December 30, 2025 • 29 mins
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Warner Bros. Discovery Inc. plans to once again reject a takeover bid from Paramount Skydance Corp. after the rival media company amended the terms of its offer, according to people familiar with the company’s thinking.
The Warner Bros. board hasn’t made a final determination, but will meet next week, said the people, who asked to not be identified discussing internal deliberations. Among the board’s concerns, Paramount has yet to increase its offer, which Warner Bros. earlier rejected as inferior to one from Netflix Inc. Paramount, the owner of its namesake studio and MTV, has been waging a public campaign to gather support for its proposal to buy Warner Bros., which owns HBO and CNN. Paramount went public with a $30-a-share cash bid on Dec. 8, three days after Warner Bros. accepted the deal with Netflix, which is only buying Warner Bros.’ studio and streaming businesses. Paramount has since amended its offer twice, most recently by including an assurance from billionaire Larry Ellison that he would personally guarantee $40.4 billion in equity financing and other commitments.
Paramount is controlled by Larry Ellison and his son David, a movie producer now assembling a media empire. The Ellisons took control of Paramount in August and have since submitted multiple bids for Warner Bros., which would give their undersized company another of Hollywood’s original studios and more scale in streaming.
Today's show features:
- Bloomberg News Managing Editor for Media & Entertainment Lucas Shaw on Warner Bros. Discovery's plans to reject a takeover bid from Paramount Skydance
- Ross Mayfield, Investment Strategist at Baird on Tuesday’s Fed minutes release and the investment outlook for 2026 Private Wealth Management
- Ed Price , Senior Non-Resident Fellow at New York University, on geopolitical unrest in Europe, Asia, the Middle East and Latin America
- Melissa Brown, Head of Investment Decision Research at SimCorp, on the momentum trade and key historical market indicators to watch with earnings season on the horizon
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Transcript
Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:08):
This is Bloomberg business Weekdaily reporting from the magazine that
helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business finance
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Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
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.
(00:54):
The back and forth continues. Give us an update here.
Speaker 4 (00:58):
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
(01:19):
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
(01:40):
offer more money because they still feel like they're deal
with Netflix is better.
Speaker 5 (01:44):
Yeah, so Lucas, why not just say that then?
Speaker 1 (01:46):
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.
Speaker 6 (02:02):
Yeah.
Speaker 4 (02:02):
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
(02:24):
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.
(02:45):
That seems to be where Warner Brothers is at right now.
Speaker 3 (02:48):
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?
Speaker 6 (02:56):
Money's the biggest thing they know.
Speaker 4 (02:58):
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
(03:19):
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.
Speaker 6 (03:35):
Like At the end of it?
Speaker 4 (03:36):
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.
Speaker 6 (03:45):
Netflix.
Speaker 4 (03:45):
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
(04:07):
got in some fights with the leadership at Paramount, including
and also with the creators.
Speaker 6 (04:11):
Of South Park over what they should do.
Speaker 4 (04:14):
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.
Speaker 1 (04:29):
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.
Speaker 5 (04:47):
Money too for this.
Speaker 3 (04:48):
Well.
Speaker 4 (04:48):
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
(05:11):
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
(05:33):
weeks as investors are worried about how much they're doing
this deal and what this deal means for the company.
Speaker 3 (05:38):
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.
Speaker 6 (05:55):
Stay with us.
Speaker 7 (05:56):
More from Bloomberg Business Week Daily coming up after this.
Speaker 2 (06:02):
You're listening to the Bloomberg Business Weekdaily podcast. Catch US
Live weekday afternoons from two to five pm Eastern. Listen
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Speaker 1 (06:17):
Staying on the markets, now, on the minutes that just
came out.
Speaker 5 (06:20):
Obviously, Ross Mayfield joins us.
Speaker 1 (06:21):
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?
Speaker 7 (06:35):
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
(06:55):
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
(07:18):
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.
Speaker 6 (07:29):
Move towards neutral.
Speaker 7 (07:31):
Of course, all assuming that we don't have another government
that's going to say before then.
Speaker 1 (07:34):
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
(07:55):
people out there that are very concerned about it.
Speaker 7 (07:58):
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
(08:20):
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
(08:41):
is directionally right to be cutting, though I understand most
of the members see it as a very close call.
Speaker 3 (08:47):
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,
(09:07):
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.
Speaker 6 (09:20):
Yeah, so I'll give too quickly.
Speaker 7 (09:21):
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.
Speaker 6 (09:33):
I think we'll see to the extent that it's possible.
Speaker 7 (09:36):
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.
Speaker 6 (09:44):
Hotie, I did that.
Speaker 3 (09:45):
Do you expect the president to say, Hey, everybody stop
doing the AI spend, which is a major initiative for
their administration.
Speaker 6 (09:52):
How do we do that?
Speaker 7 (09:54):
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.
Speaker 6 (10:05):
But obviously the.
Speaker 7 (10:06):
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
(10:28):
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
(10:49):
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.
Speaker 1 (11:03):
Well, that will be very good news to a lot
of people out there that are investors.
Speaker 5 (11:07):
What about the metals, is there a bubble? There are
we in bubble territory for any of them, gold, silver,
or any of them?
Speaker 7 (11:14):
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.
Speaker 6 (11:20):
Now it's deflated a bit.
Speaker 7 (11:21):
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.
Speaker 6 (11:32):
Consolidate, to reset sentiments.
Speaker 7 (11:34):
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
(11:55):
in ass socks right now.
Speaker 5 (11:57):
Still have today, So there's a bubble.
Speaker 6 (12:01):
I'll take that.
Speaker 3 (12:02):
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.
Speaker 2 (12:11):
This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 3 (12:29):
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
(12:53):
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
(13:16):
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.
Speaker 5 (13:28):
I did not know that either.
Speaker 1 (13:32):
Yeah, I'm going to be useful in trade, seriously useful
in your trade talks.
Speaker 8 (13:36):
Now it would have been yes, if you're allowed to wrestle.
Speaker 6 (13:39):
But there, I don't know.
Speaker 3 (13:41):
We've seen that in some I feel like Parliament's overseas,
maybe in Asia. Hey how are you?
Speaker 8 (13:45):
I'm good, thank you very well.
Speaker 3 (13:46):
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?
Speaker 9 (14:05):
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.
Speaker 5 (14:20):
I know should you be.
Speaker 1 (14:21):
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?
Speaker 8 (14:31):
Well, I think he's biding his time.
Speaker 9 (14:33):
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
(14:56):
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
(15:16):
about the China Taiwan issue.
Speaker 1 (15:17):
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.
Speaker 5 (15:23):
But yeah, continued Carl, No.
Speaker 6 (15:25):
No, no, you continue, Well, I mean again, it's for me.
Speaker 8 (15:29):
I thought for a few years that it was imminent.
I mean, I've said this before.
Speaker 9 (15:33):
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.
Speaker 8 (15:41):
Confronting the Americans. So it's harder than they think.
Speaker 3 (15:45):
I think, who do you think fears President Trump? Who
do you really think considers he and the United States
still an ally?
Speaker 9 (15:55):
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?
Speaker 6 (16:16):
Yes?
Speaker 8 (16:17):
Well, I mean, I mean I'm exhaling. I don't know
that he's respected.
Speaker 3 (16:21):
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.
Speaker 8 (16:36):
Well, I can't speak for NATO.
Speaker 9 (16:37):
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
(16:57):
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.
Speaker 8 (17:06):
You know, if X happens, why will happen?
Speaker 9 (17:08):
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.
Speaker 3 (17:16):
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.
Speaker 8 (17:28):
Yeah, he's struck Iran. But I mean I've put it
like this before.
Speaker 9 (17:31):
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.
Speaker 1 (17:50):
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.
Speaker 9 (18:05):
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.
(18:27):
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.
Speaker 5 (18:37):
Why hazard not so far?
Speaker 1 (18:38):
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.
Speaker 5 (18:52):
I mean, where else is so many going on?
Speaker 9 (18:54):
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
(19:16):
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.
Speaker 3 (19:26):
Is that why we've seen gold go up? Like, what's
your take on the gold trade or do you have one? Well?
Speaker 9 (19:31):
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
(19:52):
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.
Speaker 6 (20:13):
I would foresee, what's the biggest risk to the world?
Speaker 1 (20:16):
Is it?
Speaker 3 (20:17):
You know, there's a big risk to the world. There's
a big risk to the United States. Take whichever one
you want.
Speaker 9 (20:23):
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.
Speaker 3 (20:38):
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?
Speaker 9 (21:00):
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
(21:21):
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?
Speaker 3 (21:33):
And I would say midterms, certainly in the next election,
will give us an idea, yes, of where we go next.
Speaker 5 (21:38):
Yes, we're going to have to have you come back
in again. It's such a pleasure to have you in studio.
Speaker 8 (21:42):
Thank you.
Speaker 1 (21:43):
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.
Speaker 6 (21:58):
Yeah, stay with us.
Speaker 7 (22:00):
More from Bloomberg Business Week Daily coming up after this.
Speaker 2 (22:07):
You're listening to the Bloomberg Business Weekdaily podcast. Catch us
live weekday afternoons from two to five pm Eastern Listen
on Applecarplay and Android Auto with the Bloomberg Business app
or watch us live on YouTube.
Speaker 3 (22:20):
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.
Speaker 6 (22:35):
Here.
Speaker 3 (22:35):
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,
(22:55):
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.
Speaker 6 (23:07):
You you absolutely do.
Speaker 10 (23:08):
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.
Speaker 3 (23:30):
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.
Speaker 6 (23:40):
Well, you know, if you.
Speaker 10 (23:41):
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
(24:04):
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.
Speaker 5 (24:25):
Well, we also saw huge gains outside the US.
Speaker 1 (24:27):
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.
Speaker 10 (24:37):
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
(25:01):
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.
Speaker 1 (25:15):
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.
Speaker 10 (25:25):
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.
Speaker 3 (25:46):
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.
Speaker 10 (26:06):
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
(26:26):
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.
Speaker 1 (26:44):
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.
Speaker 10 (26:51):
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.
Speaker 1 (26:59):
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?
Speaker 2 (27:08):
Well?
Speaker 10 (27:09):
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
(27:30):
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.
Speaker 1 (27:42):
What are clients What are clients asking you most? I mean,
after they ask you the AI GOESSI.
Speaker 10 (27:47):
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.
Speaker 3 (28:03):
Mixed right now at fourteen, yeah.
Speaker 10 (28:05):
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.
Speaker 3 (28:12):
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.
Speaker 10 (28:22):
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,
(28:42):
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.
Speaker 5 (29:00):
Low on the move index as well multi year lows.
Speaker 1 (29:04):
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.
Speaker 2 (29:15):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
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(29:35):
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Speaker 2 (00:08):
This is Bloomberg business Weekdaily reporting from the magazine that
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Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
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.
(00:54):
The back and forth continues. Give us an update here.
Speaker 4 (00:58):
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
(01:19):
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
(01:40):
offer more money because they still feel like they're deal
with Netflix is better.
Speaker 5 (01:44):
Yeah, so Lucas, why not just say that then?
Speaker 1 (01:46):
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.
Speaker 6 (02:02):
Yeah.
Speaker 4 (02:02):
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
(02:24):
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.
(02:45):
That seems to be where Warner Brothers is at right now.
Speaker 3 (02:48):
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?
Speaker 6 (02:56):
Money's the biggest thing they know.
Speaker 4 (02:58):
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
(03:19):
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.
Speaker 6 (03:35):
Like At the end of it?
Speaker 4 (03:36):
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.
Speaker 6 (03:45):
Netflix.
Speaker 4 (03:45):
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
(04:07):
got in some fights with the leadership at Paramount, including
and also with the creators.
Speaker 6 (04:11):
Of South Park over what they should do.
Speaker 4 (04:14):
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.
Speaker 1 (04:29):
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.
Speaker 5 (04:47):
Money too for this.
Speaker 3 (04:48):
Well.
Speaker 4 (04:48):
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
(05:11):
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
(05:33):
weeks as investors are worried about how much they're doing
this deal and what this deal means for the company.
Speaker 3 (05:38):
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.
Speaker 6 (05:55):
Stay with us.
Speaker 7 (05:56):
More from Bloomberg Business Week Daily coming up after this.
Speaker 2 (06:02):
You're listening to the Bloomberg Business Weekdaily podcast. Catch US
Live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and the Android Auto with the Bloomberg
Business app, or watch US Live on YouTube.
Speaker 1 (06:17):
Staying on the markets, now, on the minutes that just
came out.
Speaker 5 (06:20):
Obviously, Ross Mayfield joins us.
Speaker 1 (06:21):
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?
Speaker 7 (06:35):
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
(06:55):
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
(07:18):
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.
Speaker 6 (07:29):
Move towards neutral.
Speaker 7 (07:31):
Of course, all assuming that we don't have another government
that's going to say before then.
Speaker 1 (07:34):
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
(07:55):
people out there that are very concerned about it.
Speaker 7 (07:58):
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
(08:20):
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
(08:41):
is directionally right to be cutting, though I understand most
of the members see it as a very close call.
Speaker 3 (08:47):
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,
(09:07):
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.
Speaker 6 (09:20):
Yeah, so I'll give too quickly.
Speaker 7 (09:21):
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.
Speaker 6 (09:33):
I think we'll see to the extent that it's possible.
Speaker 7 (09:36):
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.
Speaker 6 (09:44):
Hotie, I did that.
Speaker 3 (09:45):
Do you expect the president to say, Hey, everybody stop
doing the AI spend, which is a major initiative for
their administration.
Speaker 6 (09:52):
How do we do that?
Speaker 7 (09:54):
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.
Speaker 6 (10:05):
But obviously the.
Speaker 7 (10:06):
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
(10:28):
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
(10:49):
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.
Speaker 1 (11:03):
Well, that will be very good news to a lot
of people out there that are investors.
Speaker 5 (11:07):
What about the metals, is there a bubble? There are
we in bubble territory for any of them, gold, silver,
or any of them?
Speaker 7 (11:14):
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.
Speaker 6 (11:20):
Now it's deflated a bit.
Speaker 7 (11:21):
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.
Speaker 6 (11:32):
Consolidate, to reset sentiments.
Speaker 7 (11:34):
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
(11:55):
in ass socks right now.
Speaker 5 (11:57):
Still have today, So there's a bubble.
Speaker 6 (12:01):
I'll take that.
Speaker 3 (12:02):
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.
Speaker 2 (12:11):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Applecarplay and
Android Auto with the Bloomberg Business App. You can also
listen live on Amazon Alexa from our flagship New York station,
Just Say Alexa played Bloomberg eleven thirty.
Speaker 3 (12:29):
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
(12:53):
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
(13:16):
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.
Speaker 5 (13:28):
I did not know that either.
Speaker 1 (13:32):
Yeah, I'm going to be useful in trade, seriously useful
in your trade talks.
Speaker 8 (13:36):
Now it would have been yes, if you're allowed to wrestle.
Speaker 6 (13:39):
But there, I don't know.
Speaker 3 (13:41):
We've seen that in some I feel like Parliament's overseas,
maybe in Asia. Hey how are you?
Speaker 8 (13:45):
I'm good, thank you very well.
Speaker 3 (13:46):
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?
Speaker 9 (14:05):
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.
Speaker 5 (14:20):
I know should you be.
Speaker 1 (14:21):
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?
Speaker 8 (14:31):
Well, I think he's biding his time.
Speaker 9 (14:33):
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
(14:56):
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
(15:16):
about the China Taiwan issue.
Speaker 1 (15:17):
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.
Speaker 5 (15:23):
But yeah, continued Carl, No.
Speaker 6 (15:25):
No, no, you continue, Well, I mean again, it's for me.
Speaker 8 (15:29):
I thought for a few years that it was imminent.
I mean, I've said this before.
Speaker 9 (15:33):
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.
Speaker 8 (15:41):
Confronting the Americans. So it's harder than they think.
Speaker 3 (15:45):
I think, who do you think fears President Trump? Who
do you really think considers he and the United States
still an ally?
Speaker 9 (15:55):
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?
Speaker 6 (16:16):
Yes?
Speaker 8 (16:17):
Well, I mean, I mean I'm exhaling. I don't know
that he's respected.
Speaker 3 (16:21):
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.
Speaker 8 (16:36):
Well, I can't speak for NATO.
Speaker 9 (16:37):
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
(16:57):
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.
Speaker 8 (17:06):
You know, if X happens, why will happen?
Speaker 9 (17:08):
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.
Speaker 3 (17:16):
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.
Speaker 8 (17:28):
Yeah, he's struck Iran. But I mean I've put it
like this before.
Speaker 9 (17:31):
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.
Speaker 1 (17:50):
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.
Speaker 9 (18:05):
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.
(18:27):
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.
Speaker 5 (18:37):
Why hazard not so far?
Speaker 1 (18:38):
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.
Speaker 5 (18:52):
I mean, where else is so many going on?
Speaker 9 (18:54):
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
(19:16):
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.
Speaker 3 (19:26):
Is that why we've seen gold go up? Like, what's
your take on the gold trade or do you have one? Well?
Speaker 9 (19:31):
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
(19:52):
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.
Speaker 6 (20:13):
I would foresee, what's the biggest risk to the world?
Speaker 1 (20:16):
Is it?
Speaker 3 (20:17):
You know, there's a big risk to the world. There's
a big risk to the United States. Take whichever one
you want.
Speaker 9 (20:23):
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.
Speaker 3 (20:38):
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?
Speaker 9 (21:00):
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
(21:21):
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?
Speaker 3 (21:33):
And I would say midterms, certainly in the next election,
will give us an idea, yes, of where we go next.
Speaker 5 (21:38):
Yes, we're going to have to have you come back
in again. It's such a pleasure to have you in studio.
Speaker 8 (21:42):
Thank you.
Speaker 1 (21:43):
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.
Speaker 6 (21:58):
Yeah, stay with us.
Speaker 7 (22:00):
More from Bloomberg Business Week Daily coming up after this.
Speaker 2 (22:07):
You're listening to the Bloomberg Business Weekdaily podcast. Catch us
live weekday afternoons from two to five pm Eastern Listen
on Applecarplay and Android Auto with the Bloomberg Business app
or watch us live on YouTube.
Speaker 3 (22:20):
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.
Speaker 6 (22:35):
Here.
Speaker 3 (22:35):
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,
(22:55):
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.
Speaker 6 (23:07):
You you absolutely do.
Speaker 10 (23:08):
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.
Speaker 3 (23:30):
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.
Speaker 6 (23:40):
Well, you know, if you.
Speaker 10 (23:41):
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
(24:04):
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.
Speaker 5 (24:25):
Well, we also saw huge gains outside the US.
Speaker 1 (24:27):
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.
Speaker 10 (24:37):
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
(25:01):
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.
Speaker 1 (25:15):
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.
Speaker 10 (25:25):
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.
Speaker 3 (25:46):
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.
Speaker 10 (26:06):
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
(26:26):
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.
Speaker 1 (26:44):
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.
Speaker 10 (26:51):
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.
Speaker 1 (26:59):
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?
Speaker 2 (27:08):
Well?
Speaker 10 (27:09):
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
(27:30):
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.
Speaker 1 (27:42):
What are clients What are clients asking you most? I mean,
after they ask you the AI GOESSI.
Speaker 10 (27:47):
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.
Speaker 3 (28:03):
Mixed right now at fourteen, yeah.
Speaker 10 (28:05):
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.
Speaker 3 (28:12):
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.
Speaker 10 (28:22):
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,
(28:42):
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.
Speaker 5 (29:00):
Low on the move index as well multi year lows.
Speaker 1 (29:04):
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.
Speaker 2 (29:15):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
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(29:35):
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