Tesla, Markets, Bitcoin, and Deere (Podcast)

But here's something that um talking about the car business. Matt, so I just want to come come along with us. The uh they're talking the CEO is talking about he expects light vehicle sales to be close to fifteen million this year, up from thirteen point seven million in two. Where's the seventeen million number. Let's let's get Kevin Tynan on here. Kevin Tyne he covers all the auto stuff, the car stuff, truck stuff for Bloomberg Intelligence. He is

clearly an expert. So Kevin, I look at the Auto Nation numbers, good numbers, But the CEO saying fifteen million SAR? Is that? Is that all you guys can do? Kevin? There's nothing, there's almost nothing that makes Paul angrier than not aiming for peaks are other than working from home, which makes him less angry now that he has a beach house. Yes, Kevin, am I here here all right? So here's I thought was interesting about some of the

Auto Nation numbers. Was you know, they talked about beware going forward, you know, chips not so much an issue. Uh uh, left some demand on the table in in two. So automakers ramping up some production and prices are gonna fall, which is not what happened in the fourth quarter, right, It was I think the third consecutive record price or average revenue per transaction for Auto Nations specifically in the quarter. But but gross profit per vehicle new and used was compressed.

And really what that comes down too is the manufacturers seeing retailers getting over sticker from November one through November twenty two and saying, well, obviously we're not We're not charging enough at wholesale. So margins are compressing for automation, which is where they kind of directed your eye during the call or during the release. Yet prices are still very high, in fact, another record for them for this quarter. So yeah, I mean, I think the industry or the automakers.

The manufacturers don't want to leave sales behind, so that means a little bit more production, which just comes along with with softer pricing. But we're not going back to pricing structures. I always thought, you know in the Sopranos, when Tony takes over that um, gambling addicts sports business, and he just squeezes in for every penny he got until the guys broke. I feel like the automakers are

kind of doing that to the average consume. We're right now, the average monthly payment for a new car is seven hundred and seventy seven dollars. That's double what it was in late nineteen pre pandemic. UM. And now we hear uh from the credit card companies that, um, they're having problems meeting those payments. Mary baritole us yesterday. The lower end consumers are starting to miss their auto payments. I mean, at some point this is going to be a problem,

a problem. The prices are just too high, Kevin, Yeah, and it's and a lot of that is due to mix. Remember, you know, we we can go back to which was the last time in the US truck and car mix was fifty fifty and it hasn't been closed since, right, So there's there's a part of that that is, hey, if there is a finite amount of chips or production or our cost structure is is lean enough, we're just gonna make the most profitable things. Uh. And along with

that comes higher prices. So you know, I don't know, there there's very little opportunity to go back because the more affordable things just don't exist anymore. Right. So I think that's where you get the automakers looking at it and saying, well, buy something certified, pre owned or pre owned from your dealerships. We don't live in that twenty dollar space anymore. And that's you know, even use cars

are twenty to thirty dollars now. So yeah, it's it's certainly going to affect demand, but I think at different points in the supply they don't care as much as they used to write because your fixed cost structure is now rationalized to the point where you don't have to sell every possible thing at any possible price, and you can kind of hold out and say, no, we live

in this fifty dollar market. And I mean the volume brands that GM has or that Ford has or Toyota, you know those are those are moving up because their mixes so much richer. Hey, Kevin, you know we had Mary Barra here yesterday at Bloomberg talking to our print folks, are radio and TV folks, and boy, really aggressive commentary on their push into evs. Give us your your latest feeling about kind of what we're gonna hear from the Fords, from the GMS, and maybe what it means for the incumbents.

Like I gotta say, from what I heard Mary tell us and what she told David Weston on Bloomberg Television and Radio, um, it seems like GM their E V business is a coiled spring that's just about to get set off. I mean they want to make uh and sell fifty billion dollars worth of evs profitable, fifty billion dollars the evs by that's just that's like next year, right, yeah, that is and and and what was you know, unit wise was that's a million, dude, that's a million at

fifty grand apiece. Right, It's a million in two years

from forty thousand last year. Right. So so the thing I see with that is right, it's it's going to be if, if it's possible, it's going to have to be a lot of the I don't know, thirty dollars you said that, Yester, right, I mean, so, so you have to be concerned about margin and profitability if that's what you're planning to do, because essentially, right, if you look across at Ford who talked about break even on Mustang Maki going back, you know, several quarters fifty dollars

now because of material costs, it's maybe sixty dollars. Well, how many thirty thousand dollar things do you want to sell? You know, if your cost to produce them is above that, you know, a million of them, that's you know, that's that's just not how you usually run the business. So

one or two things has to happen. Either you're gonna give up a ton of profitability a margin to make that transition and hope you're rewarded with profitability kind of the way you know Tesla operated, I'm going to market. I mean, there are a lot of people out there, Kevin, who were skeptical on Tesla for a long time, and yet that company was worth over a trillion dollars for

a substantial period. Right, So maybe that's the trade is that you say, well, we're going to give up some profitability or a lot of profitability to do one million units in the next two years, um, but we'll be rewarded in market cap. What are you driving these days, Kevin? It's still my V twelve. Oh, no, big deal like it. I think the transition from internal combustion engine to e V is gonna ge a tough one. What's the V twelve. It's like an SL six five. It's a nice Yeah,

I don't see the I'll be the last one. You're gonna be the last one, all right, Kevin Tyden, thanks so much for joining us. Kevin Titan is the senior Auto's analyst for Bloomberg Intelligence, working out of our lovely Princeton office in Princeton, New New Jersey, and he is a noted card geek of some magnitude. Uh I heard he bought his car based he bought his house based

on the garage. Yes, exactly, he said. Went searching for garages, his wife was searching for houses, and they find finally found one that kind of satisfied both to get to these markets. Here Omar Aguilar, he joins us. He's the CEO and c i O. A Schwab asset management swap. Just give you a sense how big these guys are. Schwab seven seven seven billion in assets under managed management, the third largest provider of index mutual funds, the fifth

largest provider of etf These guys are massive. But I'm not sure I want to go up to Omar Cock to party and initiative discussion. Get this, he's got a PhD Statistics and decision sciences. Now the good news is from Duke. But who gets a pH d in statistics and decisions? I loved statistics. It was brutal. I mean I took one class and I quite enjoyed it. All right, good stup Omar, thanks so much for joining us here. Boy. I think about all of the SWAB clients all over

this planet. Boy, I mean, what do you tell them after what was a brutal, brutal year in two, whether those equities or fit s income waity, what are you tell them about three? Well, you know, thanks for having me, and thanks for you know, talking about his statistics. That's definitely been uh, you know a big part of my life. Uh. And it's not as bad as you think once you get used and find the good thing on it on

how you can actually use that to help people. But but you're right, you know, two was probably one of the most difficult years for all investors and particularly you know, when people look at their statements, even in the worst

possible scenarios. You know, over the last you know, thirty years, when equity markets and risky assets on their perform, you know, everybody counted on the fact that they a you know, could have their bonds or their cash doing you know, most of the you know, saving and in in last year, there were only two asset classes that ended up having you know, positive returns, cash and commodities, and you know, outside of those two asset classes, the rest ended up

you know, on their performing. So so clearly just from the perspective of of clients that had expectations of using you know, fixed income as a as a cushion or when when volatility inequities, you know, that obviously didn't work. So what we talk clients, you know, is that these you know, these tends will happen. This is very rare. There are very rare occasions with these happens, and it happens usually because we had something that we didn't expect.

Actually would probably say two things that didn't expect. One is we're just coming out of COVID, and in fact, you know, we're still in the process of coming out of COVID. And second, we nobody expected to have a war that just you know, ignorite inflation pressures that made things really, really hard. Um So what we talk about now is what what happens from now on. And the good news is that there is more opportunities to invest in diversify now than what we had even you know,

just you know, six to eight months ago. What do you what do you do at Schwab asset Management about the sort of newer or alternative asset classes that retail investors are just starting to dip their toes into. A mean e t f s are just gaining so much ground, I know, spies thirty, but it's still new ish as a rapper at least um uh Crypto has had a rough year obviously, but it's a new asset class that

some people are interested in. And then hedge funds did well last year, private credit did well last year, but that's normally just set aside for sophisticated investors. So how do you deal with these things at Schwab? Well, great question, and yes, this happens all the time, and we we have had you know, significant amount of interest, you know,

and and this you know happens in many cases. You know, you may recall not too long ago, the discussion about memestocks, and you know what, people can use that information to invest and you know how they can use several information is the good news is that you know, we attract a lot of investors to start in being interested in investing.

I think our challenge and our goal and mission continues to be to educate clients on how to think about the long term and what to think about the way to invest from the basic level of what are the fundamentals of what you try to achieve financially an investment wise for each one of your goals. And what that means is that areas like you know, for example, you know, digital assets, any type of of of related information that is more supply and demand that there is little in

terms of fundamental there's little in terms of history. You know, they tend to just be an option for clients to start getting their interest in investing, but not necessarily to

form the core of their long term strategy. We tend to just you know, continue to educate clients to say, well, you know, the basic asset classes, the basic areas of investing for the long run as of today, you know, still consists on the basic cash fixed income equities, and yes there will be other alternatives that are based on fundamentals that could actually help in the diversification process. So, Mari, I just think it's just a huge, huge number of

clients out there. Um, how do you attract new clients, younger clients. What's the schwab way to get some of these young folks to really think about investing for the

long term. Yes, we we have done, you know, quite a bit of workfoll and this where you know, we we started at the early stages of working with with our current clients and let them know that it's actually you know, good for for for their own families to just get invested in the clients, you know, whether it's investing in slices of stuffs that they like on their own and create opportunities in areas that they can have like for example, investment teams and things where they can

actually start putting you know, information for their own families, for their own kids, to just try to get early into the investment area and understand that it's it's something that they need to balance risk and returns and think about you know, holding and saving, and that's probably the key word, you know, continue to educate clients to save so that they can continue to form you know, a

nest you know as they go. The other piece that we actually try to have is we're here to help, you know, trying to work with the financial advisor, trying to work with somebody that has you know, being in the business for a while then can guide them in what is the best way to use their resources. It's another big part. And the last thing we do is

understand that we are humans. You know. We do a lot of work in decision sciences and behavioral aspects so that we can understand, you know, when people emotions get high, especially in these periods of high uncertainty, and therefore we try to educate people on what is what is sort of the utility function and the reaction function they can use in periods when things are not as clear. Omar,

what are you expecting from the economy this year? We're getting some uh more bad news on the consumer, which seems to be that um he or she is still spending a ton, but a lot of it's going on credit cards and delinquencies are rising. Yes, Um, we expect a really bumpy ride. We expect the economy going in through uh really you know on certain times, you know, for the next three quarters, it's gonna be a roller coaster.

I I can I can tell you that you know, we're still in these you know, very confusing set of level of indicators that we get every time that we need to get a new data point, you know, and of course you know, the whole discussion between you know, what will be the reaction from central banks and into their fight of inflation and how much of these inflation is as sticky as it looks like just the Prince this year with cp I p p I suggesting that, you know, the long road to get the two percent

target for the FED is really gonna be long and bumpy. Um. You know, not too long ago people were talking about still the rate cuts because they thinking that the economy was going to recover quickly. Well, we are not even in a you know, talking about recession anymore. We're talking about a potentially and re engineering of the economy that

may not even get into a landing. So so the strength and receiling of the economy, at least on the data that we have, suggest that it will take some more time for everything that the fettes manufacturing to actually play a role. And when that happens, then we can actually feel a little more you know stable for actually

make you know, changes into our economic forecast. So putting that, uh, that motif altogether, that backdrop altogether, omar, what's in thirty seconds kind of what's your main communication point to your clients about well, Tina is no longer in existent, Paul, that there's a lot of opportunities for people to actually invest. I think some of your earlier commentary was that related.

If you actually think that the short term of the curve today in fixed income, it's probably giving you as much you know, yield as you can get with earnings. And if you think about that, you know, the opportunity to just diversify between you know, the short term, the long term and equities is probably the best we have had in a while. So this is a good opportunity for people to you know, diversify their strategies between bonds and equally is that we probably haven't had for at

least fiefteen years. All right, o'mark, I really appreciate you taking a time to check in with us Omar Aguilar. He's CEO and c i O of Schwab Asset Management, talking about diversification, talking about the longer term investment parameters that you know most investors you know, need to probably focus on. Um, we should have got his favorite professor from from Duke from Duke. Yeah, we'll do that next time. I mean these statistics and decision sciences. That sounds pretty

heavy on the math. That sounds awesome to me. I don't know. I was told there wouldn't be any math theoris like game theory. I guess. I guess there's some smart people down there at Duke. So uh, good stuff. We had a story overnight that credit card debt for Americans has risen to almost a trillion dollars. I don't know if that means Americans are using credit cards more

or that prices are higher. And there's a business I've been looking into for a few weeks now called Imprint, and as far as I can understand, what they do is to try and help other companies with credit card issuance with rewards programs and loyalty programs, that kind of thing. I've managed to get the CEO in here in our studio in New York City. Dara Murphy joins us. He's also the founder of the business. So great to have you here. Dara tell us, first of all, what Imprint

does well, thanks for having me on. Imprint was started. It's about two and a half years ago, and the goal was to compete with banks that help America's great bronze launch credit cards. Co branded credit cards have been a thing for thirty years in the America. You can you get a great Delta card if you work with om X. But there's a lot of great bronze out there that the biggest banks, the bulge bracket banks, won't

work with. And we saw an opportunity to go help those those great brodens, whether their hotel companies been a around for thirty years, grocery stores, or some of our clients that have been around for a hundred years. Our goal is to help them issue credit cards. And so what we do and we talk to them, is we give them a pitch that we're like a buying plus a technology company and you get everything from us that you would get from Barclays, for example, which is a

big co branded credit card business. But in addition, you get an experience that a great brand can be proud of. So what what is um let's take the grocery store, for instance. What is the benefit to them? Is it? I guess loyalty? Right? If you have a brand and credit card, you must really like that business. But do consumers get a discount? Are they encouraged the shop? They're

more often? Are there other programs? Does it work? It should be a virtuals cycle, right, so the brand should get a stickier customer that comes back more and more. You get this beautiful boost of incrementality when you put a credit card in the person's pocket. And the reason you get the incrementality is you give the person a reason to come back. So you give them some base rewards. Everybody knows that five at the brand, one and a half two percent everywhere else, so it's a reason to

use the card all the time. And then you make them feel more special. Right. We're working with our grocery partner on express checkout lanes only for card holders. UM, we have that in our I just noticed that that's a good enough. That was just in the past couple months at the ACME in UH somewhere in New Jersey. I don't know the shop right by me. The lines

are always so damn long. But I feel like I would definitely get a credit card if I could go to I mean, you open a company right at the beginning of a pandemic, but I would think, like, just for me personally, I use my cards much more frequently now than I ever did before. And I'm guessing that's a trend. How did how did? How have you seen the business kind of involved over the past few years. We've just been fortunate over the last few years that

customers are coming back to commerce. They're going back into the real world. On brands that we work with, which we call America's great brands, really want to away to lock in their customers. All brands that have been around for over thirty years, they're under threat from the e commerce giants, whether that's Instant Cart or door Dash or Amazon, who have a trove of data. You think about Uber,

you open the Uber app. Before you open the Uber app, it knows whether you're going to order food or whether you're going to order an Uber and all of these UH incumbents are in trouble because they don't have access to that data. Well, credit cards are a great way to bothe get your customers to spend more and become more loyal, but also get to know more about your

customers and give them reasons to come back. And so when we started the company, we've been riding this wave of all of these great brands that people have tons of affinity for, love the actual experience and go to the hotel or going into the grocery store and giving them the power to lock in their customer better, giving that customer a better deal. And so, as we talked about, it should be this um self propelling circle of you get a better reward, you want to go back, and

the brand gets a stick of your customer. There is credit card debt associated with that you brought up with the start, but our goal is to be the most trusted experience, right, So there are definitely credit cards definitely have a bad name in some parts of the economy, particularly with banks sutil you think, I think it's particularly certain store cards where the banks didn't make it easy for you to pay off, where you get these gotcha bills,

you get these junk fees that President Biden has been railing against. That's a terrible experience. If we work with the great brand, we want you to We know that you trust the brand already, and our job is to engender more trust, not less trust. And so we actually think that if we work with the brand, if we give the customer better experience, we can make it easier

to see what your interest is. You never get a gotcha fee, You're much more likely to use the cards, You're much more likely to be willing to take credit when you need it and then pay it back when you don't, and you're much more likely to shop with the brand. And so that's part of the cycle of if you do right by the customer, you do right by the brand, you get us a better outcome for everyone. Does it make a difference to you if we go into a recession, or let's qualify that better. Does it does?

How much does it make a difference to you if we go into a recession? It makes a difference to every business. If we go into a recession, right spending goes down, delinquencies naturally go up in a down cycle. Our thing is how do you match risk with reward? Um we have a risk function of ten or eleven people that focus on a multibillion dollar book of loans. Their job is to forecast the cycle and keep us

safe throughout it. And our job is, honestly not to give credit to people who haven't figured out yet how to responsibly use it, because it's a bad outcome. It's a bad outcome for our company, and and it's a bad outcome for the brand, and it's a terrible outcome for the consumer. And so not are we only are we trying to protect our balance sheet or P and L when we underwrite people, we're kind of looking at for them too, and also looking out for our brand partners.

Are you threatened by Clarna or what's the other one firm? Yeah, a firm where you can buy now, pay later. So they're different products that serve different things. And so you think about a Clarna, it's great to buy a Peloton, I turn up, I want this one thing I want to loan, and I'm going to forget about it and not come back. The hard thing is when you don't have a card, you can't use it every day. The card lets you shop with merchants that you go back

to a bunch. It's not just buying a one time peloton or a fridge, and it lets you give rewards. You don't get any reward from Klarna. And so the whole purpose of Klarna, if you're a business, is help me with this incremental conversion. Make it easier to press the buy button. Our whole businesses can we bring back the customer more and make them stickier? And so we serve different problems and a lot of times our partners have a Clarina installed of the check out and it

doesn't cannibalize us because we serve a different thing. How millennials gen z, how do they engage with credit cards in general? And my daughter is twenty six, she's a point maven. I mean, it's amazing what she does with the points, and so she's technically gen Z. And if you can, if you listen to the media for the last around this, for the last ten years, they would have said gen Z doesn't like, doesn't want credit cards,

They're going to not use them. And in reality, what we've seen over the last two or three years is the highest uptake rate of credit cards is gen Z. You have waves like people become consumers, they start to worry about their credit score and they can't just use buy an out, pay later. And so we've seen a real adoption rate by gen Z and by millennials of

credit cards. They're just more thoughtful. To be honest, a lot of people have a hangover seeing their parents in the in the global financial crisis, dealing with too much time, and there's a lot more thoughtful. They want to do more socially conscious things with their rewards. So one of the things we offer is, yeah, you can earn your points, your cash back that you can use of the brand. You can also donate it. And they really like that.

And so we see gen Z using their rewards to make themselves feel better, not just to consume more, and to do things like I want to give this to the right social cause. There's a real difference between let's say older millennials who are buying a home, they have kids, their budget conscious for the first time, the boom boomers who still carry a wat of cash. There you go. Fall's an old school Wall Street bankers, so he's always going to carry a roll of cash in this pocket.

But I'll let you in a little secret. He hasn't used any cash for two years. All right, Dark Great, get you in here. I want to get you back because we can tell by your accent that you're from France or something. So I want to hear what it's like to start a business, especially in the pandemic um and and scale it at the way you have. So Dar Murfy Great to get you in here. He is the CEO and the founder of Imprint. Let's talk a

little crypto here. We're gonna check in with Bloomberg Cross Asset reporter Katie Griffelgie's here in our Bloomberg inter Active Broker studio, and we also have Bloomberg Intelligence Senior macro strategist Mike McGlone. He's manning the Bloomberg Intelligence my AMI outpost. Mike, hopefully get the work is not too hard down there for you here in this Ebruary day. But talk to us about crypto. I blinked and this thing is back bitcoins back above thousand. Give us your macro call here

as you talk to clients. The fastest horse in the race has bounced the most is here, and I think bounces the keyword Paul, because it looks to me more at risk of a bear market rally than the beginning of something new and enduring. So here's the significance of cryptos are facing their first potential US recession and bitcoin has never the fifty week moving average technically has never dropped below the two week moving average, which it has done.

So it's somewhat and that all happens around twenty five tho. So the markets bumped up to very good level, and I look at it is Yes, I think in the big picture this is a very good bull market. But I think what's happening around these levels that we're seeing more of the responsive sellers. Okay, great, I'm bullish, but

at these levels you gotta prove it. Hey, what do you think about You know, as we see regulators cracked down the sec sending out wells notices, um settling with crack in on the securitization of theorium, which was like, I mean, ethereum staking. That was part of the great hope of the future of crypto, right, why are we still seeing these games? You know, it's a good question. I have something very scary to tell you about though, a death cross it could be approaching when it comes

to bitcoin. Matt Mayley. He pointed this out in a note. I think it was yesterday. He was looking at bitcoin's fifty week moving average. It touched the two hundred week moving average. When that happens, apparently it's very he's looking at weeks we Typically it's the daily moving average, but he's looking at the the moving averages when it comes to the weeks. But in any case, that has never happened before, and I don't know, the name implies that that could be bad. I'd be curious to hear Mike's

thoughts on it. Yeah, well that's the death cross bad Mike, Well, that's the thing. But the key thing I learned as the traders, once it hits the popular press like us, then you want to do the opposite. But the key thing point Katie point out, it is the weekly so it's a significant rollover. Everything is kind of tilting down in cryptos, and they bounced up to very good levels.

The key thing I look at is what was the major force of pressured almost all risk asses, most notaly cryptos last year, and that was expectations for FED right hikes, and that's still there. The s don't fight the FED mantras still there. So I see the risk is now that the stock markets rolling over, cryptos are rolling over. But you can see what's going to happen in the long term when this whole thing bottoms, is crypto should

come out ahead. The key things right now is we're still fighting the FED and markets have bounced, and my bias is the macro. In terms of the macros, the stock market low is probably not in typically goes down a lot more in a recession, that which means more pressure for cryptos, most normally bitcoin. I just want to know how these prices are going up. Like Katie, you talk to investors all morning long, right Bill, Donna sits

right behind you. She talks to investors constantly. Mike, I'm sure that you, you know, probably go to lunch or some steakhouse with a bunch of investors at least once a week. Have has either one of you talked to anyone who's bought bitcoin. I haven't you know? You know, I'm obsessed with cash right now. So that's like the spiritual opposite of bitcoin, I would say. But it is interesting. For a while, it felt like you could just like

neatly put the macro conversation on bitcoin. Stocks are rallying, so of course bitcoin is ralling to it feels like it's almost broken away from that. And I don't have a good narrative right now for why it's rallying the way it is. I mean, I'm sure some of that just comes down to really pour liquidity and you can really push it around. My Katie wrote a great story the other day about how cash is basically yielding five percent. What's the yield on bitcoin? Well, exactly, Matt, I agree

with you. To me, this is a boomer dream when you can go plunk into a two you note and get an over nine percent for two years, you say so, thank you very much. I haven't been able to do that predicting, but I did get a call from of the smartest people I know in the bid is a big arbitrage hedge fund last last in December. In the minute, he said to me, Mike, what's this gbtcson? I knew that was a bottom because the discount got so extreme, and this is a distress distressed debt person. So to me,

this is a beer market. Explain to everyone else. There is a great scale bitcoin trust. It's the most widely tracked bitcoin um exchange trading product. It's not an e t F but it's a trusts not yet, but it got to extreme discount and had you know, hit the stops and it's up what fifty percent since like this year. Now that's a beer bear market rally. But it just got too cheap on a discounted you know, discount to premium basis. So I look at it. Okay, market get

way over sold. It's bounced, but we still face so significant headwinds that yes, and the big picture, I think bitcoin is gonna go continue to go up a lot more like most assets. But right now, what are we looking at from the Fed? They are still tightening into stock markets rolling over and we're potentially heading towards the recession. These are bad for risk gus. It's in bitcoins when

the risk rolled in incredibly bearish calling about three seconds there. Well, it's the key fact that I really have to point out is bitcoin is the leading indicator. If it sustains above this twenty five thousand lover, that means a lot for everything. And I look at as an next trader, and may you say to yourself, Okay, prove it. I'll structure a put position here and make you prove it. And if it does work, and then we'll get into

the longer term trade. Remember the old thing on Wall Street and people would say, oh, I'm bullish, and then boss would say, okay, well of south housand, what do you mean I'm bullish? And you say, well, sell thousand. We see what happens the market doesn't go down, Okay, we'll buy ten THO. He just said, g BTC isn't an e t F yet. What do you say if I told you I haven't seen Evil Dead two yet, that implies that you're going to in the future, which Mike, you're implying this will become an e t F in

the future. Have you ever heard of Gary Gensler? Terribly unlikely, But I think that's what's happening. And so we launched a Bloomberg Galaxy Cryptoline XS almost five years ago. What's the main thought is this space needs to track in decks and E t F to track and indext like the S and B five founder, I think you're gonna protect investors. That's where it's going to go. I think

right now, typically it isn't. We're in a pretty extreme regulation mode and a lot of firms in the US are are not they're leaving the US are trying to avoid the regulation. But to me, to protect investors and not pick winners, that's we're eventually gonna go. It's just gonna take a while. So, Mike, you're down in Miami, the self proclaimed capital, bitcoin capital or crypto capital of the U S the I guess the Austin, Texas or the you know, something like that, trying to be cool.

What's the mood down there of the folks that have come down there and really planted their flag in this crypto space. I was at a conference in the December right near the Lows and it was packed and Mayor Swore has spoken. The people there were all focused on the macro big picture and seemed quite positive that the problem is some of the retail people got hurt from ft X. That that really is sad. I mean, they haven't been able to have they put their trust with

an exchange that was not a good fiduciaring. It wouldn't be able to do it through n ET for something, so to me, that's scary. But overall the mood is still quite positive. In the big picture. You look at bitcoin, it looks like it's potentially body but it's four thousand right now. The last time it put a significant low around eighteen or nineteen in two thoust and around three to four thousand, so it's still we'll get the big, big sure yep from its lows. Uh. So you know

that's pretty good. You bought something, you think about it, and as a class a major exchange goes belly up. Potential for fraud we'll find out. And yet the underlying sec you think some fraud may have been in the crypto industry. Possibly, well, I can't say for certain. We can't. We'll have that trial to figure it all out. But interesting to see that assets still trading well. All right, good stuff. Mike McGlone, Bloomberg Intelligence. He's down in our

Miami outpost manning all things crypto from down there. Katie Riefeld Cross Asset reported one of the big inners in the stock market today is dear income stocks up six per cent on the back of some good, good numbers. Let's break it all down with Chris Chile. You know he's an equity research channelst at Bloomberg Intelligence. So Chris, when I when I think of deer, I think of the American farmer. So can I surmise that the American farmers doing pretty well these days. They sure are, and

we're not really seeing much signs of the slowdown either. UM. It was a real solid, beaten raised quarter. UM pricing continues to be unbelievably strong, up double digits again, and we also saw higher production, particularly in the large jag business and construction as some of these UM supply constraints are beginning to show, you know, real tangible evidence of easing UH. And the demand for farm equipment again remarkably

strong with no signs of slowing. Orders are essentially filled out into four Q and for some products were booked for the entire year UM. So this is going to even spill over into four because inventories are quite lean. So there's certain the legs to the cycle, you know. I'm UH next week, I'm gonna go down to the Duccatti dealership in Soho and talk to the North American CEO of that business. Nice They have a similar issue.

So if you want UM like a Ducatti multi strata, you're probably gonna wait until the end of the year before they can fill your order. They're all sold out already, pretty much everything they make and UM But the thing is, I wonder about new buyers who may have to finance. Maybe with Ducatti, it's a little different because it's kind of a wealthier person's product and it's a toy. They could buy it in cash if finance costs are too high.

But what's the deal with financing, Chris, You know a tractor or a plow or something that you get from deer, because I imagine rates are around seven percent? UM? Do farmers just pay cash? Are the buyers all institutional? How does that work out? You know, it's kind of a tale of two farmers. UM on the small end of the spectrum and the small local farmers. No doubt that is having a material impact. And that's the one area

of the business where you're starting to see a slowdown. UM. When it comes to your large professional farmers who made record profits last year, yes they are using cash UM, and yes they could weather these little bit higher rates UM. So as you look at the large corporate you know, professional farmers UM, it tends to have less of an impact UM. But you know, we're coming off record profitability last year. Farming comes going to be down this year, but still it would be above any prior peak cycle,

So farmers are still in a healthy financial position. How is the family farm in America? Chris? I mean, um, what's the split, you know, big institutional corporate farms to family farms. What's it looked like right now? Yeah, it's something similar to you know, it's like UM farmers or you know, corporate owned, but account for nearly like eighty

percent of our production. Something in that ballpark. So when we think about the the large professional farmers that that moved the needle, the small egg business is important, and it's somewhat split between um like agg production systems and haying forage. And then they have the you know, the traditional kind of turf and utility business that caters more towards your consumer oriented products, and that's where the biggest weakness is within their portfolio. But really that's it. I

mean construction strong, large egg, very strong. That is referred to as the Peretto principle. The Peretto principle, right, So it's the same in a lot of different things. You could say, for example, of the people have eighty percent of the wealth yep got it? Okay, that makes sense? So all right, Chris. So if if I'm a family farmer in Western Jersey. And that can happen because we are the guarded state, and I want to go and I gotta buy a couple of plows, a couple of

big tractors from my farm. Can I haggle with the sales person because I can't haggle with the car salesman anymore. Not this year. There's just no inventory out there. So pricing has just been remarkably strong. Pricing in their large egg business was up in the first quarter here, which is phenomenal. We've never seen anything like that before. UM. And the other the problem to also if you try to find a use piece of equipment, use prices are

near record levels. There's just no inventory in the channel, partly due to the the supply chain and then just partly we've been under producing for the past few years. UM. This is going to be another year in three were

demand outstrips supply. So UH pricing, while it will moderate as we progress through the year, UM, we still expect it to remain quite strong and from a price cost perspective, UM will be a significant margin teil win for deer who is the big I remember when my buddy Adam Johnson needed to buy a tractor for his farm up state. He won. He lives in Manhattan. Yeah no, but I think he wanted to get like a Mahindra, who were

the big competitors to John Dear. If you think about the large act business in North America, it's really a duopoli with Deer and CNH Industrial. The case brand um As is another big player who has made some pretty significant strides to get into some larger equipment. And then you also have Caboda, which tends to be more on the kind of the small mid horse power, but if you're talking large high horse power equipment, it's really Deer. In case Lamborghini, what Lamborghini was a tractor brand to

start with you? What was it really? Yeah? Uh, what's his name? Ferrucio Lamborghini. He was rich from his tractor business and he loved Ferrari's cars, but he thought Enzo's clutches were crap. I found out it was the same clutch that he used in this tractor. So he said, you know what, I'm gonna build my own. There you go, good story. I haven't heard that before from Matt Miller. Um So, Chris, let's let's switch gears. Since I'm gonna since we got on the phone, another one of my

favorite companies that you cover, Caterpillar. Now, Caterpillars not tied to the farmer as much as obviously dear, and I'm guessing there's some recession risk in a name like that. What's the calling Caterpillar here? You know what there is, and you know it's somewhat similar if you think about it.

The weakness is really kind of isolated right now, more in their residential construction exposure, which really is quite small if you think about their construction business that is non resi UM, and there's significant tail winds there with the government investments, whether it be the infrastructure i RA A chip sack. I mean, we've got billions and billions of dollars that are going to start flowing through the system. We're only seeing that begin to hit the backlog now,

so we think that's a significant tail wind. And then over the next two or three years, you also have UM mining equipment continues to be UM historically old age of the fleet. We we have a replacement cycle there that's unfolding, and you know, we're still seeing pretty good investments when it comes to energy, UM and commodity related products. So there's certainly some favorite bull Macro tail winds, notwithstanding

some of the the slower residential spending. You know why I brought up Lamborghini because now because Chris was saying CNCH Industrial is the big competitor to Deer, and Chris, you know who owns CNH Industrial Fiat UH, which also

owns Ferrari or a sizeable steak in Ferrari. That's I think really fascinating that those tests supercarmakers have said just clicked in CNH for the timble symbol and it says acquired by Fiat I am on so and by the way, if you've seen you know top Gear, Jeremy Clarkson, he has a new show where he buys a farm and tries to run it. He gets a big Lamborghini tractor because he likes the brand name, and then he finds

out it's too large to fit in his barn. Tough problems there, Chris, So, China reopening, what does that mean for your big industrial companies, whether it's like a Cat or Deer or some many other big industrial companies that you cover. Yeah, with the with the China reopening, I think um as it relates to deer, I think this is another tail when for them. Now you know they don't sell a lot of equipment directly into China, just the farms over there aren't conducive to a lot of

these larger equipment. But why I do think it helps is, you know, global crop supplies are historically tight, largely due to the to the war in Ukraine and the restriction of shipments and fertilizer coming out of that market. But now you throw on the China reopening, um, grain supplies are going to remain historically tight. So we think this keeps crop prices elevated for the next couple of years and really gives additional legs to the cycle. So we

see China reopening as a tail when there. As you think about cat you know, China's only roughly five percent of their sales, but it's the largest equipment market in the world. Any kind of reopening infrastructure investments over there certainly would add some upside well. And if they let the ethanol um proportion of gasoline and rise up to fift that's going to be another tail wind, right for

corn prices. Yeah, we're we're looking at kind of I think a structural deficit um when it comes to crops supply demand. So barring some kind of unforeseen weather events and um, you know, we're still going to look at you know, historically tight supplies here probably for the next several years. Um. And at the end of the day, you know, if farmers continue to make money, they tend to reinvest in equipment. Where where are you based, Chris,

You're you're down in Princeton. Princeton, New Jersey is a very nice little farm area. I was gonna say, if you're in the Midwest, you don't want to miss the Miller's Port Corn Festival. Miller's Sport, the Miller's Port, Ohio of course, best corn festival in the country. Really the most delicious corner that I imagine. It's in the fall at some point, right around right around October Fest. All right, Chris, great stuff. Chris Chile and equity research channels for Bloomberg

Intelligence joining us here. 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 Fall Sweeney. I'm on Twitter at pt Sweeney Before the podcast, you can always catch us worldwide at Bloomberg Radio