WEBVTT - Paramount Ups Battle for Warner Bros. With Hostile Bid 0:00:02.520 --> 0:00:10.520 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.520 --> 0:00:14.400 Week Daily reporting from the magazine that helps global leaders 0:00:14.440 --> 0:00:18.360 stay ahead with insight on the people, companies, and trends 0:00:18.360 --> 0:00:23.360 shaping today's complex economy, plus global business, finance and tech 0:00:23.440 --> 0:00:27.320 news as it happens. The Bloomberg Business Week Daily Podcast 0:00:27.640 --> 0:00:31.720 with Carol Masser and Tim Stenebek on Bloomberg Radio. 0:00:32.159 --> 0:00:33.840 It is a battle among I feel like the old 0:00:33.840 --> 0:00:35.239 and new media titans. 0:00:35.280 --> 0:00:36.040 A deal we thought was. 0:00:36.040 --> 0:00:40.080 Agreed right, yeah, very much so, and Adela thought was 0:00:40.120 --> 0:00:42.400 agreed to. And then we've got a hostel off for 0:00:42.479 --> 0:00:45.199 coming in today, and we've got the White House's Commander 0:00:45.200 --> 0:00:47.440 in chief, Matt definitely watching. 0:00:47.440 --> 0:00:49.040 I mean the target is Warner Brothers Discovery. 0:00:49.120 --> 0:00:53.440 That's interesting that President Trump said there may be too 0:00:53.520 --> 0:00:56.360 much market share here with which by itself, you know, 0:00:56.400 --> 0:00:59.480 between Netflix and HBO Max isn't a surprise. But then 0:00:59.480 --> 0:01:02.840 he said he's going to be personally involved in whether 0:01:02.960 --> 0:01:08.440 or not this gets through regulation. So I think that 0:01:08.640 --> 0:01:11.440 should be a bit of a concern for Ted Ted Sarandos, 0:01:11.840 --> 0:01:14.880 who has tried to do everything right I guess of late, 0:01:15.040 --> 0:01:19.560 but really Netflix is viewed as this globalist, kind of 0:01:20.400 --> 0:01:21.200 left leaning. 0:01:21.680 --> 0:01:22.600 Dare I say woke? 0:01:23.920 --> 0:01:27.480 You know, company and entity, and it wants to take 0:01:27.480 --> 0:01:31.120 over this asset that Donald Trump sued to block a 0:01:31.680 --> 0:01:34.200 time warner at and T. You know this deal in 0:01:34.240 --> 0:01:35.240 twenty seventeen, so. 0:01:35.319 --> 0:01:36.959 Way back when, right, I remember that? 0:01:37.040 --> 0:01:39.200 All right, So let's get to it, because we've got 0:01:39.480 --> 0:01:42.400 our own Felix to Let, Bloomberg News Media and Entertainment editor. 0:01:42.440 --> 0:01:44.200 You know, he's the author of It's Not TV, The 0:01:44.240 --> 0:01:46.679 Spectacular Rise Revolution in Future of HBO. 0:01:46.959 --> 0:01:49.000 He's right here in our New York studio. 0:01:48.680 --> 0:01:51.680 And then out there at our Bloomberg Intelligence headquarters in Princeton, 0:01:51.720 --> 0:01:55.000 New Jersey, Bloomberg Intelligence Senior Media Alice get to ringing 0:01:55.040 --> 0:01:57.640 off on. This is such a cool roundtable. So let's 0:01:57.680 --> 0:02:01.200 start Felix with you. The detail we got the hostile 0:02:01.280 --> 0:02:04.720 takeover a bit from Paramount. It does top Netflix's offer. 0:02:04.800 --> 0:02:05.880 I thought this was a done deal. 0:02:05.960 --> 0:02:08.480 It's not necessarily Actually, it does not top the tectives 0:02:08.560 --> 0:02:12.120 offer because in the Netflix offer, they're spinning off the 0:02:12.160 --> 0:02:14.680 cable astet, right, so they're not getting the CNN that. 0:02:14.960 --> 0:02:16.320 Probably wouldn't want them too. Half. 0:02:16.400 --> 0:02:19.000 Yeah, they're both saying that they have the higher offer, 0:02:19.080 --> 0:02:22.119 and it depends on how you value those cable networks. 0:02:22.360 --> 0:02:24.600 Is there a deal that's better, that's preferred Felix, Let's 0:02:24.600 --> 0:02:27.600 start with you and one more likely to get regulatory clearance. 0:02:27.960 --> 0:02:30.280 I mean they're both saying that they both you know, 0:02:30.440 --> 0:02:32.160 they're pointed to the finger at the other saying, oh, 0:02:32.240 --> 0:02:32.760 that will. 0:02:32.639 --> 0:02:34.240 Never get regulatory approval. 0:02:34.639 --> 0:02:34.840 You know. 0:02:35.280 --> 0:02:39.480 The paramount is saying essentially that, yeah, Netflix has over 0:02:39.639 --> 0:02:42.800 three hundred million paying subscribers. If you combine them with 0:02:42.960 --> 0:02:45.200 HBO Max, you're going to have over four hundred million. 0:02:45.280 --> 0:02:48.200 That's too much concentrated power to streaming competition. 0:02:48.680 --> 0:02:49.720 They have a lot more. 0:02:49.760 --> 0:02:52.160 So that's Netflix's argument is that it's not just the 0:02:52.200 --> 0:02:55.440 competition isn't just between streaming networks at this point, it's 0:02:55.600 --> 0:02:58.560 competing for people's attention in the living room, which includes 0:02:58.639 --> 0:03:01.440 things like YouTube, tick talk and then that world. They 0:03:01.440 --> 0:03:03.679 don't control that much attention share. 0:03:03.600 --> 0:03:06.240 Which is a fun argument, but I mean, if this 0:03:06.360 --> 0:03:09.760 were just a technocratic DOJ decision, they try to take 0:03:09.800 --> 0:03:12.600 the narrowest view possible, so they're not going to include 0:03:12.840 --> 0:03:15.680 YouTube and TikTok. Even if Carol, you spent a lot 0:03:15.680 --> 0:03:18.760 of time consuming content on those two on those things. 0:03:18.800 --> 0:03:20.000 Yeah, but and so do I. 0:03:20.120 --> 0:03:23.040 In fact, I often choose it over Netflix Prime and HBL. 0:03:23.160 --> 0:03:26.360 But that's not how the DJ traditionally views these kind 0:03:26.400 --> 0:03:26.760 of things. 0:03:26.800 --> 0:03:29.119 So, Gita, how do they view it and what's more 0:03:29.200 --> 0:03:31.680 likely to get done? What makes more sense or listen, 0:03:31.720 --> 0:03:33.399 we're going to be talking about this in the new year. 0:03:35.160 --> 0:03:39.080 Yeah, it's it's really anybody's guests right now, Carol. So traditionally, yes, 0:03:39.160 --> 0:03:43.600 they have taken the most narrowest definition possible. But I 0:03:43.640 --> 0:03:47.760 think the government also realizes that this whole video marketplace 0:03:47.920 --> 0:03:51.560 is rapidly changing. I mean Netflix has been the biggest 0:03:51.560 --> 0:03:55.400 disruptor of the video marketplace to begin with. You know, 0:03:55.560 --> 0:03:59.600 it's streaming disruptive traditional TV. Now what Netflix is worried 0:03:59.600 --> 0:04:01.960 about this is how a lot of you investors are 0:04:02.000 --> 0:04:04.760 kind of viewing this deal is does Netflix actually think 0:04:04.800 --> 0:04:07.720 that they can be disrupted by short form entertainment? And 0:04:07.760 --> 0:04:10.320 that's exactly the point that you know, Felix was bringing up, 0:04:10.720 --> 0:04:13.200 do we have to broaden the market? And you know, 0:04:13.240 --> 0:04:15.760 people will argue, yes, we do, because if you kind 0:04:15.760 --> 0:04:20.200 of look at just share of online video viewing, Netflix 0:04:20.320 --> 0:04:24.799 and HBO Max combined actually have a lower viewing share 0:04:25.360 --> 0:04:27.720 than the dominant force, which is YouTube. 0:04:29.680 --> 0:04:32.279 I got my math, by the way from you this morning, Etha. 0:04:32.360 --> 0:04:35.599 So Gita pointed out that the Netflix bid is twenty 0:04:35.640 --> 0:04:37.839 seven to seventy five. Plus you had about four dollars 0:04:37.880 --> 0:04:40.200 which you'll get for the spinoff of the cable assets. 0:04:40.200 --> 0:04:42.400 It gets you to basically thirty two. That's a little 0:04:42.400 --> 0:04:47.559 bit above paramount. But Geita, if Warner Brothers Discovery, because 0:04:47.640 --> 0:04:50.120 David Zaslov wants to get as much money as he can, right, 0:04:50.400 --> 0:04:55.480 if they somehow get broken up with by you know, 0:04:55.520 --> 0:04:57.719 the FTC or the DOJ or whatever, and they get 0:04:57.720 --> 0:05:02.080 the five point eight billion from from Netflix and then 0:05:02.240 --> 0:05:05.280 do the paramount deal, which seems like President Trump will 0:05:05.320 --> 0:05:06.480 be much more in favor of. 0:05:07.080 --> 0:05:11.480 Does that end up giving them more money than anything else? 0:05:12.720 --> 0:05:13.760 It absolutely does. 0:05:13.839 --> 0:05:15.880 And you know, this whole bidding war, I mean, the 0:05:15.920 --> 0:05:19.080 one person who's really enjoying this I think should be 0:05:19.160 --> 0:05:21.919 David Zaslav and you know, the Warner Brothers Discovery board. 0:05:22.000 --> 0:05:26.200 I mean we started we started matt at twelve dollars, 0:05:26.320 --> 0:05:29.840 you know, that was you know, on September twelfth, and 0:05:29.920 --> 0:05:32.239 this is where we've ended up. I think The big 0:05:32.279 --> 0:05:34.760 worry today, and especially as you kind of see the 0:05:34.800 --> 0:05:38.400 Netflix stock trading, is that is Netflix really going to 0:05:38.400 --> 0:05:40.880 be forced to come in with thirty dollars a share 0:05:40.920 --> 0:05:42.640 because you just kind of look at the optics of 0:05:42.680 --> 0:05:47.680 the deal paramount seemingly having the better offer, although the 0:05:47.720 --> 0:05:50.120 deals are different, but you know, just for a first look, 0:05:50.200 --> 0:05:52.080 it looks like they do have the better offer. So 0:05:52.120 --> 0:05:54.880 I think investors really concerned right now about whether Netflix 0:05:54.880 --> 0:05:57.360 will have to bid up. And that's an even better 0:05:57.400 --> 0:06:01.120 situation for David Zaslav. So he's laughing all the way 0:06:01.160 --> 0:06:01.800 to the bank here. 0:06:01.960 --> 0:06:04.520 Well, at the screen Time event, Carol, you and Tim 0:06:04.520 --> 0:06:05.760 were out in California right. 0:06:05.720 --> 0:06:06.360 Wanting to go there. 0:06:06.440 --> 0:06:09.000 Yeah, because I thought you guys did great coverage and 0:06:09.120 --> 0:06:12.520 Lucas had a fantastic event, and David Ellison, yes, gave 0:06:12.560 --> 0:06:15.440 an answer to the question about his family's closeness to 0:06:15.760 --> 0:06:16.480 President Trump. 0:06:19.000 --> 0:06:22.440 We have a good relationship with the administration. And look, 0:06:22.480 --> 0:06:24.400 I think if you look to that, I do believe 0:06:26.520 --> 0:06:29.159 other things that have been rumored about right are very 0:06:29.279 --> 0:06:32.080 large scale players that would effect that could potentially create 0:06:32.240 --> 0:06:36.000 monopolies obviously in the ecosystem. And again, I think when 0:06:36.040 --> 0:06:38.400 you look at the lens of consolidation for us, keep 0:06:38.440 --> 0:06:40.360 going back to it. It's always how do you create 0:06:40.440 --> 0:06:42.719 long term value creation? How do you put yourself in 0:06:42.720 --> 0:06:45.560 a position to produce more content, not less, and how 0:06:45.600 --> 0:06:48.120 do you ultimately build something that is better for the consumer. 0:06:48.520 --> 0:06:51.039 All right, So that is Paramounts Guide and CEO David Ellison, 0:06:51.080 --> 0:06:54.320 he talked about at Bloomberg screen Time that was back 0:06:54.360 --> 0:06:56.479 in October. So, Felix, come on back in here. I 0:06:56.520 --> 0:07:00.680 mean is we also have Affinity Partners Equity firm led 0:07:00.680 --> 0:07:03.840 behind Jared Kushner, who is of course the son in 0:07:03.920 --> 0:07:07.120 law of the president. You know, part of paraments hostile 0:07:07.120 --> 0:07:09.720 takeover a bit for Warner Brothers. So do they have 0:07:09.800 --> 0:07:10.800 an advantage? 0:07:11.240 --> 0:07:13.440 It seems like a lot of things merging that they might. 0:07:13.840 --> 0:07:16.440 They haven't set they have an advantage, and having the 0:07:16.480 --> 0:07:18.600 president's son in law as part of his bid is 0:07:18.680 --> 0:07:20.560 usually a pretty good sign. But at the same time 0:07:20.600 --> 0:07:24.120 we see that you know, today Trump came out on 0:07:24.200 --> 0:07:27.720 Truth Social and you know, complained about the Ellison's management 0:07:27.760 --> 0:07:31.280 of CBS News in sixty minutes because of the interview 0:07:31.320 --> 0:07:33.600 where he was criticized in the most recent episodes. So 0:07:34.000 --> 0:07:38.080 these things can be somewhat fickle, and let's not forget 0:07:38.080 --> 0:07:41.520 that Paramount has, you know, sort of anti trust issues. 0:07:41.560 --> 0:07:44.480 Also these you know, the deal went through with Paramount, 0:07:44.840 --> 0:07:48.440 that's two Hollywood studios that would be combined to streaming 0:07:48.480 --> 0:07:52.360 services not as big as Netflix. Granted you'd have multiple 0:07:52.400 --> 0:07:56.240 news outlets CNN and CBS, so they have their plenty 0:07:56.240 --> 0:07:58.600 of overlap and in some ways have more overlap than 0:07:58.760 --> 0:08:00.680 Netflix and Brothers Felix. 0:08:00.760 --> 0:08:02.320 Can I ask you though about I mean, you cover 0:08:02.400 --> 0:08:05.800 the entertainment industry right. I was talking today to Michael Wolfe, 0:08:06.320 --> 0:08:10.240 he of MTV previously and now Activate, and he says 0:08:10.320 --> 0:08:15.040 that the content creators, or the creative community, let's say, 0:08:15.320 --> 0:08:17.800 is much more in favor of the Paramount bid because 0:08:18.440 --> 0:08:21.200 when you listen to David Ellison's full interview with Lucas Shaw, 0:08:21.960 --> 0:08:26.920 they seem really focused on creating good original, you know, 0:08:27.320 --> 0:08:33.439 solid content, like not having AI make sequels of marketing products. 0:08:33.480 --> 0:08:37.000 So is that true that the you know that Hollywood 0:08:37.080 --> 0:08:38.400 wants Paramount to buy it. 0:08:38.520 --> 0:08:41.480 I think David Elson has been out there making that pitch. 0:08:41.559 --> 0:08:43.240 We really support the creative community. 0:08:43.280 --> 0:08:44.080 Look at all these. 0:08:43.960 --> 0:08:47.520 Concerns already, mister, have grown up watching all the movies 0:08:47.559 --> 0:08:49.079 and mister. 0:08:49.080 --> 0:08:51.559 Top Gun he loves the movie's. 0:08:51.000 --> 0:08:52.840 Expensive though, unless it does really well. 0:08:52.840 --> 0:08:54.640 You're so rich though, And you. 0:08:54.600 --> 0:08:57.160 Know, you have people like James Cameron coming out recently 0:08:57.200 --> 0:09:01.199 and expressing concern about Netflix, you know, saying that basically, 0:09:01.240 --> 0:09:04.000 if you look at Netflix's history, they've been very you know, 0:09:04.120 --> 0:09:08.080 hostile to the notion of long theatrical releases, that this 0:09:08.120 --> 0:09:11.040 would be kind of the deathbed for Hollywood. 0:09:10.520 --> 0:09:14.600 Move and movie theaters. So yeah, Ellison's Ellison. 0:09:14.400 --> 0:09:16.880 Man who brought us Avatar that uses a lot of technology. 0:09:16.960 --> 0:09:18.319 I'm just saying, but go ahead. 0:09:18.080 --> 0:09:20.360 Well, you know, saying, hey, we want to see this 0:09:20.440 --> 0:09:23.160 on the big screen. You need one hundred days in 0:09:23.280 --> 0:09:27.319 theaters exclusivity for this to be worthwhile. And you know, 0:09:27.559 --> 0:09:29.480 you're kind of a soccer if you believe Netflix is 0:09:29.520 --> 0:09:31.840 really going to do that in the long term. Their 0:09:31.880 --> 0:09:35.040 business is providing entertainment for people, and it's a. 0:09:34.960 --> 0:09:36.120 Pretty convincing argument. 0:09:36.600 --> 0:09:37.400 It's interesting stuff. 0:09:37.400 --> 0:09:39.600 Hey gee, to save forty seconds for you to wrap up? 0:09:39.640 --> 0:09:41.920 So I don't know, does this go to I don't 0:09:41.920 --> 0:09:45.439 even are we in a third round? I mean, Comcast 0:09:45.520 --> 0:09:48.240 is out right, so like Womdcast is out yet, So 0:09:49.000 --> 0:09:50.560 what's the timeline we're looking at here? 0:09:51.440 --> 0:09:55.720 Ten days, so the tender offer expires in twenty days. 0:09:55.840 --> 0:09:59.840 The Warner Brothers Discovery Board has ten days to respond 0:09:59.840 --> 0:10:02.280 to paramounts to see how they want to proceed with 0:10:02.360 --> 0:10:05.720 this whole tender offer. But they have confirmed receipt of 0:10:05.840 --> 0:10:10.120 this unsolicited tender from the paramount sky Dance people. 0:10:10.280 --> 0:10:12.560 Am I remiss to ask? Does David zoos Love have 0:10:12.600 --> 0:10:15.040 a job after it with a really good pay package? 0:10:16.240 --> 0:10:17.200 He doesn't need one. 0:10:17.440 --> 0:10:18.720 He's gonna be so right. 0:10:20.160 --> 0:10:20.520 All right? 0:10:22.040 --> 0:10:24.920 Stay with us. More from Bloomberg Business Week Daily coming 0:10:25.000 --> 0:10:25.960 up after this. 0:10:30.200 --> 0:10:34.080 You're listening to the Bloomberg Business Week Daily Podcast. Catch 0:10:34.160 --> 0:10:36.880 us live weekday afternoons from two to five y's during it. 0:10:37.040 --> 0:10:40.959 Listen on Applecarplay and Android Otto with the Bloomberg Business app, 0:10:41.120 --> 0:10:43.439 or watch us live on YouTube. 0:10:43.880 --> 0:10:46.760 The other thing top of mind, no doubt about it, Matt, 0:10:46.840 --> 0:10:49.520 is a FED decision, and that may already be factored 0:10:49.559 --> 0:10:50.880 in when it comes to you if you look at 0:10:50.960 --> 0:10:52.559 kind of the equity trade today. 0:10:52.600 --> 0:10:53.680 So I want to see what I say. It's at 0:10:53.679 --> 0:10:56.080 the bottom of my mind. It is the FED decisions 0:10:56.080 --> 0:10:57.840 at the top of your mind. They're going to I 0:10:57.880 --> 0:10:59.920 do I see three days? Oh my god. 0:11:00.480 --> 0:11:03.240 All right, but we're going to get all right. Just 0:11:03.280 --> 0:11:05.280 put him aside for a second. Let's bring Kevin Gordon. 0:11:05.320 --> 0:11:09.360 He's head of macro Research and Strategy SCHWABZT for Financial Research. 0:11:09.480 --> 0:11:12.240 It's like, I don't know, keeping cats in control here, 0:11:13.040 --> 0:11:16.520 Kevin is here right in studio. Kevin, though, is the 0:11:16.600 --> 0:11:18.000 cut already priced in? 0:11:18.040 --> 0:11:19.720 And is it all about kind of what we get 0:11:19.760 --> 0:11:23.360 in terms of the summary of economic projections and whatever 0:11:23.440 --> 0:11:25.800 commentary we might get for the new year? 0:11:26.200 --> 0:11:27.760 Well, yes, I think if you look at the word 0:11:27.800 --> 0:11:30.120 function on the terminal and then compare that to. 0:11:30.040 --> 0:11:30.880 You love that function. 0:11:31.040 --> 0:11:33.880 Yes, pricing you know, for December actually relative to the 0:11:33.880 --> 0:11:35.600 equity market, if you look at it over the past 0:11:35.600 --> 0:11:38.199 couple past month, both of those have been neck and neck. 0:11:38.320 --> 0:11:40.240 So you know, I would say it's fully priced in 0:11:40.280 --> 0:11:43.000 the sense that you know, every time the probability of 0:11:43.000 --> 0:11:45.040 a cut is increased sharply, the market's done well, and 0:11:45.120 --> 0:11:47.839 vice versa. I think beyond that, you know, one of 0:11:47.880 --> 0:11:50.400 the one of the reasons I think that we're probably 0:11:50.400 --> 0:11:52.960 not going to see as many cuts next year is 0:11:53.000 --> 0:11:55.480 because the inflation backdrop and we're putting out our outlook 0:11:56.440 --> 0:11:58.200 at some point later today. But I think that the 0:11:58.200 --> 0:12:00.319 inflation backdrop is going to be a little bit tree 0:12:00.400 --> 0:12:03.200 in the sense that there's probably some upside inflation risk 0:12:03.320 --> 0:12:05.960 from tariffs that are expected to stay high, which have 0:12:06.000 --> 0:12:09.040 already put upper pressure on goods prices, but also fiscal 0:12:09.080 --> 0:12:10.760 stimulus coming from the big Beautiful Bill. 0:12:10.880 --> 0:12:13.040 And I think still a even if. 0:12:12.960 --> 0:12:15.679 It's a wobbly but still relatively resilient labor market that 0:12:15.760 --> 0:12:18.040 keeps people spending on a month to month basis, if 0:12:18.080 --> 0:12:19.560 you add all of that together and put it into 0:12:19.559 --> 0:12:22.040 an equation, I still think you have upside inflation risk 0:12:22.320 --> 0:12:25.640 plus from a personnel standpoint for the FED. If to 0:12:25.720 --> 0:12:28.840 keep in mind that two voting members rolling onto the committee, 0:12:29.040 --> 0:12:31.520 onto the voting committee are the heads of the Cleveland 0:12:31.559 --> 0:12:33.720 and the Dallas FEDS, and they've been leading much more 0:12:33.760 --> 0:12:36.480 hawkish recently. It's Beth Hammick and it's Lori Logan, So 0:12:36.480 --> 0:12:38.679 I think that needs to be taken into consideration when 0:12:38.720 --> 0:12:41.719 you think about, especially the emphasis that has been now 0:12:41.760 --> 0:12:45.400 pushed on individual member commentary. That hasn't been the case 0:12:45.960 --> 0:12:47.679 up until maybe the past couple of months, where we've 0:12:47.679 --> 0:12:50.240 been paying so much attention to what each individual member 0:12:50.240 --> 0:12:52.600 has been saying. Now there's much more focus on that. 0:12:52.640 --> 0:12:55.120 So I think for those reasons, you probably don't get 0:12:55.120 --> 0:12:58.280 as many cuts next years as maybe some people they're expecting. 0:12:57.880 --> 0:12:59.240 A narrative around that. What do you think that. 0:12:59.480 --> 0:13:02.559 I mean, it's we're looking at with the work function 0:13:02.840 --> 0:13:08.839 getting down to a terminal rate of three percent even basically, yeah, 0:13:08.960 --> 0:13:11.000 right between three and three and a quarter right now. 0:13:11.040 --> 0:13:12.320 So that's moved up a little bit. 0:13:13.559 --> 0:13:16.240 And as we hear so much about the economic growth 0:13:16.240 --> 0:13:17.880 that we're expecting next year, as we hear so much 0:13:17.880 --> 0:13:19.520 about the stimulus we're going to get from one big, 0:13:19.559 --> 0:13:22.160 beautiful bill, I just wonder if it's going to be 0:13:22.200 --> 0:13:25.720 hard to even go that low because inflation, if you 0:13:25.720 --> 0:13:28.760 look at CPI, it's going the wrong direction, and it's 0:13:29.000 --> 0:13:30.760 fifty percent over the Fed's target. 0:13:30.840 --> 0:13:33.320 Yeah, we're averaging closer to three percent. That seems to 0:13:33.360 --> 0:13:36.080 be more like the floor even if you don't go 0:13:36.240 --> 0:13:38.520 because it's not our expectation that you go back to 0:13:38.600 --> 0:13:41.120 anything akin to twenty twenty two or twenty twenty three. 0:13:41.120 --> 0:13:43.040 I mean, getting close to you know, eight nine percent 0:13:43.080 --> 0:13:45.920 on CPI barring some major shock is just really not 0:13:45.960 --> 0:13:47.880 in the car, so we've been there, so this only 0:13:47.960 --> 0:13:50.880 three percent still hurts well, but exactly so, I think 0:13:50.920 --> 0:13:54.360 it's seven't gone down right, and you're now four and 0:13:54.360 --> 0:13:56.840 a half years of the FED being above its target. 0:13:56.960 --> 0:13:58.720 I think at some point that has to come into 0:13:58.720 --> 0:14:00.600 the equation and it'll matter in terms of how they 0:14:00.600 --> 0:14:01.160 set policy. 0:14:01.240 --> 0:14:02.480 So really, I mean, this is just. 0:14:02.400 --> 0:14:05.160 Them getting closer to neutral what they think of as neutral. 0:14:05.360 --> 0:14:07.680 If it happens to be the case that inflation pressure 0:14:08.120 --> 0:14:11.200 is reaccelerating and they're maybe too close to neutral, then 0:14:11.240 --> 0:14:12.839 you can maybe start talking about a hike. I think 0:14:12.840 --> 0:14:14.840 it's still a little early for that, but you just 0:14:14.880 --> 0:14:17.040 have to keep in mind that they've been now so 0:14:17.200 --> 0:14:20.520 far above their inflation target for so long, and labor 0:14:20.520 --> 0:14:22.440 has essentially been at target almost the entire time. I 0:14:22.440 --> 0:14:25.520 mean four point four percent for unemployment rate. Yes, it's 0:14:25.600 --> 0:14:27.640 risen over the past year, but it's been number one 0:14:27.680 --> 0:14:30.920 gradual and number two consistent with a fully employed labor. 0:14:30.720 --> 0:14:31.560 Market thirty seconds. 0:14:31.560 --> 0:14:33.120 So what does this mean for the equity markets? 0:14:33.240 --> 0:14:36.960 I mean, if there's earnings, if there's an economy that's growing, 0:14:36.960 --> 0:14:38.840 if the labor market doesn't fall apart. 0:14:38.640 --> 0:14:41.120 Well, the earnings picture just by itself. I mean, if 0:14:41.120 --> 0:14:43.680 you look at every sector so far, there's expectations that 0:14:43.680 --> 0:14:46.160 you're going to get pretty solid earnings growth. For all 0:14:46.160 --> 0:14:48.680 eleven gift sectors in the S and P, only three 0:14:48.760 --> 0:14:51.400 are expected to have earnings growth that is slower in 0:14:51.480 --> 0:14:54.720 twenty twenty six relative to twenty five. So that in 0:14:54.760 --> 0:14:56.360 and of itself just shows you that it's not just 0:14:56.400 --> 0:14:58.720 a couple of sectors or even a couple of industries 0:14:58.720 --> 0:15:01.120 that are carrying the market higher from an earning standpoint. 0:15:01.400 --> 0:15:02.440 It really has broadened out. 0:15:02.480 --> 0:15:05.200 So we think that from an index perspective, maybe it's 0:15:05.240 --> 0:15:07.720 not as great because if you don't have the megacaps 0:15:07.720 --> 0:15:11.840 contributing mostly to the gains, then the index performance might not. 0:15:11.840 --> 0:15:14.720 Look great, but you could have relatively. 0:15:14.240 --> 0:15:16.800 Healthy breadth under the surface and participation that could mean 0:15:16.880 --> 0:15:19.200 for maybe a better year for equal weighted relative to cap. 0:15:19.240 --> 0:15:21.120 Waight, thanks for coming by, Thanks for having me. 0:15:21.560 --> 0:15:25.400 You're listening to the Bloomberg Business Week Daily Podcast. Catch 0:15:25.480 --> 0:15:28.160 us live weekday afternoons from two to five eas during 0:15:28.400 --> 0:15:32.280 Listen on Applecarplay and Android Auto with the Bloomberg Business app, 0:15:32.480 --> 0:15:34.760 or watch us live on YouTube. 0:15:35.600 --> 0:15:38.360 Well, change is a foot at Berkshire at JP Morgan Chase, 0:15:38.400 --> 0:15:39.720 there's kind of a connection. 0:15:39.440 --> 0:15:40.120 Between the two. 0:15:40.440 --> 0:15:42.240 We want to get to what you need to know 0:15:42.320 --> 0:15:45.720 and with us is Shrinatarajan, Bloomberg News Chief Wall Street correspondent, 0:15:45.800 --> 0:15:48.400 right here in studio along with Bloomberg News US insurance 0:15:48.440 --> 0:15:51.720 reporter Alex raj Bandari. First up, I want to talk 0:15:51.720 --> 0:15:55.200 about Berkshire Hathaway. So Alex talk to us about these 0:15:55.320 --> 0:15:58.680 leadership changes that are going on. It is like the 0:15:58.720 --> 0:16:02.560 company getting itself ready for what happens post Warren Buffett. 0:16:02.560 --> 0:16:03.440 I mean, he's already. 0:16:03.160 --> 0:16:06.080 Announced his retirement right but once he's kind of officially 0:16:06.160 --> 0:16:08.640 off the leadership at the company. 0:16:08.720 --> 0:16:10.640 So what we know is Greg Able is taking over 0:16:10.880 --> 0:16:14.000 our next year in January, and this morning they announced 0:16:14.000 --> 0:16:17.280 this view of new appointments and some departures as well. 0:16:17.840 --> 0:16:20.080 The big one and the one that everybody's talking about 0:16:20.120 --> 0:16:22.680 it we're going to talk about today is Toddcombs, who 0:16:22.800 --> 0:16:26.040 was one of the two stock pickers for Buffett along 0:16:26.040 --> 0:16:28.760 with Ted Weschler, and they were managing with Buffett this 0:16:29.280 --> 0:16:32.080 mammoth two hundred and eighty billion stock portfolio. 0:16:32.400 --> 0:16:33.120 So he's gone. 0:16:33.200 --> 0:16:35.400 He was also the CEO of Geico. 0:16:36.280 --> 0:16:38.200 He's been doing a good job there, and then analysts 0:16:38.200 --> 0:16:41.000 have been praising the turnaround at Geico that's been struggling 0:16:41.000 --> 0:16:44.080 in recent years but gaining grounds in the past quarters. 0:16:44.920 --> 0:16:46.840 But that leaves a question mark as to what's going 0:16:46.880 --> 0:16:48.640 to happen to the stock portfolio and who's going to 0:16:48.720 --> 0:16:51.280 manage it Because Buffett no longer in the picture, still 0:16:51.320 --> 0:16:54.400 less chairman, but not at the helm. That means Able's 0:16:54.440 --> 0:16:56.640 going to do it with Weschler. But it's just two 0:16:56.640 --> 0:16:59.560 people for a big portfolio, and that's a big topic 0:16:59.600 --> 0:17:03.320 for you know, Buffet watchers and Berkshire fans and investors 0:17:03.320 --> 0:17:05.639 because they look at what where the investments are going. 0:17:06.080 --> 0:17:09.560 Is it fair to use the term exodus or even worse, 0:17:09.600 --> 0:17:12.800 brain drain right if Warren Buffett's leaving and I didn't 0:17:12.800 --> 0:17:15.000 get the top job, like I'm out. 0:17:15.640 --> 0:17:19.000 So this morning hasn't been only about departures. There's only 0:17:19.000 --> 0:17:21.439 been some appointments of people that were not in the 0:17:21.560 --> 0:17:24.720 lights so far but have been elevated to bigger roles. 0:17:24.720 --> 0:17:28.600 So that's important to point out. But yes, what you say, 0:17:28.880 --> 0:17:30.960 this raised the question as to how many people we 0:17:31.040 --> 0:17:34.680 want to work with Able going forward? And there was 0:17:34.680 --> 0:17:36.760 an analyst this morning who put out a note right 0:17:36.800 --> 0:17:39.480 after the appointments to say that he expected more to 0:17:39.520 --> 0:17:42.160 and over going forward, because it doesn't have the same 0:17:42.160 --> 0:17:44.880 cachet to work for Able than to work for Buffett. 0:17:44.960 --> 0:17:47.119 Before we get to the JP Morgan, why did comes 0:17:47.200 --> 0:17:49.920 leave Berkshire? How long was he there a while? 0:17:50.000 --> 0:17:51.400 He had been there for more than a decade. 0:17:52.560 --> 0:17:55.119 It's not been said exactly why he's leaving, but he 0:17:55.200 --> 0:17:57.760 had deep ties with JP Morgan, so that might be 0:17:57.800 --> 0:17:58.440 an explanation. 0:17:58.840 --> 0:18:01.640 Also, I'm sure they wanted him. I mean, as you say, 0:18:01.680 --> 0:18:04.159 he was in charge of a massive portfolio. That guy 0:18:04.240 --> 0:18:06.560 must have been sought after on Wall Street. But just 0:18:06.600 --> 0:18:10.480 to touch on what's happened at Berkshire, it's so weird. 0:18:10.520 --> 0:18:13.439 If you put up the shares versus the S and 0:18:13.520 --> 0:18:16.840 P from April, the S and P takes back off again, 0:18:16.960 --> 0:18:20.399 right obviously we had the Liberation Day dip from April. 0:18:20.440 --> 0:18:21.960 Berkshire Hathaway shares. 0:18:21.760 --> 0:18:24.840 Just come down like they've done. It's a mirror image 0:18:24.880 --> 0:18:26.600 of what the S and P has done. What is 0:18:26.640 --> 0:18:29.240 the concern about Berkshire Hathaway? Is it that Warren Buffet's 0:18:29.240 --> 0:18:30.760 finally leaving, is this key man risk? 0:18:31.240 --> 0:18:35.119 Well, there was talk when he announced he was retiring 0:18:35.160 --> 0:18:37.480 that they could be a buffet premium that would evaporate, 0:18:37.600 --> 0:18:41.080