't one 0:05:22.040 --> 0:05:24.760 of them. But also there's a big product refresh cycle 0:05:25.279 --> 0:05:28.279 that investors were hoping would drive better growth. But at 0:05:28.320 --> 0:05:31.159 the end of the day, the guidance was a reminder 0:05:31.200 --> 0:05:34.800 that they are still tied to IT spending. And you know, 0:05:35.160 --> 0:05:38.120 I viewed it as more as prudent conservatism because they 0:05:38.120 --> 0:05:39.719 don't know what's happening on the second half. 0:05:39.600 --> 0:05:39.960 Of the year. 0:05:40.760 --> 0:05:44.240 Given where we are, you know, we have little visibility 0:05:44.240 --> 0:05:49.040 in terms of rates as well as tire Still. 0:05:47.480 --> 0:05:50.320 So the company recognized about one billion dollars in AI 0:05:50.400 --> 0:05:54.159 revenue on fiscal twenty twenty five, and I guess AI 0:05:54.200 --> 0:05:57.600 infrastructure orders for large from large cloud of providers whoever 0:05:57.680 --> 0:06:00.080 eight hundred million in the quarter. So where do you 0:06:00.160 --> 0:06:01.039 think these numbers can go? 0:06:02.320 --> 0:06:07.160 Yeah? Look, Paul, they forecasted a billion dollars in orders 0:06:07.160 --> 0:06:10.359 for fiscal twenty five. They double that if fiscal twenty 0:06:10.400 --> 0:06:13.840 six recognize the billion of it this year, I wouldn't 0:06:13.880 --> 0:06:17.760 be surprised if AI revenues grow at least another fifty 0:06:17.800 --> 0:06:22.320 percent from here, and they're penetrating multiple pockets right not 0:06:22.360 --> 0:06:24.159 only into the cloud. But if you think about a 0:06:24.200 --> 0:06:28.200 longer term, when enterprise adoption really starts kicking in, there 0:06:28.279 --> 0:06:29.400 is going to be a growth driver. 0:06:29.520 --> 0:06:31.160 So we have to. 0:06:31.080 --> 0:06:34.360 See where it'll be in twenty six and twenty seven 0:06:34.440 --> 0:06:36.919 when enterprise grows. But the partnership with then video should 0:06:36.920 --> 0:06:38.839 be beneficial to the longer term. 0:06:38.960 --> 0:06:42.360 What AI sector? Is it just to competitive? I mean, 0:06:42.400 --> 0:06:45.000 who are some of their peers, how are they doing 0:06:45.040 --> 0:06:45.760 against them? 0:06:46.240 --> 0:06:49.240 Well, if we think about it, well, they have multiple 0:06:49.960 --> 0:06:52.960 they're in AI in multiple vectors right, So from a 0:06:52.960 --> 0:06:57.120 networking space, Arista is one of the bigger competitors, as 0:06:57.160 --> 0:07:01.560 well as a smaller company called Celestica from They also 0:07:01.560 --> 0:07:05.120 they're also very very big on optical components and they're 0:07:05.120 --> 0:07:09.480 coming up against companies like Marvel as well as Siena. 0:07:10.000 --> 0:07:15.240 And they also provide AI servers and think about Dell 0:07:15.360 --> 0:07:20.600 and HPE. So look, is it competitive, yes, but they're 0:07:20.600 --> 0:07:23.240 one of the few American vendors that can actually supply 0:07:24.000 --> 0:07:26.360 components all the way to the system hardware. 0:07:27.240 --> 0:07:30.600 Oh what what are companies like Cisco and and Dell 0:07:30.680 --> 0:07:34.240 and some other big American companies throughout the tech stack chain. 0:07:34.280 --> 0:07:37.560 What are they saying just about the environment in terms 0:07:37.600 --> 0:07:41.600 of demand from their customers? Are they sensing waning demand 0:07:41.760 --> 0:07:44.200 or wavering demand? Just to see how some of these 0:07:44.320 --> 0:07:46.760 I don't know, TIFFs other economic policies may work out. 0:07:47.520 --> 0:07:50.320 Sure, Paul, you know Cisco is one of the first 0:07:50.600 --> 0:07:53.400 hardware belt wathers that that came out. I will tell 0:07:53.400 --> 0:07:56.880 you from from the numbers that I've seen on the 0:07:56.880 --> 0:07:59.880 companies that have reported, uh, you know, the I spending 0:07:59.880 --> 0:08:02.480 of vironment has actually been more resilient than I had thought. 0:08:03.120 --> 0:08:06.440 I went into the quarter with my mediar outlook as 0:08:06.480 --> 0:08:10.320 being a little bit cautious and negative, and quite frankly, 0:08:10.560 --> 0:08:13.040 the results have come in better than I had anticipated. 0:08:13.080 --> 0:08:16.080 The outlooks have come in better than I anticipated. But 0:08:16.160 --> 0:08:17.840 the fact of the matter is I don't know what's 0:08:17.840 --> 0:08:20.160 going to happen past December, and I think the Cisco's 0:08:20.160 --> 0:08:22.600 guidance reflect that we'll have a better sense in a 0:08:22.640 --> 0:08:24.960 couple of weeks from now. When companies like Dell and 0:08:25.200 --> 0:08:28.640 then HPE after Labor Day when they report. 0:08:28.640 --> 0:08:31.360 Did they talk about their guidance at all about the impacts? 0:08:31.360 --> 0:08:34.000 We mentioned tariff quickly, but did the impact of tariffs. 0:08:34.040 --> 0:08:36.440 If so, like, did they intend to how do they 0:08:36.440 --> 0:08:38.240 intend to lessen that impact from tariffs? 0:08:38.880 --> 0:08:42.160 You know, you know, Cisco has been probably one of 0:08:42.160 --> 0:08:46.800 the better companies in terms of managing expectations of tariffs 0:08:47.120 --> 0:08:50.520 as well as maneuvering the supply chain with the tariff. 0:08:50.559 --> 0:08:54.400 So in terms of managing expectations, they embedded tariff impact 0:08:54.440 --> 0:08:57.000 in their guidance. And because tariffs came in a little 0:08:57.000 --> 0:09:00.560 bit lower than we had anticipated, that actually helped the 0:09:00.640 --> 0:09:05.520 EPs just a little bit going forward. You know, all 0:09:05.600 --> 0:09:09.520 of the guidance includes the tariff impact. Now, the one 0:09:09.559 --> 0:09:13.719 thing I will add, we're still waiting for the semiconductive 0:09:13.800 --> 0:09:16.120 rulings as it relates to Section two three to two. 0:09:18.320 --> 0:09:20.360 We'll see where it stands. If we do have a 0:09:20.400 --> 0:09:26.200 negative ruling there, that could not only affect Cisco's guidance 0:09:26.200 --> 0:09:28.720 and margins, but also the rest of the electronics space. 0:09:28.960 --> 0:09:31.360 So I'm looking at the stock would Cisco that is, 0:09:31.360 --> 0:09:33.440 and it's up about eighteen percent year to date, so 0:09:33.600 --> 0:09:36.240 certainly being in the market, and I look at the 0:09:36.240 --> 0:09:39.400 A and R function, I see sixteen buys, ten holds, 0:09:39.640 --> 0:09:41.800 and one sell. So kind of a little bit of 0:09:41.840 --> 0:09:44.600 a split up there on the street. In terms of expectations, 0:09:44.640 --> 0:09:47.360 what do you think the bold cases for Cisco from 0:09:47.400 --> 0:09:48.160 these levels? 0:09:48.600 --> 0:09:53.760 Yeah, the bowl case is fairly easy, Paul. Faster than 0:09:53.840 --> 0:09:57.439 five percent to six percent growth driven by the product 0:09:57.480 --> 0:10:03.840 reforst cycle security as a driver for Cisco, that's going 0:10:03.920 --> 0:10:07.040 to raise multiples. And if it's going to raise multiples, 0:10:07.040 --> 0:10:09.280 it's gonna you have a higher stock from where it 0:10:09.320 --> 0:10:09.920 is today. 0:10:10.720 --> 0:10:12.920 So Chuck Robin, Cisco CEO, is gonna be speaking with 0:10:13.200 --> 0:10:16.880 BTV anchors Ed Ludlow Karen Hide just after eleven o'clock. 0:10:16.960 --> 0:10:19.920 So if you were in that room, what would you ask? 0:10:21.320 --> 0:10:25.120 Yeah, what I would ask is when does a security 0:10:25.240 --> 0:10:28.800 story really start to take hold where it does affect 0:10:28.960 --> 0:10:30.040 the growth positively? 0:10:30.400 --> 0:10:30.600 Right? 0:10:31.240 --> 0:10:36.280 Security offers a faster hardware growth as well as software growth, 0:10:36.960 --> 0:10:40.319 as well as a high margin recurring revenues. So it's 0:10:40.360 --> 0:10:42.080 a security it's turning into security. 0:10:42.120 --> 0:10:44.360 At the end of the day, Stay with us. More 0:10:44.400 --> 0:10:46.600 from Bloomberg Intelligence coming up after this. 0:10:48.760 --> 0:10:52.440 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:10:52.559 --> 0:10:55.920 weekdays at ten am Eastern on Applecarplay and Android Auto 0:10:56.040 --> 0:10:59.120 with the Bloomberg Business app. Listen on demand wherever you 0:10:59.120 --> 0:11:02.599 get your podcasts or watch US live on YouTube. 0:11:03.320 --> 0:11:05.520 All right, we shift from the markets to tech, and 0:11:05.920 --> 0:11:08.640 some have suggested that President Trump's novel export arrangement with 0:11:08.720 --> 0:11:12.080 Nvidia AMD paying the US government fifteen percent of revenue 0:11:12.080 --> 0:11:14.960 from some chip sales in China, Well, it could violate 0:11:15.080 --> 0:11:18.719 federal law. And if it did, what would happen? That 0:11:18.880 --> 0:11:21.120 is the question of the latest article on the terminal. 0:11:21.160 --> 0:11:23.680 You have to check it out. Matthew Shuttlin is Bloomberg 0:11:23.720 --> 0:11:27.959 Intelligence media litigation analyst. Matthew first question right off the 0:11:28.000 --> 0:11:29.280 bat is does. 0:11:29.080 --> 0:11:32.560 It Yeah, it does it violate the law? It's an 0:11:32.559 --> 0:11:35.000 interesting question that I don't think people had. 0:11:34.800 --> 0:11:35.920 Thought about for a while. 0:11:35.960 --> 0:11:40.280 But there is this clause in the twenty eighteen Export 0:11:40.400 --> 0:11:45.120 Control Reform Act that says that no fees can be 0:11:45.320 --> 0:11:50.800 charged for the processing of these export control licenses. There's 0:11:50.800 --> 0:11:55.680 also a clause in the US Constitution going way back 0:11:56.040 --> 0:12:02.080 that says that taxes cannot be levy against articles exported 0:12:02.480 --> 0:12:05.719 from US states. You put those two things together and 0:12:06.520 --> 0:12:09.679 you start to see, you know, some serious questions that 0:12:09.840 --> 0:12:15.760 could be raised about whether imposing a fifteen percent effective 0:12:15.960 --> 0:12:19.600 tax on exports is actually legal or not. Now, no 0:12:19.679 --> 0:12:23.000 lawsuits have been filed yet, and there would be some 0:12:23.160 --> 0:12:25.760 hurdles to filing them, But I think there is a 0:12:25.880 --> 0:12:28.760 very plausible legal case that could be made. 0:12:29.120 --> 0:12:33.600 If a lawsuit were to be filed, Who would do it? 0:12:33.640 --> 0:12:34.559 What entity would do that? 0:12:35.120 --> 0:12:37.640 Yeah, so that's a great question. I mean, if you're 0:12:37.679 --> 0:12:40.640 in Nvidia or AMD, I don't think you want to 0:12:40.679 --> 0:12:43.320 run right into court after you negotiated a deal with 0:12:43.360 --> 0:12:48.720 President Trump and challenge it there. And so I think 0:12:48.760 --> 0:12:52.080 you would see a potential lawsuit come from from a 0:12:52.160 --> 0:12:56.720 trade association that's concerned about the potential for this setting 0:12:56.720 --> 0:13:02.000 a precedent that goes forward after these particular deals. You 0:13:02.040 --> 0:13:05.800 could also envision shareholders of the companies who are upset 0:13:05.840 --> 0:13:08.679 about the company agreeing to something that might be inconsistent 0:13:08.679 --> 0:13:11.640 with federal law potentially filing lawsuits as well. 0:13:12.040 --> 0:13:14.600 And I like, we keep saying if this sword happ 0:13:14.640 --> 0:13:17.079 and yes, what would be the timeline for something like this? 0:13:17.880 --> 0:13:20.520 Yeah, so it's hard to say exactly. We don't we 0:13:20.880 --> 0:13:24.160 haven't seen the final agreements here between Nvidia and AMD, 0:13:24.280 --> 0:13:26.200 and just a couple of days ago, the White House 0:13:26.200 --> 0:13:29.680 said that they were the Commerce Department was still exploring 0:13:29.720 --> 0:13:33.040 the legality of how to do this, probably because they're 0:13:33.080 --> 0:13:36.640 looking at this precise statute we're talking about here. So 0:13:37.120 --> 0:13:39.599 timing's very much in flux for all of this, and 0:13:40.200 --> 0:13:42.120 it's going to be a question of whether we see 0:13:42.120 --> 0:13:45.599 this sort of approach going forward. But lawsuits could be 0:13:45.640 --> 0:13:48.079 filed any time. They would be filed in in federal 0:13:48.120 --> 0:13:53.000 district district courts. Probably you would seek injunctions trying to 0:13:53.040 --> 0:13:56.280 stop the imposition of these taxes, and it could be 0:13:56.320 --> 0:13:58.400 litigated up through the court system from there. 0:13:58.800 --> 0:14:00.880 But I mean to be clear, were agreed to by 0:14:00.880 --> 0:14:03.720 the companies and the government. I guess the companies met. 0:14:03.960 --> 0:14:06.240 The companies are just saying, hey, this is just the 0:14:06.280 --> 0:14:10.040 cost to do business in this country with this administration. 0:14:10.440 --> 0:14:11.800 Is that kind of think they were. 0:14:11.840 --> 0:14:14.080 I think that's exactly it, and I think there would 0:14:14.080 --> 0:14:17.520 be hurdles to these companies suing for that reason. I 0:14:17.800 --> 0:14:21.640 suspect these agreements are going to include waivers of their 0:14:21.800 --> 0:14:25.680 particular right to sue. And it's better to access these 0:14:25.760 --> 0:14:31.200 markets than, you know, to not access the markets at all, 0:14:31.280 --> 0:14:33.680 even if it comes at a fifteen percent price tag. 0:14:34.560 --> 0:14:36.040 Now, this whole. 0:14:35.880 --> 0:14:38.360 Deal, it started to fuel some concern that the government 0:14:38.400 --> 0:14:41.800 could charge companies for a range of business activities with 0:14:42.040 --> 0:14:45.680 other countries. I mean, is that a viable concern? And 0:14:45.720 --> 0:14:49.000 then what questions could that bring up in the meantime? 0:14:49.440 --> 0:14:51.960 Yeah, that is really I think the big question here 0:14:52.080 --> 0:14:54.560 is is this a one off or is this how 0:14:55.000 --> 0:14:58.200 how this administration is going to operate for all exports 0:14:58.320 --> 0:15:02.040 going forward? And if it's it's the latter, I think 0:15:02.120 --> 0:15:06.080 that raises much much bigger concerns. Usually you would look 0:15:06.120 --> 0:15:09.120 to Congress to set the standards here, and there is, 0:15:09.160 --> 0:15:11.960 as I said, a statute that says no fees for 0:15:12.920 --> 0:15:18.040 the processing of these export licenses. And so in a 0:15:18.080 --> 0:15:21.400 typical world you would see Congress, you know, explore maybe 0:15:21.680 --> 0:15:25.640 setting the legality of something like this. But right now 0:15:25.680 --> 0:15:28.320 we have a law from seven years ago that may 0:15:28.400 --> 0:15:30.120 or may not be be challenged. 0:15:30.760 --> 0:15:33.920 Stay with us. More from Bloomberg Intelligence coming up after this. 0:15:36.040 --> 0:15:39.760 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:15:39.840 --> 0:15:43.200 weekdays at ten am Eastern on Applecarplay and Android Auto 0:15:43.320 --> 0:15:46.400 with the Bloomberg Business app. Listen on demand wherever you 0:15:46.440 --> 0:15:49.400 get your podcasts, or watch us live on YouTube. 0:15:50.120 --> 0:15:52.280 Right here's the story my eyes went to immediately this 0:15:52.320 --> 0:15:55.560 morning when I came in US and Canadian banks are 0:15:55.600 --> 0:15:58.720 summoning staffers back to their offices at a faster rate 0:15:58.840 --> 0:16:01.720 than European rivals. That was very interesting, and we've got 0:16:01.720 --> 0:16:04.000 lots of good data in their charts and stuff like that, 0:16:04.080 --> 0:16:07.080 But to me, it just went right to the difference 0:16:07.120 --> 0:16:09.800 between the US and Europe is it relates to banking 0:16:09.840 --> 0:16:12.560 and investment banking, where it just seems like the US 0:16:12.680 --> 0:16:15.280 banks have just dominated. And I know there's a lot 0:16:15.280 --> 0:16:17.920 of reasons why structurally, but this one just feels like 0:16:18.200 --> 0:16:20.760 a part of it. So we want to get right 0:16:20.800 --> 0:16:24.080 into it now. Tom Metcalf, finance editor for Blow News. 0:16:24.080 --> 0:16:26.560 He's in our London office. Tom, what do you guys 0:16:26.600 --> 0:16:29.520 find are are American bankers really coming back more to 0:16:29.880 --> 0:16:33.080 the office more frequently than the Europeans. 0:16:33.440 --> 0:16:36.040 Yeah, it's a very very clear trend actually. So what 0:16:36.080 --> 0:16:39.120 we did went back looked at the biggest fifteen US 0:16:39.120 --> 0:16:41.880 and Canadian banks and then also the biggest fifteen European 0:16:42.160 --> 0:16:44.880 and the split basically simpers flies down to is about 0:16:44.880 --> 0:16:47.400 three days a week in Europe compared to four days 0:16:47.400 --> 0:16:49.040 a week in the US. And of course in the 0:16:49.080 --> 0:16:51.360 US has a lot of very notable examples who are 0:16:51.440 --> 0:16:55.600 back fully to five days, right, the JP Morgan's, the Goldmans. 0:16:55.880 --> 0:16:57.680 So I think it's been a really interesting split, and 0:16:57.720 --> 0:16:59.880 like you say, it's it's kind of part and part 0:17:00.080 --> 0:17:03.520 sort of this divergence really between particularly the US banks 0:17:03.520 --> 0:17:05.719 and europe in that, you know, one of the theories 0:17:05.760 --> 0:17:07.680 going out there's lots of reasons why this is happening, 0:17:07.920 --> 0:17:10.160 but certainly one analyst was saying, you know, one element 0:17:10.359 --> 0:17:12.560 is the fact US banks are just that much more 0:17:12.560 --> 0:17:15.040 profitable and thus they sort of have almost like a 0:17:15.040 --> 0:17:18.359 little bit more leverage over their employees to effectively go no, 0:17:18.440 --> 0:17:20.359 it's going to be our way or the highway, is 0:17:20.400 --> 0:17:24.000 what Mike Mayo told us. But as you say, it's 0:17:24.040 --> 0:17:26.640 one of those stories where you know, I think anecdotally 0:17:26.960 --> 0:17:29.199 that was the kind of clearly the sense, but it 0:17:29.240 --> 0:17:31.200 was quite startling to see it kind of you know, 0:17:31.200 --> 0:17:32.960 when you really dive into the day to go, oh, yes, 0:17:33.000 --> 0:17:37.280 it's really basically almost two different strategies, with broadly speaking, 0:17:37.280 --> 0:17:39.679 the Europeans kind of viewing it as a almost like 0:17:39.720 --> 0:17:43.680 employee retention tool and US banks going we don't care. 0:17:43.760 --> 0:17:45.760 We think the most efficient way to work is in 0:17:45.800 --> 0:17:48.000 the office. You're coming back in, Well, you're. 0:17:47.920 --> 0:17:49.600 Kind of leading to it. I wanted to ask Tom, 0:17:50.000 --> 0:17:53.320 is this a cultural thing? Is this also playing a factor? 0:17:54.920 --> 0:17:57.720 Yeah, and there's obviously no one size fits all, right, 0:17:57.760 --> 0:18:01.000 but like broadly speaking, a little bit more of that, 0:18:01.160 --> 0:18:05.280 you know, go attitude, et cetera, say Goldman, Whereas the 0:18:05.320 --> 0:18:08.440 European banks, you know, structurally there's more retail banks in 0:18:08.680 --> 0:18:11.800 that space, or certainly investment banks. The capital markets is 0:18:11.800 --> 0:18:14.919 a bit smaller part of their business. So certainly a 0:18:15.040 --> 0:18:19.240 bunch of different things flowing through here. And you know what, 0:18:19.359 --> 0:18:21.399 the other interesting thing was the academic research we took 0:18:21.440 --> 0:18:24.000 a look at the same time, is not out there 0:18:24.040 --> 0:18:25.720 going if you bring everyone back to the office, you 0:18:26.000 --> 0:18:29.840 necessarily get better stock market performance or even better financial performance. 0:18:29.880 --> 0:18:33.080 So it's very much I think cultural is probably what's 0:18:33.160 --> 0:18:34.920 drive in this. You know, the tone from the top. 0:18:35.400 --> 0:18:37.320 You know, someone like a Jamie Diamond, probably the most 0:18:37.359 --> 0:18:40.200 outspoken executive on this, very very keen to have everyone 0:18:40.200 --> 0:18:42.119 back in the office. And then on the flip side, 0:18:42.200 --> 0:18:45.920 Bill Winters here, who runs Standard Chartered, he's literally taken 0:18:45.960 --> 0:18:48.480 the opposite tone, so he's just effectively going, look, we 0:18:48.560 --> 0:18:50.760 believe our employees can make the right decision for their 0:18:50.800 --> 0:18:54.000 particular teams, and we will. And you know, standard charters 0:18:54.000 --> 0:18:57.080 are a fascinating example of everyone we spoke to. They 0:18:57.119 --> 0:18:59.359 basically said they don't even have a specific mandate at all. 0:18:59.400 --> 0:19:02.520 They just truly are sort of decentralizing this and just 0:19:02.600 --> 0:19:05.240 telling people that there's no policy, just make sure you 0:19:05.320 --> 0:19:06.560 do what to write for you. 0:19:06.880 --> 0:19:10.840 Wow, that's interesting, and I wonder I'm hearing stories that 0:19:11.480 --> 0:19:14.080 you know, back to work schedules and requirements maybe used 0:19:14.119 --> 0:19:17.080 as a recruiting tool to attract and retain talent. Ie 0:19:17.920 --> 0:19:20.240 City group. I know Jane Fraser, the CEO is there 0:19:20.280 --> 0:19:24.560 is she thinks it's a recruiting tool for City because 0:19:24.600 --> 0:19:27.840 they're only at three day mandate. Are other banks thinking 0:19:27.920 --> 0:19:28.400 that way. 0:19:29.440 --> 0:19:31.480 Yeah, exactly. It goes to like it's not like kind 0:19:31.520 --> 0:19:34.280 of a universal monolith here, Like you go through the 0:19:34.400 --> 0:19:36.280 US banks and there's a bunch of an art in 0:19:36.320 --> 0:19:39.600 and City is probably maybe the most interesting example because 0:19:39.640 --> 0:19:41.960 as you say, it's got that, you know, it's going 0:19:42.000 --> 0:19:44.439 through a big restruction and as part of that, it's 0:19:44.480 --> 0:19:47.160 offering a bit of flexibility to its employees. Some people think, 0:19:47.200 --> 0:19:50.160 because you know, that helps retain talent, who might otherwise, 0:19:50.200 --> 0:19:52.200 you know, look further afield, but they can go, well, look, 0:19:52.200 --> 0:19:54.560 if I'm at city, I get way more flexibility. It 0:19:54.560 --> 0:19:56.879 fits my lifestyle, or it gives me that ability to 0:19:56.920 --> 0:20:01.560 work from most places. So it's really fascinating and I 0:20:01.560 --> 0:20:04.159 think you kind of almost have to go case by case, 0:20:05.119 --> 0:20:08.240 but broadly speaking, still, if you're looking at a US bank, 0:20:08.280 --> 0:20:10.560 you can expect a little bit more strictness around artio. 0:20:10.840 --> 0:20:13.119 Hey, Tom, before you go, is there anything that surprised 0:20:13.119 --> 0:20:14.919 you when you were doing this research where you were like, 0:20:15.119 --> 0:20:16.280 I didn't know that. 0:20:16.440 --> 0:20:17.880 I didn't think that was possible. 0:20:19.400 --> 0:20:20.879 I think the biggest thing was like, how has it 0:20:20.880 --> 0:20:22.000 been five years since? 0:20:22.560 --> 0:20:22.760 You know? 0:20:22.840 --> 0:20:24.480 I was just like, I didn't realize there's been half 0:20:24.480 --> 0:20:27.080 a decade already. And I think, I mean, look, I 0:20:27.080 --> 0:20:29.120 think that's the sense of you know, this is still 0:20:29.400 --> 0:20:31.200 very much a work in progress. And I remember writing 0:20:31.200 --> 0:20:33.320 about it, you know, during the pandemic and beyond, it 0:20:33.359 --> 0:20:35.920 was very much felt to be this kind of big 0:20:35.960 --> 0:20:39.240 philosophical debate about you know, the future of work, and 0:20:39.400 --> 0:20:42.720