Surveillance: Apple's Future Should Be in Content, Ward Says

of course on the Bloomberg Now. Ryanair has cut its fully your profit guidance today than the frills Carrier blames the impact of the slump in the pound following the brigs of vote. Let's get more from John Strickland's j LS Consulting, aviation analyst with US Paris On and head

of European Equities Fidelity International. This would probably be very painful for Michael Leary because he had campaigned first of all for the UK to stay within the EU, and then he's held off right trying to not cut profit guidance, and then finally today was too much because of course a weaker pound ways on fairs that also has quite

a big impact on yields. Yeah, well, pound Sterling is such an important currency for Ryan Air, with around about a quarter of their revenues being earned in GDP, their biggest flying activities out of the UK stands is by far their biggest base airport, even bigger their home market Dublin. And they're indicating they're going to work against this in terms of further pressuring cost reductions by driving volumes that they have a pretty stunning performance in filling their seats,

they feel aboutcent of seats. But of course the fact they have to remit Sterling into Euros as a euro denominated company is a fundamental problem. Can they head They could have hedged already, but I guess at the present time difficult to say. I mean, because there's so much

of volatility. We just can't tell how this thing is going to play out in terms of the next few weeks and months, all right, But there's nothing fundamentally wrongs, right, I mean, this is it's a currency play and we're going to see a lot of I mean, Ryan is wrong with how many people actually fly their planes paciety. I mean Ryan is the strongest of a lot. As you said, they were really once really who had until today maintained their guidance. We've seen other players like I

A G and Easy yet already issue profit warning. So I'm sure it's with great reluctance that Ryan I did so today. But it's still in a very healthy position when you look at the airlines, right, So this is a play on okay, pound and currency for for certain of the non frill hairlines, but then it's also a commodity play in oil. A lot of them were hedged wrongly overall. Can they recover? Yeah? I mean, I think I think it really comes back to looking at the

attributes of the business models long term. And we know that Ryan there, for example, have a cost advantage versus you know, lots of their peers. They're also expanding the roots of which they fly. I don't think that Brexit changes people's appetite for sort of traveling abroad. So you know, I think is is John was saying, you know, you have to sort of take a step back from looking at the very short term volatility and try and look

at the longer term attributes of the business models. John, help me out your Anthony, bring up the chart if you would. Here. Now this is British air I A g that Mr Strickland just noted the circle is Brexit down we go and to be honest, that's an ugly chart. Or John, is this the mother of all buying opportunities? The excellence of what British air has done at terminal five and worldwide full disclosure folks, I'm a fan, but then down we go? So do you pause here or

is it the mother of all Heathrow buying opportunities? Well? I a g that the parents are British Airways is still a tho strong performer. As I mentioned, they've also issued a profit warning. But he is sending their powerhouse in the powerhouse, as you said, a British Airways they are. They are also touched by Brexit that they have a

very diverse exposure, of course to global markets. If you to come to the UK, and particularly a business travel that heat throws the airport you're going to come into, it's already very constrained, which is precisety why we've got this big debate now about new runway capacity. I literally said this that evening after Brexit, when in all of London was nunb isn't the first order condition for any new prime minister to say we're open for business, we're

building Heathrow. I think it's absolutely imperative. It's it's the clearest signal that we want to be a global player of an increasing nature. If we're going to move away from the focus on EU markets and really truly want to develop further trading relationships for example, China, then we have to have a gateway which he is open for

business and where where airlines can get in. We've seen airlines in recent years either struck me to get into London or if they've got in a to all, they've perhaps got slots of Gatwick and as soon as they've had a chance, they've up sticks and moved up the road to Heathrow Airport. Does Heathrow make money for the people of the United Kingdom. It's a massive contributor to the economy because of course it facilitates trade. It's it's

an access point for tourism. Many people may not know it's one of the biggest sources of cargo and freight traffic too, because if we think of the belly hold capacity of these large wide bodied aircraft, it's not just freight aircraft fly cargo and it's Visa aircraft, two vis aircraft of the ones which are using Heathrow, so it's

a massive net contributor to UK economic performance. Yeah, and this has been usually controversial because first of all, most of the Greens, a lot of the environmentalists were against this. A lot of people living underneath this flight path, that which is actually one fourth of London, also have been arguing against this. I think no London mayor so far

in the least fifteen years, has been for Heathrow. What I don't really understand, and I understand it's a great message to say we're open for business, is that the government seems to say, well, look we don't mind losing passporting, so we don't mind really hurting the city of London, but we'll give you Heathrow to make a little bit better. It doesn't match up, Yes, I think. I mean when you talk about sort of instructure places, I mean these

are these are sort of very long term investments. I mean countries and economies reap the benefits of investment in infrastructure over decades, and so I think that this is as much a strong long term political message about the role of the UK in in the global economy, and I think that actually what it touches on is the fact that, you know, we could be in an environment where the investment in infrastructure more broadly actually starts to sort of move in a certain you know, in a

more positive direction. Right. But but again, does the city not need pass But I mean you need to protect the city before building a new runway, to make sure that that people feel good about the fact that we have access to international business gen and I think I think the two go together. Obviously, a city and financial sector are are key users of Heathrow Airport, and we need to be able to access other key financial markets within Europe, around the globe and of course all other

business sectors too. And we have airport capacity elsewhere, and it's been quite clear that airlines and not to use it, or they've moved out. Some airlines have decided not even come to the UK because of a lack of access to Heathrow. I got a killer question, you're John. Maybe you can help, Francing, you can help Why did they move the champagne and salmon bar that was right outside Terminal five British air It's such a long walk down. Francing helped me here you're starving. You get to the

airport and there's just great little champagne samon. I'm you know, I'm a prep kind of girl. I mean they moved, they moved the bar, the restaurant. It was terrible. That's a that's a question probably have to put two British areways directly to a serious point. I'm trying to save Tom Keene out of you know, the champagne and solvent question, henceforth known as the pressing Keen question. But actually, how

how do these terminals get built? I mean you kind of think, right, well, we're putting the perfumes after lipstick, after the champagne bar, so people drink and then buy more lip In an airport like Heathrow, I mean they can, they can literally have the pop up shops. The airport is a such a large scale and has such a I verse cly Ntell. There's an element by which the retail and then bevera jeoff has to vary almost by the hour, and that can be done in quite a

sophisticated way. What outbound Japanese travelers might buy, or business executives to the US like Tom could be quite different to what the holiday brigade who are going to a Mediterranean would buy now. That cannot be done at small airports. But retail again is important in airports keeping their charges down to the airlines. That's a key driver to Salmon and champagne. John, do something about JFK. That's all I ask for, John Strangling, Thank you so much. The different

spots between you throw and JFK is absolutely sharky. Heathrow has got a totally together. I wouldn't bring in Howard Ward. He is Gamecas chief investment officer of Growth Equities. It's great to have you here, Howard, and let me just start by me. I was looking at your most recent note and said, you're more concerned about the economic outlook and more cautious on the stock markets prospects than usual. Give us the lay of the land as you see

it here. And the reason for for the caution, well, a lot of it UH has to do with the lack of significant GDP growth. Nominal growth is UH trendlining and you know three real growth two UH. My view is that higher labor costs are going to continue to pinch profit margins which peaked two years ago, and that the earnings expectations for next year are probably too high. There's even a risk that we end up resetting earnings

expectations for next year at flat, possibly even negative. I think that if that were to happen, it would be very likely that the stock market would would go down. I think that globally things are weakening, and that while the base case expectation at this point is not a recession for next year, the risk of a recession has risen. I think it has to be in your conversation at

this point, how concerned are you about business investment? I was listening to the vice chair the FEDS re Board, stand Fishery, speaking yesterday, something that that he talked about the need for for more of it. When you when you look at the prospects for earnings, when you look at the climate more generally, how big a concern is that for you? Well, business investment comes out of profits, and profits have been flat for a year, and as I just mentioned, I think the expectations for next year

are too high. Uh. Another factor that's weighing on investment is business confidence, and business confidence has turned down. Uh, no surprise, I think given this election season that we're facing and policy uncertainty going forward, not just in terms of the election, but also in terms of FED policy. UM So, I think that right now the prospects for

business investment growing are not great. It's been weak. I think it's gonna stay weak and until you get some better growth, which may take UH working with corporate tax code. I think that would be the first thing I would attack. UH. We need to free up business a bit from a regulatory standpoint as well, things that will result in higher profits, and that's how you're going to get businesses to invest. Have we been ignoring business confidency? Bring it up here.

We talk a lot about consumer confidence. We look at the state of the consumer in the in the U. S. Economy and the global economy. Are we not paying enough attention to business confidence? Probably not. I think that. UM. When we've had some of the big headline risks over the macro headline risk over the last several years, you know, what we've seen is that the the CEO suite has paid much more attention to headline global headline risk than

has the U. S. Consumer. And so we've had situations where the U. S consumer has gone about his business as usual for the most part, but the CEOs have pulled back because of their fears or their lack of confidence in the future, and I think that situation remains with us today, and it is worth paying attention to more attention to how are we were talking helpha, beta, gamma earlier in the basic idea of being more defensive. When you're defensive, do you go to cash or do

you buy something different? Tom, I buy something different. And that's because in my forty years in this business, I have grown to believe with a lot of conviction that

market timing is essentially a loser's game. And so when I become more concerned and more cautious about the outlook, the idea would be to reduce the so called beta or volatility of my returns relative to the market, and to do that by stock selection, focusing more on uh the less mostly the less economically sensitive parts of the market consumer staples, healthcare, utilities, telecom. Those areas are more likely to hold up well and market the client if

it happens. And there are many occasions where people much smarter than I have expected the market to go down for all sorts of good reasons and it doesn't happen. And that's the danger in marketing? Is Jamie Diamond high beta or low beta? Well, Jamie Diamond as a CEO is low beta. JP Morgan as a bank within the banking sector is probably one of the lower beta names. However, financial services can be a dangerous place to be uh in a declining market. So I that's an area that

I am underweight and would recommend that. I just did this because David girls looking at us like greek letters beta. What are we talking to? Your define BEATABTA is the price movement relative to the underlying index right right, So you can you can pick your index. For most investors, that would be the S and P five hundred and so it's you know, how much of the return of your stock can be explained by the enterlying volatility in that index? I you know, I know that politics is happening.

Obviously we're gearing up for this debate to tomorrow night. And a number of people we've spoken to recently, strategists and investors, have said, uh, either the elections priced in or they're not that worried about the risk? Are you worried about it? And and if you're not, UH is a proxy for it? That being what's going to happen

with trade something of greater concern to you. Well, I haven't been worried about the debate because I've had the mindset that we're going to end I mean about the election, because I've had the mindset that we're we're going to have a divided government. I have seen, however, with some concern. The price action in the health care sector the last

several days, however, has been decidedly negative. And it's been that way primarily because of the growing concern of a Democratic sweep, which would of course be more difficult for healthcare the healthcare industry given the the the Democrat Democratic parties designs to have greater control over pricing in that area. So there is some election risk, the risk being a Democratic sweep. However, I still don't think that is the most likely and most likely outcome. Are you worried about trade?

Trade is of global GDP. Trade is slowing. Trade I think is going to slow further. Uh. If I'm right that the U. S economy is going to slow over the next several quarters, that's going to have a multiplier effect. Through ripple trade. We are through real trade, we are the world's largest importer. So if we sneeze, the exporters of the world are gonna feeling. Just to bring this up, David, predict wise, is this great summary of all the polls,

somewhat like real clear politics. I think it has been widely reported Secretary Clinton, Mr trumpet ten percent is the likelihood of investing. David over predict was put out a note yesterday making clear ten percent is still a chance to win for Mr Trump. The Senate se uh, but the House has come in a little bit. It's not as grim as it was three or four days ago. But Howard, I still don't see it, you know, looking at predict Wise, I'd call it less than likely or

even remote, that the Democrats would take the House. David, Yeah, it reminds me of what Stan Collinser from Corvius was signed to us last week. He was not exactly the most bright out optimist about what's going to happen in d C. In the prospects for any sort of change to taxes for infrastructure spending seems pretty bleak. Yeah, Tom, I would say that if the market truly believed in a Democratic sweep, the entire market would be getting hurt,

not just the healthcare sector. I think you're getting some precautionary selling in healthcare. It may already be overdone at this point. Apple update, well, how do you spell relief? Apple seems to have decided that maybe they don't want to get into the business of building cars, and this

is great news. The last thing the world needs is another automobile manufact extra, a business of tremendous capital intensity, global, globally competitive like no other, and it would have been, I think, just been an an abyss of throwing profits into a hole. Uh. And so I'm very, very hopeful now that Apple is going to restrain itself and focus on the software from automobiles created by Twitter software standards.

I'm not an owner of Twitter. Um, I don't think the Twitter economic model is has is working yet they don't make any money time, So even as a bolt on Apple, I don't think that Apple and Twitter make a lot of sense. Personally, I'd rather see Apple go out and buy, uh something like a Time Warner and now folks a clinic. Howard Ward of gem COO knows

as many others do, that scale is everything. The note Kochla Coasla rather of all sorts of entrepreneurial issues of two decades to go has maybe been the leader on this. Let me put things in scale. Time Warner is one tenth as big as Apple. Time Warners eb DA is less than a tenth of Apple. Their net income is

less than a tenth of Apple, and on and on. Howard, if we lined up a hundred people who are smart, smart, smart, they wouldn't know that they know the Time Warners smaller, but we forget the scope and scale that allows for mergers and next acquisitions transactions to work. Well, Time, You've just told everybody, really what Apple's problem is. They're so big.

The iPhone, which generates about their profit, is so such a mammoth product that even if you were to buy, as I've suggested, a company like Time Warner, it's not going to have a material uh packed on the bottom line right away. It may over time, but right away the impact would not do that great. That's actually not so bad because that means the risk of that kind of investment would not be right. How do you suggest a set of boltons something? I think I think that

it's there. Their only choice is to go after and you know, you know, they have the luxury of considering companies of the the size of Time Warner as a bolton. But that's what the numbers would suggest, and I think that that is the route you need to go. I think content is king. I think Apple is going to want to have their own content, uh, to differentiate some of their products. So I do think that's the direction

they should be going in. And if you want to innovate with software on the aunomobile side, find But otherwise let's go back to more of the the t MT kind of business that we would associate Apple with. David Guru Time owners cash is approximately one eight zero of Time Warner. It's not you say that the Apple should be getting into content. What explains the delay in doing that? We were talking about the car falling falling to the wayside here perhaps wisely. Why has as Apple seemingly lost

sight of that? You look at the problems they've been having with their services just generally over these last few years. How worrisome is that to you? Well, I don't think that they probably haven't lost sight of it. I think that they you know, it's been reported in the media previously that they've had conversations with Time Warner and others. Uh, you know, who knows where those stand or where what

happened to them. I do think that maybe they have decided to wait and see how this whole evolution of the skinny bundle plays out versus versus today's big bundle. Uh. For for for cable programming. I think that in the case of Time Warner, the Time Warner wins under any scenario,

whether it's all a card or bundle. They're going to win because of the channels they have and they're not burdened with the ESPN problem where they're getting where where Disney is getting about seven dollars a subscriber for ESPN, and if you go to the skinny bundle, it would be hard to perhaps replicate that, So uh, Time One,

I think wins under either condition. Uh. And there may be other media companies that Apple could be interested in, but I clearly think that the future for Apple, given their primary devices are used for viewing content and listening to content, that media would would have some synergy. And as Time said earlier, scale is important. So I think moving in that direction is the logical scenario for them, and I wouldn't be surprised if that were to happen.

What we're in this space I just want to get your sense of what's been going on with Viacom and CBS and that whole empire looking against the non passive observers. You are of that space, what do you make of of what's been happening there. Well, that's a drama. That's hard for me to talk about, uh in any real sophisticated way. I don't own Viacom. I do own CBS. You probably know Mario and the values side of our firm,

our big holders of Viacom. Mario is one of the largest in our firm, is one of the largest holders of the voting stock of Viacom. So there's a drama they're playing out that I'm I'm not part of it, and I'm hesitant to comment about that too much or enough. You did well, their days tried. However, before we let you go, there's a caution on the market you mentioned earlier. You don't do cash, you go down to more conservative stocks. Are electric utilities today like they were in our ute?

That's a great question, Tom, because you know, we have had a bit of a backup and the interest rates in recent months, and the utilities have generally sold off intent intandem with that and um, I think that the consensus opinion right now or more people than not believe interest rates are heading higher. I happen to take the other side of that bet. Right now, I think rates have have peaked or close to peaking, and consequently, anything that's a bond proxy I think represents better value than

the market believes right now. And I'd be a buyer these stocks. The business itself is has changed at the margin. Howard Ward, thank you so much. Ever the optimist from New York, This is Bloomberg. Who you put your trust in? Matters. Investors have put their trusted, independent registered investment advisors to the two and of four trillion dollars. Why they see

their roles to serve, not sell. That's why Charles Schwab is committed to the success over seven thousand independent financial advisors who passionately dedicate themselves to helping people achieve their financial goals. Learn more at Fine your Independent Advisor dot com. This is a real pleasure, folks. For the next half hour, we're gonna speak to one of the grizzled prose of

the heart of America, which is the Midwest. Our agriculture or food business and frankly those of us in three zip codes in New York Day for granted, and the expert on this is one and dignent of JP Morgan. We speak first of Caterpillar in the showing of the door to Mr Oberhelman, and then we move on to the state of our Midwest agriculture economy and thrilled to have you with us um this morning. Caterpillar was such a juggernaut, and about six years ago it ended you've

been way out front on tepid revenue growth. Let's begin with their chairman and CEO, Douglas ober Hellman. Was he shown the door? Well, I think you could answer that either yes or no. I suspect that the timing surprised people yesterday a little bit. Caterpillar will report its earnings two three earnings next week, and they usually give guidance for revenue for the following year on that call. And so perhaps the interpretation is is that Caterpillar is facing

a fifth tier of a downturn, and that's unprecedented. So if I wanted to put the bear case together, I'd say, maybe that's why Doug is leaving earlier than we might have expected. What part of securities analysis. Do you judge any of the commodity equities on is it is it a price to sales? It's the cheap Is it revenue growth that isn't there? Do you move down the income statement to cash flow or the EBITDA. Yeah, that's a

good question. We generally for machinery stocks, we think of them as being highly cyclical, and so we tend to look at a price to earning, so a p E and for machinery stops usually when the earnings is at the lowest, that's when the multiple PE multiples at its highest, generally about twenty times the trough earnings. And then when earnings are at the highest, we put the lowest multiple on those earnings, and that's generally a ten multiple on

the PE. So it's a cyclical business. We look at how well we're able to manage the earnings through the cycle. Let's talk about the last cycle featuring Doug over Helman. It was not a good one when you look at commodity prices. This was a tough market in which to be the chief executive of Caterpillar to be pursuing the kind of emana that he was pursuing. Yeah, there's no question.

When we look back and look at what happens, we he did buy be Cyrus, one of the two remaining machinery names in mining, and he bought that at the peak of the cycle. But you don't did any of us see the peak of the cycle at that point, at any of the stock on that acquisition. No, I mean, I think we were all caught up a little bit on the never ending growth in China and the build out of infrastructure in China. If there was ill timed

David Girl from peak, they've taken twenty billion revenue. You know, it's it's a crutch to say how's this playing in Peoria? But in the case of Caterpillar, we can say how's this playing Pory. I wonder what what the folks that make of this change? And what you can tell us about Mr Overhelman's successor that's been one Jim mump will be what do we know about him and how he

might change course here at Caterpillar. Well, the good news is that uncle we ran at the business that's called energy and transportation, and that business has been the crown jewel of Caterpillar. Or within that business, there's a business turbine engine business called solar and that's always been extraordinarily

well run. Um, so that's the good news. We have a good operations guy coming in to take the place of Doug, and that's probably what Caterpillar needs as we go through this cycle because we don't really know what the duration is going to be. So I got a

good operations gagling in there, that's public, you know. And I was going to go out this weekend and look for a D three K to Tier four final dozer this or the cats C four point four, a certain engine eighty horsepower net operating weight you know, seventeen thousand pounds what is it eight tons or so? Yeah, put it right out there by run it, run it up there to the trump rank and then take that puppy

up to the reservoir. And when you look at this in the romance of Caterpillar, and you're the pro on this, was it a mistake to have a chairman and the CEO together? Would there would would there have been less ill decisions, bad decisions, miss decisions if there had been a check of a separate chairman. I don't think so. In this case. Quite honestly, they've got a very strong board,

and the board approved the acquisition of peace IRUs. And you know again at the time when the acquisition was made, you know, construction Glubly was very strong, mining was very strong. China's GDP growth was accelerating, not decelerating. So I don't think that having a separate CEO and Sherman would necessarily have made any difference in this case. I think it

was just everybody got excited about the up cycle. And you know, remember other companies like he were considering getting into the mining equipment also, so you know they weren't the only ones chasing their dreams. Let's get to our next action. We've got a couple more minutes here in dining with JP Morgan. What's the state of the American farmer right now? The American farmer is facing fourth here of probably losing money, if our at least break even

to losing money. I would say, to excuse the pond, our farmers in the Midwest looked like deer headlights. They are not buying equipment and they will not be buying equipment for what could be several years. We've had seven great years. And when you asked farmers, what in agricultural cycle looks like they say, uh, maybe seven years like the Bible. So we've had seven great years. We're probably looking at seven horrible years. So it's not looking good

at there in the Midwest for our US farmers. Having reported in the Midwest on agriculture, I'm always struck by how involved farmers are in studying those cycles. How on top of those cycles they seem to be here. Uh your sense as well that they have a pretty keen sense of where we stand, where we're headed. Yes, actually, um, you know, some of them have told me over the years that they are always pessimistic because they know that somebody is going to squeeze the profit from them somehow.

So I think they recognize you know, they most of them lived through the eighties when the farming economy was horrendous, so they have long memories, and so you know, they tend to be they spend when they have money, and they don't spend when they don't have money. Do you have a by Holt sell anything and what you're strong by right now? Given the dignant bloom imry, I'm not very upbeat on our group in general and in particular

part machinery. If we look forward into you know, if interest rates start to rise, that is not the same for the purchase of machinery. So I'm pretty neutral to negative the group. Let's just John Dear okay, and diged in with us, so JP, Morgan, David Gerr and Tom Keene and we said good morning to everyone across the Midwest. And hundred and forty nine acres in Fulton County, Illinois.

And you know, I got a lot of family that's from out there, David, I'd say like a quarter of my family, the rich ones are from Fulton County, Illinois. Hundred and forty nine acres for four and SEVD. It's some you know pasture in in in acreage I should say, cut out of a forest and then there's some rough pasture in the back side. I mean. And that's the dynamic that we perceive of America. That's not the world of vandignon is. I mean, we look at that like

as farmland for sale, but it really isn't. What's the normal land you look at across the Great Midwest. How much acreage is a real farm? Oh? I would say that ten or fifteen years ago, two thousand acres was considered a large farm and then we had the agricultural cycle and farmers started to buy acres or rent acres.

And I would say today a large farm is considered about three thousand acres, and I have spent time with farmers in Iowa who farm as much as ten thousand acres, So you know, we've really seen acres grow and farms get larger over the years. You know, when you look at a company like Caterpy, let's just use that as the as the perch from which to look at at this sector. Where's the growth is it in agriculture, is it in mining? What? What what's the future look like

in terms of growth? Well, I think that that's unclear right now. You know, what we are seeing in mining, for sure, is a lot of supplies coming out on the mining side. So we've closed a lot of US coal mines, We've closed a lot of minds around the world, and so we're resetting supply and demand. What we really need to see now is demand accelerate. China is consuming hard commodities, but its economy is kind of stabilizing at about six percent growth, and that's still growth, but it's

just slower growth than everyone had anticipated. So I think mining might be the first end market that we could see some light at the end of the tunnel, because mining companies are now beginning to make a little bit of money, and perhaps in seventeen or eighteen, if you're making a little bit of money, you opened the purse strings a little bit. So I think of all the end markets we look at, mining might be the first one to put a bottom in. So we've gotten a

sense of sentiment among farmers. Let me ask you here, Ann about sentiment among the companies themselves. You were out at a big conference in Las Vegas last month wandering around talking to two companies, to folks who are buying equipment. What what did it feel like out there in Las Vegas last month when you're there for that conference. You know, we were kind of hoping to find a bright spot. We were hoping that, you know, somebody would come and say, yes,

we're buying equipment and things look great. I actually sat beside a gentleman who was on his way to the Mine Exposure show on the airplane when I was heading out there, and he was from Kazakhstan, uh And I think he said it best. He said he was coming to the show to look and talk and see what equipment was out there, but he wasn't going to be buying anything. So I think there's still a lot of hesitancy as they're around the world in terms of actually

spend money. And I just said with the Chicago Fed, and of course all of our federal reserve systems is great, great research on land costs in that and the Chicago Fed has a great district farm loan portfolio with major or severe repayment problems. The good news is we're not back to the eighties. But regarding back where we were fifteen years ago, rather rapidly, how sustained do you see these challenges on farm loans and do we have a risk getting back to the ugliness of the nine eighties?

You know, the only thing we can say about the difference this cycle versus the nineteen eighties is that farmers did not leverage up as much as this cycle. I think they learned their lessons in the eighties when they had interest rates at about eighteen percent and debt to total capital on the farmer's balance sheet was north of so the psycle farmers did not leverage up. They had a good time. They spent cash as some of them did take on debt to expand, but we're nowhere close

to where we were in the eighties. Now, all that being said, it doesn't mean that we don't have a long down cycle ahead of us, and farmers are going to have to continue to tighten their belts. So it doesn't mean that it's going to be all roses for somebody like John Deer. But the farmers themselves, you know, they're not nearly as in as bad a position as they were back in the eighties. John Deer hasn't had a bear market. It's basically a two thousand eight two

thousand seven valuations is really held up quite well. Why is that and why are you so cautious? Well, I think investors keep looking at demand and as long as the world's population continues to grow, there is this pieces that, you know, we have to feed the world, and eventually

supply and demand will come back into balance. John Deer had expected perhaps one weather event would help the supply side of the equation, but instead this year we got almost perfect weather in the Midwest, and so you know, farmers are very crowd when they grow a great crop, and when they grow record crops. However, it doesn't help when everybody has a great crop. So you know, we're now looking into seventeen and eighteen is maybe, you know, maybe the weather will help them next year or the

year after. Michael sends in a message and also Carl North of New York City and dignant, is there money in chickens? Yeah? I don't think there's a lot of money in the livestock side right now. What happened when corn got to seven dollars, we saw a lot of the protein side contract. You know, you killed all your beef, you killed all your dairy cows, you killed all your pork, and and and your and your chickens. And now we have rebuilt all of the supply side on the protein side.

So I would be cautious on the protein side in the new term. And never enough time, And thank you so much for JP Morgan. We get a ginormous response when Ms Dagon joins as she is with JP Morgan and she's well, folks, there's there isn't a fireplace mantle that could hold the trophies that she has brought home with her dedicated work. Again, we protect the copyright of all of our guests. I've got fifty five pages here of Van Dagden. I'm not going to send it out.

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