WEBVTT - Bloomberg Global Business Forum 2019 0:00:00.560 --> 0:00:03.040 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:03.120 --> 0:00:05.600 Jason Kelly. We're here every day bringing you the latest 0:00:05.640 --> 0:00:09.880 news from the world's of business and finance, plus technology, politics, economics, 0:00:09.960 --> 0:00:13.560 all harnessing the power of Bloomberg Business Week reporters and editors, 0:00:13.600 --> 0:00:16.760 not to mention our journalists and analysts and more than 0:00:16.800 --> 0:00:19.440 a hundred and twenty countries. You can download Bloomberg Business 0:00:19.440 --> 0:00:22.280 Week on iTunes, SoundCloud, or Bloomberg dot com. You can 0:00:22.320 --> 0:00:24.600 also listen to our radio show weekdays at two pm 0:00:24.640 --> 0:00:28.200 Eastern only on Bloomberg Radio. Great day at the Plaza 0:00:28.280 --> 0:00:32.000 in New York at the Global Business for annual gathering 0:00:32.280 --> 0:00:36.919 of global political leaders, business leaders, um activists. And it's 0:00:36.920 --> 0:00:39.319 all about really high level conversations. But I do want 0:00:39.320 --> 0:00:40.800 to say, and Mike set the tone at the top. 0:00:40.840 --> 0:00:43.600 Mike Bloomberg, of course, owner of Bloomberg LP, Bloomberg Radio, 0:00:43.600 --> 0:00:46.920 Bloomberg TV. You know, looking at climate change and the 0:00:47.040 --> 0:00:50.199 role public private partnerships and how you solve these problems 0:00:50.240 --> 0:00:52.760 that came up a lot in the panel discussion that 0:00:52.800 --> 0:00:56.760 we were fortunate enough to host earlier in this afternoon, 0:00:57.000 --> 0:01:00.720 but one of the underlying questions of course, is what 0:01:01.040 --> 0:01:04.960 is the state of the global economy, and what do 0:01:05.040 --> 0:01:08.280 we think about businesses, what do we think about consumers? 0:01:08.280 --> 0:01:10.760 How does US China trade play into all of it. 0:01:11.160 --> 0:01:14.920 I put all of those questions to Jonathan Gray. John Gray, 0:01:15.040 --> 0:01:17.959 he is the president and the CEO of Blackstone. He 0:01:18.080 --> 0:01:21.000 joined me earlier here at the Global Business Forum. Let's 0:01:21.000 --> 0:01:24.080 listen in to that conversation. And John just jumping into 0:01:24.200 --> 0:01:26.440 what feels like the big question right now, which is 0:01:26.800 --> 0:01:32.520 cautious businesses optimistic consumers. Help me understand is there a disconnect, 0:01:32.680 --> 0:01:34.480 is there a lag what's going on? Well, I think 0:01:34.520 --> 0:01:37.600 what you're seeing is you've got some uncertainty in the world. 0:01:37.640 --> 0:01:40.880 You certainly have some friction from the China trade, You've 0:01:40.880 --> 0:01:44.920 got the Brexit situation, and you just have some geopolitical 0:01:45.000 --> 0:01:48.880 concerns that are making everybody nervous. Businesses are responding by 0:01:48.920 --> 0:01:52.840 pulling back a bit. You see that in manufacturing, industrial data, 0:01:53.200 --> 0:01:56.480 capital investment, and you're beginning to see that in earnings 0:01:56.520 --> 0:01:59.440 from companies. So that's one side of the equation. On 0:01:59.520 --> 0:02:02.640 the other side of the equation the consumers actually doing 0:02:02.720 --> 0:02:05.600 pretty well around the world, particularly here in the US. 0:02:05.960 --> 0:02:07.680 So I was talking to a friend this morning about 0:02:07.720 --> 0:02:09.840 what I think of is the three threes, which are 0:02:10.080 --> 0:02:13.640 we have three point seven percent unemployment, wages are growing 0:02:13.720 --> 0:02:16.800 north of three percent, and home prices are growing north 0:02:16.840 --> 0:02:19.320 of three percent. So if you think about the consumer, 0:02:19.480 --> 0:02:22.400 they have a job, wages are going up, and the 0:02:22.480 --> 0:02:25.280 biggest assets appreciating in value. And that's why you see 0:02:25.320 --> 0:02:28.800 this bifurcation. So I'd say when you add it together, 0:02:28.840 --> 0:02:31.280 I think what it leads to is not a recession, 0:02:31.360 --> 0:02:34.640 but a slowdown in growth globally, which is what we're experiencing. 0:02:34.680 --> 0:02:37.320 And so how much does it slow down? And when 0:02:37.520 --> 0:02:39.800 are we in that now? I think we're in that now. 0:02:39.880 --> 0:02:42.840 It's hard to say. The good news is central banks 0:02:42.880 --> 0:02:45.480 have decided, you know that they're going to lower rates 0:02:45.480 --> 0:02:48.240 and continue to stimulate, which has helps soften the blow 0:02:48.280 --> 0:02:51.119 a bit. And it's possible that some of these issues 0:02:51.200 --> 0:02:54.919 like China trade or Brexit get resolved, which would take 0:02:54.960 --> 0:02:58.680 a little bit of this uncertainty away. I think as investors, though, 0:02:58.919 --> 0:03:00.679 you don't want to get too caught up in sort 0:03:00.720 --> 0:03:02.280 of the heat of the moment. You want to try 0:03:02.320 --> 0:03:04.480 to take a longer term view. So where are you 0:03:04.520 --> 0:03:06.880 spending money? I know your investors are asking you that 0:03:07.000 --> 0:03:09.320 every time they get on the phone with you. Where 0:03:09.320 --> 0:03:12.480 you to playing capital you've got five plus billion dollars 0:03:12.520 --> 0:03:14.839 in assets. Well, that is the big question. I think 0:03:14.840 --> 0:03:17.680 in this point in the economy where you have slow growth, 0:03:17.919 --> 0:03:20.760 you also have pretty high multiples. Right the low rate 0:03:20.800 --> 0:03:23.960 of interest rates, it's created expanded multiple So you have 0:03:24.040 --> 0:03:26.960 to be cautious on where you invest. What we're looking 0:03:27.000 --> 0:03:29.520 at our places where technology is creating a lot of 0:03:29.600 --> 0:03:32.320 change and where they're really in the path of growth. 0:03:32.440 --> 0:03:36.000 Industries in the path of growth, so globally and logistics 0:03:36.080 --> 0:03:38.680 we've talked about it before. We've been the big buyer 0:03:38.720 --> 0:03:42.000 of warehouses around the world. Probably bought seventy billion dollars 0:03:42.000 --> 0:03:44.640 on the simple premise that goods are moving from physical 0:03:44.720 --> 0:03:49.080 retail to online retail. We're doing things around content creation 0:03:49.480 --> 0:03:52.200 as a result of the cost of distribution of media 0:03:52.280 --> 0:03:55.840 coming down. You want to service that industry software as 0:03:55.880 --> 0:03:58.880 a solution. Things migrating to the cloud. We bought a 0:03:58.920 --> 0:04:02.560 big business a does things in the human resource area 0:04:02.680 --> 0:04:07.480 online UM India another area that's benefiting from I T services. 0:04:07.760 --> 0:04:11.040 So I think as the global economy transformed, even though 0:04:11.080 --> 0:04:13.760 the overall growth rate isn't that high. Trying to find 0:04:13.800 --> 0:04:16.280 those industries and sectors that have the wind at their 0:04:16.320 --> 0:04:19.200 back is really important. So you a net buyer? Are 0:04:19.200 --> 0:04:22.000 you a net seller at this point across all of 0:04:22.040 --> 0:04:24.640 your empire? You know? I would say it's a bit 0:04:24.640 --> 0:04:27.880 of both. I wouldn't say, you know, there's one clear path. 0:04:28.120 --> 0:04:31.039 I think when we find businesses that have stabilized and 0:04:31.120 --> 0:04:33.200 sort of our buy it, fixed it sell it approach, 0:04:33.520 --> 0:04:35.800 we actit. On the other hand, there are plenty of 0:04:35.839 --> 0:04:38.119 things that we still have conviction in and we hold, 0:04:38.200 --> 0:04:40.800 so you're seeing us sell, but at the same time 0:04:40.839 --> 0:04:43.440 deploy a lot of capital. We put out fifty six 0:04:43.480 --> 0:04:45.960 billion dollars of capital in the last twelve months, so 0:04:46.000 --> 0:04:48.680 we're still finding interesting things. I would say it's more 0:04:48.720 --> 0:04:52.200 selective and it tends to be in larger situations. Uh 0:04:52.240 --> 0:04:55.520 thirty seconds to go real estate? How are you feeling, 0:04:55.600 --> 0:05:00.120 especially the United States, residential and commercial? I would say, Okay. 0:05:00.600 --> 0:05:04.000 The headwind is that prices are high, multiples are high 0:05:04.040 --> 0:05:07.479 for real estate. The economy slowed. The good news is 0:05:07.880 --> 0:05:12.240 that supply is pretty limited and rates remain low. I 0:05:12.240 --> 0:05:14.600 think again, you've got to focus on where do you 0:05:14.640 --> 0:05:17.880 see better growth, so West coast of the United States, 0:05:18.000 --> 0:05:22.840 more technology, more job creation. Warehouses again another area as 0:05:22.839 --> 0:05:26.320 opposed to retail, and then rental housing. The shortage of 0:05:26.360 --> 0:05:29.279 new home construction has led to strength and rental housing 0:05:29.560 --> 0:05:33.520 and single family homes. And that was my conversation with 0:05:33.760 --> 0:05:36.919 John Gray, he is the president and the chief operating 0:05:37.000 --> 0:05:39.839 officer of Blackstone. Then we got a chance to catch up, 0:05:39.839 --> 0:05:42.520 obviously with his boss, Steve Schwartzman on our panel a 0:05:42.600 --> 0:05:45.800 little bit later on. We did, uh, and a great conversation, 0:05:45.880 --> 0:05:48.880 and we talked earlier about the optimism. What's great about Blackstone? 0:05:48.880 --> 0:05:52.719 I mean, what is it? More than half billion dollars 0:05:52.720 --> 0:05:57.320 in assets and management? Half a chillion? Forgive me right, right, right? Um, 0:05:57.400 --> 0:06:00.160 So get your head around that. So many different This 0:06:00.400 --> 0:06:03.000 is big exposure to real estate and a lot of 0:06:03.040 --> 0:06:06.280 different types of assets. So again, uh, you know, a 0:06:06.360 --> 0:06:09.120 company and individuals who really have a good snapshot of 0:06:09.120 --> 0:06:10.680 what's going on in the world. Well, and it's funny 0:06:10.920 --> 0:06:12.479 and you know, not to talk out of school. But 0:06:12.560 --> 0:06:15.320 as I was wrapping up with John off air, he 0:06:15.400 --> 0:06:18.840 basically said that what we talked about on the air 0:06:19.320 --> 0:06:22.200 was essentially every conversation he has with a big investor 0:06:22.279 --> 0:06:23.920 in the sense that they call him up and they 0:06:24.040 --> 0:06:28.360 essentially say, hey, look, I I see these companies who 0:06:28.360 --> 0:06:30.640 are saying, I'm a little bit cautious, I'm worried about trade, 0:06:30.640 --> 0:06:32.480 I'm worried about this, worried about this, worried about that. 0:06:32.800 --> 0:06:35.920 And then meanwhile, all these consumers are saying, I'm gonna 0:06:35.920 --> 0:06:37.920 buy a car, I'm gonna buy a house, I've got 0:06:37.920 --> 0:06:40.520 a job, let's buy some Christmas presents. You know. It's 0:06:41.440 --> 0:06:45.040 it's a it's a bifurcation of sorts and a dichotomy 0:06:45.040 --> 0:06:46.560 that people want to figure out. And then they say 0:06:46.560 --> 0:06:48.400 to him, so, how are you gonna spend all that money? Right? 0:06:48.440 --> 0:06:50.880 Because they have so much right to still put to work. 0:06:50.920 --> 0:06:53.479 And I do wonder about that because I feel like 0:06:53.480 --> 0:06:56.360 the private equity guy, especially the bigger players, continue to 0:06:56.400 --> 0:07:00.160 raise money, right, continue to bring out new funds. UM. 0:07:00.160 --> 0:07:02.520 I feel like we've done the stories on the infrastructure funds, 0:07:02.520 --> 0:07:04.200 and I still feel like that money is waiting to 0:07:04.200 --> 0:07:07.040 be put to work. Fascinating to hear the Prime Minister 0:07:07.080 --> 0:07:10.320 of India, you know, and talking about infrastructure needs right, 0:07:10.360 --> 0:07:14.120 and certainly they are open for business and ready. UM 0:07:14.160 --> 0:07:16.320 to work with companies to put it to work well. 0:07:16.360 --> 0:07:19.120 And on that topic of infrastructure that came up on 0:07:19.120 --> 0:07:21.320 our panel as well with Ann Mahindra. They have a 0:07:21.400 --> 0:07:24.240 huge renewable renewables business and he was being a little 0:07:24.280 --> 0:07:27.480 bit funny about it, but essentially saying, listen, everybody, just 0:07:27.520 --> 0:07:30.040 don't worry about this. It's not a thing. And by 0:07:30.040 --> 0:07:31.760 the way, I'm going to make a ton of money 0:07:31.760 --> 0:07:33.880 while you're looking the other way or either arguing about 0:07:33.880 --> 0:07:36.000 the causes and effects or saying, oh, I don't know 0:07:36.040 --> 0:07:38.360 what we're gonna do. Meanwhile, he said, you know, they're 0:07:38.400 --> 0:07:40.480 renewables business is one of their best performing, one of 0:07:40.480 --> 0:07:43.080 the best. They're making money off of it, right, They're finding, 0:07:43.120 --> 0:07:45.960 you know, a lot of business opportunities. So yeah, it's well, 0:07:46.000 --> 0:07:47.880 I was just gonna say, you know, we'll hear a 0:07:47.880 --> 0:07:50.720 little bit later in the show, I believe from Bruce Flat, 0:07:51.200 --> 0:07:53.800 who's the CEO of Brookfield. You know, he was also 0:07:54.000 --> 0:07:56.960 along this morning. He's actually on a panel right now 0:07:57.000 --> 0:08:02.520 with President Clinton and the president, the current president of Columbia. 0:08:02.800 --> 0:08:06.920 He was talking about Brexit the impact on their investments 0:08:06.920 --> 0:08:11.320 there because the only firm that's actually nipping at Blackstones 0:08:11.400 --> 0:08:14.760 heels from a assets under management is Brookfield because they're 0:08:14.760 --> 0:08:17.480 combining with oak Tree. As you remember, that deal is 0:08:17.480 --> 0:08:20.640 going to close on Monday, believe about exactly. They're going 0:08:20.680 --> 0:08:23.560 to have half a trillion dollars of their own under management. 0:08:23.680 --> 0:08:26.040 So these two big investors. So we'll get that perspective 0:08:26.320 --> 0:08:28.600 a little bit later on. Alright, looking forward to that 0:08:28.720 --> 0:08:31.040 and a lot more to come from the Bloomberg Global 0:08:31.040 --> 0:08:41.720 Business form. What is McDonald's and it is, of course 0:08:41.720 --> 0:08:44.120 the world's largest fast food chain, trying to make it 0:08:44.160 --> 0:08:46.360 in an age of code and Kale. Behind it all 0:08:46.440 --> 0:08:49.719 Steve Easterbrook, who has been president and CEO McDonald's for 0:08:49.880 --> 0:08:52.240 I think about four years. A little bit more than that. 0:08:52.559 --> 0:08:55.320 This feature story in the magazine this week online in 0:08:55.320 --> 0:08:58.520 at Bloomberg dot com. It is the cover's story, and 0:08:58.600 --> 0:09:02.760 let's talk about it with Leslie Patton. She is our 0:09:02.800 --> 0:09:09.199 Blueberg News consumer reporter. She's in our Chicago Sorry about that, 0:09:09.240 --> 0:09:11.160 she's in the Chicago bureau scie. I'm like trying to 0:09:11.160 --> 0:09:13.920 remember where everybody is. And of course Jill Weber is 0:09:14.000 --> 0:09:16.559 with us, the editor of the magazine, joining us back 0:09:16.559 --> 0:09:19.079 in our New York studio. So um, Julia made this 0:09:19.200 --> 0:09:20.679 the cover. I have to say, I love this story. 0:09:20.720 --> 0:09:22.640 I had no idea. Jason and I were talking about 0:09:22.640 --> 0:09:25.480 it all of what was going on at McDonald's in 0:09:25.559 --> 0:09:27.920 terms of becoming more digital. Yeah, so this was a 0:09:27.960 --> 0:09:30.520 story that we piqued our interest a while ago when 0:09:30.600 --> 0:09:34.440 McDonald's started to make a series of tech acquisitions and 0:09:34.520 --> 0:09:36.640 investments and we were like, that's kind of interesting. And 0:09:36.640 --> 0:09:39.000 then we kind of looked at the performance of the 0:09:39.559 --> 0:09:42.680 share price and McDonald's is amazing. It's really been on 0:09:42.720 --> 0:09:45.560 a tear over the last five years. And as we 0:09:45.559 --> 0:09:48.440 started talking to to Leslie, who covers the company, and 0:09:48.600 --> 0:09:51.600 our colleague Thomas Buckley in the UK, we said, there's 0:09:51.600 --> 0:09:54.480 a there's actually you know, Jason, you love this. There's 0:09:54.520 --> 0:09:58.000 a great strategy story here. So we got to spend 0:09:58.040 --> 0:10:02.320 some time with Steve Easterbrook, the CEO. Leslie what what's 0:10:02.360 --> 0:10:05.800 the vision? What's he what's he doing with McDonald's. I 0:10:05.800 --> 0:10:09.600 think the plan is really to move McDonald's forward and 0:10:09.760 --> 0:10:11.679 not only do that, but do it at the pace 0:10:11.800 --> 0:10:15.280 that some of the smaller places they're doing, which McDonald's 0:10:15.320 --> 0:10:18.280 the biggest restaurant chain in the whole world. Can they 0:10:18.440 --> 0:10:20.559 can they keep up with some of the smaller, more 0:10:20.679 --> 0:10:23.040 nimble players, and that's what he's really trying to do. 0:10:23.120 --> 0:10:25.920 I think, well, and Leslie one of the reasons I 0:10:25.920 --> 0:10:27.800 really liked this story. First of all, it's a deep 0:10:27.840 --> 0:10:30.959 dive and his droll says it is a great strategy story. 0:10:31.000 --> 0:10:35.720 But it's also a little bit counterintuitive, I think, especially 0:10:35.720 --> 0:10:38.959 given how breathless and I put this on all of us. 0:10:39.000 --> 0:10:43.600 We have been around faux meets and you know, artisan 0:10:43.840 --> 0:10:47.120 artisanal burgers and all of these things that are coming up. 0:10:47.400 --> 0:10:51.960 This is a behemoth that Easterbrook seems to have really 0:10:52.040 --> 0:10:57.120 turned in a direction, not without a sort of internal controversy. 0:10:57.240 --> 0:11:01.679 But this is this is a market shift. Yeah, that's right. 0:11:01.720 --> 0:11:04.560 And let's keep in mind the food itself hasn't really 0:11:04.640 --> 0:11:07.479 changed that much, right, So there might be some new sandwiches, 0:11:07.559 --> 0:11:10.040 there might be some new topics or something like that, 0:11:10.480 --> 0:11:14.719 but you know what, it's the core McDonald's is still burgers, fries, milkshakes. 0:11:15.040 --> 0:11:17.320 That's what he's promoting, and that's what he wants to 0:11:17.320 --> 0:11:20.679 really get in the hands of more people faster. That 0:11:20.800 --> 0:11:23.320 more people faster, I mean to give you a sense 0:11:23.360 --> 0:11:26.400 of what their scale is, right, This is a global company. 0:11:26.440 --> 0:11:30.360 They basically feed one percent of the global population on 0:11:30.400 --> 0:11:34.480 any given days. Amazing scale. Right, so when they make 0:11:34.520 --> 0:11:36.600 a tweak, and like one of the ones that opening 0:11:36.600 --> 0:11:40.640 anectory that Leslie and Thomas have some amazing reporting about 0:11:40.760 --> 0:11:44.280 is the moment that McDonald's decided to do delivery and 0:11:44.480 --> 0:11:47.080 it wasn't like we'll get to that next year. It's like, no, 0:11:47.640 --> 0:11:50.880 I want this now, and I want it done globally. 0:11:51.440 --> 0:11:53.800 And when you think about the operations that it takes 0:11:53.840 --> 0:11:56.280 to actually do something like that, I mean, and you 0:11:56.320 --> 0:12:00.240 know they partnered with uber Eats to accomplish that, but 0:12:00.320 --> 0:12:03.559 it speaks of like, Okay, we have a Spanish Armada 0:12:03.640 --> 0:12:06.360 style ship here that we need to move and we 0:12:06.400 --> 0:12:10.960 need to move it faster than ever before, while competitors 0:12:10.960 --> 0:12:14.640 are doing kale salads or fried chicken sandwiches now, and 0:12:14.679 --> 0:12:17.560 we're McDonald's, Like, so we have an advantage, but we 0:12:17.559 --> 0:12:22.840 we can't take that for granted. Well, and what go ahead, Leslie? No, 0:12:22.920 --> 0:12:25.720 I was wanna say, that's that's exactly right, Joel. I think, 0:12:25.760 --> 0:12:28.640 and keeping in mind that that because this ship is 0:12:28.679 --> 0:12:31.760 so large, they have such a large influence. But Easterbrook, 0:12:31.960 --> 0:12:34.520 he's really just brought this sense of urgency that wasn't 0:12:34.559 --> 0:12:37.599 there before. And he's not satisfied was taking years and 0:12:37.679 --> 0:12:40.400 years to do things and an eighteen months plan for 0:12:40.440 --> 0:12:43.480 a new sandwich is not okay anymore. Well, and I 0:12:43.520 --> 0:12:45.960 love the story at the top that talks about I 0:12:45.960 --> 0:12:48.160 think it was something like three years ago and Easter 0:12:48.200 --> 0:12:50.200 Book made a stop in Madrid before heading home for 0:12:50.200 --> 0:12:54.040 the Christmas holidays, and you know was it's the soccer 0:12:54.080 --> 0:12:56.840 matches were going on and you get a whopper delivered 0:12:56.840 --> 0:12:59.200 but you couldn't get a big Mac. Yeah, exactly, Like 0:12:59.240 --> 0:13:01.240 he was just really ticked off and did you like 0:13:01.280 --> 0:13:04.840 call these guys? Yeah, that's through the whole delivery thing 0:13:04.880 --> 0:13:07.440 into into motion. But you know the heart of this 0:13:07.520 --> 0:13:09.840 to me, though, is this this tech thing, which is 0:13:09.840 --> 0:13:13.000 why the cover it looks like a big macbox, only 0:13:13.000 --> 0:13:15.120 instead of saying a saying big Mac on the box, 0:13:15.160 --> 0:13:18.200 that says big data. And then did you see what 0:13:18.240 --> 0:13:20.120 I did? What we did there? That really I think 0:13:20.160 --> 0:13:22.440 speaks to the spirit of this, because that is the 0:13:22.480 --> 0:13:26.920 secret sauce, right, how can we use technology to sell 0:13:27.000 --> 0:13:31.520 burgers better? That? And nobody else has really thought that way. 0:13:31.640 --> 0:13:33.280 But to give you a sense of where it can 0:13:33.320 --> 0:13:35.600 go is like you you drive through the drive through 0:13:35.640 --> 0:13:39.360 and suddenly you get offered something that you had last 0:13:39.400 --> 0:13:42.800 time because it remembered your license plate number. We're basically there, 0:13:43.040 --> 0:13:45.199 like we can we can do that. Um, you might 0:13:45.200 --> 0:13:47.320 find it creepy or it's like maybe it's a way 0:13:47.320 --> 0:13:50.040 to sell you a couple of extra boxes of French fries. Well, 0:13:50.080 --> 0:13:52.360 and it does feel like, you know, you know a 0:13:52.480 --> 0:13:56.000 person my age is creepy, is a millennial's cool? I'm 0:13:56.080 --> 0:13:58.080 so glad. Yeah, I don't have to open my mouth, 0:13:58.120 --> 0:14:01.920 like get the online eating apps right. They're like, oh, hey, 0:14:01.920 --> 0:14:03.240 you had this last time. I'm like, yeah, you know 0:14:03.280 --> 0:14:05.079 what I wanted again And I don't know. I find 0:14:05.120 --> 0:14:09.960 him helpful and get another acquisition that man exactly. Great discussion, guys, 0:14:10.000 --> 0:14:12.960 Thank you so much. Check out the converstry this week 0:14:13.040 --> 0:14:15.560 in Bloomberg Business Week. Leslie Pattons she wrote it with 0:14:15.800 --> 0:14:19.000 Thomas Buckley. There's a conversation that Carol had with Thomas 0:14:19.000 --> 0:14:22.400 Buckley on our weekend show in Bloomberg Business Week this weekend. 0:14:22.440 --> 0:14:25.280 Our thanks also, of course, Joel Weber, who was over 0:14:25.320 --> 0:14:28.760 here earlier moderating a killer panel at the Global Business Forum. 0:14:28.800 --> 0:14:33.280 Back in our New York studio. You're listening to Bloomberg 0:14:33.320 --> 0:14:35.760 Business Week, Jason Kelly and Carol Master live here in 0:14:35.760 --> 0:14:44.640 New York City at the Global Business Forum Business Bloomberg Journal. Yeah, 0:14:44.720 --> 0:14:46.480 but you let me drive. Oh no, no, no no, no, 0:14:48.920 --> 0:15:09.760 Ann please, I want to try questions to the Globe 0:15:13.200 --> 0:15:16.280 Bloomberg Radio. All right, well, we have a special edition 0:15:16.280 --> 0:15:18.440 of today's Drive to the Close. Checking in with one 0:15:18.440 --> 0:15:21.120 of the world's biggest global investors. I caught up with 0:15:21.200 --> 0:15:24.200 him earlier. That's Bruce Flatt. He's the CEO of Brookfield. 0:15:24.640 --> 0:15:27.360 Let's listen to what he had to say about the 0:15:27.400 --> 0:15:30.840 state of the global markets. As you're moving around not 0:15:30.960 --> 0:15:33.680 just this event, but around New York City this week, 0:15:33.720 --> 0:15:35.400 you're talking to a lot of heads of state, a 0:15:35.480 --> 0:15:39.720 lot of investors. It's a world of instability. It feels 0:15:39.760 --> 0:15:42.280 like fair to say, but how does it feel to 0:15:42.360 --> 0:15:48.080 a big investor. Look, I'd say politically, many countries are 0:15:48.200 --> 0:15:50.960 up in the air and uh and and pretty extreme 0:15:50.960 --> 0:15:54.040 politics in those places. But on the ground, in business, 0:15:54.600 --> 0:15:58.240 actually it's pretty constructive. Most countries of the world are 0:15:58.280 --> 0:16:04.280 doing okay. And as value investors, we look for places 0:16:04.280 --> 0:16:06.800 where you can put money for a long term, you 0:16:06.840 --> 0:16:10.160 can make decent returns in the fullness of time, and 0:16:10.400 --> 0:16:14.360 uh instability sometimes brings opportunity, so you just need to 0:16:14.360 --> 0:16:16.840 think long term in these situations. Well, let's talk about 0:16:16.840 --> 0:16:19.440 those opportunities, because, as you say, maybe some of this 0:16:19.600 --> 0:16:23.840 uncertainty drives valuations down, because valuations have been pretty high. 0:16:23.960 --> 0:16:25.600 It feels like for the past couple of years. Are 0:16:25.640 --> 0:16:28.880 you seeing that yet? Well not in in the in 0:16:28.920 --> 0:16:32.840 the developed markets, valuations are still high. So so our 0:16:32.840 --> 0:16:36.800 focus is special situations in those places. Um. But you 0:16:36.840 --> 0:16:39.720 know Europe is being driven by interest rates that are 0:16:39.800 --> 0:16:45.920 really low today. UM. India has uh um a situation 0:16:45.960 --> 0:16:48.800 where the financial system needs capital, so there's a lot 0:16:48.840 --> 0:16:51.760 of opportunity there. In China, we're seeing more opportunities because 0:16:52.200 --> 0:16:54.240 of just the de leveraging going on in the country, 0:16:54.240 --> 0:16:56.720 and that's a positive and it creates opportunity. All right, 0:16:56.800 --> 0:17:00.360 So you mentioned China US China trade. Obviously, top of 0:17:00.360 --> 0:17:03.920 mind continues to be how does that play through it 0:17:04.080 --> 0:17:08.040 at all into your investments or into your thesis about 0:17:08.040 --> 0:17:11.320 the world. So our our business is about um buying 0:17:11.440 --> 0:17:16.000 real things, real assets. We buy pipelines, toll roads, real estate, 0:17:16.400 --> 0:17:20.080 renewable power plants and and their local investments in every country. 0:17:20.160 --> 0:17:22.639 So we're in thirty five countries in the world, but 0:17:22.680 --> 0:17:25.240 we're a local investor in every single country, So it's 0:17:25.320 --> 0:17:28.520 not trade doesn't really affect on the margins. It does 0:17:28.960 --> 0:17:31.880 if it affects the country's economy. It obviously affects investments 0:17:31.880 --> 0:17:34.760 of affect hits currencies, It affects your investment as a 0:17:34.800 --> 0:17:39.320 global investor. But we're on the ground investors, so trade 0:17:39.440 --> 0:17:42.080 isn't as important to us. Do you worry as someone 0:17:42.119 --> 0:17:43.959 who has to think about the whole world of the 0:17:44.000 --> 0:17:48.439 implications of a decoupling between the US and China or 0:17:48.600 --> 0:17:52.880 does that just mildly change what the landscape looks like? Look, 0:17:53.080 --> 0:17:57.800 I'd say again, as a long term value group, Um, 0:17:57.880 --> 0:18:01.160 we try to find great places in the world which 0:18:01.200 --> 0:18:05.280 have rule of law, functioning systems, respect for capital, operate 0:18:05.320 --> 0:18:07.720 with standards that we can operate with. We like to 0:18:07.760 --> 0:18:10.560 go there, and we invest for long periods of time. Yes. 0:18:11.040 --> 0:18:13.680 Does all do all these things affect us? Yes, in 0:18:13.720 --> 0:18:16.000 the short term. In the long term, not really. So 0:18:16.160 --> 0:18:20.400 let's talk about one specific local national situation that's Brexit. 0:18:20.600 --> 0:18:23.280 You know, we had Boris Johnson, the UK Prime Minister, 0:18:23.600 --> 0:18:25.520 leave here or l leave New York or leave you 0:18:25.560 --> 0:18:27.800 in General Assembly to get back. We're gonna be hearing 0:18:27.840 --> 0:18:32.199 from him later on today. You're a big landowner and 0:18:32.320 --> 0:18:35.600 in a big landlord I should say they're in London. 0:18:36.400 --> 0:18:39.280 Canary Wharf obviously has been a big project. You got 0:18:39.320 --> 0:18:44.560 a lot invested there. How does that play through? We do, Um, 0:18:44.720 --> 0:18:49.440 business has been good since Brexit happened. Every day that 0:18:49.720 --> 0:18:53.640 this gets extended and nothing happens, fewer decisions get made 0:18:53.680 --> 0:18:57.160 and that's not helpful for business in the fullness of time. 0:18:57.280 --> 0:18:59.760 I think just getting something resolved will be a good 0:18:59.760 --> 0:19:02.000 thing for everyone in London is going to be a 0:19:02.000 --> 0:19:05.399 center of commerce for a long time. And uh, we 0:19:05.480 --> 0:19:08.160 just need we just need a solution to it, that's all. 0:19:08.560 --> 0:19:13.280 Do you feel like, uh, folks are making or putting 0:19:13.280 --> 0:19:15.520 off decisions, you know people who would be leasing from 0:19:15.520 --> 0:19:18.360 you or putting off decisions. Look, we had one building. 0:19:18.440 --> 0:19:21.440 Brexit happened. It was least it opens this month. It's 0:19:21.440 --> 0:19:24.600 a percent least at the rents we thought. So people 0:19:24.680 --> 0:19:27.880 make decisions, it takes longer and right now, why would 0:19:27.880 --> 0:19:30.720 you make a decision in this month? So you'll wait. 0:19:30.960 --> 0:19:34.320 But people do make decisions. They have to. Business goes on, 0:19:34.440 --> 0:19:38.240 life goes on. And when you think about the infrastructure 0:19:38.960 --> 0:19:41.520 of possibilities that are out there right now, that's clearly 0:19:41.520 --> 0:19:43.800 on the minds of a lot of people here in 0:19:44.160 --> 0:19:47.960 the guise of sustainability and where those sorts of investments 0:19:47.960 --> 0:19:52.040 are happening. You mentioned renewables. How has your strategy evolved 0:19:52.080 --> 0:19:53.760 even over the past few years in terms of the 0:19:53.800 --> 0:19:56.399 types of infrastructure deals you might be doing. Yes, so 0:19:56.440 --> 0:19:59.600 in renewables, where the I think the largest private owner 0:19:59.600 --> 0:20:02.040 of renew wables in the world. We've always believed in it. 0:20:02.400 --> 0:20:05.440 We were a large hydro owner for many decades. Uh 0:20:05.560 --> 0:20:07.960 in the last ten years we've pushed into wind and 0:20:08.000 --> 0:20:10.840 solar and will continue to do that because we think 0:20:10.880 --> 0:20:14.000 it's it's for the future and and and why it's 0:20:14.040 --> 0:20:17.879 different today is that it's actually economically feasible to do 0:20:17.920 --> 0:20:22.040 it without without subsidies. Therefore, we're putting a much much 0:20:22.080 --> 0:20:25.480 more emphasis on that infrastructure in the world, though, is 0:20:25.560 --> 0:20:29.440 going to go and go into private hands. Governments are indebted, 0:20:29.480 --> 0:20:34.400 they need to provide services to their people and more 0:20:34.440 --> 0:20:37.760 and more, and every country will be different, but more 0:20:37.800 --> 0:20:42.080 and more infrastructure will be funded by private by private entities, 0:20:42.119 --> 0:20:45.040 and we're one of them that can put capital together 0:20:45.080 --> 0:20:47.640 for that. You've got a lot of big investment partners 0:20:47.720 --> 0:20:52.000 around the world who commit hundreds of billions of hundreds 0:20:52.000 --> 0:20:54.480 of millions, I should say ultimately and in hundreds of 0:20:54.520 --> 0:20:57.080 billions that you've collected. What's their mood right now? If 0:20:57.119 --> 0:21:00.159 you can generalize across the big institutional investors, you know, 0:21:00.200 --> 0:21:03.439 I just say that everyone in the world is thinking 0:21:03.480 --> 0:21:07.560 about and especially people with large sums of money UM. 0:21:07.720 --> 0:21:11.920 Japan went negative ten years ago. Europe has just gone negative. 0:21:12.359 --> 0:21:14.760 What that means is that there's only one place to 0:21:14.800 --> 0:21:17.840 get returns in sovereign credit, and that's in the United States. 0:21:17.880 --> 0:21:20.639 And that's obviously been pushing the yield curve UM down 0:21:20.680 --> 0:21:24.359 on the back end, but increasingly people are needing to 0:21:24.400 --> 0:21:27.520 put money into alternatives to that, and it's just pushing 0:21:28.119 --> 0:21:32.200 money into credit. It's pushing money into alternatives, and that 0:21:32.359 --> 0:21:35.960 is going to keep happening UM going forward. If interest 0:21:36.000 --> 0:21:39.040 rates with at this level you mentioned credit, you're about 0:21:39.080 --> 0:21:43.320