Kushner’s Affinity Withdraws From Warner Bros. Takeover Battle

Summary

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Bloomberg Businessweek Podcast Summary

Episode: Kushner’s Affinity Withdraws From Warner Bros. Takeover Battle
Date: December 16, 2025
Hosts: Carol Massar & Tim Stenovec

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Episode Overview

This episode dives into breaking developments in the high-stakes media mergers between Warner Bros. Discovery, Paramount, Skydance, and the sudden withdrawal of Jared Kushner’s Affinity Partners from the takeover battle. The hosts and guests analyze the implications of these moves amid industry consolidation, financing uncertainties, regulatory considerations, and what these changes may mean for consumers, investors, and the broader media landscape. The episode also features expert insights into the current financial and labor markets, the impact of artificial intelligence on the economy, and key investment strategies amidst macro uncertainty.

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Key Discussion Points & Insights

1. Breaking News: The Warner Bros. Discovery Takeover Saga

• [02:42–07:14]

  • Warner Bros. Discovery plans to reject Paramount-Skydance’s hostile bid, citing financing and structural concerns.
  • The Ellison family's (Larry and David Ellison) role and liquidity is crucial for the bid’s legitimacy—much of Larry Ellison’s wealth is tied up in Oracle stock.
  • Felix Gillette, media editor at Bloomberg, explains the back-and-forth nature of competing offers and adjustments made after concerns over earlier financing sources, including Middle Eastern investors and Tencent.
  • Regulatory and financing transparency, especially sourced from Larry Ellison versus international actors, is a recurrent sticking point.

  Quote:

  • “[Paramount] came out with the public hostile offer. But it was the same offer that the board had already rejected, essentially. So… they’re going to have to come back with a better offer, more money.” – Felix Gillette, [03:13]

  • Concerns about foreign financing parallel earlier acquisition battles like Rupert Murdoch’s, due to US broadcast ownership restrictions.

2. Kushner’s Affinity Partners Exit: What Does it Mean?

• [08:49–12:48]

  • Kushner's Affinity Partners withdraws from the Warner Bros. takeover, citing changed investment dynamics.
  • Withdrawal could make Skydance’s offer more attractive by simplifying regulatory clearance, but also eliminates connections that might have eased approval under a Trump administration.
  • The Paramount offer still involves Middle Eastern wealth funds, which introduces continued scrutiny.

  Quote:

  • “With two strong competitors vying to secure the future of this unique American asset, Affinity has decided [no] longer to pursue the opportunity…” – Affinity spokesperson (read by Carol Massar), [11:43]

  • Regulatory and political scrutiny remains high, especially with Sovereign Wealth Funds involved.

  • The exit could reduce state-level opposition (NY, CA) to the deal, but may complicate matters under different federal administrations.

3. Potential Outcomes: If Netflix Wins

• [06:12–07:14] & [10:21–10:48]

  • If Netflix’s bid succeeds, major assets (HBO, etc.) would go to them, but global cable networks (CNN, TNT, Cartoon Network) would be spun off as "Discovery Global."
  • Anxiety within Hollywood and regulatory circles about media consolidation and diminished competition in streaming.
  • Felix Gillette predicts ‘more than 400 million subscribers’ and Netflix’s utter dominance if the HBO deal goes through.

  Quote:

  • “They’re going to absolutely so utterly dominate the subscription video business that I think people are going to be like, yeah, who? There's going to be no one else to sell to, and that's going to be bad for the business overall. And ultimately, it’ll cost consumers more money down the line.” – Felix Gillette, [06:26]

• Non-core cable assets would become a declining but still profitable spin-off.

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4. Broader Financial Market Analysis

• [15:34–23:58] Guest: Chris Whalen, Whalen Global Advisors

  • Current credit markets appear healthy on paper, but significant hidden risks lurk: opaque private credit, banking system exposure, and loan losses being “fudged” post-COVID.
  • Private equity and private credit’s potential systemic risk is moderate, but big banks are exposed to these sectors and may not be shielded even from senior positions.

  Quotes:

  • “What people are worried about today is what they don't see in the data because they know that a lot of this is being fudged.” – Chris Whalen, [16:50]
  • “The private players can fail tomorrow. It will cause a bit of kerfuffle... But are they systemic like a big bank? No, but the big banks will take their lumps too…” – Chris Whalen, [20:47]

• On market outlook: Too much liquidity, asset prices elevated, real demand still lagging, and caution about “hidden” problems in non-public markets.

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5. AI’s Economic Impact: Hype vs. Reality

• [23:58–27:56]

  • Clip from Ken Griffin (Citadel): Generative AI’s broad economic impact is ‘pointed but relatively limited.’
  • Chris Whalen supports Griffin’s view: current AI advances are incremental (better search tools), much of the spend is “marketing hype,” and the real breakthrough (general AI) is yet to come.
  • Observes a “spending bubble” around infrastructure and capacity versus actual productivity impacts.

  Quotes:

  • “What we’re doing is building a lot of infrastructure. We’re spending a ton of money, not so much on building AI, but preparing to have the capacity to do it, mostly by studying the past. To me, that’s not AI.” – Chris Whalen, [26:10]
  • “It’s all marketing hype and we have to differentiate between the technology and the sell.” – Chris Whalen, [27:42]

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6. U.S. Labor Market & Economic Outlook

• [30:53–38:31] Guest: Julia Pollack, Chief Economist, U.S. Dept. of Labor

  • Not worried about headline unemployment: Recent uptick is due to temporary distortions (government worker changes, shutdown effects), expects rates to fall soon.
  • Youth unemployment and manufacturing jobs: Administration expects resurgence starting in 2026, fueled by policy measures (expensing, tax changes, reshoring incentives).
  • Fed policy: Current rates still restrictive; as policies roll out, job growth anticipated to accelerate in a “non-inflationary” fashion.

  Quotes:

  • “The unemployment rate is exactly where it was when President Trump first took office… We are setting the stage for a huge comeback in 2026 and beyond with the one big, big beautiful Bill act…” – Julia Pollack, [32:02]
  • “For the first time, labor policy and education policy are pulling in the same direction… we're now focusing very heavily on getting workers access to job connected training…” – Julia Pollack, [36:20]

• AI in the labor market: Demand for specialized skills is rising, but policy and training are aligning for future needs.

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7. Investment Strategy—Focused Stock Picks

• [41:48–49:01] Guest: Larry Petkowski, Goodhaven Capital Management
  • Market appears expensive in places, but value can be found by “turning over rocks.”
  • Bullish on Lennar: Homebuilder transformed into a lean, high-return business, potentially earning $20/share over coming years due to strategic focus and improved business model.
  • Berkshire Hathaway: Top holding, confident in management succession (Greg Abel), admires transparency in leadership transition.
  • Overall approach: Focus on long-term value, awareness of macro factors, cautious optimism.

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Notable & Memorable Moments

• Felix Gillette (on Netflix landing HBO):
  “They’re going to absolutely so utterly dominate the subscription video business…” [06:26]

• Affinity Partners' withdrawal:
  “With two strong competitors… Affinity has decided no longer to pursue the opportunity.” [11:43]

• Chris Whalen (on private credit):
  “There’s a lot of forbearance here in New York City for multifamily apartments. Our new mayor is threatening to start taking over buildings…” [17:28]

• Julia Pollack (on labor policy alignment):
  “For the first time, labor policy and education policy are pulling in the same direction…” [36:20]

• Larry Petkowski (on Berkshire, Buffett succession):
  “…give them the benefit of the doubt that it is a sensible and well-thought-out plan…” [48:48]

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Timestamps for Key Segments

• Warner Bros. Takeover Developments: [02:42–10:48]
• Kushner’s Affinity Withdrawal, Implications: [08:49–12:48]
• Netflix and the Future of Media Consolidation: [06:12–10:48]
• Financial Sector Risks & Private Credit: [15:34–23:58]
• AI’s Real Economic Impact: [23:58–27:56]
• US Labor Market Discussion (Julia Pollack): [30:53–38:31]
• Investment Strategies & Stock Analysis (Larry Petkowski): [41:48–49:01]

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Summary

This episode delivers a fast-moving, multifaceted discussion of the future of one of America’s largest media conglomerates, featuring in-depth commentary on financial and labor markets, and the reality check on today’s AI boom. The withdrawal of Jared Kushner’s Affinity Partners adds a fresh layer of intrigue to the already heated contest, raising questions about regulatory hurdles, international money, and the shape of streaming going forward. Overlaying this are big-picture perspectives on financial market opacity, the labor market's resilience and coming transformations, and tried-and-true investment wisdom in a high-priced market. The hosts and expert guests maintain a lively, incisive tone, delivering accessible insights for anyone seeking to understand the latest in business, tech, and the economy.

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Transcript

[Carol Massar]

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[Tim Stanwick]

Bloomberg Audio Studios Podcasts Radio News this is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex, complex economy. Plus global business, finance and tech news as it happens. The Bloomberg businessweek Daily Podcast with Carol Massar and Tim Stanwick on Bloomberg Radio.

[Carol Massar]

We mentioned some breaking news. Been listening just in the last few minutes regarding the media deal that we just can't stop talking about.

Yeah, and that just can't seem to get done because it goes back and forth. Warner Brothers Discovery planning to reject Paramount Skydance's hostile takeover bid due to concerns about financing and other terms. Let's see what our Felix Gillette has to say about this. He covers the media space for us so closely here at Bloomberg. So I do feel like the back and forth, the back and forth. It's hard to really kind of read the tea leaves. What do you make about this latest reporting?

[Felix Gillette]

I mean, I think it's not entirely surprising, right. Paramount lost the initial round of, of bids and to Netflix and then came out with the public hostile offer. But it was the same offer that the board had already rejected, essentially. So we're all essentially waiting for them to review it again, you know, and then essentially say, oh, you know what? We actually did like Netflix bid more and that'll toss the ball back into Paramount's court. And I think they're going to have to come back with a better offer, more money. Something in the way of addressing the concerns about financing that Warner Brothers board has had all along.

[Carol Massar]

Does Paramount Skydance have that money? I mean, Larry Ellison's worth $240 billion.

[Larry Petkowski]

Yeah.

[Carol Massar]

$219 billion of that is tied up in Oracle stock.

[Felix Gillette]

Yeah, well, I think there's questions that have not been addressed. Even though the Ellisons have said one way or another, oh, we actually did address all these concerns about the financing. You know, initially there was money from Tencent which caused some concern that was taken out. So there were. There have been adjustments made. But, you know, I think at this point it's officially going to go back to them again and they'll probably have to come up with something more, whether it's more money or whatever, addressing those concerns that remain.

[Carol Massar]

You know, I lost track in terms of Felix, the Paramount Skydance deal because it was Jared Kushner's investment firm and there was, I think, some Saudi investors. Yeah. Like, do you help me understand? Because it feels like I thought that was a lot of the financial offer.

Like it was diversified.

It was a lot more diversified.

I felt like rather of money to come in.

Well, they were ponying up. It felt like a lot of money. But I'm not quite so sure because if Larry Ellison is still so important to this offer.

[Felix Gillette]

Yeah.

[Carol Massar]

Like, is it a much smaller portion?

[Felix Gillette]

It was. I mean, they've made adjustments. So it's like, I think what probably what the Warner Brothers discovery board is saying is they want more assurance that it's from Larry Ellison that that money feels better from regulatory perspective, if you can get the money from Ellison, the Ellison family versus these other sources that have been part of financing deal from the beginning, such as the Middle east, you know, Middle east money, you know, money from Tencent, like I said, that was taken out Jared Kushner, which, again, might help with the White House, but might raise other concerns.

[Carol Massar]

Yeah, I'm glad you brought that up, because Carol brought up just a few weeks ago what happened when Rupert Murdoch wanted to buy Fox, and what a challenge it was for him to do that because of foreign ownership of a broadcast network and the hoops that he had to jump through in order to do that. Okay, so we still have a lot of questions and unanswerable at this point about what this deal looks like. Let's just say for the sake of simplicity, Netflix wins out. Yeah. Actually gets these assets. Netflix gets hbo. You wrote the book on hbo. This is a wild world that we're living in. If Netflix actually gets this, what does it mean for consumers? I mean, is this. Is this good for us?

[Felix Gillette]

Well, Netflix would say, oh, it's going to be great, because ultimately, with lower prices, you know, we'll have, you know, we'll be able to be more flexible in terms of bundling, just consolidation, usually lower prices. That's.

[Carol Massar]

I don't know.

I'm just asking.

Bill is pretty high.

I'm just asking a rhetorical question.

[Felix Gillette]

I think you've seen a lot of voices in Hollywood raising concern immediately about Netflix taking. Winning this deal because it's going to be so much consolidation of power. Now, Netflix has said, well, you know, really, you have to look at the broader universe of people's attention. And now people are on TikTok and they're on YouTube and all these other things. But really, in this subscription video on demand world, Netflix is already the market leader. If you add in all of these assets from HBO Max, they're going to be have, you know, more than 400 million subscribers around the world. They're going to absolutely so utterly dominate the subscription video business that I think people are going to be like, yeah, who? There's going to be no one else to sell to, and that's going to be bad for the business overall. And ultimately, it'll cost consumers more money down the line.

[Carol Massar]

Yeah, that feels about right. Hey, why is this so difficult to get this done? Why is this one so difficult?

[Felix Gillette]

Well, I mean, people trying to, you know, make these assets, you know, more valuable. From Warner brothers discovery for 20 years. I mean, you're going back to AOL Time Warner, which again, was around, what, the 2000?

[Podcast Advertiser / Announcer]

Yeah.

[Felix Gillette]

So, you know, and then AT&T made a run at trying to make these assets work for them. Then you had Discovery come in. It's a, you know, a challenge that has enticed so Many different people and yet has always proven more difficult in reality than on paper for, you know, decades now.

[Carol Massar]

What's the risk that somebody overpays ultimately? Like, I feel like there's, there's been so much in terms of media assets and we know the media landscape, you know, better than any most, how it continues to change and evolve. So I'm just curious.

[Felix Gillette]

Well, I think the idea is like, you know, you have the biggest library, you have the most selection for your viewers. It's going to drive subscribers, people are going to engage with it. You're going to, you know, have more subscribers coming in. But the problem is always how do you arrange those assets? How do you arrange those shows and movies on a small app in a way that's enticing and available? I mean, I think the problem that Discovery has had with Warner Brothers Discovery is that, you know, piling in all these reality shows into these, into HBO Max didn't actually increase engagement at all. In fact, it just kind of like a lot of those shows and programs just get lost in the mix and no one has, no one watches them. So that's the problem is you end up paying for a bunch of things that don't actually drive engagement.

[Carol Massar]

Well, here's this. Jared Kushner's affinity withdrawing from the Warner Brothers takeover battle.

[Felix Gillette]

Yeah, I mean, again, that would make sense. It would lower some of the concerns from state attorney generals, anyone that like is worried about what Paramount and Nelson's would do with things like cnn.

[Carol Massar]

So, so that makes Paramount Skydance's offer more attractive to Warner Brothers Discovery.

[Felix Gillette]

I think it makes it simpler and thus a little bit more attractive in terms of, again, if you're willing to just, if Larry Ellison will just put up the money and backs up this whole thing, that the easiest way for.

[Carol Massar]

Have you seen Oracle share price?

So much of his wealth is tied up. He only has 20 billion, but he has basically 18 according to the Bloomberg Billionaires Index, basically $18 billion worth of net worth that is not tied up.

Wait, so go back to this headline that just crossed Jared Kushner's affinity withdrawing from the Warner Brothers takeover battle that you say makes the Paramount Skydance potentially.

[Felix Gillette]

More attractive from the Warner Brothers Discovery board's perspective. Potentially so.

[Carol Massar]

Yeah, yeah.

[Felix Gillette]

Although at the same time, you know, it's a two edged sword because then it's also, you know, will that make it harder for the regulatory approval down the line in terms of getting approval from, you know, the Department of Justice in Trump's White House? You know, will they, without the son in law involved. Does that make it harder? I mean, I think there's a lot of questions on both sides of this and it's going to continue to play out in the weeks ahead.

[Carol Massar]

Okay, so one question that we have is about the global linear networks because Netflix's deal does not include cnn, tnt, Cartoon Network. I mean, the list certainly goes on when it comes to these assets that not that many people really want right now. Yeah, what, what's the fate of those if Netflix wins this bid?

[Felix Gillette]

Well, it'll, they'll be spun off into a separate company before the bid, before the acquisition takes place.

[Carol Massar]

Like a publicly traded company.

[Felix Gillette]

A publicly traded company. Discovery, probably called Discovery Global. That's the plan at this point. And yeah, those assets are still throwing off profits, but the viewership is declining across the board. There's a lot of other cable networks out there. Right. Comcast is in the process of just spinning off a bunch of its traditional cable assets. So, you know, at some point, does somebody come along and roll all those assets into one company? There's probably some synergies if you combine them all in one place, but yeah, it's managing a declining asset over time.

[Carol Massar]

I just want to mention because a Bloomberg story just crossing. So Jared Kushner's Affinity partners exiting from the takeover battle for Warner Brothers Discovery. A representative for the firm said Affinity. They now believe the dynamics of an investment have changed since it became involved in the process in October.

[Podcast Advertiser / Announcer]

Here's a quote.

[Carol Massar]

With two strong competitors vying to secure the future of this unique American asset, Affinity has decided longer to pursue the opportunity. We continue to believe there is a strong strategic rationale for Paramount's offer.

[Chris Whalen]

Hmm, right.

[Felix Gillette]

Well, I mean, that's the thing is, I think when you put Jared Kushner in the mix on the one hand again, you think, oh, maybe it'll improve their ability to get it through regulatory concerns faster under Trump's administration. On the other hand, it raises all these other political objections from, you know, progressive states including California, New York, where a lot of entertainment assets are located. So, yeah, there's, there's definitely problems involved.

[Carol Massar]

Well, even without Affinity Partners, Paramount's offer is being bankrolled by a list of influential Middle Eastern investors, Saudi Arabia's public investment fund, Qatar Investment Authority, as well as a little known group from Abu Dhabi called Limad Holding Company. Kushner does have strong ties to the Middle East. He founded Affinity in 2021 with funding from sovereign wealth funds from the region. Carol, as you say, it's complicated.

It's complicated this one is. Which means it will be coming because it ain't over yet either. Not Felix Gillette, thank you so much. So appreciate it. Felix, of course, covering the media space for us, as we said, wrote the book on hbo.

Yeah, the book. It's not tv. The Spectacular Rise, Revolution and Future of hbo. Get that book now if you haven't read it.

Felix is a media and entertainment editor, so thank you so much.

Stay with us. More from Bloomberg businessweek Daily coming up after this. When patients have a disease and the.

[Podcast Advertiser / Announcer]

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[Carol Massar]

Have you heard the story about the prescription plan? With savings automatically built in, it's where a family of any size can feel confident the cost of their medication won't hold them back. Go to CMK Co Stories to learn how CBS Caremark helps members save just by being members. That's CMK Co Stories.

[Tim Stanwick]

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[Carol Massar]

We're gonna stay on the macro with a financial sector emphasis. And great to have. Back with us, Chris Whalen, Chairman of Whale and Global Advisors. He worked at the New York fed in the 80s his testify before Congress and the SEC worked on wall Street. I forgot that you worked at Bear Stearns and some other. Written many books and also served on the economic advisory committee of FINRA for over a decade. And you also were a consultant to Billions, was that right?

[Chris Whalen]

Yes, it was great fun. They were buying a bank.

[Carol Massar]

They were buying a bank and they wanted to know.

[Chris Whalen]

Yeah, they were trying to, you know, finagle the regulators. It was a typical Billions kind of script.

[Carol Massar]

Well out of the entire resume that Carol just mentioned. Was that the most fun working on Billions?

[Chris Whalen]

No, I think the most fun was early days working at Bear Stearns in London, you know, selling bonds. That was a lot of fun. We had a blast.

[Carol Massar]

Well, tell us about, like, it's funny, you know, I love talking with someone like you because you have seen just kind of how the financial sector has changed a lot, Chris. Right. And the stress points that we've seen, certainly the financial crisis and elsewhere, when you look at. We just talked with Mike about some of the macro backdrop and we've talked with you about specific risks. But does it feel comfortable today, kind of the environment in your view, compared to what we've seen in the past?

[Chris Whalen]

No. I was going through the third quarter numbers for the big bank holding companies, which the Fed just released. Yeah. Day 75 after the quarter closed. That's the best that they can do. And it's eerie. The credit costs are trending down. Asset returns, thank God, are getting back to normal about 1.5%. But there's a lot we don't see, and that's what's worrying people, whether you talk about Oracle or you talk about private credit. What people are worried about today is what they don't see in the data because they know that a lot of this is being fudged. And that's what worries me as well.

[Carol Massar]

What do you think is being fudged?

[Chris Whalen]

Things like loan losses. There's a lot of forbearance here in New York City for multifamily apartments. Our new mayor is threatening to start taking over buildings that landlords are not keeping up to his standards. Well, the City of New York can't afford to take care of them either. And so we have this accumulation of pressures, mostly caused by inflation, mostly caused by our friends at the Fed debt. But in their defense, why did they do that? Because we told everybody they didn't have to pay their loans and their rent for two years during COVID People forget that in the mortgage industry. In March of 2020, we were all looking at one another going, what are we going to do? This is after President Trump declared the emergency and said you don't have to pay your bills. Yeah, well, the Fed came to the rescue by dropping rates to zero. We caused a surge of home lending activity. Record volumes. And that float was borrowed to help everybody pay their bills.

[Carol Massar]

So why aren't we seeing more stress in the credit markets and why are we seeing records on Wall street and like it sounds like then some disconnect.

[Chris Whalen]

I think part of the reason that the street has been doing well listed stocks is because you have a lot of liquidity coming out of private markets going back into more liquid markets. Makes sense, right? Private equity, private credit is a mess. Gas and we all know that something like 15% of private equity companies in the US are paying in kind rather than in cash.

[Carol Massar]

Right.

[Chris Whalen]

So, you know, waiting for the year.

[Carol Massar]

To like the exits and for things to move on.

[Chris Whalen]

There's a lack of demand from banks for loans, except in one category, non depository financial companies, which is another way of saying private equity funds, credit shops like Ares and Apollo, they're the ones that have been aggressively expanding their business using money in part from banks. So the banks are now the facilitators. And what does this remind us of, Carol? The 2000.

[Carol Massar]

Right, right.

[Chris Whalen]

It's the same thing. You have non bank intermediation reliant on the bond market, equity markets and bank credit. And the thing is, eventually they're going to stumble and that's what everybody's worried about.

[Carol Massar]

So what does that stumble look like? What is the shoe that drops?

[Chris Whalen]

It looks like first brands. Hello, we're defaulting. And most people had never focused on that company. It was a private, totally institutional play. The same thing with Tricolor Auto lender that, you know, half of their customers were illegal aliens. Nobody had ever focused on this. It was an institutional story that suddenly surged.

[Carol Massar]

So you think those, think those two instances are canaries in the coal mine?

[Chris Whalen]

I think they are typical of what we're going to see more in the future, which is you're going to see more of the missteps in the institutional non public market, which was supposedly better. Remember, everybody was selling us the idea that private was better than public. No, we have public markets because they're open and relatively liquid.

[Carol Massar]

Chris, you know, after the Jamie Dimon cockroach comment that there were many members in the private world that came out, or a few, I should say, that came on our air and that seemed to say, hey listen, and things are fine and I understand many would say they're, they're talking their book. But, you know, are they systemic risks? Like, what's the exposure with the traditional financial sector when it comes to the private markets? Because I think that's what we care most about, right?

[Chris Whalen]

No, I think the private players can fail tomorrow. It will cause a bit of kerfuffle and volatility in the markets. But are they systemic like a big bank? No, but the big banks will take their lumps too, because they are lending indirectly into these structures. They tend to take the most senior positions, but that may not save them. You see, the assumption that, okay, I'm senior and three quarters of the stack is below me and therefore I'm okay, that may not work this time around because you have leverage on leverage on leverage in some of these deals.

[Carol Massar]

So when, so when, like the big banks report again, we're getting ready for another earnings cycle, right. You know, we'll get that, you know, in early, early January. So what do we look for? For things like that? Like, what do you look.

[Chris Whalen]

The numbers are going to be wonderful. That's what worries me, you know, just as an analyst, we were supposed to have a recession last year. Credit losses largely peaked last year. Third, fourth quarter. Yeah, they've been coming down since then. So if you look at the picture, you say, God, everything is great. You don't see a lot of utilization. You don't see a lot of demand from the banks for credit. Credit. They've got a ton of unused credit out there that they wish people would use. But. So you don't see stress in the published numbers. Where you see stress is when you talk to professionals, when you read the really interesting media like Bloomberg and others that cover some of these stories. There was a great piece in the FT over the last week talking about Altus, a company that Jamie Dimon came to the rescue of, paid off their most restrictive loans so that they go out and borrow more money. So like, and all of the credit guys that you're talking about looked at Jamie Dimon and they're going, hello, what are you doing? Yeah, so he, he's an enabler of bad behavior because Jamie has to go out and make money too, in a market where there isn't a lot of, you know, what I would call quality demand.

[Carol Massar]

Which reminds me of what would happen in the great financial crisis of people saying, I know it's getting messy and ugly, but. But there was it the CEO of Citi at the time, I think, who, like, came out and made some comment about, I got to be in it.

[Chris Whalen]

Like oh no, that's right. Yeah, that was the. I can't think of the temporary CEO who replaced John Reed.

[Carol Massar]

But I'm just saying like this idea of like feeling like you have to be in it, the pressure of it.

[Chris Whalen]

Yes and no. I think that some institutions have the common sense to pull back and say no, others don't. I'll give you an example. Pnc, PNC has the lowest loss rate in the top seven banks. They've always got also got one of the lowest funding costs. That's a fairly well run half trillion dollar bank that has managed to avoid risk I think often by saying no. The street wanted them to get more involved in certain things like prime brokerage dealing with private equity funds, that sort of thing.

[Carol Massar]

Right.

[Chris Whalen]

And they said no. So I think there are institutions that are very well run in this market. But again the banks are underutilized because the non bank financial companies have stolen their march and they are going to the customer and they're using wholesale funding from the big banks and they're in turn disintermediating them at the same time.

[Carol Massar]

Chris, we want to talk a little bit about AI too in the time that we have left. We've talked about it with you before circular financing. We're not sure how it all plays out in the economy and what it has to do with productivity and with economic growth. Weighing in on AI and its potential economic impact. Ken Griffin of Citadel speaking with Bloomberg's Dani Berger a little earlier today at a conference in Paris. Check out what he said.

[Podcast Advertiser / Announcer]

I think there is some chance that we will see meaningful progress in this field that will change the calculation that I'm calculus that I'm setting forth. Like there are so many bright people in their 20s and 30s trying to unlock, trying to unlock true intelligence that this does create the environment in which a breakthrough may happen. But I think that generative AI as we know today will have a very pointed but relatively limited impact on the broader economy.

[Carol Massar]

A pointed but relatively limited impact on the broader economy. Ken Griffin of Citadel earlier today, what in your view is the impact of AI on the this economy?

[Chris Whalen]

I think it's incremental. Better search tools, you know, we're writers.

[Carol Massar]

So is he right?

[Chris Whalen]

I think he is right and frankly I read a lot of the long haired stuff on AI. Some people in the scientific community and they tell you the same thing because this is a third or fourth, fifth time that we have talked about AI. You go back to the 70s and.

[Podcast Advertiser / Announcer]

The 80s, not new.

[Chris Whalen]

Remember Watson, IBM, which was a Fiasco. But it was their way of showing what new technology could do. But is it creating general intelligence? No.

[Carol Massar]

So is all this a waste? Is all this a waste?

[Chris Whalen]

No, it's marketing, you know, never.

[Carol Massar]

Yeah, but that's a lot to spend on marketing.

But the spend.

[Chris Whalen]

Yeah, but that's. Look, everything in the US Economy is about marketing, okay? Doesn't matter what it is. And if it's attached to a stock, then, you know, it's marketing in video. I've made a ton of money on Nvidia. I'm very grateful to Mr. Wang. But is he going to change the world? No. What we're doing is building a lot of infrastructure. We're spending a ton of money, not so much on building AI, but preparing to have the capacity to do it, mostly by studying the past. To me, that's not a. I is when a machine can start to observe what's around it and react and determine what to do next based on what it sees. Not because. Because of, you know, it studied our language for the last 50 years.

[Carol Massar]

So you're under. Like the whole idea of AI is all the data that's put in from the past. You think that. Okay, that's your take.

[Chris Whalen]

All we have. Well, are you still in Nvidia? No, I got out. I got out. I wrote it up. It split. I wrote it up again. It split. When it gets to be a third of my portfolio, I've got to take the money and run. You know, with all due respect to Jim Cramer, who I'm very grateful. Grateful to. For getting me into that stock, but.

[Carol Massar]

It sounds like you're saying that this, that we're in a bubble with. At least with the spend.

[Chris Whalen]

Of course we are. That's what humans do. That's what markets.

[Carol Massar]

What happens when the.

[Chris Whalen]

Follow the shiny object?

[Carol Massar]

What happens when the bubble pops?

[Chris Whalen]

We're going to see that a lot of the spend for I will not be compensated with revenue growth. That's going to help to pay it off. And Oracle, I think, unfortunately, great companies to poster child for this, this, they were following the crowd. They decided to double down and do even more. And the truth of the matter is one large language model. If all of the tech companies had gotten together and said, look, let's do this together. Right, Right. But the other problem, I think, is the metaphors that we use in this conversation is race with China. The Chinese don't use metaphors like that. When you listen to them talk about AI, it's part of a broader range of initiatives that they're trying to use to give them an advantage in the global economy. They don't see it as a race. This is all marketing hype and we have to differentiate between the technology and the sell. Okay? Like we used to say about IBM, never mistake sales with, you know, delivery. No.

[Carol Massar]

All right, we got to leave it there. Thank you. Really appreciate it.

[Chris Whalen]

My pleasure.

[Carol Massar]

Chris Whalen, chairman of Whalen Global Advisors, joining us here in Studio.

Stay with us. More from Bloomberg businessweek Daily coming up after this.

[Podcast Advertiser / Announcer]

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[Carol Massar]

So have you heard the story about the prescription plan with savings automatically built in? It's where a family of any size can feel confident the cost of their medication won't hold them back. Go to CMK Co Stories to learn how CBS Caremark helps members save just by being members. That's CMK Co Stories.

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[Tim Stanwick]

You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Carol Massar]

Hey, we talked about the market, the U.S. jobs market earlier with Michael McKee. It's sluggish, not rapidly deteriorating. And we did see that data that came out saw traders refraining from boosting bets on near term Fed rate cuts, setting stocks lower and bonds wavering. So we're not, you know, it's not like all of a sudden traders are saying, okay, we're going to get more rate cuts because of that labor data. We got the this morning.

Yeah, a reduction is fully priced in by mid next year. Should know. But we're not seeing those bets go up.

[Chris Whalen]

No.

[Carol Massar]

Exactly. Curious to see what our next guest has to say specifically about the US labor market. Let's head to the Bloomberg News Bureau in D.C. to someone well known to our Bloomberg audience. She was formerly chief economist over at ZipRecruiter. She is Julia Pollack and she's chief economist for the US Department of Labor. Julia, good to have you back here on the Bloomberg. How worried are you about rising unemployment?

[Julia Pollack]

I'm not. So this report overstates, understates the strength of the labor market right now because there are two huge temporary distortions at play in the data here. The first is 10000 or more federal workers who took the fork and came off payrolls and some of them have gone into temporary frictional unemployment. And the second big distortion in this report is the Schumer shutdown, which forced 900,000 federal workers off the job, but it also led to weakness in the private sector because it forced work stoppages for federal contractors and led to temporary layoffs there. So I expect the unemployment rate to jump back down very soon.

[Carol Massar]

What about the youth unemployment rate, the rising and rising youth unemployment? Are you concerned about that?

[Julia Pollack]

So, you know, the unemployment rate is exactly where it was when President Trump first took office in his first term and he has a track record of bringing it all the way down to 3.5%. We have a bigger challenge this time because of the Biden inflation hangover which forced the Fed to slam the brakes on the economy and that has hurt marginal workers the most. But we are setting the stage for a huge comeback in 2026 and beyond with the one big, big beautiful Bill act which has hugely stimulative policies. And you'll see those macro stimulative effects build into 2026. They are things like, like expensing, you know, fast and, and accelerated, full and accelerated expensing for business investments. No tax on tips, no tax on overtime, no tax on Social Security.

[Carol Massar]

So Julia, if I may just jump in just because we only have about five minutes left here. So it sounds, it sounds to you like that there's, and we've heard this certainly from guests here on Bloomberg, more liquidity coming into the market, things to support economic growth. It sounds like you said that the labor picture is actually better than what the data showed. So it sounds to me then that the Fed is correct, Jay Powell is correct in being or you know, actually, forgive me, what you're sounding like you're saying is that maybe the Fed, Fed doesn't need then ultimately to be cutting rates, that things actually look pretty rosy for 2026.

[Julia Pollack]

So I think the reason that employment growth, the job growth slowed so dramatically between mid-2022 and mid-2024 is that rates were high. And the longer rates stay restrictive, the more of the economy gets hurt. The more businesses have to refinance that double the rate, the more families go out there and try to buy a home and find that it's just unaffordable. So rates right now are still restrictive and they are still a problem for, for much of the economy.

[Carol Massar]

But you said you were, you said you weren't concerned about rising unemployment. So I'm a little confused.

[Julia Pollack]

Well, the Fed has a dual mandate, full employment on the one hand and, and price stability. And this president has shown that it as policies deliver both in the first Trump administration we had non inflationary growth and, and you can do that with policies that don't, you know, throw fuel on the fire of demand and restrict supply, but do the exact opposite. So through deregulation, through reassuring incentives, we're going to see this labor market take off again and in a non inflationary way.

[Carol Massar]

Well, on the reshoring part of this motivation for reshoring, on shoring, imposing tariffs to bring back the Midwest, to revitalize what many consider the American dream. Secretary Besson has said it's been harmed by global trade. The manufacturing industry, though, it keeps shedding workers. When can we expect the data to reflect progress that the administration is trying to make in restoring that America can.

[Julia Pollack]

Drain so the economy shed manufacturing jobs for about two years before President Trump took office again. This latest report shows the largest increase in construction jobs in over a year. And that's really the front end of those investments in mining and energy and manufacturing. And they're a signal that manufacturing job growth will pick up.

[Carol Massar]

So, okay, you know, you look at the labor market, I mean, in terms of initiatives that will potentially help the US labor market, you know, the conversation around artificial intelligence. Fed Chair Jay Powell even addressed it and saying it hasn't impacted US Jobs yet. So I'm just curious, how are you factoring that into as you look at some of the upcoming moves, the president ramping up in terms of hiring people to really focus on technology, specifically in the administration, so looking to make more investments so that the US Certainly has a dominant role. I'm just curious how then you factor that into your estimates for the impact on the U.S. labor market.

[Julia Pollack]

Well, the boom is driving huge demand for workers in the skills trades, in advanced manufacturing and of course workers with AI skills. And it is our job at the Labor Department to ensure that US Workers are prepared for those jobs of the future. For the first time, labor policy and education policy are pulling in the same direction. We've aligned labor and education for the first time ever. And we are now focusing very heavily on getting workers access to job connected training that sets them up for in demand jobs and that doesn't push them to expensive degrees that leave them with nowhere to go.

[Carol Massar]

Let's talk personnel a little bit. We're curious about why it's taking so long to make another nomination as BLS commissioner. Is your name in the ring? Is your hat in the ring?

[Julia Pollack]

I have no idea. You'd have to ask the President that.

[Carol Massar]

Would you if you were asked, would you serve as that?

[Julia Pollack]

Well, I, I think there is tremendous amount of work to do there, tracking AI labor impact, improving the timeliness, the granularity, the accuracy of the data. And I have at the Labor Department made it my priority to push forward a very aggressive labor market data modernization agenda that puts workers and learners first and gives them more access to the data collected on them. So right now I love partnering with, with the BLS on all of those kinds of initiatives and I am happy to serve in whatever role the President sees fit.

[Carol Massar]

If, if, if we're thinking just 30 seconds, but if we're thinking about previous commissioners, how will this nominee or this next commissioner be different? Just 20 seconds.

[Julia Pollack]

I have no idea. But I think that whoever comes in has a very clear mandate from the President to put workers and learners at the center of what we do, to change the data paradigm to a real time data paradigm and to make sure that the data is accurate and has the utmost integrity.

[Carol Massar]

All right, Julia, thank you so much. Julia Pollock, chief economist for the U.S. department of Labor.

Stay with us. More from Bloomberg Businessweek Daily coming up after this.

[Podcast Advertiser / Announcer]

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[Carol Massar]

Have you heard the story about the prescription plan? With savings automatically built in, it's where a family of any size can feel confident the cost of their medication won't hold them back. Go to CMK Co Stories to learn how CVS Caremark helps members save just by being members. That's CMK Co Stories.

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[Tim Stanwick]

You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple Car, CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Chris Whalen]

I've been driving all night, my hands.

[Felix Gillette]

Wet on the wheel.

[Podcast Advertiser / Announcer]

Come on, let's take a drive.

[Felix Gillette]

But drive.

[Carol Massar]

Yeah, drive.

Can you just focus on driving?

[Chris Whalen]

Focus on the road.

[Podcast Advertiser / Announcer]

Why would I drive fast?

[Carol Massar]

Because I'm asking you to take your.

[Chris Whalen]

Place in the drive.

[Carol Massar]

Just drive, baby.

[Tim Stanwick]

This is the drive to the close.

[Podcast Advertiser / Announcer]

But we're going.

[Tim Stanwick]

We don't need roads on Bloomberg Radio.

[Carol Massar]

All right everybody, we are just about 80 minutes away from the closing bell on Wall Street. Carol Massar, Tim Stanwick live across Bloomberg platforms here at Bloomberg headquarters. And we're seeing some buying as we get closer to the closing bell here. And I'm just looking at what you've got an S&P 500, though that's still a little bit lower down about, up five points here, but definitely off its worst levels of the session. NASDAQ 100 now 107 points to the upside, Tim. And that's good for a gain of about 4, 10 of a percent.

All right, let's bring in Larry Petkowski is co founder and managing partner and portfolio manager of Good Haven Capital Management. He joins us here in the Bloomberg Interactive Brokers studio. In person, in the flesh, in person.

[Larry Petkowski]

It is nice to be here in the studio with you both.

[Carol Massar]

It's been many years last time.

[Larry Petkowski]

It's been a long time. We do this remotely. It seems like, like the two of you having a lot more fun in the studio than I am in my office in New Jersey. Plus you have the unlimited snacks, you know, in the lobby. So I figured, well, what the heck.

[Carol Massar]

Well, you're welcome anytime. And thanks for braving the cold for, for coming in. Hey, we want to talk about Berkshire Hathaway. We want to talk about Lennar, but I want to talk about the macro economy and sort of what the outlook looks like for, for 2026 and what the market environment looks like for 2026. How are you thinking about the new year and asset allocation?

[Larry Petkowski]

I am thinking that, that the market, there's plenty of pockets of the market that are expensive. The market overall is certainly not cheap. The economy seems okay. And I have the luxury, which I have it a little easier than you folks. You have to, you know, every day, every minute have a somewhat of a thoughtful conclusion on everything. I have the luxury.

[Carol Massar]

Oh, you are so wrong about that.

[Larry Petkowski]

I get the luxury of saying how.

[Carol Massar]

Many people who disagree I don't know know.

[Larry Petkowski]

And nobody's yelling at me if I say I don't know. So I look at the landscape and say it is what it is. But we've been fortunate at Good Haven to be able to, you know, keep turning over rocks and finding things that are undervalued. And I think the portfolio itself is attractive.

[Carol Massar]

Is it still hard to be your value mid cap player? Is it still hard to be a value player? I'm looking at the fund up about 8% year to date. Three year. We're looking at average annual returns of almost 20%, which puts you in the 97th percentile. Five year, about 16% on average annually, according to Bloomberg data, 98 percentile. So longer term Some really outperformance there. But is it harder right now to.

[Larry Petkowski]

Still be Always hard. I mean, it's always hard. And if you want to outperform over the long term, you can't outperform over every period, but it's always hard. But you should enjoy continuing to look under rocks and you should expect, as I've written to people for a long time, you know, there's periods of, of, you know, the three and five year, which you call out, which we appreciate are, you know, numbers we're proud of and you know, we think the portfolio is set up very nicely on a go forward basis. But it's always hard, but it's always also interesting and it's never boring.

[Carol Massar]

Okay, so let's talk about some of these individual stocks. I want to start with Lennar and the opportunity that you see with Lennar. It's one of the biggest holdings in the fund. Why are you bullish?

[Larry Petkowski]

Coming out of the great financial crisis, it appears that we have still been undersupplied in single family homes. You can believe whichever statistic you want. Is there 2 million on display? 3, 4, 5. And so isn't that amazing how we.

[Carol Massar]

Went from oversupply and empty homes to under supply.

[Larry Petkowski]

Well, you know, you left brain, right brain doesn't work. There usually go to other extremes and sometimes they stay there. And everybody remembers how bad that period was. But the other interesting thing, you know, there's so many fast changing parts of the economy out there. And at Good Haven we often say to ourselves, wait, what's not changing? What industry might not be changing that fast that I could have a strong view of what it might look like in 3, 5, 7, 10 years. Single family housing. Lenore is the second biggest builder after Orton.

[Carol Massar]

It is a lower price point than some of the competitors.

[Larry Petkowski]

$400,000 price. Yeah, but so are Horton Poltay. A lot of them are in that range. Toll is a million bucks. But the industry and Lenora I think is leading the way is becoming what we would call a better business. Higher returns on capital, higher returns on equity. They have taken what was a historic balance sheet that had a lot of land and they've spun that out and they're now repurchasing shares in a material way. And I think your timing is very good to have me on to discuss this because they report earnings after the close today, right. The near term. We expect to be somewhat tepid. That's an opportunity potentially. So you have a business that now has the ability to earn high returns on Capital repurchase shares, the price earnings multiple, maybe they earn around eight bucks for a little while, but the opportunity is that if they embark and continue to succeed in the strategy they've embarked on, you could imagine earnings at 20 bucks or so a couple of years down the road. As margins return to 20, 24 levels, units are up 5, 6%, you know, a year on average, and the share count comes down.

[Carol Massar]

Why are they in a position to show and get better return on capital, Higher return on capital?

[Larry Petkowski]

What is it specifically? Because they've taken a balance sheet which had a lot of land, and they spun that out into a company called Melrose, and now they've got a leaner balance sheet sheet, which gives them the ability to have higher returns on capital. They're not tying up so much capital in land. Okay. And they also will generate free cash flow throughout the cycle. The industry was a little boom and bust historically when they, you know, they didn't really generate cash except when they shrunk. And so here is, and this is a very well articulated, well thought out plan. Again, the near term should be a bit tepid, but so what? I think you're creating a better business model for the long term.

[Carol Massar]

So. So, Larry, it has more to do with their strategy versus a lower rate environment or people finally getting off the fence and buying homes. It's a little bit of everything strategy.

[Larry Petkowski]

But I think the, the bigger players in the industry.

[Podcast Advertiser / Announcer]

Yeah.

[Larry Petkowski]

Are in different ways embracing becoming better businesses. And the other interesting thing is that if I gave you 100 million bucks and I said go compete with Lennar, with Horton, with Pulte, with nvr, with Toll, I think it would be very hard to do so. I think these, these companies, the new home market has taken share from the existing home market because they have levers to pull. They have leverage in buying supplies and operating and marketing.

[Carol Massar]

So hard to be a new engine.

[Larry Petkowski]

It's hard to not admire where they're going.

[Carol Massar]

Before we let you go, we got to get you to weigh in on Berkshire Hathaway because it's your top holding in the fund. Greg Abel takes the reins next year. You're okay, you're keeping all your shares.

[Larry Petkowski]

We are for sure keeping all our shares. We made Berkshire a very big holding in the COVID era. Our returns since then have been strong. This is a management team and a board with decades and decades of success. I think it is appropriate to assume that Mr. Buffett and the late Mr. Munger, after 60 years of great decision, have made a thoughtful decision on succession. And you have to admire how well it's been laid out and articulated in the selfless way Mr. Buffett is stepping aside and letting Mr. Abel write the letter, be on the podium at the meeting, letting him really, you know, run the show, eat the cheese candy if he wants, let him run the show. So we are we admire how it's been done and we think it's the kind of thing where you should give them the benefit of the doubt that it is a sensible and well thought out plan, which we do well.

[Carol Massar]

Fun to have you in studio.

[Podcast Advertiser / Announcer]

Great.

[Carol Massar]

Yeah. Come again sooner.

[Larry Petkowski]

I will.

[Carol Massar]

We would love it.

And help yourself to any snacks.

[Larry Petkowski]

I'm going to load up my backpack.

[Podcast Advertiser / Announcer]

Old school.

[Carol Massar]

You're not the only one to do that. Old school.

I love.

You're in good company.

I love the popcorn. Larry Pitkowski, Co Founder, Managing Partner, Portfolio Manager, Good Haven Capital Manager Right here.

[Tim Stanwick]

In studio this is the Bloomberg businessweek daily podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live weekday afternoons from 2 to 5pm Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business App. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.

[Podcast Advertiser / Announcer]

These days it seems like AI agents are just about everywhere you turn every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta Okta, you'll turn risk into opportunity. Secure every agent. Secure any agent Okta Secures AI.

[Advertisement Voice]

With Bali from iShares, you get access to both monthly income and growth potential in one simple ETF. It's the best of both worlds. Discover Bali iShares Large Cap Premium Income Active ETF iShares the market is yours. Visit www.ishares.com to view perspectives for investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Risks include principal loss and the use of derivatives, which could increase risks and volatility. Monthly income is not guaranteed. Prepared by BlackRock Investments, LLC.

[Podcast Advertiser / Announcer]

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[Carol Massar]

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[Podcast Advertiser / Announcer]

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[Carol Massar]

So avoid all that shopping chaos and.

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