Credit Suisse, Crypto, Markets, and Deere (Podcast)

That is unbelievable, um for one of the leading financial services companies in Europe, one of the two stellar investment banks wealth managers in the country of Switzerland. I need to figure out what's going on because I saw this headline on the Bloomberg terminal. Credit Swiss saw eighty eight billion dollars outflows as confidence slumps, and I remember from the Great Financial Crisis. When you see headlines like that, whether it's Bear Sterns or Lemon, that's when it gets

really ugly. Alison Williams, she's a senior Global Banks and Asset Managers analyst at Bloomberg Intelligence. Alison, how bad are things at Credit Suite? I mean, those outflow numbers were stunning. This morning, and to put it in perspective, the outflows UM, you know, just in these several weeks are more than the inflows of and combined. And I mean that I guess the good news is that they said that things

have stemmed but not reversed. And so they had said in October that they saw UM outflows in the first couple of weeks. UM. They pointed to social media and a lot of the reports at the time that UM, you know, I think this is similar to what we've seen in the past, where headlines can kind of UM drive actual risk to UM the fundamentals of a business, and they had pointed to that UM. But I think certainly no one expected UM the severity that we saw. So let me just take this down to the very

basic level. For those of our listeners who aren't well versed in Credit Sweets. You and Paul obviously know the bank inside now, but UM Switzerland has two big banks, Ubs and Credit Sweets, and they're big businesses are wealth management.

They take care of money for high net worth individuals, stemming all the way back to the days when you had numbered accounts and everything was super secret and your money was safe there right, So the concern is those rich people, international wealth, they're pulling their money out of credit sweez because they have existential concerns. Is that right? Um, you know it is right. I mean again, when the headlines were coming across UM, you know talking about the

headlines really focused on the bank's need for capital. Obviously that that's something that concerns investors. Um, they've had so many prices, they've had huge losses tied to Artagos and um other sort of big giant hedge fund scams and bad risk management, and now they need to raise four billion, correct, And so you know, the good news is that they are on that path. So they are trying to study the downside, if you will, in terms of shoring up the capitol. The bad news is they announced a one

point five billion pre tax loss for the quarter. I think consensus was about seven hundred and thirty million francs. So that is a setback in terms of some of the capitals that they're raising. It's unclear what types of charges might be included there. But um, you know, the concerning thing at this point is just as I said, the fact that we're seeing outflows or they're seeing outflows

in their core business. So the wealth and asset measurement businesses as part of the new strategy or businesses, they're focusing on their restructuring the investment bank, but they're going to see a loss in both the wealthy unit and the investment banking unit in the quarter um, and so the key for them is really going to be two you know, reverse course with the with these flows, I think that's not only is it a bad quarter, but the flows are sort of an indication of business health,

and so that sort of is cast out on the overall strategy going forward. Clients pulled eight billion dollars. They need four billion dollars in capital. Clients pulled eighty eight billion dollars out in a few weeks. Crazy numbers, Alison. I think what I learned one of the things I learned during the Great Financial Crisis is when other firms won't trade with me, that's when I really got a problem.

Is credit swiss at that point? Yet, Well, the I guess the the important news is that they've really moved away from a lot of those businesses. So prime brokerage is the most um prone to those concerns. Right, So, um, if your hedge fund clients start pulling balances from you and won't trade with you. UM. Things can very quickly unravel. But they exited that business after the Arctic goes UM hit.

They announced that they were exiting it, so that that business, you know, nine percent of revenues had already kind of gone away. And then the securitized products trading business UM, which is another big business for them, is a business that they're UM selling to Apollo. UM. The interesting wrinkle there is that it was originally supposed to be Apolo and Pink Pimco UM, but it seems like we haven't

gotten any financial details yet there. But it's really Apollo that's going to be taking over that business, and so that the trading effort that they're retaining is really slimmed down at this point. And Allison thirty seconds, is there any chance the government steps in here one way or the other, either supports the bank or allows a merger with the U b S. I don't think they need to at this point. UM. You know that that's always

something that's a consideration. I don't think that they would force a merger with you guys, and I'm not sure if that necessarily solves anything, UM, But again we do see we do need to see things right it but the capital raise and all the business changes that we just talked about I think are gonna help limit the downside there, all right, good stuff as always, Matt. You know, Allison is on a vacation day today, a t day, Yet she still makes time to talk to us, so

we appreciate that. Alison Williams, Senior banks annalyst for Bloomberg Intelligence. She's old school, she works big time, folks. She's been coming to banks for decades, first of Morgan Stanley Investment Management, where she was the shareholders some of the major banks around the world, and now as Bloomberg Intelligence senior banks analysts based in our Princeton, New Jersey office. Good stuff

to check in with, Allison. This is Bloomberg looking at the Bloomberg Dollar Index itself about five point five percent from its recent high, one of the drivers fueling you know, a little bit more than a ten percent pop here in the SMP five index. I want to get a sense of kind of what's going on out there in the markets on a day to day basis. We do that with Vince Signarella, global macro Strategist for Bloomberg news, Vince, have you seen peak US dollar at least maybe I

don't know for the short term. Yeah, I think so. That it made the point about the high er smp uh five d they've been in a reverse correlation, an inverse correlation since it was from March at west in August. Uh, it's holding for now and with a bid and risk, I would expect the dollar to continue to suffer. Talk to me about the Bloomberg Dollar Index itself, Well, what's the differentiation here between that index and the d x Y,

which used to be kind of the traditional Street benchmark. Yeah, well, you're actually talking to probably the expert on the subject. The Bloomberg Dollar Index was derived from the Wall Street Journal Dollar Index, of which I am the co inventor. Very cool. The difference is, uh, it includes many, many more currencies than the Ice Dollar Index. The Ice Dollar index was recently revamped. It was initially based on just

four currencies from basically trade data in ninety two. Uh. The dollar doesn't move so much on trade data anymore. It moves on financial flows, US, fixed income flows, etcetera. You know it does. Trade does affect the dollar, no doubt, but the financial flows are a much much bigger effect, and that's what the Bloomberg Dollar Index is taken into account, including more currencies, so it's a much broader level for

the dollar. The Ice Dollar Index, I think, uh, these days, fifty eight percent of it is composed of the Euro, so it's it's almost really a euro index than it is a straight dollar index. But it is widely traded, so it does get a lot of press. But but the thing is it's often quoted, right. I'll hear Tom throw around d x y instead of b B d x y, and then I think, yeah, that is how not as useful? You know, Yeah, I think that's just

the old habit because it's been around for fifty years. Um, you know in the Bluemer Dollar Index is you know, a handful of years. I mean they've they've retro retrot it to capture the past, but it's realistically only been around I think since two tho fourteen, off top of my head something like that. So, um, the Ice Dollar Index obviously traded heavily on the ice um, the ice platform. Um,

It's it's just old school, hard, old habits hard to break. So, you know, Vince, I've heard increasingly I guess maybe since the Great Financial Crisis, a lack of liquidity in quote unquote the market, whether it's fixed income, especially on treasuries, that's the thing that but I don't hear about it in currencies. Talk to us about how liquidity has evolved across you know, certain asset classes over the last dozen years.

So if I if I showed you there was a little red book that used to go around every year, and it was done by a bank that no longer exists, And what it did was it captured all the banks that traded far in exchange all across the world, and it was roughly an inch thick. And and so liquidity was very backtick in the eighties and nineties because you had all these banks around. Now liquidity is pretty much provided by give or take ten major players. But the

volumes have risen considerably. And that's because we've learned electronic as opposed to pupil trading over a telephone. So the market's grown to like five point three triling and uh, it's liquidity is provided pretty much by by ten players, and and they're they're making markets all the time except for when the market moves abruptly. So no it's that's

that's totally true. So like if you if I were making a price to you know, X y Z corporation back in the day, uh, and they dealt on that price whether the market moved and was my tough luck. Now as soon as the electronic markets trip, and whether it's algo driven or a big order driven, whatever the case may be, if that price changes, the electronic platform disqualifies or decus the trade. So the corporation or the bank that's trying to deal on that price doesn't get

that price. They get the next one, and it could be kind of far away if if somebody's doing enough size. So you know, in a way, the market mayors, the market makers, or I should say that the takers of

the market, the corps of financial companies, etcetera. In in chasing the banks to do tighter and tighter and tighter spreads actually hurt themselves because now the liquidity shortages work against them when they're there, because the market moves abruptly and they don't get the price they think they're going to get. And this is how we get things like remember when oil traded negative, Yes, just no liquid to be there at least was paid to take a barrel

of oil. Still got it? You get those that's where you get those called fat finger trades. If you will good stuff. I'm sure I would have been, you know, a victim of that at some point. Vincignarella, global macro strategist for Bloomberg News, joining us here giving us a sense of what's happening out there in the markets. And again, the the Bloomberg Dollar Index b b d x Y on your Bloomberg terminal, it's all about five and a half percent from it's just recent high a uh several

weeks ago. It's off about a half a percent today, so a little bit of a pullback in the dollar. One of the proving to be one of the drivers here is VINCEU was just mentioning of uh stocks actually out there, so uh interesting to see that correlation coming up. I'm gonna call that w T a coud oil. It's all four point seven percent here, seventy seven dollars from w T a coudrail. That gets my tention. We are sitting in the studio here, me and Paul with our

friend Katie Greifeld. She is a cross asset reporter, so she's across everything from single stocks to E T F s too, Crypto, uh and cats. She covers cat for us as well, but the cats, well, cats and coins is the name of her newsletter. Oh would you like to join Love Too? You don't subscribe, I don't know everything actually a pretty exclusive list. If you would like to be on, you have to tell me your work email and I will add you. Okay. Uh, by the way, you say that a lot. Do you not send it

to personal emails? I used to send it. I got a lot of gmails, and then the gmails on the list got a little weird. Oh you know, you have to send me your work email so I can keep you accountable. Okay, let's talk about the latest in the ft X saga. Um, just when you think you can't get any more news, Sam Bankman Freed goes and writes a letter to employees. Yeah, he certainly he lost it. You know it's interesting. It's I feel like this would

be shocking in any other case. But you know, he was tweeting so furiously for so long, furiously just describing the pace. It's probably not too surprising to see him formalize his thoughts in a letter. I don't think it was received that well, necessarily, I don't know. I can't believe it was. Now he points out that they had, and you gotta take whatever he says with a grain of salt, right because he still maintains that they have nine billion dollars in assets. Yeah, it is, they had

sixty he did. Yeah, it's interesting to see. I don't know what reality he's operating in versus um what reality is coming to light in court. We did have first emotions yesterday, and again the f t X lawyers have made very very clear at this point SPF does not speak for f t X or for Alimato and is not involved in these processes. Do we have the authorities?

I don't know which authority would be the FBI, for example, as anybody sat down with this guy, brought him into the office in New York, in Washington, d C, in Miami, wherever I know he's I guess he's in the Bahamas, is what I hear, and said, what's going on here? I believe they would like to I think us uh, the d O J would like to meet with him in New York. I remember reading that story last week. We know that Congress would like to as well. In the Bahamas. It's not like he's on the other side

of the here. It's not too bad of a trip. It's not that far in terms of you know what. His parents need to go get him. I mean, we can sit here and talk about the fallout from the bankruptcy. It's massive. A lot of counterparties had serious exposure. What's happened to Genesis, what's happened to Gemini Um, the customers who got the short shrift? I feel horrible for them, But the bottom line is his parents need to go

get him. That's a child. You know. My youngest brother is either thirty six or thirty seven, I can't remember, but he's still a little kid. Like if something like this happened to him, I would go and physically get him and bring him home. He is he's thirty right, Yeah, that's he's only I don't understand the Yeah, I don't understand the legal side of it. The was their fraud, I don't know it sure, just from reading looks like

there may have been. So why is you know, you go get Bernie made off on the you know, sixty seven street wherever they grabbed them. They got him pretty quick. It was only a matter of days. But but you know, I look at bitcoin, it's up one today, six d bucks of coin. It's kind of holding in there. It's down from the twenty level, but it seems like the market investors haven't bailed on all things cryptofi look at bitcoin is a proxy? Yeah, no, I think this is

one of the interesting subtext that's going on. I know we've discussed this on this radio talking about how is bitcoin still resilient right now? And actually Cathy Wood of our investment management was on Bloomberg Radio on TV yesterday and she addressed that that the Bitcoin blockchain, the Ethereum blockchain, they've been running very smoothly. So this isn't necessarily a Bitcoin problem. This is all of these centralized sort of

monstrosity conglomer it's sort of compresents. This is the point I make constantly. And the thing is, it doesn't matter your take on Bitcoin. You could you can believe it's a Ponzi scheme, you can say it's worthless. I can understand the arguments on both sides um, But at the end of the day, this isn't about how Bitcoin performs. This isn't about how Ethereum performs. This isn't about how

doge coin performs. This is about how an exchange, a centralized exchange, duped so many people into thinking that it was running an orderly business exactly. It's more about the

systems that have spawned around Bitcoin. But Bitcoin itself, I mean, it's just a ledger, it's just basically a data center, uh, and it hasn't had any issues, whereas you think of some of the other blockchains I mean unrelated to uh this entire blow up over over the past three weeks, but the Salanta blockchain, for example, that had to be shut on and off many times during the summer. Different blockchains have run into different problems at certain points. But

Bitcoin ethereum no such issues. So you look at the price of bitcoin, and there are still a lot of whales out there. For example, I really think the marginal seller at this point is gone. If you're looking at this news and you're sitting on bitcoin still, you're probably a true believer. You're probably you've forgotten your quote or you bought it seven dollars or a hundred dollars, you know, so you're not going to sell all right. C Z c Z is this guy and I don't know his name,

but I'm just going to use his his initial. That's the cool thing to do. That's a cool thing to do. Is he just is there any reason to believe that Bloomberg employee is that serious? You did not know that? So is there any reason to believe that he's more legitimate less legitimate of the versus SPF or his business hasn't blown up? That's right, and so doesn't have customers who just lost millions of dollars? So is he the kind of lender of last resort? Is he a savior?

For think he in a certain way has enjoyed portraying that. And it's interesting there was a Bloomberg News exclusive that Genesis and trying to raise one billion dollars in fresh capital. There had been talks with Binance that funding failed to materialize. I don't think we can call him the lender of last resort because you look at what happened. You've never been that right exactly. And I don't think there are any saviors left at this point, at least not in

the crypto world. Well is I don't see for example, JP Morgan stepping in, City Bank stepping in saying we're gonna backstop. This market provides some liquidity. I just don't see any of that, and that to me, maybe it's just I'm just too old school. That's a little bit of a war. But the market doesn't need backstop. That's the thing. The market does not It was necessary. Yeah, okay, okay. They just took everybody's money, put it all on black one and lost and lost is what it looks like.

I mean, I haven't done any forensic accounting here, but it seems like forensic accounting will be very difficult. But at this point in terms of the companies, when you think about who Genesis is probably trying to raise money from, at this point, it's probably traditional finance players. It's interesting that no one has stepped up. But then you think about Sequoia having to basically come out and say, I'm sorry,

we did a bad job of due diligence here. That's probably I don't know, spooking a lot of Maybe some of these would be saviors. Otherwise. Matt Levin's Money, Money Stuff, Money Stuff Yesterday, which is that must read every day I have my alert set up. He basically says, you know, the instry doesn't need more bitcoin, I e. C Z stepping in. He needs dollars like the stuff that I haven't, you know, you know, the people actually can spend and that's what it really needs. And so we'll see how

that plays that. Katie Greifeld, Cross asset reporter joining US Live Broker Studio. We appreciate that. Gold Stark. Let's bring in Matt Siegel now, he's ahead of digital asset research at Van Neck. He's been on the street for a slid fifteen years. Before that, he was a producer here at Bloomberg and he also worked for The Money Honey or he worked for him. Yeah, back whever at seeing BC. Um, but it's great to have you back in the office

and especially to focus on the crypto story. Um. You have been in the space for a long time, the kind of I don't know what does Cathy would call it, that you've been on the cutting edge right of the sort of uh future investments. What do you think about where we are now in crypto? I mean, is there a future or is f t X kind of the big bang that's going to end at all. We're gonna deep deep crypto winter and that's going to be the time when the news flow is most negative and it's

easiest to become a hater in the space. So we're dealing with kind of three concurrent major stories here. The first is, you know, the apparent fraud and siphoning of funds by SPF and his family, and you know, recovery of that may impact the recovery in the bankruptcy courts. And since there's so many counterparties tied into this, whether it's Block five, Voyager, etcetera, UH, that has implications for the recoveries going forward. It is whether or not he

has charged and his personal assets or on recoveries. I have a lot of listeners writing in with the same question over the last few days and really the last couple of weeks, um how likely our customers to get anything back to recover assets The recovery process in this in these cases UH like Mount Cox can stretch into six, seven, eight years, It would could be longer than that with

a case of this complexity we are getting. We have visibility of FTX customer and bankruptcy claims that are trading you know, at three to eight cents on the dollar, So you know, if you're buying them today, if you're buying them today, that's the type of recovery that that's a Matt Miller haircut right there, three cents on the dollar. But Mount Cox, what was the final outcome of that? I mean that's been now a decade, right, Yeah, I can't remember exactly what the what the claims that were

propels Magic the gathering online exchange was stood for. I think they recovered a significant amount. And you know in the made off case there were real recoveries here there, but uh, from what we know so far, from what we read, uh, and here from John Ray, like there weren't even records kept at f t X. It's going

to be difficult. Yeah, there's multiple loans made between counterparties owned by the same guy that were not disclosed to institutional investors when private shares were sold in the market on us soil last year, breaking the terms of service that were pretty clearly written on their website. Hard to see it any other way that that he is personally liable for the chunk of it looks bad for Sam Bankman Freed at least from this perspective, which I guess

is why you're still in the Bahamas. Does this is this critical moment for the industry in terms of perhaps regulation and should this industry be regulated? If so, is there a consensus who should do it? Well, let's let's just take a step back and like talk about the two other big stories that are going on besides the ft X bankruptcy specifically, and both of them are connected

to regulation. You know. The second is that there's a hacker who stole funds off the ft X exchange is still currently holding about two fifty million dollars worth of bitcoin and ethereum that he or she has laundered through a mix of second tier exchanges and and blenders. And you know what my question is, are we sure now that that was a hack? And I know that Um in his kind of off the record Twitter d m uh interview with The Box Sam bankman Free did say

it was a hack. But some people have speculated that um, the Bahamian authorities may have instructed f t X employees to move assets. That's a separate sum where the Bahamian authorities have now it seems capitulated and will let the bankruptcy take place in New York and so we should get visibility into those funds. But there's this other three hundred million dollars in bitcoin and eath that's been laundered.

It it looks like the way that the Lazarus Group, which is connected to North Korea, has laundered funds in the past, at least according to US authorities. But tracing and potentially getting hands on those funds could also impact the recovery in bankruptcy in a material way. But you can always see them, right. I talked to Um the co one of the co founders of Chain Analysis yesterday, and he said, we have our eye on those assets. We're not gonna lose sight of them. It's not like

these blenders are sophisticated enough that they baffle us. It just makes it more difficult. Yeah, and you've got conflicting jurisdictions on the regulation side. So will it be the same parties who are going after that funds as who are investigating Sbfuh. You know, we don't know. And a lot of the reason for that, as to your question,

is that the regulatory landscape is very fragmented. So you said, there's two other issues, Um, one was the hack once the hack, one is the fraud and the personal taking of funds by SPF, and then the third is Genesis, which is, you know, the largest institutional counterparty, the only full service regulated crypto prime broker in the US. Uh. And it's hard to do business as an institutional investor and not touch Genesis in some way. They also have

connecting claims to block five. Um, so all of it kind of yes, so a lot of bankruptcies here. Um, if you want to do business in this country, I guess in cryptom you have had to deal with one of those counterparties, right, Yes. Uh, maybe Jamie Diamond was right at least at this stage, which is like you've thought he's right since the very I don't know. I mean, Japen Morgan just filed for a bitcoin wallet two days ago,

a trademark. Yes, So maybe these people sometimes say one thing one thing can do another And it's the sentiment that you express which is most common at a market. Bottoms, explain what you were telling us about El Salvador harnessing

the power of volcanoes. There's a headline on the Bloomberg terminal this morning that El Salvador has tabled a new securities law that would permit the government to transfer digital assets to and FRO and would pave the way for them, issuing a billion dollar bond on the bitcoin network would be the first sovereign blockchain bond. But they would use those proceeds to build essentially bitcoin minds what on top of their volcanoes and use the geothermal energy as power.

There's a lot of carbon in the world that's stranded, not because it's dirty or there's no use for it economically, but because the nations or entities that control it don't have the resources to build how voltage transmission lines with all that copper and all that infrastructure. Uh so. El Salvador is one such case where they're rich and natural resources. It's a country full of volcanoes and geothermal energy, but

there's no transmission down into the city. So they have built a bitcoin mine about one mega watts worth of power at the top of the volcano as a test case so that they can print their own money. Rather than having the poorest country in the world's monetary policy tied to the monetary policy of one of the richest countries in the world, it never makes much sense. It's a real loss of sovereignty. El Salvador went to a dollar economy forty years ago when they had a civil

war that increases a lot of domestic tension. So this bitcoin gambit for them, the first country in the world to make bitcoin legal tender is a way of restoring sovereignty and introducing some degree of negotiating leverage versus an I m F who has become arguably rather heavy handed in some of their demands. So they can make bitcoin with all handos. I learned something new. I mean, this guy met Sego, I don't know, and he was just in El Salvador. How is it? How is it? Were

you spending bitcoin when you were there? Yes? Yeah, so they use it. They use it. Yeah, they used for a serving lesson in bitcoin, paid for serving lesson in bitcoin in El Salvador. They used the Lightning network, which is something I was Yeah, they used the Lightning network, which makes it easier to uh, to handle in terms of spending and receiving. But I think that's so cool. You know, about two of El salvador remittances are sent

via the bitcoin network. That may sound like a low number, but the country about twenty gdp is remittances, and the World Bank has a report that the corridors that have the highest fees for remittances are the poorest countries in the world. So this is the reason why bitcoin can still provide value because it seems so One other country,

Central African Republic, has also the bitcoin legal tender. Central African Republic uses the last colonial currency and existence the c f A franc where they are forced to deposit of all their foreign exchange reserves at the Bank of France, who has veto power over how they are spent and who uses that to coerce the country into signing these commercial agreements where France gets right at first refusal on

their natural resources. So if you look at like what the new Prime Minister of Italy has been highlighting, it's these types of colonial arrangements. Uh, you know, bitcoin cryptocurrencies, they're a call option on a different financial future in which these arrangements are broken and neutral energy based money you know, grows. And that's kind of what Thomas Edison

and Henry Ford suggested a hundred years ago. You know that it seems hard to imagine now, but that's why the price of these assets are down in the last year. I want to get back to um this the Genesis Gemini story, which I think is fascinating. Really the Genesis UM GBTC story. Uh, does Barry Silbert find money for this whole? If you look at the last time Genesis raised capital, it was exactly a year ago at the peak of the market. Nice job. It was at an

equity value of ten billion dollars. Soft Bank lad that round. Google's venture arm also participated. So soft Bank doesn't have the money, right they need that they're owed five billion by by Masyoshi San. I don't see Google leading that round. So the existing investors, it seems like, are not going to put new money into this. Uh. Regulated institutions like banks, you know, still have regulatory uncertainty around it, so they're they're likely has to be a new entity that puts

money into it, or possibly a haircut. And and then GBTC, I mean they're trading at what fort below that asset value? How does that work out? Bitcoin et F could be approved under a different regulatory regime. That seems unlikely unless the HR Department, if this administration makes some changes. Otherwise

gray Scale could um break the law and redeem anyway? Well, they've been I believe I have done that in the past, and we're centered by the SEC that that's a possibility, um, but raising capital and or haircuts seeming as most likely option. All right, we're getting into Luis a little bit, but because I'm gonna get this guy back in here. Yes, I mean, he knows what he's talking about. Matt seguy's head of digital asset Research. I don't know what the

hell that is. But he's at Van Neck, which is I just learned, is a very cool that he does know what it is asset management firm and super duper smart. And he was a former producer here at Bloomberg Television, which is of course minor stop along the number one on his resume. We appreciate him coming in here. John Deer and Company Deer and Coke symbols d on your Bloomberg terminal four forty five cents right now, A five

point seven today. It hit a fifty two week high today and it also hit an all time high today. And that's saying something. This company went public back in all time high today. Some good, good numbers out of Moline, Illinois. Christian's good for America. That's by the America. It's good for the farmers. Boy, we are internationally broadcast, so that's right. I'm not biased towards one country or the other, necessarily as you wear your green flannel shirt. But I'm happy.

I'm happy about the middle story for America. Christilo, he's happy. Equity Research channels to Bloomberg Intelligence. Chris talked to us about this quarter. What what's going right for dear? What's the basis for their positive outlook? Yeah, a lot of

going right. UM, it was a real solid quarter and against some pretty elevated expectations going into the print UM and really driven by a very strong top line sales in the period where UM they were sixty and their profitable large agg business and that's really being driven by

UM robust double digit pricing and higher volume. As some of these supply disruptions seem to be easing, demand for farm equipment continues to be remarkably strong and it really doesn't appear to be showing any signs of slowing into three. You have some healthy farm fundamentals, You have order books that already extend into the second half of next year. Inventories are tight, we have a lot of pent up demand due to the supply challenges. So it's certainly a

favorable setup for deer heading into next year. Tell us about the American farmer Chris, because we don't know anything about it from here in New York. I am from the Great State of Ohio, so I'm from the live in the Garden State. Does that mean anything? I don't think they have farms there? Okay, they actually they do obviously have a lot of farming in Jersey as well. But uh, you know, is the family farms still a thing? Is this? Are there small business farms? Are they midsized?

Have corporate farms taken over? What's what is the state to the American farmer? Yeah? So you know, if if you look at the health of the farm economy UM, especially over the last three years, it's it's been remarkably healthy. We're going to set another record this year for net farm income UM and that's really being supported by these elevated crop prices that we're seeing. You know, part of that stemming from Russia's invasion of Ukraine and some adverse

weather UM. So we we think that's going to provide a favorable backdrop even as we move into next year UM as some of those grain flows out of the Black Sea region UM are restricted UM. And then you also have a lack of fertilizer availability due to the war, so we think crop eels will still be somewhat lower UM, which is going to limit some of this replenishment of depleted grainstock piles. So that's going to support this elevated

crop price environment. That being said, farmers are also facing UM significantly higher input costs, whether it's fertilizer or fuel. But because of this these higher grain price is UM, they're able to invest in equipment UM, which helps them to be more productive and efficient on the form and ultimately drives higher profits for them. So so long as cross prices are elevated UM, it's still supportive of of spending on new equipment. And the labor story at a

Deer made headlines for a while. UM. Has that been worked out? Is the union satisfied with what they got or are there any strikes on the horizon? Yeah, no, the the the U a W contract was ironed out earlier in this fiscal year for them. UM. You know, labor, labor across the industrial sector, you know, continues to be a problem UM, and labor I think is one of the headwinds that Deer and others will face as we move into next year. UM and you know DearS pouring

a lot of money into autonomy and autonomous equipment. UM. Labor and also the quality of labors is kind of an ongoing challenge on the farm. It's scarce, it's more costly, and autonomy could help mitigate some of the allunges that farmers face, UM, not only getting the job done more efficiently, but also kind of in those optimal planning windows. And Chris, you know, if I go into a car lot these days, I don't have a lot to choose from. If I do find something, I gotta pay M S r P.

Maybe even more than that. What's it like when I go on a deer lot to buy a big tractor. It's almost as bad. Um. We are at you know, historically historically low levels, particularly if you look at the large ac sector, which is really what moves the needle for deer. UM. We are significantly below historical levels. We will probably be below historical levels as we end next

year as well. UM. You know, there's so much demand out there UM and and a lot of pent up replacement from these multiple years of underproduction that you know, deer's just meeting retail demand right now. They can't even restock the dealer a lot. So we think the restocking story could unfold into which should really help extend the ag cycle for Deer. All right, very interesting stuff and the stock has just been on fire. By the way. Do you see the company taking advantage of the situation?

Can they do they have a fair amount of their own shares and award chess, Can they go and do some M and A? Is there anything like that going on in the space. Yeah, you know a lot of their investments. You know, they did a big deal for Verkin, which is a road construction equipment company number years back, So that should you know, play favorably into the infrastructure built here in the US and really help kind of

give them some scale globally. Um I think a lot of their M and A going forward will be more focused on maybe some smaller bolt on deals around technology, autonomy, electrification, something that gives them, you know, additional technological capabilities that they haven't had. Um So, I think that's probably where we're looking at if they were to do some more M and A in the future. What did they say about Ukraine. I'm guessing that's probably a big market for them.

What what are they saying uh, the big scheme of things. It's like, you know, Russia, Ukraine's like two percent of consolidated revenue. UM. You know, they've you know, suspended operations and taking some some right offs. They're um really not that different from any other UM industrial company. UM. That being said, it is important uh global commodity market, particularly

with wheat and corn UM. So you know that that's part of the reason why we were kind of in this elevated crop price environment and probably will be for the next couple of years. Well, I would not be surprised if they have suppliers there as well. You know, a lot of UM auto production gets wire harnesses for example from Ukraine. Yeah, they they produce a lot of a lot of gear over there, but obviously they're not in the equation right now, so that hurts in a

lot of ways. It also changes the picture UM, as Chris is explaining in terms of you know, uh, the crop prices, which plays out to be to to the to their benefit. Chris, great to talk to you, Thanks so much for warning us. Hope we get back on the show. Christie Alieno there equity research analysts from Bloomberg Intelligence talking to us about deer the stock trading at an all time high right now. Thanks for listening to

the Bloomberg Markets podcast. You can subscribe and listen to interviews of Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. On False Sweeney, I'm on Twitter at pt Sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio