Ed Elson (3:25)

Crazy two weeks. Yeah. We want to, we want to get your thoughts on it. I mean, we have this rejection or. Warner Brothers is urging shareholders to reject Paramount's bid of $108 billion. They say go with the Netflix deal, which is actually less money, $83 billion. I guess the big question to start off is why?

Rohan Goswami (3:47)

Well, it depends on how you slice it, right? So yeah, Netflix's total number, 83 billion, it's lower. But that's because they're only interested in part of the company, the best part company, most would say, which is the streaming and studios business. That's HBO Max, that's the movie studios. They don't want the linear TV networks. That's cnn and really a grab bag of pretty terrible cable channels. But Paramount does. And that's why Paramount's been able to claim that they have the higher bid, where things get a little fuzzy. And this is what, as we've reported, as others have reported, has worried Warner Brothers the entire time, is how they're valuing that business and how they're paying for that business. Which is unusual, Right. We think of Oracle, we think, well, maybe not lately, but we generally think pretty high flying stock. Certainly an incredibly wealthy family. And yet, as the American public knows, they're tapping a lot of unusual sources of financing here, right? We're talking about sovereign wealth funds, Apollo's in the mix on the debt, bank of America, Citi, you know, a big consortium of lenders and sponsors, which kind of raises the question, how stable is their financing? And as it turns out, yesterday's news, Jared Kushner's Affinity pulling out. The answer may be not very.

Ed Elson (4:54)

Yeah, why is Jared Kushner pulling out? That seemed to be an important element that a lot of people were interested in, especially because of his relationship with the president, who is his father in law. Do we know why he pulled out?

Rohan Goswami (5:09)

So they've publicly said, right, this is from a spokesperson for Affinity, that they believe in the bid. They think Paramount can take this all the way. But they've also said, right, quote, the dynamics of this investment have changed since October, which is when this bidding war sort of kicked off. But what's funny is if you take a close look at the actual situation, nothing has changed at all, right? This offer that Paramount made is the exact same offer. That's to say, this offer that Paramount made publicly is the same offer it made privately to Warner directly before they sort of tried to go hostile. So nothing has changed, except for one or two pretty crucial things. One, Kushner's fund is already facing some scrutiny in Serbia over, you know, a local project there, allegations of corruption. But two, the President has made it pretty clear that the Ellisons are not exactly flavor of the month for him. He's taken aim at CBS at 60 Minutes, and yesterday, just two hours before Kushner pulled out, he publicly said, you know, if this is how my friends treat me, referring to the Ellisons, the owners of cbs, then these guys aren't really my friends. And that was a big blow in, certainly in how investors think of this bid. Some investors I've spoken to, I should say, because the Ellisons have privately to investors, publicly, you know, in making their case, the more market tried to imply that they're, you know, they enjoy preferred access to this administration, that they are this administration's preferred bidder, which, of course, as we know, really matters in M and A today. And, you know, Trump's backtrack, certainly Trump's criticism, Kushner's backing out, both those two things happening so quickly, you know, with these guys, nothing is coincidental, right? Everything. Everything is designed to send a message here.

Ed Elson (6:46)

So if I were to get this right, Trump doesn't like the way CBS is talking about him. Cbs, which is now owned by David Ellison, who is the son of Larry Ellison. He complains about that, which presumably leads to Jared Kushner deciding that he needs to be in Donald Trump's good graces, which leads to him backing out of the deal, which leads to Warner Brothers looking at the financing picture of the bid that came from David Ellison saying, you don't have the money, you don't have the financing together. It all does seem kind of downstream of the president. If, if we are to make all of those connections, and if they are indeed true, would you say that Trump is kind of pushing how this went?

Rohan Goswami (7:35)

Kind of. I would say that it's. It's hard to draw a straight line between Kushner's backing out and. Because Trump made that post, fair enough. But I think certainly the timing of those two things happening so quickly is not coincidental.

Ed Elson (7:48)

Right.

Rohan Goswami (7:48)

Kushner could have chose to not publicize this or to wait a day, a week, more than that, to very clearly send the message these two things aren't connected. What is clear, what is very clear, is that Warner's Board was worried about how stable this Ellison coalition was from the jump. Right. They looked at Netflix, which is a blue chip stock. It's got a. You know, the stock has obviously done fantastically since. Since it went public. And they looked at this bid, which is, yeah, a mix of cash and stock biased towards cash. But with a really health, growthy stock like Netflix, there isn't that much risk versus three sovereign wealth funds at the time. Jared Kushner, two banks and Apollo plus them. So it's nine partners, excuse me, eight partners in total. And they said, well, okay, this is like a pretty unsteady group of guys. They don't historically all get along. Do we want to deal with eight counterparties or do we want to deal with one? So I think Warner's board was already worried about this before the Trump of it all, before Kushner pulled out. Now, certainly, I do think that their thinking has been affirmed and validated by Kushner pulling out this announcement. You know, investors and all of us who have been covering this expected this announcement to come this week or at the latest, next Monday. That's the statutory limit. They have 10 days to respond. So that deadline was going to be next Monday. Now, they came out a little early, but they've also been thinking about this basically nonstop since last Monday, right, when Ellison went public. They've had plenty of time to meet, to discuss, to confer. My understanding is that they were always leaning towards rejection because this bid, again, is the same bid that they reviewed a month ago and rejected, or three weeks ago and rejected. So they already knew what was up here. They already had the same problems. The problems didn't go away. If anything, they got worse.

Ed Elson (9:27)

Just looking about, looking towards what may happen in the future, is it possible that Paramount just comes back with a bigger pile of cash? I mean, would that fix the problems if they just said, look, we understand you don't necessarily believe that we have our. Our shit together to put it lightly, but here's more money.

Alice Han (9:49)

Yeah.

Rohan Goswami (9:50)

That would certainly go a long way to solving the question, right? I mean, with any asset, it's how much a buyer is willing to pay. But they're also going to have to do something to show the money is more stable. And what I mean by that is a general expectation that the Ellison family would have to step up more. Now, they're only contributing right now around 12 billion of that 108 billion check. Right. So that's not. That's barely 10%. Right. It's not. It's not like they're really doing this with their chest here. So there is a sense, you know, when I talk to people close to Warren, certainly media executives, they want to see more from the Ellisons. They want more investment. They want less foreign money. Those foreign funds are putting in $24 billion. Right. So they're accounting for a full nearly a quarter of this check. And putting aside sort of the CFIUS issues or the national security issues, that's a lot of money in this deal. Now, certainly the Ellisons are less rich than they were a week ago or a month ago, but they're still the second wealthiest family in the US after the Waltons. There's no question if they want to go and step up a little bit. And there's an expectation from Warner, I think that they should, that they can. So more money and better money is the answer if Paramount wants a chance at winning this out.

Ed Elson (10:55)

Yeah. Larry's money. That's how you win.

Rohan Goswami (10:59)

You know, my dad loves me, but not as much as Larry.

Ed Elson (11:02)

Larry loves David. Yes. Just before you go, how do you think this all shakes out? If you had to make predictions, what do you think we're looking at, let's say, six months from now?

Rohan Goswami (11:16)

I mean, if I'm a betting man, honestly, I put my money on Netflix. They've done a great job in D.C. right. You saw Trump make very moderated comments again for this president about the antitrust issue. He's saying he was gonna have to look at the case and actually look at the facts. So Ted Sarandos, who's the co CEO of Netflix, has done a fantastic job messaging this. My understanding is, at least from the investors I speak to, that Netflix is gonna be making its case to those investors in the coming days, weeks, months. Right. As it tries to close this deal. There's an issue in Europe, right? Of course, there's always an issue in Europe. Europe's not exactly friendly to big tech these days. But there's also a sense from some antitrust experts that I speak to that they're not willing to risk angering the president or this administration by ruling against a merger that the US blesses. So really, if. If Netflix can convince the DOJ to bless this deal, can convince the president to get behind this deal, then. Then they've got it. And that's really frustrating for actors and directors and producers. But the money talks, and they've done a great job in D.C. winning people over already.

Ed Elson (12:18)

All right, Rohan Goswami, business reporter at Semaphore. Rohan, thank you. This was very informative.

Rohan Goswami (12:24)

Appreciate your Time and a pleasure. Thank you.

Ed Elson (12:28)

After the break, an update on China. If you're enjoying the show, give Prof. G Markets a follow. Support for the show comes from Indeed. Right now. There is a talented person somewhere out there who could help take your business to the next level. But finding that person doesn't need to be a grind. Just use Indeed so Sponsored Jobs. It boosts your job posting to reach quality candidates so you can connect with the exact people you want faster and it makes a big difference. According to Indeed data, Sponsored Jobs posted directly on indeed on 90% more likely to report a higher than non sponsored jobs because you reach a bigger pool of quality candidates. Join the 1.6 million companies that sponsor their jobs with Indeed so you can spend more time interviewing candidates who check all your boxes. Less stress, less time and more results. Now with Indeed Sponsored Jobs and listeners of this show will get a $75 sponsored job credit to help get your job the premium status it deserves@ Indeed.com Prof. G go to Indeed.com ProfG right now and support our show by saying you heard about Indeed on this podcast. Indeed.com Prof. G. Terms and conditions apply. Hiring do it the Right way with Indeed. Zoe, the mall's about to close. It's impossible to do anything in 15 minutes.

Rohan Goswami (13:57)

Oh, it's possible, Harvey.

Ed Elson (13:59)

I mean you can switch to T.

Alice Han (14:00)

Mobile in just 15 minutes. So you think you can find your auntie a sweater?

Rohan Goswami (14:03)

Come on, you spent an hour buying jelly beans.

Ed Elson (14:04)

I know. I do love jelly beans.

Alice Han (14:06)

Trust me.

Ed Elson (14:07)

Now you can switch to T mobile in just 15 minutes. Plus you'll get American its best network.

Alice Han (14:10)

No, no 15.

Ed Elson (14:12)

Maybe I should switch to T Mobile.

Rohan Goswami (14:14)

Right now this holiday. Switch to T mobile in just 15 minutes from your phone. Check out in 15 minutes or less per line. T Mobile is the best mobile Network in the US based on analysis by Ooklo Speed Test Intelligence data. 1H 2025.

Ed Elson (14:26)

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Ed Elson (14:47)

Does not replace safe driving. See Ford.com BlueCruise for more details. We're back with Profty Markets. 2025 was a turbulent year for China. The world's second largest economy showed signs of a slowdown with softer retail sales, weaker industrial output, also rising unemployment. At the same time, fixed asset investment has cratered in one of the steepest drops in the country's history. And yet Chinese exports are surging as the country becomes the dominant trading partner for much of the global South. Meanwhile, as the trade war between the US And China begins to thaw, the AI wars are just getting started. Chinese AI companies are churning out cheap, efficient open weight models that are beating American LLMs on many metrics. And also their humanoid robots aren't just conceptual, their robots are actually running half marathons. All told, 2025 was such a dynamic year for China that Prof. G Media decided to create an entirely new show just to cover the country. So as we wrap up the year, we thought it was a good time to hear from one of our favorite guests, the host of the China Decode podcast, Alice Han. Alice is also China economist at Greenmantle. Alice, thank you for joining us. Good to see you.

Alice Han (16:08)

Thanks so much Ed. Great to be here.

Ed Elson (16:10)

So we wanted to bring you on just to get a summary of what's going on in China. I guess let's just start with 2025. What were the big themes in 2025 and how would you summarize China's situation right now?

Alice Han (16:26)

I think if we were to look back at 2025, I think the top line issue is China's record trade surplus. It is now exceeding $1 trillion in the first 11 months of this year. It' I think reach 1.2 trillion by the end of this year. That is a record level of surplus from China, but from any other nation in the history of the world. And it is at a time in which China defied the odds of the tariff wars, the trade wars with the U.S. obviously we saw a lot of front loading at play. But certainly I think when we look back to 2025 it's very clear that China doubled down on its export led growth and as a result exported much more to the rest of the world with huge implications not just for Europe, but for the rest of the world, including Europe, Southeast Asia, Asia, Latin America. I think that is a top line issue. We can go into the other specifics. I would say it's trade surplus. Number two I think is the fact in the second half of the year that we have seen weak fixed asset investment. And as I've mentioned previously, I think this is partly the anti involution drive. It's partly a crackdown on inefficient investment in the system. But I think that this is going to be an ongoing theme and question going into 2026, will China try to upend or reverse some of Its fixed asset investment reliant growth and move towards consumption, which is what it's saying time and time again it wants to do to rebalance the economy. Or will it again in 2026 rely on fixed asset investment? I think 2025 has launched that question out in the air. Will China pivot away from this old model?

Ed Elson (17:56)

One word that I didn't hear in there, which I'm kind of surprised I didn't, is AI. I feel like when we have the China conversation on this podcast, it's mostly revolving around is China beating us on AI or are they not? Where do we stand in terms of AI at the end of 2025? We obviously had deep seek at the beginning. That was way at the beginning. That was in January. Here we are almost a year later. Where do things stand?

Alice Han (18:21)

Well, the reason I didn't mention that, Ed, was because I think this is a multi year progress. Certainly Deepseek at the beginning of the year was a Clarin call. It was a bit of a Sputnik moment in the realm of AI, but I think it goes beyond 2025. I'm excited to see the LLMs that come out of China in 2026, the areas in which Robo severely and strongly advanced in China vis a vis the rest of the world, and the way in which China is using AI in all aspects of the economy in everyday life. I do take your point, Ed, that this is a significant story, but I think it is a story that will take many years to advance and progress. And I am excited to see what happens out of China, I think, in the next five year plan, which is again why I think the next five years will be critical. AI will be front and center. There, I think, will be a consolidation around an AI plus initiative in the economy from the government and in all aspects of governance, economy, society, even ideology. So I take your point, Ed, but I think this is going to be many years in the making.

Ed Elson (19:24)

Yeah, the other photo, I mean, I think the most important photo of the year, to me at least, was the image of Putin and Modi, the Prime Minister of India, Narendra Modi and Xi Jinping standing together in Beijing, laughing together, which was an image that we hadn't really seen in a long time. And it was contrasted to what we were seeing in the US where we were basically flipping off most of our allies, really kind of saying screw you to everyone, it seemed like. And then we had this thesis that we were kind of driving our allies into the arms of China and basically driving everyone into the arms of China. That was the moment, that was the image. Where do we stand on that front at this point? To what extent has China formed partnerships and alliances with everyone else at America's expense?

Alice Han (20:23)

I would be very cautious about this narrative. In many respects, it reminds me of 2017, when Xi Jinping made that famous speech at Davos and people had this feeling in the first Trump administration that this is Pax Seneca, it's the end of US Supremacy and China is ascendant. Not just ascendant, but is the dominant superpower. Fast forward two or three years after that. That and China was really, you know, pillared by the west, not just by Americans, by Australians, by Europeans, as a security threat, as a trade related threat. And I think that it's very hard to shake off that shadow if you're China when you're running. Again, back to my point, massive trade surpluses, record trade surpluses. So I think one article that I'll point to is Emmanuel Macron's great article in the FT that Europe needs to stand up to this. Even though it's going to be structurally very difficult, it's going to be hard for the rest of the world, including India and Russia, I would say, that are finding themselves benefiting strategically from a closer relationship to China in the short term because ultimately these countries are encountering a superpower that is dominating on trade, it's dominating on national security. So I would say that they're convenient bedfellows for now. Certainly in the case of Russia, I think it's a longer term convenient setup. But in the case of India, I would not be surprised if it pivots next year because India understands where its bread is being budded, its relationship with America is critical, and China is not just a strategic adversary, but from a geopolitical, border related standpoint, an adversary of a high degree of order. So I would say that this is going to be an interesting question in 2026. I myself believe that China may have peaked geopolitically this year and that there will be, I think, a narrative that paints China, particularly in trade, in a more negative light. Because again, we cannot escape the fact that China is running these massive trade surplus the rest of the world.

Ed Elson (22:19)

I think it's really interesting, this idea that the trade surplus everyone's beginning to recognize, and perhaps this is to Trump's credit. I mean, Trump was one of the first ones to say that this was a problem, the trade deficit that we had with China. Now, as you point out, Macron is saying the same thing. I believe it was that article where he said the relationship with China is unbearable. So I mean, I guess where is this all headed from a trade deficit perspective? Because it seems that China has decided that this is the way they're going to have influence. They're going to I guess flood other markets with their own products, make every other market reliant on China for mostly goods, probably not services. Where does this go next?

Alice Han (23:13)

Again, I think this is the number one question of 2026. When we dissect the Five Year Plan which will be unveiled in early March, it will be important to note the degree to which China is paying attention to being a quote unquote manufacturing superpower, especially on the high tech leading edge end of things. My own sense is that because consumer demand remains somewhat weak and stagnating, it's going to be hard for me to see a massive write down or slow in export led growth. And as a result I think that China in many respects will have to double down on this manufacturing export side of things. Even although it is saying that it wants to rebalance the economy and understands the geopolitical implications of overcapacity. I think there is a recognition at the highest levels of government in China that overcapacity isn't just an economic issue, but it's a geopolitical issue. To your point Ed, other countries are waking up to this. So I am more in the skeptical camp where I look at China, China's growth model and I and I think as long as they continue to target high growth, which I think they will around 5% next year, they are going to be locked in this trap where they have to rely on this addiction towards export led growth. But again we'll have to see in early March A what is going to be the growth target and B what are they going to unveil in the five year plan that shows either a doubling down on manufacturing or maybe a pivot towards really consumer led growth. But I'm more in the sort of skeptics camp when it comes to this.

Ed Elson (24:47)

When you think about the relationship with the US and China, I'd be interested to hear what your maybe one or two word characterization of that relationship has been in 2025. And then the question is what will it be in 2026? If I had to hazard a guess, it would be not great in 2025, perhaps worse in 2026. What is your view on what our relationship with China will look like?

Alice Han (25:13)

The way that I think about this relationship is that it's a decoupling. Neither side can afford. What we've seen is that hard decoupling, whether it's through tariffs, the blunt instrument of tariffs, or it's through some of these export restrictions, be it rare earths or semiconductors, can be to some extent mutually assured destruction. And so I think we've come from the precipice on both sides, both on the tariffs and trade war side and on the export controls, rare earth side of things, whereby I don't think the escalation in 2026 will necessarily be in those domains, but certainly I think it may be in the domain. On the margin of export restrictions and controls. The Trump administration has shown itself to be, I think, slightly more dovish than Biden and Trump 1.0 on some of these chips. We have to mention the Blackwells for instance, as well as the H20s earlier this that I think in practice will actually mean more, I think control over supply chains. The reason I say that is because I think China has an incentive to maybe welcome some of these degraded black walls, but also control the amount that goes in. On the same token flip side, rather, the Americans have an incentive to control where those chips go to. They don't want them to go to dual use technologies or military grade equipment. So even although there is a dovish tilt, I think in this administration 2.0 version of Trump, my guess in 2026 is that they will exercise some of these export restrictions or controls to again control some of the supply chains of these either critical minerals or critical technologies like semiconductors. We haven't gone into the domain yet of AI. I could foresee that being a political issue in 2026 whereby the Trump administration says we need to restrict not just government agencies but tech companies that are dealing with national security from using Chinese LLMs because it's a national security. I could foresee that being part of the rhetoric and debate in 2026, but I think we have moved away from tariffs as a blunt instrument largely because Bessant as the prime minister, as the chief economic adviser is pushing Trump away from using that instrument. So I think the real lever is going to be these export restrictions and controls.

Ed Elson (27:30)

Okay. Alice Hahn, host of the China Decode podcast, China Economist at Greenmantle. Alice, really appreciate your time.

Alice Han (27:38)

Thanks so much, Ed.

Ed Elson (27:43)

Well, today is December 18th, which means that this is our final episode of Profg markets daily in 2025. We have our regular interview coming out tomorrow. That's with Professor Wolfers. Fascinating conversation as always. Then on Monday, Scott Clare and I will be answering your questions in our annual Ask me anything episode. And then we will be done for the year. We'll be back in your feeds on January 5th where we will be discussing Scott's prediction for the year. So before we end, just a quick reflection on the year from me and some thoughts going into 2026. So 2025 has been kind of a crazy year. And I'm just going to summarize for you everything that has happened, everything that we've covered over the course of the year. So we obviously started with Trump returning to the presidency. Pretty soon after that, we witnessed Liberation Day, which brought about one of the largest stock market drawdowns in U.S. history. I don't know if you remember, then we obviously had Taco, where many of the tariffs were reversed. And then we saw saw the stock market rip back up. We've also seen the explosion of AI. We've seen companies like OpenAI and Anthropic creating even better tools. We also saw the explosion of AI in China with companies like Deepseek that threatened to oust our AI companies. Then we saw the development of the AI bubble. And we watched as these circular deals went from kind of questionable to extremely concerning. We were talking about that, and then suddenly the whole world started to talk about that. And we are still monitoring how that story will play out. We also saw this incredible convergence between Silicon Valley and Washington. We watched as all of the tech billionaires sat basically in a row and clapped for the president during his inauguration. We saw Elon Musk get into politics, which ended, as we predicted, quite badly. I mean, we saw Doge and the chaos surrounding that agency, and then the fact that Doge shut down. And then we saw his fight with the president where he accused Trump of being in the Epstein files. Then we also had the Epstein files, which indeed Trump was in. We saw his letter to Epstein. We saw his pictures of Epstein. And now here we are at the end of the year. We're still waiting for the rest of the files to come out. And that is, that is only scratching the surface. In sum, this has been a really wild year. And as I reflect here, I think one of the more difficult tasks over the course of the year, especially as the host of a news show has been figuring out what actually matters in the world and what doesn't really matter at all. Because this is the big problem in 2025. It's not that people are under informed right now. No one's under informed. In fact, 80% of our waking hours today are spent actively consuming information. That's up from around 40% 50 years ago. So the problem today isn't that people don't know enough. The problem is that people today don't know which things to care about, which things to actually pay attention to. We don't know what matters and what doesn't. Between FIFA giving out peace prizes and the White House coming up with ballroom plans, it's not clear what news is even worthy of our time. And that's something that I've been thinking about this year. So, looking ahead to 2026, when I think about what we will be focused on, we're gonna be focused, laser focused, on separating the signals from the noise. We already tried to do that. But in 2026, we are going to double down on that effort. Because while I can't tell you exactly what will happen next year, what I can tell you is that next year there will be a ton of distractions. There will be a lot of noise. And the only way for us to have a productive and valuable show here, and also the only way to even live a productive and valuable life, is to figure out a way to tune out the noise. It is to figure out what doesn't matter and then to ruthlessly ignore it. And so that's what we're going to do next year. We're going to obsessively cover what matters and ruthlessly abandon what doesn't matter. And my hope is that every time you tune in, you will know, unlike many other programs, that we are not peddling meaningless crap. We are only interested in that which means something, that which has an actual impact in business and in life. So here is to 2026. It's been an interesting year. Next year will be even better, and I look forward to exploring it with you. Okay, that's it for today. This episode was produced by Claire Miller, edited by Joel Patterson and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our research team is Dan Shalon, Isabella Kinsel, Kristen o' Donoghue and Mia Silverio. And our technical director is Drew Burrows. Thank you for listening to Profg Markets from Profg Media. If you liked what you heard, give us a follow. I'm Ed Elson. And tune in tomorrow for our conversation with Justin Wolfers.