OpenAI Accuses Moonshot of Extracting Data From AI Models

9AM in Shanghai, Shenzhen and here in Hong Kong. You're watching The China Show. I'm Yvonne Man with David Ingles. Good morning. Let's get to your top stories today. Asian stocks slipping to begin this new quarter after a late drop into the close in Wall Street, erasing gains sparked by this tepid inflation numbers. Yet bonds in Oz and New Zealand tracking the move lower in treasuries. OpenAI accuses Chinese rival moonshot of extracting data from its AI models, adding to Silicon Valley's claims of large scale Chinese distillation. Also ahead, passengers averts disaster on a flydubai flights after a pilot stabs his colleague, reviving debate about the need for cockpit video recording. Plus will be live from Bloomberg Screen Time in Los Angeles, with the Netflix co-CEO Ted Sarandos joining us, along with some big names there as well. Yeah, it's not much of a try to show today. I got to tell you. Golden week is underway. So certainly we're seeing both how going China is shot. So we've got to talk about other things right. We can also talk about coated O'Brien and Ben Affleck coming on to talk about that. It's a good chance to talk about that. But yes markets we're starting off the quarter not too golden at this point. No. Uh no. And I think what's interesting is obviously because of we are entering this new quarter, we were up against month and quarter and overnight, which I guess goes a long way to explain why, uh, the headline on markets today is really that massive closed lower, uh, in the U.S. session there's a micron earnings micron earnings that will unpack better. Uh, you had some issues around the margin uh unimpressed as far as markets go. But I think, you know let's give it some time for markets to digest what had happened. Because the commentary from the scene is really, really good set of earnings. It's showing up across some, uh, big names here in the Asia Pacific. As far as data goes on, the I sorry South Korea exports word again another banner explosive I guess you could say. Right. More than 100% gains for the month. So certainly does that add to this whole robustness when it comes to AI boom and demand picture there, what it means for the chip sector in particular. So certainly that could be adding in terms of beneficiary to of course the chip space here today, uh cost is slightly better, but we are seeing quite a bit of movement in Japan here. The Nikkei 225 up about 1.5%. Yes. The survey was decent right. It was better than the last quarter's read. I think we went from 22 to 24 on the large manufacturers gauge. Slightly missed expectations there. I think what's interesting to is on the exchange rate where you do have corporates still expecting a weaker, uh, the Japanese yen to remain, uh, on the weaker side. I think that takes me into the just one last note here. The dollar is coming out of the best month. Uh, going back to March, we the last few days and then move into. We managed to edge uh, the June uh, gain there so that 2% uh, and exchange rates on your screens. Uh, in a moment, we'll also talk about the fixed income space, which, by the way, the 30 year yield is again starting to exhibit some weakness against it. Uh, to the upside. But yeah, back to the, uh, the big earnings story from overnight micron earnings, adjusted sales and revenue, just over 54.25. Uh to the upside there. Earnings also climbing in 33 four. Uh when you break things down Dram and NAND you have about 40 B on DRAM and NAND closer to about 14 B um rounding down as far as that's concerned, not much reaction in the after hours trade. But when you look at what the street is saying and what the CEO is saying, as far as some of the sort of, uh, more qualitative, uh, takeaways from the numbers themselves, uh, it does seem that the memory story continues to be a strong one through into 2028. Yeah, that certainly seems to be. There's a bit more runway in this whole, uh, you know, memory chip cycle. In some ways, that's certainly what we heard from the micron CEO saying that, you know, they deliver record fiscal 2026 results. Expect an even stronger fiscal 2027. And memory, he says, enhances the intelligence and the competitiveness of our customers platforms. Uh, the call from the street is this Rise City was talking about. Yes, these are better than expected results. The guidance was also good here amid the sort of robust AI demand. So that certainly should help the Korea side of this trade here this morning too. Yeah. Vital knowledge also coming in here the qualitative commentary on supply demand is bullish. Uh the backlog is growing. And again this underscores the the visibility through 2028. Uh let me just wrap things up with the comment coming through out of Zacks Investment Research. Micron crushed earnings expectations across the board it stocks to reaction perhaps how Wall Street investors likely already expected a bit, but also the need to increase worker pay, right? Compensation. Yeah, that was really what could lead to maybe that margin outlook. Why not? The company is doing well. Yeah. You got to pay your workers. Right. Okay. Um, let's have a look at how this is playing out across markets today here in the Asia Pacific. The markets that are are open of course. And Anthony's here, but it's uh, we look at the some names here Anthony. Yeah. What's been really interesting in the early going in Asia is how muted the reaction is in Korea. Was this kind of the joy in Japan? And one of the reasons for that is that Korea has gotten more muted over time. That is a kind of a short term shareholder revolt against the fact that there isn't it isn't a, uh, kind of a program of shareholder return that goes with the extraordinary profits that the memory space is having. So you seeing that again play out, Samsung is flat on the day versus sharp almost full. And SoftBank is up three. So there's a huge divergence. And I flip the board. And you can kind of graphically see why that is the case. We see that career and earnings have just absolutely exploded to the upside, but dividends have not followed. So you've seen earnings explode here on the blue line. But the dividends are just pretty much where they're always been. And that speaks to some of this Korean discount uh kind of concerns. And that's really correct. The picture for the positivity in Korea. The volatility has come right off after the boom times in July. Correct. And it has not recovered even though the index has recovered. You contrast that to Japan. You flip the board and you see every time there is a positive news that comes out of the tech space, the Japanese stocks react. On the upside, that is what the kind of optimism in Japan is about. That's why the Nikkei is so strong and the gains are pretty much across the board. On the Japanese stocks today we see the advantage. It's almost up seven. We have big gains in laser tech which is a testing and kind of uh, chip making tool, uh provider. It's just across the ecosystem. The money is actually flowing through to shareholders in Japan, and that's driving this dispersion. There is still about a 30% gap between Japan and Korea. And let's see how much of that it closes. Anthony. Thank you. Anthony Stephens there are Bloomberg Markets reporter joining us for the latest. And of course, let's bring in Mark Cranfield now from our live team for more on these markets. Their market it's a slow start of the quarter here. What's going to be some of that you're looking out for here for Q4. Yeah I think is exactly what Anthony was saying there. People are going to be looking for the continue what the eye theme looks as though it's making a recovery. It's now just a question of who are the who are the winners going to be in this next phase. So microns kicked off a period here. What do you some Japanese names are doing very well off the back of that. And we're likely to see some some follow through as the Taiwanese markets get going today. And then as we look into the to the U.S., it's right. The beginning of the earnings season and most of the big names will be expecting to have very decent results again, or at least the the outlook from um, analysts is that most of the make seven companies, plus the other major tech companies will have another very strong quarter. So confidence should start to return the we do have the elections in the US right in the middle of the quarter. That will of course be a speed bump for some people. But if you look at the way the markets are digesting the rate hikes that we've seen so far, the projections are that they're going to be very gradual. It looks as though everybody can live with it. There's still the wild card is the Middle East what happens to oil prices? But even that seems to be something that people are factoring into their equations for the rest of the year. So all in all, the backdrop is pretty decent. If the AI theme has got legs, then we can expect the tech sector to lead everybody forward again. We should start to see some evidence of that over the next few days. So what we're seeing here in Asia is likely to follow through to the rest of the world. So a positive outlook for the AI space should feed into everybody else, barring upsets in the Middle East. Mark, we had some data overnight in the U.S. and I think goes to the point you made earlier in the week, uh, around, you know, some signposts to watch, to really understand where confidence to your body or phrase there is coming back into the bond markets. Are we in a better situation now as far as treasuries go than this time last week now? Um, we are apart from the very long end of the curve, probably we have a huge, uh, sale next week. We have ten and 30 auctions. The 30 year Treasury auction is a major obstacle for the whole market. You can see that the traders are pricing that they want to get their concession in early. They want to move the yield to a level where there should be demand for the insurance companies should come in, they should match asset liability managers. They can push the yield to a certain level where you would expect that the sale to go pretty well. If it doesn't, that's a huge problem for the whole market. But by the time we get to the auction at the end of next week, there should be enough in the market already to see that go through. Then people can relax a bit, but there is a very important auction and the way that the US Treasury themselves and the Scott Basin have behaved with their buybacks. Traders are also looking over their shoulder and saying, is there more going to come from the Treasury Department? Are they going to do more to stabilise the bond market or are they going to panic? Are they going to cancel 30 year auctions if they see another bad one? So there's a lot of debate about what's going on, particularly at the long end. Plus, when you look at what's happening with the lowest class of credit, the triple C credits. They're starting to get really hammered. They've gone about the thousand point range. That's a sign that we can expect some more defaults coming in the US market. And those are weak companies anyway. But the default rates have been relatively low. And that's something else the Treasury market has to take into account. It's a pretty fluid situation, but if we can get through the auctions next week, the whole market will probably calm down. Yeah, I'm just wondering now that we have most of the Treasury curve above 5%, it doesn't seem that many out there that are willing to stick their neck out and say that I'm going to go full on into duration. Now, there isn't that sort of conviction just yet, I feel. I mean, do you think 6% for the Treasury curve still is a possibility here? Or how do you think the direction of travel is going to look like? I think at the very long end of the curve, 6% is very realistic. I think that is going to be hard actually, to stop the 30 year yields getting towards 6%, not so much in the short end of the curve. We've had a steepening over the past few days. It's probably going to continue. The messaging we're getting from the Federal Reserve is that they do want to raise interest rates again, but as a measured pace. So that probably means December, Possibly another rate cut of another rate hike next year, but that's uncertain. But at least one more this year. That's a similar story in the Bank of Japan, probably the European Central Bank. So it's it's something that people can factor in. They can see it coming, but it's not too fast. As far as the very long end of the curve is concerned. There's never great demand for 30 year bonds anyway. But if you're not quick enough to dampen down on inflation expectations, if the fed is seen as slightly behind the curve, that is not good for that end of the market. Plus you got the mortgage factor as well. 7% yields on mortgages in the US means there's convexity. People have to sell long term treasuries to hedge for that as well. It's not a pretty picture at that end of the market. It probably means they need to get to something like a 6% a shock, a shock value here to get people back in the market. The shorter end of the curve is a different story that may start to stabilize as fed speakers. So give the idea that they're not going to squeeze the market too much. There won't be 50 basis points hikes. There will be a gradual tightening of policy. Market can absorb that. Mark thank you so much. Mark Greenfield. There are a Singapore right. Just to Mark you know one stock we've been tracking all week. Nidec. We're down a further almost 20% at one point on 17 currently. Let's call it 3,031% over the course of the last three days. In terms of the drop here and the latest here on, uh, on the back of some accounting issues is the and this is a really bad sign when your auditor withholds their opinion, it's almost akin to you going to the doctor and the doctor basically saying, let's go into another room and then just breathe it really, really, really, uh, alongside there. Yeah. Um, so this is something that we're continuing to track. Uh, obviously the market's hitting this from a bullish perspective. We'll have more on this of course, later on in the show. But shares are down 17% at. The auditor has not withheld opinion, and a company's financial statements coming up will be at the Bloomberg screen time in LA. Hearing from the Death Place co-CEO Ted Toronto, as well as on your screens, Ben Affleck and put on O'Brien are joining us for those conversations. So do join us as well. Uh, check that out on the times on your screens. And just a reminder that Hong Kong and Chinese markets are shut for National Day. We have plenty more ahead still. This is the China show. OpenAI has accused its Chinese rival, Moonshot Eye, of a widescale effort to extract data from its GPT systems. Now, as to growing concerns in Washington and Silicon Valley about the use of AI distillation by Chinese developers. Let's bring in Redmond Low, our China correspondent here to talk us through. How big of a scale, uh, are we looking at currently now? So OpenAI has revealed that they found as many as 16,000 attempts, at least in late July. There was the peak 16,000 attempts to uncover hidden information in terms of how OpenAI's models approach reasoning through problems, and what OpenAI has done so far in a bid to stop distillation, is that they've already hid, uh, the reasoning part of its model. Right? So it offers answers instead of explanations to user queries. But according to OpenAI, moonshot was able to get around it by copying the encrypted reasoning and then asking a model in a different conversation to decrypt and transcribe it. At the scale of this attack, up to 16,000 at one point is still much smaller than what anthropic previously accused, uh, this, uh, moonshot AI of doing that was in the millions. But still, it adds to this pile of accusations we have heard from Silicon Valley companies against the Chinese counterparts. Of course, moonshot has not responded to the accusations, but the Chinese government has hit back against it. And this is the crucial matter, right? Because, um, OpenAI has already shared this information with the government, partners with other Silicon Valley companies. And the question is what the U.S. will do about this? And if the U.S. does play some sort of punitive measure, that could have tremendous impact on the ability of these Chinese models to scale globally. Meanwhile, there's a story about deep sea and far away, uh, they've developed something together in terms of AI toolkit. Yes. This is also very, very critical because we know, for example, Nvidia's hardware have had had trouble entering, uh, China because of export controls. But Nvidia's mode also comes in a form of its software called the Cuda ecosystem has been seen as this global industry standard, and it's very integrated by frontier models, whether it's in the U.S. or in China. And it's very hard to switch. There's a lot of migration cost to it. It's kind of like if you've been using the Apple OS for a long time, you're very reluctant to switch to end void, right? So what Deep-Sea is doing is that it partnered with Huawei to create its own, uh, software ecosystem that is directly compatible with Huawei's Ascend chips. So they allow developers to program those AI chips. And what this does is that it would eventually allow many companies to access those chips and use that domestic ecosystem, uh, and allow Huawei to eventually be that anchor for the domestic supply chain. Right. It's all part of an answer to the to the government's call for import substitution. And this software stack is going to be fully open source. And deep Sik has touted that its programming language is also simpler and more straightforward, so making it more accessible to developers as well. Amazing man. Thank you so much, Mimi Lo, our China correspondent there. On the other topic we just touched on there, which is the security angle, of course, I had Pershing Square CEO Bill Ackman. Uh, well, I'm talking about how anthropic is really one of the greatest business stories that he's ever seen and that government oversight to the point we just made there is not needed for a larger AI firm. Speaking exclusively to Bloomberg, Ackman also told us that markets are just too focused on big IPOs. The market is very narrowly focused, I think, on space and anthropic, uh, and on on the picks and shovels that support the space. Is that a problem? Especially if anthropic. I think we should all remind everyone. I think it was on the 22nd. You put out something basically saying, are we going to see an anthropic one? Oh, by the way, there's a 10% chance we kill humanity. And that is exactly what we saw. There was a large ish part of that prospectus that basically said, here's all the harm we might cause, but what do you make of an IPO with that sort of thing in it? And is that a company you would even buy? So I think, uh, I don't anthropic, uh, it's perhaps the greatest business story I've ever seen in terms of, you know, from de novo to 2 trillion. Uh, I would say significantly just the revenue ramp of the company, the quality of the product. Uh, you know, we, we use, uh, clawed internally. So it's, uh, it's clearly an amazing company. You know, query whether the frontier model companies will be able to maintain their market presence in light of the power of and of of of, uh, open source and open weight models. I mean, you you wouldn't buy it because you're scared of that competition. You know, we look to buy businesses that we can predict what they're going to look like over a very long period of time, you know, kind of boring things like, you know, perhaps Microsoft or S&P global or Visa or Mastercard, you know, things that, uh, are in our portfolio. Um, we are less likely to be an investor in a very fast growing business that's, uh, you know, consuming a huge amount of capital, and you're betting on kind of the lines crossing at some point in the future. Do you think? I think I think it's super interesting because there is a prospectus actually been filed. I've read. No, no, no, it's just reports at this moment. So we have to wait with the actual language. but on the point. So, you know, interesting. Uh, I think Jensen's made this point. Well, if you're a $2 trillion company and you have a product or service, uh, that can cause enormous harm, um, you're going to be very careful about releasing that product to the market. I feel like you don't need, at least for the, you know, the anthropic, the world. You don't need legislation or the government to protect them from doing something stupid. You would hope you wouldn't, because they're, you know, it's a bit like a farmer company. You don't release a drug to the world. You know, maybe in the case of a drug you want, you have government oversight, but just huge disincentive to put out a product that's going to destroy the world. Does that mean that you're less concerned about all this, you know, AI worst case scenario out there, you think they're going to self-regulate? Okay, I'm actually less concerned about anthropic or OpenAI being sort of the problem. I'm probably maybe more concerned about a bad actor, a rogue actor who does not have the same considerations, who, you know, uh, uses the resources of an open source model to cause enormous harm. And I think that's still a very significant risk. So I'd rather that the. Oh, that the best labs, the best frontier labs are incredibly powerful so they can protect us apart from the rogue operator using a less powerful, uh, I. Think. Some stories are falling out of Hong Kong today. The embattled Hong Kong developer New World says it has the financial support of the billionaire Cheng family as even after a massive writedown of a Hong Kong airport complex led to a $3.6 billion loss for the fiscal year, the pledge of support confirms investor expectations of the family behind New World would back the firm. Hong Kong visitor arrivals climbed in August to their highest level since May 2019, signalling sustained tourism momentum after the recent recovery. The tourism board says total visits rose about 6% to 5.4 million. This was driven mainly by travelers from mainland China. While international arrivals softened and fewer visitors chose to stay overnight. One notable weak spot was India, from where visitor arrivals to Hong Kong fell from a year ago. Yep. And that's, uh. Well, this is essentially why, uh, we are on holiday here today. So no markets open. Of course, across Hong Kong and mainland China. It's, um, and it's one of those days where we have, of course, we, you know, mind doesn't sleep. I say sad news. Uh, so. No. So we so we don't either. So we don't. And it's one of those days where after the broadcast, Yvonne and I step outside and we kind of feel like we're in a scene from. What was that? Uh, the Will Smith movie I Am Legend when he walks in New York City. It's completely, uh, and is a ghost town. That's the feeling you get here in the Financial district. I love it, but we don't mind because you guys keep us company every day, and we thank you for that. Lots more ahead here. This is Bloomberg. Welcome back. You're watching the China show. Of course, a reminder that yeah mainland markets and here in Hong Kong are closed for a holiday here today. So I'm guessing you guys are heading either to the train station, the airport on your way. Of course. We're shot for one day here in Hong Kong, so. Certainly. Uh, yeah. Enjoy it while you can. We're still here, though. On this holiday, we're taking a look at when it comes to markets here. You are still seeing some standouts when it comes to Japan. That seems to be it outshine the likes of the Cosby here today. We continue to see that momentum behind Nikkei 2 to 5. We're close to 2% gains now here right now if the futures are slightly in the red here this morning. But yeah it's interesting what's happening with the Cosby. I guess it was a bit of a moderate response to the micron earnings. Maybe that's why the chip sector is not really. Yeah, booming here, but certainly the export side of things. The day that we got from Korea continues to be very, very strong. Beyond crazy some of the names. And I think the if you think the previous month's growth rates were already out of whack with what is orthodox, uh, this last number which came out, um, I think the adjusted one is north of 100% growth and exports headline was 83.5%. But yeah, adjusted is even bigger, even bigger. And I think it just underscores the micron story and the supply chain. Right even further. The Taiwan number we've kept with top talk talked about that a lot. The Hong Kong imports number, which grew at the fastest pace since the 1960s, which I think was out of view about a week, a week and a half ago, all are pointing to the same thing that the boom for AI exports is almost single handedly lifting many economies, especially here across the supply chain. Certainly, the key area of growth, and I would imagine will be the key driver of equity market return. And just looking at how consistent and how much momentum there is behind that. Um, just very quickly to see the exports number. And I think there have we showed that. Can we show that please. Just to give you a sense really of the direction of travel there. Right. So if you took a snapshot this time it may already be impressed. You take that a fast forward. Uh, no. The export dynamic. Okay. Thank you so much. On the left side. Uh, 80% is the headline adjusted is more than 100. And on Japan, uh, the the tank and Serbia was that this is, of course, a quarterly survey which also underscored an improvement in underlying sentiment across large manufacturers in Japan. And maybe a lot of that might have to do with the fact that the yen is, of course, weaker. And of course, you have a big part of the supply chain. It was kind of like a Goldilocks sort of print, right, where it was a strong economy, but not exactly like red hot, and to a point where the BOJ may just have to hike, uh, sooner than later. So I think that itself has eased a little bit of that pressure for the central bank as well. But certainly maybe, maybe the UK has to really rethink things too when it comes to their, you know, tightening cycle, which they also are now underway as well as other world news. We're also following here today. Authorities in Saudi Arabia are now questioning a commercial pilot who allegedly stabbed his colleague and tried to crash a plane carrying more than 170 people. Passengers and crew stormed the cockpit of the flydubai plane that was on its way to Tel Aviv after a plunge more than 14,000ft in less than 30s. They were able to subdue the attacker with another pilot who was on board as a passenger able to land the Boeing 737 in Saudi Arabia. And I salute these heroes who showed exceptional resourcefulness and courage. They saved many lives and prevented a major disaster. President Trump says former fed chair Jay Powell should reserve, resigned from the central bank's board of governors over the mismanaged renovation of its headquarters. Report from the Fed's internal watchdog has outlined a series of missteps that caused a project cost to balloon. From initial estimates of .3 billion to 2.4 billion. But it found no evidence of criminal wrongdoing. It's horrible. What they've done is incompetent, and a man that's incompetent should not be sitting on the Federal Reserve Board. And I get I'm sure that Todd and everybody's going to be lucky because the report was a pretty bad report, the report said. They did. They did a bad job. They didn't know what they were doing. All right, uh, just ahead here, we'll be on your screens coming up. Of course. Conversations with these individuals. Uh, my understanding is, uh, Bloomberg Screen time has in fact just started in LA. Anyway, day's new stay tuned, of course, for those, uh, big conversations coming up. The co-CEO of Netflix and of course, Conan O'Brien. And of course, also Ben Affleck. Uh, lots of star studded names. So suffice to say, yeah, uh, if you haven't got enough of the the the gravitas of me and Yvonne. Oh, yeah. Yeah. You have big stars coming in any day, right? We don't even hold a candle to these guys. Right? And certainly they're gonna be having a lot of conversations. Uh, really, when it comes, the opportunity is a challenges facing the entertainment industry. Of course, in the age of AI as well. So stay tuned for those because discussions there's our very own Luca Shaw kicking off the show. We're going to listen it really take off a slot became something we all talked about. Um, you had the movie business, which I think had been left for dead at basically every event we've done for this feeling very strong right now. We have a new CEO at the Walt Disney Company and Josh tomorrow. His predecessor, Bob Iger, just bought the Lakers, which is my basketball team. And David Ellison bought his second movie studio in as many years, maybe in one year. Um, I am not prone to hyperbole, but it does feel like we are on the brink of a pretty major change in media in the sense that, you know, streaming, which has been kind of the engine of growth for the last ten years, is slowing down a little bit. You have AI music, which I think was kind of a novelty when we started this a few years ago. Now being very mainstream, we have a lot of music being made with IE. Uh, and social media creators, podcasters, people have been treated as a second class. Citizens entertainment are now being treated as and paid as much as pop idols and movie stars. Uh, I cannot promise to know what is going to happen over the next 12 months, but I trust that the people that we have speaking here will be able to elucidate and help us a little bit. We're going to kick things off on this stage with the gentleman waiting over there, the co-CEO of Netflix. Ted Sarandos. He is our first returning guest, so be nice to him. Um, then we're going to go to producer Kathy Kennedy. Uh, we'll hear from comedian slash podcaster Conan O'Brien, and then we'll close things here with Ben Affleck, actor, director and I entrepreneur. Uh, but before we get things going, I want to run through a few logistics things you should know. Um, I need to thank our supporting sponsors, Autodesk, Harborview, Equity Partners, Turkish Airlines. And while Doctor Allen manages, uh, as well as our participating sponsor, Cord Music Partners. Now, for a second, uh, it's probably the only time I'll ask you to do this. Take out your phones. Um, put them on silent. Do not disturb whatever you do. Uh, there is a QR code here for an app. That's the hub app you can use. It's kind of your one stop shop. During the event, you can get Wi-Fi information. You can get the agenda, you can meet up with other people. The number one feedback we hear from folks who come is they want to network. And so we introduce these bilateral meetings this year. Uh, we have a couple of other new additions to the screentime portfolio, if you will. There's a social content hub out there behind the registration desk. It'll give you some fun questions. You don't have to do it. I am I said that the, uh, the Oscar winner for Best Picture was going to be The Odyssey, which is not a particularly original opinion. Um, there's also this memento I partnership we have related to photos taken of people here. So if you want to track them or track them down and use that, uh, if you want to talk about the event on social media, use the hashtag Bloomberg screen time tag at the Bloomberg Live. Tag me at Lucas underscore shore. I think my handle is a little different on Instagram, but don't worry about it. Um, and one final thing before we get going, this is really more for tomorrow, but we do have that Turkish Airlines lounge across the way acquired. It'll be good when it's 85 degrees. Fortunately, not next week when it's 99 degrees. Um, you all know Netflix. I think most of you know who Ted Sarandos is, but it has been a pretty busy year, the last 12 months for them. So we have a little sizzle to to show you what's happening. Uh uh. All right. As they have just dim the lights. So we'll leave for a couple of moments. We'll take you straight back there to LA with Bloomberg. Screen time in a moment. This is Bloomberg. Good morning from Asia Pacific. Welcome back by the way. We're taking you straight back here to La Lumiere. Screen time is underway. And as you can see on your screens, that is Luca Shaw, our managing editor for media, entertainment and sports. And his conversation is just starting there with, as you can see on your screens, the co-CEO of Netflix. Ted Sarandos it's time for us to Netflix and relax. Have a look. All to agree on what to watch. So you make a lot of things that appeal to different tastes, including more, uh, prestige awards, kinds of programming for that audience and which is, by the way, when we started, that's all we did. Sure. So to think getting kind of an idea of how the programming initiative has broadened over, over the years that day. And we started with House of Cards in February of 2013, we had one kind of thing just prestige serialized drama. Uh, and then we've since then, we've added competition shows and game shows and cooking shows and travel shows and original movies and standup comedy. Everything we've done since then, it's just been an ongoing expansion. But we've been doing we're not doing it. Instead of the kind of things you were talking about. Um, so and so I don't think um, and including, by the way, doing it in nearly every country in the world. So when we talk about Netflix, only half of the story, revenue or watching is happening in America. It's happening all over the world, and we have these culturally resonant shows in nearly every market that we operate in, right? But so does that mean to to follow up on it that the the answer is essentially something for everyone? Not that all programming is for everyone, but you have something for everyone because there is something for everyone for sure. Yeah, but it isn't to say that any one thing is for everyone. Yeah. Um, there's been a lot of focus of talking like Willy Wonka, right? Yeah, yeah. Um, there's been a lot of focus over the last 6 to 8 months, shall we say, on the question of engagement, which is a jargon word for how much time, people. And in watching you, there's people are worried that the, the growth has not been as strong as it once was. And so what is your answer for why engagement on Netflix is not growing as quickly as people would like it to. And what are you guys doing to fix that? Well, if I can talk about engagement for a second, just itself, the whole act of it, we we kind of set up this debate ourselves. Not on purpose. Uh, but at one point we stop talking about subscriber growth, and we talked about why don't we stop talking about subscriber growth? Because when you look at our business model, it used to be a one for one. We were a one skew company. We had one product. So if you added a new member, you knew exactly had to take those economics out. Uh, now we have multiple types of memberships, multiple in every different country, various. ALM so it became much less easy for Wall Street or the press to track Netflix. My subscriber growth, uh, our growth in any given part of the world. So we said and so instead of giving that number we said look we're going to give you engagement. So we publish a report of everything watched on Netflix. And, you know, down to the minute, uh, you know, twice a year. And so we started talking a lot about engagement. So don't worry about subscriber growth count revenue, profit just like a real company. Uh, and engagement is a is it just as another metric. But at the time we said that, I think we were pretty unsophisticated about how we talked about engagement. Meaning, in that world, all think all revenue is equal, a profit is equal, our engagement is equal, and all engagement is not equal. So we are first and foremost, we are growing engagement. Uh, so we're growing on 200,000,000,000 hours of watching. We grew 2%, you know, in our last announcement. About 2% is not what people are hoping for out of you right there used to double digit growth in at least and certainly in revenue and to some extent even in viewership, they'd expect this is this is my point about the growth in general. Yes. Overall, we're not growing as fast as I want us to, and we're working on and making that move faster. We are, though, also doing things that create a lot of headwind to that number. Meaning when we do live programming on Netflix, which is a relatively new thing, um, we spend about 5% of our content budget on live events. They generate about 1% of our watching right now they all but they do a very different job. They generate a lot of signups. They're really effective for signup, retention, advertising, all those things that they do. But it creates engagement headwind in how you invest against it. Um, and remember when I say we grew 2%, that's an easy number to sneeze at. But it's through all the growth of live. It's through incredible headwinds from things like the World Cup and world sports and all those things that are going on too. So it is a we are growing the business. We want to keep growing it faster. This past quarter, we did double digit revenue growth in every quarter in every region of the world. So the business is great and growing fine. Um, I do I mean, if you ask me when if we were growing at 20%, I would be telling you, I wish we were growing faster. Right? So when you said you wish you were growing faster and we're working on it, what are the things that you are working on to kind of re accelerate that, that growth? Well, it's these are some of the things are in the expansion of what we do. So like it was an expansion of what we did that didn't necessarily bring more growth engagement, but it brings very valuable engagement. So it's not a mystery that all engagement is not equal, because it's you probably are not surprised to know that an hour of Judge Judy in the middle of the day does not generate as much revenue as an hour of NFL football. And so those are some CPM charts recently that showed what you make per view versus what YouTube makes per view. And yours is higher. Yeah, we generate more. We monetize better. Our programming monetize is better. Now we do. We're looking constantly about how do we do things to bring more value to the members, more things to watch, more ways to watch all those things. So that is some of these things that are and I don't want to over characterize things like podcast and those things because they're very small investment and very small additions to what we're doing. Um, the best the vast majority of what we spend on is professionally made movies and television series and games. And so as we lean into those things and make those big swings, we have $20 billion content budget, and about 5% of that goes to live. And a fraction of that goes to all those other things I was just talking about. But there's other ways to, you know, put things on the format for people that they love their art of one deal in France, as an example, where, um, you can watch now, our, our customers in France would like more French content faster than we can make it. So we have an arrangement of one where the TF1 programming is available on Netflix, and it's very successful and it's growing very fast. Were you I mean, speaking of of TF1, YouTube just did that deal with Peacock, which was similar, and that you're bringing in another type of programming for YouTube premium. Was that something that like, why didn't that end up at Netflix? That felt like, um, but by the way, we're in our infancy and doing all that part and doing all those that on. So, uh, in that particular model, I'm not sure how the economics of it play out. It should be designed so that it's they're selling the peak, selling Peacock through YouTube, which is not different than other channels deals there. I think they're trying to incorporate some of the content into their own premium tier, but I haven't seen the details of it yet. But do you think because had you ended up doing the Warner Brothers deal, you would have added HBO. As you know, you would have purchased it as an add on to Netflix. Yeah, right. It would have been bundled. Yeah. Do you feel like going forward because Netflix has always been a service, you go there, there is one, one place you watch everything that as you try to keep growing, you have to become more of a platform where you are selling other services. It's not that we have to, but we should be. We think we should be much more nimble to be able to add new ways to watch on Netflix, for sure. Over time, what are the types of services that you think would? Well, I think the entertainment business itself is plenty big and we're only, you know, about 6% of it. Seven. But so that means like you would if they haven't done this with anyone. But like if you could sell Disney Plus as an add on, you would do that. I think over time those things have I think for us, the what we did with TF1 was one of the more difficult executions of it, which enables us to then spend that out too much simpler, more straightforward add ons. Right? If we choose to go that path, and I think you look at it, as we've not looked to any of those ways to grow revenue yet. So that's upside in the business over time. Um, I know you said YouTube and podcasting is a small part of what you do, but I have to ask because you like talking about different types of viewership. Yeah. And you made, at this point, somewhat infamous remarks. I think it was last year where you talked about sort of Netflix is where you spend time and YouTube is where you waste time. I probably didn't say waste time. Um, but you, Neil, you have done a bunch of deals with prominent YouTubers. We we had dinner last night. Mark Rober was there. You've done a deal with him. He's a big star on YouTube. So has your opinion of YouTube changed as you do more of these deals? I shouldn't have said that. The truth of it is no. I mean, we're definitely we're not in the UGC business. We are um, we are in the I told you and we're in the professionally produced content business now, I think there's a bunch of people on platforms that are doing pretty close to professional programming already. And and if we can better monetize that program for them, they we can make a deal with them, but we're definitely not trying to bring over the whole population of creators. There's some people, I would remind you, my my kids are 30 and 32 years old when they were seven and nine. I'm from doing the math, right. They were watching Blue's Clues on on Nickelodeon. It looks just like some of those shows. Just like Danny Go. I mean, the program. And that's how that's how that stuff has evolved. So when I look when we're looking for new talent, we're looking everywhere film festivals, film schools and submissions everywhere we go. So of course, you're going to look to the platforms and find new talent and what we do. And you could ask Mark about it when you see him. Mark, Rober, we basically take this, what they're doing and give them the resources, financially and infrastructure and otherwise and in production support to do things on a larger scale than they can do currently and that they can monetize well on other platforms. And so is that that because if I'm a YouTuber and YouTube has sort of made it known recently that they don't love, your deals have changed a little bit. The Mark Rober deal was make a bigger show than you were making, but you started to do these deals where it's day and day, post to YouTube your videos on YouTube and Netflix at the same time and YouTube does not like that. So if I'm a YouTuber and YouTube says, please don't do that, why am I still going ahead and doing a deal with Netflix? What is it you. No, I mean, it must be good for you or you want to do it. And in a perfect world, I think anytime you've got a business where you've built up, you're a content brand and you're trying to monetize the best you can, you're trying to figure out how to build one without cannibalizing the other the same way that the studio is doing today with windowing or the networks do it today with least with, should they license their content or not. So how do you build a business without cannibalizing the other one? And sometimes you can't and you just have to pick a partner. Um, you mentioned gaming earlier, which is, though you've done it for a few years, still feels new for you guys. Um, five years from now. Do you guys do you think you're still hosting games on the service? I think so we really what's exciting right now and the mobile gaming was a gateway to cloud gaming. So really, we're much more interested in what you could do on the TV, using your phone as a remote. And remember, in a kind of post console world. There's going to be all kinds of opportunities for gaming on the television. And that we want to be, you know, early invested in that. I like it for cut for IP extension. I certainly like it for, uh, brand value for people who want to spend time on that stream gaming instead of watching, uh, that we have an option for them. And would you, because you've closed some, some studios, some of which you bought, I believe, would you as you look to scale it, would you ever buy one of the big studios? Take-Two? Microsoft seems to be unhappy with that. Well, you know, we're not we have not been traditionally big buyers. Um, the Warner Brothers notwithstanding, um, that we've not really been we've been been builders from the script, from scratch. So I do think we've looked at so we have built some worked with some of the smaller studios and programmers and developers, and there's a likelihood of those things come the, the big problem. But when you do these deals, uh, and the reason why I go back, why the Warner Brothers was attractive, you know, I said we were not going to do that because it's very rare that so that this kind of asset was so clean. It was just you're just buying just the things we wanted to buy. And so we were able to very easily look at this and say, how will this add value to Netflix and not destroy value in other ways? How do you take this growth engine and have it supercharge our growth engine? And for us, the ability to do that made that deal super unique. We're not looking for the next opportunity to backfill that deal, because we are our plans. And how we're going to grow is is primarily organic and will look for opportunities that complement the business as we go. It's game. That's for games too. I'm curious, knowing what you know now and how the street has sort of turned on you a little bit because of that deal. Do you regret going after Warner Brothers at all? No, I think it was, um, the plan was solid. Um, I think we we And we won the deal at some point so that we priced it right. Um, at our scale, that was the top price point where I thought we could return value to our shareholders with that asset. Any more than that, I thought we'd be taking you into negative territory, even with our scale. So, uh, when I look at that and I think, well, you and I think that what you're just referring to, I think what it did, is it the deal itself kind of threw the business narrative off for, for and for investors, for for the price, for other, for it. And you have to be willing to put the business narrative at risk for something that's good for the long term of the business, not the whole business. You don't put the business at risk, but put the business. You have to have to put the business narrative at risk. If you are convinced that it's good for the long term return. And we have we have always run this business for the long term. And how do you reset the narrative when investors come to you and say, well, you know, we're a little worried, how are you going to grow? You just say more of the same, because that feels like an answer that's not going to you. It's been the answer, though. Yeah, you have many, many years. And I'd say if you look at it and say, you know, the business is in double digit growth in every region of the world, um, is growth. And we are doing that. And there's a funny thing, like all the bells and whistles and all the exotic things you want to do and try in India right now, our business is growing very, very healthy. And it has. The reason why it's working is they have two shows that are very, very hot in India right now. Uh, operations to feed Zafar and Musafir Cafe. And they have a daily show called Lock Up. It started off as a five day a week show and went to seven days a week. Uh, it was one day a week, went to five days, went to seven. And it is drives so much conversation and buzz in India that they come in and then they lean into this other show, which is kind of a Top Gun like series. And there's other one which is like a slow burn romance, and it's just the programming is on fire in India right now, and that's driving the business. No, they don't even have an ad tier in India. So it is it's all the end of the day. We will win and lose by executing on that core. Yeah. I mean the programming, the movies and TV that you can't live without. Okay. Movies. Um, you have a movie opening in a couple of weeks. Loyola. Niagara. It's going, I think, the longest window Netflix has ever given the movie. Um, yes. Window from the first before it ever shows up again. Remember when people always talk about these windows? We don't take the movies out of the theater when they come on Netflix, and some of them do great business after they're on Netflix. Uh, I think, uh, Frankenstein played in theaters for like four months. But you are giving level of Niagara you're giving credit for. Hence, yes, you're giving it more than a month where it's in theaters before it goes to service. Why are you doing this now? Um, there's a couple of things I'd say when we were looking at the business early on, we we this is a true thing that people have a hard time with. Um, movies in the box office are not necessarily bigger on Netflix. Not not. No disparaging movies in the box office, but movies that come out in the theater do pretty well. That happens is the the most passionate audience went to see it in the theater. So by the time it comes to Netflix, you've lost that passionate audience and you got the people to go, oh, I meant to see that, or I'm going to get around to that. Or I heard that was crappy. And I'm curious now. Yeah, now we'll take a look at it. But by the way, is this isn't that new? I go to the theater all the time, I sit, I listen to what people are talking about, and they do talk in the theater a lot more than they used to. Um, but the people sitting in front of me while they're running the trailers, I go, oh, I miss you. I can see that. What's on Netflix? I want to watch Netflix, you know? Oh, I'm going to see that. I'm going to see that. So it's not like the window is really driving that decision. They made that choice for the first time. They saw the trailer. Right? Um, but I do. But but what surprised me about, if you look at that, uh, data that we published twice a year or once a year now of, uh, the top movies, all of our top movies are the Netflix originals. They beat all the pay-TV window titles that come to Netflix, except for the kids and family movies, because they get a lot of rewatching. So what we're doing is looking at this model and saying, okay, how do we serve movie lovers who may want to see this movie in a theater? And how do we not harm value to Netflix? And how do we position the film best in the world? Last year, we put over 30 movies in the theaters, all with bespoke plans of how many days are going to be out, how much marketing to spend, what cities to play them, and very bespoke. But 30 movies in theaters. And when you look at all of this, what you figure out is that on one end of the spectrum is the boy Nagra train dreams. Last year, um, that could have played in the theaters for six months and it wouldn't have impacted. It would have done, you know, net positive to Netflix, those kind of arthouse films or, you know, play like that. Um, and then the other end is the kind of for quad family rewatch movie and that that, you know. So we said, let's take those two and treat them different. So we're going to do a big wide release for Narnia next year. Um, and then we'll do a big, wide release for Charlie Versus the Chocolate Factory at the end of the year. Um, we think they'll do great. And when the K-pop demon Hunter sequel comes, you can expect a very broad theatrical release. And, uh, what does one and the other two and the other end to we have. Um, he said label negra, but we also have, uh, a seven, uh, Imax release of, uh, the admissions booth. Um, and we have, uh, a, a shorter but not by design, shorter window release for Mosquito Ball, which is Pete Berg's new will. Uh. Uh, what? We're to move on with Pat McCarthy in it. Yeah. But it's a phenomenal movie. I'm so thrilled that we're going to get to see it on big screens, too. What does success. Because it's not your main business. And what is success for a theatrical release look like for Netflix? Well, it won't be tied to the eventual I mean, the piano itself would I would have relatively low expectations that will add much to the financial outcome of the of the film itself. Uh, so but the success would be that it played even with a big Narnia movie. You know, I would say, look, there's when you do all these things, if you're going to say to pick a little risk to the Netflix performance, it should have the potential for a very big upside in the theater. So if that and that, I think for for Narnia, for K-pop demon hunters, that's why they're going to get big, broad global release. Um, but I think in the other ones where it's kind of in the middle, that's where it gets tougher. Right. Um, we talked about selling other services. I'm curious, you guys have also talked about giving or creating a free version of Netflix. I know you're not necessarily doing it, but what would that look like? Um, well, we're not doing it. And you're not doing it. No, no, I said not now. Right. No. The second we're looking at it, right where you look at all these different models. And I think the one that would look when you look at that, you see, um, Avod has been an interesting new engine in the last couple of years that is taking attention and time and attention on television. Now, none of those services have gotten very big and none of them have gotten profitable. Um, you know, I'm talking about the, you know, to be, you know, I want to name names. You can. Sure. Um, I think they might quibble with that. They're not profitable, but maybe. Maybe, um, but when I look at it. But the hard part is, is that you're making these trade offs and saying how this can't be so this can't it won't be big enough that it will pay for cannibalizing the core product. So you have to figure out it's a very find that blind to walk of how much product you put in that product and how much you put in the product and how much you put in the hybrid one. I don't think that the Avod service can support very ambitious programming. Right. Um, and we're we are our primary reason for being the reason we jump out of bed in the morning is for ambitious programming. Um, we're low on time, And so I'm going to speed run through a few questions with you. You mentioned this is where we get in trouble. No. Um, you mentioned kind of big, ambitious programming. And I'm just curious because I feel like in the last little bit, there have been a lot of folks that you were in business with for a long time who are taking deal somewhere else or not sticking around with you. Well, we had the no bomb back announcement that Shawn Levy announcement. I wrote something about Fincher this week, and I'm just curious, does this say something to you about where you stand with the talent community? Or each of these are just individual cases where, you know, know their individual cases and the talent, these these deals all serve completely different purposes. Sometimes it's a simple way to organize a lot of work that you're going to do together for ten years, and the overall deals are interesting, a good way to repackage it and present it. Um, there there's other ones, which is you're a filmmaker, a state television creator has a very specific thing that they want to do, and that we're going to do it together and it's going to take a many years to develop. And the overall deal is a way to do business together for 2 or 3 years. It's going to take for this product to come to market, and different things come at different times. I'll talk to you about a couple of the ones you just mentioned that the Duffers have worked, you know, with us for the first decade of creators of Stranger Things. Major thing. Sorry. Uh, and they and they had a dream that they did not want to make more TV shows right now. They really want to make big temple theatrical movies. And I said to them, I told Matt and I said, guys, Matt and Russ, you guys are great at what you do and I think you should go do that. You're 40. Don't wake up when you're 60. Wishing you did that 20 years later. And I'm thrilled for them. And they're gonna have great success and they have great success. And we, the Stranger Things universe, are going to continue to be a part of forever. And that's fantastic. Sean also was with that with them, and he just kind of doing the same thing. And the problem, when you have an overall deal with someone who has a commitment and other places. You're in constant conflict for their time. And Sean is going to be making Star Wars movies for a while. And he's so that the fact that this deal is with Disney makes a lot of sense. And I'm thrilled for Sean, and we're going to do a ton of things together. You know, we have we're still with we have chosen development together. We have a show called sticks coming up that we're doing with a lot of that stuff's going to stick around. But it was a big challenge. I think even in the Ryan Murphy deal when we brought it on, was he had all these people on all the shows, you know, all these commitments, everybody else. So I mean, the desire to do movies would seem like something you could solve now that you are putting certain movies in theaters. But yeah, if that's going to be your primary thing that you want to do, that's probably not there. I said, okay. And then with David, by the way, we've been in business with David Fincher since 2013, 2011, really when you first did that? And we did that. Yeah, yeah. And then we did. And he has not done a movie outside of Netflix since 2014. And his, um, and he, he doesn't know what he's going to do next. And he's, he's, he's a great guy. We made I love the three films we've, we've done. Where do you see the further, further misadventures of Cliff Booth. It's phenomenal. Um, I super proud of Mindhunter. Uh, 17 Emmy wins for love, death and Robots. House of cards, of course. Um, and, uh. And he's just, um, he's a he's an he's one of the greatest living directors. And the meeting is when we we plan on being in business together for a very long time. And this this deal is not like he's leaving to go somewhere else to do something else. Somewhere else. We'll see what he does next and we'll be in the mix with it. Um, we talked about Warner Brothers. How big of a threat, competitive threat. Do you see? The whatever they call this new company? Uh, well, it's it's it looks on paper so far, it's 1 in 1. So I don't know if one and one is 2 or 1, and one is one and a half or one and one is three. And when you say one and one, just their share of streaming work. Yeah, yeah. Um, they do have someone running it in KC who we know you like a lot though. He's I was a good guy. Yeah. Uh, some reason we had a very well publicized lunch. You know, I think I may have eaten there many times, but. Yeah, from what I heard, there was some suggestion that there might be a job for him. Not necessarily at Netflix, but working with Netflix. Yeah. That's that. He he's going to be in a very good position wherever he does. He's a super talented guy. Um, you're another thing that got a lot of attention during that process was when the sort of relationships between the elephant family and the president, you and the president. Um, I guess two part question. What is that like? What is your relationship with President Trump like, and what do you think are the odds that we actually get this federal film tax credit passed? Well, this is for everything else. You might not think he is the guy who really cares about the entertainment business, and he cares about protecting the industry and creating jobs. And he loves to creating jobs in the entertainment business in America. So we talk a lot about how that could work and what's the upside and the downside of that? We're one of the largest producers of, you know, film and television in the world. Um, and we do business. And we've shot last over the last couple of years. We've shot actually in all 50 states. Um, so we understand the kind of the where it works and where it doesn't, where these incentives actually do create jobs and where they don't and how they work best. And I feel like what we're doing right now in new Jersey, we developed an incentive in new Jersey that is the most competitive in the country, that actually competes with most of the most of the places in the world. A good chunk of the production in America has gone to the U.K. because it's a very big, very attractive incentive. And public companies have a fiduciary responsibility to deliver the most they can for the money, so they chase those incentives all over the place. Um, in the US, the states compete with each other for that, uh, but they do not compete well with other countries for it in total. So the federal incentive, which would be a a layer of incentive that would go on top of the state's incentives, would compete with other countries and bring those to keep those jobs back in America. So what we do when we film in new Jersey, it's an economic it's not a no. That's why you like it. But do you think it's going to happen? There's a couple of wild card things. I think it's a bipartisan approach, which is helps a lot. Um, I think it makes it's completely sound. And it has a working model that's proven that you can put a dollar in and get 6 to $9 out, depending on how well you administer the incentive. Um, the problem is, is you have, you know, depending on what's going to happen in a couple of weeks, you've got a lame duck session. And if you have a change in control, and who wants to champion what and who wants to give you a win? The win for America is if that if we got it, that would be a win for the country. Um, I don't I don't I can't predict what's going to happen in politics. I'm not very good at that on a good day. So yeah, but I do think I do. It is absolutely economically sound policy to have a competitive production instead of just like you would any other industry. That was the number one question I got from some of the people backstage who work in the industry and are desperate for the jobs to come. Yeah. And I think, by the way, I think that I say this to the California as well. I just think over the years, California got, I think, complacent that the talent was here. Um, they let the infrastructure age, they make it very difficult to shoot in the city of Los Angeles. Um, I'd tell you, we just finished the David Fincher's movie was No Walk in the Park, but, um, animals. That opens next week. Uh, Ben, you're going to be not going to have been here. We've shot that in L.A.. We shot, uh, Cliff Booth in LA, and we shot the new season of Everybody Wants Us All coming up in the next couple of months. And those three productions alone, over $400 million in production spending in Los Angeles. Um, well, and we're not without without, you know, the best incentive. So, yeah. On that note, thank you very much. Thank you so much. Anthony exploded. All right. There you go. The Netflix co-CEO. The Netflix co-CEO. They're speaking with our very own Shaw on all things, of course, streaming and the like. And yeah, it's certainly a very interesting conversation. They're gonna have more from the screen time ahead as we hear from the comedian Conan O'Brien. Also, Hollywood heavyweight Ben Affleck will be discussing ISE impact on the industry and the creative process. Yet from O'Brien to Ben to Bonds. Uh, the, um, how you made that segue? Yeah, well, someone's got to do it. Maybe we we have a future either on Netflix or along Conan. Far from that, of course. Uh, we're looking at the Bloomberg Global Aggregate Index, which really had a terrible time in September. This is just to say, of course, bond yields have been rising, to levels we haven't seen actually in a in a generation. When you look at some of the yields here now, you know, the debate in the market is whether or not this is it, is it negative factors pushing yields up or is it positive factors pushing real yields higher. And I think the answer to that question will I guess, inform us where the bond market eventually land and what that means actually for risk assets. But on price bonds had a not a very good time uh, in the last quarter. Worst one, in fact, since we were battling that massive inflation issue back about 2 or 3 years back. Joining us to help extrapolate, uh, what this means, uh, as far as risk assets go, and specifically, of course, GM bonds. Let's bring in Amos here. Patrick, head of income strategies at at Pendle Group. Amy, as always, a pleasure to have you on the show. The the premise. What what do you think was behind a tailwind uh, pushing yields higher uh, in the last month. In the last quarter? Yeah, it's a tailwind, I suppose, if you want yield higher. But yeah, absolutely. I am more in the camp that it's do is real fundamental economic reasons. I mean of course inflation is here. Inflation is with all of us. But one thing I think the US is slightly different on is the extent to which the growth engine is still very much on. When I look across, you know, the health of corporate profitability, it's not all in the eye and tech sectors. Um, you know, we came off three key earnings season. Um, still really hot. And even analysts expectations are softening at the margin. The way that the US economy is currently tracking does support the fact that, yes, yields ought to be higher, real yields ought to be higher. And from a demand perspective, you know, somehow the economy is withstanding these, you know, slightly higher interest rates, definitely higher interest rates at the long end of the interest rate curve as well as higher fuel prices. Um, and a lot of, you know, macro uncertainty. So it tells me that, you know, this is probably still got legs from a real economic point of view and probably also why from a risk asset perspective. So when you look at at least the S&P 500, for example, you know, typically when we've had strong moves higher in yields over a short period of time, especially with high and real yields, you've seen um, equity markets come on distressed. You've seen credit markets come under stress. And albeit there's been a little bit more volatility, a small bit of widening and credit spreads. But all the risky assets are holding up. Which again tells me that, you know economic and corporate fundamentals are still holding up. Um, yeah. I mean, everyone's saying, look, this is the time for bonds to really kind of take advantage and get some income. Now, when you're talking about a treasury curve that is mostly above 5%, you're still saying you're not full out ready to go outright long on duration. Tell us why. Yeah. Look, I think it's it's difficult from a fixed income perspective because again, you know, lots of investors rely on the fixed income asset class to provide income into their portfolios, and it is so attractive looking at not only US treasuries, but especially the corporate bond curves and how yields have ratcheted higher over the month of September. And it's tempting to jump in, but I think what I've seen, at least locally in Australia, is that that all in yield appetite for going after corporate credit has softened somewhat over the last few weeks because bond volatility has just picked up too much. I mean, on the one hand, you want bonds to deliver that steady rate of income into your portfolios. But when you have yields going like this, you've got mark to market capsule losses that you then have to, on the other hand, explain to investors as to why your defensive part of the portfolio is causing you more volatility right now than the growth part and the risky part of your portfolio. So I think you for for that investor appetite for overall global fixed income to return to the fore. You do need a period where the world believes that you know enough is enough. Yields will be higher for longer, but you need to see that volatility come off. And I'm not sure you know again from a fundamentals perspective or into that right now when I look at for example coming up tonight you'll get um isms in the US. And again a really great indicator for that is how the regional PMIs are stacking up in the U.S.. So you get lots of reports of that, um, in a month before you even get the eyes. Um, and unfortunately, it's not good news ahead. You know, there's still lots of good fundamental reasons to sort of stay away from duration right now, but that doesn't mean that, you know, fixed income is dead, but you just probably got to look at the floating part, the fixed income rather than the fixed part of fixed income. Yeah. That's really where the, you know, the fine print and lots of people missed that bit of the fine print, which really gets them into trouble. Uh, well, since you mentioned Australia, can I just ask you, I mean, the, the spread between where you are in treasuries, let's call it the ten year, uh, and we are on the Aussie ten year has just narrowed substantially. It's called ten basis points. now. Where do you see that spread going? Um, and is there a chance that the US now becomes, uh, high yield nominally as far as compared to Australia's concern? I do think that the divergence is becoming more and more stark, and the reasons behind them becomes more stark to me as well. I think one thing that the rest of the world does miss relative to the US, is this demand for capital from such a large need for CapEx spend from the I and from the tech sector, and that competition for capital. You know, you could argue, at least for the US economy, it makes this growth engine, this this marginal part of the growth engine for the US story relatively insensitive to interest rates. I mean, I was talking about this with my colleagues this morning. But, you know, when you take a company like, um, alphabet, for example, you know, it doesn't really matter that their funding here or their funding, I don't know, 100 basis points higher or even 200 basis points higher when the need for borrowing is underpinned by the strength of demand that they're seeing and the return expectations that are well into the double digits. So if if that is what's underpinning the US demand and competition for capital, you know, you're not seeing that over here in Australia where we're building data centres as well. And there will be a higher need for capital. But that that grab the capital from a relatively interest rate and sensitive sector is not nearly the same the world over. So that divergence, you know, that is one reason alone why that divergence can continue to grow. Now it's plausible because when you look at the Aussie of the US ten year right now, it's we're above most of what you see in Europe, with the exception of gilts. Uh, a little bit more to our point here, higher than was what would be the global implication if the US Treasury market does become the world's high yield play? Uh, and do you see that as being plausible? Um, I don't see any great sort of breaking point, if that does indeed become the case again. As long as it's being underpinned by the relative strength of economic fundamentals between the US and everywhere else in the developed world, I think that's fine. You know what? I would be looking at all the pain points that tell you that something in the bond market is either causing the bond market itself to break or breakage along other parts of the financial system. So here you should be looking at, you know, not just time premia, but you should be looking at swap spreads for indications of funding stress, whether the world is starting to doubt the fiscal sustainability of the US debt story, and is that coming out in swap spreads? We don't see that yet, for example. Right. And we definitely not seeing it is, you know, the rise of the VIX or the rise of credit spreads the world over. So I would be looking at things like that to monitor whether the US, you know, whether the level of US yields has gotten too high and is about to break something. But I also wonder, you know, very controversially maybe to to end our conversation today whether, you know, it has to be the fed that kind of breaks the back of the U.S. economy a little bit here, because everything that I see, you know, whether it's the labor market, it's strong, it's tight, whether it's, you know, underlying demand, consumers are still relatively resilient, although I'm sure there's, you know, stress stories everywhere else. Something more needs to be done here to break the back. And if the fiscal lever isn't willing to be tightened, which, you know, arguably nothing much is going to happen on that side, does the fed then have to do something more drastic? Well, Amy, one of our stories today, I'm not sure if you saw it on the Bloomberg. You know, triple C, the spread is now on junk, right? I think a thousand basis points. I guess my question there is if it is indeed a very strong economy, does that do we need to be looking at that part of the curve jump specifically as not as, you know, the default risk as not as something we should be too worried about? Uh, is what I'm trying to get to here. Yeah. I would be more worried about whether the overall composition of the junk market is becoming more junk. Um, and I would argue that, you know, default rates whilst they've been picking up at the margin that nothing is exploding. When I look at lending conditions in the US, everything is incredibly benign. Financial conditions are still, you know, relaxed enough. And don't forget like again sitting in Australia, it's dark because the RBA has already hiked four times in this hiking cycle, and the US hiked once and and the world is kind of in a bit of a panic about the whole situation. But relatively speaking, you know, I think lending conditions are okay. Um, there is no funding stress signs yet in the US and Triple C's, I mean, when things get a little bit worse yet, you do expect that end of the credit spectrum to to have much higher beta. That's the way it should be. But again, I would worry more if we started to see more and more of the credit universe migrating lower in the credit ratings, rather than just the absolute spread of one particular slice of the credit spectrum. Amy, always great to have you, Amy. Share, Patrick there ahead of income strategies at Pendle Group. We've got plenty more ahead. Keep it here. This is Bloomberg. Well, OpenAI has accused its Chinese rival, moonshot, of conducting a widescale effort to extract data from its GPT models, and the company said it observed thousands of attempts by users associated with moonshot to decipher hidden information about how its models reason through problems. The accusation adds to growing concerns among U.S. firms that Chinese AI developers are improperly piggybacking on their models, using a technique known as distillation. Now, of course, this whole debate about AI safety has been really brought up into the spotlight here. In recent breaches by AI models and warnings from industry leaders have renewed focus when it comes to safety. But while the spotlight has been on Silicon Valley, China's rapidly advancing AI models have drawn far less scrutiny. Let's bring in our Bloomberg Opinion columnist Katherine Tharoor. But she is writing about this in her column here this morning and really examining whether China is ready for those same safety challenges facing the world's leading AI labs. Catherine, thanks for joining us. We've learned a lot about AI safety risks in the U.S.. Are we starting to see those same risks in China now? Well, I think more broadly, I've tried to reject some of the AI apocalypse framing that we've been seeing. But I do and I do think some people in the Chinese industry, uh, also seem to say that, you know, maybe Chinese AI is just a little bit more behind. They're not seeing some of these existential risks as much as Silicon Valley. Or maybe they're just sort of less dumber pilled. But I do think, you know, when it comes to AI agents, we are starting to see the sort of traces of behavior that has caused all this hullabaloo, whether that's, uh, agents, you know, sort of misbehaving or behaving in ways that are sort of unexpected or being a little bit harder to contain. So I think and China as we know, is going really all in on air. So I think if this is really where the risk lies, I think it it won't be just a Silicon Valley problem for a long time. Well, I mean, I just on that last point, Katherine Beijing has called some of these warnings fear mongering. I mean, is China changing its tune? So I do think that we've we've started to see a little bit of a change in tune. And, you know, when, when China put out its, uh, I safety governance framework, one of the explicit risks that it stated in there was actually, uh, fear of losing, uh, humans losing control over AI. So I sort of going rogue. And that's another, uh, concern that President XI Jinping himself has repeatedly said. So I do think China is at least showing that it's, you know, listening to these concerns and that, that I safety, uh, governance framework was also put out in English. So it was, you know, explicitly, it seems like put out for an international audience. So it's showing that it wants to at least be a sort of global leader in AI governance. And so I think it's showing that it's at least aware of some of these risks. Catherine, thank you so much. Catherine Thorbecke, our Bloomberg Opinion columnist. Uh, for us there. Uh, just know we have lots more ahead. This is the China show. Welcome back. It's, uh, it's quite late. So we are short, of course, for markets for a holiday here in Hong Kong, up in mainland China. So, uh, a couple of markets are trading. Of course, micron earnings is one of the key corporate drivers here. Chip stocks reacting to varying degrees here is up about 4.3 as we head into the Japanese lunch break flat across the Korea names, uh, here as well. There is one specific name. Uh, just apart from the chip story, that is really moving the needle on market and news flow. And that's Nidec. Yeah. We'll have more on that story here. And what the accountants have said about this or lack thereof, that's really weighing on the stock here this morning. Plenty more to come. This is Bloomberg. Japanese markets change at lunch break here this morning. It is the standard across these markets. The volumes are a bit lower. We do have China and Hong Kong markets shut off for the national day as well as Golden Week holiday. So yes the standout is the Nikkei here today were up more than 2%. The chip maker certainly is fueling that charge here. And the yen still a bit weaker there 158 levels. Their yields on the back end continue to tick higher. Yeah. So this is a story that whilst we have turn to page on the calendar quarter, it is something that we're continuing to track the weakness we're seeing across the yield space here. Now just back to the equity markets. We are just in the last 12 15 seconds before we head into the cash market. Lunch break. They're over in Tokyo and the stock has really seen better days. We were down as much as 20 at 1.8 and a half were down about 3,031% over the past few days or so in the latest here. We'll have more details in a moment. The auditor has basically said, yeah, we're holding off right now from giving our take on what's going on. Why don't we bring in Alice French? She's with us out of Tokyo, our investing reporter, to help us understand what is going on. Uh, so, Alice, we finally have a glance at the full year results. Why has the market taken them very negatively? Quite evidently, when you look at the stock price today. High. Yeah. I mean, negatively for sure. Uh, the stock's having its worst day in more than a year this morning. And let's see how it goes in the afternoon session. But unlikely things will look up I think. I mean look, as you say, I think the fact that the auditor has withheld an opinion on these results is just it's really stoking a lot of caution. Right. We know that the stock is already on special alert on the Tokyo Stock Exchange. Um, it's been removed from the Nikkei 2 to 5. And I think the fact that the auditor does not want to sign off on these statements is basically a single signal that there could be more losses to come. So we've got around ¥630 billion worth of writedowns and about 480 billion worth of charges because of these previous accounting issues. Now. The actual amount of those losses, I think, is relatively within expectations because we'd had some media reports earlier in the week. But I do think if the order to really that's that's causing the worry today. Okay. So what are the next things to watch for the company? When do you think investors want to get a little bit more clarity on the situation? Yeah, I mean we want clarity as soon as possible. Right. And that's definitely the sense here in Tokyo. I think the 28th of this month is going to be a key date to watch. So that will mark one year since the stock was put on special alert by the Tse. Um, Nidec will have to report a securities report with an order to opinion by that date, otherwise it could risk potentially being reviewed for delisting. So that's going to be a key date. I'm sure there will also be things coming out in the next few weeks regarding, um, you know, we've already heard reports that they might be looking into spinning off some of their subsidiaries and some of those kind of restructuring theme. So we'll be looking out for reports on that. I think that will also, uh, impact sentiment a lot around the stock. And the angle is on activist investors. How to what extent have they been involved in here in the saga so far? Yeah, I think it's fair to say they've been involved quite a lot. So Oasys, which is which is the biggest activist investor in Japan right now, has about 8% of the stock, second biggest holder. They've been very vocal, uh, speaking out about the fact that we need to, you know, improve governance. They've called for kind of board changes, executive changes, and they have been pretty influential. We also had yesterday that aspects, uh, hedge fund in Hong Kong had actually. So so the CEO stepped down right earlier this week. And actually that hedge fund before that stepped down had backed him to stay. So we're seeing a little bit of kind of divergence amongst shareholders in how they're responding to this. But I think definitely not at coming under pressure from all angles basically. Alice, thank you so much. Alice French in Tokyo for our Japan investing reporter. We're just getting started here on a coverage ticket. It's there to watch as we were just outlining for for for you guys. Okay. Uh, just a pivot here from Nidec. Let's have a look at where we are in the energy markets right now. So you have oil coming up on your screens, not guys and several others. Of course, there are on your screens. So there's a couple of things going on here, right? Obviously. One is, you know, on the back of where we are here in Brent prices and we are back down to about 100 or just below that part of what the yield story has been. So, uh, front and center in September, number two is you have this Chinese economy based on early indicators, starting to show signs of, uh, recovery and reception to some of the, uh, the push we're getting there from, from authorities. And I think we've had this really good story coming through as well on the. Where is China as far as then being a buyer of oil is the case. That was the biggest wild card right? When China was going to come back into this market and buy up oil again. And would that actually, uh, fuel a bit more in terms of these demand issues and also the supply issues? Right. And so therefore what we're seeing is that recovery is more nascent than initially thought, as you are seeing several firms that are now trimming their estimates about how much buying China is really going to get or how much they're going to buy, uh, here. So that certainly might in some ways help the situation. But certainly, uh, the giant China demand picture for oil. I mean, it goes beyond just the oil story we got to talk about, you know, what we've been seeing, and copper prices, diesel prices, which continues to be, uh, very robust there in terms of the price levels and the like there, you know, beyond just the oil story. Right? Yeah. Because there's just so much inflate. I mean, the inflationary pressures that we're seeing, um, beyond just the oil is the big thing to watch, I think. And you know, the their energy mix and how they've evolved that to underscore how much really oil they need to tap. I mean, there's the cold story as well. In fact, just on this fantastic piece here. And we will unpack this right now. So you have this clean energy boom, right in Pakistan. And I think this really is underscores the multiple sources of energy to China has. Right. So Pakistan has turned it into in fact, the third biggest, uh, global market for Chinese solar, uh, products. And while that shift has actually help consumers, it's also straining this existing energy infrastructure and really complicating deals with other Chinese companies that now operate in the nation's largest coal fired power plants. Let's bring in Lily Pike, our trying to climate reporter, to help us underscore the not so obvious trends that are taking place here. Lily, very nice to see a fantastic piece of Pakistan. They they've had this record breaking boom in solar over the last couple of years. Why has it taken off in such a big way, specifically in that part of the world? Thanks for having me. So I began looking into this story after seeing this record breaking solar boom unfolding in Pakistan. And just to put some numbers on this, Pakistan went from almost having no solar at the beginning of the decade to having about one third of its electricity come from solar today. So that just really happened overnight. And as you said, it's become one of the largest markets for Chinese solar panels. And so that is really fascinating. And what's extraordinary about it is that this happened not because of government policy but because of pure economics. And so what we saw is that after the Ukraine war and after some IMF reforms and Pakistan power prices really shot up at the same time, Chinese solar panels just got super cheap. And so we saw millions of people across Pakistan going to buy these Chinese solar panels to put on their farms, to put on their rooftops, on their factories. And that really shows that solar has become cheap enough that it can drive an energy transition alone without policy. Yeah, I love how you kind of frame the story that this is China's coal past meeting and really colliding with the present, which is solar. China's exports have been powering Pakistan's energy transition. So why is a solar boom also a problem for China this year? What's so fascinating about this story is, as you said, China is on both sides. So before the solar boom that we're seeing now, we saw China build massive coal plants in Pakistan over the last decade. And now what you're seeing is this clash between China's old exports, fossil fuels and China's new exports and energy, clean technology, including solar, including batteries. So the way that's playing out on the ground is that we're seeing as people go off the grid using the rooftop solar demand for grid power is going down. And that also means demand for those new Chinese coal plants is also falling. That's a problem for both Pakistan and China, because that leaves Pakistan owing billions in debt to China for those coal fired power plants. Meanwhile, usage is going down. So both countries will have to reconcile that. Yeah. And it does take a while, of course, to decommission coal plants, let alone the financing that goes into that. As you know, it's very, very complicated. Now to your point here, Lily. It this doesn't seem to be one that is a story you need to to to Pakistan. It's not government policy, it's economics at work. So I would imagine this can play out in many other places. This clash between clean tech and its legacy fossil fuel. Should we expect this trend to go beyond where we are currently seeing it? Indeed, I think that's what makes this Pakistan story so interesting, is that it's a bellwether for the energy transition to come. So we see this huge growth engine from China and its clean tech exports, now at 190 billion as of last year. And Chinese leaders and companies are really trying to push that forward. And that's even going up because of the Iran war. We see countries turning to electrification, turning to solar and batteries to replace those expensive fossil fuels. So we've seen this energy transition taking off all over the world here in Asia, in the Philippines, all the way over in South Africa. We see grid demand falling because of the rooftop solar boom. And again, this is a problem for all fossil fuel producers in these economies, including China, which put a lot of money into coal plants in the last couple of decades and is now trying to kind of reconcile and confront this, a transition from coal, its coal past to its solar future. So I think we can expect to see more of this to come. Lily, thank you so much. Lily Pike are China climate reporter in Singapore for us just ahead here in shows. You might have seen this. Uh, one of the bigger stories, of course, these last few hours or so, passengers and crew saved themselves from disaster. After this, flydubai pilot stabbed his colleague on a flight to Israel, and the plane suddenly plunges thousands of feet in a matter of seconds. An update on the investigation is just ahead. This is Bloomberg. Well, some pretty dramatic moments when it came to us on board that flight here. Authorities in Saudi Arabia are questioning a commercial pilot who allegedly stabbed his colleague and tried to crash a plane carrying more than 170 people. Now, passengers and crew stormed the cockpit and regained control of that flydubai plane that was on its way to Tel Aviv. just to tell you how dramatic it was. You take a look at what flight data has showed us that Boeing 737 plunging more than 14,000ft before turning back and diverting to travel in Saudi Arabia. So authorities are questioning now the attacker and trying to figure out a motive, but that that decline, that ascent descent. I say I should say, David, that just happened in a matter of seconds. Right. Uh, so lead us to say it was some pretty, pretty tense moments. Uh, to, to say. To say the least. Yeah. Um, and I think the motive to the last point you just made is certainly something that investigators are focusing on as we, as we speak. In fact, let's cross it over now to Dubai and our Middle East correspondent, Abby Abu Omar is there with us right now early in her morning. Thank you so much, by the way, uh, for for taking the time to join us right now. Get us up to speed. What do we what is our understanding right now because of where the investigation is? Yeah. Good morning. David. Well, look, it's a developing story. Quite surreal, actually. The developments over the past 24 hours or so. This is a crisis that was averted. Everyone is safe. Everyone landed in Tel Aviv, of course, after a repatriation flight took the passengers from Tabuk in Saudi Arabia. So a quick timeline of what happened. You guys alluded to it, of course, but this flight was taking off from Dubai and then called for a crisis warning, was crossing over Jordan, and then made its way back 180 degrees to the northwestern part of Saudi Arabia. That is where Tabuk is and landed. This is, of course, after one of the pilots with a sharp object started stabbing his colleague, and then passengers took note of they started screaming. And then the flight, of course, made the emergency landing in Tabuk. We understand that the pilot, who is of Indian nationality that was stabbed, is getting the necessary medical treatment in Saudi Arabia. The other pilot who committed the act is getting investigated in Saudi Arabia. Just to note here, we still don't have a motive. Something to note as well is that there have been a lot of rumors circulating across social media, and certainly within the wider sphere, suggesting that this could have links. We don't know what links this has yet. It is getting investigated. Flight Dubai put out a statement, David, suggesting that we still don't know the motives behind this crime and that that that hasn't been been made clear yet essentially. Yeah. And the Israeli leader and Netanyahu also chimed in and is calling this, you know, these people and the passengers, they're their heroes as well, this harrowing incident. Um, well, I mean, if you could tell us a more about what I mean, there's certainly has sparked a lot of debate about whether we can avoid situations like this, whether we need some more precautions here, whether, you know, cockpit video recorders, for example, that seems to be a question of whether we really need to be installing these sort of systems in place now for events like this. Yeah, absolutely. Yvonne. So Bloomberg did actually come up with a report suggesting that while these incidents, these suicide pilot incidents do not occur and they have actually decreased a lot over the past couple of decades, this latest incident suggests that they could still happen. And they bring up questions about whether we do need a return of or to bring the recordings in the cockpit for, for pilots. And so that is a question that I guess a lot of these, uh, flight companies will be asking themselves. It certainly feels needed at this point in time. But you're right. Prime Minister Netanyahu did meet with the passengers that have landed in Tel Aviv. He did speak to the media, and he did say that it's too early to make any kind of link that this incident is attached to Iran. Of course, one would be asking themselves the question of whether this is linked to Iran, given everything that's happening in the region. But it's just important to note here that those links have not been established. President Trump did say that he had spoken to Prime Minister Benjamin Netanyahu. He did say, of course, President Trump did suggest we had a headline quoting him suggesting that this perhaps is a terrorist incident. But again, too early to me to make those distinctions, too early to make those claims. This is a developing story. Will continue to monitor the details out of Dubai this morning. If we get any further statements out of officials, here are flydubai officials and certainly out of Israel, where our colleagues are monitoring the story very closely. Abeer, thank you. Have Abu Omar there. Dubai are Dubai in the Middle East. Correspondent uh, in terms of that will continue to track, of course, this ongoing story, a look at how Asian markets are also doing as we head to that lunch break. Commercial break I should say. Hong Kong and China markets are shut, but we are still seeing the Causeway and Taiwan are doing quite well as well. Japan on that lunch break. Also many more to come. This is Bloomberg. So I'm not complaining because you can push back against it. I mean, we have and I have some of the best conversations of my career. There were a lot of people who feel safe doing a podcast, who never showed up on the late night show because they're intimidated by that, and they think they have to pull a rabbit out of the hat in front of a live crowd and everything has to hit. But now I talk to people, you know, just them. Al Pacino will sit there and talk to me about everything for an hour and a half. You know, Dustin Hoffman, uh, Paul McCartney, um, Mick Jagger. Um, it's absolutely incredible. And if you connect with them in the moment and lock eyes with them, you never know what they're going to say. There's no pre-interview. Um, and talking to Mick Jagger, just very recently in London, when he started, I said, did you ever meet? You know, uh, did you ever meet Elvis? I was like, no, I never met Elvis. John, some of John Lennon. He starts doing a John impression. You don't want to meet Elvis. Trust me. Mick. Why didn't I meet? It was because John told me not to. And then I was asking him a lot about the new album. But if you create that sort of symbiotic, we're in a flow. We talk about everything and, you know, maybe in a different, uptight environment, it would have had to be presented to him. Kind of wants to ask you about John Lennon, and we're not really doing the 60s. We're doing the new album, but this way it's, um, he was tricked. So even. All right. Always bring the last kind. Ryan, I love it, of course. Comedian Team Coco founder and also they talking about podcasts and the like. Uh, they're at Bloomberg Screen Time. Uh, there's no other way to pivot away from that. And all the glitz and glam that's happening in Hollywood here right now. But maybe what could be overshadowing with cities like Singapore and Kuala Lumpur these days is this whole discussion about the haze there, right? It are really these cities are choking under some of the worst haze in years, as smoke from Indonesian wildfires smothering the region ahead of a busy weekend of major sporting events and the poor air quality is now threatening events, including the Singapore Grand Prix and Malaysia's return to Formula One after nine years. Yeah, that's that's coming this weekend in Malaysia. And on top of that too, you also have the marathon. The marathon, which I think is also running a marathon less than ideal in haze. Yes. Conditions for this. So as far as some of the numbers go in the rankings on your screens, right. Kale and Singapore have topped the list of cities with the worst, uh, polluted air. A powerful El Nino is certainly contributing to what is shaping up to be the worst haze season. As we were just pointing out there in many, many years, let's bring in Megan Torres and Aubrey, uh, who leads, ah, Asia, uh, agriculture coverage right now. Uh, to to help us understand, you know, Megan, thank you for joining us. I mean, for our viewers who might not be too familiar. This is something, of course, that takes place. Happens annually. Uh, put this one into context for us. What is driving this hay specifically this year? And why is it so bad? Sure. Absolutely. So the haze is really being driven by wildfires in Indonesia. Um, as you mentioned, these are an annual occurrence. Part of it is due to land clearing techniques, um, you know, using fire to make way for farmland and development. But the dryness this year is really exacerbating things. Um, El Nino has contributed to a dry season being drier than normal. Their rainfall is running 80% below normal since June, so the number of hot spots is just really climbing. They were over 15,000 in September and that was the highest since 2015. Okay. Um, what are what are people saying about how long this is going to last and what is expected to end? Yeah, absolutely. So normally Indonesia's, uh, rainy season would be starting around now, but the weather department there doesn't expect the rains to really come until November or even December this year. Um, if that happens, you know, this case could continue for for quite a while still, unfortunately, as mentioned, you know that the only year that we're talking about, it's expected to strengthen into one of the strongest on record and be quite a historic event. And so, um, you know, that often brings dryness to, uh, this was of Southeast Asia, South Asia. We've seen that with India's monsoon data yesterday as well. It's just quite dry in parts of this region. And, you know, we we showed some of the numbers and really how bad this gets, you know, from our sort of scientific objective perspective. Uh, how bad is it? I mean, you're in Singapore. Give us a give us an idea of what it's like there. Sure. Today, luckily, has gotten a little bit better, but the rest of this week it has been quite noticeable. You can really just see it in the air and almost, you know, smell it a little bit. Um, I was talking to my teammate in KL just now who said that it's quite bad there as well. Um, so yeah, I think, uh, you know, the wind patterns, that's kind of been what's causing the haze levels to differ from day to day. Um, but overall, we, you know, as someone on the ground, we are hoping that these wildfires end soon. Okay. Um, Megan, thank you so much. Megan. There is an Albury there who leads our Asia agricultural coverage. It is the season for, of course, these things. Uh, just speaking of and that's our pivot really to go into the fourth quarter here. And, uh, just in terms of what October tends to look like seasonally, uh, historically when you look at some of the data. Right. So whether that's S&P 500, Asia-Pacific, Chinese stocks, I think we have gold and bonds in there varying degrees. The S&P 500 tends to outperform in October, but as you can see, it tends to be a non-event for most major assets. When you look at a 30 day, 30 year average. Yeah, I mean and bad for bonds. Good for stocks. Um, that certainly seems to be continuing here today despite this yield. True to form the long end of the curve. There are parts of this market, particularly when it comes to the tech side of things, that is really resilient to the rising yield environment. And as Amy mentioned, this is because of the economic strength that we're seeing on this as I boom. That's why maybe investors are not really completely retreating when it comes to risk either. Okay. Just a glance at markets, a reminder that we are shut today here in Hong Kong and up in mainland China. So on that note, we're still here for you, of course, here at work, because you don't have to. Thank you so much for joining us today. We will see you all tomorrow. This is the China show.