Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. This is Bloomberg Business
Speaker 1: Weekdaily reporting from the magazine that helps global leaders stay
Speaker 1: ahead with insight on the people, companies, and trends shaping
Speaker 1: today's complex economy. Plus global business finance and tech news
Speaker 1: as it happens. The Bloomberg Business Weekdaily Podcast with Carol
Speaker 1: Masser and Tim Stenebeck on Bloomberg Radio, well on media News.
Speaker 2: Warner Brothers Discovery has agreed to reopen negotiations with Paramount
Speaker 2: Skydance after Paramount proposts raising its bid and sweetened other
Speaker 2: terms of its offer, setting the stage for a renewed
Speaker 2: showdown with Netflix. This according to a statement on Tuesday.
Speaker 2: This wasn't news to any of you, though, because you
Speaker 2: all saw Lucas Shaw and Michelle F. Davis's scoop on
Speaker 2: Sunday when they exclusively reported that Warner Brothers was weighing.
Speaker 3: Reopening networking over the weekend with Paramount.
Speaker 2: Lucashaw's Managing editor for Media Entertainment for Bloomberg News. Michelle
Speaker 2: Davis is the Bloomberg News Senior m and a reporter.
Speaker 2: Lucas is in La Michelle is here in our Bloomberg
Speaker 2: Interactive at Broker's studio, Michelle, I want to start with
Speaker 2: you the deal, the Netflix versus the Paramount deal. These
Speaker 2: are not apples and orange or apples to apples. It's
Speaker 2: apples and oranges. What is different though about Paramount skuy
Speaker 2: Dances deal this time versus you know, a few weeks ago.
Speaker 4: Yeah, I mean, and this is the moment we've kind
Speaker 4: of all been waiting for, because, of course, Paramount has
Speaker 4: been saying for months, you know, thirty wasn't our best
Speaker 4: and final offer. And what's really different. The big news
Speaker 4: that came out this morning was that it came out
Speaker 4: that Paramount's banker basically called Warner Brothers and said, hey,
Speaker 4: if you guys engage with us, we will offer at
Speaker 4: least thirty one dollars per share. This was after last
Speaker 4: week Paramount had made some concessions that the Warner Brothers
Speaker 4: board had been asking for, and so now during the
Speaker 4: next seven days it's basically the time for Paramount to
Speaker 4: show whatever it's best and final is. Warner Brothers has said,
Speaker 4: you know, put your best foot forward. This is going
Speaker 4: to you know, put up or shut up basically, and
Speaker 4: so we'll see if you know what Paramount comes up with.
Speaker 3: So now the ball is in the court of Netflix.
Speaker 4: The ball is in Paramount's court right now. So right now,
Speaker 4: Warner Brothers will be talking to Paramount to clarify the
Speaker 4: terms of its latest offer. Basically, they want whatever Paaramount
Speaker 4: has said in writing. If the board determines that this
Speaker 4: is a superior offer, then Netflix will have a chance
Speaker 4: to match it. And remember, as the incumbent, Netflix only
Speaker 4: has to match or tie whatever Paaramount has put on
Speaker 4: the table because they're not apples to apples. That means
Speaker 4: it doesn't technically have to be the same number. The
Speaker 4: board will have to weigh, you know, if they are
Speaker 4: on equal footing, and that would put Netflix in the
Speaker 4: lead again.
Speaker 2: Hey, Lucas Shaw, come on in here. You're joining us
Speaker 2: from LA. You've been following this deal, you know since
Speaker 2: before the beginning. Is this a start of any bidding war?
Speaker 5: That's what Warner Brothers Discovery shareholders are hoping for, right
Speaker 5: I think Michelle talked about this a little bit. There's
Speaker 5: been a desire that in the thought that Paramount would
Speaker 5: go higher. That they are backed by the Ellisant family,
Speaker 5: they have hundreds of billions of dollars and they can
Speaker 5: spend even more, and it feels inevitable that Paramount will
Speaker 5: offer more money, and then it will be up to
Speaker 5: Netflix whether it wants to meet that or not. So
Speaker 5: I think the price is certainly going up, but I
Speaker 5: don't know if it's going to be a frenzy bidding war, right.
Speaker 5: Netflix shareholders certainly don't want to see a crazy bidding war,
Speaker 5: And even though Paramount shareholders don't ultimately have a say,
Speaker 5: except for the Ellisons, I don't think they want to
Speaker 5: see the company get even more levered and indebted than
Speaker 5: it already is and will be if it does this deal.
Speaker 3: Who's Hollywood rooting for Lucas.
Speaker 5: Hollywood's pretty split, you know. I think initially the shock
Speaker 5: of the Netflix deal made people against it. You know,
Speaker 5: Netflix has had a big impact on how this business works,
Speaker 5: some for good, some for bad. The more time goes by,
Speaker 5: I think people are divided. Right, Folks who really care
Speaker 5: about movie theaters still tend to be against the Netflix deal.
Speaker 5: They don't really believe Netflix when they say they're going
Speaker 5: to put movies in leaders. People who are perhaps liberal
Speaker 5: leaning politically, which is a lot of Hollywood, are very
Speaker 5: worried about the Ellison's impact on CPS news and then
Speaker 5: in terms of jobs, it's sort of hard to say, right,
Speaker 5: Paramount is would be way more likely to fire people
Speaker 5: right away. They've pouted billions of dollars in synergies, but
Speaker 5: you know, Netflix could have a more negative impact on
Speaker 5: the larger ecosystem. Netflix is certainly arguing that they're better
Speaker 5: for Hollywood, Paramount saying the same. Yeah, and I think
Speaker 5: people don't really know how to feel well on that.
Speaker 3: Netflix did issue a statement and they said, while we
Speaker 3: are confident that our transaction provides superior value and certainty,
Speaker 3: we recognize the ongoing distraction for Warner Brothers Discovery stockholders
Speaker 3: and the broader entertainment industry caused by Paramount Sky Scott
Speaker 3: Ants's antics. And this was a statement that they put out.
Speaker 3: They go on to say, this does not change the
Speaker 3: fact that we have the only signed, board recommended agreement
Speaker 3: with Warner Brothers Discovery, and ours is the only certain
Speaker 3: path to delivering value to Warner brother Discovery stockholders.
Speaker 2: Okay, they're right, right, Well, will Michelle come on in
Speaker 2: on that? I mean, is you know thirty one dollars
Speaker 2: a share? Would is this best and final coming from
Speaker 2: Paramount's guidance.
Speaker 4: I think that's the big question. The Paramount banker that
Speaker 4: had reached out to Warner Brothers said we would offer
Speaker 4: or Paramount would offer at least thirty one dollars per share.
Speaker 4: But there's also some documentation issues that still need to
Speaker 4: be worked through. Warner Brothers wants to be allowed to
Speaker 4: operate kind of freely in the interim period before this
Speaker 4: deal closes, and Paramount has held back on some things
Speaker 4: that Warner Brothers has wanted. In an ideal scenario, Paramount
Speaker 4: would just basically take the Netflix agreement, erase Netflix's name
Speaker 4: and put its own name there and you know, higher
Speaker 4: share price, and that would be enough to get the
Speaker 4: deal done. It might not be as easy.
Speaker 2: They want, but they want the Linear Networks too.
Speaker 6: They do.
Speaker 4: But there are you know, certain terms that are may
Speaker 4: maybe friendly or to Warner Brothers that Paramount has been
Speaker 4: dragging its heels on Lucas.
Speaker 3: Is this about what David Zaslov wants ultimately for his
Speaker 3: company or is it just about getting the best financial deal, which,
Speaker 3: to be fair, yes, but also as someone selling their company,
Speaker 3: they do want to get the best deal for their shareholders.
Speaker 6: I would assume.
Speaker 5: Look, David As obviously has a lot of influence on
Speaker 5: the process. Who's the CEO of the company. He's on
Speaker 5: the board, a lot of people on the board know
Speaker 5: and like him, But I don't think he gets to
Speaker 5: make the final decision here.
Speaker 4: Right.
Speaker 5: You have a number of very experienced board members who've
Speaker 5: been through a lot of deals. They added a few
Speaker 5: people to their board over the last year two essentially
Speaker 5: an anticipation of this moment. I think they're looking at
Speaker 5: what's best for the company and what's best for shareholders.
Speaker 5: It's pretty clear that the board has had a preference
Speaker 5: for the kind of Netflix's offer, and also how Netflix
Speaker 5: has gone about the process. I don't think that should
Speaker 5: be a huge surprise. Netflix has a much larger and
Speaker 5: more valuable company and has been run better over the
Speaker 5: last decade than Paramount has. So if you're saying, who
Speaker 5: do I trust to kind of handle these assets, that
Speaker 5: would be Netflix. And so there's an aspect of what
Speaker 5: they're doing here where they're basically saying Paramount blow us
Speaker 5: away because we know, if you only go up a
Speaker 5: dollar or two, Netflix is probably gonna yeah. But if
Speaker 5: you go up five dollars, got it? Which probably can
Speaker 5: and we got.
Speaker 3: To take it all right, Lucas Shaw, so appreciate it.
Speaker 3: Michelle Davis as well. The latest check it out on
Speaker 3: the Bloomberg.
Speaker 7: If you're listening to the Bloomberg Business Weekdaily podcast, catch
Speaker 7: us live weekday afternoons from two to five pm Eastern.
Speaker 7: Listen on Apple CarPlay and the Android Auto with the
Speaker 7: Bloomberg Business app, or watch us live on YouTube.
Speaker 3: When we look at the markets, we are also keeping
Speaker 3: a watch on Apple because we are seeing that stock
Speaker 3: move in today's session. The shares prices up about four
Speaker 3: percent here, so quite a spike here. Happening on a
Speaker 3: Bloomberg exclusive this the company is accelerating development of three
Speaker 3: new wearable devices as part of a shift toward artificial
Speaker 3: intelligence powered hardware. It's a category tim also being pursued
Speaker 3: by Open AI meta platforms. I mean, everybody's kind of
Speaker 3: moving into space.
Speaker 2: I want to bring in a marker. I mean he's
Speaker 2: in our LA bureau. He's Bloomberg News Managing editor for
Speaker 2: Global Consumer Tech. Congratulations on yet another scoop glasses, a
Speaker 2: pendant and camera AirPods.
Speaker 6: What did you learn?
Speaker 8: Yeah, so Apple's been working on these devices for quite
Speaker 8: a while, and the strategy is to hit consumers wherever
Speaker 8: they want their AI, whether it's on their face, whether
Speaker 8: it's on their body, whether it's around their neck, whether
Speaker 8: it's in their ears, creating different devices for different features,
Speaker 8: with different types of cameras. You can see there's different
Speaker 8: tears here. Obviously, the pendant is something entry level, it's
Speaker 8: an accessory eyes and ears to the phone. The air
Speaker 8: pods is something more substantial, right with that audio gear
Speaker 8: in there. And then there's the high end of the
Speaker 8: AI strategy being the smart glasses with the high resolution camera,
Speaker 8: a computer vision camera, all sorts of functionality to really
Speaker 8: augment without a display, your real world experience using AI.
Speaker 3: Hey, so all built around the serie digital assistant. We
Speaker 3: all know our love and dislike of all I know,
Speaker 3: I know and being a little obnoxious. Are frustrated, which
Speaker 3: it was Siri. Don't they have to get Siri right first?
Speaker 6: Mark, That's exactly right.
Speaker 8: All of these products hinge on them being able to
Speaker 8: bring the new sery to market in it actually being
Speaker 8: to your point effective. They were supposed to launch it
Speaker 8: actually this month by way of introducing it, and they
Speaker 8: were supposed to release it to consumers sometime next month
Speaker 8: as part of iOS twenty six point four. But I
Speaker 8: reported last week they had hit a bunch of snags
Speaker 8: and issues and that Seri will not be arriving this spring.
Speaker 8: The Personalized Theoria will be arriving later this year, in
Speaker 8: addition to some of the other Serie features. And so
Speaker 8: none of this launches until those launch, and so we'll
Speaker 8: see what happens, but it all hinges on that.
Speaker 2: So I want to drill into some of these devices
Speaker 2: that you've been reporting on that you have reported on
Speaker 2: in this piece dependent the eyes and ears connected to
Speaker 2: the iPhone, what exactly does an Apple pendant do? And look,
Speaker 2: we should note it's no guarantee that all of these
Speaker 2: are going to come to market, right.
Speaker 8: Yeah, I do think these are ultimately all going to launch,
Speaker 8: But like I was saying, they have worked on other
Speaker 8: wearables with cameras that they canceled last May. They canceled
Speaker 8: an Apple Watch and Apple Watch Ultra with a camera.
Speaker 8: So we'll see what happens, but this is something that
Speaker 8: they're seriously working on. Tim Cook held an all hands
Speaker 8: meeting with employees earlier this month, where he said the
Speaker 8: company is investing heavily and new stuff. He did acknowledge
Speaker 8: that AI devices are the future, and he said the
Speaker 8: world is moving fast, and so he hinted that these
Speaker 8: were coming.
Speaker 2: Hey, Mark, I want to look at ADRs of esalar Lexotica.
Speaker 2: This is the parent company of many glasses brands out there.
Speaker 2: They work very closely with Meta platforms. You've been outspoken
Speaker 2: about how well the meta platforms glasses work. If Apple
Speaker 2: is indeed competing with es Lexotica, and after your piece
Speaker 2: came out, we saw shares take a dive on the
Speaker 2: day today. If indeed Apple is working on a competitor
Speaker 2: to Meta's glasses, what can you tell us about what
Speaker 2: would differentiate them, what would be the Apple experience, how
Speaker 2: they'd be different than what's out there on the market.
Speaker 8: Yeah, I mean the main two things are camera technology
Speaker 8: and build quality. That's according to people working on the glasses.
Speaker 8: They believe that the build quality using things like acrylic
Speaker 8: and other higher end non plastic materials are going to
Speaker 8: make their glasses a bit higher end and more premium
Speaker 8: than what Meta is offering. Obviously, Meta works with slew
Speaker 8: different brands. They've got Oakley, They've got ray Ban and
Speaker 8: obviously Prada is the biggest fashion oriented brand under the
Speaker 8: Extra Exotica umbrella, and so you'll see Prata versions of
Speaker 8: the metaglasses probably sometime this year, but definitely that's what
Speaker 8: they're trying to differentiate on. The other is camera technology.
Speaker 8: The metaglasses, they have one camera that can move between
Speaker 8: computer vision and for photo and video. Apple has a
Speaker 8: dedicated photo video camera and a dedicated computer vision camera,
Speaker 8: and their belief is by having both cameras they can
Speaker 8: get a better quality on each of those factors.
Speaker 3: Hey, Mark, what about the time you hear I mean,
Speaker 3: this is a pretty deep dive, and I know you've
Speaker 3: got your sources and all that good stuff and good
Speaker 3: reads on the company, but it sounds like there has
Speaker 3: been a lot going on behind the scenes when it
Speaker 3: comes to how they're thinking about the AI world and
Speaker 3: what it means for hardware, and it sounds like some
Speaker 3: of that is starting to maybe early but payoff in
Speaker 3: terms of they've got specifics here.
Speaker 8: Well, nothing's going to start paying off until Siri is ready.
Speaker 8: Like I said, the releases of this hardware will all
Speaker 8: hinge on them having a working voice assistant. And the
Speaker 8: hope is with this Gemini partnership, they will have one,
Speaker 8: and I'm pretty confident they will have one. I think
Speaker 8: the way that they're going to revamp iOS in the
Speaker 8: fall with their new Campo Voice Assistant, that's the code
Speaker 8: name for this new version of Siri, in integrating the
Speaker 8: Gemini models throughout the system, I think it's going to
Speaker 8: be fairly effective. So they need to get that done.
Speaker 8: In terms of the timing, for a while now, they
Speaker 8: have been earmarking and introduction of the small glasses at
Speaker 8: the tail end of this year, with production beginning at
Speaker 8: the very end of this year. I'm told production is
Speaker 8: still planned for December. That's beginning of production, with the
Speaker 8: release sometime in twenty twenty, so next year. The AirPods
Speaker 8: could be released as early as this year, but of
Speaker 8: course that hinges as well on the Gemini partnership in
Speaker 8: Serie working out, and the Pendant is likely an end
Speaker 8: of twenty seven thing at the earliest.
Speaker 2: Hey Mark, just last question analysts, investors, they want to
Speaker 2: know the next killer product from Apple, and I think
Speaker 2: some people thought it would be a car years ago.
Speaker 2: That's obviously not happening. Some people thought it could be
Speaker 2: Vision Pro that's obviously not happening at the end of
Speaker 2: the day. Is your piece notes. All of this still
Speaker 2: sort of hinges around the Apple iPhone ecosystem iOS. These
Speaker 2: are still all tertiary products, right, These are no sort
Speaker 2: of like freestanding single product that is like the next
Speaker 2: killer piece of hardware.
Speaker 4: Right.
Speaker 8: Well, I think it's the family of AI wearables that
Speaker 8: is the sort of next big thing. It's not one
Speaker 8: single item, but it is things. It is a group
Speaker 8: of things. And so you'll see AI wearables be one
Speaker 8: new category, and then you'll see home devices be another
Speaker 8: big category from Apple. So those are the next two
Speaker 8: big categories, with the through line being AI and them
Speaker 8: being able to launch neither until the AI works all.
Speaker 3: Right, Great stuff, as always, another exclusive from our Markerman Mark.
Speaker 3: Thank you so much for jumping on with us and
Speaker 3: laying this out. Mark German, Managing editor for Global Consumer
Speaker 3: Tech at Bloomberg News. Joining us from the Bloomberg News
Speaker 3: bureau in Los Angeles.
Speaker 7: This is the Bloomberg Business Week Daily podcast. Listen live
Speaker 7: each weekday starting at two pm Eastern on Apple car
Speaker 7: Play and the Android Auto with the Bloomberg Business app.
Speaker 7: You can also listen live on Amazon Alexa from our
Speaker 7: flagship New York station. Just say, Alexa played Bloomberg eleven thirty,
Speaker 7: I got.
Speaker 3: To say in Jeffrey Epstein's World few billionaires, though loom
Speaker 3: as large as Leon Blacks, certainly very well known to
Speaker 3: the Bloomberg audience. The Justice Department's largest release yet of
Speaker 3: the Epstein file shows he was Leon Black's stealthy, do
Speaker 3: it all fixer. And I mean it's interesting is our
Speaker 3: team is going through documents, you realize how close Epstein
Speaker 3: was with a lot of very influential people.
Speaker 2: Hey, part of that team includes Max Abilson. He's Bloomberg
Speaker 2: News financi reporter. He joins us here in the Bloomberg
Speaker 2: Interactive Broker's studio. We're going to get to what you
Speaker 2: found in your story, what you found going through this
Speaker 2: latest batch of files, which at this point was two
Speaker 2: weeks ago, but still the stories are still coming out.
Speaker 2: I mean, how do you do this something like this?
Speaker 2: How do you take on a trove like this and
Speaker 2: then find the stories and tease them ount? I mean,
Speaker 2: this is kind of unlike anything that journalists have had
Speaker 2: to do.
Speaker 9: That's such a that's such a generous question. Thank you
Speaker 9: for asking that. Well, I'll tell you, I'll give you
Speaker 9: the real answer. The real answer, first of all, is teamwork.
Speaker 9: I think of this Epstein work, at least for me personally,
Speaker 9: is kind of bifurcated into two different eras. Last year
Speaker 9: I worked with an incredible team, people like Harry Wilson
Speaker 9: and archarlie'deva and Jason and Lauren Eder, and it goes
Speaker 9: on and on, and we had access to I mean,
Speaker 9: it was so many emails to us. It was like
Speaker 9: eighteen thousands, more than nineteen thousand emails. And we spent
Speaker 9: months together digging, and you know, thinking like, okay, geez,
Speaker 9: you understand the law, so you dig into lawyers. You know,
Speaker 9: you understand the investments. You look into that, or money
Speaker 9: laundering you look into that. We split it up, we
Speaker 9: worked together. It was it was a very honestly, it
Speaker 9: was quite a moving experience. It was also extremely grim,
Speaker 9: as you might imagine. But eighteen thousand, I mean that's
Speaker 9: a pimple. That's nothing compared to what's been happening in
Speaker 9: these last few weeks, three and a half million files.
Speaker 9: I mean, I want to be my professional self and
Speaker 9: make sense of it for you too, and for viewers
Speaker 9: and listeners. But just to be honest, it is hard
Speaker 9: to make sense of it. The scale alone, just how
Speaker 9: much material there is here to be to sort of
Speaker 9: meet these documents where they are and to not either
Speaker 9: be dismissive of them and be like, you know, well,
Speaker 9: what does it matter it's so much, or rather I
Speaker 9: should say, to not be overwhelmed by them, and then
Speaker 9: to not sort of wave our arms and get overly
Speaker 9: excited about things that aren't really there. So we're splitting
Speaker 9: it up. I worked with Laura Benitez for the story
Speaker 9: about Leon Black at David Sheer, our editor, and what
Speaker 9: we did is we clicked one after another and we're
Speaker 9: trying to read them all, trying to put them into
Speaker 9: chronological order, trying to understand them, trying to understand what
Speaker 9: they mean, and trying to understand these relationships.
Speaker 3: Because not everything's in order right, and there's redacted stuff
Speaker 3: and you've got to kind of sometimes piece things together correct.
Speaker 9: I would be so happy or in order, and you
Speaker 9: know what, I feel very proud of working in the
Speaker 9: news room with journalists who I admire and we're fond of.
Speaker 9: But I want to give a shout out not just
Speaker 9: to our colleagues across Wall street journalism who've been looking
Speaker 9: into Epstein and Leon Black now for years or at
Speaker 9: least for months, if not years and years.
Speaker 6: In some cases.
Speaker 9: But in this case, you know, even just readers who
Speaker 9: are interested, people on Twitter, people who are digging in.
Speaker 9: It seems it's like reminds me of like being in school.
Speaker 9: It's like a large group project. Everyone's kind of throwing in.
Speaker 9: People are looking and it's fun to be digging alongside
Speaker 9: what feels like kind of a collective effort.
Speaker 6: Well, let's dig.
Speaker 2: Let's talk about that digging. So I just want to
Speaker 2: throw out some numbers here. Leon Black has acknowledged paying
Speaker 2: Jeffrey Epstein one hundred and fifty eight million dollars over
Speaker 2: the year, saying it was for advice on a state
Speaker 2: and tax planning. The new relylease documents, though that you
Speaker 2: and the team found said it was for much more
Speaker 2: than just a state and tax planning. What else did
Speaker 2: he do?
Speaker 9: Well, Just to be really, really, really specific, the way
Speaker 9: I'm going to put it is going to be slightly
Speaker 9: different from that, which is the way that I'm going
Speaker 9: to say it is. Leon Black's story up until now
Speaker 9: has been like something along the lines of I don't
Speaker 9: want to overgeneralize for him, but it's been something along
Speaker 9: the lines of like, look, he gave me tax advice,
Speaker 9: and his sax advice was good and it was worth it.
Speaker 9: And there's some there's some other things on the side,
Speaker 9: things like estate planning and what our story is about.
Speaker 6: And I hope.
Speaker 9: Viewers and listeners will go go check out our story
Speaker 9: called the Leon Black Files. What it's about is some
Speaker 9: really concrete things. One is one is an angry mistress.
Speaker 9: One is an angry mistress of of Leon Blacks, or
Speaker 9: to be fair, I think at the time of these emails,
Speaker 9: she was a former mistress. And and Epstein, who by
Speaker 9: then was a sex offender, he helped Black kind of
Speaker 9: kind of manage the situation. We can talk about in
Speaker 9: what ways and then let's let's think about sort of
Speaker 9: off to the side. There are these I r S
Speaker 9: questions about gifts to another woman, this is this is
Speaker 9: going to be a second woman, and the way the
Speaker 9: way that Epstein was a fixer for this man and
Speaker 9: watching him work. Of course, you know, the best we
Speaker 9: can do is watching his and send and receive emails.
Speaker 9: But it was it was quite an experience for you know,
Speaker 9: I've been. I've been at this now, writing about Wall Street,
Speaker 9: ratting about money in our here at Bloomberg News for
Speaker 9: fifteen years, maybe more now, But I can't remember the
Speaker 9: last time I had the feeling of sort of watching
Speaker 9: watching history unfold before me, or watching a movie. I mean,
Speaker 9: it's I don't want to make it sound fun or
Speaker 9: romanticize it, because it's as grim and difficult work, but
Speaker 9: it really was amazing to see sort of email by email,
Speaker 9: month by month, year by year, to see how Epstein
Speaker 9: just goes to work trying to fix the dark secrets
Speaker 9: of a very important billionaire.
Speaker 3: You know, it always blows me away from just the
Speaker 3: various things I've been reading here at Bloomberg and elsewhere
Speaker 3: when it comes to Jeffrey Epstein is just the level
Speaker 3: of intimacy that he has with certainly people that we
Speaker 3: cover so much at Bloomberg, with these titans of finance.
Speaker 3: I mean, Apollo is kind of an iconic firm in
Speaker 3: many ways and very revered and still is on Wall Street,
Speaker 3: and Leon Black created this firm, and so whether it's
Speaker 3: Epstein helping with family portras like that stuck out like
Speaker 3: that's a level like I understand maybe the estate planning,
Speaker 3: because that's kind of what Epstein was doing. But the
Speaker 3: involvement in even very personal things is kind of interesting.
Speaker 9: That level I have relationship. I think that might be
Speaker 9: one of the most profound things going on. You simply
Speaker 9: cannot exaggerate it. The level of involvement and the level
Speaker 9: of intimacy, personal and professional intimacy that Epstein craved and
Speaker 9: won from these powerful people. Know, I know for obvious
Speaker 9: reasons that a lot of people who are interested in
Speaker 9: Epstein and interested in the Epstein files are john to
Speaker 9: political leaders Bill Clinton, Donald Trump.
Speaker 6: That makes sense.
Speaker 9: These people were presidents and leaders of the free world,
Speaker 9: as it were. But I want to say a word
Speaker 9: for just focusing on the financial the financial moguls that
Speaker 9: are involved.
Speaker 3: And kind of have everything right, and they're wealthy, and
Speaker 3: they seemed like it's just I'm not.
Speaker 6: I don't know, that's right, I know.
Speaker 9: I mean, do you remember, do you remember when I
Speaker 9: worked with Jason on an oral history of Juxel Burnham Lambert.
Speaker 9: You and I talked way many years ago, and you
Speaker 9: know that that, of course is Michael Milkin and a
Speaker 9: junk bond empire, and you know who was there back back.
Speaker 6: Then sir Leon Black, right, and you know, to.
Speaker 9: Track his career that was of course, that was a
Speaker 9: long time ago in nineteen eighties. But to at track
Speaker 9: Leon Black's career and what he did with Apollo, I
Speaker 9: think it's I think it's really fair to say that
Speaker 9: he and his peers are a part of the generation
Speaker 9: that reshaped the landscape of American finance the private equity.
Speaker 9: Private equity was invented before then. Mainly I'm Black didn't
Speaker 9: personally invent private equity. That wouldn't be fair, but ran
Speaker 9: with it. But what Apollo and what Leon Black did
Speaker 9: as shaping shaping American finance was important and is important,
Speaker 9: and I hope that readers will find it important to
Speaker 9: understand in detail and with fairness and with care and
Speaker 9: with facts, just exactly what I've seen was doing. And
Speaker 9: you know, some of it was as you say, like
Speaker 9: arranging you know, family portraits or you know, meeting is
Speaker 9: his young adult kids. But but but some of it,
Speaker 9: some of it was grim, some of it. You know,
Speaker 9: you you described that Lean Black sort of would have
Speaker 9: it all, but clearly he also had he also had
Speaker 9: problems and issues, and and Epstein was clearly want to
Speaker 9: work trying to help some of them.
Speaker 2: The art side of this, What was the role of
Speaker 2: art in your story?
Speaker 9: Well, you know, I'll answer your your question, which has
Speaker 9: to do with not only Paul Clay but also an
Speaker 9: art book publishing company called Faidan.
Speaker 2: But also it's a very famous company that makes like
Speaker 2: very expensive beautiful books.
Speaker 6: That's right, nice coffee table books.
Speaker 9: I think I have some Fadan books in our library
Speaker 9: at home, so I want to try to spell that out.
Speaker 9: But I also just want to give a quick shout
Speaker 9: out to some of the reporting that we've been doing elsewhere.
Speaker 9: There's a great story on Cambodian art, so went interested
Speaker 9: in the Epstein Files and art told check out the
Speaker 9: Bloomberg News piece on Cambodian art. There's also there's also
Speaker 9: more more in this general subject of art in the
Speaker 9: Epstein Files. But in this case, but in this case,
Speaker 9: it's fair to say that one of Black's investment vehicles
Speaker 9: agreed to pay I want to say, a one point
Speaker 9: eight million dollar commission for helping to sell a Paul
Speaker 9: Clay oil work, and that was like, you know, about
Speaker 9: twenty three percent of the sale price, and that money
Speaker 9: went to one of the women that I was describing before.
Speaker 9: So you know, we want to be really careful when
Speaker 9: we do this reporting. We don't want to put one
Speaker 9: in one together and get three right. We don't want
Speaker 9: to overdescribe, and we don't want to underdescribe. We don't
Speaker 9: want to undersell it. But absolutely it's fair to say
Speaker 9: that Black paid a lot of money to one of
Speaker 9: the women who I guess were one of the two
Speaker 9: women that I described earlier.
Speaker 10: Yeah.
Speaker 3: Yeah, I think, like all of this reporting that that
Speaker 3: you are doing and the team are doing, it's just
Speaker 3: the tentacles of these stories and they're not just very
Speaker 3: simple line like, there's just so much to it, you
Speaker 3: know what I mean, like each each aspect of it.
Speaker 3: And he's right, we want to be very careful. But
Speaker 3: I think what increasingly we're getting this fuller picture and impact,
Speaker 3: if you will, of what we simply put as Jeffrey Epstein, No,
Speaker 3: I hear you so much more.
Speaker 6: I mean, speaking reporter to reporter.
Speaker 9: I think that sometimes when I'm feeling overwhelmed at work
Speaker 9: and story subjects seem too hard or too convoluted, or
Speaker 9: too obscure to opaque, I find that it's sort of
Speaker 9: it helps to remember that It's like, you know, honestly,
Speaker 9: they're cliches, but I'm gonna use them anyway. It's like
Speaker 9: follow the money.
Speaker 6: Yeah, you know, what are we doing here?
Speaker 9: We're follow the money. You know, we're chronicling capitalism. You know,
Speaker 9: capitalism is interesting and it's important, and I think one
Speaker 9: way to describe.
Speaker 6: That files is that they allow us to chronicle capitalism.
Speaker 3: Incredible zoeys Max Abelson, Thank you so much.
Speaker 7: You're listening to the Bloomberg Business Weekdaily podcast. Catch us
Speaker 7: live weekday afternoons from two to five pm Eastern. Listen
Speaker 7: on Apple CarPlay and Android Auto with the Bloomberg Business app,
Speaker 7: or watch us live on YouTube.
Speaker 2: I want to bring in Bill Smith, founder, chairman and
Speaker 2: CIO of Smeed Capital Management. The firm has about five
Speaker 2: point six billion dollars in assets under management. He joins
Speaker 2: us from Phoenix, Arizona.
Speaker 3: Bill, Wait, are you in your own radio studio?
Speaker 2: They do podcasts there.
Speaker 3: That's pretty impressive.
Speaker 10: It's the podcast room.
Speaker 2: Hey, Bill, the AI enthusiasm of today. You've talked about
Speaker 2: this with us in the past, but not not recently,
Speaker 2: not in a few months, and it's kind of gotten
Speaker 2: even more enthusiastic. Since then you argue this resembles past manias,
Speaker 2: like the late nineteen nineties. I'm going to utter those
Speaker 2: words in a question to you, isn't this time different?
Speaker 10: Well, it's always different. That's the problem with manias is
Speaker 10: they're all different, but they rhyme. So what put me
Speaker 10: over the edge on this one was when they named
Speaker 10: the nine people that created AI, two ladies and seven men,
Speaker 10: and they put them on the steel beam, imitating the
Speaker 10: Time magazine cover from nineteen thirty two where the construction
Speaker 10: workers are sitting on the steel beam eating lunch with
Speaker 10: way off the ground in Manhattan, and they put the
Speaker 10: nine of them superimposed on there. And so I said
Speaker 10: to my analyst team, I said, gee, let's look back
Speaker 10: over the last twenty five years and ask the question,
Speaker 10: how many times as a stock market or business person
Speaker 10: been the Time Person of the Year, And in the
Speaker 10: twenty five times, it's only happened four times in the
Speaker 10: last twenty five years, and one of those was a
Speaker 10: negative reason. The accountants that disclosed the en run and
Speaker 10: WORLDCLM debacle were named the Time Person of the Year
Speaker 10: at the end of twenty one, but one of the
Speaker 10: other three was Jeff Bezos was named the Time Person
Speaker 10: of the Year December twenty seventh, nineteen ninety nine, and
Speaker 10: then the AI people, well, Jeff bezos stock fell ninety
Speaker 10: five percent over the next eighteen months from that magazine cover. Okay,
Speaker 10: but even though it ended up being an incredibly successful company,
Speaker 10: I mean, people got destroyed. I mean, no one makes it.
Speaker 10: No one makes it back from a ninety five percent
Speaker 10: loss unless they're part of the company like Jeff was.
Speaker 10: So so it was kind of like the ultimate timing
Speaker 10: indicator that time. The front cover of a magazine in
Speaker 10: the investment business is a curse.
Speaker 2: And to be fair, you did mention, you know, the
Speaker 2: success of Amazon. It's over two trillion dollar company. Now
Speaker 2: Jeff Bezos is the fifth wealthiest person in the world,
Speaker 2: with a fortune of over two hundred and twenty five
Speaker 2: billion dollars. Are you saying that? Are you saying that,
Speaker 2: or are you saying that at this point we are
Speaker 2: going to see some sort of correction like we saw
Speaker 2: a post nineteen ninety nine.
Speaker 6: Yes.
Speaker 10: In other words, regardless of how much you think of
Speaker 10: any of the companies involved, first of all, the next
Speaker 10: two to three years are not likely to be good
Speaker 10: for their stocks because we had reached a pinnacle. That
Speaker 10: also can be measured in other markers. The other two
Speaker 10: markers we've used is Buffett wrote in eight at the
Speaker 10: bottom by American, I am because the stock market was
Speaker 10: eighty percent of the GDP, and the stock market is
Speaker 10: two hundred and twenty percent of the GDP. And if
Speaker 10: you if you can listen real closely, you can hear
Speaker 10: Buffett whispering, hold a lot of cash. I am okay.
Speaker 10: So that's the second marker is that that's at a
Speaker 10: reverse right now. The GDP to stock market marker is
Speaker 10: way off. And then lastly, we took a look at
Speaker 10: all the forty year lookbacks since nineteen thirty nine, and
Speaker 10: this at the end of December was the best forty
Speaker 10: year return in the S ANDP on appreciation nine percent
Speaker 10: compounded appreciation going back forty years, and the second, third
Speaker 10: and fourth place finishers ten years later. The S and
Speaker 10: P was lower all three times. In other words, you
Speaker 10: lost money in capital appreciation over the course of the
Speaker 10: next ten years all three times the market was this good.
Speaker 3: So a couple of things I just want to listen
Speaker 3: to you, Bill, like in terms of Amazon, like everybody
Speaker 3: always says, invest for the long term. So have you
Speaker 3: invested for the long term in Amazon even through those
Speaker 3: years as it was investing in holding out you know,
Speaker 3: longer term, it seems like it's turned out to be
Speaker 3: a pretty good investment. When do you know, like AI,
Speaker 3: Nobody says we really know. We just talked about Mary
Speaker 3: Daily of the San Francisco Fed trying to talk about
Speaker 3: AI and the economy, and like everybody who comes on says,
Speaker 3: we just don't really know the impact and who ultimately
Speaker 3: will be winners and losers. So do you just not
Speaker 3: make the bets now? Or can you assume that the
Speaker 3: bigger players are going to be the ones that are
Speaker 3: the most successful because they have the deepest pockets. Even
Speaker 3: though you look at a company like Amazon, which is
Speaker 3: about to go what negative in terms of free cash
Speaker 3: flow for the first time or not for the first time,
Speaker 3: but it's something that we haven't seen with a name
Speaker 3: like Amazon in a long time.
Speaker 10: Well, we just looked at a chart today. Over the
Speaker 10: last five years, Amazon has underperformed the S and P
Speaker 10: five hundred for just as one example. You picked on
Speaker 10: one example, So think of it like this.
Speaker 3: Just got above their seconds.
Speaker 6: Yeah, go ahead, the two.
Speaker 10: Sides of investing ignorance avoidance, okay, and then stock selection
Speaker 10: ignorance avoidance means that for you to squeeze blood out
Speaker 10: of a turn up that has been as strong as
Speaker 10: tech has been in the last ten years, you're asking
Speaker 10: for all recorded history to be reversed, stock market history,
Speaker 10: all of it needs to be reversed. It means tulip
Speaker 10: bulbs are going to keep coming up. It means the
Speaker 10: dot com bubble is going to go on forever. That's
Speaker 10: the problem. The problem isn't that there's not meritorious companies.
Speaker 10: There are meritorious companies and it is going to change
Speaker 10: our life. The problem is the investment rewards have already
Speaker 10: been taken for probably the next five years.
Speaker 3: All Right, interesting stuff, Bill, so appreciate it. Bill Smeeth,
Speaker 3: Chief investment Officer at SMED Capital Management, joining us.
Speaker 7: This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
Speaker 7: and anywhere else you get your podcasts. Listen live weekday
Speaker 7: afternoons from two to five pm Eastern on Bloomberg dot Com,
Speaker 7: the iHeartRadio app, tune In, and the Bloomberg Business App.
Speaker 7: You can also watch us live every weekday on YouTube
Speaker 7: and always on the Bloomberg terminal