WEBVTT - Bloomberg's Ubelhart on Deere, Kapur on Bernie Sanders (Audio)

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<v Speaker 1>dollar fifty the ounce to twelve fifty three, a drop

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<v Speaker 1>Intermedia crude. That's a drop of nine tenths of one percent.

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<v Speaker 1>I'm Charlie Pellett. And that's a Bloomberg business flash. This

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<v Speaker 1>is taking stock with Pins Box and Kathleen Mays on

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<v Speaker 1>Bloomberg Radio commodities bubble that burst, including for agricultural commodities

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<v Speaker 1>in the construction industry that is still under pressure around

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<v Speaker 1>the world. These are things weighing on the world's biggest

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<v Speaker 1>agricultural equipment manufacturer, that's Deer and Company. The stock price

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<v Speaker 1>down five percent today, trading at seventy eight dollars and change.

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<v Speaker 1>Here to tell us about the quarter, the quarterly results

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<v Speaker 1>for Deer and even more importantly, what they have to

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<v Speaker 1>do next and what lies ahead is our own Karen

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<v Speaker 1>obial Heart. She's industrials analyst for Bloomberg Intelligence. So Karen, Uh,

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<v Speaker 1>the quarter was a beat, helped by a lower tax rate,

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<v Speaker 1>but there was bad news in three segments. Yeah you know. Uh.

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<v Speaker 1>The big surprise in the quarter was the credits of

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<v Speaker 1>which usually gives them pretty stable earnings and fluctuates a

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<v Speaker 1>little bit with volume or uh demand for equipment, but

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<v Speaker 1>this time there was a real shortfall and operating leases

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<v Speaker 1>which cut people. By surprise, UM, the company had to

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<v Speaker 1>write off residual values. UM equipment is being turned in

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<v Speaker 1>earlier than uh, you know the end of the lease.

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<v Speaker 1>Because farmers are under stress. It's just another indication of stress.

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<v Speaker 1>And Deer had to cut their expectations for the credit

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<v Speaker 1>sub quite a bit. So that was the biggest surprise. Uh,

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<v Speaker 1>construction equipment have been weak. Uh, they have largely North

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<v Speaker 1>American exposure. UM. The pricing was a lot worse there,

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<v Speaker 1>and they indicated that big competitors were discounting more than

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<v Speaker 1>expected and studed that it wasn't necessarily the Japanese. So

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<v Speaker 1>that's probably UM Caterpillar, which is the biggest construction equipment producer.

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<v Speaker 1>And then the third piece of bad news is the

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<v Speaker 1>company did not just aid us from concluding that might

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<v Speaker 1>be a fourth down year for farm equipment, which is

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<v Speaker 1>their largest and most profitable business. That was not anticipated UM,

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<v Speaker 1>and that if a fourth down year would be for

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<v Speaker 1>the worst for farm equipment since the late nineties. So uh,

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<v Speaker 1>you know, even though it looked like they'd be you know,

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<v Speaker 1>inside the numbers, that looked quite that across the board.

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<v Speaker 1>Karen speak if you can about the effects of lower

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<v Speaker 1>prices for oil, natural gas, and other mining commodities. Mainly

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<v Speaker 1>because if you've got construction equipment and you're not using it,

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<v Speaker 1>You're going to put that back on the market. That

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<v Speaker 1>means a lot of used stuff is available. Yeah, use

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<v Speaker 1>equipment prices have been a pressure for them in both

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<v Speaker 1>egg and construction and construction, um, the oil business. What's

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<v Speaker 1>happened is that's returned a lot of equipment, that construction

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<v Speaker 1>equipment that was being used in that that market is

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<v Speaker 1>now the uh you know, being returned to be used

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<v Speaker 1>in construction markets which aren't that strong in and of itself.

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<v Speaker 1>So the oil and gas market is definitely backed up

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<v Speaker 1>on the on the you know, construction equipment side as well, um,

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<v Speaker 1>the discounting. We've had tough pricing, but Deer actually said

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<v Speaker 1>construction equipment prices will be negative this year and I

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<v Speaker 1>think that that was worse than expected. And they decided

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<v Speaker 1>sales incentives, which is basically companies trying trying to preserve

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<v Speaker 1>market share. So, Karen, what lines ahead. Deer has been

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<v Speaker 1>taking steps to cut costs right to pull back and

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<v Speaker 1>you can understand that there was it was a big

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<v Speaker 1>move upcomudi prices. They were riding high, right, So where

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<v Speaker 1>are they in a cycle now? Have they? Is it

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<v Speaker 1>time for people to take a look because there's value

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<v Speaker 1>there now or do they still have a lot of

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<v Speaker 1>work to do to get their you know, get their

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<v Speaker 1>model in line. I think, um, we have to let um,

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<v Speaker 1>you know, people observed absorb the latest bit news and

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<v Speaker 1>that this might be another down year in seventeen. I

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<v Speaker 1>think the general consensus thinking was, okay, is going to

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<v Speaker 1>be a third down year, which would be a longer

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<v Speaker 1>downturn than average. But now we've got another it's yere

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<v Speaker 1>to uh to perhaps contend with and uh, you know,

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<v Speaker 1>I think that that has to settle in the numbers

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<v Speaker 1>had to continue to come down. UM. The company has

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<v Speaker 1>done very well on an operational level given what they're

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<v Speaker 1>dealing with. UM, but I think this latest shot, um,

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<v Speaker 1>you know, I think we need a little time to

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<v Speaker 1>um figure out what the implications of that will be

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<v Speaker 1>for next year. I think basically people were not expecting

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<v Speaker 1>a big pot next year, but they weren't expecting another

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<v Speaker 1>down year. Thank you very much, Karen Eubile, Heart Industrials

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<v Speaker 1>analysts for Bloomberg Intelligence. Of course, Bloomberg Intelligence providing unique

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<v Speaker 1>in real time research and context for a variety of

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<v Speaker 1>industries and markets, as well as government factors that would

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<v Speaker 1>affect businesses terminal customers just access this function by going

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<v Speaker 1>to be I go on the Bloomberg. All right, now,

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<v Speaker 1>let's absorb some political news and perspective from Sahel Kapoor.

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<v Speaker 1>He is Bloomberg News politics reporter and producer joining us

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<v Speaker 1>from Washington, d C, home to Bloomberg and one oh

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<v Speaker 1>five point seven h D two Sahil Bernie Sanders Hillary Clinton?

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<v Speaker 1>Are we going to get a contested convention? I wouldn't

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<v Speaker 1>say a contested convention, but it does look like we're

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<v Speaker 1>going to go to the convention without either of the

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<v Speaker 1>two candidates having officially clinched the votes they need UM

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<v Speaker 1>to to guarantee themselves the nominee. Because remember, hundreds of

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<v Speaker 1>delegates at the convention are super delegates and they can

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<v Speaker 1>vote for whoever they want. So if we take the

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<v Speaker 1>super delegates out their word, which I think we're pretty

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<v Speaker 1>safe to do, then Hillary Clinton is the odds on favorite,

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<v Speaker 1>UM overwhelmingly likely, all but certain that she will be

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<v Speaker 1>the nominee. And I think that's pretty clear to everyone,

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<v Speaker 1>including UM the Bernie Sanders folks, even if they are

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<v Speaker 1>fighting to the end. What would happen if Bernie Sanders

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<v Speaker 1>won California? Would I mean to a certain extent. It

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<v Speaker 1>might not totally change the math. But that's a big

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<v Speaker 1>state and there's a lot of delegates there. It is

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<v Speaker 1>a big site, and there are a lot of delegates.

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<v Speaker 1>But keep in mind these are proportionately allocated. So if

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<v Speaker 1>he wins by four or five points, and they'll split

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<v Speaker 1>the delegates and he will and he won't net that many, right,

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<v Speaker 1>So even if he does win California is not gonna matter.

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<v Speaker 1>He's gonna need to win California on the remaining states

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<v Speaker 1>by as much as thirty to thirty five points, which

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<v Speaker 1>is the sort of thing that that's going to take

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<v Speaker 1>a miracle to achieve. So he'll Philadelphia has already approved

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<v Speaker 1>four demonstration permits in support of Senator Bernie Sanders for

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<v Speaker 1>the July Democratic National Convention. They're figuring on a very

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<v Speaker 1>large rally that will be planned near the convention center.

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<v Speaker 1>What will that look like and what will that do

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<v Speaker 1>to the inevitable race between the Democratic nominee and the

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<v Speaker 1>Republican nominee. We can certainly expect a rowdy series of

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<v Speaker 1>demonstrations from Bernie Sanders supporter as he's activated a long

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<v Speaker 1>dormant element of the Democratic party that's been dormant at

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<v Speaker 1>least since the ninety nineties. UM, which is the staunch

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<v Speaker 1>left you know, the staunch left wing element of the

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<v Speaker 1>Democratic Party, UM that wants almost the sort of fundamental

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<v Speaker 1>change that that Donald Trump is pushing for from the right,

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<v Speaker 1>they wanted from the left. So we're certainly going to

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<v Speaker 1>see that that UM side of the party and that

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<v Speaker 1>wing of people that very energized and very mobilized and

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<v Speaker 1>demanding certain um demanding certain things from the Democratic Party

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<v Speaker 1>in the platform and from Hillary Clinton in the general

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<v Speaker 1>election campaign. And a lot of it is going to

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<v Speaker 1>depend on, I think what Sanders does, how he uses

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<v Speaker 1>his leverage, how he uses these supporters that are on

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<v Speaker 1>his side, and how he harnesses that energy. Things could

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<v Speaker 1>get out of control. So you have a big story today.

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<v Speaker 1>You talked to some leading Democratic Party leaders, public statements

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<v Speaker 1>and and sort of you know, more behind the scenes. Uh.

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<v Speaker 1>I think when the most interesting ones comes from your

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<v Speaker 1>interview with Senator Tim Keane of Virginia. Now it's true

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<v Speaker 1>he's a Clinton ally, but he's also former chairman of

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<v Speaker 1>the Democratic National Committee. He's not so patient with Bernie

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<v Speaker 1>Sanders pushing on. He is starting to lose his patients,

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<v Speaker 1>as many Democrats are. They don't like the fact that,

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<v Speaker 1>given that it's it's um all but certain at this

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<v Speaker 1>point that Hillary Clinton is going to be the nominee,

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<v Speaker 1>that Bernie Centers continues to fight that, he continues to

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<v Speaker 1>paint Hillary Clinton as the candidate of Wall Street and

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<v Speaker 1>in a big business and kind of, you know, suggest

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<v Speaker 1>that she's corrupted by all these campaign contributions. They don't

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<v Speaker 1>like the fact that one of their own is still

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<v Speaker 1>attacking their presumptive UH and likely nominee. So I think

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<v Speaker 1>Tim Kane was giving voice to what a lot of

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<v Speaker 1>people in the Democratic Party think in terms of arguing

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<v Speaker 1>that now is the time for Bernie Sanders to dial

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<v Speaker 1>back the rhetoric and shift toward a more unifying UH stance.

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<v Speaker 1>So he'll is there an understanding that whoever the Republican

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<v Speaker 1>nominee is, and perhaps it would be Donald Trump, will

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<v Speaker 1>use the actual words and video of Bernie Sanders in

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<v Speaker 1>the national election against Hillary Clinton if she is the nominee. Right, So, firstly,

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<v Speaker 1>Donald Trump is the presumptive nominee, he will be the nominee.

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<v Speaker 1>And yes, that is a guarante, that is an absolute certainty.

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<v Speaker 1>That he will use Bernie Sanders words against Hillary Clinton.

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<v Speaker 1>He's already doing it. He's already doing it in tweets

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<v Speaker 1>and social media postings, and frankly, the Hillary Clinton campaign

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<v Speaker 1>is going to do the same thing with Donald Trump.

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<v Speaker 1>A lot of Donald Trump's Republican opponents said some very

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<v Speaker 1>fiercely critical, um, some pretty nasty things about him in

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<v Speaker 1>the primary as well. So you know, this is just

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<v Speaker 1>part of the whole. This is just I guess, part

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<v Speaker 1>of the whole exercise of electoral politics. We'll see that

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<v Speaker 1>happening on both ends. What does this mean for the

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<v Speaker 1>Democratic Party? More brawdly is is Bernie Sanders an outlier

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<v Speaker 1>who disappears after this? A lot of people in your

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<v Speaker 1>story are not happy with the way he's conducted to

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<v Speaker 1>this a point. No, he definitely want to disappear after this. Um,

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<v Speaker 1>the question is what kind of figure emerges. So this

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<v Speaker 1>is this is sort of the fork in the road

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<v Speaker 1>that Bernie Sanders has a content with and decide what

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<v Speaker 1>sort of um politician he wants to come out as.

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<v Speaker 1>On the other side, now he has two options as

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<v Speaker 1>I see it. Wanted to continue as the figure he's

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<v Speaker 1>been for the last twenty five years and work within

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<v Speaker 1>the party to achieve reforms. The other is to use

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<v Speaker 1>his grassroots base of supporters as a sword against this

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<v Speaker 1>party and to try to force reforms against their will.

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<v Speaker 1>Very interesting, very exciting, so Hil Kapoor, politics supporter and

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<v Speaker 1>producer for Bloomberg News based in Washington, d C. History

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<v Speaker 1>Sanders to find on the stump, quietly reassures Democrats on unity.

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<v Speaker 1>Kathleen Hayes and Pim Fox taking stoff on Bloomberg Radio