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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business app.

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Speaker 1: We'll begin this hour with stocks rising as traders increased

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Speaker 1: risk appetite ahead of the Fed's rate decision. Christian Nolting

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Speaker 1: of Deutsche Bank Private Bank Writing giving Given the positive

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Speaker 1: macro environment, we expect twenty twenty six to be another

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Speaker 1: constructive year, albeit with continuing market volatility. Christian joins us. Now, Christian,

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Speaker 1: wonderful to see you, Thank you so much. So let's

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Speaker 1: talk about twenty twenty six. Yes, continued volatility. Is there

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Speaker 1: a c change and where the leadership comes from? Akin

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Speaker 1: to what we heard from ed Yard Denny or suddenly

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Speaker 1: big tech doesn't cut it for leadership.

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Speaker 3: Everyone is a tech company.

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Speaker 4: Well, I would say we still count on tech and

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Speaker 4: that tech delivers earnings. We do, though, expect that earnings

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Speaker 4: growth is coming down a little bit, which I think

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Speaker 4: is really healthy. But of course earnings will be very important,

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Speaker 4: and those companies won't deliver earnings in twenty twenty six

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Speaker 4: will certainly get say punished, and that could cause volatility

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Speaker 4: in the market. It's, by the way, one of the

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Speaker 4: reasons why we are saying, probably for twenty twenty six,

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Speaker 4: let's not be complacent and just expect the same really

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Speaker 4: positive performance we've seen so far this year and likely

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Speaker 4: to get into the end, I hope. So from that perspective,

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Speaker 4: that's something to watch. But I still think THATAI is

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Speaker 4: not a bubble. I think it's still a boom and

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Speaker 4: a structural change, and that's why we are constructive for

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Speaker 4: next year as well.

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Speaker 1: Do you think that the United States is still the

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Speaker 1: epicenter of that constructive change? That was also a big

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Speaker 1: part of edyr Danny's call is that the US has

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Speaker 1: benefited disproportionately to this point and that is poised to change.

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Speaker 4: Well, I still look very easily at productivity, and that's

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Speaker 4: the highest in the US and honestly, I don't think

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Speaker 4: that's massively changing next year. Look at Europe, for example,

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Speaker 4: productivity is far behind the US. Hopefully that's getting better

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Speaker 4: with the fiscal policy here, but to be seen. But

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Speaker 4: the thing to catch up on the US productivity is very,

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Speaker 4: very tricky, at least in the short term. So longer

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Speaker 4: term maybe, but it's a long way to go. And

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Speaker 4: from that perspective, I think we have seen this year

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Speaker 4: the five but then with the investments coming in, I

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Speaker 4: would say that's continuing.

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Speaker 5: You make a good note in your research about how

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Speaker 5: the government stimulus we're going to get from the United

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Speaker 5: States when it comes to one big beautiful bill is

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Speaker 5: going to be timed after three Fed interest rate cuts.

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Speaker 5: So Christian, looking at next year, do you think the

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Speaker 5: Fed needs to cut anymore?

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Speaker 4: Well, I think if you look at the APPS level,

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Speaker 4: I wouldn't be surprised if we see three cuts, So

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Speaker 4: starting probably this week is the first, and then two

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Speaker 4: more into next year. If you look at a twelve

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Speaker 4: months time horizon, I think that could be justified because

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Speaker 4: although there is physical spending, yes, and increasing, but I

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Speaker 4: would say at this point in time, and you rightly said,

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Speaker 4: we don't have all data yet, but I think the

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Speaker 4: US is a bit in a weaker spot. On the

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Speaker 4: other end, something I think very important we also say

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Speaker 4: in the outlook is inflation. So if you look at

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Speaker 4: the ten year use treasuries, we think they could be

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Speaker 4: four fifteen like exactly where we are right now in

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Speaker 4: twelve months time, because inflation remains a topic. So we

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Speaker 4: don't see inflation to substantially come down, but even go

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Speaker 4: up to slightly from two point eight to two point nine.

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Speaker 4: That's our forecast.

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Speaker 5: You also think that policy will deliver a cycracal impulse

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Speaker 5: in Europe. What kind of policies are you looking at,

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Speaker 5: because Europe at the moment, especially seeing the data out

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Speaker 5: of China, is struggling.

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Speaker 4: That's correct, But of course I look at the largest economy, Germany,

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Speaker 4: not because I'm obviously in Germany at this point time,

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Speaker 4: but so far it was roughly not growing, so zero percent,

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Speaker 4: and I do think it could go to one point

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Speaker 4: three to one point five nixt year because not of

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Speaker 4: monetary policy of the ECB. There we do expect the

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Speaker 4: ECB to stay steady at two percent for the whole

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Speaker 4: year next twenty twenty six, but it's fiscal policy, and

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Speaker 4: that's why we see that government spending which is coming now.

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Speaker 4: It was a bit delayed, I have to say, but

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Speaker 4: now we see that really happening, which is good news.

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Speaker 3: Christian.

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Speaker 1: How much is your constructive outlook next year really predicated

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Speaker 1: on this idea of fiscal and monetary support from the

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Speaker 1: United States in particular, but also globally, well.

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Speaker 4: It's a major source of growth absolutely, ba in the US.

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Speaker 4: We do see Germany especially doing something. It's a lot

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Speaker 4: of fiscal policy, but then the center winks as well.

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Speaker 4: I think Bank of Japan, of course, is different. We

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Speaker 4: expect two hikes there. But otherwise, if you look at

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Speaker 4: monetary policy, we counted more than potentially eighty cuts of

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Speaker 4: global sen I think that's quite a constructive environment, perse

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Speaker 4: I would.

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Speaker 1: Say, which is probably the reason why if anyone has

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Speaker 1: a deal to announce, let's announce it.

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Speaker 3: That seems to be the mood of the morning, the

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Speaker 3: mood of the week, the mood of the month.

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Speaker 1: We've certainly seen that from the likes of Netflix and

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Speaker 1: Warner Brothers.

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Speaker 3: We've seen that with the debt.

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Speaker 1: Issue, and from the likes of Oracle, which reports earnings

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Speaker 1: this week, as well as Meta, as well as a

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Speaker 1: whole host of the other tech names. I'm just wondering,

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Speaker 1: at what point you think that it's going to become

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Speaker 1: too much for debt markets to finance, given some of

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Speaker 1: the concerns about the structural changes in this industry.

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Speaker 4: Yeah, I think there's a lot of discussion about this,

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Speaker 4: but I think it's a normal development. We've seen this

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Speaker 4: in other major structural trendships that companies started at one

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Speaker 4: point in time to use also debt because free cashlow

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Speaker 4: was not always enough. I think I've not seen really

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Speaker 4: some bond auctions struggling at this point in time. There's

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Speaker 4: a lot of demand, and I think given all the

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Speaker 4: discussion about sovereign debt, which is there because of all

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Speaker 4: the fiscal policy, people look at also corporate bonds and

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Speaker 4: if there's an attractive of course they will go for this,

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Speaker 4: especially if it's investment grade, which we still recommend, or

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Speaker 4: those spreads are quite low. So if I don't see

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Speaker 4: a recession, which with all the fiscal policy is quite unlikely,

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Speaker 4: I think then it's still an interesting investment. And again

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Speaker 4: I've not seen any bond auction struggling at this point

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Speaker 4: in time. But of course it's something to be watched.

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Speaker 1: Just heading into next to your Christian what's your highest

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Speaker 1: conviction trade?

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Speaker 4: I would still say is gold on the one hand,

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Speaker 4: to be very honest. On the other hand, what I

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Speaker 4: just said, corporate bonds looks very interesting. On the equity

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Speaker 4: side with all that fiscal policy, I would say could

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Speaker 4: also be constructive, but don't expect the same double digit performance.

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Speaker 4: I would be okay if it's like single digit, high

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Speaker 4: single digits, say eight to nine percent, that would rather

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Speaker 4: be our forecast.

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Speaker 2: Stay with us. More Bloomberg Surveillance coming up after this.

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Speaker 2: We'll let you got to go.

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Speaker 6: Through a process see what happens.

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Speaker 7: So Netflix a great company and they've done a phenomenal job.

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Speaker 7: Ted is a fantastic man. I have a lot of

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Speaker 7: respect for him. But it's a lot of market share.

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Speaker 7: He's done one of the greatest jobs in the history

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Speaker 7: of movies and other things that He's got a lot

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Speaker 7: of interesting things happening. But it is a big market share.

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Speaker 7: There's a question, but it could be a problem.

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Speaker 1: Here's the latest President Trump weighing in on Netflix, this

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Speaker 1: seventy two billion dollar deal to buy Warner Brothers Discovery,

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Speaker 1: saying it could face difficulty being approved due to antitrust

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Speaker 1: worries joining us now as KEITHA Ron Knath and of

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Speaker 1: Bloomberg Intelligence, Keith that we talked about this last week.

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Speaker 1: This was going to be in albatross to get through

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Speaker 1: the regulatory hurdles. How much bigger do they get over

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Speaker 1: the weekend?

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Speaker 8: It definitely got a whole lot bigger With President Trump.

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Speaker 8: I mean there was first the school from Lucas Shaw

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Speaker 8: which seemed to suggest that Netflix had ted Surroundos had

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Speaker 8: actually met with President Trump before the deal, and then

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Speaker 8: of course you have him kind of weighing in. This

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Speaker 8: is going to be a very very long road, Lisa,

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Speaker 8: there is no doubt about it. We're going to get

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Speaker 8: a whole lot of noise. There is the constant question

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Speaker 8: looming about the two services, the Netflix platform with over

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Speaker 8: three hundred million subscribers, HBO Max with over one hundred,

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Speaker 8: two hundred and thirty million subscribers. I mean that pretty

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Speaker 8: much makes up over half the market, and so you

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Speaker 8: know the question is going to be whether Netflix is

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Speaker 8: going to be forced to divest HBO Max down the road.

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Speaker 8: But expect a lot of noise, and that's kind of

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Speaker 8: reflected in the five point eight billion dollar termination fee,

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Speaker 8: one of the biggest fees that we've seen so far

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Speaker 8: in the history of media deals.

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Speaker 1: Yeah, and a question of how this is all going

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Speaker 1: to get financed. Keith roganath and a Bloomberg Intelligence stay close,

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Speaker 1: will be catching up with you throughout the day and

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Speaker 1: week ahead. Robert Fishman of Maffat Nathanson writing, Ultimately, we

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Speaker 1: think the likelihood of approval comes down to how successful

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Speaker 1: Netflix will be in defining the market beyond the traditional

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Speaker 1: media landscape.

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Speaker 3: Robert joins us.

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Speaker 1: Now, Robert, this is one of the most fascinating deals

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Speaker 1: because it's at the cross section of politics and frankly

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Speaker 1: a deep transfer of the media space. How do you

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Speaker 1: expect Netflix to spin this to indicate that they're not

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Speaker 1: quite as dominant as the potential four hundred and fifty

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Speaker 1: million dollars million subscribers might suggest.

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Speaker 6: Yeah, thank you.

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Speaker 9: So, when you look at the market, it really comes

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Speaker 9: down to how you define it. And when you look

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Speaker 9: at the streaming market, Netflix is actually number two right

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Speaker 9: now to YouTube. That's something that not a lot of

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Speaker 9: people really.

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Speaker 6: Know out there.

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Speaker 9: So when you think about YouTube and the size and

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Speaker 9: scale of a free platform, that's how Netflix is thinking

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Speaker 9: about this in terms of the share that they get

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Speaker 9: on the total streaming not just streaming, but the total

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Speaker 9: viewing platform. And that doesn't even include other short form

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Speaker 9: content like TikTok and Instagram, and so really, when you

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Speaker 9: define what the marketplace is, that's how Netflix is going

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Speaker 9: to look to take this to the regulatory approval process.

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Speaker 5: I think most people think that they're just going to

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Speaker 5: talk about Amazon's Prime Walt Disney when it comes to streaming,

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Speaker 5: so that likes of TikTok and YouTube make this a

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Speaker 5: little bit more interesting. Do you think it's going to

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Speaker 5: work with the regulators?

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Speaker 9: I mean, time will tell, but I do think Netflix

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Speaker 9: clearly has a points right when thinking about who they're

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Speaker 9: competing against and what the long term view of the

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Speaker 9: media landscape looks like. YouTube is that biggest media player

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Speaker 9: out there. That's what my colleague Michael Nathanson has been

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Speaker 9: writing for a long time now. So we can't ignore

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Speaker 9: YouTube and thinking about Alphabet and these other large digital

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Speaker 9: players when defining the market. So, yes, within streaming and

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Speaker 9: subscription streaming, I should say Netflix.

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Speaker 6: Clearly has dominated and won that war.

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Speaker 9: But when you think about the broader market overall, I

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Speaker 9: think you have to factor in these other players.

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Speaker 5: I think we also have to factor what the President

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Speaker 5: United States said last night, Robert He said that this

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Speaker 5: would be a big market share could be a problem.

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Speaker 5: After our colleague Lucas Shaw reported that the co CEO

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Speaker 5: of Netflix left the White House and apparently Trump had

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Speaker 5: said Warner Brothers should just sell to the highest bidder.

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Speaker 5: Do you think the President of United State, it's getting

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Speaker 5: intimately involved in this deal potentially mean problems.

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Speaker 3: Yeah.

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Speaker 9: I mean there's a lot to still play out here.

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Speaker 9: I think something that we're quitely very focused on right

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Speaker 9: now is Paramount Skydance really done, And so I think

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Speaker 9: that there's a lot more noise that could come within

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Speaker 9: this whole bidding war. Clearly Netflix has won in terms

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Speaker 9: of the announcement and moving forward with this regulatory process.

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Speaker 9: But what we're most interested right now is Paramount Skydance

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Speaker 9: going to come back with a either more aggressive bid

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Speaker 9: or are they going to take their bid and go

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Speaker 9: hostile towards the shareholders.

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Speaker 1: Wellert, this feels existential, and I'm not sure who it's

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Speaker 1: more existential for. It was thought to be more existential

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Speaker 1: for Paramount Skydance, but suddenly there's a real question that

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Speaker 1: maybe for Netflix it's equally existential. What do you think,

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Speaker 1: I mean, who sort of guy has the bigger motivation

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Speaker 1: to make this happen.

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Speaker 9: So I think Netflix has looked at this as an opportunistic,

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Speaker 9: you know, rare opportunity. I think what was there was

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Speaker 9: their words they used in terms of what this asset

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Speaker 9: and these multiple assets and all of the premium ip

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Speaker 9: that comes with it, thinking about the Warner Brothers studio,

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Speaker 9: both theatrical TV studio and of course let's not forget

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Speaker 9: HBO and all all of the premium content that comes

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Speaker 9: out of that.

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Speaker 6: So from Netflix the standpoint.

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Speaker 9: They also have a lot of amazing data that they've

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Speaker 9: gotten from Warner Brothers Discovery over the years of licensing

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Speaker 9: that content and seeing how it performs on their platform.

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Speaker 6: So for them, they.

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Speaker 9: See this as clearly a very unique opportunity that they

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Speaker 9: have to monetize this content, increase engagement and really you know,

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Speaker 9: grow the assets some in some direction that they think

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Speaker 9: that they could do a much better job of under

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Speaker 9: their own platform than Warner Brothers Discovery could do with

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Speaker 9: a subscale platform. Yes, it's clearly a big platform compared

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Speaker 9: to some of the other competitors, but Netflix just takes

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Speaker 9: it to a different level. For the other guys, and

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Speaker 9: you mentioned Paramount, Skuidance and even Comcast and what they're

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Speaker 9: looking to do for Peacock, it does become some sort

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Speaker 9: of an existential question because those are the platforms that

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Speaker 9: need this content, we would argue even more to really

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Speaker 9: help fix and define where their future is going in

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Speaker 9: terms of how they're looking to compete with the Netflix's,

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Speaker 9: Disney's Amazons of the world. So for them, we do

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Speaker 9: think that ultimately they need it more than Netflix does.

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Speaker 1: Just quickly here, Robert was looking at Cinemark shares on

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Speaker 1: Friday down eight percent, AMC down almost three percent.

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Speaker 3: Are movies dead in the movie theater?

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Speaker 6: I definitely wouldn't call them dead, but this is a

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Speaker 6: new threat.

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Speaker 9: Have been through definitely some some difficult years and have

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Speaker 9: gotten through a lot of that and most of that

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Speaker 9: on the other side.

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Speaker 6: This is this is a new one.

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Speaker 9: And in terms of what this means for theatrical releases,

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Speaker 9: Netflix has already indicated that they plan to keep the

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Speaker 9: business operations you know as as it currently stands today.

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Speaker 9: That means theatrical release releases for Warner Brothers Discovery, but

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Speaker 9: clearly given Netflix's own strategy with theatrical releases, it raises

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Speaker 9: questions in terms of what that ultimately means for how

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Speaker 9: long the window is going to be for for the

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Speaker 9: Warner Brothers Discovery releases that the Warner Brothers releases, and

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Speaker 9: what Netflix will look to do with that with their

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Speaker 9: own with their own content. So lots of questions that

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Speaker 9: this raises. So far, Netflix is saying status quo, but

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Speaker 9: I think investors, as you point out, have some skepticism

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Speaker 9: around that.

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Speaker 2: Stay with us Multpleinberg savannas coming up off to this.

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Speaker 3: Joining us now is it?

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Speaker 1: Patrick McHenry a former House Financial Services Committee chair, Patrick,

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Speaker 1: great to have you.

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Speaker 3: Thank you so much for being with us.

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Speaker 1: What do you make of some of the noises coming

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Speaker 1: from inside the White House about some controversy about how

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Speaker 1: to message affordability issues?

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Speaker 10: Well, it is the driving issues, the driving issue that

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Speaker 10: brought President Trump back to the White House one year ago,

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Speaker 10: and it's a driving issue for voters at the last election.

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Speaker 10: That message is very clear to the White House, and

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Speaker 10: they have their best economic messenger, Scott Bessett, out there

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Speaker 10: delivering what is a distinct message for this administration.

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Speaker 6: They're going to address it.

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Speaker 10: They believe that they can conquer it and they can

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Speaker 10: actually get to a prosperity message rather than just conquering

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Speaker 10: the price of things. But it's going to be it's

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Speaker 10: going to be a tough effort because the stickiness of

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Speaker 10: inflation has impacted fed policy. It obviously impacted and the

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Speaker 10: last administration was unable to do anything.

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Speaker 6: And substance about it.

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Speaker 10: But the president believes they have a very good economic message.

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Speaker 10: They have to just deliver on the regulatory relief and

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Speaker 10: the tariff negotiations that are foremost with this administration.

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Speaker 5: Do you think the president himself needs to really look

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Speaker 5: at the words he uses when he talks out affordability.

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Speaker 5: There's this Wall Street Journal article that a lot of

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Speaker 5: AIDS seldom needs to calibrate his message because remember during

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Speaker 5: the Biden administration, they would tell you the economy was

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Speaker 5: doing so well, but people weren't feeling it because of

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Speaker 5: how high prices were.

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Speaker 10: Well, look, the Biden administration was, don't believe you're lying eyes.

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Speaker 10: The economy is fantastic, Do not believe what you actually feel.

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Speaker 6: That is not a winning message.

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Speaker 10: It's a very bad message for politicians at every level

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Speaker 10: to tell the voters that they're dumb and they don't know.

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Speaker 6: What they're thinking.

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Speaker 10: So you see a few things that the president floated,

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Speaker 10: that this was a really partisan initiative to talk about affordability, it.

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Speaker 6: Was coming from the left.

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Speaker 10: I think you're going to see that dialed in in

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Speaker 10: the coming weeks and coming months.

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Speaker 6: And I think the clear message.

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Speaker 10: Here came from Scott Bessett this weekend going out with

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Speaker 10: really what is a honed economic message they had deeply contemplated.

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Speaker 1: Patrick, with all due respect, you say that it was

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Speaker 1: a losing message from the Biden administration. Do you think

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Speaker 1: that affordability is a hoax a winning message coming from

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Speaker 1: the White House currently?

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Speaker 6: No, not at all.

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Speaker 10: And so what I'm saying is that the President is

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Speaker 10: going to hone a message that is distinct as he does,

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Speaker 10: and we're all going to watch his aides are going

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Speaker 10: to watch how he hons it, but no one's going

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Speaker 10: to control his message. They didn't do it the first term,

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Speaker 10: they're not doing it the second term. And Scott Besson

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Speaker 10: is out with a very honed, very focused economic message.

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Speaker 10: That's the person we have to dial to. We'll see

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Speaker 10: what Kevin Hassett does this week, and whether they've doubled

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Speaker 10: down on the Besset message that is actually a much

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Speaker 10: more winning message than what President Trump rolled out, which

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Speaker 10: was an echo of what Biden Biden did in his

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Speaker 10: final year or two.

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Speaker 1: Patrick, do you think that messaging is enough or do

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Speaker 1: you think that it's sort of imperative on this administration

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Speaker 1: to deliver two thousand dollars checks or deliver other kinds

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Speaker 1: of more significant measures that make people feel immediately like

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Speaker 1: they are getting some sort of immediate benefits.

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Speaker 10: No, the immediate benefit has to come from the regulatory really,

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Speaker 10: if they're driving the agencies, which takes time for it

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Speaker 10: to be felt. The tax bill that was signed into

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Speaker 10: law in record speed, six months earlier than they did

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Speaker 10: in the first term, those things will have effects. But

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Speaker 10: the big driver here and the big drag on the

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Speaker 10: economy are tariffs. The cost of things come in the

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Speaker 10: United States are more expensive because of tariffs. That does

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Speaker 10: have an impact on the economy. It does have impact

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Speaker 10: on people's lived experience. Getting that right is the biggest

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Speaker 10: economic delivery this administration could have. That is far better

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Speaker 10: than any words that any politician can utter.

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Speaker 5: Patrick, do you think we're going to see some sort

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Speaker 5: of reconciliation from Democrats and Republicans on what to do

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Speaker 5: when it comes to healthcare. This week we should have

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Speaker 5: a Senate vote on the enhanced Obamacare sub season. I'm

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Speaker 5: just wondering if we're barreling once again, maybe on January thirtieth,

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Speaker 5: to another government shutdown.

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Speaker 10: I think that's the most likely scenario, is that we're

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Speaker 10: going we're barreling towards no extension of healthcare policy and

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Speaker 10: then breaksmanship when it comes to government funding.

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Speaker 6: These things have not been resolved.

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Speaker 10: The Democratic Party is offered not what they said they

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Speaker 10: would offer, which was a one year extension. They're asking

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Speaker 10: for a three year extension of policy. They're unseerious. Republicans

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Speaker 10: have had this problem for a very long time on

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Speaker 10: healthcare policy. It's not that they lack a plan, it's

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Speaker 10: that they have too many plans. And so we're seeing

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Speaker 10: this offering on the Senate floor this week, where you

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Speaker 10: have multiple Republican proposals, none of which will get sixty votes,

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Speaker 10: and then we see a unified Democratic Party on a

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Speaker 10: singular approach, which is continuing subsidies.

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Speaker 6: I think this is.

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Speaker 10: Headed for your train wreck rather than a compromise.

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