Investing, Energy, China, and SCOTUS (Podcast)

is are kind of in the market. I know, rates are going up, that's in the market. Our names you're coming down, that's kind of in the market. So don't I just buy stocks and buy bonds and stuff like that now so that I could sit in cash? You could sit in cash. I guess now I'm getting you know, on the two year, I'm getting four point four nine percent on my two years. So who knows? Phil Ta's he's the CEO of T'sset Management. He has to do this for a living. That got a couple of bill

under management. Phil, what are you doing in this marketplace? Because I know you and your team you had been real a long cash for a while. Um, what are you doing these days. Yeah, so we were almost nine cash for the majority of this year. You can do that. We can, In fact, we manage funds and ets that are able to go fully defensive in cash or be fully headed with options. But we were driven partially back into the market into high yield bonds last week, and

that represents about fifty percent of our business. But you know, I don't I wouldn't say that we're optimistic, but I think that there's a possibility that we can continue to move higher. I mean, you said, go ahead and just put money in stocks and bonds. I feel like there's such a recency bias towards declines being very short term, like we saw in the pandemic, that we're all just expecting this to be over. But I kind of doubt

that it is. And I think maybe looking at the Internet double burst where it happened two thousand, two thousand, two thousand, two to two and a half years, is the kind of market that we're going to be looking forward to. I want to talk about junk bonds. That's really interesting. I call them high yield. I'm sorry, let me use the government name. So those high yield bond funds I track e t f s. That's my day job here at Bloomberg News. Influence into high yield debt.

E t f s have been on fire, So it's interesting to hear you say that. Tell us a little more about that flip. What triggered it to co out of cash into junk debt? I said it. Well, so it could be it could be managers like us. Certainly we came in with around seven million dollars last week. But what if you look at high yeld bonds seven dollars to work last week? Yes, that's real money. Yeah, write that down? Could you do that? Like? How did you? How did you just tell us? How? Like how a

manager does that? So you know, the market is so liquid for places like high yield bonds and and certainly you know stocks if you look at the major blend indices, so it's not a problem to come into the market and not really move it and take that type of

a position. But it could be traitors like us, because if you look at the history of high yield bonds, they tend to not move that much per day on average, they move about maybe twenty basis points, So you don't get whipsode if you have to come in and out. You know, we're driven by trend following algorithms. So it's possible that we came in last week and we could be out again this week. But look, there's a potential

here with yielded around nine and a half percent. Uh, if markets move up this fourth quarter and we get that kind of yield plus a little bit of appreciation, that could be a decent trade. I think. All right, just just kind of for giggles here, Elon Musk is refinancing his Twitter debt today. Do you buy any of any of his new debt come into the market? Would you be interested in and Elon musk debt package for Twitter? Not what you know about Twitter. I would love to

answer that question with authority and with knowledge, but I don't. Unfortunately, when we buy how yield bonds were buying just looking at in disease and I guess when you're buying high yield, you have to have a call on a recession, how deep, how long it will be? Are you concerned about that as you go into some higher yielding paper. Yeah, So when we come in because we've follow trends and they can move lower and have us out again, this week.

We're not so worried about that. What we like though, is positions that come in after we've had a decline like we've had of around fifteen percent and high yield bonds, so that potentially produces opportunity. Look back to the financial crisis there we saw high yield bonds move around down around twenty you know, eight the following year they advanced fifty percent. So the opportunity is there, we just don't know if it's right now or maybe sometime in or later.

So given that you are trend following, how often do you make these sort of big allocation shifts that you just made from cash into high yield for example. Yeah, So so we manage six funds and two e t s and they and they make up equities and high yield bonds on average across our whole platform. We're buying or and selling, maybe making two to three round turns for a year, so not a lot. It's some people

refer to it as turtle trading, so we're not. We're not speculating and trying to make it take advantage of just any one day move. We're really trying to take advant page of moves that that lasts over several months. But that sounds like trying to market time, which I've thought as a tough business. Yeah, so it's really tough business until you see the market move down and you

don't participate. That's what you really want to do. But market timing is an interesting phrase, and it refers technically to people that are out there trying to predict what's going to happen in the markets, which we don't do

and we don't recommend uh historically. However, though, if you are able to just follow trends and be out in the early phase of declines before they move down significantly, and then just right out and be in cash as we have been a lot this year, and then attempt to come in the very early stage of advances, it can be very favorable. Look, even if you don't return what the markets return, if your investors are participating in that big move lower, that can be a huge benefit

to them. All right, great stuff. Really appreciate getting your points of view. It's a different point of view, and we appreciate hearing that. Phil Taste, he's the CEO of Ta's asset management. He joins us Live and Bloomberg Interactive

broker studio. And you always appreciate that we're at the time of the year where university endowments are reporting the returns on their endowments for the trailing twelve months and in June of this year, and you think back a year ago, they were talking fifty fifty positive returns, just extraordinary numbers. But as we all know, two has been

the other side of that coin. We've got equity markets down, fixed income markets down load of mid teens, so you'd expect to see some returns like that, but we're not. We're seeing kind of flat minus two, minus four, minus five. What's going on here? Let's check in with Gabrov Patankar. He covers all that stuff for Bloomberg Intelligence, and he joins us here in a Bloomberg Interactive broker studio because he does not phone it, and he comes in, uh,

in line. Here, here's my concern or here's my guess. They're not marketing their private equity investments to market. Is that the case? That's a that's a very very good, very very good and very well informed gas. But I think there's much more to it. So if you just peel the onion a little bit, all the university pension plans have done extremely well over the years. As we all know, they followed the Yale model and really took on a liquid risk, which conceptual is not such a

bad thing. If your liabilities are are over the long term, you should be investing over the long term. Having said that, a lot of the private managers the mark to markets in this particular situation is very subjective. It's about when your auditor comes in and and literally goes through asset by asset. There's a one or two or three or

even a four quarter delay from time to time. There's also inconsistencies but on how different managers mark the same investment for different investors based on different mandates, or how different managers mark the same investment in different investors portfolio. So it's extremely complex. I think we're just at the

beginning of these marks beginning to manifest themselves. I think the expectation for a lot of managers would have been to just wait it out and over a period of time the markets might come back and they don't really ever have to mark. But as we all know, that is not going to happen. I'm emailing your note literally as we speak down to my good buddy Neil triple It at the Duke University Management Committee. So get his

thoughts well to that point. I mean, is there a period in time where they do have to come out with their mark to market returns just and say what the raw number is there, Katie. That's a great question, and I think this time the canary is going to come out of the coal mine. When it comes to the smaller pension plans, smaller US public pension plans, as you know, the good old state pension plans, there's a

lot of scrutiny. There's a lot of both the political scrutiny as as as well as an investment comedy scrutiny, and there's zero incentive to really extend and pretends. I think some of the same managers that have also been recipients of capital from state plans are going to have to be forced to mark their books down. I think

he has to answer your question. Ear end would be a very interesting time when auditors, some of the largest auditors in the world, are going to really have to come to the table will and think about these private assets in a very very objective fashion. And I think

there could be significant marks. I think some of the endowment CEOs, including Navika, have been on record saying that there's a bunch of turbulence that lies ahead, and so I do expect that the year end is perhaps a good time, or early next year is when we start

seeing distance manifesting. I'm looking at your research note here, and you know that Yale, which is kind of the leader in university endowment investment in terms of you know, kind of really thinking outside the box, maybe becoming very aggressive as opposed to the traditional sixty for equity bond portfolio, they've got upwards in privates or alternatives. Wow, I didn't know it was that high, but I guess that's the

way they're doing here. That's how that you look for yield and what had been a zero interest rate environment. But the Yale model has been what it has been has been very successful and the gold standard for a lot of other smaller endowments and many others. In fact,

even in the pension world. To follow Having said that the forty three number for three percent there might actually even be a much lower number than what it could be because, as you know, the last three to six months, there's a lot of managers that come back to the allocators for reapping, come back to the allocators for incremental capital calls and things of that nature. Is actually that number, if one way to speculate, it could be much not

of the party three percent as well. Now, that is a very very large equity risk that that Yale has in the book, and traditionally endowment is supposed to have a much higher equity risk. But again, if you add liquidity marks that are not being taken and the capital commitment calls coming in, this becomes a pretty significant risk. So a significant risk. I mean, how worried are you?

How worried should we be about that? Because all I hear right now when it comes to the treasury market, the public equity market, liquidity is hard to come by when it matters. I mean that's a bit of an exaggeration, but we've been hearing about liquidity risks all year long. Now we're talking about the liquid markets, actually a liquid markets.

How can a into you? No, I'm reasonably concerned. I mean having said that endowments are not I'm not saying there's going to be a run on endowments or endowments are going at a business that's not what I'm saying. But what I'm saying is there's going to be a significant cost for concern because the endowments are sometimes on

the bigger hands that feeds operating budgets of universities. So when you think of cash flows, when you think of matching cash flows, I think that there are significant problems already based on some of the antidotal conversations we've had with managers that are lower in duration that the endowments want to fund, but they don't have the liquidity to fund those assets. Now, how are they going to get that liquidity is by secondarying out some of their private exposure.

Why are they not secondarying out that exposure at any good speed is because they're not getting the marks that they want. And why are they not getting the masks? Because there is no buyer for this And there's no buyer because the next set of buyers where public pensions, and they're not going to buy it at at the price that the endowments want to sell. All right, are good friends up in Cambridge, Massachusetts, Harvard, they've stepped up

their investments in hedge funds. What's up with that? Yeah, that's a great question, Harvard. For the longest period of time, while it's the largest endowment, has kind of been a laggered when it comes to performance. But over the last three to four years, Harvard has really taken a slightly different stance for other endowments based on whatever little public information we have, and what they have tried to do is pivot more around reducing the duration of the alternatives portfolio.

And I think Um the CEO of Narvika, and Ric's Locan the CIO have been on record to talk about that, and I think it makes a lot of sense, and these kind of turbulent markets where you're collecting some rent and reducing the duration of the alternatives portfolio while managing through.

Not that Harvard does not have a liquid private equity exposure where the capital calls may be coming, but they're able to manage through a little bit better than some of the other endowments like Washington or Yale or Princeton, which might have very very high degree of capital calls and more liquidly. Illequially, we only have about a minute left, but you also write the endowments have outperformed public pension funds by about a hundred seventy paces points over the

past ten years. You say that could converge. What's behind that call. Look, that's a very bold call to make, Katie. But there are a couple of reasons why I feel strongly about this. Endowments have always been the cool kids in the block. Public pensions not not so much. Now, what is really going to fundamentally change? You know what? Because they were not as school, they never really got up the liquidity spectrum. What they have is out there

in the open domain. It's tested every three months. There are politicians, investors, um citizens scrutinizing it. And they were a little bit behind the curve. And that's gonna come back to their rescue. And they are actually going to be in a unique situation where they could actually deploy to some of these secondaries or distressed funds at a time, which is very very interesting to be deploying capital in

their liquid markets. Alright, some good stuff there as always patank car ahead of alternative investments and manager research at

Bloomberg Intelligence. He's got a really good noe doubt that's getting the attention a lot of folks out there, and the pension fund business and the endowment business, uh, talking about some of those returns and again some just some extra in he returns over the last couple of years from some of these university endowments, and of course they were blowing their own horn, but you might be paying

for that here in some of these results being reported recently. Katie, we got w T I crude oil any seven dollars about you know a barrel here? It seems like it's kind of settled into that kind of range. But I want to talk about the global supply and demand of oil, and for that we talked to Fernando Valley. He's a senior analyst to Bloomberg Intelligence. He's been covering this energy business for like decades, and Katie, he says he knows

four languages. English, that's debatable, Portuguese. Willias from Brazil's will give him that Spanish. It's basically the same thing as Portuguese. So you give him that German. I'm not giving him credit for that. I need to see him like in a conversation with Matt Miller to give him credit for German. Sure, the ultimate has exactly Fernando, We'll give you credit for knowing the oil business. Um, what's the call here? I know you guys Bloomberg intelligence. You have your demand models,

your supply models. This is a commodity after all, and it's supplying demand. What are your models telling you now about where CREWD may be going? Well? Hi, Paul and first Good and Morrigan and Shodan's montag bones Poita, Uh so well schooling exactly. Um. Well, the first thing is that the market is as uncertain as you are. And if you look at the positions derivatives positions, uh, they

show a lot of divergence. Uh if we are near the highs on the long positions for Brent and for distillance, but when you put a UH call, but call options were actually towards the lower half of the percentiles. Because the market is unsure, what is going to be the

strongest hold. Will it be the lack of supply that we've talked about over time or the economic pressures that we're starting to see emerge in Western Europe and now with China and the locked ins, And we think for the remainder of two those economic pressures are just too much for the supply to really make UH inroads. But as we go through and we look at the history

of how recessions and even the pressions have impacted oil demand. Uh, they tend to be short lived impact on consumption because ultimately energy is what gets us out of the economic slowdown, So demand tends to recover relatively quickly, and that's when we think that the supply gap will really emerge. And so I mean putting that into some numbers, if I see, uh, you know, w T I at about eighty seven dollars right now, to Paul's point, feels like we've been hanging

around there for a while, just bumping below ninety. I mean, where's the floor, where's the ceiling? Well, I think with w T I, there is avential that as we end November and a strategic petrol and reserve releases, we're gonna get a little bit of a catch up to brent UM. But then the two benchmarks may may drop a little

bit further. And you know, they never fall linearly. So could we see seventies It's probably an acceptable range, but it could go to fifty depending on how bad the economic news are, and especially if we see something uh of a renewed lockdown in China or um more austerity in Western Europe. Um. But then the ceiling, I mean, I think for now we're probably going to be capped at a hundred for the remainder of the year, even if we have positive news on the economic front um.

But then when we look at the long term, you know, the sky is the limit. When you look at diesel, today we near two hundred dollars a barrel for diesel, So if you put that into context, that would be with typical margins that would be a hundred and fifty to a hundred and seventy dollars. Brent A Fornando, we we woke up this morning to what looks like a change in leadership in Brazil. I pulled up the shares of Petro boss uh and they're down five percent today.

Your view of how the global energy market is looking at Brazil with potentially a new leader, Yeah, well it's the old leader uh and we've we've known what he's done in the past, and there are two fears really. One is that he slows down exploration. That's something they did. Brazil made the largest discoveries in the world and over thirty years during his first term, but they were slow to develop it and and then Petro Bras became the most indebted oil company in the world during his terms.

And his his successor dema recess, and the fear is he's talked about building refineries again. And we have a no doubt that we talked about that because under his terms, Petrobiz was supposed to build five refineries. They spent nearly forty billion dollars on those five refineries, but only half of them half of one was completed. So they were supposed to build nearly a million barrels of a day of refining capacity, and to this date we only have

about a hundred fifteen thousand barrels a day. So that's the fears that the heat UH returns to those days of overspending and not returning capital to shareholders. So does that is that I mean, does that spell bad news potentially for UH Latin American oil companies broadly beyond just the biggest well, I think they they have been following their own paths down They have governments that aren't necessarily market friendly. You can see Echo Patrol with Gustavo Petro

in Colombia. He's talked about subsidizing fuel prices directly from Echo Petrol, which has its own negative impacts. YEPF obviously hamstrung by the massive ramp been inflation in Argentina. Um. They continue to grow, but their profitability and cash flow has a lagged peers significantly, so they aren't very active in Brazil. Eco patrol a little bit more than hitepf UM. But you know, I think that silver lining is since Lula's last term, there have been changes in regulations in

Brazil that make it harder for him to interfere. Petro Brass has also sold a lot of assets, so he doesn't It doesn't have the same impact on the Brazilian economy that it did back in the in the early two thousand's. Looking at the stock for Petro Boss spoiler, the last traveling in twelve months up up like a lot of other big oil companies, So we'll have to see how that place out and real quickly ten seconds. World Cup coming up in a few weeks. Are you

just picking Brazil? I mean I have to, but I also say my Brazilian team, Flamngo won the South American Championships, So go Flamingo. Oh good stuff, there are we got the world I'm gonna I'm gonna be into the World Cup this year. I'm gonna force myself to watch a lot of is and my sleeper pick Netherlands. How about that mine too? Now, I just decided exactly so we'll see that. All right, good stuff there for now. No Vale, he covers all things global energy for Bloomberg Intelligence. I

should be doing it for decades. We really appreciate getting his global perspective here on this global market. Katie, you know how much I love logistics, so I want to get righted to our next guest, Drew Wilkerson. He's the CEO of r x OH. He's currently x p O s president of North American Transportation. He will become chief executive officer of the company's plan spinoff of its tech

enabled broker services platform. R x OH XPO, the big logistics company, reported some numbers today, some better and expected ep SH stuck up about five percent today. Drew, thanks so much for joining us. Give us the highlights, uh, from your earnings. I mean, I want to talk supply chain and logistics and things like that, but your numbers tell me that maybe things are getting a little bit better out there. Yeah, Paul, thank you so much for

having me excited to be here with you. When you look at what we did this quarter as a company, at XPO. We grew revenue three billion of revenue, which was up three percent, our highest third quarter with adjusted IBADA in the company's history, a three D fifty two million. We had solid operating leverage when you look at the part of the business that I oversee that will be r x so as of tomorrow morning. Um. We saw strong volume growth. So volume was up for US nine

percent on a year of a year basis. It was the most amount of volume that we've ever moved in a quarter. And we did this, and we did this with strong profits. We operated at a gross profit percentage of nineteen percent and we grew our overall gross profit dollars by thirty one percent on a year of a year basis. So it was a great quarter for XPO, and it's a great time for us to be spinning out as r XO with a ton momentum at our back. We'll tell us a little bit about the spinoff expected tomorrow,

So what is the thinking behind that. Obviously, like you said, too great time to spin off. How long has this been in the works. It's been in the works. We announced it in March of this year that we were looking to spend it off. And this is the second spin off we've done. We did one last year with our contract logistics business, which is g x SO. So we're keeping a lot of X and o's in the family. But with with with with this business that is spinning

off tomorrow. It is our tech enabled truck brokerage platform. We're the fourth largest truckload broker in the country. And if you look over the last eight years from through the brokers grew at a phenomenal rate. It grew over a non percent KAGAR. During that same time period, we grew it over a twenty seven percent KAGAR and that's nearly three times what the industry is growing. Is because of our investment in technology. We've got a first mover

advantage in technology. We've been investing into it for over a decade and this allowed us to outperform the market and take share profitably. All Right, Drew Amy Mars one of our top top reporters at Bloomberg Radio. She was also a graduate of the University of South Carolina. So maybe you guys can exactly big game, who are you playing? Well, we just lost in Missouri, but we're playing Vanderbilt, so hopefully, oh yeah, that'll be that that should be w all right, Drew.

I started my career covering the the trucking stocks took a bunch of the public back in the day, So I think I kind of know about the trucking business. I know how important it is to the US economy. I'd love to get your view of kind of where we are in this whole supply chain snarl, if you will, that we've been dealing with since the pandemic. From your perspective, kind of where are we now and and and and how close are we to maybe getting things back to

quasi normal. The last several years, there's been a lot of chaos in the transportation market, and for us, you know, volatility is not a bad thing, and customers lean into us when there when there's volatile times. Volatile times means that the market could be the load of truck ratio could be tight, or it could be loose. We have seen the truckload market loosen over the last six to

eight months. And you know, we're operating at strong margins with within that of the third quarter, operating at ninetent gross profit dollars. Okay, So, as you've mentioned, the market has loosened quite substantially. What do you see it as the biggest risk at this point when you look overall

at volume, we're seeing different things from different customers. You know, some of our retail and e commerce customers as a whole, that vertical is down for us on a year of a year basis, But what we're hearing from our other customers is a is a really good story. Overall, pretty much all of our other verticals are up on a year of a year basis in terms of volume. And as we look out, customers are going to continue to

come to r x SO for two reasons. One, they're gonna come to us because we provide best service and solutions with technology that gives them complete visibility of what's going on for the life of a shipment. And then two, they're going to continue to look in who the leaders are within the market, and r x SO has established itself as one of the transportation leaders, growing three times than the industry has grown over the last eight year.

And true, ever since I followed the trucking business now more than thirty years, it's been a labor shortage that you know, the near turnover in the trucking industry, and I'm guessing it's it's no different today. Maybe the pandemics made it even worse. How do you guys deal with that? Well, first, we love the carriers that we that we work with. This quarter, we actually added ten thousand carriers star are

r XO Connect platform. So to your point, there's definitely been a turnover in the driver industry, but carriers like just like customers are coming to do business with r x So we have so much volume that they don't have to leave the system to find their next load. We also do a rewards program that gives them disc council things that matter to drivers most things like fuel, tire,

roadside maintenance. And we've got a system that is so easy for them to use that they can pick up their cell phone, they can book a load, they can negotiate, They do all of that with no interaction. So we've had great success with with the carrier basis. We've got over a hundred thousand carriers and our r XO Connect platform we've got access to a million and a half truck so we have massive amounts of capacity and a long runway to continue that growth. All right, so you

guys spent out tomorrow, right, TRIU. We spent out tomorrow. We we we will be ringing the bell at nine thirty in the morning, all right. R XO is a symbols that right, all right. So it's a simple alright that trading on a one issued basis right now, So you put that into your Bloomberg terminal. R XO, uh, you'll get that business again being spun off from XPO tomorrow standalone business. Drew Walkers and CEO of our x OH talking to us about the logistics business, the supply chain,

all things that moves goods across this country. You know, we now have a little bit of perspective here on the changes that took place in China over the last month or so with presidency getting another five year term and a little bit of perspective here. And I need to complete reset of how I should think about it and maybe the markets and investors to think about it. And for that we turned to Leland Miller. He's the CEO of the China Basebook International. And folks the China

Basebook International. These folks, these folks, they get their own data. They have boots on the ground, they you know, so they don't rely on the government or anything like that. They have really really you know, amazing granular data and it gives them some pretty good insights. So Leland, thanks so much for joining us here. I mean, what is your perspective, What are you telling your clients about China over the next five years? What should we expect much

lower growth? You know, there there's two there's two different dynamics that are going on right now, one structure and one cyclical, and people are getting them very mixed up. Cyclically, we have COVID zero that has been crushing demand, hurting supply, crushing demand and just causing havoc throughout twenty two but but really for several years now. But the bigger, the bigger issue at least it will be the bigger issue

for China long term, is the structural slowdown economy. This is the diminishment of the property sector as a key growth driver. This is less credit going into reckless credit expansion to zombie companies. All this is happening a lot less and we're going to see a much more precipitous slowdown over the coming years. That that said, right now,

you've got particularly smothered growth because the COVID zero. So you have the potential for a little bounce up so along the way, but structurally we're going much much slower. So Leland on the topic of COVID zero, you know, covering the movements in Chinese stock markets last week, just absolutely crushed after paying stacked as lead ship ranks with loyalists. The explanation there was that we're probably going to get

a continuation of these COVID zero policies. Does that narrative hold water with you when you just think about the really brutal asset reaction, Yeah, it does, But I think it's it's even more than that. I think we're going to get a continuation of not just COVID euro but all of the she policies that investors have come to really really dislike. You know, what we kept hearing for the past year or so was that just wait, just wait,

anomaly will wait for it's a Party Congress year. Oh WAWO is not doing too well way to the Party Congress. And I think what the Party Congress was was just the last straw where the bull argument on China having some policy pivot on growth on stibulus of COVID zero, it just blew apart. And that's why you saw market wide surrender across the board on Chinese assets, Leland. If I'm a CEO of a U S domaliciled global corporation, can I allocate capitals China? Can I invest in China?

Can I bank on China for the next five years or ten years? Well, you have to be really careful. You know, so much money went into this for decades, which very little thought. The idea there's you know, over a billion consumers, they'll just start buying stuff. And even if they won't, my board is forcing me to go into China. So let's just do this. I think at this point there are opportunities in Shina. Sure, but you have to evaluate the conditions on the ground much differently.

You're not going to have the wild upside that a lot of people thought. You're not gonna have a lot of sectors that are going to be kept uh bolstered because of credit. You're not going to have uh you know, you're not gonna have this this robust consumer economy that people thought. So you sure, there are opportunities to if you pick your sectors right, to make some money. But but really you have to think this through because this

is not an automatic victory story. And conversely, Leland, if I'm president g and I one of my stated goals is to be a world leader, not participate in the world, but be a leader. Can he achieve that if he has kind of a China first, inward looking, not non engagement type of mentality, Well, you know, probably not, but he sure thinks he can. And I think the mindset from from the from she and the rest of the top leadership is we have to get China prepared for leadership.

And that means not just juicing growth, not not you know, default to the playbook. We need to have much more self reliance. We need to sever our connections on the technology side as much as possible with the West so that we're not going to be caught through some you know, export control disaster. So a lot of what they think they need to do is just necessary pain. And everyone thought, oh, it's just a matter of months before you know, he flips his fingers and his pain point has been reached

and he reverses. Course, that is not going to happen. And so Leland really quickly about thirty seconds here this potential structural slowdown in Chinese growth, What does that mean? For the rest of emerging markets and for the world at large. What it means is that is that China can get through this if they do all the things right, they can get this through this okay and have a

have a stronger, albeit slower economy. But all the countries around the world that think that China is going to be producing these large levels of growth, big infrastructure, endless demand for commodities, they're in real trouble if they haven't been diversifying, and most of these countries have not been over the past several years. Ten seconds, Leland, are you

a bull or bear on China next five years? Well, I'm a bull because I think she is doing some of the structural stuff necessary in order to turn around the economy. But it doesn't mean there's gonna be high levels of growth, and I think that's the first thing investors shooting in away from this. Yeah, good stuff, all right, Leland, Thanks so much for taking the time. We always appreciate getting your informed perspective on China. Some Yeah, I don't know.

I guess it wasn't change. I guess it was a continuation of the existing policy. But uh, in to see how China evolves over the next five years as a global player. Leela Millar, China, bag Book International. Today's Big Take story is a big one. We want to get right to it. And of course you can listen to the Big Take podcast on the I Heart Radio app, Apple and anywhere else you get your podcast and listen to The Big Take every night at eleven pm Eastern

on Bloomberg Radio. Today's is a big one. Kelsey Butler joins us and along with Patricia Hurtado, Kelsey reported on an amazing story here. The US Supreme Court is considering a radical overhaul of the college admissions process that would alter the country's most elite institutions and workplaces. We're talking about affirmative action. Kelsey, thanks so much for joining us here. Exactly what is the court? What's on the court stock

at this term? Here? Sure? So right now there are two cases that are currently before the court, and UM, just given the makeup of the court, what are reporting and selling us in the U kind of conservative of the court, It's very likely, um, that affirmative action as we know it could go go away, which means that schools, both public and private universities that are that it is will no longer be able to consider race it as part of the admissions process when they're deciding who to

allow into their schools, and Kelsey walk us through the potential ramifications. They're one of the first lines in your story. You write that when the practice ended in California, the state's most selective campuses saw minority enrollment dropping more than fifty percent. Is that a blueprint for what could be to come? Certainly we've seen affirmative action UM in college admissions go away in UM you know, across the country.

Right now, it's not allowed in nine states, and in those days, there's been a ton of research that really has shown that immediate drop off. California is one example, Michigan is another. UM. Minorities, specifically black Native American UM students had a huge drop off in the most selective institutions, and it's they really haven't caught up. And we're talking about more than a decade in some of those places.

How long How long has affirmative action been around? It just seems like it's always been around, But I just I don't know when it really came about. So it's been around since the Civil rights era. UM. The first time that the Supreme Court weighed in on affirmative action was in the seventies. Um, and it kind of uh set a blueprint for the way race is considered in the college admissions process, which means there's no such thing

as a quota. Um, it's just part of the holistic picture that an admissions office kind of looks at when they are deciding who to admit. Again, in those days where it's allowed, as I mentioned nine, it is banned and Kelsey, I mean, given that long history, how long they've known affirmative action in the US, Why now, why is this being considered now? Um? So there is a special interest group that has kind of um champion this issue. Uh, and they are kind of bringing this issue up before

the court. They are arguing that the practice discriminates against Asian American students and essentially keeps them out of these elite institutions. And uh, now really is the time that they've been able to kind of bring this back up again? I will say, though, affirmative action has been something that has come up before the Supreme Court many many times. UM, and so this is looking like the time it might

go away. But it's been decided and affirmed by the court several times over like as it relates to higher education, is this just for public universities or would it also apply to private universities? So, because the two cases that are before the court, one is a private school Harvard, I have heard of it, UM, the oh there is a public institution UM. It could very well have an impact on both types of institution. What are we hearing from Corporate America? They kind of weighed in here and

kind of what they like to see the ramifications. Certainly, I think one really interesting thing in my reporting with reading through a lot of the court briefs UM, the arguments for UM and against this UM, and there was one brief in UM one of the court cases, a whole host of companies including Google, General, Electric, Jet Blue, UM basically said this is important for them and said that they without affirmative action, they will lose access to

a pipeline of highly qualified future workers and it's going to make them harder for them to hit diversity goals and targets that they have for their own organizations. And Kelsey walk us through the timeline here. What are the you know, potential milestones to watch as this story develops. Certainly so arguments are happening this week. Our reporters are going to be following it closely and highlighting UM, you know,

all the big kind of moments in those arguments. The Supreme Court likely won't make it this vision until next year, so we'll certainly be following that, and then we'll see the impact in the schools in the year or two years to come, because obviously we know admissions decisions are a little bit on a lag, so we'll start seeing it in UM freshman classes thereafter. And does this affirmative action issue does it effect? Is it applied to companies or they just kind of keeping the scope to colleges

and universities. Well, what could happen is, you know, as I mentioned, companies will be impacted because of the basically what the cohort of elite institutions is going to look like as far as their student bodies. And it could open the door to UM companies being hamstrung in the way that they make hiring decisions as well. And so, I mean, Paul asked a little bit about what Corporate

America's response has been. Outside of Corporate America, I mean, are there any groups leading a pushback effort here, what does that effort look like. We've seen in UM places like California. UM, there have been kind of community organization, activist groups that have tried to push back on these types of things. Not too long ago, there was a ballot measure UM to try to bring affirmative actions back in the state, and it actually didn't pass, so it's

still banned in the state of California. There's certainly been kind of this, uh, this movement to try to bring it back in some places, but UM, you know, it's certainly, as I mentioned, there are a lot of misconceptions about it, so sometimes it's not as popular with people as one might think. Yeah, interesting story. As always, the Big Take stories always kind of tackle the big issues. Kelsey Butler, equality reporter for Bloomberg News, with a Big Take story here.

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