Agricultural Economy Is Softer, More Vulnerable Now: CoBank CEO

is the agriculture industry. What with the trade wars between the United States and China, could farmers in the United States be affected for many years to come. Joining us now to help us answer to this question is Tom Halverson. He is the president and the chief executive of KO Bank, assets under management more than a hundred and twenty five billion. They are based in Denver. Co Bank is one of the four banks of the Farm Credit System. It provides loans, leases,

and other financial services to rural communities across the United States. Tom, thank you very much for being with us. Tell us the current state of health of the agriculture industry when it comes to growing soybeans, certainly, I'm happy to do that. The fact of the matter is, you know, we are in the midst of this trade turmoil that you've been talking a great deal about as a result of negotiations have now been underway for quite some period of time.

But if you roll the tape back further, the agricultural economy the United States UH started softening well back in

fourteen periods. So if you look at the Department of Agricultures owned data on net farm income, for example, it's fifty lower today than it was in So before UH the disalignments that we've been experiencing with our NAFTA partners and with China occurred, the agri cultural economy was already soft UH, and the consequences of the negotiations UH that we've been experiencing over the over the recent months have exacerbated that tendency as a result of UH, the teriffs

that we have imposed, in the retaliatory tariffs that Mexico, Canada and China have imposed UH and and response. So the agricultural economy was soft before it's it's softer and more vulnerable today. So Tom, what does that mean in terms of whether the US agricultural industry is headed for a recession, whether we accept well, whether we expect bankruptcy is to pick up as we've seen a little bit

in the Upper Midwest. Well, you know, let's step back and answer that by recognizing that the agricultural economy is one of the most positive participants in the trade balance the United States. We have grown US exports of agricultural products over the last twenty five years dramatically, and it makes a very positive impact on the trade in current

account balance of the country. But you're exactly right. The fact of the matter is that is manifesting itself in in UH, in stress in the rural economy, in the wide areas of the of of the country that manifests itself, and stress and and and bankruptcies and difficulties. Looking in various sectors, whether it's you know, soybean producers and growers whose whose markets are are under stress or UH dairy production complex for example, is experiencing similar levels of stress.

And then when you go up to the next level, which is the aggregators of producers, products, agricultural co ops and the like, UH, they they may be experiencing difficulties as well. So there's belt tightening, and that means that people buy less new you know, machinery and equipment, and

they're looking for ways to reduce their costs. And they are being caught for the first time in a decade as the rest of the economy is in a rising interest rate environment where for many years is now interest rates weren't really a significant component of of production agricultural cost side. Uh, it's becoming much more so. So for people who entered this period with from a position of relatively high leverage, you know, that exacerbates their tensions and

their and their credit stress. Tom, does this does this uncertainty and this stress that you're describing, does it bleed over into other areas of the agricultural industry? And I'm thinking, because you know, your customers are not just food and agri business, but it's rural power communications, You've got water cooperatives, also, rural community facilities, agricultural credit association. You've got a variety

of customers. Oh no, you're absolutely right. So if you look across wide swaths of the Upper Midwest, look at the Dakotas in Nebraska, Montana, for example, those are just a couple of examples but there is a very high correlation between the health and well being of the agricultural economy and the health and well being of the rural economy as a whole, because all of those industries, as

you say, are very highly correlated and inter related. So when one of the biggest or the biggest in the case of agriculture, suffers, that has big knock on effects for the for the economy as a whole. You know, one thing that I'm struck by is when you were talking about how the entire agricultural industry in the US had been struggling a bit or seeing a slowdown for a number of years even before the trade tensions. I'm wondering, how much are people blaming trade for things that were

already in place before those tensions emerged. Well, that's a good question people often get. Everyone gets confused and the difference between causation and correlation and and uh, you know, people look at what's happening, and they look at the headlines and the like, and it's easier to uh, to blame you know, another country or a market thing that's

beyond your control. And I'm sure that there's some of that going on, But I find in my experience that that farmers and ranchers and people in the agricultural industry in the United States are some of the most thoughtful, smartest, well informed people about what's going on in the world that you can find anywhere. And the reason for that is, for two two and a half decades now, we have

dramatically grown our export markets. So there are lots and lots of farmers and ranchers who's been all over the world making relationships with their Chinese customers or their or their customers and other parts of the world. So they're pretty attentive to what's happening and the underlying causes and market factors and supply and demand factors that affect the prices for their commodities. Well, in that case, what are they doing or can they do anything in order to

mitigate the effects of these tariff wars? Well, I think everybody. If you go out and ask you go out and ask our customers, or go out and ask people in rural parts of the country, you'll find Yeah, they're all doing things. Number One, they're watching it with great care, uh, and they're trying to take it into consideration as they

make their decisions. For next year, for example, you know, harvest is done, there's a gigantic crop of of agricultural commodities uh that's not being purchased at the moment, for example, in the case of soybeans by China. Uh. And so we have a lot of commodities with no with no market or an insufficient market, and farmers all over the Upper Midwest, for example, are having to decide what are they going to do next year? Are they going to grow as many soybeans as they did this year? Given

the state of trade relationships? Are they gonna uh you know trade are they going to produce less soybeans and more corn? You know? And that has big knock on implications on seed suppliers, uh, fertilizer suppliers, you know, machinery manufacturers and all those people and farmers and ranchers are right now having to try and make decisions about what their capital structure and their business plan is going to be for twenty nineteen. Tom Howiverson, thank you so much

for being with us. It's really an important area to keep an eye on, certainly as we've seen the price of soy in particular really flipping around depending on the trade headlines. Tom howiverson his chief executive officer of Kobank uh joining us here where we are broadcasting live from Commonwealth's Power and Practice Alumni Workshop in Orlando, Florida. Coming up Bloomberg Politics, Policy, power and law. A lot to talk about, including about some of the tariffs and trade tensions.

Are they easing? Are they not? What are the details we don't know? Does it for us? And Lisa Almos along with my coast and colleague Pim Fox. This is Bloomberg. I want to turn now to one of the headline events of the day. This is really an incredible contribution from a contributor to Bloomberg Opinion, former head of the Bank of England, Mervin King, writing a column. Well, I'm gonna let Clive Crook sort of give us the details there because he was the editor for this particular column.

And Clive Crook, Bloomberg Opinion editor, joins us now from Washington, d C. Clive, what was it like to actually receive uh, Lord King's column at this particular time when the Brexit is got coming up for a vote. Well, it's uh, it's a fantastic piece. That's anything to say about it? In my view. I think it's the best piece on the subjects I've read, and it's a withering attack on terrace. Some mays Brexit deal and he explains what's wrong with it,

essentially that it gets the worst of all worlds. You know, it isn't a it isn't a compromise any meaningful sense. It sacrifices British sovereignty and it and it will cause economic damage as well. So I mean it's a terrific piece. Well, Clive, why is he writing this now? Well, I mean, you know the decision is about to be made. I'm sure he wants to influence it. He's calling on Parliament to reject the deal, and if they read the piece and think about it, I think they might well decide to

do just that. Well, any idea being that the deal is the worst of both old as you were just saying, I guess what I'm trying to understand is is he trying to sort of augur for what uh the European Union judge just ruled, which is perhaps take a revote and try to undo Brexit altogether. Well, I think his position in this column is not um, you know, pro Brexit or anti Brexit. It's against this specific deal. Um.

So you know, I think there's another it's a separate issue. Really, you know what happens next, what kind of deal Britain should seek. But the point is that this particular deal that's on the table is terrible. That's what That's what Irvin King is arguing. UM. So he doesn't really go to the question of you know, so do we have a no deal brexit or do we do we stay

in Um, that's not what he's grampling with. He's saying this particular deal is the result of, as he puts it, monumental in competence, and he calls it a betrayal of Britains. It's this deal that's bad. Now the e c J H Well, it isn't an e c g J ruling, you know, it's it's advice from a lawyer that the c J usually takes very seriously. UM. So I do think it's increased the chances that Britain could unilaterally revoke

Article fifty and put the whole process on pause. Um. But it doesn't need to be noted that, you know, the European Commission is arguing the opposite, and the European Unions leaders are also of the view that revoking Article fifty and halting this process in its tracks would require

the unanimous agreement of the other European governments. So although this advice I think increases the probability that the Court itself will rule that a unilateral revocation is possible, it doesn't make it a done deal by any means, And the Commission and the European Union's leaders are pushing back against that view. What has been the reaction from European leaders and would they want Britain to come back into the European Union. Well, that is an excellent question. Um,

I'm not sure what the answer is yet. I mean, the truth is they haven't really addressed it collectively. You know, there is no, as it were, agreed European Union view on this. Some European Union leaders have said that they want Britain to stay in, but um, I don't think that view would be unanimous myself. I think if Britain did revoke Article fifty, um, I think some EU leaders might wonder if that was actually in the interests of

the European Union. You know, many people in Europe are as sick of the Brexit process as many people in Britain are and I think they just want Britain and their complaints to go away. So I don't think, you know, Britain would be welcomed back unanimously with open arms by any means. Well, Clive, just in thirty seconds here, I'm wondering what's the risk and how much does it go up that there is a hard Brexit or a no deal Brexit, which is a worst case scenario for a

lot of people if this deal is rejected. I think it is a significant risk. Um. I think, um, you know, because the problem is that it's the default option. Time is running out now, and if nothing else happens, Britain leaves the European Union on March twenty nine, so interventions are necessary to stop that process. And um, I think there is a risk, almost by accident, um, that Britain might decide it wants to stay after all, or it wants to slow this process down, and it might just

not be possible to do that. So I think a hard Brexit is a real, a real possibility. Clive Crook, thank you so much for being with us. Clive Crook, Bloomberg Opinion editor, talking about that fabulous Mervin King Carlin Murvin King, of course, is a former Bank of England governor, talking about how the current deal on the table waiting to be voted for is the worst of both worlds,

arguing against voting for it. Meanwhile, perhaps there's a little bit of a glimmer saying that perhaps there's a chance for them to take a revote on Brexit. We are broadcasting live from Commonwealth's Power and Practice Alumni Workshop in Orlando, Florida, and we are joined by Marianna Goldenberg, founder of Cure

Wealth Management. Marianna, I'm so glad that you're here because there have been a series of tax changes that have actually changed the calculus for some people, including as we've discussed on this show with respect to divorce, because after this year, I believe alimony payments will not be tax deductible. So I'm curious from you whether you're seeing more people taking that into account, expediting their divorces this year and what you're expecting into your end. Thank you, Lisa for

having me on your show. I'm very honored, and thank you my broke a deala Commonwealth Financial and Joe in particular for having me on the show. Uh you're absolutely right. UM, I do see quite a bit of divorces happening today due to the changes in the tax law. Just a

little bit of a background. I am a Certified Divorce Financial Analyst, which is a designation that you receive UM and helps you understand the laws, the divorce laws from legal standpoint and also also financial ramifications of UM going through divorce. UM. As you discussed before, there are some changes happening in two thousand nineteen. The alimony that used to be deductible for people paying the alimony and taxable

for the receivers is no longer be taxed. So what's happening now People are rushing in to settle their divorces before the end of the year because they will be

grandfathered starting in two thousand nineteen UM. And it's quite an interesting phenomena because people are trying to figure out that creative ways to UH to split the assets and make sure that two parties UH separate for the rest of their life and stay financially UM strong and able to build back their resources after they go through divorce.

So that's that's what's been happening in different areas, and I think UH specifically, women get really short changed in this whole rush to do this because they don't quite understand what that means to them financially down the road. Everything looks at it today. Okay, today, it's gonna cost me X number of dollars in taxes. They don't look at what it will be in the future. Uh. If I settled with retirement funds, am I able to live

comfortably down the road using this fund to? Am I better off taking the taxable investments and create a cash flow from there. So I think that's the rush decision that that unfortunately is caused by the new regulations. But I think there will be much more creative ways of handling down the road. Um, if people spend time and look at the overall picture, not at what's happening today. Maryanny, you excuse me. You earned a degree in mathematics and

finance from the Wharton School, University of Pennsylvania. Many people are familiar with that. How many people are familiar with the designation Certified Divorce Financial Analysts. Thank you for asking. Um, it's it's a question that I've been asked a lot. When I initially received the designation was into about eight years ago and there are not that many of us that we're doing that. Uh, today I see it much

and much more. The reason I looked into this and I thought it would be very um helpful for me in my actus is because as I my practice matured from starting at Maryland and spending ten years there in another eleven at LPL, I realized that more and more of my clients are becoming a women that are were referring other women, um because they either were state at home moms that needed help with finances, or they were very successful executives that were busy building their career and

not having enough time spent on the financial side of it, or taking or using their employee I'm sorry, employer benefits to better their life. So to me, this was an ability to learn something that I didn't know on the legal side, and ability to work with other advisors such as their attorneys or c p a s to make sure that as a team we look at the well being of people. Just thirty seconds, I'm wondering, have you seen a fewer or more women wanting to go into

the advisory business? Um? I wish I could say I see more. It's much more than I started Uh, the statistics are showing that when I started, there was about five women for each hundred female or male advisors, and right now I've been seeing sixteen percent, where at Commonwealth it's a little higher. We're about female advisors, which is phenomenal. Thank you very much for being with us and sharing all this information. Much appreciated. Marianna Goldenberg is the founder

of Curo Wealth Management. They are based in Langhorne, Pennsylvania. We are broadcasting from the Power in Practice Alumni Workshop for Commonwealth Financial Network in Orlando, Florida. You're going to Disney World? I don't think so. I think maybe our engineering expert Charlie Vulmer will make a trip to Disney World. What you're wearing? Your mouse ears? No? No, these are my own. I know it's confusing, but thank you for that.

We are broadcasting from the Power in Practice Alumni Workshop at Commonwealth Financial Networks annual meeting here in Orlando, Florida. Joining us now is Tim Dessetti. He is a senior partner at Infinitas. They are based in Overland, Kansas, but he joins us here on site. Tim, thank you very much for being here. I want to jump right into it because I think one of the issues that you have experienced with is crucial to the industry, and that

is handling consolidation and mergers. How do you put together disparate organizations that all say they want to help the client, but they have a different tool kitten, maybe a different level of experience in doing that. What has been your your experience, Yeah, thank you, Bammy, it's a it's been a fun and interesting right over the last few years.

You know, we had the we had that kind of combination of perception and reality in the world in terms of uh, you know, a lot of the huge, larger firms are are perceived to be the best firms and and what we really had, you know, uh, strength and being associated with Commonwealth Financial Network. You know, we had a group of advisors that were really considered to be some of the best advisors in the marketplace, and uh it really wanted to bring a consolidated firm together so

that we could you know, make each other better. Uh, you know, battle some of those perceptions in the world that if you just don't have umpteen billion dollars under management, you're just not a good firm. So uh so, how much consolidation. Have you seen over the past few years, I mean, has it been accelerating? Well, Kansas City has been kind of a hotbed for that. I mean, the vast majority of the big firms are mostly doing it

through acquisition, acquiring other practices. Trying to get bigger um ours was not a story of acquisition, but more of a story of just merger, merging practices together so that we could uh make each other better, take advantage of talent and specialized areas of planning. But it's it's an

absolute trend. You go across the country and talk to other advisors that everywhere people are talking about some form of Have you ever seen faster rates of consolidation in the industry, I haven't, No, I mean it's it's very very prevalent in the Midwest for sure. What kinds of back office issues do you face most when you try to combine different practices, Well, there's there's always a battle

of culture, you know. We uh part of the reason is to be better for your clients, but you also want to make an environment it's better for your team. You know, we have a tremendous staff and and team in Kansas City and and working together has been of

benefit to them as well. So culture is a big challenge. Um, you know, we're we're all very successful financial advisors, so you know, getting everybody to be on one page in terms of a team vision, in terms of what we want to accomplish for our clients, what we want to accomplish them. I have a if I have a room where they're just where you realize there's either not enough

oxygen or there are too many heads in the room. Now, you know, I perceived that that could exist, and I know the room that we have there in Kansas City. But it's often, uh more a story of just people looking for that greater good, uh you know, greater good for one another for their own practice be as well for their clients. So we've had a really good go of it. So how much is the consolidation just joining forces and sort of providing uh you know, counterpoints for

one another in terms of skills and assets. And how much is trying to gain economies of scale and then downsizing in certain areas. Yeah, absolutely, there's all. There Absolutely was the reality of economy of scale, you know, looking at the numbers and saying, look, we're we're in a as Matt had said before. You know, we're in a fee consolidation type industry. We want to have reasonable fees

for our clients. Everybody's much more aware of of fees, you know, whether it be through d O L or just through being you know, just the fee based progression in the business. So economy of scale was was a factor. You know, we were able to consolidate a large group of firms and not really decrease our costs necessarily, but definitely not increase our costs and and get more physical

goods so to speak for the consolidation. But but the bigger part of it is really the specialization being able to work with other advisers that might specialize in special needs families, that might specialize in executive stock options, that might specialize in retirement plan um, you know, fiduciary management. So just it's you can't be all things to all people, but with the right sized firm you can be in a better way. What what's your view of where people

are taking risk where they shouldn't right now? Where are they taking risk that they that they shouldn't? Should they should people take some of their gains and be happy or do you feel because you know, we're pretty long into the bull market. Yeah, you know, if it's statistically speaking, though, you know, there's a lot of uh, a lot of gain probably still yet to Um. We're in a really good economy. UM. I think you know, paim, maybe the opposite of some case is true people have been too

conservative and not you know, and missing out. I can't replace money that you miss out if you miss out on being in the market. I have people come to me and say, you know, I've been in cash for five years. I'm ready now, Okay, Well we I can't replace that that loss in terms of your loss on the up side. So I think it's a balance, you know, simply speaking, one of three things is gonna happen. It's gonna go up, it's gonna go down, it's gonna stay the same. You've got to have a strategy to make

money in every one of those environments. And uh, you know that that's the approach we're taking. Tim Decidi, thank you so much for being with us. Really appreciated. Timbs, senior partner at Infinite Us, talking about the rash of mergers and acquisitions, the fastest paced pim uh he has ever seen. We are broadcasting live from Commonwealth's Power and

Practice Alumni Workshop in Orlando. I just want to get you caught up on the market because what we are seeing is a deepening sell off with the NASDAC now eating the way down down about nine tenths of one percent PIM a lot so oil has turned lower by the way, where I was higher. Now we're I mean basically on change, but it is turned lower in the

late morning trading. It's just interesting, and I do have to wonder, going back to what we were talking about with Dave, how much is this being driven by signals from inverting yield curves and how much is this from some of the conflicting messages that we've gotten out of the White House with respect to how concrete a trade truce really is with the US and China. I'm Lisa Abram Why it's along with my co host and colleague Pim Fox. This is Bloomberg. Thanks for listening to the

Bloomberg p m L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa abramowit's one before the podcast. You can always catch us worldwide on Bloomberg Radio