Imagining a Musk-Led TikTok; Israel and Hamas Agree to Ceasefire
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Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. We're tracking a couple of stories this morning, including news of an Israel-Hamas ceasefire. And in a moment, we'll be joined by Dr. Ariel Cohen of the Atlantic Council. And of course, we'll be looking at markets. Our guest today is Ross Mayfield of Baird Private Wealth Management. We'll check in with him a little later on. But first, the future of TikTok in the U.S.,

We go to Tokyo and join Catherine Thorbeck. She covers tech for Bloomberg Opinion, and she's been writing about the potential of an Elon Musk takeover of TikTok's U.S. operations. Catherine, thank you for making time to chat with us on this story. I think we've got to set the scene up front. TikTok, as we know, is facing a ban in the U.S. beginning Sunday. That's unless the Supreme Court were to intervene on a new U.S. law. That law requires the app TikTok.

to basically sell itself by the 19th, otherwise face a ban. And earlier this week, Bloomberg reported that the Chinese government has even discussed the possibility of a sale to Elon Musk. What is your take on a potential Musk ownership?

Good morning, Doug. So I think Elon Musk swooping in here is not as crazy as it sounds at first. You know, he's long said that he hopes to create an everything app and incorporating TikTok into X, which is formerly Twitter, would take him a step toward that goal. It would also unlock a potential goldmine of training content for his AI startups.

And, you know, he's a close ally of the incoming president. But I think more importantly for him, even if it doesn't necessarily make business sense for the world's wealthiest man to sort of swoop in here, I think that this would really help him cement his influence over American discourse, which, you know, he's definitely done on X.

That said, I also think it was really interesting that these sort of rumors came from Beijing, came from China, because in the past, any sort of talks about a TikTok sale was sort of a nonstarter. You know, Beijing a couple of years ago actually tweaked its export laws so that, you know, it couldn't TikTok algorithm and TikTok couldn't be sold to a U.S. buyer. And in the past, they very forcefully signaled that they're very opposed to this, you know.

So I think the fact that Elon Musk's name was now floated around as a potential buyer, I think it's interesting for a number of reasons, including the fact that Elon Musk is one of the few U.S. business leaders that actually still has exposure to China's market through Tesla, his electric vehicles company.

So I think there's so many layers here. It's obviously not a done deal. And there's a lot of things still up in the air and a spinoff would be very messy. But I think that this isn't as sort of out of left field as it might sound at first. You write that in the past, China has signaled a complete rejection of the sale. And they even went so far as and when I say they, I'm talking about officials in Beijing tweaking export laws that

as a display of fierce opposition. And this kind of goes to the algorithm, does it not? Which is really the goal that TikTok has kind of built around. That's right. So in the past, you know, as I mentioned, sort of discussions about selling TikTok to a U.S. buyer were sort of a non-starter. And I think part of that is, you know, Beijing doesn't want to sort of lose face here or feel like it's been forced into this. And obviously, you know, I want to be sensitive. You know, TikTok,

and ByteDance are ostensibly private companies. But with all sort of these business dealings in China, Beijing ultimately does have some sort of say. And that does come down to this export law that they tweaked back when talks of TikTok being banned in the US first sort of emerged back in, I think it was 2020 or Trump's first term.

So I think it's interesting now that Elon Musk has sort of emerged as this potential broker. But I think it's interesting because, you know, Beijing might feel like they still might be able to wield some sort of power over Musk because of his business dealings in China. So Elon Musk sort of walks this very fine line where he's a close ally of Trump. But at the same time, his business empire and especially Tesla is very much

tied up in China and a lot of other U.S. business empires are not in that market, whereas Tesla recently opened a big plant in Shanghai and actually has access to the Chinese market and has been that's been a source of revenue for Elon Musk.

So I think it's interesting that they may be open to some sort of sale of TikTok if Elon Musk is involved. At the same time, it's not totally clear that Elon Musk even knew about this before this Bloomberg sort of bombshell reporting dropped earlier this week. You put your finger on something I think it's worthwhile pursuing, which is data collection. I mean, this is certainly one of the pushbacks, you know, that for Chinese ownership, right, that you wouldn't want a Chinese entity to be in control of vast amounts of data on American consumers.

That wouldn't change. Ostensibly, it wouldn't change under a Musk ownership, would it not? Does that raise any red flags?

So I think it's really interesting because a Musk takeover would assuage Washington's fears about Beijing potentially having access to vast troves of U.S. user data and, you know, potentially being able to influence content, which is, you know, what the big national security concerns are. But at the same time, the tradeoff here seems to be that Elon Musk, the world's wealthiest man, might be able to, you know, influence content on TikTok, and then he would be able to collect all this vast data on users. And so he might not be sort of a foreign adversary, but I

I think it kind of also exposes that, you know, it's still, you can still use money and power to sort of buy this sort of social media influence campaigns. And I think, you know, if you look at what Elon Musk has done to X,

A lot of users have actually left X since he took over more than two years ago. They've decamped to Meta's threads or this upstart Blue Sky. And I think a lot of people were feeling like Elon Musk has made changes to X, formerly Twitter, that sort of put his own tweets at the top of people's feeds. And he's sort of...

he's sort of been able to tweak Twitter's algorithm, X's algorithm, so that he really has a huge influence over the platform and he really helps drive discourse. And I think a lot of TikTok users are like, we don't necessarily want that. We don't see that as a win, even if it saves the app from being banned in the US.

It's interesting, too, because we're getting indications that not only TikTok creators, but TikTok users as well have been flocking to other Chinese social media platforms. And it's curious to me because the law in China is that if you're a Chinese company and you're collecting data, you must, if asked, turn that data over to the Chinese government. So the same issues for these other social media platforms would apply as they have applied to ByteDance. Is that not true?

So I think that these TikTok refugees, and a lot of them are flocking to this app called Xiao Hongshu or Red Note in English. And I think that this sort of movement is really interesting because it started as sort of a protest of, you know, if you're going to ban TikTok, we're all going to go to this other Chinese owned app. And we're going to sort of poke fun at, you know, these sort of whack-a-mole approach to app regulation and singling out TikTok.

But at the same time, I don't think it's going to last. But I think that there's been a really interesting sort of cultural exchange happening on Xiaohongshu right now, which is, you know, Chinese teens and American youth are sort of interacting online for the first time and, you know, sharing photos of their cats with each other, helping each other with, you know, English homework. Chinese people, excuse me, American teens are learning Mandarin Internet slang. And I don't think any lawmakers in Washington could have expected this.

But I do think it's sort of you're absolutely right that the sort of data collection and privacy and national security risks that Washington is so concerned about absolutely apply to Xiao Hongshu, if not more than TikTok. But I think that these sort of TikTok refugees, these TikTok users and creators that are flocking to this app are sort of, you know, letting Washington know that, you know, this this sort of

approach of just singling apps out one by one doesn't actually, in the absence of sort of comprehensive data regulation, there are ways around this. And I think that they're trying to sort of protest that, if that makes sense. It does indeed. Catherine, it's always a pleasure. Thank you so much for making time to chat with us. She is Catherine Thorbeck, Bloomberg Opinion columnist, and you can read her latest piece right on the Bloomberg terminal, Elon Musk won't save TikTok. Catherine, joining us from Tokyo.

So we turn our focus to the Middle East. Israel and Hamas have agreed to a ceasefire. This brings a temporary halt to the war in Gaza. Now, the ceasefire will begin on Sunday and last six weeks. Thirty-three hostages captured by Hamas after the attack on Israel back on October 7, 2023, will be released.

Israel will withdraw from populated areas of the Gaza Strip and release hundreds of Palestinian prisoners. For some reaction, we're joined now by Dr. Ariel Cohen. He is Senior Fellow at the Atlantic Council's Eurasia Center. Ariel, thank you so much for making time to chat with us. Can I begin by just getting your reaction to what has unfolded over the last several hours? Indeed. These were very tough negotiations. I think it's

in the big scheme of things. Israel came out as a losing side. It will be releasing 1,640 Hamas and allied terrorists. Don't forget, besides Hamas, there's Palestinian Islamic Jihad, a subsidiary of the Iranian Islamic Revolutionary Guard,

core organization controlled by Tehran. So their terrorists will come out as well. And not all of them will go to Gaza. Some of them, hundreds of them, will go to the West Bank, Judea and Samaria, where they will be the leaders of the next iteration of this terrorist campaign against Israel. How would you assess the probability that this ends the war? Or is it something that we should just be grateful for in the moment and the risk of war still exists?

You know, in Judaism, there is a principle that one who saves one's soul as if saved the whole world. And this is what has driven the Israeli unprecedented concessions. Israel is doing it for 40-plus years. When I was a young journalist in Israel, they did that. I was strongly against it.

IT'S THEN AND I'M AGAINST IT NOW. I'M OF COURSE IN FAVOR OF RELEASE OF THE BABIES AND CHILDREN, OF WOMEN WHO WERE RAPED AND MAIMED, OF MEN WHO WERE TORTURED. HOWEVER, RELEASING OVER 1,500 TERRORISTS

And allowing Hamas a free reign in Gaza is courting disaster in the future. We have an outgoing administration in the U.S. President Biden is stepping down, obviously, and President-elect Trump will be inaugurated on Monday.

Now, President-elect Trump's envoy was involved in some of these conversations. Both the Biden administration and the incoming Trump administration have taken some credit for this deal. Would you like to weigh in on who you believe had greater influence in getting this deal done?

We have a sitting president. I think Biden went out of his way to force Israel to provide concessions to Hamas. Having said that, I've been in Israel a couple of times since the tragic incident

and terrible attack of October 7th, 2023. And there was a lot of domestic pressure. There's also pressure on Netanyahu to launch a Judiciary Commission of Inquiry under the Israeli law for that, an independent commission as to what happened

on October 7th, and this outcome will be yet another step to force Netanyahu to appoint such a commission. It is, in my view, absolutely necessary to get to the bottom of a tremendous strategic failure for the history books, just as a victory

The initial victory against Hezbollah with the attack in September is for history books and will be studied in military academies. The collapse of deterrence in October of 23 and the lack of advanced deterrence.

warning and knowledge in Israel will be studied in the future all over the world. Ariel, so far we have yet to hear from Prime Minister Netanyahu directly, although the office of the Prime Minister did release a statement indicating that several details

still needed to be worked out and the deal hadn't been finalized. Having said that, Qatari and U.S. officials went ahead and declared AC's fire anyway. So when we do hear from the prime minister himself, what do you think he will have to say? He is going to say that this was a very hard deal for him, for Israel.

And, you know, there's always a hope for a better tomorrow. But leaving a jihadi, extremist, Islamist organization, military organization that openly declares that its goal is not only the extermination of the straight state of Israel, but murdering of all the Jews around the world. It's in their...

founding document online, and you just declare a ceasefire after many, many ceasefires that Hamas violated and has the Islamic jihad on its side. These are terrorist organizations are a

a part of the global Islamist militant network, including al-Qaeda, including ISIS, and many other organizations like that, that murdered Americans by thousands on 9-11, that keep killing people all over the world. And now Israel is releasing more of their fighters, expecting what? Expecting a miracle that these people will convert and will be

pacifists all of a sudden, unfortunately, there will not be. And this will just extend the warfare. After that, it is necessary to bring forces to Gaza that can restore peace and leaving Hamas in place defeats that goal. Ariel, thank you so much for sharing your perspective. Dr. Ariel Cohn is senior fellow at the Atlantic Council's Eurasia Center, joining us here on the Daybreak Asia podcast.

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Where retail inflation cooled in the month of December, core CPI, which excludes food and energy costs, increased by two-tenths of one percent. Now, that reading was below forecast, and it triggered a rally in both stocks and bonds.

Data compiled by Bloomberg show today's combined market reaction was the best up day for a CPI release since October 2023. Joining me now for a closer look is Ross Mayfield, investment strategist at Baird Private Wealth Management, joining from Louisville, Kentucky. Ross, thanks for being with us. One of the things that I was struck by is how aggressively the market began betting that we're going to get a Fed rate cut sooner rather than later. What's your expectation here?

I tend to agree with you. You know, there is a lot to like in the CPI print, but it didn't I wouldn't have expected on first glance that it would catalyze such a strong day in the equity markets. I think that probably this was more

The fact that maybe markets had moved too far in the other way, pricing out Fed rate cuts, worried about the move higher in long-term yields. I think the Fed is still in cutting mode. One to two this year probably makes sense. And I think that now we can see in the Fed fund futures that we're back to about expectations for two cuts. So I think this was more about getting back to level from an overcorrection and less about the actual report, although it was

you know, quite good for folks concerned about a second wave of inflation. In terms of equity market price action, we had a rally. A lot of that had to do with what we heard from some of the big banks. We had J.P. Morgan, Goldman, Citigroup and Wells Fargo all reporting their second most profitable year ever in 2024. Do you like the financials?

Yeah, absolutely. I mean, those are great reports and a great market reaction. And that's really before any of the potential benefits from this new administration hit that sector. And to me, that is one of the cleanest

sector plays on the new administration. I mean, energy is tricky because obviously they're pro-energy, but if they drill too much and oil prices fall, that hurts profitability. Other sectors, there's push and pull around tariffs. Financials are a pretty clean story about deregulation, ramping up in animal spirits, whether it's M&A, IPO activity.

and pretty insulated from, you know, either geopolitical conflict or tariffs, you know, trade. So it's a clean story. They're already performing very well. They've got a lot of momentum behind them. So I think for 2025, it's a great place to be. The other thing that maybe doesn't get discussed enough is the adoption of some very sophisticated technologies where the banks and the financials are concerned. We had a story here on the Bloomberg terminal a couple of weeks ago

talking about a staggering number of jobs in financial services that could be eliminated with the adoption of artificial intelligence. So if you can help make the turn here away from banking to tech, is AI a trade that you like?

Yeah, I think you have to. I mean, it's hard to be anti-AI at this point. I mean, the market will just trample you if you don't have some exposure to that secular theme. But I do think, obviously, you can see it, whether it's the hyperscalers and the amount they're spending or NVIDIA, which keeps just crushing expectations quarter after quarter. I think the banks are actually, to your point, a great example of what I think we'll need to see in 2025, which is

Past the chips, past the build out of data centers, what are the applications for non-technology and consumer technology companies that actually bring about the productivity enhancements that have been promised? Certainly in the financials, I mean, I work in the industry. I know that there is a lot of redundant, you know, modeling and kind of, you know,

Busy work is the wrong way to put it, but things that might be exposed to some AI help. And so to the extent that you're hearing about JP Morgan or Goldman Sachs reaping a lot of benefits from that, I think we'll need to start seeing that in other sectors as well, in retailers and utilities.

to justify the massive amount that's being spent to stand up the AI technology. Well, I'm glad you mentioned the utility play because power is often discussed when you talk about the construction of those data centers. Are the power producers a place that you want to have exposure to right now or is that horse already left the barn, so to speak?

No, I don't think so. I think there's still opportunity there. I mean, I think in a lot of the second derivative plays still have plenty of room to run. So utilities, you mentioned the incredible need for power, again, just to stand up the data centers and all that it takes to run.

um, these AI models is, is, is pretty overwhelming. Um, you know, you think about things like, all right, we built all these data centers and then the companies that provide the cooling and the data center management, there, there are a lot of tangential plays that can benefit from a theme this large and this overwhelming. Um, so yeah, so utilities are, um,

They're obviously up against it a bit with the moving yields because there's such a yield proxy for a lot of equity investors. But by and large, I think they offer an exposure to AI. And really, for utilities, they don't get a lot of chances to be a growth stock. I think they're going to be able to capitalize on that over the next couple of years, especially if we do get a little bit more moderation on the rate front.

You know, valuation is one of the concerns that many investors have when they look at kind of risk assets in the U.S. versus things that may be offshore. And I'm wondering whether or not you would be somewhat in that camp and looking to diversify a little bit away from the U.S. into markets where valuations may be a little bit more attractive. Yeah, it's a great question. It's one that our clients have brought to us more and more is whether international diversification still makes sense, whether they still need to do it.

I tend to be a little old school and be in the camp that I do still think some international diversification makes sense. I don't think you have to go back all that far to the 2000s to see a lost decade in US stocks where international really outperformed and added a lot to a diversified portfolio. So I think some exposure there still makes sense. But I would also say that

A lot of the valuation difference boils down to a sector difference, right? The US has a lot more tech, a lot more consumer tech, which you pay up for on multiple front. Whereas across the Atlantic, for instance, there's a lot more energy, there's a lot more staples which demand lower valuation. So once you put it on a sector neutral basis, the valuation gap narrows. And then once you look at...

Just the fact that U.S. company earnings have been so much more robust and consistent than European and other developed market earnings over the past five to 10 years. I think that does a lot more to bring the valuation gap together. So I see the case for international diversification. I don't necessarily know that the valuation is the primary basis, at least in my head.

One of the things I think we can agree on, though, is many of those jurisdictions are exposed to potential tariffs from the U.S. How do you understand the tariff risk right now? Yeah, absolutely. I mean, this is the number one question, right? I think first and foremost, tariffs are going to be leveled against China. I mean, there are already a lot in place. The Biden administration didn't reaffirm.

remove all that much, if any, from the ones that the original Trump administration put in place. But they will get additional tariffs. I think the real question now is whether the threat of a universal tariff or a global tariff is real or whether it's a negotiating tactic. I think a universal tariff would be something that would cause the market to take it on the chin a little bit. So we'll keep an eye on that. I think there are voices in the room that understand the risks

what that would do to global economic activity and the implications. I would also add, though, as far as the inflation risk from tariffs, one of the things that we've been talking about with our clients a lot is to look to the first Trump administration and look at what inflation was like from 2017 to 2019, because it was anchored at 2%. It didn't really move around.

And that's despite the fact that immigration, tax reform and tariffs were the three main pillars then just as they are now. There may be different ways they get implemented. They may be a little more extreme today. But inflation was quite anchored the first Trump term until COVID kind of broke the economy. So I do think that the concerns of an inflationary spiral might be a little bit misplaced here.

All right. We'll leave it there. Ross, always a pleasure. Thanks for making time to chat with us. Ross Mayfield there. He is the investment strategist at Baird Private Wealth Management, joining from Louisville, Kentucky, here on the Daybreak Asia podcast.

Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Krisner, and this is Bloomberg.

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