WEBVTT - Surveillance: Greenwich Economic Forum 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg's Surveillance Podcast. I'm Tom Keane along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownowitz Jaily. We bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.799 Find Bloomberg Surveillance on Apple Podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:29.280 and of course on the Bloomberg terminal. Yeah, Fed Lamont, 0:00:29.480 --> 0:00:32.519 the Democratic governor from a Connecticut who has been in 0:00:32.640 --> 0:00:35.159 office is two thousand nineteen. Thank you so much for 0:00:35.320 --> 0:00:37.680 joining us. And there are a lot of people who 0:00:37.680 --> 0:00:39.159 live here. It was really easy for them to come 0:00:39.200 --> 0:00:40.879 to this conference, many of them who lived in New 0:00:40.960 --> 0:00:44.040 York City prior to the pandemic. Many people who have come, 0:00:44.159 --> 0:00:47.559 including businesses. How do you, as the governor, plan to 0:00:47.720 --> 0:00:52.120 keep them considering the poll the lure of low tax dates. 0:00:54.360 --> 0:00:56.400 I think we have one of the great education systems 0:00:56.440 --> 0:00:58.640 in the country, so a lot of people want to 0:00:58.680 --> 0:01:02.040 come here for their families to start things up. Stanford 0:01:02.040 --> 0:01:06.880 Greenwich has become a real financial center, fintech center, you know, cryptocurrency, 0:01:07.200 --> 0:01:10.839 financial services. Obviously, we've got the insurance capital of the world, 0:01:11.200 --> 0:01:13.960 so there's a great ecosystem and base for finance. And 0:01:14.000 --> 0:01:15.480 I think a lot of We've had a lot of 0:01:15.480 --> 0:01:18.240 finance companies come up to Connecticut over the last few years, 0:01:18.440 --> 0:01:20.440 and we've noticed that right with all of them moving 0:01:20.440 --> 0:01:23.880 their headquarters to both Connecticut and also to Florida because 0:01:23.880 --> 0:01:27.080 it's a low tax state. You're running against Bob Stefanowski, 0:01:27.280 --> 0:01:30.200 and they're about thirty days left in this election cycle. 0:01:30.520 --> 0:01:35.600 He's been espousing lowering taxes. You've previously raised taxes. How 0:01:35.600 --> 0:01:38.080 do you sort of speak to this issue given that 0:01:38.160 --> 0:01:40.480 you talk about the education system, you talk about some 0:01:40.520 --> 0:01:43.880 of the services that cost money. Well, to be exact, 0:01:43.959 --> 0:01:46.720 we inherited a two billion dollar budget deficits as far 0:01:46.760 --> 0:01:48.920 as the eye could see, and we balanced that by 0:01:48.960 --> 0:01:51.120 holding the line on spending. It was the first governor 0:01:51.120 --> 0:01:54.240 in thirty years not to raise income taxes, and this 0:01:54.400 --> 0:01:57.240 last year we put in place the biggest middle class 0:01:57.240 --> 0:02:00.280 tax cut there is. But um making life a little 0:02:00.320 --> 0:02:03.320 more affordable in this inflation every time, but bigger. You're right, 0:02:03.440 --> 0:02:05.760 I've gotten place of rainy day fund. I'm gonna hear 0:02:05.800 --> 0:02:08.600 from the finance people here today whether I'm aeryl on 0:02:08.680 --> 0:02:11.240 the side of caution, I hope i am, But I'm 0:02:11.240 --> 0:02:13.200 gonna be ready you said that you're gonna be listening 0:02:13.240 --> 0:02:16.480 to Ray Dalio talk about how the world's about to implode, 0:02:16.639 --> 0:02:19.360 and then you're gonna sit there and hide under your 0:02:19.400 --> 0:02:21.800 chair as you try to prepare your budget. How do 0:02:21.960 --> 0:02:26.440 you plan to uh really with withstand whatever is to 0:02:26.520 --> 0:02:29.080 calm given the negativity out there, and given that it 0:02:29.160 --> 0:02:32.880 is hard to borrow right now with rates where they are. Well, 0:02:32.880 --> 0:02:35.480 two things. I've got a fifteen percent of our budget 0:02:35.560 --> 0:02:38.400 set aside in cash. We call it the rainy day funds. 0:02:38.400 --> 0:02:41.919 So if capital gains start slipping, which it already has, 0:02:42.040 --> 0:02:44.200 you know, we'll be ready. I don't have to raise taxes. 0:02:44.240 --> 0:02:47.280 I don't have to cut education, you know, funding going forward. 0:02:47.560 --> 0:02:50.480 I budgeted very conservative for this fiscal year. I think 0:02:50.480 --> 0:02:52.639 we could see sort of the storm clouds out there. 0:02:53.000 --> 0:02:55.320 I assumed we were going to have less revenues this 0:02:55.400 --> 0:02:58.120 year already, so I think we're ready for what may 0:02:58.160 --> 0:03:01.080 be coming. I go back to the election cycle, because 0:03:01.120 --> 0:03:02.920 this is the midterm election cycle, as I'm sure you 0:03:02.960 --> 0:03:05.680 are more aware of than anybody else. In Bob Safinowski, 0:03:05.919 --> 0:03:08.840 your opponent, does keep talking about the importance of keeping 0:03:08.840 --> 0:03:11.320 some of the businesses here to keep the revenues. How 0:03:11.320 --> 0:03:15.040 do you balance lowering taxes to be competitive with states 0:03:15.200 --> 0:03:17.600 that have really drawn a lot of Wall Street businesses 0:03:18.200 --> 0:03:21.840 if you think the money to actually make the state livable. Look, 0:03:21.840 --> 0:03:24.800 we had a couple of fortuneies move into the state. 0:03:24.880 --> 0:03:28.120 We had dozens of other companies, but Lisa, more importantly, 0:03:28.480 --> 0:03:31.240 a lot of our local companies are growing and expanding 0:03:31.280 --> 0:03:34.160 big time. We had new more new business startups than 0:03:34.160 --> 0:03:36.680 ever before. You know, I've often said I don't want 0:03:36.680 --> 0:03:39.920 more taxes, but I don't mind more taxpayers. Our economic 0:03:39.960 --> 0:03:42.160 pie is growing and that's why we have a surplus. 0:03:42.480 --> 0:03:45.080 So your tone has shifted a little bit in the 0:03:45.160 --> 0:03:49.240 election cycle, with more focus on just get out and vote. 0:03:49.280 --> 0:03:52.520 Why is there the emphasis on getting people to vote? 0:03:52.520 --> 0:03:54.400 Do you think that there is something that will keep 0:03:54.440 --> 0:03:59.200 Democrats home? I think anger sometimes motivates people. I'm more 0:03:59.240 --> 0:04:01.680 optimistic believe in the state. I've got to make people 0:04:01.720 --> 0:04:04.960 believe we're turning things around. We're making progress every day, 0:04:05.040 --> 0:04:06.800 and I don't want people to be complacent. I want 0:04:06.800 --> 0:04:08.920 you to have a stake in this election. So yeah, vote, 0:04:09.120 --> 0:04:12.440 all right? So going forward, how I'm concerned are you 0:04:12.480 --> 0:04:15.520 about some of the businesses that have been leaving. Given 0:04:16.200 --> 0:04:19.600 the low tax issue, and given the fact that some 0:04:19.680 --> 0:04:22.440 of the revenues are going to be strained for possibly 0:04:22.560 --> 0:04:26.320 years if what Ray Dalio says comes to pass. I 0:04:26.360 --> 0:04:28.000 think a lot of the companies that are coming to 0:04:28.040 --> 0:04:32.120 Connecticut and staying in Connecticut a respect tax stability. They 0:04:32.160 --> 0:04:33.919 know that for the first time in years, we have 0:04:34.000 --> 0:04:37.240 not raised taxes. That makes a big deal, but it's 0:04:37.360 --> 0:04:39.760 it's bigger than that. Again, they love the best education 0:04:39.839 --> 0:04:41.640 system in the country. They love the fact that we 0:04:41.760 --> 0:04:44.640 provide job training so they'll get the people they need 0:04:44.680 --> 0:04:46.440 and the skills they need. Do you feel like there's 0:04:46.440 --> 0:04:48.360 a shift right now? And we talk about this all 0:04:48.360 --> 0:04:52.320 the time on Bloomberg Surveillance about how there is constraint 0:04:52.440 --> 0:04:55.640 on the fiscal response to crises at this moment, because 0:04:55.640 --> 0:04:58.320 when you're dealing with inflation, you're dealing with the situation 0:04:58.360 --> 0:05:00.360 where you cannot borrow money in the same in kind 0:05:00.400 --> 0:05:03.320 of way. How are you preparing for that with the 0:05:03.400 --> 0:05:09.760 lack of ability to plug gaps with simply selling bonds. Hey, look, 0:05:10.120 --> 0:05:12.520 there's a big macro economic world out there and we're 0:05:12.560 --> 0:05:15.440 a small piece of it. We get buffeted by international 0:05:15.480 --> 0:05:18.839 and national things all I can do is prepared, and 0:05:18.880 --> 0:05:21.080 I've prepared by you know, making sure we have a 0:05:21.080 --> 0:05:23.880 lot of dry patterns they suggested before billions of dollars 0:05:23.920 --> 0:05:26.560 set aside. I can't go out and borrow my way 0:05:26.560 --> 0:05:28.360 out of this. Maybe that's a little game they play 0:05:28.400 --> 0:05:30.400 in Washington. You can't do that at the state level. 0:05:30.680 --> 0:05:33.080 And when you look out today and you hear all 0:05:33.080 --> 0:05:36.960 of these executives of major alternative investment firms, many of 0:05:37.000 --> 0:05:39.520 which including Apollo. We're gonna be speaking with Apollo coming up, 0:05:39.839 --> 0:05:43.520 have moved recently to Connecticut. What are you listening to? 0:05:43.600 --> 0:05:46.240 What if you heard from them that you find most 0:05:46.279 --> 0:05:49.600 compelling to sort of shape your narrative going forward. I 0:05:49.600 --> 0:05:51.800 think they like being here. They don't necessarily have to 0:05:51.839 --> 0:05:54.200 be in New York City or Boston, depending of you know, 0:05:54.279 --> 0:05:56.320 five days a week, maybe it's one or two days 0:05:56.360 --> 0:05:59.240 a week. Otherwise, I think they like the lifestyle here, 0:05:59.360 --> 0:06:01.479 They like the coach system. They like the fact we 0:06:01.520 --> 0:06:05.440 have a very well trained, smart educated workforce helps them 0:06:05.480 --> 0:06:08.080 grow and expand right here. Do you have more tax 0:06:08.160 --> 0:06:10.719 hikes planned for anyone? I know that there were tax 0:06:10.800 --> 0:06:13.640 hikes overall, perhaps not for the middle class, but overall 0:06:13.680 --> 0:06:15.960 there were some tax hikes that you did with your 0:06:15.960 --> 0:06:19.159 first budget. Do you plan on doing that again or 0:06:19.200 --> 0:06:21.160 was that a one time thing? No, we didn't. We 0:06:21.240 --> 0:06:22.880 didn't do that. As I said, I was the first 0:06:22.880 --> 0:06:25.839 guy not to raise the income tax, you know, on anybody, 0:06:26.160 --> 0:06:28.640 and we're not doing that. People want tax stability. They 0:06:28.680 --> 0:06:31.160 want to say, what's the state not only look like now, 0:06:31.200 --> 0:06:33.160 but what's it gonna look like in five years? They 0:06:33.160 --> 0:06:35.200 can plan according to Look. I come out of the 0:06:35.200 --> 0:06:37.320 business world. I need to know what the world's gonna 0:06:37.320 --> 0:06:39.159 look like in a few years so I can put 0:06:39.200 --> 0:06:41.719 together my projections and make them happen. Why are you 0:06:41.720 --> 0:06:47.840 a Yankees fan? They like to win, blow, blow anything, 0:06:48.279 --> 0:06:50.679 And we are looking at a situation after the Mets 0:06:50.720 --> 0:06:52.680 going on, and you've been trying to encourage CVI Cohen, 0:06:52.680 --> 0:06:55.360 who is also a resident of your state, to buy 0:06:55.360 --> 0:06:57.720 your local team. Is that correct? Yeah, we have the 0:06:57.800 --> 0:07:01.200 yard Goats. It's an amazing minor league baseball team up 0:07:01.200 --> 0:07:04.040 at Hartford, and uh I doting thought, boy, if you 0:07:04.080 --> 0:07:06.440 want to get a foothold here bigger in Connecticut buying 0:07:06.440 --> 0:07:09.080 the yard Goats and make them a Mets franchise. So 0:07:09.120 --> 0:07:11.320 that's your pitch to him. That's why is he so 0:07:11.400 --> 0:07:13.120 give us the inside scoop? Is he going to buy? 0:07:13.840 --> 0:07:16.040 I think he plays his cards pretty close to the best. 0:07:16.400 --> 0:07:19.200 I think so too, Ned Lamont, thank you so much 0:07:19.240 --> 0:07:22.880 for being with us, Governor of Connecticut, here with us 0:07:23.000 --> 0:07:36.920 in Greta. Right now, we have someone who has been 0:07:36.920 --> 0:07:39.800 in the bond market for decades, Jim Zelter, co president 0:07:39.800 --> 0:07:43.040 of Apollo Global, who has really helped found the entire 0:07:43.080 --> 0:07:46.040 credit business which now has more than three fifty billion 0:07:46.040 --> 0:07:48.960 dollars of assets under management. And as John's been talking 0:07:48.960 --> 0:07:52.240 about all morning, this was the day of bond vigilantes. 0:07:52.240 --> 0:07:54.480 This is the year of bond vigilantes, and this is 0:07:54.560 --> 0:07:57.320 raising so much fear among people who have gotten used 0:07:57.320 --> 0:07:59.960 to zero rates over such a long period of time. 0:08:00.400 --> 0:08:03.720 Are you more nervous today or more excited? Well, you 0:08:03.800 --> 0:08:06.120 gotta respect it. Um. First of all, nice to be 0:08:06.160 --> 0:08:09.000 here this morning. Um. You know, certainly there's a big 0:08:09.000 --> 0:08:11.040 paradigm ship going on right now, and you have to 0:08:11.080 --> 0:08:14.280 respect the markets. As you said, the body vigilantes, they'll 0:08:14.280 --> 0:08:16.840 get rates where they should be, more so than the 0:08:16.840 --> 0:08:19.720 Fed or the central banks. But um, it's an interesting 0:08:19.720 --> 0:08:22.760 paradigm shift where you see where rates have been, and 0:08:22.800 --> 0:08:25.760 we've been in this period where uh there's been an 0:08:25.840 --> 0:08:29.520 undoe focus on low rates and it's put valuations very 0:08:29.600 --> 0:08:32.080 very high. So it's a period of transition. You have 0:08:32.120 --> 0:08:33.840 to respect it, but also you want to be on 0:08:33.880 --> 0:08:36.360 your front foot, which we've been able to do over 0:08:36.360 --> 0:08:38.240 the last several months and will continue to do. So 0:08:38.440 --> 0:08:40.720 what does that mean, Well, what it really means is 0:08:40.720 --> 0:08:42.960 if you've been proved in the last decade and not 0:08:42.960 --> 0:08:46.120 not been over your skis and valuations and have been 0:08:46.160 --> 0:08:48.480 thoughtful about what you put on the books. There's a 0:08:48.600 --> 0:08:51.959 very interesting time. The cost of capital now matters, purchase 0:08:52.040 --> 0:08:55.200 price matters, and those who have capital and have a 0:08:55.200 --> 0:08:58.280 lot of flexibility in their toolbox, you will find many 0:08:58.320 --> 0:09:01.200 interesting companies from which to give capital to. Are you 0:09:01.200 --> 0:09:03.320 taking more risk right now or less risk than you 0:09:03.320 --> 0:09:06.199 are a month ago? You know, we were measured. We 0:09:06.559 --> 0:09:08.800 run a very very large platform, as you said, over 0:09:08.840 --> 0:09:12.760 five fifty billion and aggregate over almost four billion in debt. 0:09:13.200 --> 0:09:16.120 You really can't pick the bottom um, it's really impossible 0:09:16.160 --> 0:09:19.040 to predict. You can prepare along the way, but we 0:09:19.120 --> 0:09:23.079 are we are methodically putting opportunities to work. Um, We've 0:09:23.120 --> 0:09:25.720 been active in the CLO market. We've been active in 0:09:26.280 --> 0:09:29.360 working with some of the banks on the large stocks indications, 0:09:29.360 --> 0:09:32.880 Citrix in particular. So, you know, I think I have 0:09:33.000 --> 0:09:36.080 a healthy respect for what's going on, but I don't 0:09:36.120 --> 0:09:38.640 think we are in the corner of cowering by any means. 0:09:38.679 --> 0:09:41.080 I love the sanitized language that you're using. And then 0:09:41.080 --> 0:09:42.839 I think about some of the stories that we've written, 0:09:42.880 --> 0:09:46.400 including you're talking about clos. We've worked with banks, We've 0:09:46.400 --> 0:09:49.559 helped them. You made incredible amounts of money, especially recently 0:09:49.559 --> 0:09:51.880 with UK c ls in the wake of some of 0:09:51.880 --> 0:09:54.760 the volatility with citrics. The banks that are all with 0:09:54.800 --> 0:09:57.600 all of these hung Bridge loans, right commitments that they 0:09:57.640 --> 0:10:01.160 made to finance mergers and acquisitions that are perhaps not 0:10:01.280 --> 0:10:03.720 priced the way that they were at the time of commitment. 0:10:04.240 --> 0:10:07.439 How many opportunities do you have to go in and 0:10:07.480 --> 0:10:11.320 buy some of these assets for the banks. Well, if 0:10:11.360 --> 0:10:13.959 you just put today in context with a decade or 0:10:14.000 --> 0:10:16.240 so ago in the in the GFC, the banks were 0:10:16.320 --> 0:10:20.120 arguably long five plus billion of loans and high yield. 0:10:20.520 --> 0:10:23.240 Today that number is circa eighty to a hundred billion, 0:10:23.679 --> 0:10:27.720 So it's a much smaller opportunity set uh, and much fewer, 0:10:27.880 --> 0:10:30.440 you know, not not as many names. So we we 0:10:30.520 --> 0:10:33.040 have a constant dialogue. We're a very active trader with 0:10:33.080 --> 0:10:36.880 the banks, you know, no permanent friends, no permanent enemies. 0:10:36.960 --> 0:10:39.120 You know. We we act, We act very very in 0:10:39.440 --> 0:10:42.920 great dialogue with them, but uncertain names. We will we 0:10:42.960 --> 0:10:46.600 will partner um in many regions, especially in the US 0:10:46.640 --> 0:10:48.880 and Europe, with the large banks. Are they willing to 0:10:48.920 --> 0:10:52.120 sell well, I think I think it's it's you. You 0:10:52.200 --> 0:10:55.080 have to have a realistic dialogue, and it's it's a 0:10:55.200 --> 0:10:58.200 it's a challenging position. I think they want to move on, 0:10:58.320 --> 0:11:00.080 they want to get back in business. I mean, the 0:11:00.120 --> 0:11:03.520 reality is the high yield financing markets are arguably shut 0:11:03.520 --> 0:11:06.880 down right now, um and I think that they would 0:11:06.880 --> 0:11:09.200 like to be in addition to be able to make 0:11:09.240 --> 0:11:12.800 new loans at appropriate levels and get paid fairly for those. 0:11:13.000 --> 0:11:15.440 So it's going to be an interesting period of transition 0:11:15.520 --> 0:11:18.480 between now and the end of the year. Traditionally, alternative 0:11:18.480 --> 0:11:22.600 asset managers, including Apollo have lights investing in credit that 0:11:22.760 --> 0:11:25.360 is not traded very often. Right, you invest in a company, 0:11:25.400 --> 0:11:28.440 you get more control, you also have higher yield. Is 0:11:28.440 --> 0:11:30.960 that the same now or do you find more opportunities. 0:11:31.000 --> 0:11:34.199 And the public credit markets, given that yields are now 0:11:34.280 --> 0:11:38.480 north of ten percent in many cases and arguably north 0:11:38.480 --> 0:11:42.000 of eight percent even for pretty high rated credits, well, 0:11:42.000 --> 0:11:44.120 there's a lot of a lot you brought up there, Um. 0:11:44.480 --> 0:11:47.440 In our credit business, we are really a performing investor. 0:11:47.559 --> 0:11:51.679 We're looking to extend, extend capital the companies that are 0:11:51.679 --> 0:11:53.960 growing and get paid back. So there's not really a 0:11:54.000 --> 0:11:57.920 distressed angle in our typical credit business, um to you, 0:11:57.960 --> 0:12:00.640 as you raised, um, there are when you had the 0:12:00.640 --> 0:12:04.120 dislocation we've had thus far, there are opportunities in the 0:12:04.120 --> 0:12:09.080 public markets, within the investment grade market with low dollar price, 0:12:09.200 --> 0:12:13.320 long duration assets, pretty interesting opportunities. And the private markets, 0:12:13.400 --> 0:12:16.560 you know, new capital is coming with better terms and 0:12:16.679 --> 0:12:19.760 better pricing. So you're at this unique period right now 0:12:19.800 --> 0:12:23.200 where there's actually opportunities and the higher end of both 0:12:23.240 --> 0:12:26.959 of those markets. It's interesting. High yield on a yield 0:12:27.040 --> 0:12:31.480 basis is somewhat attractive on a spread basis is sort 0:12:31.520 --> 0:12:34.640 of historical levels, and you know the the spreads this 0:12:34.720 --> 0:12:38.680 morning or mid five hundreds approaching six hundred, that's typically 0:12:38.679 --> 0:12:41.160 a time when when you get interested in high yield. 0:12:41.840 --> 0:12:44.480 Right now, the yields are approaching ten percent, which is 0:12:44.520 --> 0:12:48.439 a very attractive number. So you know, it's our it's 0:12:48.480 --> 0:12:50.040 my view that, you know, having done this for a 0:12:50.040 --> 0:12:54.160 few decades now, things are happening faster and faster and faster. 0:12:54.640 --> 0:12:56.840 The rate rise in the US and globally in the 0:12:56.880 --> 0:13:00.240 last you know, six months has been historic in only 0:13:00.240 --> 0:13:03.440 the space speed which has happened, but also the amount 0:13:03.640 --> 0:13:07.000 and in the past that might have happened over twelve, eighteen, 0:13:07.040 --> 0:13:10.840 twenty four months. So it's my suspicion that by the 0:13:10.880 --> 0:13:13.760 time we really are officially in a recession in twenty 0:13:13.840 --> 0:13:17.440 three or twenty four, the opportunity to buy paper will 0:13:17.520 --> 0:13:19.600 some of it will have evaporated. So you have to 0:13:19.640 --> 0:13:22.199 be measured in patient along the way. Do you think 0:13:22.200 --> 0:13:24.520 we're going to see a default cycle a kin Toy 0:13:24.559 --> 0:13:26.480 saw in two thousand and eight or even some of 0:13:26.480 --> 0:13:30.080 the prior ones into the early two thousands. Yes, you 0:13:30.120 --> 0:13:32.240 will see some degree of a default cycle when you 0:13:32.240 --> 0:13:34.920 you can't slow down the economy with the breaks that 0:13:35.120 --> 0:13:39.360 the the monetary policy is leading to today without expecting 0:13:39.440 --> 0:13:43.040 some accidents, it's going to happen. Reside reside mortgages have 0:13:43.080 --> 0:13:44.800 gone from the low to mid two is the north 0:13:44.840 --> 0:13:48.000 of six percent. There's going to be a default cycle. 0:13:48.080 --> 0:13:50.080 It may not be as pervasive, it may not be 0:13:50.120 --> 0:13:52.920 as wide and deep, but there will be some companies. 0:13:52.960 --> 0:13:55.600 And also not only the amount of debt, but the 0:13:55.679 --> 0:13:59.640 actual interest costs have have have increased dramatically on a 0:13:59.679 --> 0:14:02.000 floating rate basis. What's more attractive to you at this 0:14:02.080 --> 0:14:06.240 point looking for those idiosyncratic companies where you want to 0:14:06.280 --> 0:14:11.360 invest in or investing in niche investors UH actually going 0:14:11.480 --> 0:14:14.480 to other asset managers and saying we'll give you money, 0:14:14.600 --> 0:14:17.880 We'll give you a stake in our assets and go 0:14:17.920 --> 0:14:21.200 at it. Well, my answer us obviously both. Um. You 0:14:21.200 --> 0:14:26.000 know you're alluding to our recent announcements in Diameter, in Sofa, Nova, 0:14:26.280 --> 0:14:29.200 in Havevelli. These are all great managers that are proven 0:14:29.240 --> 0:14:32.360 their their wisdom and their judgment over time in their 0:14:32.400 --> 0:14:35.920 in their strategies. We're providing capital for them to grow. 0:14:36.520 --> 0:14:38.960 At the same time, we're very active on our own accounts, 0:14:39.000 --> 0:14:41.120 so you know we have we have a large platform, 0:14:41.160 --> 0:14:43.920 We're connected to a lot of folks, Um. But I 0:14:43.960 --> 0:14:46.240 think from us you'll see a strategy of being able 0:14:46.240 --> 0:14:50.440 to do both of those in concert you mentioned clos 0:14:50.480 --> 0:14:52.880 and I mentioned the United Kingdom. I know that that 0:14:52.960 --> 0:14:55.960 has been a public issue in terms of how much 0:14:56.000 --> 0:14:59.000 money you made buying clos at the right time and 0:14:59.040 --> 0:15:01.560 then seeing a policy response from the Bank of England. 0:15:01.880 --> 0:15:06.160 How much are you playing in the UK market right now? Well, 0:15:06.360 --> 0:15:09.480 I think from our perspective, the UK market, you know, 0:15:09.520 --> 0:15:13.360 it's it is a robust economy going through some great challenges, 0:15:13.560 --> 0:15:17.000 and you know, we were very active in post the 0:15:17.040 --> 0:15:21.000 GFC in the resi market place over there. I suspect 0:15:21.040 --> 0:15:23.480 in the residential market, in the commercial real estate market, 0:15:23.480 --> 0:15:26.160 you'll see us active over the next couple of years 0:15:26.480 --> 0:15:29.640 as they go through their challenges in the economy. Um, 0:15:29.680 --> 0:15:32.160 it's earlier, you know, really our activity in the celo 0:15:32.280 --> 0:15:35.240 market was really US and raw the Europe, with some 0:15:35.360 --> 0:15:38.200 in the UK. UM. But as you said earlier, like 0:15:38.200 --> 0:15:40.560 the cello market right now, if you look at the 0:15:40.560 --> 0:15:44.480 most senior tranches, um, it's a pretty draft coney assumption. 0:15:44.520 --> 0:15:48.960 They're assuming ten plus percent defaults for the next five years, 0:15:49.440 --> 0:15:51.720 which we think in some cases an opportunity to be 0:15:51.760 --> 0:15:54.880 a buyer. And is in Europe a similar story kind 0:15:54.880 --> 0:15:58.360 of taking place or is that yes? I means well 0:15:58.920 --> 0:16:02.120 in my view, Europe is a bit behind the US 0:16:02.240 --> 0:16:06.120 in terms of it's always um a bit tighter when 0:16:06.120 --> 0:16:09.360 the market's tight, and it and its accentuates the wides 0:16:09.480 --> 0:16:12.440 and courage of volatility. So there's plenty for us to 0:16:12.480 --> 0:16:15.280 focus on right now in the US. I think Europe 0:16:15.280 --> 0:16:17.200 and the UK will be a twenty three and twenty 0:16:17.240 --> 0:16:20.480 four opportunity set, but certainly the US is our primary 0:16:20.520 --> 0:16:23.720 focus right now. When we talk about investing alongside some 0:16:24.200 --> 0:16:27.920 smaller niche investors, do you have any interest in a 0:16:27.960 --> 0:16:30.600 big European bank that might be going through some distress, 0:16:30.680 --> 0:16:34.480 that might be splitting up certain aspects of its business. 0:16:34.840 --> 0:16:38.040 Would you ever be interested in acquiring certain aspects of 0:16:38.040 --> 0:16:41.080 that business? Well, you know, over the as I said, 0:16:41.160 --> 0:16:43.640 since since I weight or nine, there's been many instances 0:16:43.680 --> 0:16:46.520 in two thousand twelve and two thousand fifteen where we 0:16:46.640 --> 0:16:49.440 had strategies that really partnered with the banks or we're 0:16:49.440 --> 0:16:52.000 an off tank for the banks, whether it was credit 0:16:52.040 --> 0:16:55.240 card subsidiaries in Spain and Ireland, whether it was for 0:16:55.800 --> 0:16:59.160 real estate portfolios in in Germany and in the UK. 0:16:59.680 --> 0:17:02.280 We were always there as a partners like we were 0:17:02.280 --> 0:17:03.840 in O eight O nine for the U S Bank. 0:17:03.920 --> 0:17:07.040 So if there's a global bank and they are considering 0:17:07.200 --> 0:17:11.399 large scale strategic transactions, we certainly expect to be part 0:17:11.440 --> 0:17:14.480 of those dialogues. How much does your base case include 0:17:14.520 --> 0:17:17.160 four to four and a half percent fed funds rates 0:17:17.400 --> 0:17:20.800 for perhaps a year or even two, you know, I 0:17:21.240 --> 0:17:23.320 think that's got to be the base case. You were 0:17:23.440 --> 0:17:27.200 in a higher rate regime that has shocked the system, 0:17:27.359 --> 0:17:31.080 and the monetary policy makers are trying to really shock 0:17:31.160 --> 0:17:36.200 the economy on this on this nasty concept of inflation. 0:17:36.760 --> 0:17:39.280 So you have to expect we're in a higher rate 0:17:39.280 --> 0:17:42.520 period for some period of time. We're not macro investors, 0:17:42.560 --> 0:17:44.080 You've got plenty of other folks that can come up 0:17:44.080 --> 0:17:45.760 here and talk to you, but we're certainly in a 0:17:45.840 --> 0:17:48.000 higher rate regime for some period of time, and that's 0:17:48.040 --> 0:17:51.240 definitely shaping this view in terms of what's required in 0:17:51.320 --> 0:17:53.800 terms of payment from a lot of these companies. Jim Selter, 0:17:53.880 --> 0:17:56.040 thank you so much for taking the time a co 0:17:56.160 --> 0:18:03.840 president of Apollo Global. Lucky this morning not just because 0:18:03.840 --> 0:18:05.959 we have Muhammed our area around the table with us, 0:18:05.960 --> 0:18:08.600 but also because we joined by Naria Calvino, the Deputy 0:18:08.600 --> 0:18:11.439 Prime Minister of Spain, mad and Vice President, fantastic to 0:18:11.440 --> 0:18:13.560 have you with us in the building. Thanks for having me. 0:18:14.080 --> 0:18:17.239 Let's start here. The prospect of joint debt to do 0:18:17.359 --> 0:18:20.520 something about the energy crisis in Europe. Is that something 0:18:20.600 --> 0:18:24.160 you think we can find agreement on at the European level. Well, 0:18:24.200 --> 0:18:26.760 when we were hit by the pandemic, Europe reacted in 0:18:26.800 --> 0:18:30.600 a very decisive manner on the basis of unity and solidarity. 0:18:30.640 --> 0:18:32.800 I think that now this time around, that we're faced 0:18:32.840 --> 0:18:37.280 with global challenges again, a war at the DOORSEP of Europe, 0:18:37.320 --> 0:18:39.480 we should react with the same principles. You know. Whether 0:18:39.560 --> 0:18:43.240 that entails additional debt, isissuance or not, we will see. 0:18:43.520 --> 0:18:45.560 But in any case, we should act, you know, together 0:18:45.600 --> 0:18:48.359 in a decisive manner to tackle these challenges based on 0:18:48.400 --> 0:18:51.520 preliminary discussions. Would say the Germans, if they conveyed to 0:18:51.560 --> 0:18:54.359 you that that's something they would support. We were with 0:18:54.480 --> 0:18:57.880 Actually we had the bilateral summits between Spain and Germany 0:18:57.920 --> 0:19:01.400 this last week and we had an exchange with the ministers, 0:19:01.440 --> 0:19:04.080 also with with the Chancellor Shoals. He was one of 0:19:04.119 --> 0:19:06.440 the persons that was behind the issues of joint debt 0:19:06.600 --> 0:19:09.280 to address and to tackle the challenges from the pandemic. 0:19:09.920 --> 0:19:12.400 We didn't go into into the details, but I am 0:19:12.480 --> 0:19:14.320 quite sure that German is aware of the need to 0:19:14.359 --> 0:19:17.680 react in a manner which makes us stronger and allows 0:19:17.760 --> 0:19:20.240 us to to face the current challenges in the best 0:19:20.280 --> 0:19:24.040 possible manner for our populations. To your excellency, there was 0:19:24.160 --> 0:19:26.560 a market consensus developing that this is going to be 0:19:26.600 --> 0:19:29.919 a very difficult winter for Europe. It winter that may 0:19:29.960 --> 0:19:33.560 see Europe fall into recession. What's not clear is the 0:19:33.720 --> 0:19:37.240 length and depth of this potential recession. Do we have 0:19:37.320 --> 0:19:41.320 any indicators of what happens if indeed Europe falls into 0:19:41.359 --> 0:19:44.640 recession this winter? But I think what what what will 0:19:44.680 --> 0:19:47.560 happen will depend on what we do. That is something 0:19:47.600 --> 0:19:49.480 I think we have learned in the last three years. 0:19:49.960 --> 0:19:53.080 So I am not really deterministic in the sense of 0:19:53.160 --> 0:19:55.280 this is what's going to happen. We need to now 0:19:55.320 --> 0:19:59.720 take the right decisions to avoid this situation arising. Where 0:19:59.760 --> 0:20:02.120 mid in this work in the in the World Bank 0:20:02.200 --> 0:20:06.080 and I m F annual meetings. This is a very 0:20:06.160 --> 0:20:09.399 challenging and delicate point in time. The global economy is 0:20:09.400 --> 0:20:13.760 slowing down, inflation is is increasing in some Western economies. 0:20:14.200 --> 0:20:15.840 But I hope that we are able to make the 0:20:15.960 --> 0:20:20.080 right decisions to avoid these scenarios to arise in practice. 0:20:20.280 --> 0:20:21.919 And what do we say to people who say the 0:20:21.920 --> 0:20:26.639 initial conditions are such that there's almost no policy flexibility. UM, 0:20:26.720 --> 0:20:31.280 the ECB has to address inflation, UM, fiscal space is 0:20:31.280 --> 0:20:34.600 limited and if you go too far, the bond vigilantes 0:20:34.680 --> 0:20:36.280 may come in. Just look at what has happened to 0:20:36.320 --> 0:20:39.760 the UK. And the reality is that even if governments 0:20:40.280 --> 0:20:44.040 wish to move, the amount of measures available to them 0:20:44.119 --> 0:20:46.720