WEBVTT - Apollo Global Management CEO & Co-Founder Marc Rowan Talks Increasing Assets Under Management 0:00:00.080 --> 0:00:02.360 I want to head over to an interview. We all 0:00:02.400 --> 0:00:05.680 are very much looking forward to Jonathan Farrow just high 0:00:05.720 --> 0:00:08.480 tail the ADDA here to head over to Apollo sitting 0:00:08.520 --> 0:00:11.039 down with Mark Rowan, who is the CEO. 0:00:11.160 --> 0:00:15.560 John take it away, A Lisa, thank you. 0:00:15.600 --> 0:00:17.400 This was the deal we agreed to it. If the 0:00:17.440 --> 0:00:20.040 stock closed, it an all time hard investigate. Mark Rowan 0:00:20.079 --> 0:00:21.759 would show up alongside me and it's a man of 0:00:21.800 --> 0:00:22.200 its word. 0:00:22.239 --> 0:00:23.439 Market morning. It's good to see you. 0:00:23.560 --> 0:00:26.280 Thank you, and technically you're here. You came to visit us, 0:00:26.280 --> 0:00:26.800 so thank you. 0:00:27.160 --> 0:00:28.840 Thank you. You planned it this way. 0:00:28.880 --> 0:00:31.600 I'm sure big target for twenty twenty nine ten billion 0:00:31.600 --> 0:00:33.120 dollars of annual learning. So I think we have to 0:00:33.120 --> 0:00:35.720 start with a pretty broad question. Race are coming down. 0:00:36.040 --> 0:00:39.720 Economy is pretty decent. Let's just call financial conditions easy. 0:00:40.200 --> 0:00:42.800 Why people coming to you instead of just issuing a 0:00:42.840 --> 0:00:44.479 bond in public markets? 0:00:44.800 --> 0:00:46.319 I think if they come to us, when they can 0:00:46.400 --> 0:00:49.080 issue a bond in public markets and it's cant is 0:00:49.120 --> 0:00:51.600 not that it's not open, It's that they want to 0:00:51.640 --> 0:00:54.840 do something that the public markets will not allow. Public 0:00:54.880 --> 0:00:58.960 markets over the past two decades have become very vanilla, 0:00:59.160 --> 0:00:59.920 call it beta. 0:01:00.520 --> 0:01:01.880 If you want to do something unique. 0:01:01.920 --> 0:01:05.040 If you want to finance the next generation of infrastructure, 0:01:05.120 --> 0:01:07.200 you want to build a project, you want to build 0:01:07.280 --> 0:01:09.559 data centers, you want to build power, you want long data. 0:01:09.600 --> 0:01:13.200 Do you want special features that's just not available, you 0:01:13.280 --> 0:01:17.560 come to someone like us, and increasingly private markets are 0:01:17.600 --> 0:01:21.200 offering really compelling solutions to investment grade borrowers. 0:01:21.319 --> 0:01:23.280 Let's talk about some of those days, IC and c 0:01:23.840 --> 0:01:28.199 IB and beth Intel recently. What's the common theme behind 0:01:28.200 --> 0:01:29.240 those three companies for you? 0:01:29.640 --> 0:01:33.280 The common theme for US is excess return relative to 0:01:33.319 --> 0:01:36.160 the credit of the underlying borrower. The common theme for 0:01:36.240 --> 0:01:39.080 the issuer is they are achieving something they could not 0:01:39.240 --> 0:01:43.440 otherwise achieve. When we did ABMBV some six billion dollars 0:01:43.520 --> 0:01:47.560 years ago, everyone around us, our peer group, that was interesting. 0:01:47.760 --> 0:01:49.880 That was one off in COVID, You'll never do another 0:01:49.920 --> 0:01:53.960 one another investment grade private deal. One hundred billion dollars later, 0:01:54.520 --> 0:01:58.000 we're still doing investment grade private deals. And I see 0:01:58.040 --> 0:02:01.760 nothing but a long line of of interesting borrowers and 0:02:01.800 --> 0:02:02.960 interesting situations. 0:02:03.000 --> 0:02:05.440 Because think about what we're doing in the world today. 0:02:05.800 --> 0:02:10.239 We are building infrastructure, we are building and changing energy transition. 0:02:10.360 --> 0:02:12.360 We're just at the beginning of this, and we are 0:02:12.360 --> 0:02:15.120 building the next generation of data and power. Every one 0:02:15.160 --> 0:02:17.480 of those things is long dated. Many of them are 0:02:17.560 --> 0:02:21.160 complex financings. Some will go to the banking system, some 0:02:21.280 --> 0:02:25.280 will go to public markets, But increasingly, for these more 0:02:25.280 --> 0:02:29.640 complicated financings and long dated financings, private market investment grade 0:02:29.680 --> 0:02:30.760 is where borrowers are coming. 0:02:30.919 --> 0:02:32.839 There was a theme an invested Day, and you've talked 0:02:32.880 --> 0:02:37.519 about this with me yourself, privately global industrial renaissance. 0:02:37.760 --> 0:02:38.760 What are you talking about? 0:02:39.040 --> 0:02:41.200 We're talking about is this massive need for capital. 0:02:41.280 --> 0:02:43.440 I mean, you can believe or not believe all the 0:02:43.480 --> 0:02:45.280 figures that are out there, but when you add up 0:02:45.840 --> 0:02:48.240 the amount of money that is needed for energy transition, 0:02:48.680 --> 0:02:51.120 the amount of money that is needed to fix our infrastructure, 0:02:51.280 --> 0:02:53.200 the amount of money that will be needed to build 0:02:53.400 --> 0:02:56.480 data centers and power to supply them, much less to 0:02:56.520 --> 0:03:00.120 connect and redo our power lines, you're talking about the 0:03:00.120 --> 0:03:02.480 amount of money that's been spent since the invention of five, 0:03:03.440 --> 0:03:06.480 all with the backdrop of the US government borrowing two 0:03:06.520 --> 0:03:10.480 trillion dollars to finance itself. On a current basis, this 0:03:10.520 --> 0:03:13.320 is not a question of will private markets grow. The 0:03:13.400 --> 0:03:16.680 question will be how much, Yes, public markets will continue 0:03:16.720 --> 0:03:19.760 to play a really important role banking system, really important role. 0:03:20.120 --> 0:03:23.160 But this tool, this notion of private investment grade, has 0:03:23.240 --> 0:03:27.720 really not been available to CFOs or others arranging financing, 0:03:28.200 --> 0:03:29.600 and increasingly it will be. 0:03:29.800 --> 0:03:31.760 How labor intensive is this for you? 0:03:32.320 --> 0:03:34.840 And as you do more deals, do you get a 0:03:34.880 --> 0:03:37.600 benefit from that that you better able to replicate things 0:03:37.640 --> 0:03:39.320 and use less and less people. 0:03:39.520 --> 0:03:41.080 This is scars of experience. 0:03:41.400 --> 0:03:44.280 So these are all labor intensive, and that is actually 0:03:44.360 --> 0:03:47.840 what the competitive advantage is. The investment grade bond market 0:03:47.880 --> 0:03:51.600 became so efficient and so low cost that financial firms 0:03:51.640 --> 0:03:54.920 stopped allocating resources to it. There were just not any 0:03:54.920 --> 0:03:57.560 money in doing that, and so the market is very available, 0:03:57.640 --> 0:03:58.880 but it is very plain vanilla. 0:04:00.200 --> 0:04:02.200 One has built what we've built. 0:04:02.520 --> 0:04:05.880 When you look at employment at Apollo, the greatest group 0:04:05.920 --> 0:04:09.600 of employment four thousand people, some eight billion dollars that 0:04:09.600 --> 0:04:12.600 we've spent over the past fifteen years all goes to 0:04:12.640 --> 0:04:15.840 what we call origination. Now, not all of these originators 0:04:15.880 --> 0:04:19.120 are out calling on investment grade borrowers. Some are running 0:04:19.640 --> 0:04:24.520 other types of origination vehicles, aircraft finance, fleet finance, receivables finance, 0:04:24.560 --> 0:04:26.599 inventory finance, infrastructure finance. 0:04:27.360 --> 0:04:30.640 Increasingly, this is how America. 0:04:30.200 --> 0:04:35.039 Borrows introduced City and a twenty five billion a dollar partnership. 0:04:35.800 --> 0:04:38.800 What's behind that it's that acknowledgment from you that you've 0:04:38.839 --> 0:04:40.440 got more cash than you know what to do with. 0:04:41.279 --> 0:04:45.159 I think it's an acknowledgment that origination, the control of 0:04:45.200 --> 0:04:49.160 the product is actually what has value. And some of 0:04:49.160 --> 0:04:51.320 that origination we're going to build ourselves, and we've built 0:04:51.360 --> 0:04:53.840 more of it than any But let's face it, we 0:04:54.200 --> 0:04:57.240 a whole industry is short origination. To the extent we 0:04:57.279 --> 0:05:00.000 can find a meeting of the minds with City, that's fabulous. 0:05:00.480 --> 0:05:03.680 And I think the bigger theme here is the banking system, 0:05:03.720 --> 0:05:06.760 particularly one of the big four banks, is actually figuring 0:05:06.800 --> 0:05:11.280 out what we believe all along. We don't want what 0:05:11.360 --> 0:05:14.760 the bank wants. We don't want the bank's customer. We 0:05:14.800 --> 0:05:19.560 want the asset the bank. We can't offer advice, m 0:05:19.560 --> 0:05:24.080 and A, derivatives hedging, foreign exchange payments, credit cards, or 0:05:24.120 --> 0:05:27.640 any other service the bank wants to offer those things. 0:05:28.200 --> 0:05:30.960 The bank sometimes wants the loan, but more often than 0:05:30.960 --> 0:05:32.000 not does not want the loan. 0:05:32.120 --> 0:05:32.920 Who do you think field it? 0:05:32.960 --> 0:05:35.600 The most calls that day when that was announced that partnership, 0:05:35.680 --> 0:05:37.760 was it Jane Fraser an annoyed asset managers or was 0:05:37.800 --> 0:05:39.200 it you an annoyed bankers. 0:05:39.200 --> 0:05:41.599 From the comparing of notes last night? It was Jane. 0:05:41.680 --> 0:05:44.960 It was Jane. Did you get the calls you saw 0:05:45.040 --> 0:05:46.120 from LOX. 0:05:45.800 --> 0:05:47.640 We definitely got a few calls. 0:05:47.760 --> 0:05:49.080 Do you get the sense that this is the beginning 0:05:49.120 --> 0:05:51.760 of something bigger? Twenty five billions the number with citsy 0:05:52.120 --> 0:05:53.560 just give me an idea of what this looks like 0:05:53.600 --> 0:05:54.360 further down the line. 0:05:54.480 --> 0:05:55.720 Does it include other banks too? 0:05:56.120 --> 0:05:57.719 I think it does, and now I think it is 0:05:57.760 --> 0:06:00.200 difficult to serve lots of people in the same way 0:06:00.240 --> 0:06:03.320 with the same terms. But the City partnership is focused 0:06:03.440 --> 0:06:06.000 on a certain type of borrower. I think you'll see 0:06:06.000 --> 0:06:09.240 international partnerships. I think you'll see investment grade partnerships. I 0:06:09.279 --> 0:06:12.599 think you'll see infrastructure related partnerships. I do think that 0:06:12.800 --> 0:06:15.919 we are becoming a partner in some ways to the 0:06:15.960 --> 0:06:18.599 banking system, rather than how it is portrayed in the press, 0:06:18.839 --> 0:06:21.400 which is a fierce competition over everything. 0:06:21.800 --> 0:06:24.520 This conversation so far has really been about how the 0:06:24.520 --> 0:06:27.880 financing of companies, particularly in this country, is changing, how 0:06:27.920 --> 0:06:30.880 the company's doing the financing is shifting. The emphasis being 0:06:30.920 --> 0:06:34.360 on private markets. Part of your vision is how investing 0:06:34.440 --> 0:06:36.839 is going to change as well, So let's spend some 0:06:36.920 --> 0:06:39.880 time on that. How is investing going to change? How 0:06:39.920 --> 0:06:42.920 do we think about public versus private now? And how 0:06:42.920 --> 0:06:44.599 do you hope we're going to think about it in 0:06:44.720 --> 0:06:45.240 years to come. 0:06:45.440 --> 0:06:47.040 Look for me, this is year forty. 0:06:47.200 --> 0:06:49.920 It's sometimes hard to believe I've been doing it this long, 0:06:50.080 --> 0:06:54.960 but we grew up thinking private was risky and public 0:06:55.040 --> 0:06:58.119 was safe, and probably forty years ago that was true. 0:06:58.360 --> 0:07:01.599 Private was three products, equity, venture capital, and hedge funds, 0:07:01.640 --> 0:07:03.839 all three of which can be risky, but done the 0:07:03.880 --> 0:07:07.239 right way are excellent investments. And public was eight thousand 0:07:07.240 --> 0:07:10.320 public companies, diversified portfolios of stocks and bonds. 0:07:11.080 --> 0:07:13.200 Let's just say that's not how the world is today. 0:07:13.600 --> 0:07:16.840 The world that we see private is safe and risky 0:07:17.360 --> 0:07:19.120 and public is safe and risky. 0:07:19.560 --> 0:07:20.400 And if that's. 0:07:20.200 --> 0:07:23.840 True, everything we know about portfolio management, the way we 0:07:23.880 --> 0:07:27.280 construct portfolios today is going to change. Think of the 0:07:27.360 --> 0:07:30.600 typical investor a very bland I say, a three flavor 0:07:30.640 --> 0:07:34.560 ice cream portfolio, stocks, bonds, and a little bit of alternatives. 0:07:35.760 --> 0:07:38.840 Why well, because when something is risky, you put it 0:07:38.840 --> 0:07:42.040 in a small bucket called alternatives. You watch it carefully 0:07:42.160 --> 0:07:44.880 and you demand high returns out of it. But if 0:07:45.000 --> 0:07:48.480 private is just another form, I think what you're going 0:07:48.560 --> 0:07:50.720 to see is the whole business of what I call 0:07:50.760 --> 0:07:55.560 replacement fixed income, which today means investment grade public credit. 0:07:56.080 --> 0:07:58.400 I think is going to be investment grade public and 0:07:58.480 --> 0:08:01.520 investment grade private teen months from now. I do not 0:08:01.600 --> 0:08:04.600 believe investors will actually know the difference between investment grade 0:08:04.640 --> 0:08:07.680 public and investment grade private. It will not be the issuers, 0:08:07.880 --> 0:08:09.920 it will not be the size, it will not be 0:08:09.960 --> 0:08:12.840 the ratings, it will not even be the liquidity. Everything 0:08:12.880 --> 0:08:16.840 that exists in the public markets, repo borrowing, market making, 0:08:17.000 --> 0:08:19.680 daily pricing, is coming to the private markets. 0:08:19.920 --> 0:08:22.239 What is the total addressable market? What kind of numbers 0:08:22.280 --> 0:08:22.960 are we thinking about? 0:08:23.240 --> 0:08:26.360 We're talking about massive marketplace when we look at the 0:08:26.560 --> 0:08:28.360 entirety of our industry. 0:08:28.520 --> 0:08:29.520 The entirety of our. 0:08:29.400 --> 0:08:32.160 Industry has been built out of the alternative bucket of 0:08:32.200 --> 0:08:36.160 institutional investors. The fixed income bucket, which is the one 0:08:36.200 --> 0:08:38.679 I'm talking about now, is fifty percent larger than the 0:08:38.720 --> 0:08:41.880 alternative bucket and is mostly one hundred percent private. 0:08:42.160 --> 0:08:43.280 Work to me public. 0:08:43.000 --> 0:08:46.840 Investment grade iquitcy different to debt. 0:08:47.200 --> 0:08:48.960 Can you tell me how that's going to be transformed, 0:08:48.960 --> 0:08:51.079 and whether some of the companies that typically would becoming 0:08:51.120 --> 0:08:54.160 public are going to state private. Whether we've got to 0:08:54.200 --> 0:08:56.520 see a big shift in capital markets over the next 0:08:56.800 --> 0:08:58.080 five years or so on that front. 0:08:58.120 --> 0:08:59.120 Well, we're seeing it already. 0:08:59.160 --> 0:09:01.760 So this is this This is a two pronged to answer, 0:09:01.800 --> 0:09:04.520 which is eight thousand public companies? Is now four thousand 0:09:04.520 --> 0:09:07.640 public companies. Fewer than one hundred companies go public every 0:09:07.679 --> 0:09:10.240 year and more than one hundred companies go private. There 0:09:10.280 --> 0:09:12.880 do not seem to be compelling reasons for companies to 0:09:13.000 --> 0:09:16.920 be public, particularly with what's happened on the investing side. 0:09:17.120 --> 0:09:20.120 So much of our market today is indexed and correlated. 0:09:20.559 --> 0:09:24.080 Think of passive now sixty seventy percent of the overall marketplace. 0:09:24.880 --> 0:09:27.480 Active management, which historically has been the buying and selling 0:09:27.559 --> 0:09:30.400 of stocks, has really been a very, very difficult place 0:09:30.440 --> 0:09:32.480 to be, has failed to be at the index ninety 0:09:32.480 --> 0:09:35.240 plus percent of the time for twenty years. I think 0:09:35.280 --> 0:09:38.040 we're going to see an evolution also take place in equity. 0:09:38.360 --> 0:09:41.600 It's going to happen more slowly. In fixed income. We 0:09:41.679 --> 0:09:45.040 are going to see fixed income replacement public and private 0:09:45.160 --> 0:09:47.240 essentially come together. And the reason I know that is 0:09:47.240 --> 0:09:50.319 we're seeing it every single day. And in fixed income 0:09:50.400 --> 0:09:54.720 we have arbiters of credit quality rating agencies who tell 0:09:54.760 --> 0:09:57.240 investors that something public and something private is of the 0:09:57.240 --> 0:09:57.960 same quality. 0:09:58.280 --> 0:09:59.880 In equity, we lack those. 0:09:59.760 --> 0:10:04.239 Our But nonetheless, I think investors are beginning to understand 0:10:04.600 --> 0:10:07.160 when ten stocks are thirty five to forty percent of 0:10:07.200 --> 0:10:10.680 your portfolio and four stocks have determined all your returns 0:10:10.880 --> 0:10:14.520 for the past four years, and one stock has basically 0:10:14.600 --> 0:10:16.880 been one hundred percent of your quarter. I mean, think 0:10:16.920 --> 0:10:19.320 of what we've done as a country. We've taken the 0:10:19.440 --> 0:10:22.200 largest pool of savings in the world, four oh one 0:10:22.280 --> 0:10:25.360 k twelve to thirteen trillion dollars from a group of 0:10:25.360 --> 0:10:27.439 people who need retirement savings more than ever. 0:10:28.120 --> 0:10:28.720 What are they own? 0:10:29.800 --> 0:10:33.960 They own daily liquid stock index funds generally S and 0:10:34.000 --> 0:10:38.720 P for fifty years. Why well, we have a mistaken 0:10:38.760 --> 0:10:42.440 belief that public is safe and private is risky. You 0:10:42.480 --> 0:10:45.040 look at the best retirement system anywhere in the Western 0:10:45.080 --> 0:10:48.760 world in Australia, where they've introduced superannuation forty years ago. 0:10:49.559 --> 0:10:51.280 Just a fancy way of saying is they gave the 0:10:51.320 --> 0:10:54.400 equivalent of four oh one k investors access to private markets. 0:10:54.760 --> 0:10:57.960 The returns have been nothing short of spectacular. Outcomes for 0:10:58.080 --> 0:11:01.400 investors can be not a little bit better, fifty and 0:11:01.480 --> 0:11:02.520 sixty percent better. 0:11:03.160 --> 0:11:06.760 You know the view here public is transparent and privates 0:11:06.800 --> 0:11:07.199 a payek. 0:11:07.800 --> 0:11:08.800 How do you change that view? 0:11:09.320 --> 0:11:11.240 Well, I think it's going to happen in fixed income. 0:11:11.280 --> 0:11:13.920 I think when you get to daily pricing, when you 0:11:13.960 --> 0:11:17.000 get to daily liquidity, when you can see a market. 0:11:17.400 --> 0:11:20.200 But let's not fool ourselves. Markets are different than we 0:11:20.280 --> 0:11:24.000 think they are. Everything changed in two thousand and eight, 0:11:24.080 --> 0:11:26.640 as it should as a response to the financial crisis, 0:11:26.880 --> 0:11:29.520 but we just did not experience as investors those changes 0:11:29.559 --> 0:11:31.600 because right after we change the rules, we printed eight 0:11:31.640 --> 0:11:34.600 trillion dollars and everything went up into the right. One 0:11:34.640 --> 0:11:37.480 of the most interesting things that changed there is no 0:11:37.559 --> 0:11:40.960 liquidity in public fixed income the SATs I've seen it 0:11:40.960 --> 0:11:44.000 takes five days to sell an investment grade corporate bond. 0:11:44.480 --> 0:11:47.439 So when you see a quote, is that liquid, Well, 0:11:47.480 --> 0:11:49.640 we feel good because it's public, it's there, we can 0:11:49.679 --> 0:11:52.480 see it. I do think we're going to end up 0:11:52.600 --> 0:11:55.760 not caring in fixed income in the next eighteen months 0:11:55.840 --> 0:11:58.560 as to whether something is public or private. The comfort 0:11:58.640 --> 0:12:01.240 that people are developing in private markets on the fixed 0:12:01.280 --> 0:12:04.760 income side, I believe will eventually extend to equity, and 0:12:04.800 --> 0:12:10.720 we will see equity also adopt private side by side 0:12:10.720 --> 0:12:13.920 with public. As I sometimes joke, investors will own equity 0:12:13.920 --> 0:12:16.800 that is private rather than private equity, the difference being 0:12:16.800 --> 0:12:17.439 the leverage. 0:12:17.559 --> 0:12:20.880 You say, wait, you mean investors to regulate to say 0:12:20.880 --> 0:12:21.720 it the same way. 0:12:21.920 --> 0:12:22.640 I think they do. 0:12:22.880 --> 0:12:25.959 I mean, the conversation with regulators is actually a fascinating 0:12:25.960 --> 0:12:27.720 one because clearly. 0:12:28.000 --> 0:12:29.640 Change is scary. 0:12:29.679 --> 0:12:34.280 But the typical conversation is every dollar of borrowing that 0:12:34.360 --> 0:12:37.520 moves outside of the banking system to the investment marketplace. 0:12:37.600 --> 0:12:40.040 And let's face it, there are only two choices for regulators. 0:12:40.559 --> 0:12:43.360 Money in an economy can come from investors or from banks. 0:12:43.400 --> 0:12:44.480 There's no third choice. 0:12:44.960 --> 0:12:48.360 So every dollar that moves actually delevers the banking system 0:12:48.360 --> 0:12:51.560 and makes it safer, and people recoil and shock. And 0:12:51.600 --> 0:12:54.000 this is just math. A bank is levered twelve to 0:12:54.040 --> 0:12:57.360 fourteen times. The typical institutional investor is levered zero, the 0:12:57.400 --> 0:13:00.960 typical mutual fund levered zero, typical bde levered one point 0:13:01.040 --> 0:13:04.640 five times, typical retirement services company levered eight times. It 0:13:04.679 --> 0:13:10.800 is deleveraging. The second is disclosure. We think it's not transparent. 0:13:11.200 --> 0:13:14.079 The typical bank disclosure says loans to customers and loans 0:13:14.080 --> 0:13:16.960 to companies. You click on our website you can see 0:13:16.960 --> 0:13:20.680 every security we own every quarter. Then you talk about 0:13:21.720 --> 0:13:25.880 maturity transformation. Maturity transformation is really where the economy has 0:13:25.920 --> 0:13:30.560 suffered and financial markets have suffered. Banks are in business 0:13:30.559 --> 0:13:33.640 to do maturity transformation. They borrow shortened form of deposits 0:13:33.640 --> 0:13:35.840 and lend long in form of loans. That's not a 0:13:35.880 --> 0:13:38.360 bad thing, that's just how they're set up. In the 0:13:38.360 --> 0:13:42.439 investment marketplace, generally, you're talking about investors who are matched 0:13:42.559 --> 0:13:45.280 from a maturity point of view. And the final thing 0:13:45.280 --> 0:13:48.160 that I always sit with regulators, what percentage of assets 0:13:48.160 --> 0:13:50.800 in the US banking system are investment grade? 0:13:51.400 --> 0:13:51.880 They don't know. 0:13:53.000 --> 0:13:55.280 We have a perception that they're all investment grade, but 0:13:55.320 --> 0:13:57.480 the reality is about sixty percent of bank. 0:13:57.320 --> 0:13:58.880 Assets are investment grade. 0:13:59.080 --> 0:14:01.160 You look at a balance sheet like ours and just 0:14:01.160 --> 0:14:05.120 as an example, we're ninety plus percent investment grade. And 0:14:05.160 --> 0:14:08.440 so it's change, but it is actually changed. That is 0:14:08.480 --> 0:14:11.480 making the system more robust and more diversified. And we 0:14:11.679 --> 0:14:14.280 let's make no mistake we are the envy of the world. 0:14:14.320 --> 0:14:17.640 We the US are the envy of the world. In Europe, 0:14:18.040 --> 0:14:21.360 they are squeezing the banking system through Vaslin game, but 0:14:21.440 --> 0:14:24.400 they haven't yet decided to allow investors to fill that gap. 0:14:24.920 --> 0:14:28.760 And there are questions, why are we struggling with financial markets? Well, 0:14:29.080 --> 0:14:31.640 you're squeezing the banking system and you're not allowing investors 0:14:31.640 --> 0:14:32.400 to fill the gap. 0:14:32.680 --> 0:14:35.640 Have you had this conversation with a senator from Massachusetts 0:14:36.320 --> 0:14:38.200 As that conversation ever happened. 0:14:38.240 --> 0:14:39.760 It hasn't, but I welcome it. 0:14:40.080 --> 0:14:43.200 I've spent I spend lots of time in DC and 0:14:43.280 --> 0:14:46.760 elsewhere speaking to regulators because we are in a really 0:14:46.840 --> 0:14:50.280 dynamic phase. Everything that we think works the way it 0:14:50.320 --> 0:14:53.960 works has changed, and we're about to experience and are 0:14:54.080 --> 0:14:57.440 experiencing the changes that were made in two thousand and 0:14:57.480 --> 0:14:59.160 eight in response to the financial crisis. 0:14:59.240 --> 0:15:04.360 Speaking of change, which is Washington, DC is becoming increasingly interventionist. 0:15:04.680 --> 0:15:06.920 You compared some of the benefits of doing business in 0:15:06.960 --> 0:15:11.360 America and doing business in Europe. Doing business in America 0:15:11.400 --> 0:15:13.120 is aren'turally not as easy as it used to be, 0:15:13.480 --> 0:15:14.760 and it may well get harder. 0:15:15.280 --> 0:15:16.680 What's your view on where we're heading. 0:15:18.000 --> 0:15:20.320 You may be right, but it's all relative. 0:15:20.880 --> 0:15:22.800 This is the single best market to be in at 0:15:22.800 --> 0:15:24.120 this point in time, Barnutt. 0:15:24.880 --> 0:15:27.400 When we spoke before Christmas and we talked about the 0:15:27.440 --> 0:15:30.240 choices on the menu, then for the upcoming election, you 0:15:30.320 --> 0:15:31.200 went too impressed. 0:15:31.600 --> 0:15:34.160 The menu's changed a little bit. What's your view? 0:15:34.880 --> 0:15:38.200 Well, since i'll be under banishment here if I give 0:15:38.240 --> 0:15:40.080 you a direct view, let me to say. The way 0:15:40.120 --> 0:15:43.600 I frame this is you are either more scared of 0:15:43.640 --> 0:15:46.360 four years of the status quo or more scared of 0:15:46.400 --> 0:15:48.520 four years of change. You just have to decide what 0:15:48.560 --> 0:15:51.640 you're more scared of. Me personally, I'm more scared of 0:15:51.640 --> 0:15:52.800 four years of the status quo. 0:15:53.040 --> 0:15:54.200 What's wrong with the status quo? 0:15:55.840 --> 0:15:59.960 I see a direction where the trend is not our friend. 0:16:00.160 --> 0:16:03.560 Right now, we are, as you suggest, we are the 0:16:03.600 --> 0:16:05.400 single best place to do business in the world. We 0:16:05.440 --> 0:16:09.040 are the luckiest people in the world. Can we screw 0:16:09.040 --> 0:16:09.360 it up? 0:16:09.880 --> 0:16:10.440 Yeah? We can. 0:16:12.120 --> 0:16:15.120 The notion that we are spending two trillion and excess 0:16:15.160 --> 0:16:18.200 of what we take in in peacetime with full employment 0:16:19.000 --> 0:16:21.960 does not bode well for the availability of capital to 0:16:22.000 --> 0:16:23.760 do what we need to do for the next generation. 0:16:24.360 --> 0:16:26.520 We're spending the next generation's money currently. 0:16:27.080 --> 0:16:28.920 Do you see anyone in the campaign trail that's waiting 0:16:28.960 --> 0:16:29.600 to do And I think. 0:16:29.440 --> 0:16:33.800 About that on the campaign trail, not in reality. Let's hope. 0:16:34.280 --> 0:16:36.000 All we can hope for is better governance. 0:16:36.280 --> 0:16:40.400 I've said repeatedly on Bloomberg Surveymance, on Bloomberg TV, on 0:16:40.440 --> 0:16:43.000 Bloomback Radio for years that America has the privilege, the 0:16:43.080 --> 0:16:45.160 unique privilege of acting recklessly. 0:16:45.880 --> 0:16:46.720 Are we losing that? 0:16:47.600 --> 0:16:49.720 Not yet? We have a long way to go. 0:16:49.760 --> 0:16:52.560 We have lots of examples around the globe of people 0:16:52.560 --> 0:16:54.840 who have acted recklessly for a much longer period of 0:16:54.840 --> 0:16:57.320 time than we have been acting recklessly. But we also 0:16:57.400 --> 0:17:00.720 have obligations that others do not. Right now, we are 0:17:00.760 --> 0:17:04.840 the beneficiary of being the strongest economy, the strongest capital market, 0:17:05.080 --> 0:17:06.120 the strongest. 0:17:05.640 --> 0:17:07.240 Military, and the best place to do business. 0:17:07.320 --> 0:17:09.080 I mean, if you tick off what's happened over the 0:17:09.119 --> 0:17:11.600 past years here, we may not like how we got 0:17:11.600 --> 0:17:13.879 here and how we financed it. Three years ago we 0:17:13.920 --> 0:17:17.040 decided to build infrastructure. We allocated two trillion dollars. None 0:17:17.080 --> 0:17:19.600 of that's built yet, it's all being built. Two years 0:17:19.640 --> 0:17:22.840 ago we spent fifty two billion dollars of semiconductor subsidies 0:17:22.880 --> 0:17:25.520 to build semiconductors here. Not a single plant is open. 0:17:25.600 --> 0:17:28.880 It's all being built a year ago. Inflation Reduction Act 0:17:28.960 --> 0:17:32.679 to encourage the manufacturer renewables one point three to two 0:17:32.720 --> 0:17:33.560 point three trillion. 0:17:33.800 --> 0:17:36.359 No one really knows. Not a single plant is opened. 0:17:37.240 --> 0:17:40.440 We are the beneficiary and the largest recipient of foreign 0:17:40.480 --> 0:17:43.080 direct investment three years in a row. So people around 0:17:43.119 --> 0:17:45.640 the globe are actually figuring out we're better off here. 0:17:46.280 --> 0:17:48.720 And something tells me we're ramping defense production. 0:17:49.400 --> 0:17:53.600 All of those things are fiscally stimultive and positive fore employment. Oh, 0:17:53.640 --> 0:17:57.000 by the way, we have no legal immigration. This sets 0:17:57.080 --> 0:18:01.200 us up very well fiscally. A strong economy, which I 0:18:01.240 --> 0:18:01.879 think we're seeing. 0:18:02.760 --> 0:18:05.240 Federal Reserve is kind of interest rates by fifty basis points. 0:18:05.280 --> 0:18:07.679 Are you in Toulston slot camp? And you can agree with, 0:18:07.960 --> 0:18:11.000 agree or disagree with. Tulson of course works here. He 0:18:11.119 --> 0:18:13.240 believes this economy doesn't need rate cuts. We're in a 0:18:13.240 --> 0:18:14.600 great place. Do you share that view? 0:18:14.680 --> 0:18:15.399 I said it. 0:18:15.560 --> 0:18:19.600 I was, I guess unfortunate to be on TV an 0:18:19.600 --> 0:18:21.879 hour after the raid cut, and I said, this was 0:18:21.920 --> 0:18:24.080 a very very expensive insurance policy. 0:18:24.359 --> 0:18:25.440 What's expensive about it? 0:18:25.920 --> 0:18:28.199 The notion that we would cut rates. 0:18:28.320 --> 0:18:31.000 Financial markets are wide open, equities are at all time high, 0:18:31.080 --> 0:18:33.919 financing is available, real estate prices are going up in 0:18:33.960 --> 0:18:39.040 every market, and yet we're stimulating, and we're stimulating fiscally. 0:18:39.600 --> 0:18:43.120 It is not clear that we need more rate cuts 0:18:43.160 --> 0:18:45.200 at this point in time. And to the extent we 0:18:45.920 --> 0:18:48.520 encourage growth, and growth was very strong, as you saw 0:18:48.600 --> 0:18:53.000 from GDP for the quarter. To the extent we accelerate 0:18:53.040 --> 0:18:55.119 the economy and have to go in the other direction, 0:18:55.359 --> 0:18:56.400 that would not be a good deck. 0:18:56.840 --> 0:18:58.840 Just pause. You think the Fed might have to start 0:18:58.920 --> 0:19:00.080 hiking interest rates again. 0:19:01.119 --> 0:19:03.800