Speaker 1: Bloomberg Audio Studios, podcasts, Radio News.
Speaker 2: Kent a fantastic conference.
Speaker 1: We talked about geopolitics, regulation, the Trump administration, Europe. So
Speaker 1: there's nothing at all going on, and we have forty
Speaker 1: five minutes to try.
Speaker 2: And put the world to rights. So let's start about
Speaker 2: the markets.
Speaker 1: What do you think the markets are seeing and not
Speaker 1: seeing right now?
Speaker 3: So the markets are seeing the enthusiasm that the Trump
Speaker 3: administration has created in the American investing public and in
Speaker 3: corporate America.
Speaker 4: I mean, we'll get into some policy details in a.
Speaker 3: Few minutes, but it's important to understand that this administration
Speaker 3: is clearly trying to encourage economic growth in the United States.
Speaker 3: They are pursuing a set of policies to reindustrialize America,
Speaker 3: and they are unquestionably interested in America's prosperity in a
Speaker 3: way that we have rarely seen from an administration in
Speaker 3: years past. Secondly, the Trump administration is very much aligned
Speaker 3: with seeing the success of the American worker.
Speaker 4: So a number of the policies that are being.
Speaker 3: Effectuated really are about the average American family feeling that
Speaker 3: life is better and working better for them. This backdrop
Speaker 3: is fueling much of the enthusiasm that we see in
Speaker 3: markets in the United States.
Speaker 4: And then, of.
Speaker 3: Course we're on a program of both fiscal and monetary
Speaker 3: stimulus that you would expect to see in the middle
Speaker 3: of a recession. We're seeing right here right now in
Speaker 3: a period of near full employment several years.
Speaker 4: Into the business cycle.
Speaker 3: So we're definitely on a bit of a sugar high
Speaker 3: in the US economy right now.
Speaker 1: So broadly have markets moved away from the terriff issues.
Speaker 3: That the teriff issue is pretty much in the rear
Speaker 3: view mirror right now from the perspective of the market
Speaker 3: day and out.
Speaker 4: Now.
Speaker 3: The issues that relate to tariffsicular high inflation are yet
Speaker 3: to be resolved.
Speaker 4: There's a sense of.
Speaker 3: Almost inevitability that the inflation genie is going to go
Speaker 3: back in the bottle. But I think that's a very
Speaker 3: premature conclusion. If you look at both the immigration policies,
Speaker 3: the fiscal policies, and the military policies, it's a very
Speaker 3: pro inflationary environment, and I think the markets are just
Speaker 3: way too calm about the prospects of a substantial move
Speaker 3: higher in inflation.
Speaker 1: Is the FED right to focus on the jobs labor
Speaker 1: market instead of inflation.
Speaker 3: So I think that is a really interesting debate. And
Speaker 3: I remember when when Janet Yellen became the Chair of
Speaker 3: the FED, she had a very simple framework that she
Speaker 3: thought about. She thought about the fact that the US
Speaker 3: had gone through one significant recession and the risk of
Speaker 3: another recession and the ensuing job loss and human capital
Speaker 3: atrophy that would go with a second, adjacent or nearby
Speaker 3: recession would be incredibly.
Speaker 4: Damaging for millions of Americans.
Speaker 3: You lose your job twice in just a few years,
Speaker 3: you really do become separated.
Speaker 4: From the broader employment market.
Speaker 3: And that was the lens through which she made a
Speaker 3: number of decisions to be in both at the time
Speaker 3: and in retrospect, reasonably dubbish in terms of managing industry
Speaker 3: policy right here right now, I think that argument is
Speaker 3: a bit hard to reach. And the FEDS trying to
Speaker 3: make a decision between buying some downside protection on the
Speaker 3: labor market and managing inflation, and I think they're making
Speaker 3: a decision that puts them at risk if we do
Speaker 3: see inflation reaccelerate early into twenty twenty six, is that.
Speaker 1: What you're expecting or reacceleration inflation? Why has it not
Speaker 1: played out like many many people thought that behind.
Speaker 3: I mean, we're still well about target, right, I mean,
Speaker 3: let's just cut to the chase. Inflation is substantially about
Speaker 3: target and substantially above target and all.
Speaker 4: Forecasts for next year.
Speaker 3: I mean, it's part of the reason the dollars depreciated
Speaker 3: by about ten percent in the first half of this year.
Speaker 3: It's the single biggest decline in the US dollar in
Speaker 3: six months in fifty years. Gold is at record highs,
Speaker 3: and the appreciation in other dollar substitutes, to use that
Speaker 3: word loosely, and items like crypto for example, is unbelievable.
Speaker 3: So we're seeing substantial asset inflation away from the dollar
Speaker 3: as people are looking for ways to effectively de dollarize
Speaker 3: or de risk their portfolios visa the US sovereign risk.
Speaker 2: Are you really seeing that?
Speaker 4: Just check the price of goal. Well, I mean, I
Speaker 4: don't have to look very hard.
Speaker 2: Its own it's a life of its own. Gold.
Speaker 4: No, but it's a life of its own.
Speaker 3: As you see sovereigns around the world, central banks around
Speaker 3: the world, as you see individual investors around the world go,
Speaker 3: you know what, I now view gold as a safe
Speaker 3: harbor asset in a way that the dollar used to
Speaker 3: be viewed.
Speaker 4: That's what's really concerning to me.
Speaker 3: And there's been plenty of published research in recent weeks
Speaker 3: months about foreign investors now when they buy US equities,
Speaker 3: hedging the returns back to their local currency.
Speaker 4: So that again is a bifurcation of I'm going to
Speaker 4: bet on.
Speaker 3: American business, but I want to immunize some of my
Speaker 3: sovereign exposure to the United States.
Speaker 1: Can the previous panels talking about the shutdown, given where
Speaker 1: we are in the shutdown, can the FED properly do
Speaker 1: its job at the end of the month in these
Speaker 1: circumstances where we may not have enough data.
Speaker 3: I don't think the data over a few weeks should
Speaker 3: really be that determinative to the FED.
Speaker 4: I mean, that's sort of over.
Speaker 3: Overgrandizes what the impact or importance to that data is,
Speaker 3: particularly with the sampling errors that's intrinsic in how that
Speaker 3: data is produced and compiled for the FED. I just
Speaker 3: think that's a bit of a misplaced warrior concern.
Speaker 2: Do you worry about the shutdowns? Will stop?
Speaker 4: Look?
Speaker 3: The shutdown is symbolic of a different problem, which is
Speaker 3: the dysfunction between the Republican and Democratic Party on resolving
Speaker 3: issues with respect to the budget.
Speaker 4: The United States of America.
Speaker 3: And to be clear, both parties today are guilty of
Speaker 3: just profligate spending.
Speaker 4: You know, as I said at.
Speaker 3: The start, the US fiscal situation is that of a
Speaker 3: nation that's trying to work its way out of a recession.
Speaker 4: Except the reality is we're multiple years into a very
Speaker 4: high period of growth. This is where we should.
Speaker 3: Be running a deficit of you know, in the Clinton day,
Speaker 3: as we ran a surplus at this point in the
Speaker 3: business cycle, We're now running a deficit of close to
Speaker 3: six six to seven percent, depending upon where a number
Speaker 3: of things land.
Speaker 4: That is just completely irresponsible.
Speaker 3: And so what's amazing is we're having a shutdown debate
Speaker 3: over the scheme of things a relatively small amount of money,
Speaker 3: and neither party is stepping up the plate to deal
Speaker 3: with or grapple with the reality that the United States
Speaker 3: needs to endure a fair amount of fiscal reform to
Speaker 3: be in a path for long term sustainability.
Speaker 2: Why is it not being talked about?
Speaker 3: It's politically unpopular, and unfortunately politics have gotten shorter and
Speaker 3: shorter and shorter in horizon. You know, can you imagine that,
Speaker 3: Like I said in the Clinton day, as they signed
Speaker 3: a budget with a surplus, and yet that was in
Speaker 3: our lifetime. It's been a long time since we've seen
Speaker 3: that level of discipline in Washington around managing the affairs
Speaker 3: of the US economy.
Speaker 1: You worry a lot about debt, or you worry about debt,
Speaker 1: what's the way I want?
Speaker 3: I mean, you must also, like we all have to
Speaker 3: worry about the level of debt we have in the
Speaker 3: United States, and the market is pretty cool about it.
Speaker 4: The market is we'll look past it for a few years.
Speaker 3: But if you go out with anybody to talk about
Speaker 3: what they worry about with respect to the US economy,
Speaker 3: the fiscal situation is almost always top of list. So
Speaker 3: you know, I think there's one thing to keep in mind,
Speaker 3: which is acid prices reflect a level of exuberance that
Speaker 3: we see today.
Speaker 4: But I got to tell you, if you're out with
Speaker 4: anybody who's.
Speaker 3: The asset manager business top of this concerns, the level
Speaker 3: of spending in Washington is always top three, if.
Speaker 4: Not number one, on the list.
Speaker 2: What's the way out?
Speaker 3: Well, the way out is we need I mean, first
Speaker 3: and foremost, growth is an important part of the way out,
Speaker 3: and this is where the Trump's administration focus on deregulation
Speaker 3: is so important. It's so important in terms of creating
Speaker 3: an environment in which growth can exist, like really important
Speaker 3: unleash unleashed the animal spirits in America. And the one
Speaker 3: thing about this country different than most countries is the
Speaker 3: entraal class in this country is incredibly ambitious and it
Speaker 3: is really able to make profound changes happen. I mean,
Speaker 3: if you look at if you look across our investment portfolios,
Speaker 3: a substantial portion of all the money we invest is
Speaker 3: in business has started in the last fifty years. I mean,
Speaker 3: it's remarkable the wealth created in this country by newly
Speaker 3: forgmned businesses.
Speaker 4: It's just stunny. It's the envy of the world.
Speaker 3: And the Trump administration is certainly taking steps to help
Speaker 3: encourage that canntinued American success story. But we also need
Speaker 3: to give real consideration to tax policy and to spending policies.
Speaker 3: And I think that the the how are they rebranding,
Speaker 3: rebranding the big beautiful Bill at this point, do you
Speaker 3: have the rebranding is.
Speaker 4: Going to be yet?
Speaker 2: How would you rebrand it?
Speaker 4: Well?
Speaker 3: I mean, I don't think there's a nice way to
Speaker 3: put lipstick on that pig. I mean it's a pro
Speaker 3: cyclical tax cut late in the economic cycle. And you know,
Speaker 3: everybody in this room, like, let's be clear, no one
Speaker 3: wants to pay more in taxes. But if you're not
Speaker 3: on a sustainable set of tax policies in the best
Speaker 3: of times, what policies will that.
Speaker 4: Unleash in the worst of times?
Speaker 3: You know, for example, the United States head towards a
Speaker 3: wealth tax when the inevitable bills come due, will be
Speaker 3: head towards tax rates that we last saw in Europe
Speaker 3: sixty seventy eighty percent as the inevitable bills come do
Speaker 3: what is the long term consequence of these policies right here,
Speaker 3: right now? And I think people are very concerned about
Speaker 3: what that might be in ten or fifteen or twenty years.
Speaker 4: How to inheritance taxes have to.
Speaker 3: Change in light of the tremendous amount of wealth held
Speaker 3: by the baby boomers and the tremendous amount of debt
Speaker 3: that their generation.
Speaker 4: Was a part of.
Speaker 3: So I think these are going to be really interesting
Speaker 3: policy debates that will merge seven years, ten years, fifteen
Speaker 3: years down the road, which could have some pretty adverse consequences.
Speaker 3: I mean, particularly for American non for realism today is
Speaker 3: not sure. You're like, if I build a great business,
Speaker 3: I will get to keep a substantial amount of wealth
Speaker 3: I create. If you go back to a world of
Speaker 3: seventy percent tax rates that we had in this country
Speaker 3: in this last century, maybe throwing a wealth tax for
Speaker 3: good measure you may really impact that zeitgeist that is
Speaker 3: so powerful in terms of our economic prosperity.
Speaker 1: Do you see the animal spirits in the US because
Speaker 1: a lot of chief executives say, look, they like some
Speaker 1: of the policies, but there are also a lot of
Speaker 1: policies it could be visas or others, and because they're
Speaker 1: uncertain where the next one comes from, they're a little
Speaker 1: bit reluctant to spend.
Speaker 3: Right now, Well, I mean, let's be clear that the
Speaker 3: Trump administration has been able to give us a lot
Speaker 3: that we love and a lot that we hate. Right,
Speaker 3: They're an equal opportunity giver. And on the pro side
Speaker 3: is clearly the push for deregulation is clearly a message
Speaker 3: to American whether it's small business owners or entrepreneurs, that
Speaker 3: this country wants to see our commercial class succeed. That's
Speaker 3: a foreign language to the Biden administration. I mean, they
Speaker 3: had no connectivity with American business. The Trump administration is
Speaker 3: very connected in a very different and profound way. But
Speaker 3: having said that, the terror policy has had incredibly uneven
Speaker 3: impacts across the commercial landscape. I mean, I really do
Speaker 3: feel sorry for the small and medium sized businesses that
Speaker 3: that are single source in terms of their goods from
Speaker 3: from Asia who are now seeing tariffs that are at
Speaker 3: levels that are unimaginable in the context of their business model.
Speaker 3: They're really going to be in a world of hurt
Speaker 3: over the months ahead, and they're not going to have
Speaker 3: the flexibility that you know, a large conglomerate will have
Speaker 3: and being able to re architects, supply chains and navigate around.
Speaker 4: These these issues.
Speaker 3: So that that's an area that's that's quite painful to watch.
Speaker 4: The impact on farmers.
Speaker 3: I mean that the Chinese have voted very clearly to
Speaker 3: buy their food products from other countries and it's really
Speaker 3: hitting the American farming community quite hard. That's that's painful
Speaker 3: to watch play out. The immigration policies, I must say
Speaker 3: I scratched my head over we we as a nation
Speaker 3: are facing a birth rate that's that's below that required
Speaker 3: to make contain our population. So unless the United States
Speaker 3: actually wants to shrink in size over the next fifty years.
Speaker 3: We're going to have to permit immigration, and I would
Speaker 3: think that our policies would be around trying to encourage
Speaker 3: the best and brightest around the world coming to the
Speaker 3: United States and building careers and building families and building
Speaker 3: roots in our country. You know, I've long said every
Speaker 3: single student in the United States with a STEM degree
Speaker 3: should get a green card, staple that diploma and a
Speaker 3: path to citizenship. You know, roughly fifty percent of all
Speaker 3: the Silicon Valley startups are started by immigrants.
Speaker 4: I mean, it's just remarkable.
Speaker 3: How this country has won in the global war for talent,
Speaker 3: and we should continue to pursue that aggressively. And then
Speaker 3: on the millions of people who came across the borders
Speaker 3: in the last several years, you know, I applaud the
Speaker 3: President for controlling our borders. It was really important to
Speaker 3: stop that flow of illegal immigrants. And unfortunately, as you
Speaker 3: and I both know, a number of countries in South
Speaker 3: and Central America didn't send us their best and brightest.
Speaker 3: They did empty their prisons and send people to the
Speaker 3: United States that.
Speaker 4: We really should not have welcomed. Warmly.
Speaker 3: So I applaud the President for shutting the borders, but
Speaker 3: those who've come to this country, who have placed roots here,
Speaker 3: who are working and contributing to our economy, we should
Speaker 3: find a path for them to be able to stay
Speaker 3: here and continue to contribute. They're important in agriculture, they're
Speaker 3: important in construction, They're important in.
Speaker 4: The leisure industries. They do a lot of jobs that will.
Speaker 3: Be damn near impossible for us to fill with American
Speaker 3: American born labors.
Speaker 4: That's just gonna be really tough.
Speaker 3: And what gets lost in some of the debate is
Speaker 3: they're not taking jobs from Americans by and large, they're
Speaker 3: actually playing critical roles that help American businesses thrive and succeed,
Speaker 3: that allow us to employ more people at higher wages
Speaker 3: across the broader economy. So I think when it comes
Speaker 3: to immigration were at large, I think we've come off
Speaker 3: the rails and we really do need to rethink our policies.
Speaker 4: First and foremost President is right to close the borders.
Speaker 3: But if you're at home depot in the morning looking
Speaker 3: for a job, that's not where I should be trying
Speaker 3: to find the person to deport.
Speaker 1: On attracting the best and Righteous Citadel has been doing that.
Speaker 2: Do you worry about your hiring.
Speaker 1: In the future because of the visa policy?
Speaker 4: I mean, you know, fortunately, we're.
Speaker 3: In a sector of the economy where the we're one
Speaker 3: hundred thousand dollars one time cost to hire persons not
Speaker 3: going to be.
Speaker 4: Make it or break it. I worry far more.
Speaker 3: About the brilliant student in India who doesn't come to America,
Speaker 3: or the gifted student in mathematics and physics who.
Speaker 4: Chooses to stay in China.
Speaker 3: I mean I was in China shortly after Deep Sek
Speaker 3: was announced. Let me tell you what the Chinese were
Speaker 3: profoundly proud of. Not one author on Deep Seek was
Speaker 3: educated in America. It was a point of national pride
Speaker 3: in every meeting I went to, was the profound pride
Speaker 3: that not one person who authored Deep Seek was educated
Speaker 3: in America.
Speaker 1: That has a lot of consequences, has dire consequences longer term.
Speaker 1: What are you expecting from the Trumpe meeting that we
Speaker 1: may get before.
Speaker 2: The end of the year.
Speaker 4: I mean, what I would love to see is Dayton.
Speaker 3: I would like to see the relationship reach a point
Speaker 3: of stability. Right now, it's two great superpowers that are
Speaker 3: trying to find a new equlibrium, And so long as
Speaker 3: we are both competing from a position of self interest
Speaker 3: in a world of seven billion people in a rapidly
Speaker 3: changing environment, you're gonna have points of friction. And would
Speaker 3: be wonderful to see that that come later this year,
Speaker 3: that President she and President Trump are able to find
Speaker 3: in some sense a more constructive set of rules of
Speaker 3: engagement that both countries in our position to both prosper
Speaker 3: and to meet the needs of their citizens and have
Speaker 3: less tension between our two superpowers day in and day out.
Speaker 2: Do you worry about the world fragmenting?
Speaker 4: I know the world. The world has fragmented.
Speaker 2: We're put to a point of no return.
Speaker 3: So the question is is what is the long term
Speaker 3: ability for the United States to play a pivotal and
Speaker 3: influential role in the development of Africa, South America and
Speaker 3: most of Asia Asia ex the most developed countries. And
Speaker 3: I go to Africa several times a year. Chinese is
Speaker 3: generally speaking in that in that continent provide the power plants,
Speaker 3: they build the airports, they provide the cellar networks. So
Speaker 3: when you turn on your phone, turn on the lights
Speaker 3: and go anywhere by plane, and it's all provided for
Speaker 3: by the Chinese.
Speaker 4: You tell me whose orbit that country is in.
Speaker 3: The United States used to control those orbits pretty carefully.
Speaker 3: You know, General Electric was an incredible source not just
Speaker 3: of industrial might, but of policy might, because it used
Speaker 3: to be companies like General Electric that really projected American
Speaker 3: power around the world. And I would really like to
Speaker 3: see the United States be in a position to reassert
Speaker 3: that form of interconnectedness, not just through foreign policy, but
Speaker 3: through industrial connectivity. And unfortunately, as you know, the history
Speaker 3: of tariffs is that companies tend to retreat back to
Speaker 3: their domestic market.
Speaker 4: We're to be perfectly blunt.
Speaker 3: They can provide an inferior product at a higher price
Speaker 3: point to a disillusion can and they ultimately become.
Speaker 4: Uncompetitive on the world stage.
Speaker 3: So ironically, the administration is pushed towards higher tariffs. If
Speaker 3: we just look at the history where this has been
Speaker 3: done around the world, it's usually a story of retrenchment
Speaker 3: or retracement from your global position to a more local position.
Speaker 3: That's the wrong direction of travel for the United States
Speaker 3: of America.
Speaker 1: Do you tell this to the current administration? How do
Speaker 1: you navigate that relationship.
Speaker 3: I have a team of people who are in constant
Speaker 3: dialogue with members of the Administration, the House, and the Senate,
Speaker 3: and we've been pretty vocal on this over the course
Speaker 3: of the last several months. I mean, you know, from
Speaker 3: my perspective, the right economic policies, the right policies on immigration,
Speaker 3: the right policies and education, the right policies on culture
Speaker 3: can have a profoundly positive impact on the United States
Speaker 3: for decades to come. And with one part control, which
Speaker 3: is relatively rare in American history, you do have a
Speaker 3: two year window here to effectuate those changes and to
Speaker 3: really to help the president realize his dream of making
Speaker 3: America great again.
Speaker 4: I mean, I do believe that.
Speaker 3: His actions and choices come from a from a from
Speaker 3: a good place, but I do wish that that he
Speaker 3: had better advisors that were better grounded in economic theory,
Speaker 3: in particular to lead this country to a more prosperous future.
Speaker 1: There's been a lot of talk about FED independence. Does
Speaker 1: that do I mean, how should we view that?
Speaker 2: Is it noise or is there real danger that?
Speaker 3: Look, I think it's a it's a it's a it's
Speaker 3: a very different Let me just give you this succinct answer.
Speaker 4: Why does FED independence matter?
Speaker 3: Because from time to time, the FED has to make
Speaker 3: choices that are really politically unpopular. That's why you want
Speaker 3: FED independence. You want the FED to be independent so
Speaker 3: that when you have to raise rates to break the
Speaker 3: back of inflation, it's going to happen. And if the
Speaker 3: FED is viewed as being politically captive, which politician do
Speaker 3: you think on either side of the aisle is going
Speaker 3: to argue to raise rates and to slow the economy
Speaker 3: down and cause millions of people to lose their jobs.
Speaker 4: Can you name a politician who do that.
Speaker 2: Political suicide?
Speaker 4: Right?
Speaker 3: And if you're unwilling to break the back of inflation,
Speaker 3: you run the risk of runaway inflation, and in particular
Speaker 3: in a profound way. In a profound way, you hurt
Speaker 3: those Americans who are most vulnerable, and particularly the retirees
Speaker 3: and near retirees who no longer have the flexibility in
Speaker 3: either their career or their investment portfolios to withstand the
Speaker 3: damage that inflation yields. So I think this is a
Speaker 3: huge strategic mistake by the administration because of inflation does
Speaker 3: rear it's ugly head. They want somebody to be angry
Speaker 3: with like the armrest of the American people are gonna
Speaker 3: be angry with and who is ever Paul's successor will
Speaker 3: bear the brunt, just as as you know Vulgar did
Speaker 3: years ago in making that really tough call to raise
Speaker 3: rates in a way that's painful to the American families
Speaker 3: in the short run, but necessary to protect the interests
Speaker 3: of our country holistically.
Speaker 1: But the market has largely looked through that, right, So
Speaker 1: maybe they're waiting on the Supreme Court to see what happens.
Speaker 3: With these I think you can't you can't underestimate just
Speaker 3: you know, we are we are deep in a bull market,
Speaker 3: and there is a lot of fomo. There's a lot
Speaker 3: of fomo, And I just think to sort of chalk
Speaker 3: everything up to the market looks passed. The market looks past,
Speaker 3: the market looks past. Crash of eighty seven.
Speaker 4: And I'm not saying this is going to happen tomorrow.
Speaker 3: You know, the big news story on the on the
Speaker 3: day of the crash of eighty seven was Nancy Reagan
Speaker 3: had just been diagnosed with breast cancer and there was
Speaker 3: an attack by some inconsequential Iranian.
Speaker 4: Or Iraqi boat on a US vessel.
Speaker 3: I mean like inconsequential, and the market lost almost a
Speaker 3: quarter of its value in a day. In a day like,
Speaker 3: the market lost almost a quarter of its value.
Speaker 4: So I sort of think just.
Speaker 3: To sort of say like the market looks past all
Speaker 3: this misses the fact that when the market chooses to
Speaker 3: change its mind, the correction can be extraordinarily quick and
Speaker 3: extraordinarily painful.
Speaker 2: Does it need a catalyst to change direction?
Speaker 4: I mean, in eighty seven we didn't have a catalyst.
Speaker 3: Now in eight, clearly you had the continued to erose
Speaker 3: the capital base the banking system due to the housing
Speaker 3: market turmoil. But even the massive financial losses in eight
Speaker 3: in the scheme of life, had very little forewarning. So
Speaker 3: I just I think it's very important that that when
Speaker 3: you're in the money manager business, you put your risk
Speaker 3: management hat on. You keep in mind that no matter
Speaker 3: how exuberant the market may be at any moment in time,
Speaker 3: when you're late in that cycle, that cycle can shift
Speaker 3: in the blink of an eye.
Speaker 1: But for the moment, it's AI valuations right that are
Speaker 1: propping everything up.
Speaker 3: AI is clearly having a moment in the sun today,
Speaker 3: and the AI community is going to have to demonstrate
Speaker 3: its ability to deliver literally trillions of dollars of value.
Speaker 3: And you know, I I as an American, hope that
Speaker 3: that comes to pass.
Speaker 4: But there are.
Speaker 3: Reasons that we should all be just just a bit
Speaker 3: concerned about the speed with which this change will happen.
Speaker 4: I mean, it's a simple here's a simple frameworker.
Speaker 3: When they invented the personal computer, Okay, did we think
Speaker 3: the world was going to change in a profound way.
Speaker 3: Of course we did, but it's taken fifty.
Speaker 4: Years to play out. We're still very much in the
Speaker 4: middle of the journey AI today.
Speaker 3: Large language models particular, have been in existence for a
Speaker 3: few years.
Speaker 4: I think there's a real chance that when we think
Speaker 4: about the.
Speaker 3: Forms of AI that are alluded to by many of
Speaker 3: the markets leaders today, that their dream for the future
Speaker 3: may not take three to five years to play out.
Speaker 4: It could be twenty years, it could be thirty years.
Speaker 3: You know, It's like the Internet and I people hate
Speaker 3: this analogy, but like the dot.
Speaker 4: Com moment.
Speaker 3: Back at the start of this century, did anyone have
Speaker 3: any doubt that the Internet was going to change the world.
Speaker 2: No.
Speaker 4: Has the Internet changed the world, absolutely, but it takes
Speaker 4: longer than anticipated. And was there a.
Speaker 3: Period in which which there was a real sort of
Speaker 3: sorting of the winners and losers that took place on equivocally,
Speaker 3: on equivocally, And I think that the AI story will
Speaker 3: have many the same components. There really will ups and downs,
Speaker 3: ups and downs. I mean, I'm going to age myself.
Speaker 3: But like Lotus one two three, all right, wow, I
Speaker 3: mean unbelievable blue VisiC health out of the water.
Speaker 4: That's really aging oneself, isn't that?
Speaker 3: And then Excelf came out of the scene and Lotus
Speaker 3: one two three literally disappeared into the duskin of history, right,
Speaker 3: And that all happened in just a few years. You know,
Speaker 3: I remember I used to buy on a website called
Speaker 3: buy dot com, but became like I bet that you're
Speaker 3: I wonder if they even links to anything today.
Speaker 4: But how many you know, there was e Toys and
Speaker 4: Pets dot com.
Speaker 3: There were hundreds and hundreds of consumer sites to buy
Speaker 3: goods and services from Amazon and Walmart have locked that
Speaker 3: market up today. We're going to see a lot of
Speaker 3: fallout in the I story over the next couple of
Speaker 3: years and long run, are we going to continue to
Speaker 3: see incredible advances in the use of computers and technology
Speaker 3: to improve productivity.
Speaker 4: Absolutely, that's going to happen, unquestionably.
Speaker 1: Ken, talk to me about the tokenization push. What are
Speaker 1: the risks around that?
Speaker 3: You just had the regulatory panel right, what was what
Speaker 3: did they say? I mean, I'm going to tell you
Speaker 3: what I say. What a great opportunity for shysters. I mean,
Speaker 3: let's just go ahead and unleash the worst of the
Speaker 3: animal spirits. Let's find a new way for retail America
Speaker 3: to just get absolutely hosed.
Speaker 4: So cushion, cushion.
Speaker 3: That will be a credible moment on Bloomberg, I'm sure.
Speaker 3: And the big picture is the US securities market.
Speaker 2: Is just.
Speaker 4: Is extraordinarily efficient.
Speaker 3: You know, if you're a retail investor, you generally trade
Speaker 3: today for less than a fraction of a sent and
Speaker 3: a bit spread and you pay no commission. You know,
Speaker 3: I love the members of the tokenization Communee. Oh, it's
Speaker 3: so expensive to trade today. I don't even know what
Speaker 3: my annual DTCC fees are there so low, like it,
Speaker 3: it's trading the United States in most asea classes has
Speaker 3: approached costless. So you can't tell me that tokenization is
Speaker 3: about reducing the cost or trading. What it's really about
Speaker 3: is a mechanism by which I think a lot of
Speaker 3: investors are going to be lured into frankly pretty poor investments,
Speaker 3: and I worry about that.
Speaker 4: It's it's like an end of cycle phenomena.
Speaker 3: Let's go ahead now and and in some sense, let.
Speaker 4: The boiler rooms re emerge.
Speaker 3: And you know what's really amazing about the United States,
Speaker 3: The boilerrooms pretty much disappeared over the last fifteen years.
Speaker 3: I mean, we have we as a country have done
Speaker 3: have done a profoundly extraordinary job of you know, great,
Speaker 3: great transparency in our companies.
Speaker 4: There's been very little corporate fraud in the United.
Speaker 3: States, and people people generally have made money investing in
Speaker 3: businesses that have turned around and created tremendous amounts.
Speaker 4: Of value for the economy.
Speaker 3: I mean, the amount of Apple owned by retail investors
Speaker 3: is stunning, and the amount of both not just corporate
Speaker 3: profit but consumer value created by Apple or Amazon or
Speaker 3: Microsoft is stunning.
Speaker 4: Like that is when a capitalist.
Speaker 3: System is working for its citizens and tokenization is not
Speaker 3: part of that story.
Speaker 1: How do you see citadel securities growing? Is there anything
Speaker 1: where you're not present for what you want to be present?
Speaker 3: There's there's tremendous amounts of white space that civil securities
Speaker 3: can and will grow into. Everything from the treading of
Speaker 3: mortgage backed securities of the United States to government bonds
Speaker 3: in Asia. There's a there's a tremendous amount of white
Speaker 3: space for civil securities to grow into. And I'm really
Speaker 3: thrilled that Jim Esposito joined the firm, you know, roughly
Speaker 3: a year ago. He's had a tremendous impact on expanding
Speaker 3: our connectivity with clients around the world, and it really
Speaker 3: honing civil securities leadership on what are the key in
Speaker 3: saliling problems that we need to solve to better further
Speaker 3: the interests of our clients. Because businesses that stay focused,
Speaker 3: that are client centric at the core, our businesses that
Speaker 3: solve real, tangible problems, and people will pay you to
Speaker 3: help solve their problems. And Jim's just done a great
Speaker 3: job in instilling that ethos.
Speaker 4: And culture within the four walls of cityl Securities.
Speaker 1: A lot of the prediction market platforms are growing like crazy.
Speaker 2: Is that an opportunity for Citadel.
Speaker 3: It's an area that we will we will of course
Speaker 3: look at and stay very much on top of as
Speaker 3: it continues to grow and I think it's reasonable to
Speaker 3: say that if that market continues to grow, and given
Speaker 3: our focus on retail vests across those securities, we will
Speaker 3: step into provide liquiding in that space if it continues
Speaker 3: to have the success it's had.
Speaker 1: I know the past, you've talked about possibly, you know,
Speaker 1: bringing in public. Is that still the case?
Speaker 3: You know, I'm I'm very fortunate that I don't have
Speaker 3: to make that decision day to day out. That comes
Speaker 3: down to Punk Chow CEO and his leadership team, and
Speaker 3: that ball is really in his court he will.
Speaker 4: Have to decide and deal with.
Speaker 3: And this is one of the things that the President
Speaker 3: is focused with the burns of being the CEO of
Speaker 3: a public company. And I know the President has talked
Speaker 3: about moving reporting to a semi annual cycle.
Speaker 4: I actually don't think that's the problem.
Speaker 3: You know, every company the United States produces financials monthly,
Speaker 3: if not more frequently today. The quarterly reporting per ses
Speaker 3: is not a burden to being public. But what you
Speaker 3: want to think about as a public company is, you know,
Speaker 3: the constant harassment from the class action lawyers, the constant
Speaker 3: harassment from those who are trying to agitate on your
Speaker 3: proxy statement, you know, solving those issues would be much
Speaker 3: more helpful encouraging companies to go public than trying to
Speaker 3: reduce the very transparency that has made the United States
Speaker 3: such a incredible destination for capital from around the world.
Speaker 1: But private markets are growing by the minute.
Speaker 4: They are growing.
Speaker 3: And just to be clear, you know, we have a
Speaker 3: small number of outside shareholders and sal securities, and they
Speaker 3: have quarterly financials and I bet they even get monthly numbers.
Speaker 3: Two all right, So the short termism is not driven
Speaker 3: by the frequency of your financial reporting. It's driven by
Speaker 3: the vision and leadership of your management team or lack thereof.
Speaker 3: And I've seen stories in the United States of incredible
Speaker 3: wealth created by CEOs who have had longer term visions.
Speaker 4: I'll give you a name of one, Jeff Bezos.
Speaker 3: And there's countless stories like the Amazon story.
Speaker 4: It's a bit of a.
Speaker 3: It's just not true that the nature of our quarterly
Speaker 3: reporting is driving the lack of companies being public.
Speaker 1: Do you see I see more the M and A
Speaker 1: spirits are buying. Do you see more more companies wanting
Speaker 1: to IPO or not so much?
Speaker 4: Well, we're you know, we've seen some increased the level.
Speaker 3: Of Emina activity, but frankly, I think far less than
Speaker 3: people had expected. I think that has to do with
Speaker 3: the policy uncertainty in areas light tariffs.
Speaker 4: You know, when you're trying I mean I was.
Speaker 3: I was with a very large group of US business executives.
Speaker 4: We had a two day meeting a few months ago.
Speaker 3: The amount of energy that was dedicated to navigating tariffs
Speaker 3: even blew my mind. And when you talk about me,
Speaker 3: you know, these executives have talked about war rooms and
Speaker 3: how their entire leadership teams were working six seven days
Speaker 3: a week. There's no time for an M and A
Speaker 3: strategy when you're when you're trying to profoundly change your
Speaker 3: supply chain and your long term strategy against a very
Speaker 3: quickly changing care background backdrop. So I think for for
Speaker 3: M and A to really reaccelerate, you're going to have
Speaker 3: to see what is perceived as a level of stability
Speaker 3: in our policy.
Speaker 4: Making in Washington, and even the.
Speaker 3: IPO calendar has some of the same challenges at play.
Speaker 4: Washington.
Speaker 3: Even a policy change that will be ultimately good for
Speaker 3: the American business comm in the long run, because in
Speaker 3: the short run it will create winners and losers comes
Speaker 3: with a real cost in economic growth in the short run,
Speaker 3: even if it's good for the long run. And I
Speaker 3: will tell you furthermore, a policy change that's negative in
Speaker 3: the long run is really unsettling when it comes to
Speaker 3: short term decision making and planning. And that's why it's
Speaker 3: so important that the president has the right advisor on
Speaker 3: economic matters, and not just the president, the leaders both
Speaker 3: on the majority and minority side of the House and Senate.
Speaker 3: Our country has too much at stake to be pursuing
Speaker 3: economic policies that don't rapidly grow the size.
Speaker 4: Of the pie.
Speaker 1: I want to ask you about private credits and then Miami.
Speaker 2: So what's your take on private credit?
Speaker 3: Your private credit is really fascinating a growth story over
Speaker 3: the last decade in the alternative space, and it has
Speaker 3: some really important strengths. And in particular, private credit has
Speaker 3: been incredibly helpful to the LBO firms the private equity
Speaker 3: firms because it gives them certainty of execution for the
Speaker 3: deals they're trying to get done. You know, twenty years ago,
Speaker 3: thirty years gosh, I'm really aging myself thirty years ago.
Speaker 3: That would have been thirty five years ago. The letter
Speaker 3: from Drexel, we are highly confident we can raise the
Speaker 3: money right And Michael Milkan literally changed the world of
Speaker 3: finance with those letters. He changed the entire US economy.
Speaker 3: But jump forward thirty five years the day of Drexel,
Speaker 3: the private credit community is now able to tell a
Speaker 3: private equifirm you can definitively consummate this transaction because we're
Speaker 3: good for it. The challenge with private credit is you
Speaker 3: lose the mark to market feedback loop that you have
Speaker 3: in public market securities.
Speaker 4: So I worry about two factors that come from that.
Speaker 3: Number one is are the people who are underwriting those
Speaker 3: credits receiving really good feedback about the quality of their
Speaker 3: investment decision making process, because that's how they learn and grow.
Speaker 3: You know, very few companies actually ever default, So that
Speaker 3: mark to market journey is a really important indicator to
Speaker 3: the quality of your investment decision making as an investor,
Speaker 3: and they're losing that. That's gone, and with so much
Speaker 3: money being deploying the private credit markets, that worries me
Speaker 3: about how thoughtfully we allocate capital as a society. That's
Speaker 3: number one. Number two for retail and social investors. It's
Speaker 3: very hard to judge a private credit money manager. Because
Speaker 3: the assets aren't marked daily, weekly, or monthly in a
Speaker 3: meaningful stringent way, it's really hard to differentiate the quality
Speaker 3: of performance between different firms. And being an investor in
Speaker 3: privately myself, I will tell you it's remarkable. You know,
Speaker 3: I've seen term sheets for a given deal. The fact
Speaker 3: that every single private credit firm delivers almost exactly the
Speaker 3: same term sheet is really quite profound. I mean, what
Speaker 3: real distinction in underwriting is happening When you've got seven
Speaker 3: people all bidding out a deal and they're all within
Speaker 3: twenty five bases points to one another.
Speaker 4: I mean that, that to me is shocking.
Speaker 1: Yeah, we only have a couple of minutes left. I mean,
Speaker 1: Citadel planned a one billion dollar tower in Brickel.
Speaker 4: I wish it was a billion dollars.
Speaker 2: Is it not a billion dollars?
Speaker 4: Oh? No, that's that's going to.
Speaker 3: Put that option well, due to inflation in the cost
Speaker 3: of construction, that's going to be about a two billion
Speaker 3: dollar tower.
Speaker 2: When does constructions do.
Speaker 4: It Probably mid to late next.
Speaker 2: Year from one it was meant to be one billion.
Speaker 3: I didn't ever think we could build that for a billion.
Speaker 3: But I will tell you that the numbers I have seen.
Speaker 3: Those are big numbers. Have you signed bigger numbers to
Speaker 3: build a building in New York, which is even more scary.
Speaker 2: Have you signed any big tenants.
Speaker 4: We're not worried about filling.
Speaker 3: The building's not worried, so you don't need to speak
Speaker 3: to you.
Speaker 2: Build it and they'll come.
Speaker 4: Oh, if we build it, they will come now.
Speaker 3: I mean Miami has a huge deficit of grade A
Speaker 3: office space. I mean the influx of firms of human
Speaker 3: capital over the last several years. I trust me that
Speaker 3: building will fill very quickly.
Speaker 1: Do you need financing for it or will you just
Speaker 1: slip the bill?
Speaker 4: We'll cross that bridge in a year and change.
Speaker 1: Are you looking to buy any more commercial or the
Speaker 1: residential real estate in South Florida?
Speaker 3: You know this is like televised I have to be
Speaker 3: very careful my choice of words. Let me just cut
Speaker 3: to the chase. South Florida has something that the rest
Speaker 3: of the world wants. It has oceanfront property in a
Speaker 3: state with extraordinarily safe streets, great schools, strong sense.
Speaker 4: Of community, great cultural institutions.
Speaker 3: Miami is one of the most vibrant cities in the world.
Speaker 3: It has been with respect to a.
Speaker 4: Real estate portfolio.
Speaker 3: You'd be hard pressed to beat the returns of real
Speaker 3: estate and South Florida over the last seven years. And
Speaker 3: at this point I have enough. But in two years
Speaker 3: we can tokenize it.
Speaker 1: How have the recruiting efforts gone to bring more senior
Speaker 1: executives to Miami from other locations.
Speaker 4: We're on plan. We're good.
Speaker 3: And part of that is, you know, very deliberately. We
Speaker 3: have a very large team here in New York City.
Speaker 3: This is our largest city in the world by headcount.
Speaker 4: I mean, New York is.
Speaker 3: The financial capital of America today. But our country has been,
Speaker 3: you know, over the decades, defined by really good, robust
Speaker 3: competition between our cities. And with the rise of Miami
Speaker 3: and the rise of both the capital community, hedge funds,
Speaker 3: judisal asset managers, we're seeing the emergence of a new
Speaker 3: financial center in the United States. And I'm actually profoundly
Speaker 3: excited about that. It's really it's so much fun to
Speaker 3: be in a city where people are profoundly optimistic about
Speaker 3: their future.
Speaker 1: And our executives, your executives actually do they find what
Speaker 1: they need to live with their families in Miami.
Speaker 3: Let me give you some flipping around my executives are
Speaker 3: part of an all volunteer workforce. Most of them don't
Speaker 3: need to work, and they can certainly all work anywhere.
Speaker 4: They wanted to.
Speaker 3: In financial services, we have not had one senior person
Speaker 3: lead Miami.
Speaker 4: Like not one people.
Speaker 3: There's always, you know, noise about this or that, but
Speaker 3: buy and large people love being in a city where
Speaker 3: your kids can jump in an uber and you're not
Speaker 3: worried about it, where you can walk the streets tonight
Speaker 3: and not worry about it.
Speaker 4: And Chicago, you.
Speaker 3: Know, over the last unfortunately, over the last six or
Speaker 3: seven years, has been engulfed in a series of problems,
Speaker 3: which is our headquarters for years. Asking people to leave
Speaker 3: for Chicago or New York or Miami has not been hard.
Speaker 3: We've gone from probably thirteen hundred people in Chicago to
Speaker 3: a few hundred, from being the primary tenant of one
Speaker 3: of the largest skyscrapers to I think will be down
Speaker 3: to two floors in a year. I think that the
Speaker 3: more the sad part of the story was how many
Speaker 3: people who had built lives in Chicago were willing to
Speaker 3: walk away from that and move to Miami or New York.
Speaker 4: Just given the.
Speaker 3: Challenges that Elinoy has faced. I mean, the governor of
Speaker 3: Illinois has overseen the state. That literally is there are
Speaker 3: more murders in Chicago on a bad weekend.
Speaker 4: Than there is in Miami. In New Year.
Speaker 3: There are fifty some schools in the state of Elinois
Speaker 3: where not a single child is at grade level. Not
Speaker 3: one child is at grade level. Fifty schools in Illinois.
Speaker 3: And I was with the governor of the state of
Speaker 3: Florida just a few days ago. We welcomed Success Academies
Speaker 3: to South Florida. They're going to open several new schools
Speaker 3: in the Miami area. There are hundreds of thousands of
Speaker 3: kids in the state of Florida who are in charter schools.
Speaker 3: And I know Eva Moscow was blown away by one thing. Everybody,
Speaker 3: everybody extended her the warmest of welcomes.
Speaker 4: Want her in Miami.
Speaker 3: We want our children to have the future that Success
Speaker 3: Academies will prepare them for. I mean, these will be
Speaker 3: kids that will go on from every socioeconomic background, that
Speaker 3: will go on to have great careers and great lives
Speaker 3: because they've had a great K through twelve education. And
Speaker 3: there's nothing more powerful than when your governor, you're head
Speaker 3: of education, the head of the local college are all
Speaker 3: just embracing you to come there. In contrast, here in
Speaker 3: New York, she's always fighting uphill battle with the unions
Speaker 3: and with many members of the.
Speaker 4: Political class to do what is.
Speaker 3: To use a word that was used in financed years ago,
Speaker 3: but to do God's work to help children who have really,
Speaker 3: really challenging backgrounds get ahead. I mean, I can't believe
Speaker 3: that she struggles like she does in New York to
Speaker 3: open new schools, and we in Miami are so excited
Speaker 3: to welcome her to the great state of Florida.
Speaker 1: You can maybe one final question, how you know, what
Speaker 1: else do you look at to do in philanthropy for education?
Speaker 3: So you know, the big wildcard in the United States,
Speaker 3: of course, on the filmthropic side of education is our
Speaker 3: university system. And there's one thing that makes it very
Speaker 3: clear that our universities need to change how they do business.
Speaker 3: A material portion of all student loans are not currently
Speaker 3: being paid, which tells you that the recipient of the
Speaker 3: student loans feels that the value of the education they
Speaker 3: received was so poor that even though they have a
Speaker 3: legal obligation to pay the loans, they'd rather just default.
Speaker 3: Could you imagine how long Walmart would last if like
Speaker 3: thirty percent of their customers didn't pay.
Speaker 4: For the products they bought. Eight weeks, four weeks, two weeks.
Speaker 3: All Right, American higher education is plagued by offering a
Speaker 3: product that's extremely expensive that the recipients themselves don't value.
Speaker 3: And so I think we need to look long and
Speaker 3: hard at the success stories of American higher education. You
Speaker 3: know what Mitch Daniels was doing at Purdue, for example,
Speaker 3: for a real roadmap and how we have to transform
Speaker 3: our universities to deliver, to deliver a better value product,
Speaker 3: and that is to prepare the students of our country
Speaker 3: to be the leaders of our country twenty thirty years
Speaker 3: from now.
Speaker 4: And between now and that day and time for those students.
Speaker 3: To be really, really effective in contributing members to society.
Speaker 4: Who will run the AI companies that.
Speaker 3: We were speaking about twenty minutes ago, Who will drive
Speaker 3: that new business formation that will create tens of millions
Speaker 3: of jobs that will help our nation succeed for decades
Speaker 3: for centuries to come.
Speaker 2: Ken, Thank you so much, Ken Griffin.
Speaker 1: Everyone