WEBVTT - Bonus Surveillance: The Bloomberg Global Credit Forum 0:00:05.120 --> 0:00:07.119 This is the Bloomberg Surveillance Podcast. 0:00:07.160 --> 0:00:11.080 I'm Tom Keane, along with Jonathan Ferroll and Lisa Abramowitz. 0:00:11.280 --> 0:00:15.760 Join us each day for insight from the best an economics, geopolitics, 0:00:15.760 --> 0:00:20.720 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:20.960 --> 0:00:25.400 Spotify and anywhere you get your podcasts, and always on 0:00:25.520 --> 0:00:29.880 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 0:00:30.200 --> 0:00:32.680 Live from the city of London, hometol for me, no secret, 0:00:32.720 --> 0:00:35.080 my favorite city on the planet. And I could say 0:00:35.080 --> 0:00:37.599 that because we've got a hime audience. Good afternoon, Good 0:00:37.600 --> 0:00:40.640 afternoon to you all. A special edition of Bloomberg Surveillance 0:00:40.800 --> 0:00:44.360 from our Bloomberg Global Credit Forum alongside Tom Kean and 0:00:44.360 --> 0:00:48.080 Lisa Brownitz. I'm Jonathan Ferrow TK. We couldn't aplan to anybody, 0:00:48.080 --> 0:00:48.360 could we. 0:00:48.440 --> 0:00:50.080 Yeah. They came to me like six months ago. 0:00:50.240 --> 0:00:52.400 Julie had her people calling me up, and Julie so 0:00:52.560 --> 0:00:53.920 we got to do this Pale I said I don't 0:00:53.920 --> 0:00:56.240 want to do it, and I said, you know, okay, 0:00:56.280 --> 0:00:58.880 we're gonna do this panel, but we need some theatrics. 0:00:58.880 --> 0:00:59.800 So she said, look, if. 0:00:59.760 --> 0:01:02.720 We can range of fed and the BOE, particularly the 0:01:02.720 --> 0:01:05.800 BOE five four decision to blow up the bond market. 0:01:05.840 --> 0:01:08.520 Over forty eight hours, we could probably get Zeldner and 0:01:08.520 --> 0:01:09.240 that's how this start. 0:01:09.319 --> 0:01:11.920 Let's get the two year something close to five, twenty 0:01:12.160 --> 0:01:14.080 ten year up to maybe four fifty. 0:01:14.200 --> 0:01:14.360 Yeah. 0:01:14.400 --> 0:01:16.560 But the problem is is that the volatility, as Jim 0:01:16.640 --> 0:01:18.920 was saying, is all in the two year, the ten year, 0:01:18.920 --> 0:01:20.679 the thirty year. It isn't in the credit market, which 0:01:20.720 --> 0:01:22.760 is what you would expect. And people have been wondering, well, 0:01:22.800 --> 0:01:26.680 will actually matter for the fact that it's getting more expensive. 0:01:27.000 --> 0:01:31.080 Yeah, it's real sophisticated yield up, price down, price down 0:01:31.160 --> 0:01:34.600 means assets are challenged. I don't care what flavor you 0:01:34.720 --> 0:01:37.800 have here of the ice cream of the fixed income market. 0:01:37.840 --> 0:01:40.479 The answer is coming out of this. Dare I say 0:01:40.520 --> 0:01:44.600 what Bojada is tomorrow? We've got moonshots in certain series 0:01:44.640 --> 0:01:46.360 and what I'm focused on more and this is my 0:01:46.400 --> 0:01:48.360 first question to Jim, is going to be the ten 0:01:48.440 --> 0:01:49.120 year real yield. 0:01:49.160 --> 0:01:51.040 We're all living this right now, and I think slowly 0:01:51.080 --> 0:01:53.600 over the last couple of months and then quickly internalizing 0:01:53.600 --> 0:01:56.480 that high for longer message across various central banks, but 0:01:56.520 --> 0:02:00.520 particularly the federal reserve. We're internalizing that increasingly, we're seeing 0:02:00.520 --> 0:02:04.040 it in the treasury market. Risk assets really resilient in 0:02:04.080 --> 0:02:05.720 the face of all of this. She's talking about it 0:02:05.880 --> 0:02:09.840 to real anominal ness, psycle highs and risk assets just 0:02:09.880 --> 0:02:10.520 pretty steady. 0:02:10.560 --> 0:02:13.440 Still, there's no question about that in the last eighteen months. 0:02:13.440 --> 0:02:14.880 But I'm going to go to the memory of Jim 0:02:14.960 --> 0:02:18.280 Curry out the door at Golden Sachs and Jim Curry 0:02:18.280 --> 0:02:19.200 and hydrocarbons. 0:02:19.240 --> 0:02:21.639 There he said, look, the real yield changes. 0:02:21.720 --> 0:02:25.080 It affects everything in the real economy, including all the 0:02:25.120 --> 0:02:28.160 investments of apollow really everything out There's no question. 0:02:28.000 --> 0:02:29.919 Jeff Curry is not in the audience, Jeff, he is 0:02:29.960 --> 0:02:32.640 this afternoon, Jeff, excuse Jeff Curry. 0:02:32.680 --> 0:02:34.800 It's late to day. I did last night. 0:02:35.240 --> 0:02:38.000 Three minutes into this. It's funny time from Mark. I'm 0:02:38.040 --> 0:02:38.840 going to bring in the guest. 0:02:39.000 --> 0:02:40.480 I'll bring in the guest right now. 0:02:40.520 --> 0:02:43.040 This is fun and it's really fun given where the 0:02:43.040 --> 0:02:45.679 markets are. He played lacrosse at Duke University, and I 0:02:45.760 --> 0:02:48.240 went back and I looked at the first day that 0:02:48.360 --> 0:02:52.280 Jim walked into Apollo, and the real yields about back 0:02:52.320 --> 0:02:54.560 to where we were in two thousand and six, we've 0:02:54.600 --> 0:02:57.359 come full circle. First of all, what was the first 0:02:57.440 --> 0:03:00.400 day like at Apollo, And what does it mean that 0:03:00.480 --> 0:03:02.480 the real yield, the ten year real yield is now 0:03:02.560 --> 0:03:03.399 back to where. 0:03:03.160 --> 0:03:05.040 It was in six seven. 0:03:05.440 --> 0:03:07.720 Well, first of all, thanks for inviting me today. I'm 0:03:07.720 --> 0:03:11.880 excited to be part of this great road trip, you know, 0:03:12.000 --> 0:03:14.919 taking back down memory lane. Apollo was a much smaller 0:03:14.960 --> 0:03:18.240 business back then. We were probably twenty billion in assets. 0:03:18.240 --> 0:03:21.959 We're six hundred and fifty today. The role of banks 0:03:22.480 --> 0:03:25.480 was much much different. There was a massive risk appetite 0:03:25.560 --> 0:03:29.040 that time in the world. But certainly if you go back, 0:03:29.160 --> 0:03:31.160 I think the world was very different, and I guess 0:03:31.160 --> 0:03:33.880 I would start out today saying, as you guys talk about, 0:03:33.960 --> 0:03:36.760 you know where real rates are. Basically what you're really 0:03:36.800 --> 0:03:39.560 saying is the cost of capital has gone through a 0:03:39.640 --> 0:03:43.160 massive reversal. And so all the activity going on in 0:03:43.240 --> 0:03:45.720 the last eighteen months between all the central banks of 0:03:45.760 --> 0:03:50.040 the globe, that was the mechanics of getting to this destination. 0:03:50.480 --> 0:03:53.440 But now we have the rebounds. 0:03:54.280 --> 0:03:57.960 We got out of Bounce for ten years that was 0:03:58.040 --> 0:04:01.800 priced way too cheap, and you were forced to go 0:04:01.840 --> 0:04:07.040 into equities and basically debt subsidize massive amount of equity returns. 0:04:07.600 --> 0:04:09.440 And so the last eighteen. 0:04:09.080 --> 0:04:12.040 Months, you know, the world now has about three hundred 0:04:12.040 --> 0:04:14.960 trillion in debt on one hundred trillion in global economy. 0:04:15.600 --> 0:04:18.560 Those numbers are up basically doubled in the last ten years. 0:04:18.839 --> 0:04:21.080 And when you go from zero to basically four or 0:04:21.120 --> 0:04:25.200 five percent, that's ten trillion of borrowing costs that have 0:04:25.279 --> 0:04:28.600 to be absorbed. And so there's a massive balance going 0:04:28.640 --> 0:04:32.800 on between debt versus equity and versus balance sheets. 0:04:32.880 --> 0:04:35.760 So yeah, I get folks, we're gonna turn this into 0:04:35.760 --> 0:04:38.000 a two hour seminar. Given where the markets are. We're 0:04:38.080 --> 0:04:39.040 arguing about this, I'm. 0:04:38.880 --> 0:04:40.520 Not sure they want this to become a two right now. 0:04:40.839 --> 0:04:43.240 Well, the answer is, I'm gonna let least in John 0:04:43.279 --> 0:04:45.200 do the heavy lifting here. I got one more question, 0:04:45.240 --> 0:04:48.159 which is the memory of nineteen ninety eight, which was 0:04:48.200 --> 0:04:51.839 about leveraging the system. It was about shadows in the system. 0:04:52.200 --> 0:04:54.159 Now that we're back here, and with the first and 0:04:54.200 --> 0:04:57.160 second derivdives of how we got back here, where are 0:04:57.160 --> 0:04:58.040 the shadows now? 0:04:59.240 --> 0:05:04.240 Well, certainly the wherever there's an asset liability mismatch. SVB 0:05:04.440 --> 0:05:07.800 was a perfect example. At people talk about regulation. It 0:05:07.880 --> 0:05:10.800 was just a simple not how you operate a financial 0:05:10.800 --> 0:05:11.640 services business. 0:05:12.680 --> 0:05:13.640 Where are there. 0:05:13.839 --> 0:05:17.520 Al mismatches you certainly, I don't think it's in the 0:05:17.520 --> 0:05:20.760 world of private credit. I think is probably a lot 0:05:20.800 --> 0:05:24.080 of consumer finance challenges around the globe right now. You've 0:05:24.080 --> 0:05:26.080 got way too much public debt right now. 0:05:25.960 --> 0:05:26.760 There's challenges. 0:05:27.160 --> 0:05:29.800 So there will no doubt be challenges for the next 0:05:29.800 --> 0:05:33.200 twenty four to forty eight months as you've got fund 0:05:33.200 --> 0:05:37.280 companies that have funded debt, laiden balance sheets of companies 0:05:37.279 --> 0:05:40.320 that have funded growth cap x and they cannot pay 0:05:40.320 --> 0:05:41.200 the piper right now. 0:05:41.560 --> 0:05:44.000 Everything you said in your opening remarks is what Lisa 0:05:44.000 --> 0:05:46.080 wrote about for the best part of a decade, right 0:05:46.240 --> 0:05:48.800 complaining about the previous regime. We're all trying to figure 0:05:48.800 --> 0:05:50.840 out if this is truly a new regime or just 0:05:50.880 --> 0:05:53.040 the moment in time that we move away from pretty quickly. 0:05:53.400 --> 0:05:56.799 Can we live with where real rights are right now? 0:05:57.279 --> 0:05:58.040 Can we live with that? 0:05:58.200 --> 0:05:58.400 Well? 0:05:58.600 --> 0:06:01.920 I think that it's sort of we're getting back we talked. 0:06:02.279 --> 0:06:05.920 You say real rates, I say cost of capital. It's 0:06:05.960 --> 0:06:07.880 cost of capital for everything we do. If you think 0:06:07.920 --> 0:06:10.240 at the last ten or fifteen years, the growth of 0:06:10.279 --> 0:06:13.679 technology companies, the growth of biotech. There's some great companies 0:06:13.720 --> 0:06:17.400 out there, but they were funded with the equity, had 0:06:17.400 --> 0:06:20.479 all the benefit, and the zero cost of debt is 0:06:20.520 --> 0:06:21.600 not really sustainable. 0:06:21.680 --> 0:06:23.960 So this is the real world right now. 0:06:24.120 --> 0:06:26.520 Real rates are going to be higher the cost of 0:06:26.560 --> 0:06:29.640 capital as we go back to this balance, and I 0:06:29.680 --> 0:06:32.440 don't think it's a surprise this week as we were 0:06:32.440 --> 0:06:36.520 talking about earlier the ft ed by the two finance 0:06:36.600 --> 0:06:42.040 ministers of France and Germany talking about the European financial 0:06:42.080 --> 0:06:43.800 services sector and the role of banks. 0:06:43.839 --> 0:06:46.680 So there's a parallel path here. 0:06:46.640 --> 0:06:51.680 Conversation about how companies finance, how they get access to capital, 0:06:52.360 --> 0:06:54.320 the role of savings and securitizations. 0:06:54.320 --> 0:06:55.960 So it really is all tied together. 0:06:56.200 --> 0:06:58.760 Although are we really living with rates where they are? 0:06:58.920 --> 0:07:00.520 I mean, we take a look at these average rates, 0:07:00.800 --> 0:07:03.720 we see them in the numbers, but that's not what 0:07:03.720 --> 0:07:06.520 anyone's actually paying. Companies have already turned out their debt. 0:07:06.920 --> 0:07:08.080 So are we living with it? 0:07:08.120 --> 0:07:09.440 Are we going to see what it looks like to 0:07:09.480 --> 0:07:10.240 live with it in a year? 0:07:10.520 --> 0:07:11.640 I think we're not seeing it. 0:07:11.680 --> 0:07:18.120 So to highlight that comment, the mechanism, the transition mechanism 0:07:18.160 --> 0:07:20.160 which the feather would like to see in slowing down 0:07:20.200 --> 0:07:23.280 the economy, which we all expected, it's taken a lot longer. 0:07:24.040 --> 0:07:27.640 In the US, you have a mortgage market with thirty 0:07:27.720 --> 0:07:30.400 year mortgages at a three percent interest rate. You have 0:07:30.520 --> 0:07:32.960 the high yual market with a six percent coupon and 0:07:33.000 --> 0:07:36.480 an eight year duration. So the real impact of higher 0:07:36.520 --> 0:07:39.520 costs around the globe, in the US and Western Europe, 0:07:39.680 --> 0:07:42.680 it's not been felt yet. And so when people say, well, 0:07:42.680 --> 0:07:45.960 we're going to have a soft landing, I'm skeptical. I 0:07:46.160 --> 0:07:49.320 see a world where financial conditions have gotten tighter, and 0:07:49.440 --> 0:07:52.280 it's just a question of how long that transition mechanism, 0:07:52.440 --> 0:07:54.400 which will probably be longer than it's taken in the past. 0:07:54.600 --> 0:07:56.200 There are a couple different ways for us to get 0:07:56.240 --> 0:07:59.120 to something other than a soft landing. There's the crash 0:07:59.240 --> 0:08:01.640 and then rates going back down, and then there's something 0:08:01.760 --> 0:08:04.040 where it's just sort of a stagflation light or a 0:08:04.080 --> 0:08:07.160 stagflation proper, where rates remain high for a very long 0:08:07.200 --> 0:08:10.480 time and growth just slows substantially. It seems like the 0:08:10.520 --> 0:08:12.840 market is leaning into the ladder. How much does that 0:08:12.960 --> 0:08:15.400 change your perception of what's going to happen in. 0:08:15.320 --> 0:08:15.960 The credit space. 0:08:16.240 --> 0:08:19.480 Well, this conversation is going into one where we need 0:08:19.520 --> 0:08:21.840 to get torched in here because he's the economists of POWO, 0:08:21.920 --> 0:08:26.320 not me. But certainly what you're talking about is an 0:08:26.440 --> 0:08:31.120 environment where growth is more challenged and with how to 0:08:31.200 --> 0:08:35.160 companies access capital with a new price of marketplace. Certainly 0:08:35.200 --> 0:08:37.360 you have challenge whether it's in Germany or in the 0:08:37.440 --> 0:08:41.839 UK with a slowing economic growth. But there's a variety 0:08:41.960 --> 0:08:48.000 of aspects that we would see. Unemployment, while still very low, 0:08:48.400 --> 0:08:52.560 it's going in probably a more challenging direction. Delinquency needs 0:08:52.600 --> 0:08:55.080 are going up, the faults are going up a little bit, 0:08:55.080 --> 0:08:57.000 in the leverage loan market, in the high oal market, 0:08:57.040 --> 0:09:00.320 recoveries are lower. So there's a lot of points would 0:09:00.320 --> 0:09:02.280 say to you that there's going to be a more 0:09:02.400 --> 0:09:07.160 challenging tightening financial conditions. But certainly for us, the US 0:09:07.200 --> 0:09:09.920 has been quite strong, the UK, there's still a lot 0:09:09.920 --> 0:09:13.120 of areas to lend. There is on Western Europe as well, 0:09:13.520 --> 0:09:15.840 so I do I guess the theme that I would 0:09:15.840 --> 0:09:18.360 take away from this is that we're going from a 0:09:18.400 --> 0:09:21.960 decade of a real imbalance where the equity was the 0:09:21.960 --> 0:09:26.240 big beneficiary, debt paid a crazy price. That balance has 0:09:26.240 --> 0:09:30.000 been completely changed to one hundred eighty degrees, And now 0:09:30.120 --> 0:09:33.760 how do companies navigate, how does the financial services, how 0:09:33.800 --> 0:09:36.720 to banks, how to alternative asset managers? How do we 0:09:36.800 --> 0:09:39.480 all balance and navigate this marketplace ahead of us? 0:09:39.600 --> 0:09:41.240 Is this the return of the bond vigilantes? 0:09:41.280 --> 0:09:42.880 Then, well, I. 0:09:42.840 --> 0:09:46.840 Do think when people talk about when the central banks 0:09:46.840 --> 0:09:49.400 are going to actually lower rates, I think it will 0:09:49.440 --> 0:09:51.960 happen well before they actually get around to it, just 0:09:52.000 --> 0:09:54.400 like it happened on the upside in terms of rates. 0:09:54.960 --> 0:09:57.439 There's no doubt that one of the challenges of the 0:09:57.520 --> 0:10:02.080 last fifteen years of the regularory environment is you've had 0:10:02.200 --> 0:10:06.400 so much capital withdrawn from these marketplaces in terms of 0:10:07.080 --> 0:10:10.800 trading desk capital, So the amount of capital to trade 0:10:10.840 --> 0:10:13.240 one hundred or a billion dollars of ten year treasuries 0:10:13.320 --> 0:10:16.080 right now, that has a greater impact. So there's no 0:10:16.200 --> 0:10:19.320 doubt that any kind of activity in the secondary markets 0:10:19.360 --> 0:10:23.640 will have a pronounced impact. And that's that's just that's 0:10:23.679 --> 0:10:27.240 just the way of the regulatory impact post GFC. But 0:10:27.360 --> 0:10:29.600 for us, I mean, if you're in my seat at Apollo, 0:10:29.679 --> 0:10:31.880 there's been four trends since I got in the business. 0:10:32.280 --> 0:10:37.200 There's been massive technology improvement, there's been massive globalization, there's 0:10:37.240 --> 0:10:40.320 been massive deregulation, and the fourth there's been a decline 0:10:40.360 --> 0:10:43.960 of interest rates. Other than technology, you're probably having those 0:10:44.040 --> 0:10:47.800 tailwinds be massive headwinds as an investor now, so. 0:10:47.679 --> 0:10:50.120 How do you navigate that? How do you organize yourself? 0:10:50.160 --> 0:10:53.800 But I do think in terms of investors, it's a 0:10:53.840 --> 0:10:54.320 time to be a. 0:10:54.760 --> 0:10:57.319 Big technology change is the Bloomberg terminal. 0:10:58.320 --> 0:11:00.520 Everyone needs a blomback time and everybody is out the pitch. 0:11:00.559 --> 0:11:03.720 We done this, Okay, We're done. Earlier in the conversation, 0:11:03.840 --> 0:11:05.800 Jim mentioned that joint op ed that was in the 0:11:05.880 --> 0:11:08.959 Financial Times. The headline, for those of you didn't read it, 0:11:09.240 --> 0:11:12.240 we must close the EU Capital markets gap. Can you 0:11:12.280 --> 0:11:14.640 talk to me about how Europe goes about doing that? 0:11:14.720 --> 0:11:18.959 Because me, Tom, Lisa, this whole audience has heard that 0:11:19.040 --> 0:11:20.559 a million times in the last ten years. 0:11:20.640 --> 0:11:21.760 How do we close that gap? 0:11:22.160 --> 0:11:24.320 Well, I think let's talk about how we got here. 0:11:24.360 --> 0:11:28.040 We got here a POSTGFC where a lot of tools 0:11:28.160 --> 0:11:30.760 that have been used to push risk out of the 0:11:30.800 --> 0:11:34.320 banking system that I think have been successful in some 0:11:34.440 --> 0:11:38.720 regions of the globe. The European regulators took a different view. 0:11:38.760 --> 0:11:41.600 They took a dim view of securitizations. I would argue 0:11:41.600 --> 0:11:44.400 that if you look at securitized product that's actually been 0:11:44.520 --> 0:11:47.160 very good for the banking system and aggregate, it's push 0:11:47.280 --> 0:11:49.920 risk out to the real owners of risk. If you 0:11:49.960 --> 0:11:53.960 look at other things that they talk about about shareholder activism. 0:11:54.200 --> 0:11:55.200 But I do think. 0:11:55.160 --> 0:11:59.160 There's got to be an embracing of these types of 0:11:59.200 --> 0:12:04.760 tools to allow greater activity, because I think it's creating 0:12:04.840 --> 0:12:07.160 a bit of financial services stagnation. 0:12:07.800 --> 0:12:10.360 Tursan Slot called me up one day and he said, 0:12:10.480 --> 0:12:12.520 you know, you really ought to look at the Austrian piece. 0:12:12.559 --> 0:12:14.679 So I loaded the boat in the ninety seven year 0:12:14.760 --> 0:12:17.319 Austrian bond that really has worked out well. I'm don 0:12:17.440 --> 0:12:21.160 like seventy percent or whatever. Tell me about what duration 0:12:21.320 --> 0:12:23.640 is going to do and choice of duration is going 0:12:23.679 --> 0:12:26.920 to do given this new environment back to six seven 0:12:26.960 --> 0:12:27.320 o eight. 0:12:28.400 --> 0:12:30.880 You know, again, when I think about the world, I 0:12:30.920 --> 0:12:32.560 think about long duration. 0:12:32.679 --> 0:12:35.559 But we what we do, we do what Apollo is, We're. 0:12:35.400 --> 0:12:38.160 Really trying to figure out places where we're not taking 0:12:38.160 --> 0:12:41.120 credit risk or duration risk. I'm just creating great spread. 0:12:41.240 --> 0:12:44.880 So whether it's fixed income replacement, I certainly believe that 0:12:44.960 --> 0:12:47.280 the world has been on that textbook of if you 0:12:47.320 --> 0:12:49.720 want to make money in fixed income, you got a duration. 0:12:50.360 --> 0:12:52.200 I think that's it's an interesting way to look at 0:12:52.240 --> 0:12:52.600 the world. 0:12:52.880 --> 0:12:54.839 I think you're getting paid right now and risk free 0:12:54.920 --> 0:12:56.439 rates to some degree. 0:12:56.280 --> 0:12:58.120 Whether they go a little bit higher or wider. 0:12:58.480 --> 0:13:00.720 I certainly know for us at apollow for us, whether 0:13:00.720 --> 0:13:04.160 it's in the investment grade world, public and private, whether 0:13:04.160 --> 0:13:06.600 it's in private capital. When we can make high single 0:13:06.600 --> 0:13:10.000 digits ten percent being a lender, that's a great business. 0:13:10.000 --> 0:13:11.640 Do you headge into that? I mean we do. 0:13:13.080 --> 0:13:16.440 We are our business. If we are most of our 0:13:16.480 --> 0:13:18.760 business is unlevered. But if we do have any kind 0:13:18.760 --> 0:13:21.880 of leverage in our business, we match alm complete asset 0:13:21.920 --> 0:13:23.440 liability matching all the way through. 0:13:23.520 --> 0:13:26.080 So it's better for you now, right private or public. 0:13:26.120 --> 0:13:28.240 You said that private is sort of immune, and yet 0:13:28.320 --> 0:13:30.560 a lot of people think it's just not traded. So 0:13:30.600 --> 0:13:32.760 you can't see some of the carnage that you see 0:13:32.760 --> 0:13:36.400 in some of the IPOs of arm sure and instacart. 0:13:36.480 --> 0:13:40.040 So what's your view there, Well, I think certainly if 0:13:40.080 --> 0:13:43.160 you look at an aggregate, it's hard to make money 0:13:43.160 --> 0:13:46.400 in the public markets. Is an aggregate statement equity and debt, 0:13:46.760 --> 0:13:51.199 certainly with the valuations where they've backed out in terms 0:13:51.240 --> 0:13:53.319 of where rates are right now or risk free rate. Yes, 0:13:53.320 --> 0:13:56.240 there's some opportunities in the investment grade world, but if 0:13:56.280 --> 0:13:58.840 you look at high yield indexes and leverage loan indexes, 0:13:58.920 --> 0:14:01.440 they're arguably rich. They're rich for a lot of technical 0:14:01.480 --> 0:14:04.600 reasons and so our ability. Again, when we talk about 0:14:04.679 --> 0:14:07.839 private credit, most people you talked about earlier, they talk 0:14:07.880 --> 0:14:11.760 about really the sponsor finance market. The reality is, whether 0:14:11.760 --> 0:14:15.600 it's inventory finance, trade finance, solar finance, there's a massive 0:14:16.240 --> 0:14:20.480 thirty to forty trillion dollar opportunity in terms of the TAM. 0:14:20.920 --> 0:14:23.080 So that's where we're spending most of our time creating 0:14:23.160 --> 0:14:27.160 great safe spread yield really on investment grade companies. 0:14:27.240 --> 0:14:29.800 This sounds like a bank, Well, I would say is 0:14:29.840 --> 0:14:31.840 we are a credit lender. 0:14:32.080 --> 0:14:34.680 We provide credit, and we do it in a manner 0:14:34.680 --> 0:14:38.040 where we're not using a balance sheet that we can 0:14:38.080 --> 0:14:41.720 lose deposits tomorrow. We have long tail liabilities and we 0:14:41.760 --> 0:14:42.320 match those. 0:14:42.560 --> 0:14:44.680 A lot of people have said, particularly in the banking sector, 0:14:44.880 --> 0:14:46.720 they're going after their lunch and that they have to 0:14:46.760 --> 0:14:49.480 follow pretty significant regulations and you don't have to, and 0:14:49.520 --> 0:14:52.040 you have fixed capital and it's kind of what it 0:14:52.040 --> 0:14:54.560 sounds like in terms of the size and the scope 0:14:54.560 --> 0:14:56.640 that you need to achieve. It's kind of taking on 0:14:56.680 --> 0:14:58.680 a lot of the functions that banks used to fulfill. 0:14:58.960 --> 0:15:00.200 Is that the business model right now? 0:15:00.480 --> 0:15:01.920 Well, I think our business model so if you look 0:15:01.920 --> 0:15:05.000 at our six hundred and fifty billion today, three hundred 0:15:05.040 --> 0:15:09.840 and fifty billion comes from retirement services, balance sheets, fixed annuities. 0:15:09.960 --> 0:15:11.560 The other half is the GP model. 0:15:12.120 --> 0:15:15.960 We're able to lend money to air France, to Venovia, 0:15:16.000 --> 0:15:18.320 the big German real estate companies. We can do that 0:15:18.440 --> 0:15:21.360 in a manner where we are solving the company's problems, 0:15:21.600 --> 0:15:24.480 and many times we're doing it in conjunction with a 0:15:24.480 --> 0:15:27.440 advisor or a bank. There's a narrative out there that 0:15:27.480 --> 0:15:30.040 we win, the banks lose, or vice versa. The reality 0:15:30.160 --> 0:15:33.000 is we are doing more in collaboration than we've ever 0:15:33.000 --> 0:15:36.200 done before. We have a big venture with BNP and 0:15:36.280 --> 0:15:39.920 Inventory Finance. They've got an amazing franchise. We partner with 0:15:39.960 --> 0:15:42.640 them so they can manage their capital in a more 0:15:42.640 --> 0:15:48.680 efficient way. But the reality is there's more collaboration. And 0:15:48.760 --> 0:15:51.120 people say, are you frenemies, are you opponents? Are your 0:15:51.160 --> 0:15:53.840 competitors it's all the above. We work very closely with 0:15:53.880 --> 0:15:54.960 them and they work closely with us. 0:15:55.080 --> 0:15:55.960 To make some news. 0:15:56.200 --> 0:15:58.880 There was a headline yesterday Apollo looking to raise about 0:15:58.880 --> 0:16:01.280 two point five billion to len in private markets, according 0:16:01.360 --> 0:16:03.480 to people with knowledge of the matter. We're talking to 0:16:03.480 --> 0:16:04.960 someone with knowledge of the matter. 0:16:05.080 --> 0:16:06.280 Maybe, are you. 0:16:06.240 --> 0:16:08.480 Looking to raise about two point five billion dollars to 0:16:08.560 --> 0:16:09.640 lend a private markets? 0:16:09.960 --> 0:16:14.280 You know, we're an active player in the extension of 0:16:14.560 --> 0:16:18.200 senior loans to sponsors. We're active in many of these businesses. 0:16:18.560 --> 0:16:20.680 We've got a four hundred and twenty five billion dollar 0:16:20.720 --> 0:16:24.800 credit business. The fact is we built this business not 0:16:25.080 --> 0:16:29.040 expecting real yields and absolute yields to beat these levels. 0:16:29.280 --> 0:16:31.000 We thought it was going to be lower for longer. 0:16:31.320 --> 0:16:34.080 We created all these origination platforms. So the reality is 0:16:34.120 --> 0:16:37.880 today investors around the globe are clamoring and they're saying, way, 0:16:37.880 --> 0:16:41.680 on a risk adjusted basis, we can do this in 0:16:41.720 --> 0:16:43.960 the credit markets or in the debt markets. 0:16:44.840 --> 0:16:46.440 Why do we need to take that equity risk? 0:16:46.960 --> 0:16:50.240 And I think that's why you're seeing a preponderance of 0:16:50.280 --> 0:16:55.680 conversations about from sovereign funds to foundations to pensions around 0:16:55.680 --> 0:16:58.320 the globe. Saying we can make what we had to 0:16:58.360 --> 0:17:00.600 take equity risk in the past. We can do it 0:17:00.600 --> 0:17:01.840 on the death side of the balance sheet. 0:17:01.920 --> 0:17:06.080 I think, yes, yes, you are looking to raise two 0:17:06.080 --> 0:17:08.240 point five Well, we're recently, we. 0:17:08.160 --> 0:17:10.280 Have a we have a large platform, we're one of 0:17:10.320 --> 0:17:12.000 the we're one of the handful of great players in 0:17:12.040 --> 0:17:12.399 the world. 0:17:12.600 --> 0:17:13.640 We're raising How. 0:17:13.560 --> 0:17:15.880 Does that work? Do you make like six phone calls? 0:17:16.280 --> 0:17:18.159 I mean, you know, I travel quite a bit. 0:17:18.440 --> 0:17:19.960 If you ask my family, I travel a little bit 0:17:20.000 --> 0:17:22.360 more than those six phone calls. But you know, we 0:17:22.359 --> 0:17:25.960 we have several thousand LPs around the globe, and my 0:17:26.040 --> 0:17:28.520 schedule could be packed up going to visit. 0:17:28.320 --> 0:17:29.119 I can see a policy. 0:17:29.160 --> 0:17:30.960 Are right now, Jim, you were not meant to say yes. 0:17:31.240 --> 0:17:33.680 Just keep talking and answer the question. Jim. 0:17:33.760 --> 0:17:37.159 Let's go back to spring. Spring was really messy. Banks 0:17:37.160 --> 0:17:39.639 failed in America, and I remember sitting down and we 0:17:39.680 --> 0:17:41.960 had guests come on the program with a some Bloomberg surveillance, 0:17:41.960 --> 0:17:44.160 and lots of guests said, we started a process here, 0:17:44.640 --> 0:17:46.679 it's the end of the cycle. There's going to be 0:17:46.720 --> 0:17:49.040 a hard landing. It's only several months ago. 0:17:49.280 --> 0:17:50.000 What was that. 0:17:50.960 --> 0:17:53.840 I think it was a expectation of what was happening 0:17:53.920 --> 0:17:57.040 at that moment was going to happen uh completely. And 0:17:57.080 --> 0:18:01.000 the reality is this is a big, broad global The 0:18:01.040 --> 0:18:03.560 consumer plays a massive role in it. Back to my 0:18:03.640 --> 0:18:07.119 common earlier about three percent mortgages on thirty years, The 0:18:07.240 --> 0:18:10.600 US consumer really has not. We may have taken rates up, 0:18:11.000 --> 0:18:14.879 but the real impact of this higher cost, the second, 0:18:14.920 --> 0:18:19.199 the third derivative, it's early still, it's really early, and 0:18:19.240 --> 0:18:22.040 I think that's the difference between you know, there is 0:18:22.080 --> 0:18:24.240 no doubt the health of the US consumer has what 0:18:24.440 --> 0:18:27.800 allowed us to extend the economic cycle. But I don't 0:18:27.840 --> 0:18:29.960 think I think they're eating through some of their savings. 0:18:30.720 --> 0:18:33.359 And there's no doubt that there's a more that the 0:18:33.400 --> 0:18:36.200 tightening of financial conditions is going to be out there, 0:18:36.240 --> 0:18:38.960 and you know, we're finding more companies coming to us 0:18:39.000 --> 0:18:41.960 trying to solve their financing needs going forward. 0:18:42.040 --> 0:18:44.800 There are other firms challenged because they decided they were 0:18:44.800 --> 0:18:47.200 going to go off and do something different, new, original, 0:18:47.280 --> 0:18:49.800 and they're selling things for a haircut. You're probably involved 0:18:49.840 --> 0:18:54.000 in those transactions. How do you avoid worse practices? You 0:18:54.040 --> 0:18:57.440 guys have grown this thing from next to nothing. The 0:18:57.480 --> 0:18:59.480