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Hey, folks, you want to get back to that breaking news story involving Warner Brothers Discovery planning to reject a takeover bit from Paramount Skuydance after the company amended the terms of its offer. This breaking news story by our own Lucas Shaw, Lucas's Bloomberg News Managing editor of Media and Entertainment, also the writer of the screen Time newsletter. He joins us from I Believe the West Coast. I'm Lucas. The back and forth continues. Give us an update here.
Yeah, so, so those who who haven't been paying extra close attention, Paramount has now made seven or eight bids for Warner Brothers Discovery. This was the latest sinciment public with its offer a couple of weeks ago. The main difference with this bid was that it kind of addressed concerns about whether Larry Allison, who along with his son David controls Paramount, was fully backstopping the bid, which he is, but Warner Brothers says it is still not enough. They
haven't made a final decision. The board will meet next week. They'll likely be a filing next week when they make that decision. But Paramount hasn't really increased its offer in a few weeks. It keeps amending it by sort of tweaking things around the margins, and I think the Warner Brothers board is waiting to see if Paramount wants to offer more money because they still feel like they're deal with Netflix is better.
Yeah, so Lucas, why not just say that then?
Why not just say this is not valuing the company highly enough and give us more money? Why add the part that they're not really sure about the financing? And it seems like that's a little bit aggressive to you know, a group of bidders that were already panting on potentially launching a lawsuit over this.
Yeah.
I mean, they've I think tried to enumerate a number of concerns about the Paramount bids so that it gives them cover given the threat of lawsuits, and that Paramount has been on kind of this public campaign, right They've had one of their big shareholders, Jerry Carnally, went on a very popular podcast and talked about why he thought that the Warner Brothers board was making the wrong decision.
They have appealed directly to shareholders, They've threatened lawsuits. So Warner Brothers has created a pretty substantive paper trail laying out many concerns to explain it. It gives them, It gives Paramount more to do. They don't understand why. I think Paramount's not just saying we'll match. We'll kind of agree to everything Netflix has agreed to and here's even more money. That seems to be where Warner Brothers is at right now.
I mean, do we have any indication Lucas of what really Warner Brothers wants and what they think. Is it just coming down to money or is it actually who is the buyer?
Money's the biggest thing they know.
The Paramount offer and the Netflix offer are fairly comparable. A lot of it depends on how much of value you assigned to the cable networks at Warner Brothers zones that's you know, CNN, TNT, among many others. Warner Brothers thinks they're worth more than Paramount, hence the disagreement. I think there's some concerns about Paramount as a buyer because look, Paramount is a very small company, right. If they didn't have the Allison's behind them, this would not be a
deal that it could contemplate. But it does have one of the wealthiest families in the world behind them, and that helps get the deal done. But what does that mean, or I guess I should say, what does Paramount look.
Like At the end of it?
It is still a company sitting on a bunch of kind of troubled cable networks and some studio and some streaming services that are kind of in the third tier.
Netflix.
You know you're getting You're getting the most valuable company in the entertainment business, some one that's been run very well, and so I think they feel good about that deal. There are also some concerns about the limitations that Paramount would place on Warner Brothers in the interim period if they were to do that deal. Limitations around what they
could do with their debt. We saw this play out actually with the Allison's in Paramount where they kind of got in some fights with the leadership at Paramount, including and also with the creators.
Of South Park over what they should do.
It's up to a third party, I guess, to decide if a lot of these are window dressing and it's really just all about the money, I would assume that, you know, at the end of the day, most of these deals are about who offers us the most money. If Paramount came and offered thirty three dollars share, thirty four dollars to share, thirty five dollars share, that get the deal done.
I was just going to say, it feels like, you know, they want to go with Netflix, and they just will go with Netflix. But I guess if Paramount there's a price for everything, right, Paramount will be able to do this deal if it meets a certain price goal. But where will the biding stop. Because Netflix could probably raise some more.
Money too for this.
Well.
I think that's one of the kind of concerns or things that Paramount is trying to work through. Right, If they are going to come back and offer more money, how do they do that in a way where they don't just end up in another bidding war that they lose. I think they felt like they long felt like they were the favorite to win this. They were surprised by how aggressively Netflix came after it. They certainly share your belief that the Warner Brothers board just prefers the Netflix offer.
And so if you're a paramount and you come back and you only increase your bid by two or three dollars a share, that's something that Netflix could probably match if you have to increase. If you increase it by even more, some of those Netflix shareholders might balk and say, why are we doing this? Because you've already seen the share price of Netflix go down over the last few weeks as investors are worried about how much they're doing this deal and what this deal means for the company.
We thought it would carry over into twenty twenty six, and it looks like it will all right. Lucas good stuff. As always really appreciated that. Lucas Shaw, he's managing editor Media and Entertainment here at Bloomberg News and also writer of the screen Time newsletter, really the keeper of the screen Time universe. Joining us there from Los Angeles.
Stay with us.
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Staying on the markets, now, on the minutes that just came out.
Obviously, Ross Mayfield joins us.
He's investment strategist and Baird Private Wealth Management. Ross, obviously you haven't had a chance to parse the minutes. But is there anything from what you heard in the last few minutes that would concern you or that would give you any more clarity about the path ahead for the Fed?
No, there's a lot to parse. I think a couple key takeaways. The division is obviously not unprecedented, but fairly unprecedented for the last decade plus, and I don't think that replacing Fetcher pal is going to alleviate that. So I think at some point in twenty twenty six we'll start to see pressures at the long end of the curve again. Even in this bull market, the equity market has responded. When you've ten year yields press up towards
five percent. I don't know if we'll get there or not, but I do think that at some point the bond market will start to worry again about the politicization of the FED and what that might mean for rates. You know, the other key thing I think is, you know, the FED, by cutting in December, gives them room to not cut in January and then get to March, when we will
have several more months of clean data. We'll kind of get to work through all of the shutdown idiosyncrasies and get a better picture of things as they.
Move towards neutral.
Of course, all assuming that we don't have another government that's going to say before then.
We hope, right we don't know what's going to happen at the end of January, but hopefully there won't be a repeat. So ross would you be more concerned right now about inflation coming down the pike, particularly with the one big beautiful bill taking effect, or the labor market, which at least so far doesn't appear to be materially weakening, but there are some signs and there are very definitely people out there that are very concerned about it.
I'm far more concerned about the late I think the FED is doing the right thing by kind of resuming cutting mode to at least get to neutral, if not go a little bit below it. In twenty twenty six, the uptick in the unemployment rate, some of the jolts and some of the survey data that we've seen is
quite concerning. And then on the flip side, yes, inflation is sticky above two percent, but we really have never had inflation kind of just hover around two percent for a long period of time or even a medium period of time. You've got rents coming down, you've got energy costs under control. There might be some upside pressure from tariffs, but I do think that the major concern about tariffs is a bit overblown, or that's what the data would say at this point, so much more concerned about the
labor market. And so I do think that the FED is directionally right to be cutting, though I understand most of the members see it as a very close call.
Hey, you know, Ross, I just want to get into you have done some work, you guys, and put out a note and you talk about eight themes heading into the new year, everything from data center electricity consumption to ROI return on investment. Out of all of the AI spend, You look at what's going on in tariffs, you talk about, you know, kind of references back to the dot com bubble, and you also talk about fitzcher J. Powell. So I'm
just curious. We can't go through all eight of them, but give us one or two that you think have to be top of mind in the new year.
Yeah, so I'll give too quickly.
I think the biggest thing next year, as we talk about inflation and in a midterm year, is going to be data centers and the price of electricity. This has already been kind of a burbling theme, but I think it'll come to a head next year.
I think we'll see to the extent that it's possible.
Government intervention in regulating or getting energy prices under control, especially in a midterm year when we know that inflation has been such a hot button political issue.
Hotie, I did that.
Do you expect the president to say, Hey, everybody stop doing the AI spend, which is a major initiative for their administration.
How do we do that?
I think the administration, at least in the near term, will lean on deregulation to kind of get some costs in control that's been a theme in more traditional fossil fuel energy sector as well.
But obviously the.
Administration can't risk losing the AI race to adversaries like China, so you can't stop. But I do think that they're going to be very hyper sensitive to electricity inflation when they won an election in twenty twenty two or I'm sorry on twenty twenty four on the back of you know, inflation, affordability, cost of living that has people sew up in arms. The other point I would just make is I think that the concerns about a bubble, while they make sense to me, I think we are so far from a
bubble at this point, especially the dot com corolarry. You know, we're in a nice bowl market. The market is roughly doubled off the October twenty twenty two lows, but if you, you know, overlay it with what the market did in the late nineties, I mean, the market went up eightfold into the two thousand top. I don't think that the
sentiment is bubbly. I don't think that the price action is bubbly, and I think that the fundamentals of the underlying companies show that this is just a ball market driven by profits and not a bubble.
Well, that will be very good news to a lot of people out there that are investors.
What about the metals, is there a bubble? There are we in bubble territory for any of them, gold, silver, or any of them?
To me, gold was you know, we were talking about an AI bubble at a time when the real bubble and markets was in gold.
Now it's deflated a bit.
You know, we had the parabolic price move into the fall, a bit of consolidation here, and you tend to see that, you know, whether it's in gold or other assets, you have a parabolic price move goes vertical, you need a period to.
Consolidate, to reset sentiments.
So I think, you know, over the intermediate term, you know, bullishness on metals and using it as a diversification part of a portfolio makes a lot of sense. But I don't know that we resume that uptrend maybe until the middle of twenty twenty six. I think there's some sentiment that has to be reset and price action that has to be consolidated. But it certainly had a lot more signs of a bubble over the summer than we're seeing in ass socks right now.
Still have today, So there's a bubble.
I'll take that.
It's crazy, right, all right, good stuff, so appreciate it. Thanks so much for joining us. Ross Mayfield investment strategist over at bear To Private Wealth Management.
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All right, everybody, we're back on Bloomberg Markets. Carol Masser along with Bonnie Quinn live here at Bloomberg Headquarters. There is a lot going on geopolitically, was this past year, will be probably again in twenty twenty six. Here's just a few of our stories that have crossed the Bloomberg On this Tuesday, the United Arab airmitz Emirates excuse me said it well, withdraw forces from Yemen following a flare up intensions with Gulf ally Saudi Arabia over military operations
in the conflict hit country. You've got u Essentral Command coming out saying US forces and partners killed or captured nearly twenty five is state operatives following large scale air strikes across Syria earlier this month, and then also European leaders held a call to talk about Ukraine after Russia said it would revise its negotiating position, claiming Ukrainian drones targeted a residence of President Vladimir Putin. There's a lot going on, so good to have back with us. Ed Price.
He's senior Fellow non Resident at NYU. Former British trade official, he has advised members of the European and British parliaments. He also teaches jiu jitsu in New York, which I had no idea.
I did not know that either.
Yeah, I'm going to be useful in trade, seriously useful in your trade talks.
Now it would have been yes, if you're allowed to wrestle.
But there, I don't know.
We've seen that in some I feel like Parliament's overseas, maybe in Asia. Hey how are you?
I'm good, thank you very well.
How are you doing okay? Like it's amazing that we are here in December. It was a year that felt like we had weeks that would never end and a year that would never end. And yet here we are. How's the world doing right now? And what are the what are the parts of the world that you're watching most closely? What are the leaders that you were watching or who are well?
I mean, I'm always watching President Donald Trump. He lives in my head rent free, and I think that's probably true a lot of people. And then of course Putin I'm watching Putin Zelenski and that nexus. It's interesting that I'm not really watching Shijinpin at the moment, which.
I know should you be.
I mean, we saw those exercises the last two days. It's really popping off again if you like. I mean, is he just prodding the Japanese and the US or is he actually working on a plan?
Well, I think he's biding his time.
And someone like me who is always very excitable about the downside, and I could list all the times I've got that run. I'm always watching China for its potential invasion of Taiwan, and it does seem this year and in the last few years that that doesn't seem as imminent as you'd think. Now, you're right to point out that there's visual data and there's military data that would
suggest otherwise. But I think that's probably part of the strategy, as you suggest, to ratchet up the pressure and remind Japan and remind the United States that China has this new foundability. It doesn't necessarily mean that if it deploys its forces, it will employ them. So my conclusion after a while is that I've probably been a bit hysterical about the China Taiwan issue.
Well, no, but there is a deadline on it, right, I mean, she's being once that's done at the back end of a ten year plan.
But yeah, continued Carl, No.
No, no, you continue, Well, I mean again, it's for me.
I thought for a few years that it was imminent. I mean, I've said this before.
The reason I think it isn't is that China understands that you can't just float a force over the one hundred and twenty miles to the west coast of Taiwan without also.
Confronting the Americans. So it's harder than they think.
I think, who do you think fears President Trump? Who do you really think considers he and the United States still an ally?
Well on the first one, who fears him? Vulnerable members of our labor market, possibly Spanish speaking people who are here in good faith, working hard to create the GDP that we need to confront China or Russia. That's a bad thing if your labor market is shrinking and afraid in the geopolitical confrontation. And the second part of your question is I think who respects him?
Yes?
Well, I mean, I mean I'm exhaling. I don't know that he's respected.
Because you listen, we talk about your relationships that you've had, certainly in the UK and with European officials. I'm assuming you still have confidence and folks that you talk to. I mean, do they fear him, do they respect him? Do they consider him? Certainly members of NATO still an ally.
Well, I can't speak for NATO.
I mean I was in the economic side of government, but yes, rendering them anonymous. Friends of mine who are still serving in various parts of the world do not respect President Donald Trump. And they don't respect him for one reason, which is that, whereas Nixon presented a very effective mad madman routine, Donald Trump doesn't actually stick to his guns. And if you go through his record, I mean I was talking in the green room about Liberation Day.
Every single time he's said thus far, and no further or this will happen.
You know, if X happens, why will happen?
It hasn't really, So I think that people have now sort of realized that there's no incentive with him to do as he asks necessarily because he doesn't follow through.
Well, so is it just is it so that the bark is worse than the bike ultimately for President Trump? I mean yeah, right at times, Van, we've certainly felt the bite Liberation Day in markets, investors struck Iran.
Yeah, he's struck Iran. But I mean I've put it like this before.
Seddy Roosevelt famously said, speaks softly and carry a big stick. Yeah, And it seems that President Trump, with as much respect as I can muster, speaks incoherently and sort of occasionally carries a stick. And you can't infer, as a rival power or an adversary or even an ally, exactly what his behaviors are going to be, right.
But that's what makes it so terrifying, especially if you're of Venezuela and you know there's so many warships, carriers and troops basically stationed off your coast. What's going to happen with Venezuela. Ed.
Whatever we do, we are damaging our power. Whatever we do in showing hard power in the way that we are and moving away from soft power, we are reducing the overall power of the United States. That's because the hard power of the United States is in part based on our soft power. People like us, they trust us, they lend us money, and we definance a military. So I don't know exactly what's going to happen in Venezuela.
I imagine there's going to be more extra judicial killings, but at some point that is going to seep into the market for US debt, and at some point people are going to notice in the next decade.
Why hazard not so far?
I mean, for a president who said we're not getting involved internationally in any international wars, We're you know, in Russia, Ukraine, we're in not Well, we're not in Taiwan yet, but maybe we would be Nigeria, Venezuela.
I mean, where else is so many going on?
Well, in striking people from the air, that's the Obama playbook, So I think there's some continuity there with President Trump. He hasn't put boots on the ground, so that would be the marker for a real sea change in his policy if he put boots on the ground in Venezuela.
But back to the point on treasuries, I mean, I think that the dollar is on a structural course to some form of run on the dollar, some form of massive correction this century, perhaps even in the next quarter century, and that is going to be very difficult for economic policy makers to deal with.
Is that why we've seen gold go up? Like, what's your take on the gold trade or do you have one? Well?
I mean, I mean I think as the dollar smile potentially weakens, it won't completely go away, but it will fade. Yeah, people are going to want what they consider to be safe for assets. I think that's gold. I think that's been bitcoin, even though the course bitcoin has you know, speculation attached to it. But what I really scratched my head about is if there was a new thesystem emerged that there were too many dollars in existence per se,
what exactly would the economic policy response be. It couldn't be the response that we or in the two thousand and eight crisis, which was constantive easing. It would have to be some sort of second Folca shock and that would be disastrous. So I don't know why the treasury market isn't more inliquid I would have expected it to be, but that is the trend.
I would foresee, what's the biggest risk to the world?
Is it?
You know, there's a big risk to the world. There's a big risk to the United States. Take whichever one you want.
The United States right now is the biggest risk to the world, as expressed in the world that the United States built. And the United States has become the first country, as far as I can see, in history, to voluntarily dismantle its empire and to voluntarily annoy its own allies.
Can I ask you something. I worked with someone from the UK, and she said, you have a young country. This kind of stuff's going to happen. Talk to me about the history of the United Kingdom and how it has changed. So, how does this moment in time, We've only got about forty five seconds or a minute left here, How do you think possibly this moment in time fits into US history?
Well, the United States has always had a decision between a system of government based on block which is essentially consent, and this is something the ideas that Jefferson copied or Hobbs, and the bigger that America has got, the more that you've seen some American characters in history say hold on, the president should be stronger and stronger, he should become Leviathan that the Hobbs writes about. And this is what
the Trumpian moment is. Are we going to continue down a consensus based model of governance or are we in fact going to see a much much stronger executive emerge?
And I would say midterms, certainly in the next election, will give us an idea, yes, of where we go next.
Yes, we're going to have to have you come back in again. It's such a pleasure to have you in studio.
Thank you.
Yeah, Christ senior fellow at New York University, and our thanks to him. Really just running the gamut there of all of the theaters of I don't want to say theaters of war, but theaters let's say our stress points, stress hotspots exactly.
Yeah, stay with us.
More from Bloomberg Business Week Daily coming up after this.
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All right, gonna keep on the markets here as we've got about just to shy of a minute, sh a minute wishful thinking. No, we have about an hour to go here and then one more dat tomorrow. We do have just two trading days left, two closes to get through.
Here.
Our next guest reminds us that the US market has had a great year, but has lagged other major markets. It's always a good perspective to kind of pull out from the US and see what's gone on around around the world with moren the year that was and what
maybe in store in twenty twenty six with US. As Melissa Brown, head of Investment Decision Research over at Simcorpse, she joins us here in studio, I always like we're like, oh, look what the US has done, considering everything that was thrown at it this year, and yet take us through global market performances, because if you widen out, you see some real outperformance.
You you absolutely do.
That's not to say that US market has not been unusually strong this year. It's just that markets outside the develop markets excluding the US have been much stronger, and emerging markets have been even stronger than that. So you know, we've seen just huge strength across the globe, with the US kind of you know, towards.
The back of the pack. It's interesting do you think, well, okay, so do you think that continues in twenty twenty six or how are you gauging what has happened this year and is it an indication of what could happen next year.
Well, you know, if you.
Look back historically at annual returns, so we've had if you know, unless something really changes between now and tomorrow, we'll have about a three year return of about twenty percent on average each year. That kind of strength three years in a row the US market, I'm talking about the US market. Yes, that kind of strength three years in a row is typically followed by lower than average returns.
In fact, when it's happened, going back for you know, the one hundred years we have data, it's about half the time the market's been down in the subsequent year and about half the time the market's been up. But on average, it's the return is about a third of the long term average return.
Well, we also saw huge gains outside the US.
So if you were a prudent investor, would you say, look, there's a lot of unknowns about the US right now. Sure there are a lot of knowns about margin markets too, but maybe I'll just dip my toe in there better.
I would agree with that sentiment because I you know, the world outside the US had landed for many years, I think for about twenty years, so I think it's just starting its catch up phase. And assuming that companies can report decent earnings, that economies stay real strong, I think outside the US, you know, certainly offers a lot of opportunities. The problem comes, I think, is if the US market falls apart, in which case you know, nobody is immune, nobody is a mune exactly.
Well, then would you want to rotate a little bit into the bond universe, for example, or something a little bit safe for I mean I would have said gold, but gold has just been on so much of a tearr that I'm not sure that would be wise either.
I mean, I also worry a little bit about the bond market because I think it really you know, I think if the FED is too aggressive in cutting rates, yeah, everybody is going to start to worry about longer term inflation, and we're going to see longer rates going up, so I don't think that's going to be at least right now. You don't want to invest in bonds, Melissa.
You guys wrote a piece that looked at historically annual returns and you called it forget the FED, forget the AI trade, forget earnings, inflation, market concentration. What do statistics tell us about the US market in twenty twenty six. Do you feel like at this that you have a good batch of statistics to figure out twenty twenty six or do we have to wait a little bit.
Well, you know, on the one hand, you could say past performance is no indication of future exactly into which any of us in this business know we say all the time. But on the other hand, if you think about it, intuitively, the market has been so strong, valuations
are quite high. So unless we can come up with unusually good earnings growth, when at the same time inflation stays tame, employment stays strong, so we have the consumers staying in the market, it's intuitively it's hard to imagine how we could get another year of twenty percent plus returns.
And yet, as I was saying to Herod earlier, if we get just eight percent of a return. Now it's going to feel like so disappointing, isn't it.
It will when in fact it's probably not that bad, particularly you know, in a relatively low inflation environment, the real return is still pretty good.
So if momentum is shifting, where would you look to in the market. I mean, are we're going to see a broad rotation into everything else the four hundred ninety three or will there be winners there too?
Well?
I think there will be winners there. I mean, the AI trade hasn't gone away. I think it's going to broaden out though, to companies who are adopting AI in you know, in some way. I think, you know, if that can help their margins and uh and just you know, help their overall earnings. I think that's we can see some running out running out, but it probably needs to be selective. I don't think we I would say, you know,
sell the mag seven and buy everything else. At this point, I think we still need to see what happens.
What are clients What are clients asking you most? I mean, after they ask you the AI GOESSI.
Well, you know, we're in the business of forecasting volatility more than forecasting returns, and the big question is why is volatility so low? It seems like there's so much on certainty out there, whether it's geopolitical or economic.
Mixed right now at fourteen, yeah.
VIX at fourteen. Our risk models are at you know, they're not at all time lows, but they're much they're lower than average.
All right, Melissa, I'm your client. Why is it so low? Well, I think I'm not really his our client playing, but why is it so low? Why I much complacency.
I think one of the reasons is that you actually stocks are not moving together. You have low correlations, so you have the days the mag seven does well and everything else doesn't. Or maybe it's you know, it's a tech move versus everything else. But stocks have very low correlations, so that translates into, yes, the market has been going up,
but it's been going up little bits every day. You're not getting these huge surges in returns, and I think that's one reason that both the VIS and models that predict volatility as we run continue to see volatility staying very.
Low on the move index as well multi year lows.
Thank you so much for joining fascinating conversation there That is Melissa Brown joining us in studio. She's head of investment decision Research at some for in New Year.
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