WEBVTT - Putin’s Invasion Shows War Machine Needs More Ammo 0:00:01.320 --> 0:00:05.680 This is Bloomberg business Week inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.440 --> 0:00:13.640 global business, finance and tech news. The Bloomberg business Week 0:00:13.680 --> 0:00:18.600 Podcast with Carol Masser and Tim Stinebec from Bloomberg Radio 0:00:21.160 --> 0:00:23.520 as we mentioned yesterday, and the new double issue of 0:00:23.520 --> 0:00:27.680 Bloomberg Business Week, several stories on the destruction in Eastern Europe, 0:00:27.720 --> 0:00:30.520 including one on the new arms race that has to 0:00:30.520 --> 0:00:34.800 do with supplies and Russia and Ukraine having enough ammunition. 0:00:34.840 --> 0:00:37.920 Who knew there were ammo shortages? And so crazy to 0:00:37.960 --> 0:00:40.159 think that it's been a year since that Russian invasion 0:00:40.159 --> 0:00:42.879 of Ukraine. Absolutely, and as you said, who knew that 0:00:42.880 --> 0:00:46.080 there were AMMO shortages? Our business team, business Week team 0:00:46.120 --> 0:00:48.360 definitely knew. The new issue, by the way, online at 0:00:48.360 --> 0:00:51.479 Bloomberg dot com slash business Week, also on the Bloomberg terminal, 0:00:51.520 --> 0:00:55.600 of course on newsstands. Let's get to it with Natalia Drosdac. 0:00:55.680 --> 0:00:58.720 She's Bloomberg News reporter covering EU government. She's on the 0:00:58.720 --> 0:01:01.760 phone from Brussels, along with the Bloomberg Business Week editor 0:01:02.160 --> 0:01:04.440 Jill Weber, of course, editor of the magazine. He's here 0:01:04.440 --> 0:01:07.680 in our Bloomberg Interactive Broker Studio. I have to say, Joe, Uh, 0:01:07.840 --> 0:01:11.280 the to all the coverage really important and as Maddie said, 0:01:11.640 --> 0:01:13.760 hard to believe that we're already one year in or 0:01:13.800 --> 0:01:15.880 almost one year in on this. Yes, so to mark 0:01:15.959 --> 0:01:18.959 that we wanted to create a package of stories and 0:01:19.520 --> 0:01:23.000 um In in the ongoing effort to show how important 0:01:23.280 --> 0:01:26.840 return to office is. Natalia, who happened to be in 0:01:26.920 --> 0:01:31.600 New York from Brussels, floated as I bumped into every 0:01:31.640 --> 0:01:34.520 one day, Uh, this idea that you know, the world 0:01:34.560 --> 0:01:38.320 happens to actually be running short on on AMMO, And 0:01:38.360 --> 0:01:41.760 I said, well that has some serious implications when um, 0:01:41.800 --> 0:01:46.080 you know Putin has decided to wage war in Europe, right, 0:01:46.200 --> 0:01:48.640 and and that is a coverage area that I just 0:01:48.720 --> 0:01:51.520 think is going to become even more interesting as the 0:01:51.600 --> 0:01:54.840 conflict reaches on. But Natalia, bring us up to speed 0:01:54.880 --> 0:01:58.360 on on your reporting and which you found. Yeah, I 0:01:58.360 --> 0:02:02.600 think one of the features of this war in Ukraine 0:02:02.600 --> 0:02:06.800 that we've seen is um the incredibly high attrition rates 0:02:06.840 --> 0:02:11.800 of ammunition that is taking place every day. Both sides 0:02:11.840 --> 0:02:16.160 are burning through as much as thirty thousand, one five 0:02:16.240 --> 0:02:22.639 five millimeter ammunition UM, which is artillery ammunition basically, and 0:02:22.680 --> 0:02:25.680 I think that has really um that has really taken 0:02:25.720 --> 0:02:27.960 the West by surprise. I mean so much so that 0:02:28.320 --> 0:02:32.400 their stockpiles have also been depleted as a result of 0:02:33.000 --> 0:02:37.680 supporting Ukraine in its fight against Russia. And we know 0:02:37.800 --> 0:02:40.519 that Russia is also facing that pressure. I mean that 0:02:40.639 --> 0:02:43.640 just in terms of the staggering amount of ammunition that 0:02:43.680 --> 0:02:48.480 they're they're going to going through. That means that there's been, 0:02:49.000 --> 0:02:53.000 um basically this urgent need to to boost production on 0:02:53.000 --> 0:02:56.800 on all fronts, on all sides, um in Ukraine and 0:02:56.960 --> 0:03:01.320 Russia in the West. And so there's this expense from 0:03:01.680 --> 0:03:04.919 the officials in recent weeks that the war is really 0:03:04.919 --> 0:03:08.960 becoming a battle of factories and production as much as 0:03:09.000 --> 0:03:12.720 it is a battle of troops and weapons. And so 0:03:12.800 --> 0:03:15.600 there's this real race to to to produce as much 0:03:16.240 --> 0:03:20.000 ammunition in particular to get that to the front, especially 0:03:20.080 --> 0:03:24.760 right now with both Russia and Ukraine launching new offenses 0:03:24.800 --> 0:03:27.880 in the coming weeks and months. So this is an 0:03:27.960 --> 0:03:31.880 urgent issue. Okay, so you might have been tired of 0:03:31.919 --> 0:03:34.680 hearing about supply chains, but it turns out wars have 0:03:34.840 --> 0:03:38.400 supply chains to Let's actually just focus on on the 0:03:38.440 --> 0:03:41.560 europe side, and and what's going into Ukraine to support 0:03:41.560 --> 0:03:44.760 the Ukrainian side. Where where is that stuff coming from 0:03:44.760 --> 0:03:47.080 and what sort of what do the numbers look like? 0:03:48.120 --> 0:03:53.200 As that machine has rapped back up, well, so Europe UM. 0:03:53.600 --> 0:03:56.360 So both Europe and the US have had to boost production. 0:03:56.920 --> 0:03:59.680 I think it's fair to say that the US has 0:04:00.040 --> 0:04:05.480 and quicker to do it. UM. They were producing around 0:04:05.640 --> 0:04:11.040 fourteen thousand UM shells per month before the war, and 0:04:11.120 --> 0:04:13.360 now they're planning to get up to as much as 0:04:13.480 --> 0:04:17.760 nineties thousands per months as soon as the next year. UM. 0:04:17.839 --> 0:04:22.160 But but Europe does seem to be lagging behind UM. 0:04:22.279 --> 0:04:27.120 And you know, we have we have some examples of 0:04:27.120 --> 0:04:30.120 of companies in Germany and Slovakia who are who are 0:04:30.120 --> 0:04:32.600 really trying to dose production. But the problem is that 0:04:33.000 --> 0:04:37.120 Europe comes from this context of years of really limited 0:04:37.360 --> 0:04:40.280 defense spending, which I'm sure you will remember from the 0:04:40.279 --> 0:04:42.799 Trump days because that was something that he was really 0:04:43.480 --> 0:04:46.679 UM pushing the Europeans to do more of, to spend 0:04:46.680 --> 0:04:50.640 more in defense UM. And as it happens, because Europe 0:04:50.680 --> 0:04:55.280 was spending UM in a limited amount of defense on 0:04:55.320 --> 0:04:58.520 the basis of the assumption that there wouldn't be a 0:04:58.600 --> 0:05:03.440 major war this content that meant that production and industry 0:05:04.080 --> 0:05:07.960 has also kind of uh scaled back in a big 0:05:07.960 --> 0:05:11.400 way as a result. Hey, to tell you, I'm so 0:05:11.440 --> 0:05:13.600 sorry to jump in. I just wonder. I know you're 0:05:13.600 --> 0:05:16.680 talking about the europe impact, but we've been talking all 0:05:16.720 --> 0:05:19.480 week about how the US has also been limiting investment 0:05:19.520 --> 0:05:22.000 in defense. I wonder to what extent some of the 0:05:22.000 --> 0:05:24.960 sources that you spoke with in your fantastic reporting on 0:05:25.000 --> 0:05:27.960 this would be concerned about that as well, the US 0:05:28.040 --> 0:05:33.680 potentially pulling back on investment in production of something like AMMO. Well, 0:05:33.720 --> 0:05:36.760 I think I mean the context right now, that would 0:05:36.800 --> 0:05:40.200 be really hard to justify, um, because I think this 0:05:40.839 --> 0:05:43.960 there's just such an urgent need not just to support Ukraine, 0:05:43.960 --> 0:05:50.120 but also to to replenish the Allies stockpiles, and NATO 0:05:50.240 --> 0:05:54.040 Allies just just in the recent weeks UM and months 0:05:54.040 --> 0:05:58.120 has agreed to to raise stockpiling guidelines as a result 0:05:58.200 --> 0:06:01.560 of that. So this is like a clear, uh concrete 0:06:01.920 --> 0:06:05.760 um takeaway that they're they're they're yet that they're making 0:06:05.839 --> 0:06:08.800 from from the war and learning lessons from what they're 0:06:08.800 --> 0:06:10.920 seeing in Kraid to tell you, I feel like there's 0:06:10.920 --> 0:06:13.039 a reality of and you make a great reference to 0:06:13.080 --> 0:06:15.880 World War One, um when it comes to ammunition. But 0:06:15.920 --> 0:06:18.320 the reality is, you know, ultimately who is able to 0:06:18.400 --> 0:06:21.159 kind of bring in and build up their stockpiles could 0:06:22.120 --> 0:06:27.320 have a large um impact on ultimately who maybe wins 0:06:27.440 --> 0:06:30.240 this war. So is there a net net who has 0:06:30.279 --> 0:06:33.719 the advantage right now? Russia or Ukraine? I think it's 0:06:33.800 --> 0:06:37.560 it's a really tight race. Um. You know, when you 0:06:37.600 --> 0:06:42.880 talk to NATO officials, they're really confident about their position. Um. 0:06:43.240 --> 0:06:46.960 They know that Okay, Ukraine's using less, but they're more 0:06:47.000 --> 0:06:51.280 efficient about the ammunition that they're using because they've gotten 0:06:51.400 --> 0:06:55.840 very um modern weapons from from NATO allies, and those 0:06:55.920 --> 0:07:00.680 modern weapons are more precise at targeting UM targeting, making 0:07:00.720 --> 0:07:06.560 those hits UM. And Russia's under sanctions, it's a Ukraine 0:07:06.600 --> 0:07:11.640 also has the backing of the entire West Western production 0:07:11.720 --> 0:07:16.280 capacity potential capacity. But on the Russian side, they've really 0:07:16.600 --> 0:07:21.560 they've really um, I mean they've they've switched into wartime economy. 0:07:21.720 --> 0:07:24.200 So that means that the sense has become a number 0:07:24.240 --> 0:07:28.440 one priority. So there it's us the forefront, and we 0:07:28.440 --> 0:07:32.480 we don't have concrete numbers about their current production of ammunition, 0:07:32.520 --> 0:07:35.400 but we know that before the war they were producing 0:07:35.920 --> 0:07:39.000 one point seven million, one five two, which is the 0:07:39.040 --> 0:07:45.360 Soviet UH standard for ammunition. I'm gonna jump in here. 0:07:45.440 --> 0:07:48.320 I highly recommend everybody check out the series of stories, 0:07:48.360 --> 0:07:51.360 the photo essay, your story there with all the numbers. 0:07:51.600 --> 0:07:53.840 Um just talking about here. We are almost one year 0:07:53.880 --> 0:07:57.160 in u Natalia Josiac Bluemberg News and of course the 0:07:57.240 --> 0:07:59.360 editor of Blueberg business Week. Check out this is the 0:07:59.440 --> 0:08:03.200 cover a special jeep dive into the war in Bloomberg 0:08:03.240 --> 0:08:08.320 business Week. You're listening to the Bloomberg Business Week podcast. 0:08:08.600 --> 0:08:11.400 Catch us live weekdays from two to five pm Easter 0:08:11.640 --> 0:08:15.120 on Bloomberg Radio, the Bloomberg Business app band you too. 0:08:15.240 --> 0:08:18.360 You can also listen live to our flagship New York station, 0:08:18.760 --> 0:08:25.920 Just Say Alexa play Bloomberg e Love and Dirty. Ain't 0:08:26.560 --> 0:08:34.400 calls on trucks, but if it runs, dear matter, thanks much. 0:08:34.440 --> 0:08:38.319 Tract sex all right, we're gonna talk about tractors. Yeah, 0:08:38.360 --> 0:08:42.120 I guess they could be sexy. I don't know. Down 0:08:42.160 --> 0:08:45.000 on the farm. Everybody, alright, cheers of deer. They are 0:08:45.200 --> 0:08:47.240 roommate and I and the team we were just talking 0:08:47.280 --> 0:08:49.720 about this deer jumping today. Certainly one of I think 0:08:49.720 --> 0:08:52.120 it's the number one gainer in the SNP five reported 0:08:52.120 --> 0:08:55.319 first quarter results be the expectations. They raised their forecast. 0:08:55.440 --> 0:08:58.320 Let's get into what is going on at the company, 0:08:58.320 --> 0:09:01.960 maybe what it says more broadly about the farm economy 0:09:02.000 --> 0:09:04.480 and the world at large. With us is Bloomberg News 0:09:04.480 --> 0:09:07.520 ag reporter Elizabeth Elkin. She's joining us via zoom in 0:09:07.559 --> 0:09:10.480 New York City, and we've got Bloomberg Opinion, Deals and 0:09:10.520 --> 0:09:13.760 Industrials columnist Brook Sutherland right here in our Bloomberg Interactive 0:09:13.800 --> 0:09:16.320 Broker studio. Hey, Elizabeth, I want to start with you 0:09:16.360 --> 0:09:20.320 break down the quarter for us. Yeah. Absolutely. Um, So, 0:09:20.640 --> 0:09:24.439 like you said, we had a really really really strong 0:09:24.600 --> 0:09:27.800 day for deer today. Um, you can kind of see 0:09:27.960 --> 0:09:31.000 how well farmers are doing based on how well deer 0:09:31.040 --> 0:09:33.920 is doing. Right, So, farmers are making a lot of money, 0:09:34.320 --> 0:09:37.040 which means that they're buying a lot of tractors, and 0:09:37.080 --> 0:09:39.400 so then you get deer making a lot of money 0:09:39.480 --> 0:09:41.400 off that. Right. There are a lot of farmers who 0:09:41.480 --> 0:09:44.840 are going in and they're upgrading their fleets. You know, 0:09:45.040 --> 0:09:48.200 they need they need new equipment just like anyone else does. 0:09:48.360 --> 0:09:51.600 And uh yeah, they're they're upgrading and they're spending a 0:09:51.600 --> 0:09:54.200 lot of money and and Deer is making money off that. 0:09:54.240 --> 0:09:57.400 Of course, So Brooke, bringing you into the conversation here, 0:09:57.480 --> 0:09:59.160 tell me a little bit about what this is looking 0:09:59.200 --> 0:10:01.559 like on the deal side. What are people most excited 0:10:01.559 --> 0:10:04.640 about when it comes to Deer? Uh, sure, I mean 0:10:04.679 --> 0:10:06.920 on the deal side. I think in the industrial world, 0:10:06.920 --> 0:10:09.959 it's just interesting to see, um, you know, how these 0:10:10.000 --> 0:10:12.920 companies might behave if we see some valuation reset. We've 0:10:12.920 --> 0:10:16.720 heard a lot of companies complaining about prices being very expensive. Certainly, 0:10:16.800 --> 0:10:20.800 Deer has been making some inroads on the technology front, 0:10:20.800 --> 0:10:23.199 which you know, we've seen that across the industrial sector 0:10:23.240 --> 0:10:27.800 of companies wanting to invest in these higher tech options 0:10:27.800 --> 0:10:30.640 for their equipment. But you know, I think what's interesting 0:10:30.640 --> 0:10:33.040 in today's numbers and just really echoes what we've heard 0:10:33.080 --> 0:10:36.800 across the manufacturing sector this quarter that they're not really 0:10:36.840 --> 0:10:39.680 seeing that dramatic drop off in demand that people have 0:10:39.720 --> 0:10:42.440 been worried about for so many quarters. Certainly there's pockets 0:10:42.440 --> 0:10:45.160 of weakness um for Deer, particularly that's on the more 0:10:45.200 --> 0:10:48.280 consumer facing side. Some of those sort of hobby tractors 0:10:48.320 --> 0:10:50.360 that were very big during the pandemic when we were 0:10:50.360 --> 0:10:53.320 all sitting at home, and I'm trying to figure out really, 0:10:53.720 --> 0:10:56.120 I mean, people who think tractors are sexy and we're 0:10:56.120 --> 0:10:58.120 excited to get out and do that during the pandemic, 0:10:58.120 --> 0:11:00.000 and so we're seeing weakness there. But in terms of 0:11:00.000 --> 0:11:03.880 they're really in more industrial facing businesses, it's just not 0:11:03.960 --> 0:11:06.000 happening there and and nor is it for a lot 0:11:06.040 --> 0:11:07.959 of the other industrial companies that I look at. But 0:11:08.160 --> 0:11:10.240 go through some of the headlines and numbers that we 0:11:10.320 --> 0:11:12.800 got from Dear though that was so strong about you know, 0:11:12.800 --> 0:11:16.360 they addressed demand, they talked about supply chains, walk us 0:11:16.360 --> 0:11:18.959 through it a little bit, sure, like Elizabeth was saying, 0:11:19.000 --> 0:11:21.559 you know, um, farmers are are doing well right now. 0:11:21.600 --> 0:11:24.599 Crop prices are up, and you know, there's some expectation 0:11:24.640 --> 0:11:27.040 that net income for farmers will be down next year 0:11:27.080 --> 0:11:29.280 relative to this year, but Deer still expects it to 0:11:29.320 --> 0:11:31.800 be at a very healthy level to support that replacement 0:11:31.840 --> 0:11:35.000 demand for this aging farm equipment that we've been talking 0:11:35.000 --> 0:11:38.120 about for years and years now, and they are looking 0:11:38.200 --> 0:11:40.440 to invest. And you know, Deer has also come out 0:11:40.480 --> 0:11:44.840 with higher tech offerings UM that can help improve farmers productivity, 0:11:44.880 --> 0:11:46.600 which of course is very appealing at a time when 0:11:46.600 --> 0:11:48.360 crop prices are high, and you want to get as 0:11:48.440 --> 0:11:51.319 much bang for your buck as you possibly can. UM. 0:11:51.440 --> 0:11:53.040 You know, it's part of this. And let me first 0:11:53.040 --> 0:11:55.520 start with you and then I'll bring you back in Elizabeth. 0:11:55.559 --> 0:11:58.840 It's part of this the inflation story that because farmers 0:11:58.880 --> 0:12:01.600 have been have they been able to charge higher prices? 0:12:01.679 --> 0:12:04.720 Is that part of it. Deer seen incredible pricing power 0:12:04.760 --> 0:12:06.600 and they're not alone in this UM, you know, But 0:12:06.679 --> 0:12:09.719 I think it is just notable how much Deer has 0:12:09.800 --> 0:12:11.920 raised prices. And it's somewhat similar to what we've seen 0:12:11.960 --> 0:12:14.400 at Caterpillar in terms of pricing power. But these are 0:12:14.800 --> 0:12:18.320 very big companies with very deep networks of dealers UM 0:12:18.360 --> 0:12:22.080 and service providers, and they have a lot of power 0:12:22.160 --> 0:12:24.680 when it comes to pricing UM and they certainly have 0:12:24.800 --> 0:12:27.520 not hesitated to flex that in this environment. But is 0:12:27.520 --> 0:12:29.720 it because farmers are making more money off the crops? 0:12:30.080 --> 0:12:33.839 I mean, I think farmers be able to absorb the 0:12:33.920 --> 0:12:36.240 higher costs UM. And you know, at the end of 0:12:36.240 --> 0:12:39.439 the day, if you need the equipment, UM, you're you're 0:12:39.440 --> 0:12:41.560 going to You're gonna want to buy it. UM. Of course, 0:12:41.720 --> 0:12:43.319 you know there are competitors that you can look to 0:12:43.400 --> 0:12:45.560 in this field. But you know, like I said, Deer 0:12:45.600 --> 0:12:48.040 is a big company in the agriculture equipment space and 0:12:48.040 --> 0:12:50.800 they have a lot of power. Elizabeth, come on in 0:12:50.840 --> 0:12:55.000 on this and what we've been talking about. Yeah, absolutely, So, Um, 0:12:55.240 --> 0:12:58.360 commodity crop prices are really really high and farmers are, 0:12:58.720 --> 0:13:01.760 as we've said, making a lot of money off of that. Um, 0:13:01.800 --> 0:13:04.679 you know, we do as as we've been looking at 0:13:04.679 --> 0:13:07.920 this year or this past sort of year period, UM, 0:13:07.960 --> 0:13:12.000 we've been worried somewhat about like farmers being able to 0:13:12.800 --> 0:13:18.360 outpace inflation, right because everything that goes into growing crops 0:13:18.640 --> 0:13:22.000 goes into like the farm you know, like processes. We've 0:13:22.040 --> 0:13:25.520 seen like massive inflation on that. But but so far 0:13:25.640 --> 0:13:29.640 crop prices have kept up pace more than so and 0:13:29.760 --> 0:13:32.800 so um yeah there. I mean, farmers are kind of 0:13:32.880 --> 0:13:36.120 rolling in cat right now. And that's where we see 0:13:36.160 --> 0:13:39.320 this come in, right, So farmers are rolling in cash. 0:13:39.360 --> 0:13:43.600 I wonder how much of this is the fundamentals versus 0:13:43.600 --> 0:13:46.760 the technicals for dear, Like, what what is the exact 0:13:46.840 --> 0:13:49.960 data point that people are most excited about when looking 0:13:50.000 --> 0:13:51.720 at Deer and Brooke? I wonder if you can touch 0:13:51.760 --> 0:13:54.120 on that sure, I mean, I think it's a variety 0:13:54.120 --> 0:13:56.200 of things. I think there was a lot of angst 0:13:56.320 --> 0:13:58.720 heading into this quarter. Um you know that we might 0:13:58.760 --> 0:14:01.280 start to see signs of a slow down. Deer uh 0:14:01.720 --> 0:14:04.880 It's stock is up significantly over the last couple of years, 0:14:04.920 --> 0:14:06.920 and you know, I think people are wondering if you know, 0:14:06.960 --> 0:14:09.480 there's an opportunity for some profit taking at some point here, 0:14:09.480 --> 0:14:13.160 but the company just keeps out performing, blowing past. It's 0:14:13.200 --> 0:14:16.280 kind of markable. I just went back to I guess 0:14:16.280 --> 0:14:19.800 that was a little bit of a Yeah, I think 0:14:19.960 --> 0:14:21.760 was a little bit of a down year, but they 0:14:21.760 --> 0:14:23.880 have just been shooting up year after year they have. 0:14:24.080 --> 0:14:26.720 And I mean it's not just the agricultural equipment either. 0:14:26.760 --> 0:14:28.120 I mean one of the things that stood out to 0:14:28.120 --> 0:14:30.440 me just you know, looking at the industrial sector more broadly, 0:14:30.480 --> 0:14:33.200 like I do, is their optimism around construction equipment that 0:14:33.280 --> 0:14:36.160 you know, whatever weakness we're seeing and housing, they still 0:14:36.200 --> 0:14:40.040 are seeing very strong demand for construction and forest equipment. Um. 0:14:40.200 --> 0:14:44.200 You know, as some of that institutional commercial spending comes in, um, 0:14:44.240 --> 0:14:46.720 you know, benefits from infrastructure spending, that sort of thing. 0:14:46.840 --> 0:14:48.720 So you know, that's a focus for a lot of 0:14:48.760 --> 0:14:51.440 investors in the industrial side. And I know Elizabeth that 0:14:51.480 --> 0:14:54.120 you cover this in a much more high brow way. 0:14:54.160 --> 0:14:56.080 But I do wonder to what extent kind of the 0:14:56.120 --> 0:15:00.520 memification of Deer and Caterpillar has any impact on the companies. 0:15:00.560 --> 0:15:03.600 Like when we see everyday consumers just wanting to buy 0:15:03.680 --> 0:15:07.440 anything branded Dear to kind of express their own love 0:15:07.480 --> 0:15:10.920 of the company. Um, does that stay sticky? Does that 0:15:11.040 --> 0:15:13.520 remain a good sign for the company when you look, 0:15:13.640 --> 0:15:15.560 you know, a year from now, five years from now. 0:15:16.640 --> 0:15:20.480 I mean, look, Dear is like one of these top names, right, 0:15:20.520 --> 0:15:22.640 I mean I don't think that I can think about 0:15:22.760 --> 0:15:24.880 driving through I went to school in Alabama, Like, I 0:15:24.920 --> 0:15:28.160 can't think of that driving through Alabama without seeing a 0:15:28.200 --> 0:15:32.400 bunch of big green deer tractors, right, Um, and the hats, 0:15:32.520 --> 0:15:37.920 you know, and the children. Really they have so much 0:15:37.960 --> 0:15:40.280 that you can buy to just be like, I love 0:15:40.320 --> 0:15:43.040 this brand, and they've done so much marketing around that, 0:15:43.080 --> 0:15:45.600 and I just wonder. I know that's a low expense, 0:15:45.640 --> 0:15:47.760 but I wonder if that has an impact on the 0:15:47.760 --> 0:15:51.280 health of the company. I think it's a great thought. 0:15:51.320 --> 0:15:54.760 I mean, the branding is obviously really really important to 0:15:54.800 --> 0:15:57.080 a company like this, and you know, like you said, 0:15:57.120 --> 0:15:59.640 even like the hats and things like those are things 0:15:59.680 --> 0:16:03.720 that I who like don't. I don't drive tractors, right, 0:16:03.840 --> 0:16:06.520 but I could still buy a bunch of like deer 0:16:06.560 --> 0:16:09.720 you know, hats and uh shirts and things and like 0:16:09.800 --> 0:16:12.320 be like, yeah, I love big grain tractors, you know, 0:16:12.360 --> 0:16:14.640 all of those country songs like I can still do that. 0:16:15.080 --> 0:16:19.800 So I would imagine that that is helpful for these companies, right. 0:16:20.320 --> 0:16:22.920 I would also think that the brand power helps and 0:16:23.000 --> 0:16:25.920 plays a role in the pricing factor to um. You know, 0:16:26.240 --> 0:16:28.880 it's a well known brand that people think of and 0:16:28.960 --> 0:16:31.120 that that gives them a lot of power. You know, 0:16:31.160 --> 0:16:34.200 I'm looking at your een go back to the end 0:16:34.200 --> 0:16:36.880 of it's up at almost I mean, it's really just 0:16:36.920 --> 0:16:38.720 been on a tear. So guys, let me just we 0:16:38.760 --> 0:16:40.600 just have about a minute and a half left here. Brook. 0:16:40.680 --> 0:16:42.520 Let me start with you. So when you look at 0:16:42.560 --> 0:16:45.720 the industrial space more broadly, we've had reports you've got, dear, 0:16:46.040 --> 0:16:48.160 what does it tell you about what's going on more 0:16:48.160 --> 0:16:50.360 broadly in the economy. I mean, as you say, these 0:16:50.400 --> 0:16:53.200 are not inexpensive machines, No they're not. But I mean 0:16:53.240 --> 0:16:55.640 I think one of my biggest takeaways this earning season 0:16:55.680 --> 0:16:59.400 has been CEO's willingness to not only hold steady capital 0:16:59.400 --> 0:17:01.600 expenditures but step them up. I mean, I think you 0:17:02.000 --> 0:17:05.520 have to feel like they're they're taking a pretty confident 0:17:05.600 --> 0:17:07.720 view of the economy here to be making these spinning 0:17:07.760 --> 0:17:09.480 decisions that you know, there might be some sort of 0:17:09.480 --> 0:17:13.800 soft dip, a soft landing, short term dip, but they're 0:17:13.800 --> 0:17:16.480 looking past that and thinking about the long term future 0:17:16.480 --> 0:17:19.640 of their companies and seeing a very robust demand back drop, 0:17:19.680 --> 0:17:23.480 whether that's from reshoring or infrastructure or other stimulus programs 0:17:23.480 --> 0:17:26.480 in the US and in Europe or China, and they 0:17:26.520 --> 0:17:29.320 feel good. Elizabeth, come on in for a final thought here, 0:17:29.359 --> 0:17:31.320 just got about thirty forty seconds here, because I always 0:17:31.320 --> 0:17:33.919 think about people think about farmers always needing subsidies, and 0:17:33.960 --> 0:17:37.040 it's such a tough industry. What does it say more 0:17:37.080 --> 0:17:39.359 broadly to you about what's going on in agg and 0:17:39.359 --> 0:17:43.000 again got about thirty seconds here. Absolutely, yeah, I mean, 0:17:43.000 --> 0:17:45.000 it is a tough industry. But at the same time, 0:17:45.119 --> 0:17:50.000 like you see huge commodity farmers like really making money. Um. 0:17:50.119 --> 0:17:52.439 That being said, you also see some of the smaller 0:17:52.440 --> 0:17:54.600 farmers really struggling. Um. And I think that you can 0:17:54.600 --> 0:17:57.640 see that in some of these equipment sales numbers. UM, 0:17:57.720 --> 0:18:01.359 small egg in the US was looking down for the year, 0:18:01.520 --> 0:18:03.320 and UM, I think that that's sort of telling of 0:18:03.400 --> 0:18:06.520 some of the smaller scale farmers rather than these big 0:18:06.560 --> 0:18:08.879 commodity farmers that we talked about a lot. Well, the 0:18:08.920 --> 0:18:11.800 deer numbers stock still up about seven point three percent. 0:18:11.880 --> 0:18:13.520 We saw a co going up, and we saw other 0:18:13.600 --> 0:18:16.280 names in the space definitely trending higher. Um. Thank you 0:18:16.320 --> 0:18:20.680 both really appreciated. Bloomberg News Agriculture reporter Elizabeth Elkin joining 0:18:20.720 --> 0:18:22.400 us via zoom in New York City, and of course 0:18:22.400 --> 0:18:27.040 Bloomberg Opinion, Deals and Industrious columnist Brooks Sutherland. You're listening 0:18:27.080 --> 0:18:30.520 to the Bloomberg Business Week podcast. Catch us live week 0:18:30.640 --> 0:18:33.680 days from two to five pm Easter on Bloomberg Radio, 0:18:33.880 --> 0:18:37.119 the Bloomberg Business Band. You too. You can also listen 0:18:37.240 --> 0:18:40.760 live to our flagship New York station. Just say Alexa, 0:18:40.960 --> 0:18:52.639 play Bloomberg even dirty. I'm room journal. Yeah, but you 0:18:52.720 --> 0:18:57.720 let me drive, no, no, no, hon please, I'll go 0:18:57.800 --> 0:19:04.720 Bombardi Revels. Right, I want to drive. Good question D. 0:19:07.720 --> 0:19:13.520 This is the Drive to the Globe down on bloom 0:19:13.520 --> 0:19:16.000 Bird Radio. All Right, we just heard from Charlie of 0:19:16.040 --> 0:19:17.960 course breaking down the trade here. Keep in mind we 0:19:18.040 --> 0:19:20.400 are on track for the S and P to see 0:19:20.440 --> 0:19:22.720 its first back to back weekly declines, the first time 0:19:23.160 --> 0:19:26.360 that we've seen that here. In standout though, is those 0:19:26.359 --> 0:19:28.920 small caps up about one and a half percent for 0:19:28.960 --> 0:19:31.080 the week overall, and a little bit higher certainly in 0:19:31.160 --> 0:19:33.720 today's trade. So let's talk about the markets. Let's talk 0:19:33.720 --> 0:19:36.080 about it with someone who knows it very well. We've 0:19:36.119 --> 0:19:39.600 got Alan Zaffran, founding partner and co CEO at I 0:19:39.800 --> 0:19:42.639 e Q Capital. He is joining Carol and myself on 0:19:42.760 --> 0:19:46.800 zoom from northern California. Allen, great to speak with you here. 0:19:47.160 --> 0:19:50.600 I'm gonna start with the million dollar question on all 0:19:50.680 --> 0:19:54.800 of our minds. What's the outlook for recession in three 0:19:54.920 --> 0:19:58.840 Can you read the tea leaves for us? Mawson and Carol, 0:19:58.880 --> 0:20:01.920 thanks for having me. Of tea leaves are not terribly 0:20:02.160 --> 0:20:05.159 encouraging other than this day. If we're going to have 0:20:05.280 --> 0:20:09.440 a recession, the appearances are that will be relatively shallow 0:20:09.680 --> 0:20:14.040 but extended. And I think the challenges being seen in 0:20:14.119 --> 0:20:15.840 the way the market is playing out right now. It 0:20:16.160 --> 0:20:19.280 is a strange time, Madison. And the reason is the 0:20:19.400 --> 0:20:23.359 bulls are arguing that we've avoid were avoiding recession. But 0:20:23.440 --> 0:20:25.840 if you're avoiding recession, the economy is going to be strong. 0:20:25.920 --> 0:20:28.040 And if the economy is going to be strong, that 0:20:28.160 --> 0:20:31.280 means the Fed's going to keep rates up higher and longer, 0:20:31.800 --> 0:20:34.560 which in turn is going to push down economic activity, 0:20:34.960 --> 0:20:37.760 and it's gonna push down valuations and earnings estimates. And 0:20:37.920 --> 0:20:40.399 so the market wants to hear that we've already pivoted 0:20:40.480 --> 0:20:43.160 with the Fed, We've had a soft landing, and it's 0:20:43.240 --> 0:20:45.880 all steam ahead. The problem is the market isn't yet 0:20:45.960 --> 0:20:49.400 priced in fully higher rates for a longer period of time, 0:20:49.520 --> 0:20:52.520 and the fact that has on reducing earnings estimates. That 0:20:52.720 --> 0:20:55.040 is the struggle worth witnessing right now. Al I gotta say, 0:20:55.040 --> 0:20:56.680 it feels like chicken and the egg, like I'm not 0:20:56.800 --> 0:20:59.240 quite sure you know it's and this is the predicament 0:20:59.320 --> 0:21:01.240 that FED finds it's self in. And we know FED 0:21:01.320 --> 0:21:04.200 policy not exact or you know, it takes a while 0:21:04.280 --> 0:21:06.800 for these moves to really feel their impact, and so 0:21:07.280 --> 0:21:09.359 none of this is an exact science. Having said that, 0:21:09.480 --> 0:21:12.560 we do know are a lot of conversations have been 0:21:12.560 --> 0:21:16.320 about inflation. Bringing it down. It's harder, right, The first 0:21:16.600 --> 0:21:20.800 bunch is easier but as as as the time drags on, 0:21:20.920 --> 0:21:24.720 it's a little bit stickier and trickier. Um. Having said that, 0:21:25.359 --> 0:21:29.199 the investors that you talked to, are they more optimistic 0:21:29.320 --> 0:21:32.560 or pessimistic at this point because the earnings and the 0:21:33.280 --> 0:21:37.800 kind of held up out here in the Silicon Valley, 0:21:37.880 --> 0:21:41.480 people are guarded and concerned. Not from the standpoint that 0:21:41.560 --> 0:21:45.119 it's armageddon. There's just this feeling that we're in the 0:21:45.320 --> 0:21:49.880 middle of an elongated, slow grinding cycle that hasn't played out, 0:21:50.480 --> 0:21:54.160 and it's just gonna take more time, and it's aggravating, 0:21:54.240 --> 0:21:57.800 particularly for those in Silicon Valley that have startup in 0:21:57.880 --> 0:22:01.800 early stage businesses with short runways of cash before they 0:22:01.880 --> 0:22:04.200 burn up and need more money. That's the scary part. 0:22:04.720 --> 0:22:08.119 Other much more well positioned, solid businesses, predominantly in the 0:22:08.240 --> 0:22:11.120 SMP five or an index, don't have those near term 0:22:11.240 --> 0:22:15.439