Stocks Struggle as Gold Rout Deepens | Bloomberg Surveillance
Summary
Investment Focus: The discussion emphasized the importance of the quality of profit and the strong earnings performance of US markets, particularly the tech sector and the "Magnificent 7" companies.
Capital Expenditure: The podcast highlighted a shift to a more capital-intensive phase in tech investments, with companies leveraging bond markets and private credit to fund growth, emphasizing the need for strategic timing in investments.
Geopolitical Concerns: Trade tensions between the US and China were noted as significant, with the US trade policy uncertainty index rising, impacting market reactions and investment strategies.
Market Divergence: A K-shaped recovery was identified, with large-cap companies showing strong fundamentals and small-cap companies under pressure, highlighting the need for selective risk deployment.
Geographic Opportunities: The podcast favored US and Japanese equities over European options, citing stronger earnings revisions and the influence of the AI theme in the US market.
Fixed Income Strategy: An upgrade to long-duration US Treasuries was discussed, with expectations of Fed rate cuts and attractive real yields, despite a broadly inflationary environment.
Oil Market Insights: The conversation addressed a potential global oil glut, with increased oil on the water and the impact of OPEC decisions and China's demand on future oil prices.
China's Economic and Military Position: The podcast explored China's need for economic reform and its military ambitions, with a focus on the implications of US-China relations and potential meetings between leaders.
Transcript
[Music] Bloomberg Audio Studios podcasts radio news. [Music] This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Why uh joins us this morning for an extended conversation. Why I want to go back to first principles. My great mentor in the United Kingdom, he has recently died. Magden Desai, Lord Desai of India and of the United Kingdom would say it's just about profit. What is the quality the physics of technology profit that makes you committed to Max 7? >> Well, it is about the quality of profit. It is about it is also about the reality of earnings coming through really strong, right? We're not putting hypothesis out there. We're just looking at the ability of these companies to generate earnings to generate profit. And so far if you look at equity attribution of uh various markets globally, US really stood out in being able to deliver earnings to justify the performance and tech and magnificant 7 in particular really stood out at uh in terms of their earnings basically explaining almost all of their performance so far this year. >> When will you know the profit of all this capex investment? Are you going to know that somewhere next year or do we have to wait 10 years to know? >> Maybe somewhere in between. Actually, that's a very good uh point. So far, phase one of this buildout has been really companies spending their free cash flow and they a wash with cash to invest in this mega deal. But we're now entering phase two where perhaps the buildout is more capital intensive. If we're talking about some new entrance tapping into bond market, into private credit, into joint ventures to fund some of this investment and vendor financing is seen as well. Right? So phase two is more capital intensive and timing is everything. You know, we can be right about the revolutionary nature of the technology, but we can still have a very rocky markets on our hand. So what we're seeing right now is trillions of capex being kind of talked about and estimated in the coming years. But time will tell if we have the right return on investment to justify those uh those investment those capex commitment but in the meanwhile we cannot afford to stay out of this market. So signposting is everything. Looking at the earnings, looking at free cash flow in particular of those companies that are going to be consumers of this copex investment is how we are navigating this moment. >> Way we are in fact in the middle of uh earning season. That's a good thing. We saw some some pretty strong numbers out of the the big money center banks and now we're getting some industrial companies reporting. Um but it seems like geopolitics is not far off the radar for this market. China in particular, trade discussions with the US. How do you think about that? Is that something you just try to ignore? Do you try to play it? Because it seems like the trade talks with China and what that means for global GDP over the coming years are still front and center. >> It's really hard to follow the headlines blowby-blow, right? like from one moment we hear that maybe we're going to get a good deal between US China and to the next moment where maybe uh the meeting won't happen. So it's very uh uh noisy in terms of headlines right now and if you look at the Bloomberg US trade policy uncertainty index it peaked in April but it recently started going higher again. So markets are reacting quite a lot to it but I think it's very hard to generate alpha by just following headlines. So focusing on the things that cannot change very quickly in the near term is how we're trying to navigate this environment. So inflation considerations for the US but also thinking about the balance of payment for China and how important that is. Uh and if markets get carried away we would lean against that extreme pricing because these things cannot change very quickly which is why right now we're still pro risk despite the very busy trade headlines. >> Way with black rockck with us for an extended conversation to start strong. Elizabeth economy on China in the 9:00 hour. I just put out on LinkedIn my LinkedIn of the day. It's way lee. >> I had to be polite, you know, did that. But it's a great Bloomberg screen of the margin difference between S&P and small cap. Excuse me, large cap versus small cap. We Lee, it's back 30 years. Can I say it's never been like this? I think we're seeing some extraordinary K-shaped developments. The um chart that I put out, the Broom Bloomberg screenshot that I put out on LinkedIn is the profit margin of S&P 500 large cap and S&P 600 small cap. And they're really starting to diverge. But that's just one manifestation of this K-shaped development, right? We see K-shaped recovery of the consumers. we see K-shaped kind of default type of pattern in credit and also including in private credit. I think in an environment where we don't have rising tide of very easy policy lifting or boat of very easy fiscal stimulus kind of supporting everything being very selective in terms of how we deploy risk is going to be the name uh of the game. We see credit markets. You look at the the the the cycle, there is almost a missing credit cycle. But digging under the hood, fundamentals support the very strong uh uh uh large capsu with cash, whereas the very small uh uh players are currently under uh uh pressure. So K-shaped development is a characterization of the environment that we're in and I think that's here to stay for a while. Way, can you talk to us about geography? Where do you see, I guess, best opportunities? Maybe US versus rest of the world? Are you focusing on Europe? How do you think about from a geographic perspective where some of the opportunities are out there? We currently actually still like uh US equities and we also prefer uh Japanese uh equities and uh we uh favor them over uh for example European uh opportunities where uh we would want to be a bit more selective you know uh uh financials and industrials how we want to play that together with defense theme and the reason that we still favor US equities you look at how markets have developed so far This year US equities became a little bit more expensive but not as much as how much more expensive i.e. rerating has taken place in the rest of the the the world because of the stronger earnings delivery in the in the in the US market. You look at the earnings revision the last two months or so. US uh earnings have been revised higher versus European earnings having been revised lower. So the direction of travel very much speaks to kind of the the underlying economy and the concentration of the AI theme. So for as long as I think we're still in this AI um AI uh conviction AI core, it would be hard to fade the the US ugly market at this juncture >> in the fixed income space here. I mean you can sit there at a two-year Treasury get three almost three and a half% here. That seems to be a not a bad place to be here. Do you sit there in the US treasuries or do you maybe take some credit risk out there? >> Um for our Q4 outlook that was released now we meet October that was released almost one month ago. We upgraded the long duration US treasuries because we felt that the Fed is getting lucky a little bit because it is embarking on restarting the Fed cutting cycle and the macro environment actually supports that i.e. labor market is just weak enough for fed independence not to be under scrutiny as it restarts cutting cycle. Right? So as we kind of uh still uh are in this environment the Fed is still uh getting lucky uh in that you know like we heading into next week I think 24 bips of rate cut is a foregone conclusion. We do want to lean into this momentum and lock in some of those really attractive real news in particular. So, so, so, so we like treasuries at this uh at this structure. >> That's right where I want to go. You're reading my mind. And Paul, I'm glad you brought it up because I've been real equity century focused. I got a 395 10-year yield. Is this finally where we get the inertial force to lower yields? Do we finally break down to a lower real yield, lower nominal yields? Well, we we do think that in the very near term uh markets can go with this narrative that uh because of weak labor market actually the the Fed needs to to cut and because there is macro justification for that uh maybe the long end of the curve is not going to be penalized uh in that term premium may not go higher as markets challenge the the the the fat independence topic. So that is a bit of a sweet spot for for treasuries. Now having said that heading into next year, if you look at the the market pricing for policy path, we're talking about below 2.9% by the end of 2026. I think given the still broadly inflationary environment, we're still waiting to see the impact of tariffs through to to CPI for example. I think market pricing for below 2.5% policy 2.9% policy rates by the end of next year is too optimistic but we may not get to the awakening moment just yet which is why we're tactically overweight. >> I've got to ask you why with your heritage in your academic excellence in China. >> We have Elizabeth economy coming up of Stanford uh later why your thoughts on this important set of meetings to a new five-year plan in China. Well, this is a economy that needs to uh go through reforms, right? Like this has been talked about for many years now. It needs to go from a investment heavy uh driven type of growth model to consumption having uh driven type of um growth model and right now consumer sentiment still is somewhat uh uh uh tapped. So I think how to energize that is going to be very key especially against the backdrop of aging uh population and structural headwinds to to economy. So that's that's a very delicate balance but the key here is mega forces and specifically navigating and capitalizing on the AI uh uh revolution. >> Way thank you so much with black record. Stay with us. More from Bloomberg surveillance coming up after this. You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10:00 a.m. Eastern. >> Listen on Apple CarPlay and Android Auto with the Bloomberg Business App, or watch us live on YouTube. >> This is a conversation of the week, but dare I say, folks, here in October, our most important hydrocarbon conversation to the end of the year. Edward Morris is absolutely iconic, made more so at Cityroup recently screaming at the oil perpetually over $100 a barrel. People going maybe not. He is right. He he was right, I should say, and still is right at Heartree Partners. Ed Morse joins us with all of his service to the nation. Uh senior fellow council on foreign uh relations. You open up classic Ed Moyer, Ed Morris, supply and demand and the increase of oil on the water. What is oil on the water? Is that boats? It's actually tankers and they're either moving from where the supply is coming from, going to where the demand is, or they're just not going anywhere because there's nobody who wants the oil. So, we've had an incredible surge in oil on the water. That surge has come after the summer demand season is over. It's come as OPEC plus has added oil to the market. >> So, uh, Bessimists were 1 billion250 million barrels of oil in transit as of a week ago. And that's the most since 2020, which we all remember when oil prices went negative. >> Um, well, oil prices went negative and and again, you said look for lower prices. the acclaimed Bloomberg Business Week cover of years ago of tankers off Singapore just sitting in the water. Is that what 2026 looks like? >> Well, 2025 certainly looks like it's going to end that way. What happens in 2026 is partly a function of what the OPEC countries decide to do. Are they going to continue to put more oil in the market? Uh and the other big question is China. China has absorbed most of the excess amount of oil in the market. That's why inventories are so low around the world other than China. They were uh importing an average of over a million barrels a day to put in storage. That's geopolitical of course. Uh they've kind of slowed down a little bit uh related, I'm sure, to US China talks. Uh but those seem to be going nowhere. So, China is part of the issue of how much they're going to suck in to build their own inventory for some future date. >> WTI crude oil at $58. With WTI crude oil at $58 a barrel, is there a global glut of oil in the marketplace? >> Well, it looks like that. That's what the oil on the water is telling us. There's a glut. It's showing up. It's beginning finally to show up in inventories, but the inventories are so low they have a long way to go. Uh but yes, there is definitely a glut. Supply is significantly more than what demand is at the moment. >> So what is the the if I'm sitting down there, I watched Landman for one season, so I know all about the oil and gas. I'm an expert >> in Austin at the F1 at the Sweeney corner was the big advertisement for Land Man. >> So I know all about the global energy business. >> What's the fix that? I mean, if I'm in Houston, I want $75 a barrel, don't I? Well, if you're in Houston, you want the highest price you can get. So, yes, certainly is higher than WTI at 58. Um, and we'll see how they're doing. You know, the US hit record levels of production in the month of August, where you don't have the full data yet, but there's no sign of there being, you know, a downturn in US production. I I think among the things to look at at the moment in the month of November is whether the crown prince of Saudi Arabia is going to come to the United States. >> November 18th seems to be the schedule. How will that response be? What will be the oil discussion in the Oval Office? >> Well, I suspect he's not going to come if >> earlier in November they decide to not put more oil in the market in o in December. So, I think that'll be a signal. Okay. I think they're looking at uh three or four things. Uh they've noticed that Qatar has gotten a NATO like defense agreement with the US government. They would certainly like something similar to that. They are more important in many respects to the US and to Trump's desire to have lower gasoline prices at the pump. They're looking for a military deal similar to the one that was struck when Trump was visiting Riad uh last spring and that was just about $150 billion worth of military equipment. They're particularly looking for F35 uh fighter jets. Are they going to get any at all? Are they going to get what they want? Is there going to be a nuclear agreement? Are they going to be seeing US technology and US material come in as they build nuclear energy for power generation and free up more oil for export? >> Ed Morse with us. We continue right now with Heart and of course iconic at Cityroup and his assistance of the country in studying oil particularly within the Middle East. 2012, I remember this article. Matt Bessler came out of Michigan, great great academics at economics in Michigan, writing for business insider. It's just a classic headline. City's Ed Morris has a huge note blasting everyone who believes in peak oil. This is the feisty Morris from years ago. Peak oil biases continue to blind analysts to an emerging oil cycle turning point. You nailed it. Matt Ber, I should say, is now with Bloomberg, and that's to our advantage. You nailed it. What's the myth right now in oil that's wrong? The myth that's wrong is that oil demand is peaking, whether it's peaking in 2028 or 20 2032, the consensus in the market seems to be that oil demand is peaking. Yet if you try to study oil demand uh you can notice that uh whatever the cycles have been GDP is the driver of oil demand u and GDP relationship with oil the oil intensity of GDP is certainly falling. It's been falling at a steady pace. It's a very linear line from where we were in the early '7s when for every 1% increase in GDP around the world uh and we do this in constant dollars by the way there's there was over 1% demand for oil that has come down linearly and we just looked deeply at 2020 through the first half of 2025 and we're on a slope that tells us that oil demand is going to peak in 2064. >> Okay. Well, that's out there. Lisa, make note of that. 2064. Ed and I won't be around. Ed Morris, what's your target on oil here now? You were so good at 100 saying think 80. At 80, think 60. Can Ed Morris think $40 a barrel? I think it gets to 40 by overexuberance once it crashes through that $50 number. So, um I I think there'll be a lot of reactions uh at under 50. >> What does $50 barrel oil mean for the Middle East and particularly for Riad? It means a little bit of difficulty on the credit side. So, yes, they have a fiscal break even that is substantially higher than uh $60 Brent. Uh but they get in trouble with their A+ rating on credit and they need the credit. They need the lending in order to make their own energy transition, which is to diversify their economy and get off a dependence on crude oil. >> John from the Jersey Shore emails in. He says, "With my Hummer H2, what's a gallon of gas cost at Ed Morris is 40." I mean, where are we? Under two bucks. >> Wow. >> $2 a gallon. >> It depends on where in the country. If you're in California that is Yeah, there's always closer to >> Absolutely. brilliant. Are EVs having an impact on the price of oil? >> Of course they are. They're part of the system of replacing oil with something else. And if we look at the declining intensity that oil has in GDP around the world, we're having an increased intensity of GDP in electricity and that's where the geopolitics are turning as we look into the next decade. >> Y please come back next week. Ed Morris with us with Hardry. Folks, what a briefing there for Global Wall Street. Edward Morris with all of his service to the country, the discussion of oil, the geopolitics of oil. Stay with us. More from Bloomberg Surveillance coming up after this. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say, "Alexa, play Bloomberg 11:30." I have been asking for days please Elizabeth economy of Stanford Dr. economy joins us right now definitive on the trans-Pacific debate economy just the prism of 7 8 n military commanders out the door in China how do you interpret that >> I mean you know honestly this has been 13 years worth of a continuing anti-corruption purge um it sounds like a lot and it's not insignificant particularly given that three of them um are members of the central military commission which is the top body that oversees the party body that oversees the Chinese military. So that's three out of seven that were just purged. So it's not you know inconsequential but you know Xinping this is just a continuation of you know a purge that just never ends for him. You know what does that say about the nature of how he goes around uh dealing with corruption? I think uh it suggests that he hasn't found uh the proper method to deal with this because you know it's it's ongoing. Um and these are people that he himself put in place. Uh so it's not about finding people who are more loyal to him necessarily. These were supposed to be uh you know loyal compatriots. Um so it's not a good look but frankly it's not that new. >> So so one of the problems here Paul and this is like the the small life that I live with Elizabeth economy. They have a book thing in the back of Foreign Affairs magazine and Elizabeth economy will be there and go let me ruin your October, November, December. I have literally Liz in the top of my pile the book you said here's the primmer on the military power of China Bloomberg surveillance just spoke with Admiral Mullen and we talked about the South China Sea. give us the Liz economy update on the military capability of China and the South China Sea. >> Yeah, I mean I I think um you know from everything and and you you you have the book in front of you so you can you can read it yourself uh Tom but I think the you know the takeaway is really that um China has made enormous gains in terms of its military capabilities particularly in terms of uh sort of the near abroad you know in its own backyard. um it wants to be the dominant military power uh in the Asia-Pacific. So that's been its priority. I think the weaknesses um remain in terms of the command and control um the fact that China doesn't necessarily you know hasn't had a lot of actual war fighting experience. So nobody really knows how good they'll be uh when put to the test uh and whether the top down nature of control will enable uh sort of the mid-level u military commanders to make the type of split you know moment decisions split-second decisions that you want them to be able to make. Um so there are some you know weaknesses and again I think they haven't made you know progress as much progress as they would have liked in um establishing bases overseas. you know, they want to have a larger footprint globally. Uh they're doing that in terms of their arm sales. They're doing more military training of other countries, you know, with the people's liberation army. So, they have in place many of the elements of a global military presence. Um but they're not quite there yet. And I think that's, you know, those are sort of the two major messages if we're trying to understand where the Chinese military still falls short. Those are probably the two main areas. Elizabeth, for those of us on Global Wall Street, we're trying to keep a pace of the changing economic discussions between the US and China here. Will there be a meeting with President Xi and President Trump later this month? What's your current read of the relationship, of the potential negotiations, and how this all might shake shake out? >> Yeah, I mean, I think um you know, odds of there being a meeting are quite high right now. um you know it it looked less good uh you know a week or two ago when we had uh the most recent sort of tit fortat uh with the US export controls and the Chinese controls and new licensing restrictions and um on rare earth elements. Um so that was you know I think a huge dust up but President Trump has pretty clearly signaled that he expects to meet uh with President Xi um on the sidelines of APE in South Korea next week. Uh, so I take that as as a positive in terms of what's likely to come out of the meeting. Look, the president has made clear what he wants. He wants, you know, and it's nothing we haven't heard before. You know, he wants China to do more in terms of controlling the export of the precursors for fentanyl. He wants China to, you know, buy more soybeans, you know, because basically they're not buying any soybeans from the United States. They've completely gone to other, you know, markets, um, like Brazil and Argentina. Um, and he wants China to lift these new restrictions on the export of rare earth elements because that really hits hard at our technology and defense industries. For China, you know, they'd like to see um, you know, the United States not discriminate against Chinese companies. Um, you know, globally, they want the US to lift its own export controls, particularly the last set, which basically places about 12,000 Chinese companies on the entity list, which is pretty, you know, significant. Um they'd like the president to do something on Taiwan at the very least an affirmation of you know the one uh China what we call the one China policy what they call the one China principle they're slightly different what I have to interrupt here this is too important what is the Elizabeth economy gaussian distribution of outcomes with Trump Xi and China what's the most likely thing in Taiwan what's the most likely thing Liz >> on the Taiwan question. Um I I think um the president is President Trump. Um I don't think he has much personal um interest uh in Taiwan, much of a sort of personal sensibility of its importance save uh the fact that we, you know, import more than 90% of our advanced semiconductors from uh from Taiwan. and that will continue to be the case despite all of the investment in the United States by TSMC, their major um semiconductor manufacturing firm. Um so he's not going to get away from the silicon shield. Um but I I think you know the range of of possibilities I think um basically is you know number one that we sort of say we commit to and I think this is on the outside we commit you know to you know diminish our arm sales to Taiwan. I think that would be, you know, a high priority for China. I think that's less likely, but it's a possibility. >> Liz, a number of years ago, your book, The Third Revolution, was my book of the summer. Folks, it it's dated now. It's a short read. Let's bring that up to date. What's the fourth revolution look like, Dr. Economy, for Beijing and for President Xi? No, I mean I think the fourth revolution my hope would be would be a new Chinese leadership with a uh sort of return to a more open political and economic system. Um you know the sort of the the trend is basically every 30 years you get a a revolution. Uh and so we're not we're not quite ready for the revolution. Tiin Ping's been in power for 12 years. So there's a long space to go yet uh to have that next revolution. I think what we're going to continue to see frankly in the foreseeable future is just an amping up of what we already have which is just this incredible you know investment in terms of innovation and technology this ramping up of China's presence and its belief in its own leadership uh on the global stage um which you know can only be curtailed possibly by you know a US-led alliance pushing back against some of its worst practices and potentially by some internal factors um you you know, some of China's economic challenges that it's facing that it still hasn't dealt with. But I think in terms of the, you know, next 10 years or so, I think it's all system goes for Xiinping in China. >> Wow. Elizabeth, if Xihinpa does sit down with President Trump uh in South Korea later this month, who has the leverage, if anyone, >> you know, I think when this all began, I was pretty skeptical about the US um leverage with regard to China, which I think was built on the faulty premise that simply because uh we uh import so much more from China than China does from us that that gave us leverage because it excluded the fact that we, you know, have so much more single source dependency on China for things like rare earth elements and for the precursors uh for, you know, hundreds of our most important drugs, right? Precursor chemicals um the active pharmaceutical um uh ingredients. So I think that this you know was the fundamental mistake that this administration made when it first launched this trade war with China that it thought China was simply like every other country and now we're paying the price for that. Um so in my estimation China has the stronger hand and at some level it's always had the stronger hand. It's better able to tolerate the pain you know from its population. It had done more to diversify into other markets uh over the past you know four to you know nine years and and so I think it's in a better position unfortunately. >> I got one final question now that you're sconce out at Stanford. She doesn't give any A's. I mean it's all solid C's for Elizabeth economy. She's at the Hoover Institution and uh of of course with all of her work over the years for America and her public service I should say with uh Secretary of Commerce uh Rando here recently. Liz, when you teach at Stanford or the young people come up and say, "OMG, Elizabeth Economy," do you still tell them to read Jonathan Spenc's the search for modern China? Is it still valid as thick as it is? Um you know listen I think um Spence I think there are um many Chinese um you know historians of China um I think all of it's valuable uh because understanding the history of China helps you understand the mindset that China brings to the table today. So absolutely uh I would continue to recommend uh you know books by Jonathan Spence if in fact any students came up to me and said oh my god Liz economy although some students do come up to me >> and some of them probably say it in Mandarin. We got to leave it there. Elizabeth economy thank you so much at Stanford. She's been a huge supporter of our effort here. Stay with us. More from Bloomberg Surveillance coming up after this. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7:00 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say, "Alexa, play Bloomberg 11:30." >> Lisa Mateo with the newspapers. What do you have? >> Tighter visa restrictions could be the reason behind a drop in applications for MBA programs in the US. They're saying a lot more of those international students there, they're choosing to go closer to home. That's the choice they're starting to make. I want to point out the data really quickly. It says interest in MBA programs in the US dropped 1% in 2025. Applications to business school programs worldwide, they increased 7% and it's a big turnaround from last year when more people were going. >> You mentioned the dinner last night and there was a blurb yesterday in the zeitgeist of PhD, which is not MBAs. I'm going to use this word loosely, folks. PhD applicants at major schools have cratered because there were so many international kids involved. >> Yep. And it's too And it's uh they tend to be full pay. The international students tend to be full paid. They're sponsored by their companies and things like that. So it's it's a it's an issue. >> John Silberg, Boston University. He's the one that really efforted that. Yep. >> Brilliant. Anything else on that, Lisa? Um yeah, also one more thing from that is that in East Asia, including China, international applications were up 42%. So that's kind of a big area that we're talking about um where they're deciding to stay home. Yep. >> Um okay, so this next one, we mentioned Hermes earlier, so I wanted to kind of dig into it, get into those Birkin and Kelly bags. Okay. Um so it was another quarterly sales jump, but investors wanted more and that was kind of the issue. um their key leather unit. They fell short of expectations even though it was higher than LVMH. Um but despite all that, it's still like top luxury brands. It's keeping um their business model is keeping people hooked um keeping those items scarce, you know, limiting demand. So, you kind of got to you have to have that bag. It works. I don't take my word for it. I haven't jumped on one yet, but it does because in the US, um, they're saying wealthy shoppers, especially in the US, are continuing >> the US really, you talk about tech and exceptionalism and the stock market, US really popped and even China there with a little bit of >> Yes, even China and that was a big thing. And what they say too, they didn't increased the price back in May, but they haven't increased it since then. So, I guess people were happier about that. So, they continue to buy. Yeah. LVMH. You know, I saw a lot of Birkin bags at the Commonwealth Conference. >> Did you? Okay. We went to Seattle. I was Oh, there's another. Oh, okay. Very nice. >> There you go. You said good morning. Thank you for your keynote speaker Commonwealth today is Coach K. >> Ah, I'm surprised you didn't call. Exactly. Next, you got one more squeeze. >> Okay. So, Six Flags, right? The theme park's been struggling. I remember as a kid, we always used to go bad weather. Yes. Bad weather. uh declining visit. So now an active investor is pushing for big changes. He's teamed up with Travis Kelce. Yes, NFL's Travis Kelce. It's New York based hedge fund Janet Partners. Kelsey, other investors, combined stake of about 9% of the theme park operator shares or $200 million. Um and he actually said Kelsey said he is a super fan. He loves roller coasters. He's been going to these things since he was a kid. Um so the chance to kind of work with them, he was all up for it. So he's starting to get into it. And so they have a couple plans what they want to do like you know marketing and customer experience modernizing technology um refresh leadership which was interesting that they said that um and even evaluate a potential sale. So we'll see what happens but um yeah they've worked with celebrities before a lot of these active investors >> CC Sabathi Shaquille O'Neal there you go >> exactly and those are some >> and the Chiefs the fundamental thing is the Chiefs are doing better. Lisa Mateo of the newspapers thank you so much greatly greatly appreciate that. This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 7 to 10:00 a.m. Eastern, on Bloomberg.com, the iHeart Radio app, TuneIn, and the Bloomberg Business App. You can also watch us live every weekday on YouTube, and always on the Bloomberg terminal.
Stocks Struggle as Gold Rout Deepens | Bloomberg Surveillance
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[Music] Bloomberg Audio Studios podcasts radio news. [Music] This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Why uh joins us this morning for an extended conversation. Why I want to go back to first principles. My great mentor in the United Kingdom, he has recently died. Magden Desai, Lord Desai of India and of the United Kingdom would say it's just about profit. What is the quality the physics of technology profit that makes you committed to Max 7? >> Well, it is about the quality of profit. It is about it is also about the reality of earnings coming through really strong, right? We're not putting hypothesis out there. We're just looking at the ability of these companies to generate earnings to generate profit. And so far if you look at equity attribution of uh various markets globally, US really stood out in being able to deliver earnings to justify the performance and tech and magnificant 7 in particular really stood out at uh in terms of their earnings basically explaining almost all of their performance so far this year. >> When will you know the profit of all this capex investment? Are you going to know that somewhere next year or do we have to wait 10 years to know? >> Maybe somewhere in between. Actually, that's a very good uh point. So far, phase one of this buildout has been really companies spending their free cash flow and they a wash with cash to invest in this mega deal. But we're now entering phase two where perhaps the buildout is more capital intensive. If we're talking about some new entrance tapping into bond market, into private credit, into joint ventures to fund some of this investment and vendor financing is seen as well. Right? So phase two is more capital intensive and timing is everything. You know, we can be right about the revolutionary nature of the technology, but we can still have a very rocky markets on our hand. So what we're seeing right now is trillions of capex being kind of talked about and estimated in the coming years. But time will tell if we have the right return on investment to justify those uh those investment those capex commitment but in the meanwhile we cannot afford to stay out of this market. So signposting is everything. Looking at the earnings, looking at free cash flow in particular of those companies that are going to be consumers of this copex investment is how we are navigating this moment. >> Way we are in fact in the middle of uh earning season. That's a good thing. We saw some some pretty strong numbers out of the the big money center banks and now we're getting some industrial companies reporting. Um but it seems like geopolitics is not far off the radar for this market. China in particular, trade discussions with the US. How do you think about that? Is that something you just try to ignore? Do you try to play it? Because it seems like the trade talks with China and what that means for global GDP over the coming years are still front and center. >> It's really hard to follow the headlines blowby-blow, right? like from one moment we hear that maybe we're going to get a good deal between US China and to the next moment where maybe uh the meeting won't happen. So it's very uh uh noisy in terms of headlines right now and if you look at the Bloomberg US trade policy uncertainty index it peaked in April but it recently started going higher again. So markets are reacting quite a lot to it but I think it's very hard to generate alpha by just following headlines. So focusing on the things that cannot change very quickly in the near term is how we're trying to navigate this environment. So inflation considerations for the US but also thinking about the balance of payment for China and how important that is. Uh and if markets get carried away we would lean against that extreme pricing because these things cannot change very quickly which is why right now we're still pro risk despite the very busy trade headlines. >> Way with black rockck with us for an extended conversation to start strong. Elizabeth economy on China in the 9:00 hour. I just put out on LinkedIn my LinkedIn of the day. It's way lee. >> I had to be polite, you know, did that. But it's a great Bloomberg screen of the margin difference between S&P and small cap. Excuse me, large cap versus small cap. We Lee, it's back 30 years. Can I say it's never been like this? I think we're seeing some extraordinary K-shaped developments. The um chart that I put out, the Broom Bloomberg screenshot that I put out on LinkedIn is the profit margin of S&P 500 large cap and S&P 600 small cap. And they're really starting to diverge. But that's just one manifestation of this K-shaped development, right? We see K-shaped recovery of the consumers. we see K-shaped kind of default type of pattern in credit and also including in private credit. I think in an environment where we don't have rising tide of very easy policy lifting or boat of very easy fiscal stimulus kind of supporting everything being very selective in terms of how we deploy risk is going to be the name uh of the game. We see credit markets. You look at the the the the cycle, there is almost a missing credit cycle. But digging under the hood, fundamentals support the very strong uh uh uh large capsu with cash, whereas the very small uh uh players are currently under uh uh pressure. So K-shaped development is a characterization of the environment that we're in and I think that's here to stay for a while. Way, can you talk to us about geography? Where do you see, I guess, best opportunities? Maybe US versus rest of the world? Are you focusing on Europe? How do you think about from a geographic perspective where some of the opportunities are out there? We currently actually still like uh US equities and we also prefer uh Japanese uh equities and uh we uh favor them over uh for example European uh opportunities where uh we would want to be a bit more selective you know uh uh financials and industrials how we want to play that together with defense theme and the reason that we still favor US equities you look at how markets have developed so far This year US equities became a little bit more expensive but not as much as how much more expensive i.e. rerating has taken place in the rest of the the the world because of the stronger earnings delivery in the in the in the US market. You look at the earnings revision the last two months or so. US uh earnings have been revised higher versus European earnings having been revised lower. So the direction of travel very much speaks to kind of the the underlying economy and the concentration of the AI theme. So for as long as I think we're still in this AI um AI uh conviction AI core, it would be hard to fade the the US ugly market at this juncture >> in the fixed income space here. I mean you can sit there at a two-year Treasury get three almost three and a half% here. That seems to be a not a bad place to be here. Do you sit there in the US treasuries or do you maybe take some credit risk out there? >> Um for our Q4 outlook that was released now we meet October that was released almost one month ago. We upgraded the long duration US treasuries because we felt that the Fed is getting lucky a little bit because it is embarking on restarting the Fed cutting cycle and the macro environment actually supports that i.e. labor market is just weak enough for fed independence not to be under scrutiny as it restarts cutting cycle. Right? So as we kind of uh still uh are in this environment the Fed is still uh getting lucky uh in that you know like we heading into next week I think 24 bips of rate cut is a foregone conclusion. We do want to lean into this momentum and lock in some of those really attractive real news in particular. So, so, so, so we like treasuries at this uh at this structure. >> That's right where I want to go. You're reading my mind. And Paul, I'm glad you brought it up because I've been real equity century focused. I got a 395 10-year yield. Is this finally where we get the inertial force to lower yields? Do we finally break down to a lower real yield, lower nominal yields? Well, we we do think that in the very near term uh markets can go with this narrative that uh because of weak labor market actually the the Fed needs to to cut and because there is macro justification for that uh maybe the long end of the curve is not going to be penalized uh in that term premium may not go higher as markets challenge the the the the fat independence topic. So that is a bit of a sweet spot for for treasuries. Now having said that heading into next year, if you look at the the market pricing for policy path, we're talking about below 2.9% by the end of 2026. I think given the still broadly inflationary environment, we're still waiting to see the impact of tariffs through to to CPI for example. I think market pricing for below 2.5% policy 2.9% policy rates by the end of next year is too optimistic but we may not get to the awakening moment just yet which is why we're tactically overweight. >> I've got to ask you why with your heritage in your academic excellence in China. >> We have Elizabeth economy coming up of Stanford uh later why your thoughts on this important set of meetings to a new five-year plan in China. Well, this is a economy that needs to uh go through reforms, right? Like this has been talked about for many years now. It needs to go from a investment heavy uh driven type of growth model to consumption having uh driven type of um growth model and right now consumer sentiment still is somewhat uh uh uh tapped. So I think how to energize that is going to be very key especially against the backdrop of aging uh population and structural headwinds to to economy. So that's that's a very delicate balance but the key here is mega forces and specifically navigating and capitalizing on the AI uh uh revolution. >> Way thank you so much with black record. Stay with us. More from Bloomberg surveillance coming up after this. You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10:00 a.m. Eastern. >> Listen on Apple CarPlay and Android Auto with the Bloomberg Business App, or watch us live on YouTube. >> This is a conversation of the week, but dare I say, folks, here in October, our most important hydrocarbon conversation to the end of the year. Edward Morris is absolutely iconic, made more so at Cityroup recently screaming at the oil perpetually over $100 a barrel. People going maybe not. He is right. He he was right, I should say, and still is right at Heartree Partners. Ed Morse joins us with all of his service to the nation. Uh senior fellow council on foreign uh relations. You open up classic Ed Moyer, Ed Morris, supply and demand and the increase of oil on the water. What is oil on the water? Is that boats? It's actually tankers and they're either moving from where the supply is coming from, going to where the demand is, or they're just not going anywhere because there's nobody who wants the oil. So, we've had an incredible surge in oil on the water. That surge has come after the summer demand season is over. It's come as OPEC plus has added oil to the market. >> So, uh, Bessimists were 1 billion250 million barrels of oil in transit as of a week ago. And that's the most since 2020, which we all remember when oil prices went negative. >> Um, well, oil prices went negative and and again, you said look for lower prices. the acclaimed Bloomberg Business Week cover of years ago of tankers off Singapore just sitting in the water. Is that what 2026 looks like? >> Well, 2025 certainly looks like it's going to end that way. What happens in 2026 is partly a function of what the OPEC countries decide to do. Are they going to continue to put more oil in the market? Uh and the other big question is China. China has absorbed most of the excess amount of oil in the market. That's why inventories are so low around the world other than China. They were uh importing an average of over a million barrels a day to put in storage. That's geopolitical of course. Uh they've kind of slowed down a little bit uh related, I'm sure, to US China talks. Uh but those seem to be going nowhere. So, China is part of the issue of how much they're going to suck in to build their own inventory for some future date. >> WTI crude oil at $58. With WTI crude oil at $58 a barrel, is there a global glut of oil in the marketplace? >> Well, it looks like that. That's what the oil on the water is telling us. There's a glut. It's showing up. It's beginning finally to show up in inventories, but the inventories are so low they have a long way to go. Uh but yes, there is definitely a glut. Supply is significantly more than what demand is at the moment. >> So what is the the if I'm sitting down there, I watched Landman for one season, so I know all about the oil and gas. I'm an expert >> in Austin at the F1 at the Sweeney corner was the big advertisement for Land Man. >> So I know all about the global energy business. >> What's the fix that? I mean, if I'm in Houston, I want $75 a barrel, don't I? Well, if you're in Houston, you want the highest price you can get. So, yes, certainly is higher than WTI at 58. Um, and we'll see how they're doing. You know, the US hit record levels of production in the month of August, where you don't have the full data yet, but there's no sign of there being, you know, a downturn in US production. I I think among the things to look at at the moment in the month of November is whether the crown prince of Saudi Arabia is going to come to the United States. >> November 18th seems to be the schedule. How will that response be? What will be the oil discussion in the Oval Office? >> Well, I suspect he's not going to come if >> earlier in November they decide to not put more oil in the market in o in December. So, I think that'll be a signal. Okay. I think they're looking at uh three or four things. Uh they've noticed that Qatar has gotten a NATO like defense agreement with the US government. They would certainly like something similar to that. They are more important in many respects to the US and to Trump's desire to have lower gasoline prices at the pump. They're looking for a military deal similar to the one that was struck when Trump was visiting Riad uh last spring and that was just about $150 billion worth of military equipment. They're particularly looking for F35 uh fighter jets. Are they going to get any at all? Are they going to get what they want? Is there going to be a nuclear agreement? Are they going to be seeing US technology and US material come in as they build nuclear energy for power generation and free up more oil for export? >> Ed Morse with us. We continue right now with Heart and of course iconic at Cityroup and his assistance of the country in studying oil particularly within the Middle East. 2012, I remember this article. Matt Bessler came out of Michigan, great great academics at economics in Michigan, writing for business insider. It's just a classic headline. City's Ed Morris has a huge note blasting everyone who believes in peak oil. This is the feisty Morris from years ago. Peak oil biases continue to blind analysts to an emerging oil cycle turning point. You nailed it. Matt Ber, I should say, is now with Bloomberg, and that's to our advantage. You nailed it. What's the myth right now in oil that's wrong? The myth that's wrong is that oil demand is peaking, whether it's peaking in 2028 or 20 2032, the consensus in the market seems to be that oil demand is peaking. Yet if you try to study oil demand uh you can notice that uh whatever the cycles have been GDP is the driver of oil demand u and GDP relationship with oil the oil intensity of GDP is certainly falling. It's been falling at a steady pace. It's a very linear line from where we were in the early '7s when for every 1% increase in GDP around the world uh and we do this in constant dollars by the way there's there was over 1% demand for oil that has come down linearly and we just looked deeply at 2020 through the first half of 2025 and we're on a slope that tells us that oil demand is going to peak in 2064. >> Okay. Well, that's out there. Lisa, make note of that. 2064. Ed and I won't be around. Ed Morris, what's your target on oil here now? You were so good at 100 saying think 80. At 80, think 60. Can Ed Morris think $40 a barrel? I think it gets to 40 by overexuberance once it crashes through that $50 number. So, um I I think there'll be a lot of reactions uh at under 50. >> What does $50 barrel oil mean for the Middle East and particularly for Riad? It means a little bit of difficulty on the credit side. So, yes, they have a fiscal break even that is substantially higher than uh $60 Brent. Uh but they get in trouble with their A+ rating on credit and they need the credit. They need the lending in order to make their own energy transition, which is to diversify their economy and get off a dependence on crude oil. >> John from the Jersey Shore emails in. He says, "With my Hummer H2, what's a gallon of gas cost at Ed Morris is 40." I mean, where are we? Under two bucks. >> Wow. >> $2 a gallon. >> It depends on where in the country. If you're in California that is Yeah, there's always closer to >> Absolutely. brilliant. Are EVs having an impact on the price of oil? >> Of course they are. They're part of the system of replacing oil with something else. And if we look at the declining intensity that oil has in GDP around the world, we're having an increased intensity of GDP in electricity and that's where the geopolitics are turning as we look into the next decade. >> Y please come back next week. Ed Morris with us with Hardry. Folks, what a briefing there for Global Wall Street. Edward Morris with all of his service to the country, the discussion of oil, the geopolitics of oil. Stay with us. More from Bloomberg Surveillance coming up after this. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say, "Alexa, play Bloomberg 11:30." I have been asking for days please Elizabeth economy of Stanford Dr. economy joins us right now definitive on the trans-Pacific debate economy just the prism of 7 8 n military commanders out the door in China how do you interpret that >> I mean you know honestly this has been 13 years worth of a continuing anti-corruption purge um it sounds like a lot and it's not insignificant particularly given that three of them um are members of the central military commission which is the top body that oversees the party body that oversees the Chinese military. So that's three out of seven that were just purged. So it's not you know inconsequential but you know Xinping this is just a continuation of you know a purge that just never ends for him. You know what does that say about the nature of how he goes around uh dealing with corruption? I think uh it suggests that he hasn't found uh the proper method to deal with this because you know it's it's ongoing. Um and these are people that he himself put in place. Uh so it's not about finding people who are more loyal to him necessarily. These were supposed to be uh you know loyal compatriots. Um so it's not a good look but frankly it's not that new. >> So so one of the problems here Paul and this is like the the small life that I live with Elizabeth economy. They have a book thing in the back of Foreign Affairs magazine and Elizabeth economy will be there and go let me ruin your October, November, December. I have literally Liz in the top of my pile the book you said here's the primmer on the military power of China Bloomberg surveillance just spoke with Admiral Mullen and we talked about the South China Sea. give us the Liz economy update on the military capability of China and the South China Sea. >> Yeah, I mean I I think um you know from everything and and you you you have the book in front of you so you can you can read it yourself uh Tom but I think the you know the takeaway is really that um China has made enormous gains in terms of its military capabilities particularly in terms of uh sort of the near abroad you know in its own backyard. um it wants to be the dominant military power uh in the Asia-Pacific. So that's been its priority. I think the weaknesses um remain in terms of the command and control um the fact that China doesn't necessarily you know hasn't had a lot of actual war fighting experience. So nobody really knows how good they'll be uh when put to the test uh and whether the top down nature of control will enable uh sort of the mid-level u military commanders to make the type of split you know moment decisions split-second decisions that you want them to be able to make. Um so there are some you know weaknesses and again I think they haven't made you know progress as much progress as they would have liked in um establishing bases overseas. you know, they want to have a larger footprint globally. Uh they're doing that in terms of their arm sales. They're doing more military training of other countries, you know, with the people's liberation army. So, they have in place many of the elements of a global military presence. Um but they're not quite there yet. And I think that's, you know, those are sort of the two major messages if we're trying to understand where the Chinese military still falls short. Those are probably the two main areas. Elizabeth, for those of us on Global Wall Street, we're trying to keep a pace of the changing economic discussions between the US and China here. Will there be a meeting with President Xi and President Trump later this month? What's your current read of the relationship, of the potential negotiations, and how this all might shake shake out? >> Yeah, I mean, I think um you know, odds of there being a meeting are quite high right now. um you know it it looked less good uh you know a week or two ago when we had uh the most recent sort of tit fortat uh with the US export controls and the Chinese controls and new licensing restrictions and um on rare earth elements. Um so that was you know I think a huge dust up but President Trump has pretty clearly signaled that he expects to meet uh with President Xi um on the sidelines of APE in South Korea next week. Uh, so I take that as as a positive in terms of what's likely to come out of the meeting. Look, the president has made clear what he wants. He wants, you know, and it's nothing we haven't heard before. You know, he wants China to do more in terms of controlling the export of the precursors for fentanyl. He wants China to, you know, buy more soybeans, you know, because basically they're not buying any soybeans from the United States. They've completely gone to other, you know, markets, um, like Brazil and Argentina. Um, and he wants China to lift these new restrictions on the export of rare earth elements because that really hits hard at our technology and defense industries. For China, you know, they'd like to see um, you know, the United States not discriminate against Chinese companies. Um, you know, globally, they want the US to lift its own export controls, particularly the last set, which basically places about 12,000 Chinese companies on the entity list, which is pretty, you know, significant. Um they'd like the president to do something on Taiwan at the very least an affirmation of you know the one uh China what we call the one China policy what they call the one China principle they're slightly different what I have to interrupt here this is too important what is the Elizabeth economy gaussian distribution of outcomes with Trump Xi and China what's the most likely thing in Taiwan what's the most likely thing Liz >> on the Taiwan question. Um I I think um the president is President Trump. Um I don't think he has much personal um interest uh in Taiwan, much of a sort of personal sensibility of its importance save uh the fact that we, you know, import more than 90% of our advanced semiconductors from uh from Taiwan. and that will continue to be the case despite all of the investment in the United States by TSMC, their major um semiconductor manufacturing firm. Um so he's not going to get away from the silicon shield. Um but I I think you know the range of of possibilities I think um basically is you know number one that we sort of say we commit to and I think this is on the outside we commit you know to you know diminish our arm sales to Taiwan. I think that would be, you know, a high priority for China. I think that's less likely, but it's a possibility. >> Liz, a number of years ago, your book, The Third Revolution, was my book of the summer. Folks, it it's dated now. It's a short read. Let's bring that up to date. What's the fourth revolution look like, Dr. Economy, for Beijing and for President Xi? No, I mean I think the fourth revolution my hope would be would be a new Chinese leadership with a uh sort of return to a more open political and economic system. Um you know the sort of the the trend is basically every 30 years you get a a revolution. Uh and so we're not we're not quite ready for the revolution. Tiin Ping's been in power for 12 years. So there's a long space to go yet uh to have that next revolution. I think what we're going to continue to see frankly in the foreseeable future is just an amping up of what we already have which is just this incredible you know investment in terms of innovation and technology this ramping up of China's presence and its belief in its own leadership uh on the global stage um which you know can only be curtailed possibly by you know a US-led alliance pushing back against some of its worst practices and potentially by some internal factors um you you know, some of China's economic challenges that it's facing that it still hasn't dealt with. But I think in terms of the, you know, next 10 years or so, I think it's all system goes for Xiinping in China. >> Wow. Elizabeth, if Xihinpa does sit down with President Trump uh in South Korea later this month, who has the leverage, if anyone, >> you know, I think when this all began, I was pretty skeptical about the US um leverage with regard to China, which I think was built on the faulty premise that simply because uh we uh import so much more from China than China does from us that that gave us leverage because it excluded the fact that we, you know, have so much more single source dependency on China for things like rare earth elements and for the precursors uh for, you know, hundreds of our most important drugs, right? Precursor chemicals um the active pharmaceutical um uh ingredients. So I think that this you know was the fundamental mistake that this administration made when it first launched this trade war with China that it thought China was simply like every other country and now we're paying the price for that. Um so in my estimation China has the stronger hand and at some level it's always had the stronger hand. It's better able to tolerate the pain you know from its population. It had done more to diversify into other markets uh over the past you know four to you know nine years and and so I think it's in a better position unfortunately. >> I got one final question now that you're sconce out at Stanford. She doesn't give any A's. I mean it's all solid C's for Elizabeth economy. She's at the Hoover Institution and uh of of course with all of her work over the years for America and her public service I should say with uh Secretary of Commerce uh Rando here recently. Liz, when you teach at Stanford or the young people come up and say, "OMG, Elizabeth Economy," do you still tell them to read Jonathan Spenc's the search for modern China? Is it still valid as thick as it is? Um you know listen I think um Spence I think there are um many Chinese um you know historians of China um I think all of it's valuable uh because understanding the history of China helps you understand the mindset that China brings to the table today. So absolutely uh I would continue to recommend uh you know books by Jonathan Spence if in fact any students came up to me and said oh my god Liz economy although some students do come up to me >> and some of them probably say it in Mandarin. We got to leave it there. Elizabeth economy thank you so much at Stanford. She's been a huge supporter of our effort here. Stay with us. More from Bloomberg Surveillance coming up after this. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7:00 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say, "Alexa, play Bloomberg 11:30." >> Lisa Mateo with the newspapers. What do you have? >> Tighter visa restrictions could be the reason behind a drop in applications for MBA programs in the US. They're saying a lot more of those international students there, they're choosing to go closer to home. That's the choice they're starting to make. I want to point out the data really quickly. It says interest in MBA programs in the US dropped 1% in 2025. Applications to business school programs worldwide, they increased 7% and it's a big turnaround from last year when more people were going. >> You mentioned the dinner last night and there was a blurb yesterday in the zeitgeist of PhD, which is not MBAs. I'm going to use this word loosely, folks. PhD applicants at major schools have cratered because there were so many international kids involved. >> Yep. And it's too And it's uh they tend to be full pay. The international students tend to be full paid. They're sponsored by their companies and things like that. So it's it's a it's an issue. >> John Silberg, Boston University. He's the one that really efforted that. Yep. >> Brilliant. Anything else on that, Lisa? Um yeah, also one more thing from that is that in East Asia, including China, international applications were up 42%. So that's kind of a big area that we're talking about um where they're deciding to stay home. Yep. >> Um okay, so this next one, we mentioned Hermes earlier, so I wanted to kind of dig into it, get into those Birkin and Kelly bags. Okay. Um so it was another quarterly sales jump, but investors wanted more and that was kind of the issue. um their key leather unit. They fell short of expectations even though it was higher than LVMH. Um but despite all that, it's still like top luxury brands. It's keeping um their business model is keeping people hooked um keeping those items scarce, you know, limiting demand. So, you kind of got to you have to have that bag. It works. I don't take my word for it. I haven't jumped on one yet, but it does because in the US, um, they're saying wealthy shoppers, especially in the US, are continuing >> the US really, you talk about tech and exceptionalism and the stock market, US really popped and even China there with a little bit of >> Yes, even China and that was a big thing. And what they say too, they didn't increased the price back in May, but they haven't increased it since then. So, I guess people were happier about that. So, they continue to buy. Yeah. LVMH. You know, I saw a lot of Birkin bags at the Commonwealth Conference. >> Did you? Okay. We went to Seattle. I was Oh, there's another. Oh, okay. Very nice. >> There you go. You said good morning. Thank you for your keynote speaker Commonwealth today is Coach K. >> Ah, I'm surprised you didn't call. Exactly. Next, you got one more squeeze. >> Okay. So, Six Flags, right? The theme park's been struggling. I remember as a kid, we always used to go bad weather. Yes. Bad weather. uh declining visit. So now an active investor is pushing for big changes. He's teamed up with Travis Kelce. Yes, NFL's Travis Kelce. It's New York based hedge fund Janet Partners. Kelsey, other investors, combined stake of about 9% of the theme park operator shares or $200 million. Um and he actually said Kelsey said he is a super fan. He loves roller coasters. He's been going to these things since he was a kid. Um so the chance to kind of work with them, he was all up for it. So he's starting to get into it. And so they have a couple plans what they want to do like you know marketing and customer experience modernizing technology um refresh leadership which was interesting that they said that um and even evaluate a potential sale. So we'll see what happens but um yeah they've worked with celebrities before a lot of these active investors >> CC Sabathi Shaquille O'Neal there you go >> exactly and those are some >> and the Chiefs the fundamental thing is the Chiefs are doing better. Lisa Mateo of the newspapers thank you so much greatly greatly appreciate that. This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 7 to 10:00 a.m. Eastern, on Bloomberg.com, the iHeart Radio app, TuneIn, and the Bloomberg Business App. You can also watch us live every weekday on YouTube, and always on the Bloomberg terminal.