Nippon & U.S. Steel Deal Closes, Fed Holds Steady, and YouTube Wins Over Older Viewers

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He was the highest paid TV star of all time.

When it started to change, it was queer.

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No.

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I think we're past that, Charlie.

We're past that, yeah.

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Aka Charlie Sheen, only on Netflix September 10th.

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It means that the average load contains 16 terabytes of data, which is the equivalent of 250 iPhones.

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A lot of guys out there might be feeling down on themselves, but I just want to remind you that at the very least, you're great at storing data.

Welcome to Property Markets.

I'm Ed Elson.

It is June 19th.

Let's check in on yesterday's market vitals.

The major indices climbed through the morning, then erased those gains following the Fed's interest rate announcement.

We'll talk more about the Fed's decision in a moment.

Meanwhile, oil prices held steady after Trump said Iran wants to negotiate over its nuclear program.

Coinbase stocks soared 16% as the Senate passed a stablecoin bill known as the Genius Act.

And Uber and Lyft shares fell around 2% after Waymo applied for a New York City testing permit.

Okay, what else is happening?

Nippon Steel has officially closed its $14 billion takeover of US Steel.

The combined company will form the world's second largest steel maker.

It will also put an end to a political saga that has lasted 18 months ever since the acquisition was first announced.

As you'll remember, President Biden was against this deal.

He said it was a national security risk.

So was President Trump for many of the same reasons.

But it was all settled under this very unusual deal that gave the U.S.

government what is known as a golden share in the new company.

Scott and I discussed this golden share a couple weeks ago when it was first announced.

At the time, we didn't really know what it meant.

We knew it gave Trump some level of control, but we didn't know the specifics.

Well, now, with the deal completed, we do know the specifics.

The golden share will give the president the perpetual right to veto any decisions that concern the following issues.

Capital investment, changing the company's name, changing the company's headquarters, re-domiciling outside of the US, moving production abroad, making acquisitions, and also closing any existing facilities.

So in sum,

the president's got a lot of control over this new company, and that is very unusual.

As we've discussed before, the only times when the American government has ever taken up a stake in a company is when there was some level of systemic risk to the economy, such as AIG in 2008 or General Motors in 2009.

Both of those were, of course, in response to the financial crisis.

But the difference here is that there is no real risk to the economy.

U.S.

Steel is actually quite a small company.

It's the 23rd largest steel maker in the world by production volume.

It employs seven times fewer people than Chipotle.

And at $14 billion,

it's roughly as valuable to the marketplace as Texas Roadhouse.

So for the president to have a golden share in this company, it is legitimately quite strange.

And it begs a question, which is, has Trump now set a precedent?

And this is very important when it comes to MA.

Is it now acceptable or normal for the government to intervene during acquisitions and to exert its control over the decision-making processes of a private business, business, as it has done with Nippon Steel here.

This is the question that MA experts are now concerned about, especially when it comes to foreign MA, because it's now very feasible that if another foreign company comes along and they say, We want to buy an American company, Trump may now just point to the Nippon deal and say, Well, you've got to do what they did.

You've got to give me some control.

And if he does that, then suddenly this whole golden share thing, which at present is an anomaly, it might eventually become the norm.

And that would shake up the M ⁇ A industry very dramatically.

So we wanted to find out more about this, specifically how this impacts M ⁇ A.

So our producer Claire spoke with Joshua Gruenspecht, a national security lawyer with Wilson Cincinnati.

In one sense, this is a pretty unusual situation.

And the fact that many, many deals continue to go through without any kind of golden share type situation being imposed upon the parties to the transaction indicate that this may not be a highly generalizable situation.

On the other hand, it is a new approach.

And if the President of the United States decides that he likes it, then you could see it more often.

And I do think that that would create

some meaningful uncertainty for markets.

I mean, it's a cliche to say that markets don't love uncertainty, but it's also true.

And

so, you know, what what happens if this becomes a common structure is that foreign acquirers then have to sort of take a look at capital markets transactions that they want to engage in in the borders of the United States and say, am I going to get the benefit of my bargain?

Am I going to, you know, acquire this business and actually own it at the other end of

this transaction?

Or are there meaningful ways in which I don't actually have the authority that I want over the business that I'm investing so much money to acquire?

And I do think that if that happens, if this is a harbinger of a more common use of this structure, I do think that that could create

meaningful uncertainty in the markets.

Yeah, can you say a little bit more about how that uncertainty might actually manifest?

Are you basically saying foreign investors might slow their role into U.S.

companies?

Yeah, I mean, I think that's really hard to predict.

I think it depends on how common this becomes and what industries it's

known to be a problem in.

I think that could be a sector-specific issue.

But on the other hand, we do see regularly these days, people investing even into highly sensitive technology sectors, semiconductors and so on and so forth, without these structures.

So if this does not become more common, I don't think there's going to be an effect.

If it does, I think that investors will read the markets and say, hey, you know, I see that in transactions in,

you know, let's just say,

metals and manufacturing, right?

Like let's say that this this happens not just in steel, but also in aluminum and another aluminum deal down the road and, you know, a couple more mining deals.

Then all of a sudden, I do think that foreign investment into those sectors, specifically in the United States, might start to taper.

Well, I just think it's hilarious that Trump was supposed to be the guy who's going to bring about the MA boom.

I mean, people have been talking about this MA slump that we've been seeing for several years now.

And now what we're seeing is this golden share is actually,

according to Joshua, and I think he's right here, this could cost a chill over the MA market.

So, we'll see if this becomes a trend.

As of right now, it is just an anomaly.

This is the only company where the government has this golden share,

but it could become something more.

And that's the thing that we need to keep an eye on.

We'll be right back after the break for a look at the Fed meeting.

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The Federal Reserve met yesterday and Jerome Powell announced his interest rate decision for June.

He decided to maintain interest rates as they are.

We did not get a rate cut.

Despite what the president's been pushing for.

The Fed funds rate remains in the range of 4.25 to 4.5%.

This was widely expected.

Most economists thought we would not get a rate cut.

But what is striking is what the Fed is signaling now about future rate cuts, and that is they're looking increasingly unlikely.

Last month, Most analysts expected we'd get a rate cut as soon as July.

The probability of the July cut was around 70%.

I made the prediction on the podcast that that would not happen.

My belief was that Jerome Powell would wait for the next quarter of GDP data to come in and that we wouldn't see a rate cut until September.

It is beginning to look like that will be the case.

Two of the Fed officials out of the 19 are now expecting only one rate cut in 2025 and seven of them are now expecting no rate cuts at all this year.

So the probability of a July rate cut, which was 70% last month, it is now down to 12.5%.

So the Fed is getting more cautious about reducing interest rates, not less.

Why?

Well, as you'd probably guess, because of inflation.

Despite what Trump and Besant keep saying about how inflation is done, it's over, and it's all because of our great policies.

We've discussed that on the show.

Despite all of that.

The Fed believes that, yes, tariffs raise prices and therefore prices will rise.

They now expect inflation to increase to 3.1% this year.

And they also expect that unemployment will rise from 4.2% to 4.5% by the end of the year.

So the calculus for the Fed is pretty simple.

They believe tariffs are creating inflation.

or that they will create inflation.

So they're deciding, no, we're not going to cut rates because if we did, we would accelerate that inflation.

Pretty basic, makes a lot of sense.

But did that stop President Trump from hurling even more attacks at Jerome Powell?

No, it didn't.

He actually ramped it up yesterday.

I mean, we have almost no inflation.

We've done a great job.

When I came in, we had a lot of inflation.

We went through four years of the highest inflation in the history of our country with sleepy Joe Biden.

And then it came down because when I got elected, it started dropping because people understood that I knew what I was doing.

But now we have a man that just refuses to lower the Fed rate, just refuses to do it.

And he's not a smart person.

I don't even think he's that political.

I think he hates me, but that's okay.

You know, he should.

He should.

I call him every name in the book, trying to get him to do something.

I've been nice to him.

I do it always.

I don't know how to sell.

I've been so nice to him, fellas, you wouldn't believe, let's have dinner.

Too late.

I'd call him too late.

Come on, too late.

Let's have dinner.

I do it every way in the book.

I'm nasty.

I'm nice.

Nothing works.

He's like just a stupid person.

Well, look, the good news is I don't think Jerome Powell cares much about about what Trump has to say about him.

Trump has tried to goad him several times and Powell consistently never really reacts.

The bad news though is I think a lot of Americans might actually think that what Trump is saying here is true or accurate.

And it's so frustrating to watch because when Trump says inflation has come down, which it has, he's essentially taking credit for something he didn't do.

Because yes, inflation fell in April, but this has been a years-long process.

And it's a process for which we owe the credit to Jerome Powell.

He's the one who decided to raise interest rates.

He's the one who decided to hold them there despite all the criticism he got that it would kill the economy.

He's the one who brought down inflation and he was able to do it without killing the economy and without tanking employment.

He achieved what most thought wasn't actually possible, and that is a soft landing.

And he deserves credit for that.

But here we have Trump, who actually inherited those inflation numbers and is now taking credit for them while also ruining them in the form of tariffs and at the same time calling Jerome Powell stupid.

So I've said this before, but this is just a continuation of what I call the tariff inflation psyop.

This is the administration trying to convince you that the reduced inflation that we've seen in the past couple of months isn't the result of the years of work by Jerome Powell, but it's the result of tariffs, which doesn't make any sense and also just isn't true.

And when that inflation ticks back up again, which it will because of tariffs, my bet is they'll blame Jerome Powell again.

They'll say, no, no, no, it's not the tariffs.

This is because of the bad policy at the central bank.

But I just want to be clear because I think it's important.

Thus far, Jerome Powell has gotten almost everything right.

He was handed handed a very difficult situation.

He decided to raise rates and keep them up, which he got a lot of criticism for, but he ultimately kept the economy moving while bringing inflation down.

And I just think we owe it to ourselves as a country to, yes, criticize our leaders when they get things wrong, but also to give credit to our leaders when they get things right.

And I'm sorry, but I'm just, I'm not going to let Donald Trump change the record on this.

Jerome Powell got it right.

He did a phenomenal job.

And I would have thought that the results would speak for themselves, but we have a president who's trying to mess with what the results are telling us.

So let's just be very clear about this.

Jerome Powell has done a great job so far.

He is not a stupid person and he deserves to get the credit here.

Not Trump.

Our final story.

Last month, for the first time ever, Americans watched more TV via streaming services than they did through broadcast and cable networks combined.

That is according to a new report from Nielsen.

Nielsen started measuring streaming compared to broadcast and cable back in 2021.

And at that time, the gap was actually huge.

Cable and broadcast made up...

two-thirds of overall TV viewing time and streaming at the time made up just 26%.

Now the dynamic has officially switched and streaming now makes up 45% of total TV viewing time in America, more than cable and broadcast combined.

So nothing necessarily new to us here.

I think this mostly just ratifies what we've been talking about for a long time, which is that traditional TV is on the way out.

And this is our proof.

We have the data.

Yes, it's out.

But there were some other little data points in this report that I thought were especially interesting.

And the one that really caught my attention is what has happened to the viewing habits of old people or boomers or people over the age of 65.

And what the report found is that old people still watch a ton of TV more than any other age group, but they are increasingly moving over to streaming.

And that's what clinched it this month.

That is the reason why streaming officially took the crown in May.

But what's even more interesting is that there is one streaming service that old people seem to love right now more than any other platform.

And I will give you a moment to guess because the answer, at least to me, is quite surprising.

Okay, locked your answer in.

The answer is YouTube.

Yes, YouTube watch time for people over 65 has risen 106%

since May 2023.

And old people are now the fastest growing cohort of any age group to be watching YouTube from a television set.

In fact, the amount of time that boomers are spending on YouTube is now equal to that of children under the age of 11.

This is crazy.

This is the group that famously watches a ton of YouTube.

This is why Cocomelon is the third most popular channel on the platform.

So now old people are actually rivaling children in terms of their addiction to YouTube, which is just fascinating because, you know, it used to be that old people were addicted to cable, shows like Fox and CNN and MSNBC.

Scott regularly makes fun of this.

He often points out the fact that the average age of an MSNBC viewer is 70.

And by the way, yes, that is actually true.

But now old people are migrating from those networks and they're moving to, of all platforms, YouTube.

So let's get Scott on the line because I want to hear his reaction to this report.

Hey, Scott.

Eduardo, Miamigo, Bonsoir.

Where are you right now?

So I am at the Google Beach Party, which is the most obvious branding mistake of Can.

And that is, if they called it the YouTube beach, it would be much cooler and they'd get much cooler entertainment.

Instead, they call it Google Beach and it gets an okay crowd because it's a huge company, but

it doesn't get the same sort of riz, if you will, if they called it YouTube Beach.

Anyways.

That's where I am.

I'm literally sleeping with the enemy and I'm Coco Chanel sucking some Nazi cock right now.

Too much?

Too much?

No, not too much at all.

Let's get your reaction to this Nielsen report.

Specifically, YouTube is absolutely crushing right now.

Any thoughts?

The streaming news has blew me away.

In the last couple of years, the four years, steamers up 71%,

cable down 30-something percent.

broadcast down 20%, but already

off of very like diminished base.

That's dramatic.

And what I see is that the thing, the data that really

struck me was that if you look at the cost per minute of YouTube, YouTube gets about 13% of all viewership.

Netflix, about eight,

recently about five.

Netflix has to spend about 50 cents on content per minute of viewership.

So about, they spent 18 billion.

That means they're getting about

36 billion minutes they have absorbed in it or

or viewership.

This is what blew my mind.

YouTube spends 20 cents.

Why?

Because it's an asset-like model.

They don't produce any content.

They just have a revenue share program.

And TikTok only spends about two cents because the revenue share program doesn't need to be as generous because their algorithm is so good.

So what you have is essentially all of these All of these TikToks of Hollywood and LA professionals prying into their camera about how Hollywood is disappearing and their jobs are disappearing.

If you look at YouTube, YouTube actually spends as much on content creation as Netflix does.

They're just spending it on

creators across the world.

So the same amount of content spent is actually happening, maybe even more.

It's just not being funneled through SAG AFCRA or the typical actors.

So what you have here is essentially YouTube and TikTok are doing to Netflix what Netflix did to Comcast and Fox.

So, Scott, what are your predictions for how this all plays out?

Okay, so some predictions.

Well, naturally, you think this is probably going to put strain on Netflix.

It's had an unbelievable run.

So, if you were going to make predictions, you would say that Netflix stock that's going to come under pressure over the next two or three years as it continues to lose share to

said life companies, if you will, specifically YouTube and TikTok.

ByteDance, which owns TikTok, is probably the most undervalued tech company right now, trading its three times revenues versus OpenAI at 30.

And then Alphabet is undervalued, given that it has YouTube and only trades with six, a multiple of 16 versus everyone else in the SP at 26.

And also sort of a long shot prediction is that

Alphabet prophylactically spins YouTube.

Because if the slack of Alphabet goes down, they'll decide to spin this yoga called YouTube and sign and make a deal with the DOJ and the FPC to say, hold on, before you try and break us up, what if we spin YouTube?

But this is just, this is really dramatic news around how the world is shaping in terms of the creator economy and who the winners and losers are.

But add enough of that shit.

I'm going from Google Beach to the Spotify party who really knows how to throw a party.

And I'm going to try and steal this giant YouTube balloon.

What do you think?

What do you think?

Should I do that?

You got a good idea.

Get after it.

Okay, bye, Scott.

So look, I think this all plays into a dynamic that I've discussed for several years now.

And that is I think YouTube is the most ascendant media platform in the world.

And I also think it is the most underhyped media platform in the world.

And the reason I say underhyped is because when you look at Google's valuation and you look at it vis-a-vis the sum of its parts, as we did a few weeks ago, you can only really conclude that the market is undervaluing YouTube.

And if you want to see our analysis there, you can go check out that episode.

But the reality for YouTube is this: it is not only the most popular streaming platform on mobile and desktop, it is also the most popular streaming platform on TV.

And by far, it makes up 12.5%

of total TV viewing time now.

The number two is Netflix at 7.5%.

The number three is Disney at 5%.

So YouTube is still the juggernaut.

We already knew that, but it's worth re-emphasizing.

And in addition, YouTube is now stealing what is the largest and most addicted cohort in the TV ecosystem.

And that is old people, people over the age of 65.

So great news for YouTube.

In my view, even more reason to buy Google stock, but ultimately just more terrible news for cable and broadcast, which continue their decline.

Okay, that's it for today.

Thanks for listening to Property Markets from the Vox Media Podcast Network.

I'm Ed Elson.

Tune in tomorrow for our conversation with Justin Wolfers only on property markets.

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