Larry Ellison Pledges $40 Billion to Bolster Warner Bros. Bid

Summary

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Bloomberg Businessweek: "Larry Ellison Pledges $40 Billion to Bolster Warner Bros. Bid"

Date: December 22, 2025
Hosts: Carol Massar, Tim Stenovec
Key Guests:

• Molly Schutz (Bloomberg News Media Editor)
• Stephen Flynn (Senior Credit Analyst, Bloomberg Intelligence)
• Kui Nguyen (Chief Investment Officer of Equity Strategies, Research Affiliates)
• Mike McGlone (Senior Commodity Strategist, Bloomberg Intelligence)
• Derek Hamilton (Economics and Urban Policy Professor, The New School)

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Episode Overview

This packed episode dissects the intensifying bidding battle for Warner Bros. Discovery, as Larry Ellison pledges a staggering $40 billion of his fortune to back son David Ellison’s Paramount Skydance bid, directly challenging Netflix’s leading offer. The hosts and guests analyze the financial structures of the competing deals, implications for the media and streaming landscape, debt risk and market reactions, and broader themes in investing from equities, AI trends, to precious metals. Also, the episode explores "Trump accounts" versus baby bonds as mechanisms to close the wealth gap for the next generation.

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Section 1: The Bidding War for Warner Bros. Discovery

(02:29–12:13)

Main Theme

A massive corporate takeover battle escalates as Larry Ellison steps up with personal funds to back Skydance-Paramount’s competing bid for Warner Bros. Discovery, posing a serious challenge to Netflix’s board-approved offer.

Discussion Highlights

• Larry Ellison’s Move: Ellison pledges $40 billion in equity to support the Paramount Skydance bid, aiming to prove financial solidity and offset Netflix’s credit advantage.

  • “He’s putting his name on the line. He’s saying, ‘I’m personally backing this $40 billion in equity financing...’” — Molly Schutz (03:04)

• Financing Structures Compared:

  • Paramount Skydance now boasts Ellison's backstop plus a $54 billion secured credit agreement.
  • Netflix is offering nearly $60 billion in bridge financing and is viewed as the stronger credit (Single A rating, strong cash flows).
  • “Netflix is a much, much stronger credit than Paramount Skydance... plenty of capacity to borrow in the investment grade corporate bond market.” — Stephen Flynn (04:54)

• What’s at stake for the board?

  • Paramount Skydance improving its position with Ellison’s backing.
  • Netflix’s deal has an established investment-grade reputation.
  • Complexities arise, e.g., if Paramount needs to “sweeten” its offer or reconfigure based on shareholder response.

• Trade-offs in Company Structure & Assets:

  • Paramount wants all of Warner Bros., including CNN and TNT.
  • Netflix is only interested in the studios/streaming, with plans to spin off the networks.
  • “Paramount Skydance wants the whole thing... Netflix doesn’t want [the cable networks].” — Carol Massar (09:18)
  • “Netflix will acquire what’s left after the spin-off…” — Stephen Flynn (09:38)

• Deal Value Questions:

  • Paramount Skydance offers $30 per share in cash.
  • Netflix offers $27.75 plus the spun-off networks’ value (hotly debated).

• Who’s ahead?

  • Netflix remains frontrunner (“hard to break a deal once approved”), but the race isn’t over:
    • “Paramount Skydance... really want this. You could argue that they really need this.” — Stephen Flynn (10:32)

• Potential Fallout:

  • If Paramount Skydance fails, they may seek other targets to gain scale.

Notable Quotes

• “Is this Larry Ellison offer now a last ditch effort, do you think, by Paramount Skydance?”
  — Carol Massar (06:45)
• “Paramount’s argument is that, you know, we will be a good steward of this content…”
  — Molly Schutz (08:50)
• “I think we still have a ways to go in this.”
  — Stephen Flynn (10:32)

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Section 2: Stock Market & Investment Trends for 2026

(15:50–22:53)

Main Theme

Analysis of the US and global stock market’s remarkable rally, diversification trends beyond big tech, the risk of over-investment in AI, and investment opportunities for 2026.

Key Points

• Broadening Rally:

  • Shift from mega-cap tech (the “Mag 7”) to mid-caps, small-caps, other sectors.
  • “We’re already beginning to see broadening out within technology itself, but you’re also seeing broadening out to other sectors. Financials are doing well. Healthcare stocks are seeing signs of life now.” — Kui Nguyen (17:31)

• AI Investment Risks:

  • Current massive capital flows may lead to over-investment, but not an immediate risk.
  • Diversification remains the best hedge.
  • “It’s really hard to pick who the winner is. So the best way to invest in this is to stay diversified.” — Kui Nguyen (18:24)

• Interest Rates, Sectors to Watch:

  • Lower rates favor small/mid-caps and financials.
  • The consumer sector is “overlooked”; emerging markets, especially China, are seen as a value play.

• AI’s Role in Startups:

  • Lowers barriers to entry, especially for new codebases and idea implementation.
  • “What I’m hearing from people is that … coders that know how to use [AI] are becoming much more productive.” — Kui Nguyen (21:33)

Memorable Quotes

• “Short term interest rates are coming down. Everything else is commentary.” — Alexis (19:42, paraphrasing Kui Nguyen)
• “Markets just tend to go up... unless something happens to change that. And what usually happens... is a tightening of financial conditions. We're not seeing that right now.” — Kui Nguyen (19:54)

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Section 3: Precious Metals, Cryptocurrencies & 2026 Outlook

(23:35–30:55)

Main Theme

A deep dive into the unprecedented performance of gold and silver, bitcoin’s prospects, and what soaring precious metals might signal for the broader market in 2026.

Key Points

• Gold & Silver’s Run:

  • Gold +65%, silver +100% in 2025.
  • Unusual for equities and precious metals to rally together; factors include geopolitical tensions, inflation fears, policy shifts.
  • “Gold just absolutely loves our new president. Mr. Trump is pushing back on the Fed, potentially creating more inflation… It’s all good for gold.” — Mike McGlone (25:32)

• Market Risks:

  • Gold’s parabolic rise is historically a sell signal; correction possible.
  • “There’s never wrong where you can say take profits when it goes parabolic... I look at gold here as just absolutely frightening for what it means to me.” — Mike McGlone (26:43)

• Bitcoin Outlook:

  • Predicts mean reversion to ~$50,000; overhyped ETF cycle may be ending.
  • “It was one cryptocurrency in 2009 and now there’s 28 million. So the whole cryptocurrency space is a bunch of pigeons versus four doves … the precious metals.” — Mike McGlone (29:06)

• 2026 Forecast:

  • Gold will likely outperform, especially if equities falter.
  • “The ratio between bitcoin and gold... is a good leading indicator and it’s pointing lower. I think that ratio is more likely to go to 10 than … above 30.” — Mike McGlone (30:55)

Notable Moments

• “We’ve never had gold rally at this velocity ... with stock market volatility staying this low. That’s never happened. That to me is fearful.” — Mike McGlone (27:52)

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Section 4: Wealth Building for the Next Generation — Trump Accounts vs. Baby Bonds

(34:43–44:47)

Main Theme

Scrutiny of the proposed “Trump accounts” (government seed investment accounts for children) versus “baby bonds” (targeted government endowment for low-income newborns), with insight from policy expert Derek Hamilton.

Key Points

• Trump Accounts Overview:

  • $1,000 for children born 2024–2028, managed like an IRA/529.
  • Backed by billionaires including Ray Dalio and Michael Dell ($6.25B donation).

• Baby Bonds vs. Trump Accounts:

  • Baby bonds target “endowment” — giving enough capital to actually close the wealth gap and enable asset-building, rather than savings via tax incentives (which favor the already well-off).
  • “The Trump accounts … emphasize savings by way of the tax code... potentially going to subsidize those that have the wherewithal to raise capital in the first place.” — Derek Hamilton (36:42)

• Role of Philanthropy vs. Government:

  • Philanthropy can seed momentum, but sustaining real change requires government commitment.
  • “We shouldn’t be reliant on the charitable contributions of a billionaire for our salvation.” — Derek Hamilton (37:43)

• Connecticut’s Experience:

  • All Medicaid births receive $3,200 at birth; projections of $12K–$18K available by adulthood.
  • Provides a model for other states; more states showing interest.

• Key Policy Concern:

  • Don’t conflate policy’s intent (democratizing wealth) with structures that help only the affluent.
  • “The way wealth is created … is that down payment to put you in an asset that passively appreciates over your life. If … you believe in the market, then you should support people having some seed capital to get into that asset.” — Derek Hamilton (40:48)

Memorable Moments

• “The American people don't want to be at the whim of billionaires.” — Derek Hamilton (42:23)
• “People don't have the wherewithal to save en masse. ... It's not as if they don't love and adore their children... It's wherewithal.” — Derek Hamilton (43:34)

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Timestamps for Critical Segments

• [02:29] — Warner Bros. bidding war: Larry Ellison’s $40B pledge
• [04:25] — Comparing Netflix vs. Skydance financing
• [06:11] — Strategic fit: Paramount vs. Netflix
• [09:18] — What happens to legacy cable assets?
• [11:26] — Paramount’s “Plan B” if deal fails
• [15:50] — Stock market rally broadens, sector trends
• [17:31] — Investing beyond the “Mag 7”
• [18:51] — Over-investment in AI?
• [20:55] — EM equities as diversification
• [21:33] — AI’s role in entrepreneurship
• [23:35] — Gold, silver, and market signals with Mike McGlone
• [26:43] — Is gold’s parabolic move a warning sign?
• [29:06] — Bitcoin’s 2026 prospects
• [34:43] — Trump accounts/baby bonds explainer
• [36:42] — Baby bonds vs Trump accounts
• [39:43] — Review/state of baby bonds in Connecticut
• [43:34] — Why low-income Americans can’t save

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Overall Tone

The episode is crisp, analytical, and grounded in policy-and-market realities — with editors, analysts, and expert guests offering straightforward, jargon-light explanations and plenty of candid, quotable insight on some of the biggest deals, trends, and reforms shaping the economy as 2026 dawns.

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Summary prepared for readers seeking a fast but comprehensive understanding of the debates and market-moving stories featured in this pivotal Bloomberg Businessweek episode.

Transcript

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[Carol Massar]

Radio the fight for Warner Brothers discovery. Guess what? It's not over yet. Not by a long shot. Both Netflix and Paramount Skydance are now strengthening their financial backing for their respective offers. So where do things stand right now? Let's get a check in with Bloomberg News Media Editor Molly Schutz and Bloomberg Intelligence Senior Credit Analyst Stephen Flynn. They join us here in Studio. Thanks so much for being with us. So Molly, I'm just going to start with you. Just bring us up to speed on what Larry Ellison is saying here. I guess he's throwing his own Personal fortune, this deal, to say, hey, listen, we're good for the money.

[Molly Schutz]

That's right. He's. He's putting his name on the line. He's saying, I'm personally backing this $40 billion in equity financing to help son David Ellison, who's the CEO of Paramount Skydance, succeed in their takeover office offer for Warner Brothers.

[Alexis]

But, okay, so I want to bring in Stephen here. Larry Ellison is the fifth richest person in the world with a fortune of around $246 billion. Are there any credit risk implications of his personal guarantee? Or like this, having a billionaire really backstop meaningfully and extend the Runway for deals like these?

[Carol Massar]

Yeah, sure.

[Stephen Flynn]

So it's important you have the backstopping of Larry Ellison. You also have a lot of other funds involved. And importantly, they also have a $54 billion secured credit agreement in place. So there's plenty of financing to support the $30 per share cash offer for the tender offer for Warner Brothers shares.

[Carol Massar]

So Netflix, though, was talking about a bridge loan, right, of nearly $60 billion. How, if you had to stack it up? Because I'm sure the board, right, at Warner Brothers is going through this whole pros and cons list. How do these two. Molly, I'll ask you first. I'd like both your thoughts on this, but how do these two deals stack up next to each other when you're talking about. I'm just talking about the financing of the debt. Is there one that just seems more plausible or more attractive than the other?

[Molly Schutz]

I think the latest offer by Paramount today shows that that was their effort to say, look, we've got the solid footing here. This will help with credit investment grade, Help our investment grade and show that we're serious and that this bid is solid, which Netflix already has an investment grade rating and was seen originally as having a better solid financial footing.

[Carol Massar]

What are your.

[Stephen Flynn]

Listen, Netflix is, is a much, much stronger credit than Paramount Skydance. Netflix has a single A rated balance sheet. They have a large market cap. They have growing ebitda, growing free cash flow, and very, very low net leverage. So Netflix has plenty of capacity to borrow in the investment grade corporate bond market. Now, the company has, you know, single A credit ratings. I believe Moody's has already affirmed their single A rating. I expect the S and P to do the same. So they have plenty of capacity. On the flip side, Paramount, Skydance, they have a bridge commitment in place. So the commitment is there from a number of large banks now, that is secured debt, and they will probably strive for investment grade ratings on that secured debt saying, hey, this comes ahead of the other debt that the company has. And if you use charter as a comparison, you could have a split rated capital structure where you have secured debt that's rated investment grade and certain other debt, whether it's unsecured or security that's inferior to the security provided to the other debt with high yield ratings.

[Carol Massar]

So you can get creative with the way you sort of stack the debt, if you will.

[Stephen Flynn]

Yeah, these get very creative, I bet.

[Alexis]

So, debt structure aside, talk to us about a media tech standpoint. What will it look like if the company merges with Netflix or with Paramount, which makes more sense?

[Molly Schutz]

Well, both, you know, Netflix and Paramount think they're deal makes more sense for Netflix. Obviously it gives them direct access to the library, one of Hollywood's most iconic libraries for film and TV content with Warner Brothers. And that's also what Paramount technically is trying to do. Paramount plus is a much smaller streaming service right now than Netflix. So they're really seeing this deal as a way to bulk them up and allow them to compete better with the likes of Netflix and Amazon and Disney.

[Carol Massar]

Is, is this Larry Ellison offer now a last ditch effort, do you think, by Paramount Skydance? Because we know that Warner Brothers is already saying, listen to the shareholders, we want you, we believe the Netflix is a stronger deal. We want you to vote that way. Do you think we're going to hear yet again from Paramount and what might that be? Might it be a sweetened offer if this doesn't work?

[Stephen Flynn]

Yeah, well, so mid last week, the Warner Brothers discovery board recommended shareholders do not participate in the tender offer. And they listed reasons why. Now what Paramount this morning has done is kind of addressed many of those reasons, particularly given the Larry Ellison guarantee. So I believe Paramount's going to see how many shares they get to participate in the tender offer and if they need to, you know, conversations with shareholders, if they need to raise it to a certain level that they're still comfortable with, I'd imagine that's what they would do.

[Alexis]

Talk to us about the size of this deal because our Bloomberg story said something like it's the biggest in a decade.

[Molly Schutz]

It's definitely one of the biggest media deals in a long time. I mean, it harkens back to the days of Disney and Fox, those kinds of deals. I mean, this is definitely a big deal, both financially and also in terms of what it means for Hollywood and for content production and the creative industries.

[Carol Massar]

At large is the debt financing. Now you think the deciding factor here for, for, for the board of of Warner Brothers. Is this, is this what it's going to come down to for them, do you think, Stephen?

[Stephen Flynn]

No, because I don't think if you have a commitment in place, that's why companies get bridge loans to say that, hey, we're good on the debt part. Look at the financing here. It's, you know, provided by a slew of banks. So that typically provides companies with some comfort that the debt component is going to come through. I think what Warner Brothers was asking for, more comfort on the equity side. Right. Because there's over $40 billion of equity capital as part of their acquisition proposal for the Warner Brothers shares.

[Alexis]

How does Ellison's bet change Paramount's position relative to, like, Netflix, YouTube and Amazon? Does it enable a different operating model or is it just really scale at this point?

[Molly Schutz]

I think it's mostly scale. Yeah. Paramount's offer. Paramount's argument is that, you know, we will be a good steward of this content and this will allow us to. Because, you know, Paramount Skydance is a pretty small operator in terms of, if you're looking at, compared with Disney, Netflix, even Amazon. And so really, having a studio like Warner Brothers behind them and to be able to tap into that library of content would really be a step up for them.

[Carol Massar]

But I guess a big difference between these two offers is Paramount Skydance wants the whole thing, including cnn. Right. Tnt, where Netflix doesn't want that. They want the studios and the streaming service. So what if Netflix does win this bidding war? What happens to CNN and those cable properties?

[Stephen Flynn]

So the way the Netflix deal is set up is that they're going to have Warner Brothers Discovery spin off their global networks business. That includes many of the channels that you described here. And what will be left behind is the studios, which is very valuable, and the streaming business, which is very valuable. And then Netflix will acquire that remaining company. And that's what makes it a little bit tough to compare the valuations here.

[Derek Hamilton]

Right?

[Stephen Flynn]

Because Netflix was offering 2775 per share, mostly cash, but some Netflix stock for the remaining company. So investors had to figure out, okay, what's the per share value in the global linear networks that's being spun off? Paramount Skydance is saying, hey, that's only worth a dollar. Some people are saying, well, that's worth several dollars. And so that 2,775 plus the value of that stub piece is your total value compared to $30 a share in cash from Paramount Skydance for the whole company.

[Alexis]

Who is the. Which one is the front runner here so far, in your opinion?

[Stephen Flynn]

Well, clearly from the board of Warner Brothers, Netflix is right. They accepted Netflix offer. They wrote, you know, put out a letter last week saying that why investors should reject the Paramount Skydance offer. So it's, you know, it's hard to break a deal. It can happen, but it's hard. So it's, it's seems that Netflix, given what's going on so far, is ahead. But something tells you that this is going to last quite some time, right? Paramount Skydance has significant financial backers. They really want this. You could argue that they really need this. They need to gain scale. And so they're motivated. So I think we still have a ways to go in this.

[Carol Massar]

So if this thing drags into 2026, which it looks like it very well might, we know the media landscape's continuing to change. Let's just say, you know what? Paramount doesn't get Warner Brothers. What does Paramount? Do they eye another company? And if so, who might that be?

[Molly Schutz]

I mean, I think that's the. I think that's the big question now. Where will they go from here? David Ellison has said, I mean, despite the fact that, yeah, he really, really does want this company, he says, well, okay, if we don't get it, we'll be able to proceed and we'll still continue to produce great movies and great content and we'll find other ways to grow and to compete. Compete.

[Stephen Flynn]

Let's remember Paramount, Skydance was recently formed, right? You merged. You had David Ellis and Skydance merge with Paramount and they took out the national amusements on the Paramount side. So that company was just formed. They had a plan. They were going to cut costs, grow certain areas and so improve the overall business. And now Warner Brothers would give them a certain amount of scale. If this doesn't work out, I'm sure they could look for other assets for additional scale.

[Carol Massar]

All right, we're going to have to leave it there, but certainly we're going to see how this all plays out. As I guess the board continues to look at these deals through the, through the holiday, I think a lot of folks thought that we can wrap this thing up. Netflix might have thought we can wrap this thing up and I'll celebrate the new Year. But there are still lots and lots of question marks. Our thanks to Bloomberg News Media editor Molly Schutz and Bloomberg Intelligence Senior credit analyst Stephen Flynn for being here in our studio to help break down what really has become a quite complicated scenario for all of these companies. Lots of tangled web. So thanks a lot for being with us.

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[Alexis]

So Alexis, it's been really a stellar year for markets in the US and across the globe. And we've talked about how the S and P is on track to see it eighth winning streak, its longest winning streak since 2018. And already next year is looking quite optimistic. We have sell side strategists really putting their price targets for the S and P out there and the range is around 7,000 to 8,100.

[Carol Massar]

And that's quite the range.

[Alexis]

Quite the range, but it's high. For context, we're around 6800 to 6900 at this point. And it's really hard to make sense of the markets next year because we have a lot of optimism, but we do have a lot of uncertainties as well. And joining us to make sense of of all of that and to give us a look ahead is Kui Nguyen. She's the chief investment officer of Equity Strategies at Research Affiliates. She's with us in the Interactive Broker Studio. So thank you so much for joining us on this Monday to help us make sense of all of this. We're seeing a bull market right now and it's a bull market that's broadening beyond mega cap tech into mid caps and small cap stocks.

[Kui Nguyen]

Absolutely.

[Alexis]

Why does that matter to make this rally durable?

[Kui Nguyen]

I mean, I think that when you have very, very narrow leadership, the danger is always that there's a hiccup in something and whatever it is that's driving that narrow leadership. And we saw that recently with the whole AI story, people wondering whether or not these stocks are overvalued. But I think one of the things that you're seeing is that a lot of other stocks are benefiting as well. So as long as people have a lot of options to choose from that continue to do well, people will stay invested.

[Carol Massar]

Do you have reason to believe we're going to branch out from the sort of narrow stocks we've been looking at driving the rally this year? And by that I mean are we going to break out of AI and start to see some opportunity elsewhere?

[Kui Nguyen]

I think we're already beginning to see that. I mean, if you take a look at what's happened in the markets this year, everybody is focusing on the Mag 7, right? Everybody's focusing on Nvidia, on Alphabet. But if you really think about it, Nvidia was not the top performing chip stock this year. Nvidia is up something like 36%. And you have intel, remember that stock from long ago that's up 82%. So I think you're already beginning to see broadening out within technology itself, but you're also seeing broadening out to other sectors. Financials are doing well. Healthcare stocks are seeing signs of life now.

[Alexis]

So there's massive, massive capital flowing into AI. In the short term we're seeing who are the winners, but not everyone will be a winner longer term. So how real is the risk of over investment in AI? Because already we have investors kind of feeling jittery that they it might not be paying back, at least in the short term horizon.

[Carol Massar]

Sure.

[Kui Nguyen]

I mean I think that one of the things that we see is that the companies that are investing in AI are really strong cash flowing companies. They're very, very strong. There is some debt behind this, but it's not an overwhelming amount of debt. So I do think that there is the risk of overinvestment. I don't necessarily see a real risk quite yet, but also I think it's really hard to pick who the winner is. So the best way to invest in this is to stay diversified.

[Carol Massar]

We're most likely going to be in an environment of lower interest rates. I mean it looks like the market is banking on two interest rate cuts. As long as we don't get an interest rate hike anytime soon, we might very well see these financials do well, these smaller and mid cap stocks do well. But is there an area of this market you wish was seeing a little more love that isn't that maybe, you know, should be and that people are just overlooking?

[Kui Nguyen]

So one of the areas that I do think is highly overlooked is really the consumer sector. Right. So you see a lot of the large names, consumer discretionary, doing poorly. I mean Walmart's done well this year, but you see a lot of companies not doing so well. You see Target for example, a beloved American brand. And again there the issues are changing consumer taste and whether or not they can keep up.

[Alexis]

I love the you're, you're in your talking points. The very first one is short term interest rates are coming down. Everything else is commentary. Is that really the story right now or investors already looking past beyond the rate cuts?

[Kui Nguyen]

No, I think that if you take a look at what drives markets, markets just tend to go up. They stay with whatever momentum it is unless something happens to change that. And what usually happens, what's usually necessary to change that upward trajectory that we're in right now, is a tightening of financial conditions. If you take a look at bear markets, meaning they go down 20% over a certain period of time. They're always preceded by some sort of tightening financial conditions and we're not seeing that right now. I do think that lower interest rates are benefiting US equities, but they're also benefiting non US equities, namely emerging markets as well. So I think investors are going to have a variety of opportunities to choose from next year.

[Carol Massar]

I'm really glad you talked, you brought up em, because emerging markets have sort of been the sleeper story I think of the year. They've, they've really done quite well and even Europe has sort of come along for the ride. So if you're looking for opportunities to diversify outside of US equities, where in particular might you be looking next year?

[Kui Nguyen]

Oh, I definitely think emerging markets are exciting, particularly China. I mean China got so cheap. And what you're seeing there is yes, there are difficulties with growth, but I think you have a lot of world class companies there. A lot of money was flowing out of it. Now money is flowing back in because of the valuation opportunities. We're also seeing more of a stabilization of the trade situation. All of these things really do help emerging market.

[Carol Massar]

It's a lot.

[Alexis]

And I want to go back quickly. You've pointed out that AIR is already changing the investing landscape, especially in the startup world. How does AI lower the barrier to entry compared to other tech super cycles?

[Kui Nguyen]

So I think AI is just the most recent tech super cycle. I mean, if you really think about the tech bubble, you know, the late 90s, if you wanted to throw up a, an e commerce company, pets.com for example, you had to go out and invest a lot in computers and servers and bandwidth. It was very, very expensive to have a startup. The cloud came along and essentially you could just license a lot of this stuff out, right? It became much, much more cost effective or less capital intensive to have a startup. And I think now what you're really seeing is on the software side you're getting a lot of benefit from, from AI. What I'm hearing from people is that if you wanted to start up a company like Uber or Lyft, you need a lot of coders, right, to create that entire code base for you. But now with AI, all coders are becoming, or at least the coders that know how to use it are becoming much more productive. You need to hire far fewer people. That said, it's most beneficial when you have a new code base, right? So if you have an existing code base it's not nearly as productivity enhancing. And so in some ways, I think one of the things that we're seeing is that I wouldn't be surprised if there's a lot more new ideas being put into play in the venture world, a lot more disruption that happens in technology.

[Carol Massar]

All right, we're going to leave it there. Kwei Nguyen, Chief Investment Officer, Equity Strategies with Research Affiliates thanks for coming by and giving us your thoughts on where the market is now and headed into the new year.

[Host/Announcer]

Stay with us. More from Bloomberg businessweek Daily coming up after this. This is the Bloomberg Businessweek Daily Podcast. Listen live each weekday starting at 2pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30.

[Carol Massar]

Things are shaping up to be sort of a festive end, if you will. Isabel to the year for the markets and a solid start to the new year. We have the stocks now, US equities erasing those December losses. The S and P set for its eighth straight month of gains.

[Alexis]

It seems like the Santa Claus rally is really shaping up and Santa Claus rally is of course the last trading days of December, the five last in the first, two in January. And we have Mark Hackett of Nationwide saying that the Santa Claus rally is typically the best two weeks of any trading year since 1950. So as you said, it's great water cooler chat and I will definitely use it on December 24, even if, even.

[Carol Massar]

If trading volume is thin because we know lots of participating also just want to throw in their fund managers are maintaining record low levels of cash right now. So they're really putting money to work in this market. Markets are still banking on two rate cuts next year. And we had Fed Governor Stephen Myron on Bloomberg Television earlier today and he said the central bank actually risks sparking a recession unless it continues lowering rates next year. Though we know he has, he has a bias right now to lowering rates in a more aggressive way.

[Alexis]

So the bullishness is really there. But inflation remains above the Fed's target, unemployment has ticked higher, and the heavy spending has yet to be realized. So I feel like there's also uncertainty even if all the bulls here are like, rah, rah, rah, 2026 is going to be great.

[Carol Massar]

There's not a lot of clarity still going going into the new year. Precious metals, by the way, have been on a tear this year. Gold and silver on course for their strongest annual performance since 1979. Gold up more than 65% and silver up better than 100% so far this year. With still a few more trading days left, how much further can they go? Mike McGlone covers commodities for Bloomberg Intelligence. He joins us from the Bloomberg Miami bureau. So Mike, first of all I've got to ask because we have seen all year long stocks rising in tandem with precious metals. This normally doesn't happen. Explain to us why that phenomenon is happening this year if you can.

[Mike McGlone]

That's the harder question. Why It's a key thing is gold is basically grabbing alpha in a significant way. So it's up almost 70% on the year. S&P 500 is maybe 20%. So it's way over outperforming. I think part of it the main thing is was the main trigger was 2022 Russians invasion of Ukraine and some of the issues with the dollar. But gold just absolutely loves our new president. Mr. Trump is pushing back on the Fed, potentially creating more inflation, inflation running it hot. It's all good and it's volatility is all good for gold. The significance I look for in gold, gold now is looking forward is you mentioned how extended is how stretched it is. History does not really bode well for new longs at these levels. One good example is silver. Its peak, its close in 1979 was 32 and this year's low was 28.

[Alexis]

So we have Goldman Sachs among the several banks who predict that prices will keep rising in 2026. They're issuing a base case scenario of $4,900 an ounce with risks to the upside. Do you see more Runway for growth for gold here or are we going to see maybe a correction soon because we have kept on rising higher and higher up around 60% this year.

[Mike McGlone]

There's an old saying in markets you're supposed to be selling when they're yelling that's the inklings I got in cryptos last year and that kicked in this year. And I'm getting those inklings in gold and silver now. I've been bullish forever but there's never wrong where you can say take profits when it goes parabolic. So momentum could easily carry to 5,000. But a normal correction from such stretched levels, Maybe it's almost 100% above its 60 month moving average. This is the night most since 1979 could easily get gold back to 3500. That's just how it works and has worked in history. So I look at gold here as just absolutely frightening for what it means to me. The implications of gold going up at this High velocity and crude oil going down at this high velocity is potentially global deflationary inklings and potentially signaling a down year for the s and P500 next year.

[Carol Massar]

But wouldn't, I mean I'm looking at sort of everything around the precious metals like geopolitical tensions, the things that would make people sort of run to the quote unquote safety of these precious metals. I feel like 2026 has a lot of geopolitical tension, Mike, I got to tell you. And I think that maybe that could be a tailwind for these methods metals, don't you think?

[Mike McGlone]

Oh well, absolutely. You're describing the current bull market. Things we talked about five years ago, things that were happening. But the bottom line is commodity strategies now is just look at the lessons of history. Once you get to these levels, everybody points out the fundamentals. There's always good reasons. But you have to flip over to your risk management hat and say do you realistically think it's the relative value is probable is good for getting overweight long at these levels and it typically is not. So I'm very concerned. One thing that's not never happened histories. We've never had gold rally at this velocity. Almost a 100% difference versus 60 month moving average with stock market volatility staying this low. That's never happened. That to me is fearful. I think it's going to indicate next year is that stock market volatility 120 day volatility at 11% which will be the lowest since 2017. It's just going to pick up and get to its average next year which is closer to 20%. Not a big deal. But that might seem a big deal when the market corrects. So that's the signals I'm getting. It's just purely frightening.

[Alexis]

We've seen gold backed ETFs seeing inflows rise week over week in the past, I think one month. But you know what has seen outflows? Bitcoin ETFs. And I know you also read about bitcoin and crypto. Can you talk to us about your outlook briefly for next year? What are we expecting in that asset class?

[Mike McGlone]

So I think bitcoin is more likely to revert back to its enduring mean around $50,000 which has been the case on the annual charts since 2021. I don't think it gets much above 100,000. It has the curse of the best backtest in history and the biggest ETF launch in history. And now we're finding out the realization what happens with the great Backtest, usually that means the best is over. The thing about Bitcoin, it was one cryptocurrency in 2009 and now there's 28 million. So it's basically the whole cryptocurrency space is a bunch of pigeons versus four doves, which is gold, silver, platinum, palladium and precious metals. So that to me is what's happening. The bottom line I think for cryptos next year is the stock market absolutely has to go up or that Bloomberg Galaxy crypto index, which is down about 20% on the year, which is the same price since 2021, will probably continue to drop next year. I think the whole space is just getting overhyped over got a little bit too bullish and I'm fearful precious metals are getting a little bit overhyped and a little too bullish now.

[Carol Massar]

So Mike, as you look into your crystal ball for 2026, which precious metal has more Runway in Europe in your opinion?

[Mike McGlone]

Well, I think gold is going to continue outperforming virtually all commodities and versus own stock market. But this time potentially with the stock market going down rather than going up. So the key thing to remember about gold is almost always up, almost everything except maybe treasury bonds when the stock market's going down. And to me that's the biggest risk for next year. It's not in anybody's model. It's everybody's assumes it's the stock market's going to be up 11% which means it better be or we got issues. And the gold. The ratio between bitcoin and gold has been a key indicator this year. It's dropped down about 19 ounces of gold per one bitcoin. That's the lowest level in almost two years. That's a good leading indicator and it's pointing lower. I think that ratio is more likely to go to 10 than anywhere get above 30.

[Carol Massar]

All right, good stuff. Something tells me we're going to be talking to you a lot, Mike McGlone, in the new year. We always appreciate your insights. Bloomberg Intelligence senior commodity strategist Mike McGlone. They are joining us in sunny, warm Miami as we are here in cold chilly please New York City.

[Host/Announcer]

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[Carol Massar]

YouTube. I want to switch gears and talk about these Trump accounts, right? They're part of the president's one big beautiful bill. They're designed to create these investment nest egg for kids. And here's how it would work. Isabel. Right. So children born now through 2028, they're going to be given $1,000 from the federal government into an account that would act sort of like a hybrid IRA or 529 plan because there are some tax consequences here. It would be managed by parents until the child turns 18. And we know they have the backing of some deep pocketed investors like Ray Dalio. Michael Dell and his wife are donating six and a quarter billion dollars to help this fund to help fund the Trump accounts. And Michael Dell spoke earlier this month with Bloomberg's Caroline Hyde about his.

[Mike McGlone]

Donation. We do think that this will be catalytic and that more philanthropists and companies will, will join us over time and again. This is a platform for the.

[Host/Announcer]

Future of these children long.

[Mike McGlone]

Term. We think, you know, you know, investing these accounts in The S&P 500 is a very good way, way to.

[Carol Massar]

Compound over time for these children. Well, our next guest says Trump accounts, they're not the answer when it comes to closing the wealth gap for the next generation. Derek Hamilton is a Henry Cohen professor of economics and urban policy at the New School. He's also the brainchild behind baby bonds. Connecticut was the first state to implement this concept just a couple of years ago. And since then we've had more states come on board, including California. I also believe Washington, D.C. and Derek Hamilton joins us here in studio. Derek, thanks so much for being.

[Derek Hamilton]

Here. Thank you. Glad to be on the.

[Carol Massar]

Show. Yeah, especially ahead of the holiday, I guess there's a lot to dig into. But let me just start with what is, I guess the main difference between baby bonds and the Trump accounts? Because on their face there seem to be a lot of.

[Derek Hamilton]

Similarities. Well, conceptually, the goal is to provide access to asset building by way of having some financial capital so that you can get into asset building. The problem with the Trump accounts versus baby Bonds is baby bonds. Focus on what actually is the problem. It's one of endowment. Essentially the way wealth is created is wealth begets more wealth. It's having a large enough nest egg so that you can get into a home or get into an education without debt or to be able to have some capital to start a business. The Trump accounts essentially emphasize savings by way of the tax code. So in an ironic way, it's structured in a way that's potentially going to subsidize those that have the wherewithal to raise capital in the first.

[Alexis]

Place. What does it signal to you when billionaires step in to fund youth wealth building programs? Are we seeing it as innovation that government couldn't achieve on its own, or is it just a quiet shift away from maybe public.

[Derek Hamilton]

Responsibility? I mean, I applaud philanthropy, the desires to be vanguards and trying to create pathways to democratize wealth. However, the mechanism in this case is only feeding into a bad system. The federal government should not be ultimately subsidized for their duty. We shouldn't be reliant on the charitable contributions of a billionaire for our salvation. But what a billionaire can do is provide demonstration, be a catalyst, seed some momentum so that we ultimately can have them invested. And you know, I'll make one other quick point which is when you think about the $6.4 billion, which is a huge number, it requires context. So two context points. One is it's contextual to that $4 trillion big beautiful bill that was referenced at the beginning of the segment. So if we're thinking about the ways in which the federal government is spending wealth towards advancing access to asset building for the population, that 6.4 billion deserves context to that $4 trillion, which is from our public leg rest. And in the other context, about 80% of children between the ages of 0 and 10 will have some access to this donation, this legresse. But if you were to disaggregate that, that amounts to about $250 per child, right? So essentially that's not going to be the catalyst. So it's distracting a little.

[Carol Massar]

Bit. You know, some countries have done this pretty successfully, right? I know. I believe Germany is among them. They'll give an allowance, a monthly allowance to parents for kids of a certain age. Some countries use it as an incentive to get people to have more children. It's now these baby bonds have been implemented in, let's say Connecticut since 2023. I believe they were the first state. How are things going? It's still in the infancy there, but how are things.

[Derek Hamilton]

Going? I mean, Connecticut is a really great model and it's a state, so it doesn't have the capacities of the federal government. But here you have a scenario with every Medicaid birth will receive $3,200 automatically at birth. And the treasurer is managing that money in a collective fund in an astute way with responsible investing, where the projections are that the children, you know, low income children born as part of a Medicaid birth from rural to urban areas throughout the state will have about 12 to 18,000 as some seed capital to begin wealth building. And then, you know, other examples would be the UK did it, they didn't fund it to the extent that we would call for in the US and then here's perhaps even the best counterfactual. The United States has done similar programs with the GI.

[Stephen Flynn]

Bill. That's right.

[Derek Hamilton]

Right. We have a history of doing.

[Alexis]

This. Do you think that programs like these have an influence to affect economic policy long term? Or do you think they create risking a system that just really hinges on, to your point, philanthropy of maybe rich individuals or big.

[Derek Hamilton]

Corporations? And that's exactly why it should be a government responsibility. And here's the point. This is not charity, this is an investment. So if you believe in the market, if you don't believe in the market, regardless, again, it's pretty simple. The way wealth is created, it is that down payment to put you in an asset that passively appreciates over your life. So if you are authentically somebody who believes in transaction in the market, then you should support people having some seed capital to get into that asset. So again, it's a question of endowment, not savings.

[Carol Massar]

Behavior. Is there anything about the Trump accounts that you actually like? I mean we have to, I think we can agree that you know the concept, I mean the heart's in the right.

[Derek Hamilton]

Place. Well, I mean that's just it, the attention on trying to make sure that we democratize access to wealth, that's a good thing. But the structure, the 529 structure, we have less than from that where, you know, 529 saving, tax provision savings so that we can provide access to college for our children. The bottom half percent of earners essentially don't participate. Only about 2.5% of Americans participate. So there are really good ways we can do it. My fear is that we co opt a good idea. It's a really good idea. We have pathways to really facilitate a good value for America, our American economy, which is inclusion. We just got to work on.

[Alexis]

The delivery to Alexis, point. There's the idea of corporation match welfare embedded here. Are there any upsides to that? What should policymakers be cautious.

[Derek Hamilton]

About? I apologize for laughing, but the phrasing of corporate welfare, again, I take the Dells as being not disingenuous but really trying to be supportive. I think there's better ways, there's more catalytic ways. They could spend that $6.4 billion. But at the end of the day, the American people don't want to be at the whim of billionaires. And then there are other aspects as well that we should be leery about, which is state private partnerships for which we have to be concerned about the potential for grift when we're relying on billionaires to provide economic security for the American.

[Carol Massar]

People. So if, if we're thinking, you know, look, a lot of folks are not going to take advantage of a 529 plan. Is that because they don't have the money to do it? Is that because they don't know they exist? Is that because a lot of Americans cannot be left to their own devices to save for themselves? I mean, think about how, you know, some of our programs like Social Security came to be. It's because it was supposed to be some sort of a safety. So is it a good idea for the government to put aside some money for folks who might not otherwise do.

[Derek Hamilton]

It? I mean, that actually is a great idea. But just how and the mechanisms by which we do it, that's the problem. So it is the case that clearly we have an affordability crisis in this country. So people don't have the wherewithal to save en masse. And that's a big reason why people don't participate in the 529 council. Not as if they don't love and adore their children and desire for them to have savings. It's wherewithal. And then the other big point is for those that have a mass wealth in America, it's not active savings that's driving that. And by active savings, income that we actively save, it's passive savings, it's that down payment. It is critical for young adults to really have some capital so that they can get into that automatic vehicle to.

[Carol Massar]

Save. All right, we're gonna have to leave it there. But it's not the last we've heard of baby bonds. We'll see if they come into other states. Are they coming to other states soon? Do we know? Is this in the.

[Derek Hamilton]

Pipeline? Lots of momentum at the state level. There are demonstrations. I have to give a Quick Plug, which is at the Institute on Race, Power and Political Economy. That's race power policy.org we have a whole list of where they are flourishing, the various states, the demonstrations where this idea is incubating across the United.

[Carol Massar]

States. Derek Hamilton, University Professor Henry Cohen, professor of Economics and Urban Policy at the New School thanks so much for coming in, especially ahead of the holiday.

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