WEBVTT - Walmart Shares Surge, Deere Earnings 0:00:02.920 --> 0:00:10.840 Bloomberg Audio Studios, Podcasts, radio news. You're listening to the 0:00:10.840 --> 0:00:15.040 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:17.480 Eastern on Apple, card Playing and broyd Otto with the 0:00:17.520 --> 0:00:21.320 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:23.320 or watch us live on YouTube. 0:00:24.880 --> 0:00:28.840 Let's head over to talk about what's happening and our 0:00:28.920 --> 0:00:31.880 good friends at Walmart again, a really good quarters and 0:00:32.400 --> 0:00:36.520 revenues beat the earnings, talking pretty I think people again, people, 0:00:36.880 --> 0:00:38.280 I think really look at Walmart is kind of a 0:00:38.320 --> 0:00:40.920 read on the US consumer and that was kind of, 0:00:41.000 --> 0:00:43.199 I guess, a pretty good report there. Let's check out 0:00:43.240 --> 0:00:46.720 Jen Bartashes. She follows all the retailers for Bloomberg Intelligence. 0:00:46.760 --> 0:00:51.000 She is in Prince, New Jersey. I'm guessing, Jen, what's 0:00:51.040 --> 0:00:53.519 your takeaway from our good friends in Bettonville. 0:00:54.440 --> 0:00:57.440 Yeah, good morning, Paul. When I look at today's results, 0:00:57.480 --> 0:00:59.440 I think one of the striking things that is a 0:00:59.520 --> 0:01:02.320 takeaway that is beyond just the story of the higher 0:01:02.400 --> 0:01:05.040 income consumer which everyone is focused on, is that the 0:01:05.120 --> 0:01:08.520 multiple year strategy that Walmart's been employing to change their 0:01:08.600 --> 0:01:12.000 business mix is really starting to yield results, and that's 0:01:12.000 --> 0:01:15.040 allowing them to grow operating income ahead of revenue. That's, 0:01:15.160 --> 0:01:18.480 you know, driving profitability, and it's driving that long term 0:01:18.560 --> 0:01:21.440 margin expansion that they think they can sustain. So to me, 0:01:21.800 --> 0:01:24.480 this is a great quarter, and yes they do have 0:01:24.560 --> 0:01:27.199 a great read on the consumer, but it is also 0:01:27.280 --> 0:01:29.759 starting to show that all of those investments are really 0:01:29.840 --> 0:01:31.919 paying off in the way that they're evolving the company. 0:01:32.959 --> 0:01:35.920 So, Jen, I'm vowing to do a store walk this 0:01:36.080 --> 0:01:37.720 Saturday for the Walmart near here. 0:01:38.240 --> 0:01:38.920 How do I do that? 0:01:39.200 --> 0:01:39.400 Would? 0:01:39.480 --> 0:01:40.120 How would you do it? 0:01:40.520 --> 0:01:40.560 Like? 0:01:40.640 --> 0:01:41.040 What do I do? 0:01:41.120 --> 0:01:41.880 Will you drive there? 0:01:41.920 --> 0:01:44.760 And I'm going to get there? There's a million aisles. 0:01:44.840 --> 0:01:47.200 These things are huge, they are you know. 0:01:47.319 --> 0:01:49.240 I mean, what I would say, Paul is wander around 0:01:49.280 --> 0:01:50.800 a little. But what I do when I go into 0:01:50.840 --> 0:01:52.640 stores is I find one of the people who are 0:01:52.720 --> 0:01:55.560 picking the online grocery orders or they're online orders, and 0:01:55.640 --> 0:01:58.160 I follow them around and that way I get a 0:01:58.240 --> 0:01:59.920 sense of what it is, what is it that people 0:02:00.080 --> 0:02:02.480 are actually buying, what are they putting in their basket? 0:02:02.920 --> 0:02:06.120 And how are employees actually effectively navigating that big store. 0:02:06.800 --> 0:02:08.239 So that would be one tip I have for you. 0:02:08.720 --> 0:02:15.040 That's very cool. Okay, you definitely should be doing. Get 0:02:15.080 --> 0:02:19.359 that guy Jen, when we look at the areas of 0:02:19.520 --> 0:02:21.520 mix that you were mentioned that they sort of were 0:02:21.600 --> 0:02:24.760 changing their business mix, that huge part is e commerce, 0:02:24.919 --> 0:02:28.639 right it is If their main competitor though, is Walmart 0:02:28.760 --> 0:02:31.200 for e commerce, how does that evolve? 0:02:32.520 --> 0:02:35.000 Well, you know what Walmart's been doing is they've added 0:02:35.040 --> 0:02:38.320 a lot of sellers to their marketplace. It's unlocking ad 0:02:38.400 --> 0:02:42.920 revenue growth, it's unlocking the ability to charge for fulfillment services. Now, 0:02:43.000 --> 0:02:45.120 these are all things that sound very familiar because they 0:02:45.160 --> 0:02:47.440 are things that Amazon, for example, is very strong at. 0:02:47.840 --> 0:02:50.680 But that doesn't mean that it can't help Walmart evolve 0:02:50.720 --> 0:02:53.000 and it can't help make Walmart a much stronger company 0:02:53.040 --> 0:02:56.000 in the long term. I think the advantage that Walmart 0:02:56.040 --> 0:02:59.080 has is because they have that strong store base, they 0:02:59.080 --> 0:03:01.920 can help keep some of the costs to fill digital 0:03:02.040 --> 0:03:05.800 orders down, which helps them with that overall profitability profile 0:03:05.840 --> 0:03:06.160 as well. 0:03:07.400 --> 0:03:09.680 When you talk to investors about Walmart, again, it's stock 0:03:09.760 --> 0:03:11.560 hitting an all time high here today. 0:03:12.960 --> 0:03:13.679 It ain't cheap. 0:03:13.760 --> 0:03:15.360 How do you talk to them about valuation? I had 0:03:15.600 --> 0:03:18.320 like twenty six twenty seven times on a pe basis, 0:03:18.639 --> 0:03:19.880 how do you talk to them about valuation? 0:03:20.600 --> 0:03:24.079 To get to your question, Paul it's really when I'm 0:03:24.120 --> 0:03:26.600 talking to investors, it's you know, about where is the 0:03:26.639 --> 0:03:29.720 company headed? Right. So I think one of the things 0:03:29.760 --> 0:03:32.720 that's admirable about the company, or that is is really 0:03:32.800 --> 0:03:35.080 something they just do so well, is they keep their 0:03:35.120 --> 0:03:39.040 cooperation tight. They're good at controlling costs, but they are 0:03:39.200 --> 0:03:43.040 not They don't hesitate to invest in opportunity, but they 0:03:43.040 --> 0:03:45.080 also will walk away from things that don't pan out. 0:03:45.120 --> 0:03:46.560 So I think, you know, you saw that with the 0:03:46.600 --> 0:03:49.960 announcement earlier this month about closing health clinics. At one 0:03:50.000 --> 0:03:51.880 point they thought they might be able to you know, 0:03:52.160 --> 0:03:55.640 drive a big business out of that realistically couldn't make money, 0:03:55.800 --> 0:03:58.760 closed it down. So I think that that spirit of 0:03:59.400 --> 0:04:02.120 trial and or the willing to the willingness to actually 0:04:02.240 --> 0:04:05.720 try to flex, but then know when to say, Okay, 0:04:05.840 --> 0:04:07.960 this isn't this isn't what we wanted. It's something that 0:04:08.080 --> 0:04:11.000 has become a strength of the company and helps, you know, 0:04:11.120 --> 0:04:14.440 helps put it up as a as a company that justifies, 0:04:14.560 --> 0:04:18.240 you know, potentially a higher valuation versus some other strict 0:04:18.440 --> 0:04:21.120 retail peers that are really just focused on growing a 0:04:21.200 --> 0:04:21.880 retail business. 0:04:22.320 --> 0:04:24.280 I think she's gonna think and ask one more question. Yeah, 0:04:24.320 --> 0:04:27.040 I am gonna do it. What Amazon has, though, that 0:04:27.160 --> 0:04:29.880 Walmart doesn't is a w S. That's where they're going 0:04:29.960 --> 0:04:31.800 to get their bulk of their margin. That's where they 0:04:31.839 --> 0:04:35.280 get all the juicy, sexy revenue. Walmart doesn't have that. 0:04:35.920 --> 0:04:36.480 So is that so? 0:04:36.680 --> 0:04:39.320 So how does it sort of ramp up other revenue 0:04:39.360 --> 0:04:42.200 streams that can yield that kind of growth and margin. 0:04:44.160 --> 0:04:46.480 That's a that's a that's the question of the day, 0:04:46.640 --> 0:04:49.880 right because you don't actually want Walmart to be another Amazon. 0:04:50.000 --> 0:04:52.840 You want Walmart to be Walmart. And so I think 0:04:52.880 --> 0:04:54.640 that when you look at some of the areas that 0:04:54.720 --> 0:04:57.159 they're doing well, especially in some of the international markets 0:04:57.200 --> 0:04:59.920 where they're they're playing around with it in things like fintech, 0:05:00.320 --> 0:05:02.320 you know, those are areas where I think that there's 0:05:02.440 --> 0:05:05.520 some great opportunity for the company without them having to 0:05:05.920 --> 0:05:08.880 try to be a cookie cutter of Amazon and you 0:05:08.960 --> 0:05:11.640 know and have some you know, have something like an 0:05:11.640 --> 0:05:16.800 AWS that is not natural to their their current operations. 0:05:17.360 --> 0:05:19.040 All right, Jen, thanks so much for joining us. I 0:05:19.120 --> 0:05:22.920 appreciate it. Jen Bartasha. She covers all the retail stuff 0:05:23.560 --> 0:05:27.920 for Bloomberg Intelligence, including Walmart again, which had a really 0:05:27.960 --> 0:05:31.400 good Quarterstock up six percent here, all time high. So 0:05:31.560 --> 0:05:33.520 good stuff for that, I think a good you know, 0:05:33.560 --> 0:05:35.280 a little just kind of a bullet point there. For 0:05:35.960 --> 0:05:37.600 if you're trying to get a sense a beat on 0:05:37.680 --> 0:05:40.440 how the consumer's doing, doing fairly well. 0:05:42.080 --> 0:05:45.960 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:05:46.080 --> 0:05:48.960 weekdays at ten am Eastern on applecar. 0:05:48.600 --> 0:05:51.080 Play and Android Auto with the Bloomberg Business. 0:05:51.480 --> 0:05:54.279 You can also listen live on Amazon Alexa from our 0:05:54.360 --> 0:05:58.719 flagship New York station, Just Say Alexa, playing Bloomberg eleven thirty. 0:06:00.080 --> 0:06:03.240 I'm Alexei alongside Paul Sweeney. This is Bloomberg Intelligence Radio. 0:06:03.279 --> 0:06:06.760 We are live interactive broker studio right here in midtown Manhattan. 0:06:06.839 --> 0:06:08.640 So here was the front page of the Ft today 0:06:09.080 --> 0:06:13.200 when I logged in. Apparently, Starwood Real Estate Investment Trust 0:06:13.400 --> 0:06:17.480 CREATE is one of the largest unlisted property funds, and 0:06:17.600 --> 0:06:20.240 it has drawn more than one point three billion dollars 0:06:20.320 --> 0:06:22.839 of its one point five to five billion unsecured credit 0:06:22.920 --> 0:06:26.520 facility since the beginning of twenty twenty three. That sounds bad. 0:06:26.839 --> 0:06:29.680 That sounds like they're in a cash crunch kind of scenario. 0:06:29.760 --> 0:06:30.000 Poul. 0:06:30.720 --> 0:06:33.320 And as we keep hearing, commercial real estate isn't a 0:06:33.360 --> 0:06:35.320 really tough spot. But yet I haven't seen a lot 0:06:35.360 --> 0:06:36.080 of shoes dropping. 0:06:36.360 --> 0:06:37.680 I haven't either. I don't know how this is going 0:06:37.720 --> 0:06:39.320 to play out. Maybe our next guest I'll help us 0:06:39.320 --> 0:06:41.440 out with that. Rich Hill, head of real Estate Strategy 0:06:41.440 --> 0:06:43.480 and Research at Cohen and Steers, joining us here in 0:06:43.480 --> 0:06:46.480 our Bloomberg Interactive Broker studio. Why because we're here every 0:06:46.560 --> 0:06:50.040 day m hm, And that's how we roll. Rich, I 0:06:50.160 --> 0:06:53.120 walk from Penn Station to Hear every day, all through 0:06:53.160 --> 0:06:55.400 Midtown Manhattan. Now, I know this is not the world, 0:06:55.440 --> 0:06:57.520 it's only Midtown Manhattan. But there's a lot of vacant 0:06:57.560 --> 0:07:00.760 real estate. People aren't coming back. I saw via Twitter 0:07:00.880 --> 0:07:04.200 yesterday via a report Bank Bank of America research report 0:07:04.480 --> 0:07:07.800 that kind of showed vacancies, and it seems like they're 0:07:07.920 --> 0:07:10.120 calling this new normal, which is about fifty percent of 0:07:10.200 --> 0:07:13.560 commercial real estate properties. They're calling that the new normal, 0:07:14.000 --> 0:07:17.360 just because that's kind of what the date is showing. A. 0:07:17.480 --> 0:07:18.680 Do you agree with that? And B what does it 0:07:18.760 --> 0:07:20.680 mean for the owners and the lenders and all that 0:07:20.760 --> 0:07:21.239 kind of stuff? 0:07:21.240 --> 0:07:22.000 The new system? 0:07:22.080 --> 0:07:23.480 First of all, thanks for having me in this morning. 0:07:23.520 --> 0:07:27.280 It's good to see you guys. Look, I'll begin by 0:07:27.280 --> 0:07:29.760 saying people like to talk about commercial real estate as 0:07:29.800 --> 0:07:34.600 a big, singular asset class, but in reality, it's actually 0:07:34.680 --> 0:07:38.240 eighteen different sub sectors under a big umbrella, and those 0:07:38.280 --> 0:07:41.960 eighteen sub subsectors can behave very differently in very different 0:07:42.040 --> 0:07:45.880 market environments. So you're leading with New York City, You're right, 0:07:46.400 --> 0:07:50.960 New York City office vacancies are high, retail vacancies are high. 0:07:51.680 --> 0:07:52.760 Leading with maybe. 0:07:52.880 --> 0:07:55.640 Retail, that doesn't actually tell the whole story, because if 0:07:55.640 --> 0:07:57.960 you actually look at what's happening with retail real estate 0:07:58.240 --> 0:08:01.120 across the United States, it's actually really strong footing. For 0:08:01.200 --> 0:08:04.240 two reasons. I think, you know, you rewind ten years ago. 0:08:04.280 --> 0:08:07.560 Everyone was talking about the retail apocalypse, so no one 0:08:07.680 --> 0:08:10.680 really was building new retail properties over the past ten 0:08:10.720 --> 0:08:13.720 to fifteen years, so you had no new supply coming. 0:08:13.880 --> 0:08:16.960 And then COVID was a great Darwinistic event where it 0:08:17.080 --> 0:08:20.040 actually sort of right sized all the retail properties that 0:08:20.200 --> 0:08:23.560 were maybe on the edgines. You couple that with the 0:08:23.600 --> 0:08:27.160 fact that e commerce companies realized that physical retail real 0:08:27.280 --> 0:08:32.040 estate can provide micro fulfillment to their customers. The retail 0:08:32.080 --> 0:08:35.200 real estate market is actually on pretty strong footing, particularly 0:08:35.320 --> 0:08:38.559 open air shopping centers, whether it be community centers, neighborhood centers, 0:08:38.800 --> 0:08:39.720 or even power centers. 0:08:40.200 --> 0:08:42.360 That's a really interesting point, and you're right, we kind 0:08:42.400 --> 0:08:44.520 of lump it all in in commercial real estate. We 0:08:44.559 --> 0:08:48.600 think office, So is that is that troublespot office commercial 0:08:48.679 --> 0:08:51.360 real estate? And again like when is that shoe dropping? 0:08:51.600 --> 0:08:57.160 Yeah, Look, it doesn't do any good to say anything 0:08:57.280 --> 0:09:01.560 other than the facts about office. Office is struggling nationwide, 0:09:02.080 --> 0:09:04.120 by the way, we probably built too much of it 0:09:04.200 --> 0:09:07.880 prior to COVID. Work from home dynamics have have tipped 0:09:07.920 --> 0:09:11.720 that nationwide, office vacancies are twenty percent and they're increasing 0:09:11.760 --> 0:09:14.319 from here. And so there's a lot of ways you 0:09:14.360 --> 0:09:16.959 can unpack office. Though, just like I said, you know, 0:09:17.080 --> 0:09:18.920 maybe the truth is somewhere in the middle. It's not 0:09:19.000 --> 0:09:20.640 as bad as everyone fears, and it's not as good 0:09:20.679 --> 0:09:23.280 as everyone fears. If you look at office, new, clean 0:09:23.360 --> 0:09:26.920 and green office even in New York City is doing exceptionally. 0:09:26.440 --> 0:09:28.319 Well, like Hustin Yards is doing well, right, and that 0:09:28.440 --> 0:09:29.480 one Vanderbilt thing. 0:09:29.640 --> 0:09:32.360 One vendor Bilt least up to almost one hundred percent 0:09:32.559 --> 0:09:36.240 during the middle of COVID. So class B and C properties, 0:09:36.320 --> 0:09:38.200 Class B and C properties are properties that were built 0:09:38.240 --> 0:09:42.000 in the nineteen seventies and nineteen eighties with no cop 0:09:42.280 --> 0:09:44.640 X put CAPEX put into it over decades and decades 0:09:44.679 --> 0:09:45.160 and decades. 0:09:45.920 --> 0:09:46.280 I get it. 0:09:46.360 --> 0:09:48.640 No one wants to work there. So we're sort of 0:09:48.720 --> 0:09:51.480 in this weird time period where office is struggling. I 0:09:51.520 --> 0:09:53.679 want to be clear. Office is only around twenty percent 0:09:54.080 --> 0:09:56.839 of the serie market. It's only around three percent of 0:09:56.880 --> 0:09:59.520 the US listed rate market. But look, everyone loves a 0:09:59.520 --> 0:10:00.840 great Greek tragedy. 0:10:00.960 --> 0:10:01.280 I get it. 0:10:01.480 --> 0:10:04.480 Like it sells clicks, it sells papers. It is a 0:10:04.600 --> 0:10:06.559 really challenging asset class. And so I don't want to 0:10:06.559 --> 0:10:07.000 belabor that. 0:10:07.640 --> 0:10:12.720 What's the lending environment like now for real estate investors? 0:10:12.840 --> 0:10:15.520 What are the banks doing where they were the real 0:10:15.600 --> 0:10:17.000 estate investors sourcing their capital. 0:10:17.120 --> 0:10:21.160 Yeah, so this is probably the single most important topic 0:10:21.200 --> 0:10:23.760 when we talk about commercial real estate. The reason being 0:10:23.800 --> 0:10:26.680 that commercial real estate isn't inherently a levered asset class. 0:10:27.120 --> 0:10:29.439 When people buy a commercial real estate property, they put 0:10:29.480 --> 0:10:32.520 debt on it. There's not very few properties that don't 0:10:32.559 --> 0:10:34.800 have debt on it. So it is a levered asset class. 0:10:35.640 --> 0:10:38.600 And so that's actually why valuations are being pressured so much. 0:10:38.679 --> 0:10:41.880 We think property valuations generically are down around twenty percent. 0:10:42.120 --> 0:10:45.560 Office valuations are probably down thirty five percent. The reason 0:10:45.640 --> 0:10:48.959 they're down so much isn't necessarily because of fundamentals. Fundamentals 0:10:49.040 --> 0:10:52.079 ex office are on pretty strong footing. It's because the 0:10:52.200 --> 0:10:55.120 right side of the balance sheet is repricing. Both financing 0:10:55.200 --> 0:10:58.440 cost higher and the availability of debt much lower than 0:10:58.480 --> 0:11:01.160 it where it used to be. So look, lenders aren't 0:11:01.240 --> 0:11:04.000 lending as much as they used to. If you look 0:11:04.000 --> 0:11:08.480 at the Mortgage Bankers Mortgage Bankers Association Senior Loan their 0:11:09.080 --> 0:11:12.400 Loan Origination Index, it's close to the lowest level since 0:11:13.080 --> 0:11:14.320 we've been in twenty fourteen. 0:11:14.640 --> 0:11:15.040 I get it. 0:11:15.600 --> 0:11:18.640 A lot of people have loans on their balance sheet 0:11:18.640 --> 0:11:20.440 and they're working through those. But you made a really 0:11:20.480 --> 0:11:24.839 good point. Distress hasn't really come about yet. And I 0:11:24.880 --> 0:11:27.080 think there's a really important point. And I'll pause here 0:11:27.120 --> 0:11:30.320 for a second. Lenders and borrowers are in a pretty 0:11:30.400 --> 0:11:34.079 challenging position. So they're actually solving the prisoner's. 0:11:33.720 --> 0:11:36.360 Dilemma, meaning that a bank doesn't want to own an 0:11:36.360 --> 0:11:36.920 office space. 0:11:37.200 --> 0:11:39.079 So a bank doesn't want to own it, they're not 0:11:39.160 --> 0:11:41.520 in the business of it. And guess what the regulatory 0:11:41.600 --> 0:11:43.920 capital charges for owning a property on your balance sheet 0:11:44.120 --> 0:11:46.880 are actually higher than if you were just to modify 0:11:46.960 --> 0:11:49.800 the loan at say a ninety nine percent LTV BLTV. 0:11:49.880 --> 0:11:52.200 Ooh, okay, break it down for US loan to value. Okay, 0:11:52.280 --> 0:11:54.400 So what would that mean if you if you brought 0:11:54.440 --> 0:11:56.160 that down to nine nine percent LTV. 0:11:56.480 --> 0:11:56.680 Yeah. 0:11:56.800 --> 0:11:59.160 So let's assume ten years ago you did a loan 0:11:59.280 --> 0:12:01.559 at a fifty percent and LTV. So you had a 0:12:02.080 --> 0:12:04.959 property that was worth ten dollars and you put a 0:12:05.040 --> 0:12:07.199 loan on it was the worth five dollars, so fifty 0:12:07.240 --> 0:12:10.599 percent LTV. Fast forward ten years, the value of that 0:12:10.679 --> 0:12:13.040 property drops from ten to five, and you still have 0:12:13.120 --> 0:12:16.199 five dollars of loan. That's one hundred percent LTV. The 0:12:16.360 --> 0:12:20.679 regulators are actually incentivizing the banks to actually modify and 0:12:20.760 --> 0:12:24.120 extend loans. So some people might call it kicking the 0:12:24.200 --> 0:12:26.600 can down the road. I don't necessarily think it's kicking 0:12:26.640 --> 0:12:28.839 the can down the road. I just think borrowers and 0:12:28.920 --> 0:12:32.439 blenders are incentivized to figure out way out of this 0:12:32.679 --> 0:12:35.560 of this environment. It's a pretty challenging environment for everyone 0:12:35.679 --> 0:12:38.160 right now, and so they are coming to a less 0:12:38.280 --> 0:12:40.640 bad situation modifying extending these loans. 0:12:40.760 --> 0:12:42.280 One of the things I've seen in the last ten 0:12:42.360 --> 0:12:44.520 years and been amazed about. Alex n I talk about 0:12:44.520 --> 0:12:47.280 it a lot, is the growth of private credit. Is 0:12:47.400 --> 0:12:49.840 private credit coming into the real estate space to maybe 0:12:50.920 --> 0:12:52.080 just find some opportunity here. 0:12:52.200 --> 0:12:57.200 Yeah, it has been for some time. Okay, twenty fifteen, 0:12:57.400 --> 0:13:00.559 private credit market share of total lending was probably ten 0:13:00.600 --> 0:13:02.920 percent plus or minus, and I'd probably say it's a 0:13:02.960 --> 0:13:05.000 little bit less than that. At the peak of the 0:13:05.080 --> 0:13:07.800 market it was around twenty percent or so. But look, 0:13:07.960 --> 0:13:10.679 there is something to be said for private for private 0:13:10.720 --> 0:13:14.560 credit finding a home within commercial real estate. There's forty 0:13:14.600 --> 0:13:17.800 two hundred banks across the United States. Bank share is 0:13:17.880 --> 0:13:21.599 around forty percent of total lending. There will be some 0:13:21.720 --> 0:13:24.760 banks that pull back for various different reasons. There has 0:13:24.840 --> 0:13:27.120 to be a home for those additional loans, and I 0:13:27.200 --> 0:13:30.520 do think private credit, if you have the expertise not 0:13:30.600 --> 0:13:32.720 to just underwrite the loans, but work out the loans 0:13:32.800 --> 0:13:35.079 when some of them inevitably go bad, there's a home. 0:13:35.200 --> 0:13:37.000 There's a home for private credit. Do I think it's 0:13:37.000 --> 0:13:39.599 going to fifty percent market share? No, I sort of 0:13:39.640 --> 0:13:41.800 think the upper limits is around twenty percent. We're probably 0:13:41.800 --> 0:13:43.440 a little bit less than that right now. But there's 0:13:43.440 --> 0:13:44.480 a home for private credit. 0:13:44.600 --> 0:13:46.640 So when we talk about the shoe and commercial and 0:13:46.760 --> 0:13:49.720 office commercial real estate not dropping, it sounds like maybe 0:13:49.760 --> 0:13:51.679 it won't drop at all. It'll just be sort of 0:13:52.400 --> 0:13:54.120 John Tucker's doing the wave and I don't really know 0:13:54.200 --> 0:13:57.360 why that is, but get oh, we hit it. 0:13:59.240 --> 0:14:01.880 That person just came back down number for a moment, 0:14:02.360 --> 0:14:04.439 doubt the tick up counts. 0:14:04.559 --> 0:14:05.000 Yes it does. 0:14:05.320 --> 0:14:08.320 That was amazing. This is not maybe going to drop. 0:14:08.400 --> 0:14:10.319 It's just going to be worked out and then no 0:14:10.440 --> 0:14:13.040 one's going to be sitting with really terrible loans forever. 0:14:13.800 --> 0:14:16.319 So this is going to take longer than what was 0:14:16.440 --> 0:14:19.080 feared a year ago. A year ago when you had 0:14:19.160 --> 0:14:21.680 banks coming under stress, I think a lot of people 0:14:21.760 --> 0:14:26.280 were fearing a quick collapse in commercial real estate lending. 0:14:26.800 --> 0:14:27.720 That has not occurred. 0:14:28.160 --> 0:14:30.560 This will be a slow burn over a number of years. 0:14:30.920 --> 0:14:32.840 I want to be clear, though, we are not calling 0:14:32.960 --> 0:14:35.480 for no distress in the commercial real estate market. I 0:14:35.600 --> 0:14:37.880 mentioned to you that property evaluations are down around twenty 0:14:37.960 --> 0:14:40.480 percent right now. We are expecting them to be down 0:14:40.560 --> 0:14:43.120 peak to trough around twenty five to thirty percent, So 0:14:43.240 --> 0:14:45.560 around two thirds of the way through the next leg, 0:14:45.640 --> 0:14:49.920 lower is going to be rising distress. And by the way, 0:14:50.160 --> 0:14:52.360 that actually might be a contrarian bullish sign. 0:14:52.600 --> 0:14:54.440 So what do I mean by set at the bottom? 0:14:54.480 --> 0:14:59.600 Maybe exactly exactly. It basically means sellers are finally capitulating 0:14:59.680 --> 0:15:02.000 and knowing where buyers want to buy. That's a healthy 0:15:02.040 --> 0:15:02.840 contrarian signal. 0:15:02.960 --> 0:15:06.120 See Richel Like, I think half of the real estate 0:15:06.200 --> 0:15:09.040 finance people in the business came out of Morgan Stanley. 0:15:09.120 --> 0:15:10.680 It's like a mafia there, those guys that are all 0:15:10.720 --> 0:15:13.040 over the place. Richard is off one of them. Richiel, 0:15:13.080 --> 0:15:15.480 head of real estate strategy and Research at Cohen and Steers, 0:15:15.680 --> 0:15:17.800 joining us here in at Bloomberg Interactive Brokers Studio, talking 0:15:17.840 --> 0:15:21.440 about the overall commercial real estate business, not just office 0:15:21.720 --> 0:15:23.520 and octimity. But that's a one of them. I can't 0:15:23.520 --> 0:15:24.880 wait to see what some of these buildings on Third 0:15:24.920 --> 0:15:27.520 Avenue when they change hands, what the discount is going 0:15:27.560 --> 0:15:29.160 to be. I think it's gonna be huge, like the 0:15:29.200 --> 0:15:31.320 Lipstick Building, just to pick one, that iconic building, but 0:15:32.000 --> 0:15:33.000 it's not an a property. 0:15:35.440 --> 0:15:39.280 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:15:39.400 --> 0:15:42.120 weekdays at ten am Eastern on Affo car Playing and 0:15:42.240 --> 0:15:45.080 broud Otto with the Bloomberg Business App. Listen on demand 0:15:45.160 --> 0:15:48.240 wherever you get your podcasts, or watch us live. 0:15:48.160 --> 0:15:49.240 On YouTube. 0:15:50.760 --> 0:15:53.320 From Alex Steel alongside Paul Sweeney and John Tucker. This 0:15:53.360 --> 0:15:55.640 is Bloomberg Intelligence Radio. We bring you all the top 0:15:55.720 --> 0:15:58.680 news and economics and finance all around the world. But 0:15:58.720 --> 0:16:01.560 they're great Bloomberg Intelli Legends analysts. They cover two thousand 0:16:01.600 --> 0:16:04.960 companies and one hundred and thirty industries worldwide. What's not 0:16:05.160 --> 0:16:07.840 at a record it's small caps. So they pushed higher 0:16:07.960 --> 0:16:10.080 yesterday they were near a two year high, but not 0:16:10.200 --> 0:16:12.960 yet at a record, and today they're a little bit softer, 0:16:13.200 --> 0:16:15.720 So you have to wonder if that whole rally broadening 0:16:15.760 --> 0:16:18.880 out thing is still on the docket. Let's get more 0:16:18.880 --> 0:16:22.720 here with David Kudla, founder's CEO and chief investment strategist 0:16:22.760 --> 0:16:26.320 at Mainstay Capital Management. He's on Zoom from Naples, Florida. 0:16:27.000 --> 0:16:30.560 So that's not too shabby. Yeah, nice job on that one, David. 0:16:30.880 --> 0:16:34.200 Forty thousand for the Dow. It's a nice round number. 0:16:34.320 --> 0:16:35.640 We like nice round numbers. 0:16:35.920 --> 0:16:39.560 You buying it, Yeah, I'm buying it. Good morning, Alex 0:16:39.640 --> 0:16:42.800 and Paul. You know, the market just has a lot 0:16:42.840 --> 0:16:45.760 of things going for right now. There are things that 0:16:45.800 --> 0:16:48.920 were tailwinds or were headwinds have become tailwinds. We've got 0:16:49.000 --> 0:16:53.560 strong earnings, we've got a fed that you know, I 0:16:53.640 --> 0:16:56.880 think Jay Pal's looking for a reason to cut, and 0:16:57.160 --> 0:17:00.320 I think the jan Ellen once Jay palett cuts so 0:17:00.440 --> 0:17:04.399 that you can afford the service the debt our national 0:17:04.480 --> 0:17:09.080 debt better. And we we look at we look forward 0:17:09.160 --> 0:17:13.679 at at market fundamentals. We look forward to what's happening 0:17:13.760 --> 0:17:16.399 with generative AI and what that means in terms of 0:17:16.480 --> 0:17:20.080 what we're calling the next industrial revolution. Uh, this deal 0:17:20.200 --> 0:17:24.560 with Apple and open AI and the power that people 0:17:24.560 --> 0:17:27.240 are gonna have in the in the holding their hand 0:17:27.280 --> 0:17:30.600 at a handheld device. Yeah, there's there's some things that 0:17:30.640 --> 0:17:33.600 can trip us up. But you know, the market's really 0:17:34.080 --> 0:17:36.760 really in good shape right now. On market sediment has 0:17:36.920 --> 0:17:39.880 changed so much investor sediment from just two weeks ago, 0:17:39.920 --> 0:17:40.600 it's incredible. 0:17:41.680 --> 0:17:45.520 So, Uh, David talks about earnings. What are your takeaways 0:17:45.560 --> 0:17:48.760 here for this earnings which have generally been pretty solid 0:17:48.920 --> 0:17:50.360 across the board, what are your takeaways? 0:17:51.560 --> 0:17:54.680 Well, you know, we went through their earnings trough and 0:17:55.000 --> 0:17:57.399 you know, we've emerged from that, and now when we 0:17:57.480 --> 0:18:00.680 look at first quarter earnings, we're coming in well ahead 0:18:00.680 --> 0:18:03.960 of expectations. Profit margins are the best in two years, 0:18:04.520 --> 0:18:07.960 and that's really the key, you know, when when there's 0:18:08.000 --> 0:18:10.440 a questions, so many questions about the FED. Look, we've 0:18:10.480 --> 0:18:12.280 been just since the beginning of the year, we've been 0:18:12.320 --> 0:18:14.920 all over the map on how many FED rate cuts 0:18:14.960 --> 0:18:17.840 we'll get this year, anywhere between zero and seven or 0:18:17.880 --> 0:18:21.960 even a rate hike. But when we look over at fundamentals, 0:18:22.280 --> 0:18:26.000 just corporate earnings are coming in better than expected, and 0:18:26.440 --> 0:18:30.000 you know that's that's obviously positive for stocks and one 0:18:30.000 --> 0:18:32.880 of the most important long term factors. And we're looking 0:18:32.920 --> 0:18:35.560 for double digit growth and earnings down the road this year. 0:18:35.720 --> 0:18:39.720 So it's a it's a scenario that if we continue 0:18:39.800 --> 0:18:46.000 with some multiple expansion, earnings continue to do well. The Fed, 0:18:46.080 --> 0:18:49.920 if anything that is looking to show that they're on 0:18:50.080 --> 0:18:54.160 a cutting cycle, they want to cut at least once 0:18:54.240 --> 0:18:57.639 to show they're on a cutting cycle. It's just they're 0:18:57.640 --> 0:18:59.800 having trouble. They got help with non farm payrolls, they 0:18:59.800 --> 0:19:03.679 got help with retail sales CPI. You know, we're going 0:19:03.720 --> 0:19:06.920 to see an opening here and that'll just be more, 0:19:07.200 --> 0:19:11.200 you know, another catalyst, more horsepower for the bulls out 0:19:11.200 --> 0:19:13.400 there to take the market higher. So does that mean 0:19:13.480 --> 0:19:16.960 that is coming I'm sorry, I was going to say, 0:19:17.359 --> 0:19:22.159 with it coming on more in the spirit of a 0:19:22.280 --> 0:19:30.160 normalization of FED policy, not because the recessionary forces out 0:19:30.200 --> 0:19:33.840 there are becoming overwhelming and we're seeing a slow economy. 0:19:33.920 --> 0:19:36.679 We're not seeing that GDP has remained quite strong. 0:19:37.359 --> 0:19:40.440 So when you talk about the AI and New Industrial Revolution, 0:19:41.320 --> 0:19:44.640 what's so interesting is that utilities over the last few 0:19:44.680 --> 0:19:48.600 weeks in may have been the second best performing sector 0:19:48.680 --> 0:19:51.879 in the S and P along with tech. Can utilities 0:19:52.000 --> 0:19:55.960 be a growth sector in this environment that you're outlining. 0:19:57.440 --> 0:19:59.280 I think that's yet to be seen. You know, the 0:19:59.359 --> 0:20:02.840 belief there are the thesis there is that there is 0:20:02.960 --> 0:20:07.800 going to be so much demand for all these super 0:20:07.920 --> 0:20:13.320 chips and and all the the the the energy required 0:20:13.880 --> 0:20:20.480 for this revolutionist implementation of of general of AI. I 0:20:20.520 --> 0:20:23.840 think it's also investors looking for more areas they can 0:20:23.920 --> 0:20:26.040 diversify into. But I think it's you have to be 0:20:26.119 --> 0:20:29.440 seen how much that really translates. You know, that that 0:20:29.640 --> 0:20:35.040 demand for energy translates into actually pushing utility stocks higher. 0:20:35.680 --> 0:20:38.880 It's not it's not a typical reaction function we've seen 0:20:38.920 --> 0:20:41.560 in the past, but we can see how it could 0:20:41.560 --> 0:20:42.560 be one going forward. 0:20:43.560 --> 0:20:46.960 David, you know, aside from the AI play, you know, 0:20:47.640 --> 0:20:49.600 a lot of investors feel like maybe they've kind of, 0:20:49.640 --> 0:20:51.520 at least in the short term, missed some of the 0:20:51.560 --> 0:20:54.960 Big seven Magnificent seven plays. What are some other areas 0:20:55.000 --> 0:20:58.520 that you think there's maybe value out there in the marketplace? 0:20:59.560 --> 0:21:01.760 Yeah, well we we you know, we've been saying this 0:21:01.920 --> 0:21:04.120 for a while, even when we've had these sell offs 0:21:04.160 --> 0:21:07.240 in the Magnificent seven or the Fabulous for or really 0:21:07.400 --> 0:21:11.680 just megacap tech, to stay with them because you know, 0:21:11.720 --> 0:21:14.760 they're really becoming all weather stocks with these fortress balance 0:21:14.800 --> 0:21:17.600 sheets and wide boats around them and uh, you know 0:21:17.960 --> 0:21:20.600 they're balance sheets that you know, companies like Apple, it 0:21:20.880 --> 0:21:25.440 doesn't Microsoft, doesn't matter what rates are doing. So so 0:21:25.560 --> 0:21:28.320 it's it's such a good place to have a good 0:21:28.400 --> 0:21:32.240 Porsche or portfolio and large caps, specifically large cap tech 0:21:32.320 --> 0:21:35.240 with that focus on AI. But yeah, we can we 0:21:35.400 --> 0:21:38.560 look to other areas that have done well, and it 0:21:38.600 --> 0:21:42.639 will depends how the economy moves forward. There's still this 0:21:42.840 --> 0:21:47.960 risk we move into a stagflationary environment, which might lead 0:21:48.040 --> 0:21:52.440 US towards commodities. Uh, there's also you know, do we 0:21:52.600 --> 0:21:55.680 have a hard landing, soft landing or no landing. We've 0:21:55.680 --> 0:21:57.880 been calling for the no landing scenario. I think we're 0:21:57.920 --> 0:22:01.000 somewhere between soft landing and no landing. But clearly I 0:22:01.080 --> 0:22:04.040 think golden locks economy. So a lot of different sectors 0:22:04.080 --> 0:22:07.680 are looking good and overseas, you know, there are even 0:22:07.760 --> 0:22:08.600 some areas there that. 0:22:08.920 --> 0:22:11.280 Are attractive well well where over seeds. I know that 0:22:11.720 --> 0:22:13.880 the NK in Japan has been a huge hot spot, 0:22:13.920 --> 0:22:15.360 particularly with the weaker yen. 0:22:16.800 --> 0:22:21.080 Yeah, that's that's really our main play is Japan. You know, 0:22:21.200 --> 0:22:24.480 we've a lot of it is is in fact the 0:22:24.520 --> 0:22:26.720 currency play, and you need if you invest in Japan 0:22:26.840 --> 0:22:29.280 do with a currency hedged vehicle. 0:22:30.200 --> 0:22:32.720 But you know, the the the. 0:22:34.640 --> 0:22:37.639 Rally in the in the EK two twenty five, I mean, 0:22:37.920 --> 0:22:41.000 we reached a high here here that we haven't seen 0:22:41.359 --> 0:22:43.840 since nineteen eighty nine when I was walking around the 0:22:43.880 --> 0:22:47.560 campus at Stanford learning how to invest in learning about business, right, 0:22:47.640 --> 0:22:51.920 I mean, it's been that long, and so there's you know, 0:22:52.000 --> 0:22:57.000 with corporate reforms, things that still are bringing true from abbynomics, 0:22:57.720 --> 0:23:03.720 Japan is in a position struggling with monetary policy obviously, 0:23:04.280 --> 0:23:06.359 but with that week currency, they're just they're a ne 0:23:06.359 --> 0:23:09.480 ex supporting country. Their products are so competitive abroad, and 0:23:10.240 --> 0:23:12.080 so that's why they've done so well. You've just got 0:23:12.160 --> 0:23:14.800 to hedge that bet. Europe is starting to look a 0:23:14.840 --> 0:23:18.200 little bit better too, from where they were a year ago. 0:23:18.920 --> 0:23:19.040 Uh. 0:23:19.600 --> 0:23:22.280 The concern here is where rates go, you know, when 0:23:22.320 --> 0:23:24.639 you come to emerging markets and some of those some 0:23:24.800 --> 0:23:30.680 of the other more interest rate sensitive economies like you know, 0:23:30.760 --> 0:23:34.920 we we've seen China researchs in China earlier but or recently, 0:23:35.000 --> 0:23:37.800 but we would continue to avoid there for now because 0:23:37.840 --> 0:23:40.800 of the structural problems they have. But it's really right 0:23:40.920 --> 0:23:45.240 now for US. It's America first. The US economy is 0:23:45.320 --> 0:23:48.600 on is still rolling, you know, in a in a 0:23:48.680 --> 0:23:52.159 pretty strong manner. The consumer is still strong. We're wondering, 0:23:52.440 --> 0:23:54.720 you know, how many times have we heard the consumers 0:23:54.800 --> 0:23:56.760 running out of money? The consumer is gonna they're going 0:23:56.800 --> 0:23:58.960 to run out of pandemic money, They're running out of money, 0:23:59.000 --> 0:24:02.640 they're borrowing. But the consumer's still strong. And that's that's 0:24:02.720 --> 0:24:05.399 the mainstay of our economy. So no pun intended. That's 0:24:05.440 --> 0:24:08.880 the main stay of our economy. And you know we're 0:24:09.520 --> 0:24:14.280 we're America first with looking for some opportunities to tactically yeah, 0:24:14.760 --> 0:24:19.000 out to some other areas to manage portfolio risk. 0:24:19.600 --> 0:24:23.200 All right, David, I always appreciate checking in with you. 0:24:23.320 --> 0:24:25.720 David Coodley, he's a founder and he's a chief executive 0:24:25.720 --> 0:24:28.240 officer and he's a chief investment strategist over at Mainstay 0:24:28.640 --> 0:24:33.160 Capital Management based in Michigan, but smartly right now in Naples, Florida, 0:24:33.520 --> 0:24:35.840 coming at us from zoom all right, the Naples days 0:24:35.840 --> 0:24:37.680 a kind of done. It's going to get like unbearably hot. 0:24:38.080 --> 0:24:40.640 Where you want to be from now on Jersey Shore, baby. 0:24:40.640 --> 0:24:42.720 Yeah, you kind of do. Also, like today it's not 0:24:42.800 --> 0:24:44.600 that nice in New York. It's rainy and grows, but 0:24:44.720 --> 0:24:48.040 man is it humid? Yes, So henceforth the Jersey Shore, 0:24:48.200 --> 0:24:50.840 the Paulsweeni House. We're all waiting for our invite. I mean, 0:24:50.920 --> 0:24:52.920 John Tecker and I were like, I don't really need 0:24:53.000 --> 0:24:56.000 one down there too. I guess I haven't. Okay, I'm 0:24:56.000 --> 0:24:58.360 waiting for an invite to y'all house. I guess that's 0:24:58.400 --> 0:24:59.000 not gonna happen. 0:25:00.600 --> 0:25:04.440 You're listening to the Bloomberg Intelligence Podcast Catch us Live 0:25:04.560 --> 0:25:07.480 weekdays at ten am Eastern on applecar. 0:25:07.119 --> 0:25:09.840 Play and Android Auto with the Bloomberg Business Act. 0:25:10.000 --> 0:25:12.800 You can also listen live on Amazon Alexa from our 0:25:12.880 --> 0:25:17.240 flagship New York station just Say Alexa playing Bloomberg eleven thirty. 0:25:19.359 --> 0:25:22.440 Deer is one of those names that reported earnings, and again, 0:25:22.880 --> 0:25:25.040 when I think about Deer, I think about it in 0:25:25.119 --> 0:25:27.000 the context of being a really good snapshot of where 0:25:27.040 --> 0:25:30.400 the US farmer is in terms of their economic well being. 0:25:30.480 --> 0:25:33.879 Chris Chilo, he follows Deer, He follows all those industrial 0:25:34.080 --> 0:25:38.080 companies for Bloomberg Intelligence. He joins us here, Chris, what 0:25:38.160 --> 0:25:41.520 does it takeaway from Deer this quarter in the outlook? 0:25:42.720 --> 0:25:44.200 You're right, it's all about the outlook. 0:25:45.000 --> 0:25:47.640 We expected them to cut their twenty twenty four outlook. 0:25:48.040 --> 0:25:50.760 You saw that from their peers at CNACH and Aco. 0:25:50.960 --> 0:25:55.320 They both lowered their expectations this quarter. But the haircut 0:25:55.480 --> 0:25:58.120 this quarter for Deer was more than we had anticipated. 0:25:58.240 --> 0:26:01.600 They actually took net income down. So we're looking at 0:26:02.119 --> 0:26:05.080 nettingcome around seven billion dollars this year, which would imply 0:26:05.800 --> 0:26:08.000 earnings a little north to twenty five dollars a share, 0:26:08.440 --> 0:26:12.200 or roughly eight percent below the street. And really there's 0:26:12.240 --> 0:26:15.320 two things for the reduction and the outlook. One, farm fundamentals, 0:26:15.800 --> 0:26:19.440 farm economics continue to deteriorate, so we're seeing weaker, broadly 0:26:19.880 --> 0:26:23.000 weaker demand across the globe. And then two, they're going 0:26:23.080 --> 0:26:26.280 to have to underproduce retail demand here because inventories continue 0:26:26.320 --> 0:26:30.639 to pile up given the softer demand backdrop, So production 0:26:30.760 --> 0:26:32.920 will be down significantly in the back half of the year. 0:26:33.680 --> 0:26:35.880 But I think now the question becomes, is this cut 0:26:36.040 --> 0:26:38.280 going to be enough to de stock the channel moving 0:26:38.320 --> 0:26:39.120 into twenty five? 0:26:39.760 --> 0:26:39.920 Is it? 0:26:43.160 --> 0:26:45.080 I don't think so, no, because I think we're going 0:26:45.160 --> 0:26:49.200 to see further degradation and the retail demand environment. You know, 0:26:49.320 --> 0:26:52.600 the backdrop isn't particularly encouraging for farmers. I mean, we're 0:26:52.600 --> 0:26:56.320 still looking at lower crop prices, you have higher production expenses, 0:26:56.640 --> 0:26:59.560 interest rates, they're still quite elevated, so net farm income 0:26:59.600 --> 0:27:01.960 is going to be double digits for a second straight year. 0:27:03.000 --> 0:27:05.680 On top of that, you have broadly weaker farmer sentiment. 0:27:06.200 --> 0:27:07.840 They went out and bought a lot of equipment over 0:27:07.880 --> 0:27:09.720 the last three years, so there's really no impetus to 0:27:09.760 --> 0:27:12.439 go out and start spending again. And this is an 0:27:12.440 --> 0:27:15.360 election year, so add another layer of uncertainty on top 0:27:15.440 --> 0:27:18.280 of that, So I guess really struggle to see a 0:27:18.359 --> 0:27:20.399 catalyst at least in the near term that's going to 0:27:20.480 --> 0:27:22.080 really really accelerate demand. 0:27:22.400 --> 0:27:24.119 Well does that mean is that good news for the 0:27:24.200 --> 0:27:25.719 John Tuckles of the world who want to go out 0:27:25.760 --> 0:27:27.680 and buy it John dear tractor. Are they can get 0:27:27.680 --> 0:27:30.439 a deal here? Are they going to get some competitive pricing? 0:27:31.680 --> 0:27:35.119 You certainly can get a deal. We're starting to hear 0:27:35.359 --> 0:27:38.600 more and more about competitive pricing, particularly in South America. 0:27:38.720 --> 0:27:42.479 But there's too much inventory globally. We heard that from 0:27:42.560 --> 0:27:45.240 Deer on the call, at least for particularly for North America. 0:27:45.640 --> 0:27:48.200 That seemed to be a change intra quarter here where 0:27:48.240 --> 0:27:50.680 they're going to have to underproduce for the back half 0:27:50.720 --> 0:27:54.119 of the year. So both new and use too much inventory. 0:27:55.280 --> 0:27:58.120 That being said, a lot of this equipment, even though 0:27:58.400 --> 0:28:00.760 it's sitting on lots, does come at an a significantly 0:28:00.840 --> 0:28:03.120 higher price point than even just five years ago given 0:28:03.160 --> 0:28:05.000 all the technological advancements. 0:28:05.480 --> 0:28:08.800 So basically this is still a cyclical business and we 0:28:08.960 --> 0:28:11.240 haven't hit the bottom of the cycle. Let yet. Do 0:28:11.280 --> 0:28:14.560 you have visibility on when we may do that? It's 0:28:14.600 --> 0:28:15.280 a great question. 0:28:16.240 --> 0:28:18.400 No, I'm one in the camp that thinks that we're 0:28:18.440 --> 0:28:21.600 in a little bit more of a prolonged downturn. You know, 0:28:21.880 --> 0:28:25.200 historically downturns in this business don't last one year. And 0:28:25.280 --> 0:28:27.720 if you look at you know, consensus expectations are for 0:28:27.840 --> 0:28:31.080 roughly flat sales and earnings for deer and that the 0:28:31.160 --> 0:28:35.080 ag equipment peers for next year. Historically, downturns last two 0:28:35.160 --> 0:28:38.000 to four years. We typically look at peak to truck 0:28:38.040 --> 0:28:41.000 the clients north to thirty percent. We'll be down roughly 0:28:41.080 --> 0:28:45.000 fifteen percent in terms of volume this year. Historically speaking, 0:28:45.240 --> 0:28:48.760 that tends to accelerate in year two. So it really 0:28:48.880 --> 0:28:51.280 ultimately comes down to I think what are crop price 0:28:51.400 --> 0:28:53.360 is going to do? I think that would be probably 0:28:53.400 --> 0:28:56.720 the early sign that maybe we're approaching a bottom. But 0:28:56.800 --> 0:29:01.120 we're looking at another bumper crop this year bearings adverse weather, 0:29:01.320 --> 0:29:03.720 then I think you're going to see continued downward pressure 0:29:03.800 --> 0:29:04.320 there though. 0:29:04.400 --> 0:29:07.280 Chris, what are the what are the crops that you 0:29:07.400 --> 0:29:09.640 look at and investors look at they see whether it's 0:29:09.640 --> 0:29:11.360 gonna be a good year or bad year for farmers? 0:29:11.480 --> 0:29:12.640 Is it soybeans? 0:29:12.720 --> 0:29:13.000 Corn? 0:29:13.400 --> 0:29:14.239 What do you look at? 0:29:15.400 --> 0:29:18.640 So there's three that matter. It's corn, It's soybeans, and wheat. 0:29:19.160 --> 0:29:21.719 If you think about in the US, those three crops 0:29:21.800 --> 0:29:25.640 alone account for roughly fifty five percent of farmer cash 0:29:25.840 --> 0:29:29.680 receipts or farmer crop cash receipts, which are essentially farmer revenue. 0:29:29.760 --> 0:29:32.000 So those are the ones that really move the needle, 0:29:32.120 --> 0:29:36.440 particularly for the large, high horsepower equipment which really you know, 0:29:36.600 --> 0:29:37.640 drive the earnings power. 0:29:37.720 --> 0:29:41.280 For deer, this may be a really weird question, but 0:29:41.640 --> 0:29:47.640 the used tractor business DoD Deer and Caterpillar, etc. Do 0:29:47.720 --> 0:29:51.040 they own the resale the secondhand business or is it 0:29:51.120 --> 0:29:52.920 a different type of dealer that does that and is 0:29:52.960 --> 0:29:56.000 there any sort of benefit to be made for them 0:29:56.040 --> 0:29:56.680 on that level. 0:29:58.160 --> 0:30:03.360 So, generally speaking, dealers independent businesses. That being said, the 0:30:03.440 --> 0:30:06.520 OEMs do have pretty significant influence there, so they do 0:30:06.640 --> 0:30:11.600 make their own business decisions. But you know, like I said, 0:30:11.840 --> 0:30:14.560 it's both a problem in the used market as well 0:30:14.560 --> 0:30:18.600 as that there's too much inventory out there, and until 0:30:18.680 --> 0:30:20.720 you could start maybe clearing some of that out on 0:30:20.760 --> 0:30:24.200 the second and third hand market, it's really tough to 0:30:24.720 --> 0:30:28.000 re accelerate demand for new equipment because most new equipment 0:30:28.040 --> 0:30:31.040 purchases typically will involve a trade in of older equipment 0:30:32.160 --> 0:30:35.400 and really the second and third buyers tend to be smaller, 0:30:35.480 --> 0:30:38.520 mid sized type farmers. So unless there's some kind of 0:30:38.560 --> 0:30:42.480 improvement in farmer profitability, particular for those those farmers that 0:30:42.720 --> 0:30:46.480 are more pressured, it's really tough to you know, accelerate 0:30:46.560 --> 0:30:47.040 that demand. 0:30:47.600 --> 0:30:53.640 So soybeans, wheat, corn, When does that stuff like get planted, harvested, 0:30:53.680 --> 0:30:54.520 all that kind of stuff. 0:30:55.680 --> 0:30:58.160 Right now, we're right in the heart of planting season. 0:30:58.760 --> 0:31:01.160 I think about roughly fifty percent of the corn crop 0:31:01.280 --> 0:31:05.920 is in the ground. Yeah, particularly in North America, this 0:31:06.120 --> 0:31:09.000 is the planning season. South America a little different. You 0:31:09.080 --> 0:31:12.160 get multiple growing seasons down there due to the to 0:31:12.280 --> 0:31:17.600 the climate. But really we're squarely focused in on corn, corn, 0:31:17.680 --> 0:31:20.720 and soybeans right now. And really, you know, if you 0:31:20.760 --> 0:31:24.960 look at soil moisture, it's actually quite favorable. So there's 0:31:25.000 --> 0:31:28.560 really expectations that this is going to be another bumper crop. 0:31:29.440 --> 0:31:31.520 So you think you're can get a bumper crop because 0:31:31.560 --> 0:31:32.600 the soil is moist. 0:31:33.680 --> 0:31:36.880 We have moist soil now, so you know, like I said, 0:31:36.960 --> 0:31:40.400 bearing some kind of drought, I think you probably see 0:31:40.480 --> 0:31:43.120 more downward pressure on crop prices, which kind of leads 0:31:43.200 --> 0:31:45.520 us to be probably a little bit more cautious heading 0:31:45.560 --> 0:31:48.400 into twenty twenty five, just because farmer incomes are still 0:31:48.400 --> 0:31:50.760 going to be under tremendous pressure, really what we think 0:31:50.800 --> 0:31:53.640 will be for at least a third straight year, and 0:31:53.800 --> 0:31:56.400 that's really just going to you know, temper buying the expectations. 0:31:56.480 --> 0:31:58.240 All right, Chris, we really appreciate it. 0:31:58.320 --> 0:31:58.440 Chris. 0:31:58.520 --> 0:32:00.360 You'll you know, joining us bloom We're gonna tell legends, 0:32:00.680 --> 0:32:03.120 senior US machinery analysts. But it keep you two moist, 0:32:03.200 --> 0:32:04.880 like you can't have floods and you can't have drought. 0:32:05.000 --> 0:32:08.640 You know, John, your assignment today, Go home and feel 0:32:08.680 --> 0:32:11.160 your soil. See how moist it Isn't I don't, but 0:32:11.720 --> 0:32:14.920 you run the danger of the seats rotting before they 0:32:15.040 --> 0:32:15.720 sprout if. 0:32:15.600 --> 0:32:16.360 It's two moist. 0:32:16.400 --> 0:32:18.440 So exactly too much moisture gonn to be a problem 0:32:18.480 --> 0:32:19.360 with farming businesses. 0:32:19.400 --> 0:32:21.640 Top Oh my god, at least with my pegonias. 0:32:21.720 --> 0:32:23.160 I mean, that's why you have crop insurns, like you 0:32:23.280 --> 0:32:25.160 really need it because you're just I mean, even though 0:32:25.160 --> 0:32:27.080 you might complain about all the handouts, et cetera, but 0:32:27.200 --> 0:32:28.400 like it's huge, it's big. 0:32:30.920 --> 0:32:34.760 You're listening to the Bloomberg Intelligence podcast Catch us Live 0:32:34.880 --> 0:32:37.400 weekdays at ten am Eastern on Apple. 0:32:37.160 --> 0:32:40.160 Car Play and Android Auto with the Bloomberg Business app. 0:32:40.320 --> 0:32:43.120 You can also listen live on Amazon Alexa from our 0:32:43.160 --> 0:32:47.520 flagship New York station, Just say Alexa play Bloomberg eleven thirty. 0:32:49.320 --> 0:32:51.400 If you remember, about a week ago, I attended the 0:32:51.400 --> 0:32:54.720 Boston Consulting Group Edge Expo in Boston, Massachusetts. Had the 0:32:54.760 --> 0:32:57.000 opportunity to chat with a lot of smart people top 0:32:57.040 --> 0:33:01.000 execs at BCG. One was with Global Chair Rich Lesser. 0:33:01.400 --> 0:33:04.600 He engages with CEOs, boards of directors, and senior leaders 0:33:04.640 --> 0:33:08.160 around the world on critical topics, including climate change and 0:33:08.280 --> 0:33:11.920 artificial intelligence. I began the conversation by asking Rich what 0:33:12.200 --> 0:33:14.680 he spends the most time talking to clients about. Let's 0:33:14.680 --> 0:33:15.160 take a listen. 0:33:15.680 --> 0:33:18.080 So it's been a remarkable decade and it's not even 0:33:18.160 --> 0:33:18.880 half over yet. 0:33:19.400 --> 0:33:21.080 And I think the two. 0:33:21.080 --> 0:33:23.840 Characteristics that we are living with right now to a 0:33:24.080 --> 0:33:28.040 very high degree is uncertainty and change, and they're not 0:33:28.160 --> 0:33:31.040 the same thing. Uncertainty causes you to want to hunker down, 0:33:31.160 --> 0:33:33.560 you know, just get through it. Change forces you to 0:33:33.640 --> 0:33:37.280 be bold, to invest, to take some risk. And right now, 0:33:37.440 --> 0:33:40.560 more than I can remember, CEOs get pooled in both 0:33:40.680 --> 0:33:44.400 directions how to navigate, particularly if you're like a European CEO. 0:33:44.520 --> 0:33:47.400 You've got two wars not so not so far away, 0:33:47.440 --> 0:33:50.400 and you've got all the pressures of energy costs and 0:33:50.520 --> 0:33:53.600 all the uncertainty of all these elections this year and 0:33:53.640 --> 0:33:55.920 so forth. You've got an enormous amount of uncertainty. But 0:33:56.000 --> 0:33:58.200 of course, just like CEOs everywhere in the world, you've 0:33:58.240 --> 0:34:01.200 got rapid technology evolution, and you've got to prepare for 0:34:01.320 --> 0:34:03.960 climate change, all sorts of things. So I think that's 0:34:04.080 --> 0:34:05.920 the tension point, is how to balance. 0:34:05.640 --> 0:34:08.359 Those Let's talk about climate change a little bit here. 0:34:08.800 --> 0:34:10.960 It feels like maybe we're at a little bit of 0:34:10.960 --> 0:34:12.680 an ebb here in the US. I'm not sure if 0:34:12.719 --> 0:34:14.719 I don't think that's necessarily case in Europe, but I'm 0:34:14.760 --> 0:34:16.840 feeling a little bit here. How do you engage with 0:34:16.920 --> 0:34:20.279 your clients about climate change? What's the challenge these days? 0:34:20.360 --> 0:34:23.040 Is it convincing them that it's there, that it's an issue, 0:34:23.360 --> 0:34:27.040 convincing them that they need to maybe invest in getting 0:34:27.120 --> 0:34:29.440 to a cleaner economy. What are some of the challenges 0:34:29.480 --> 0:34:30.000 you guys have seen. 0:34:30.120 --> 0:34:33.839 I think it's really important to separate what people want 0:34:33.920 --> 0:34:38.320 to talk about publicly and what they do. Many many CEOs, 0:34:38.360 --> 0:34:42.080 particularly of leading US companies, have made pretty substantial commitments 0:34:42.120 --> 0:34:43.840 over the last two to three years. 0:34:44.560 --> 0:34:47.560 But in making those commitments, they were. 0:34:47.640 --> 0:34:50.040 Very, very visible and public about it a couple of 0:34:50.120 --> 0:34:52.600 years ago, and I think right now the sense is 0:34:53.080 --> 0:34:55.040 you don't walk away from your commitments. And I know 0:34:55.400 --> 0:34:58.600 very few CEOs, very few that I think are really 0:34:58.640 --> 0:35:00.919 trying to walk away from their amendments. I think most 0:35:00.960 --> 0:35:03.120 of them have tried to put them in their processes 0:35:03.239 --> 0:35:06.359 and sure they get delivered. But at the same time, 0:35:06.840 --> 0:35:09.759 it's become such a politicized topic. We're all going to 0:35:09.800 --> 0:35:11.520 live on this planet, we're all going to bear the 0:35:11.600 --> 0:35:16.800 consequences of climate change, but unfortunately, in the public discourse 0:35:17.200 --> 0:35:19.200 and in a very you know, it's an election year. 0:35:19.160 --> 0:35:20.640 It's just become very political. 0:35:20.960 --> 0:35:23.520 And I don't think CEOs want to be so public 0:35:24.080 --> 0:35:27.160 on these very difficult, divided, divisive topics. 0:35:27.239 --> 0:35:28.480 So they're much quieter. 0:35:29.000 --> 0:35:32.799 They're not walking away from their previous commitments, but they're 0:35:32.840 --> 0:35:36.160 also being careful about new commitments, partly because of the 0:35:36.200 --> 0:35:38.640 public attention and partly because they don't know where the 0:35:38.680 --> 0:35:40.480 policy environment is going next year. 0:35:40.680 --> 0:35:43.080 And you know, I guess an example that is ESG. 0:35:43.360 --> 0:35:46.440 It was the termed for so many years and now 0:35:46.480 --> 0:35:48.640 it's really fallen out of favor here in the US 0:35:48.719 --> 0:35:51.960 in particular. But again I guess the underlying commitment for 0:35:52.120 --> 0:35:53.440 many of those folks are still there. 0:35:53.680 --> 0:35:54.960 Well. The problem is ESG. 0:35:55.840 --> 0:35:58.920 Even people who were committed weren't always sure exactly what 0:35:59.360 --> 0:36:02.239 ESG was and what it meant. It was initials that 0:36:02.320 --> 0:36:05.960 were bundling three very different kinds of attributes together, and 0:36:06.680 --> 0:36:09.719 then it got politicizes a term without even people knowing 0:36:10.120 --> 0:36:13.200 why they shouldn't like it sometimes, so I think very 0:36:13.280 --> 0:36:16.200 few CEOs are using ESG language right now. You talk 0:36:16.239 --> 0:36:19.479 about your climate and sustainability commitments, you often talk about 0:36:19.520 --> 0:36:23.120 diversity and inclusion, good governance. I don't think anybody questions 0:36:23.200 --> 0:36:25.880 makes for stronger companies. But when you put it together 0:36:25.880 --> 0:36:28.920 in ways people don't understand, you're just almost looking for trouble. 0:36:29.360 --> 0:36:31.400 And I think CEOs the last thing they want to 0:36:31.440 --> 0:36:32.400 do is look for trouble. 0:36:32.840 --> 0:36:34.520 You know, when you look at the economic data, which 0:36:34.600 --> 0:36:37.120 is what we get Boomberg do all the time, and 0:36:37.280 --> 0:36:38.640 we talk about it all the time. For a lot 0:36:38.640 --> 0:36:42.000 of smart people, what are you hearing about the economy 0:36:42.080 --> 0:36:44.879 from some of your CEO clients out there, seems again 0:36:44.920 --> 0:36:47.520 there's some shifting wins out there for a lot of people. 0:36:47.920 --> 0:36:51.759 Those that won't assets, life's good. Those that don't maybe 0:36:51.840 --> 0:36:54.480 not so much. That inflation thing, for example. 0:36:54.200 --> 0:36:55.680 Is a real problem. What are you hearing? 0:36:56.160 --> 0:36:59.880 So, Look, we've been on the more optimistic side of 0:37:00.040 --> 0:37:02.719 the economic outlook for a while back, when everybody was 0:37:02.760 --> 0:37:06.960 saying recession or super high inflation. We were of a position, 0:37:07.120 --> 0:37:10.000 led by our chief economist Philip Carlson, that we could 0:37:10.040 --> 0:37:12.080 get to a soft landing and that that was not 0:37:12.160 --> 0:37:14.960 as low a probability scenario. Now we're living in a 0:37:15.040 --> 0:37:18.640 soft landing world. But one soft landings for companies have 0:37:18.800 --> 0:37:22.080 hard edges. You still have wages growing faster than your 0:37:22.120 --> 0:37:25.120 power to raise prices. You still have low growth, not 0:37:25.280 --> 0:37:28.040 super high growth. It's hard to drive your own growth 0:37:28.040 --> 0:37:31.680 agenda without doing a lot of innovation, and so it's 0:37:31.760 --> 0:37:34.560 not so easy. And second, we're finding actually the glide 0:37:34.600 --> 0:37:37.200 path for the last thousand feet to the ground. We 0:37:37.280 --> 0:37:39.799 got a glidepath from thirty thousand feet of risk down 0:37:39.840 --> 0:37:42.200 to a couple thousand. But you know, getting from a 0:37:42.320 --> 0:37:45.080 world of high two s low threes down to a 0:37:45.200 --> 0:37:48.080 well below two and a half. Approaching two is proving 0:37:48.160 --> 0:37:50.680 to be tricky, and the consequence of that, as you say, 0:37:50.800 --> 0:37:54.120 is that interest rates are high and there's much less 0:37:54.160 --> 0:37:56.960 sign of them coming down, and in that environment it 0:37:57.040 --> 0:37:59.920 makes a couple things hard. First, for many many consumers, 0:38:00.040 --> 0:38:02.200 you don't have much in the way of savings, buying 0:38:02.239 --> 0:38:04.520 a car, buying a house, renovating a house, all of 0:38:04.560 --> 0:38:07.720 those things go up much more than the underlying prices 0:38:07.800 --> 0:38:10.759 do because of the interest costs. And second, for many 0:38:10.800 --> 0:38:13.280 of the capital investments we need to make, including climate 0:38:13.320 --> 0:38:16.200 and sustainability, things that look like they made a lot 0:38:16.239 --> 0:38:18.480 of economic sense a couple of years ago are much 0:38:18.520 --> 0:38:21.200 harder to justify now. So if you have a lot 0:38:21.239 --> 0:38:23.279 of assets, you're right, it's not bad right now you 0:38:23.360 --> 0:38:25.840 can get good value on But if you've got to 0:38:26.120 --> 0:38:29.280 make investments, take on debt, do things, that is trickier. 0:38:29.760 --> 0:38:31.600 We spent a lot of time at your conference here 0:38:31.680 --> 0:38:34.840 talking about AI and the investment needed in AI and 0:38:34.960 --> 0:38:39.560 the commitment needed and the ethics around AI. How prevalent 0:38:39.680 --> 0:38:41.920 is that in your discussions with your declines at the 0:38:42.040 --> 0:38:43.640 CEO level, the board level. 0:38:44.040 --> 0:38:49.600 I am blown away by how much energy CEOs are 0:38:49.719 --> 0:38:53.040 putting into thinking this topic through. But for me, the 0:38:53.080 --> 0:38:55.279 big difference between the last six months and say the 0:38:55.360 --> 0:38:58.239 first nine or ten months since the big announcements. The 0:38:58.360 --> 0:39:00.560 last six months people are less focused on thinking it 0:39:00.640 --> 0:39:03.160 through in the sense of understanding the technology and more 0:39:03.160 --> 0:39:06.480 about how they can drive business impact at scale. And 0:39:06.680 --> 0:39:09.480 for us, it's been honestly one of the most exciting 0:39:09.600 --> 0:39:12.319 periods I can remember on something where we went from 0:39:12.400 --> 0:39:14.680 less than twenty clients a year ago to day working 0:39:14.760 --> 0:39:17.480 on this to three hundred and fifty. I mean, we've 0:39:17.520 --> 0:39:20.440 never had something like that. And I think that for us, 0:39:20.600 --> 0:39:23.279 there's a lot of opportunity that we're seeing now get 0:39:23.440 --> 0:39:27.920 materialized versus theorized, and CEOs are realizing it. They have 0:39:28.040 --> 0:39:29.880 to balance it, they have other priorities they have to do. 0:39:30.080 --> 0:39:31.840 They have to do it in a responsible way. To 0:39:31.920 --> 0:39:34.760 your point, be careful, there aren't hidden biases. Be careful, 0:39:34.760 --> 0:39:37.920 they're not misusing the technology. But the underlying sense of 0:39:38.000 --> 0:39:40.840 opportunity right now has gone up quite a lot. And 0:39:40.920 --> 0:39:44.000 I think the more they see other companies delivering actually 0:39:44.080 --> 0:39:48.440 putting it into results, that they post deeper customer relationships. 0:39:48.680 --> 0:39:50.120 The faster we'll see that come along. 0:39:50.320 --> 0:39:52.800 Yeah, we met with well the goodness for BCGS. You 0:39:52.840 --> 0:39:54.719 have a lot of smart people on this topic here, 0:39:54.840 --> 0:39:58.000 we've met them here today. One aery was the ethics site, 0:39:58.000 --> 0:40:00.880 your chief ethics officers talking about that. Yeah, that's got 0:40:01.000 --> 0:40:02.879 to be front and center. I would think for total 0:40:02.920 --> 0:40:05.759 discussions before you start thinking about putting dollars to work, 0:40:05.800 --> 0:40:07.440 you have to have a commitment, it seems like, to 0:40:07.680 --> 0:40:09.600 try to do this as responsible. 0:40:09.120 --> 0:40:11.760 As Yes, and it has to be owned by the CEO, 0:40:12.040 --> 0:40:14.000 not owned by the technology team. 0:40:14.160 --> 0:40:16.240 Right, this is a CEO level issue. 0:40:16.360 --> 0:40:18.640 What are the governance frameworks, What are the kind of 0:40:19.120 --> 0:40:20.800 biases to look out for? How do you have a 0:40:20.880 --> 0:40:23.680 process where you don't just put technology into the wild 0:40:23.760 --> 0:40:25.800 and hope you did a good job, but you're monitoring 0:40:25.920 --> 0:40:29.480 it in an ongoing basis, figuring out what the risks are, 0:40:29.719 --> 0:40:32.360 escalating the things to the right level, intervening in the 0:40:32.440 --> 0:40:36.280 right ways. That is a CEO and a top leadership agenda, 0:40:36.640 --> 0:40:40.920 and it's really important. But we are seeing companies navigate 0:40:41.040 --> 0:40:43.880 that really well. And so yes, you have to be 0:40:43.960 --> 0:40:46.359 really careful, but that can't be the reason you don't 0:40:46.480 --> 0:40:47.719 choose to act. 0:40:47.880 --> 0:40:50.239 Yeah, all right, You've been in this consulting game a 0:40:50.320 --> 0:40:55.359 while here, how has it changed? You know, certainly before 0:40:55.400 --> 0:40:57.759 the pandemic. I'm guessing the business models for a lot 0:40:57.800 --> 0:40:58.720 of companies have changed. 0:40:58.760 --> 0:40:58.880 Here. 0:40:59.000 --> 0:41:01.080 How how is your day to day house and consulting 0:41:01.120 --> 0:41:02.879 business evolved in over the least? 0:41:02.960 --> 0:41:07.560 Right, So, I'd say there are two massive changes over 0:41:07.640 --> 0:41:11.040 the last five to ten years. Until five or ten 0:41:11.080 --> 0:41:13.400 years ago, it was very clear, get to the right 0:41:13.440 --> 0:41:16.600 answer for very difficult problems. Make sure the change really happens. 0:41:17.160 --> 0:41:20.720 I think the focus right now on driving real lasting 0:41:20.960 --> 0:41:23.520 impact goes up and up and up. We see it 0:41:23.600 --> 0:41:26.080 in so many clinident discussions. They don't just want partners 0:41:26.120 --> 0:41:28.080 to give them good ideas or give them a page 0:41:28.120 --> 0:41:31.400 of recommendations. They want impact partners that can team with 0:41:31.520 --> 0:41:36.000 to drive stuff through. And two, they need an enablement focus. 0:41:36.080 --> 0:41:38.600 They need a focus on building because the world's going 0:41:38.680 --> 0:41:42.320 to keep changing, So making change once, however successful, is 0:41:42.440 --> 0:41:45.800 not sufficient. What you need to do is enable your organization, 0:41:46.000 --> 0:41:49.560 the people and the technology to keep learning, to keep growing, 0:41:49.680 --> 0:41:52.480 to keep evolving. So the role of people like us 0:41:53.000 --> 0:41:56.239 are not just to make great change happen one successfully, 0:41:56.520 --> 0:41:59.480 but to build skills within the organization, so in the 0:41:59.640 --> 0:42:02.759 organist and keep growing and learning and evolving, and those 0:42:02.840 --> 0:42:05.520 two things have grown dramatically over the last five years. 0:42:05.760 --> 0:42:06.120 All right. 0:42:06.160 --> 0:42:10.120 That was Global Chair Rich Lesser of BCG Boston Consulting Group. 0:42:10.160 --> 0:42:13.279 I was up there attending their Boston Consulting Group Edge 0:42:13.360 --> 0:42:16.200 Expo in Boston, talking to a lot of their leaders 0:42:16.360 --> 0:42:18.600 senior partners there at bcgpas some of the issues they 0:42:18.640 --> 0:42:21.520 are working with their clients are on. A lot of 0:42:21.600 --> 0:42:26.719 it was about competition, global competition technology, particularly AI as well. 0:42:26.840 --> 0:42:29.640 So a lot going on there and they're getting more 0:42:29.640 --> 0:42:32.000 and more engaged with their clients. 0:42:32.280 --> 0:42:36.759 This is the Bloomberg Intelligence podcast, available on apples, Spotify, 0:42:36.960 --> 0:42:40.120 and anywhere else you get your podcasts. Listen live each 0:42:40.160 --> 0:42:43.319 weekday ten am to noon Eastern on Bloomberg dot com, 0:42:43.640 --> 0:42:47.000 Beheart Radio app, tune In, and the Bloomberg Business app. 0:42:47.160 --> 0:42:50.160 You can also watch us live every weekday on YouTube 0:42:50.400 --> 0:42:52.160 and always on the Bloomberg terminal.