WEBVTT - Businessweek Extra - Michael Tennenbaum 0:00:02.560 --> 0:00:06.440 This is Bloomberg Business Week from Bloomberg Radio. I'm Jason 0:00:06.519 --> 0:00:09.000 Kelly and I'm Carol Masser. Welcome to the Bloomberg Business 0:00:09.039 --> 0:00:11.559 Week Extra. It's our weekly podcast bringing you an in 0:00:11.600 --> 0:00:14.360 depth interview you will not hear anywhere else. And this 0:00:14.400 --> 0:00:18.119 week we caught up with Michael Tannenbaumb. What a character. 0:00:18.239 --> 0:00:21.880 I've known him for a long time and his history 0:00:22.079 --> 0:00:25.360 on Wall Street, first at bear Stearns, then striking out 0:00:25.400 --> 0:00:30.240 on his own, creating a namesake investment fund out in California, 0:00:30.480 --> 0:00:32.760 and then moving to Puerto Rico. This is a guy 0:00:32.760 --> 0:00:36.880 who's definitely lived life and still doing so. Here's our conversation. Well, 0:00:36.920 --> 0:00:39.040 and this is a guy that I've actually known for 0:00:39.080 --> 0:00:41.760 a number of years. He also, i should say, big 0:00:41.800 --> 0:00:45.480 tennis fan, and he's joining us on the in the aftermath, 0:00:45.520 --> 0:00:47.640 I should say, of one of the most exciting US opens, 0:00:47.920 --> 0:00:50.159 but we're not going to talk about that a little bit. 0:00:50.200 --> 0:00:53.559 Michael Tannebaumb is here the new book Risk, Living on 0:00:53.680 --> 0:00:58.440 the Edge. It's an unbelievable read, really captures the scope 0:00:58.480 --> 0:01:01.560 of what you've been doing, uh for a number of 0:01:01.640 --> 0:01:03.440 years now. Thank you so much for joining us in 0:01:03.480 --> 0:01:06.560 New York. It is a pleasure and an honor, particularly 0:01:06.640 --> 0:01:09.399 to hear that you've enjoyed my book makes me happy. 0:01:09.600 --> 0:01:13.120 We loved it. And I think in part because your 0:01:13.240 --> 0:01:17.720 story is really one of Wall Street over the last 0:01:17.840 --> 0:01:20.800 four decades in many ways, why did you decide to 0:01:20.800 --> 0:01:23.880 write it? Let's start there. Well, it was interesting. Actually 0:01:23.920 --> 0:01:29.080 I was interviewed at Bloomberg. You've heard of them? And afterward, 0:01:29.560 --> 0:01:34.720 and this is not hint, uh the uh the journalist said, 0:01:34.760 --> 0:01:37.880 let's go across the street and have some drinks. And 0:01:37.920 --> 0:01:40.320 I said, you know a number of my more famous 0:01:40.319 --> 0:01:43.560 friends have written memoirs. And I was just wondering, I'm 0:01:43.600 --> 0:01:46.559 sure it was competitive, right, uh, if perhaps I should? 0:01:46.680 --> 0:01:48.840 And he said something so smart, He said, if you 0:01:48.880 --> 0:01:51.440 have a story to tell. And I said, you know, 0:01:51.440 --> 0:01:53.800 I'm not nearly as famous. He said, if you have 0:01:53.840 --> 0:01:57.720 a story to tell. So, because I was an Army officer, 0:01:57.760 --> 0:02:01.000 I learned to keep records. You live by your file 0:02:01.160 --> 0:02:04.040 when you're a bureaucrat. And I had all these records, 0:02:04.040 --> 0:02:07.960 which I organized by topic and then in chronology, and 0:02:08.040 --> 0:02:11.440 I realized I did some pretty cool stuff. And and 0:02:11.480 --> 0:02:16.240 so I started writing, uh, my first effort, and I 0:02:16.280 --> 0:02:20.959 gave it to my son Andrew, who manages screenwriters, and 0:02:21.000 --> 0:02:23.200 he said, this is really interesting, this is good. Now 0:02:23.280 --> 0:02:27.639 get a writer. So I realized mostly I had written reports, right, 0:02:28.240 --> 0:02:32.520 So I was very fortunate. We we met Donna Beach, 0:02:32.560 --> 0:02:37.840 who's a very wonderful uh ghostwriter, I guess and uh. 0:02:37.919 --> 0:02:40.920 And she made this book into something really interesting. You know, 0:02:40.960 --> 0:02:43.120 if I would mention someone's name, she would go do 0:02:43.240 --> 0:02:46.320 research and have have this color that she added. So 0:02:46.360 --> 0:02:49.119 it made me a much more aware reader of other 0:02:49.120 --> 0:02:52.040 people's books. So that's how what happened. Well, we want 0:02:52.080 --> 0:02:53.760 to talk to you about your time on Wall Street, 0:02:53.800 --> 0:02:55.320 but I do want to just go into because the 0:02:55.320 --> 0:02:57.119 title of the book is risk, living on the edge, 0:02:57.120 --> 0:02:59.640 and that's a common threat. And you talk about risk, 0:03:00.120 --> 0:03:02.440 you know, by your grandmother, you talk about risk by 0:03:02.440 --> 0:03:04.600 your father, just in terms of coming to the United 0:03:04.639 --> 0:03:07.400 States and the risk that you've taken on throughout your life. 0:03:07.520 --> 0:03:11.079 Not everybody takes on risk. Well that's really the theme 0:03:11.120 --> 0:03:13.680 of the book. Because the other thing I was advised 0:03:13.680 --> 0:03:16.400 to get a central idea. That's something you learned in English, right, 0:03:16.480 --> 0:03:20.079 I forgot it. So I began looking for a common thread, 0:03:20.560 --> 0:03:24.000 and I began talking to my super successful, more famous 0:03:24.040 --> 0:03:27.680 friends who keep working even though they're rich. And I said, 0:03:27.720 --> 0:03:29.519 you know, what is it? I mean, how have you 0:03:29.560 --> 0:03:31.960 manage your life when you came to choices? Which one 0:03:32.000 --> 0:03:34.840 did you take? And they would ramble. And when I say, 0:03:34.920 --> 0:03:37.720 you see, each time you selected a difficult college, you 0:03:37.800 --> 0:03:41.160 selected difficult course, you selected difficult career, I said, do 0:03:41.200 --> 0:03:44.640 you understand that you have a propensity toward risk? And 0:03:44.680 --> 0:03:46.920 they thought about it and I said yeah. And then 0:03:46.960 --> 0:03:49.720 I said, and and by the way, it's because your 0:03:49.840 --> 0:03:53.360 way your brain is wired. You have a shortage maybe 0:03:53.400 --> 0:03:56.200 a serotonin, so you need more stimulus than other people. 0:03:56.920 --> 0:03:59.680 And and finally, why don't you quit? You got fame 0:03:59.720 --> 0:04:02.120 in my bunny. And then they sort of, you know, 0:04:02.760 --> 0:04:05.160 pretend to be reflective and I say, well, I like it, 0:04:05.440 --> 0:04:08.240 or what else would I do? Or you know, I 0:04:08.280 --> 0:04:10.960 don't know, and I said, I'll tell you why you're addicted. 0:04:11.120 --> 0:04:13.120 And then they get very quiet, because that's that's a 0:04:14.000 --> 0:04:18.279 emotionally loaded. But it's true. Your brain wearing doesn't change 0:04:18.760 --> 0:04:21.320 and you keep going. And I became aware of that 0:04:21.400 --> 0:04:24.480 when I sort of retired to Puerto Rico four years ago. 0:04:24.880 --> 0:04:27.039 I thought I would read and write and you know, 0:04:27.120 --> 0:04:29.680 hang at the beach, and I just I couldn't do it. 0:04:29.760 --> 0:04:32.120 I mean, and I didn't go buying bonds either. Well 0:04:32.160 --> 0:04:35.000 I did. I bought Puerto Rican bront So. But you 0:04:35.040 --> 0:04:37.120 see what I mean. But you see what I mean. 0:04:37.600 --> 0:04:40.320 You know, you got addicted to a certain way of 0:04:40.480 --> 0:04:43.240 working and you get uncomfortable. I mean, you know, if 0:04:43.279 --> 0:04:45.840 I bought treasury bills, I would I'd be nervous that 0:04:46.000 --> 0:04:48.000 the inflation don't be back, which I think it is, 0:04:48.080 --> 0:04:50.280 by the way, But you talk about educated risk, right, 0:04:50.440 --> 0:04:52.920 risk with some skills, right, because there people take risk 0:04:53.160 --> 0:04:55.279 and they really, you know, run into trouble. But you 0:04:55.360 --> 0:04:57.720 talk about that in your book about having kind of 0:04:57.760 --> 0:05:02.160 a certain level of skills combined with risk creates incredible opportunities. 0:05:02.200 --> 0:05:05.320 But that's ever so important. What you said, uh Ill, 0:05:05.360 --> 0:05:09.159 prepared risk taking is disastrous. I mean, you may get 0:05:09.240 --> 0:05:11.159 rich for a while, you're a child of your time, 0:05:11.279 --> 0:05:14.120 you know, and then boom, you give it back. So 0:05:15.080 --> 0:05:17.599 when you look at particularly those mountain climbers like in 0:05:17.680 --> 0:05:21.400 Free Solo, you know, the preparation is extraordinary. And you 0:05:21.440 --> 0:05:24.200 mentioned the tennis. Just imagine how hard those people work 0:05:24.240 --> 0:05:27.039 all year to be able to endure five hours of 0:05:27.120 --> 0:05:31.560 asymmetric you know, torking of your frame. So preparation is 0:05:31.680 --> 0:05:35.640 vital and if you also have the risk appetite, the 0:05:35.680 --> 0:05:39.560 two usually leads to success, I believe. So speaking of risk, 0:05:39.720 --> 0:05:42.520 you were on Wall Street at a very well known house, 0:05:42.680 --> 0:05:45.880 bear Stearns, at a time when in some ways risk 0:05:46.000 --> 0:05:48.240 was really coming into vogue in a in a lot 0:05:48.279 --> 0:05:51.839 of ways. What did you experience what did you identify 0:05:52.360 --> 0:05:54.880 visa the risk when you were at bear Stearns. It 0:05:54.960 --> 0:05:59.080 was interesting because as you say, Wall Street changed. Uh, 0:05:59.160 --> 0:06:02.920 it was year before pension plans, insurance companies could buy stocks. 0:06:03.440 --> 0:06:07.200 People traded in bonds. That's what they did when I 0:06:07.279 --> 0:06:12.279 went to Wall Street. Uh, beginning of nineteen sixty two. Uh, 0:06:12.440 --> 0:06:15.120 a couple of my classmates went to Morgan Stanley. They 0:06:15.120 --> 0:06:17.280 told me that their balance sheet, their net worth in 0:06:17.400 --> 0:06:20.880 was five million dollars. They didn't take risks, you know. 0:06:21.279 --> 0:06:23.200 They once they were in a good club. They went 0:06:23.240 --> 0:06:26.920 there and they got business. So this changed over time 0:06:27.480 --> 0:06:34.040 as as the Commission structural eroaded and the fat income 0:06:34.279 --> 0:06:37.200 and profits of Wall Street was attacked, they had to 0:06:37.200 --> 0:06:39.919 take more and more risk, and that's how they survived 0:06:40.600 --> 0:06:43.320 and they put their money at risk in order to 0:06:43.360 --> 0:06:47.440 get transactions the block trades for example, and and risk 0:06:47.520 --> 0:06:52.440 then became I think almost a central idea of Wall 0:06:52.480 --> 0:06:57.839 Street and the universal banks. And when you don't do well, 0:06:57.880 --> 0:07:01.640 you see recently the earnings reports where trading profits were 0:07:01.680 --> 0:07:06.640 down and now you have margins being squeezed. So you 0:07:06.640 --> 0:07:10.240 know that usually human behavior is pretty dorp right, So 0:07:10.480 --> 0:07:13.240 talk to us specifically about bear Stearns, because it really 0:07:13.320 --> 0:07:16.400 is one of the most storied houses doesn't exist anymore. 0:07:16.520 --> 0:07:20.040 We all know that all too well. You were onto 0:07:20.040 --> 0:07:23.920 your next adventure before that demise. But what was it 0:07:24.040 --> 0:07:28.000 specifically about that firm that that made it different because 0:07:28.040 --> 0:07:30.520 you had a lot of very senior jobs there. Well, 0:07:30.600 --> 0:07:35.520 it was interesting when bear Stearns management top management changed, 0:07:35.600 --> 0:07:37.400 it was usually by what I call in the book 0:07:37.480 --> 0:07:42.320 brute force. Si Lewis made money trading bonds during the depression, 0:07:42.360 --> 0:07:45.520 and he pushed out the founders and and took control. 0:07:45.960 --> 0:07:47.800 And they were smart enough to see they didn't want 0:07:47.800 --> 0:07:49.600 to lose talent, so they let him do it and 0:07:49.600 --> 0:07:53.680 they stuck around. This was rather civilized way in Dorwinian 0:07:53.720 --> 0:07:59.880 world to do things. Then Alan Greenberg, Jury Coolberg, John 0:08:00.040 --> 0:08:04.480 Rosenwald and sig Warsaker were the four most productive partners 0:08:05.080 --> 0:08:07.840 in the early sixties, and they went to the then 0:08:07.960 --> 0:08:11.000 senior partners like sy Lewis and said we're gonna leave 0:08:11.200 --> 0:08:14.320 if we don't take over, and once again brute force. 0:08:15.080 --> 0:08:18.760 The older partners were clever enough to realize they didn't 0:08:18.760 --> 0:08:23.480 want to lose people like this. But the the change 0:08:23.520 --> 0:08:28.400 that broke that was when Jimmy Caine, through an extraordinary 0:08:28.480 --> 0:08:34.720 machiavellian UH campaign UH took control by first getting control 0:08:34.800 --> 0:08:37.600 over compensation, which is the key to Wall Street's heart 0:08:38.280 --> 0:08:43.440 and UH the eventually UH he had control. But he 0:08:43.440 --> 0:08:47.959 had not ever managed a large, successful department, so this 0:08:48.080 --> 0:08:54.160 was different and with extraordinary risk taking. As I point 0:08:54.200 --> 0:08:56.560 out in the book, the change in composition of the 0:08:56.559 --> 0:09:00.600 balance sheet was amazing, and the fact that they chose 0:09:00.679 --> 0:09:03.360 to finance it with short term money which was very cheap, 0:09:03.440 --> 0:09:06.120 which boosted the return on equity which is how the 0:09:06.160 --> 0:09:09.480 bonus system worked. You know, it was an extraordinary risk 0:09:09.640 --> 0:09:15.160 ill liquid assets, overnight financing, bad combination right, which ultimately 0:09:15.200 --> 0:09:18.080 led to their demise come the financial crisis. Well, as 0:09:18.160 --> 0:09:21.559 I say in the book, they had this huge portfolio 0:09:22.280 --> 0:09:27.240 of mortgage back bonds. And when the FED brokered the 0:09:27.280 --> 0:09:32.880 marriage between JP Morgan and bear Stearns, JP Morgan's board 0:09:33.120 --> 0:09:38.160 and their brilliant CEO, Jamie Diamond said We're just not 0:09:38.240 --> 0:09:40.120 going to take that degree of risk. So the FED 0:09:40.240 --> 0:09:44.360 had to retrade the deal on the Sunday where the 0:09:44.400 --> 0:09:48.560 FED made JP take of I think it was about 0:09:48.559 --> 0:09:50.680 a billion and a quarter of the bottom risk. And 0:09:50.679 --> 0:09:53.840 then after that the FED stood behind this enormous portfolio. 0:09:54.480 --> 0:09:56.240 And then if you look at what happened to that 0:09:56.320 --> 0:09:59.680 portfolio over the next few years, it paid off in 0:09:59.720 --> 0:10:02.440 the had made billions. And so what I say in 0:10:02.480 --> 0:10:06.320 the books, bear Stearns, if they could have dealt with 0:10:06.400 --> 0:10:11.880 their ill liquidity would have survived just smaller. So before 0:10:12.000 --> 0:10:15.320 any of that happened, you took what many would say 0:10:15.480 --> 0:10:18.920 is probably the biggest risk of your professional career, which 0:10:18.960 --> 0:10:22.559 is you're in California at the time to hang out 0:10:22.559 --> 0:10:26.280 a shingle, leave a very lucrative career at a big 0:10:26.280 --> 0:10:31.120 Wall Street firm, and start your own shop. You captured 0:10:31.160 --> 0:10:33.360 that moment, and it's a great moment between you and 0:10:33.400 --> 0:10:35.439 your wife where you're you know, you're looking out at 0:10:35.440 --> 0:10:38.120 the at the water. If I remember correctly, and she 0:10:38.280 --> 0:10:40.520 essentially knows you well enough at that point to say, listen, 0:10:40.520 --> 0:10:43.000 you gotta do this. You're doing it. It's just a 0:10:43.040 --> 0:10:46.120 matter of how and when, What was inside you at 0:10:46.120 --> 0:10:48.280 that moment, what was in your head that convinced you 0:10:48.320 --> 0:10:50.560 this was the right move. As I told her, you know, 0:10:50.600 --> 0:10:52.959 when I was young, I used to like to swim. 0:10:53.000 --> 0:10:56.240 I was a lifeguard, and I dove off the low 0:10:56.440 --> 0:10:58.080 board a lot now. And then I went up to 0:10:58.080 --> 0:11:00.439 the high board and dove off. And you walk out 0:11:00.480 --> 0:11:02.080 to the end, you look down and say, why am 0:11:02.080 --> 0:11:04.360 I doing this? You know this? Why you know you 0:11:04.360 --> 0:11:06.960 didn't want to climb back down the ladder. Sometimes you did, 0:11:07.360 --> 0:11:09.000 And I said it was like that, you know, I 0:11:09.040 --> 0:11:11.800 was so tempted to leave. I hated the climate at 0:11:11.800 --> 0:11:15.760 bear Stearns at the time and in the nineties, and 0:11:15.760 --> 0:11:17.200 and but every time I got out to the end 0:11:17.200 --> 0:11:19.520 of the board, I looked down, and then finally, yes, 0:11:19.840 --> 0:11:21.839 I said it was enough. And I think she was 0:11:21.880 --> 0:11:26.160 afraid I'd retire and hang around the house. Gotta do something, 0:11:26.160 --> 0:11:28.640 you gotta do something, yeah, right. I took Fridays in 0:11:28.720 --> 0:11:31.319 the house, and so she would go to town on Friday, right, 0:11:32.200 --> 0:11:34.880 But what did you see that was the opportunity? Because 0:11:34.960 --> 0:11:37.079 you know you mentioned Jerry Coldberg. Jerry Coldberg sort of 0:11:37.120 --> 0:11:39.920 see something in nineteen seventy six with you know, two 0:11:39.960 --> 0:11:43.400 young colleagues, Henry Kravits and George Roberts. You know, fast forward, 0:11:43.520 --> 0:11:49.000 you know, years later you saw something, an opportunity around 0:11:49.040 --> 0:11:53.000 distress and around a sort of new form of investing 0:11:53.040 --> 0:11:56.280 in many ways. What was it? You know a number 0:11:56.280 --> 0:11:58.559 of people have reviewed my book and said it has 0:11:58.600 --> 0:12:00.760 a lot of candor, you know, so I have to 0:12:00.760 --> 0:12:03.559 be candid. I didn't know what the hell I was doing, Okay, 0:12:03.840 --> 0:12:07.040 I just wanted to go prove I could do it. 0:12:07.120 --> 0:12:09.679 Is that simple? I mean I had I hired two 0:12:09.760 --> 0:12:13.120 brilliant young men, right, and we sat around, we came 0:12:13.200 --> 0:12:16.319 up with these strategies, and trust me, they weren't good. 0:12:16.800 --> 0:12:20.080 But I was always a contrarian investor, and so I 0:12:20.200 --> 0:12:24.120 uncovered opportunities that were cheap. And I had made a 0:12:24.120 --> 0:12:26.440 lot of money for wealthy people, and I would go 0:12:26.480 --> 0:12:29.560 to and say, okay, uh, we're gonna buy this, and 0:12:29.600 --> 0:12:31.439 we want you to come in with us, and we'll 0:12:31.480 --> 0:12:34.280 take this share of the profits. None of them would 0:12:34.280 --> 0:12:36.960 do it, and so we did it, and we made 0:12:36.960 --> 0:12:39.960 a lot of money. And and then I thought, dummy, 0:12:40.240 --> 0:12:42.880 you're a contrary investor. What does that mean? Nobody else 0:12:42.960 --> 0:12:45.480 likes them? Right? So I realized that I had to 0:12:45.520 --> 0:12:47.640 get a fund. You might say I got the memo 0:12:48.160 --> 0:12:51.560 very late. But then we were fabulous. We made high 0:12:51.600 --> 0:12:55.240 returns and we had funds every year. And but isn't 0:12:55.240 --> 0:12:57.080 it amazing because I think in your booky right, that 0:12:57.120 --> 0:12:59.840 you didn't have an audited track record, right, So here 0:12:59.840 --> 0:13:03.080 you war after how many decades on Wall Street already 0:13:03.160 --> 0:13:06.360 right and involved in you know, incredible deals, and then 0:13:06.360 --> 0:13:07.760 all of a sudden you're on your own, but you 0:13:07.800 --> 0:13:09.760 don't have that track record to stage at somebody see 0:13:09.880 --> 0:13:11.760 this is what I've done. So it's amazing to have 0:13:11.800 --> 0:13:13.840 to kind of start at that level. Where were you 0:13:13.880 --> 0:13:16.679 when I needed you? I mean, neither one of us 0:13:16.720 --> 0:13:18.760 said we had There are three of us, right, and 0:13:18.800 --> 0:13:21.120 none of us had a track record. And I mean, 0:13:21.320 --> 0:13:23.400 you gotta remember I grew up in a small town 0:13:23.440 --> 0:13:25.880 in South Georgia, right, I mean this all stuff came 0:13:25.920 --> 0:13:29.640 to me late, but you know that's the truth. Anyway, 0:13:29.679 --> 0:13:31.680 what we did was we hired one of the national 0:13:31.679 --> 0:13:35.280 accounting firms. We gave them all my tax returns, all 0:13:35.320 --> 0:13:40.520 my UH brokerage statements, and they reconstructed my investment record 0:13:40.600 --> 0:13:43.560 that way. And people I knew were kind enough to 0:13:43.640 --> 0:13:45.800 lend their name and some of their cash to our 0:13:45.840 --> 0:13:48.040 first fund, and that's that really got it started. I 0:13:48.080 --> 0:13:49.719 want to go back there to those days at Bear 0:13:49.760 --> 0:13:52.840 Sterns because I think what's remarkable about your career is 0:13:52.920 --> 0:13:55.079 I think Wall Street was at a different time and era. 0:13:55.240 --> 0:13:57.320 I mean, I love just reading about your early interviews. 0:13:57.360 --> 0:14:00.160 I mean, you met, you met with those four guys 0:14:00.240 --> 0:14:02.840 that we're going to leave, including A. S. Greenberg who 0:14:02.840 --> 0:14:05.120 became it seems like a pretty close friend of yours. 0:14:05.360 --> 0:14:07.200 Tell me about like the first time you walked and 0:14:07.200 --> 0:14:08.959 it wasn't your first Wall Street firm, right because you 0:14:09.040 --> 0:14:11.679 had it been at Burnham. But tell me about that 0:14:11.720 --> 0:14:14.760 first time at Bear and meeting with these guys and 0:14:15.160 --> 0:14:17.920 what it was like in those early days. Well, I 0:14:17.960 --> 0:14:22.040 got fired around Christmas time at Burnham. I just didn't 0:14:22.080 --> 0:14:25.520 get along with Bobby Lynton and I was a green kid. 0:14:25.600 --> 0:14:28.840 I mean, you'd say, you know, you better learn to 0:14:28.880 --> 0:14:32.160 behave differently, right, But I had gone there because I 0:14:32.200 --> 0:14:35.680 was impatient. You know, I wanted to immediately be successful 0:14:35.720 --> 0:14:37.920 and not get trained and waste all my time learning 0:14:37.960 --> 0:14:40.760 how to do things. That was a big mistake. So 0:14:40.960 --> 0:14:44.040 it didn't work out. And I had a fabulous mentor 0:14:44.120 --> 0:14:48.120 there though, Danny Cowen, who was also mentoring Warren Buffett, 0:14:48.280 --> 0:14:52.600 had bought the Berkshire Hathaway stock for him and uh, 0:14:52.760 --> 0:14:55.520 and Danny said, look, go over to bear Stearns a 0:14:55.640 --> 0:14:59.200 Screenberg is going to run it sometime and he's really fabulous. 0:14:59.720 --> 0:15:02.040 And so I went over there and that was great advice. 0:15:02.120 --> 0:15:04.880 And Danny was a wonderful and a long friend, a 0:15:04.920 --> 0:15:09.160 long time friend. And then Ace liked me, mostly because 0:15:09.280 --> 0:15:12.360 Danny said I was good. And then Ace took an 0:15:12.400 --> 0:15:15.000 interest in my career and that's so important. People, young 0:15:15.000 --> 0:15:17.960 people today asked me, you know, you know what advice 0:15:18.040 --> 0:15:20.360 to give? I said, decide where you want to be 0:15:20.440 --> 0:15:23.360 in two to five years and get a great mentor. 0:15:25.000 --> 0:15:28.960 And so as you you know develop, you know, fast 0:15:28.960 --> 0:15:33.160 forwarding again to Tannembomb Capital, you build this up. You 0:15:33.600 --> 0:15:36.640 do create, to Carol's point, an actual track record that 0:15:36.720 --> 0:15:39.600 you can then invest against more and more funds. You're 0:15:39.640 --> 0:15:42.560 building a firm, but you're building a different sort of firm. 0:15:42.600 --> 0:15:45.840 It feels like, in part because you're in Los Angeles, 0:15:45.920 --> 0:15:47.800 you're not you know, back in New York, you're not 0:15:47.840 --> 0:15:51.120 sort of subject to the wiles of uh sort of 0:15:51.160 --> 0:15:54.280 New York thinking what was it about being in on 0:15:54.320 --> 0:15:56.880 the West coast in l A That that might have 0:15:57.000 --> 0:15:59.640 helped the ethos of the place. Well, like I said, 0:15:59.640 --> 0:16:02.560 I got all the memos really late. I mean, serendipity 0:16:02.600 --> 0:16:05.840 has been my friend. We tried to figure out what 0:16:05.840 --> 0:16:07.480 we were going to do with the firm. We realized 0:16:07.520 --> 0:16:10.760 we had to have funds so we could control the 0:16:10.760 --> 0:16:14.560 the purchases of the ugly investments, which mostly what we 0:16:14.640 --> 0:16:17.600 bought because when people don't like them and there's anybody 0:16:17.680 --> 0:16:22.680 left to sell and uh. After we began to to 0:16:23.240 --> 0:16:28.640 develop um track record, we became experts in credit. UH. 0:16:28.960 --> 0:16:32.040 Credit to me, especially the stress credit is the most 0:16:32.120 --> 0:16:36.000 most complex asset class. You have to understand the economy, 0:16:36.160 --> 0:16:41.200 the industry, the company, the instrument, the legal processes of 0:16:41.280 --> 0:16:45.720 particularly like bankruptcy processes. I'm very proud that Tenet Bomb 0:16:45.800 --> 0:16:48.080 Capital Partners was one of three or four firms that 0:16:48.160 --> 0:16:52.120 put Caesar's in bankruptcy when they were abusing the investors. 0:16:52.680 --> 0:16:56.480 So we we we took calculated risks and and our 0:16:56.520 --> 0:17:00.880 first two funds were returning net a year. So you know, 0:17:01.040 --> 0:17:04.400 from there it got a lot easier. Talk to us too, 0:17:04.720 --> 0:17:09.639 about your exposure to Puerto Rico, because you do have 0:17:09.680 --> 0:17:14.719 a home there. I am a resident, and for people 0:17:14.880 --> 0:17:18.800 who want to maintain their American citizenship, and you know, 0:17:18.880 --> 0:17:22.760 I'm a first generation American, my wife's a second and 0:17:22.920 --> 0:17:25.760 you know, and I have feelings about America. It's been 0:17:25.800 --> 0:17:28.560 a great place, and so I didn't want to give 0:17:28.680 --> 0:17:32.119 up my citizenship. But I got pretty tired of seeing 0:17:32.119 --> 0:17:36.080 my tax dollars wasted and uh and and I just 0:17:36.160 --> 0:17:39.200 liked to invest. I didn't want to build a business again. 0:17:39.760 --> 0:17:43.439 And Puerto Rico has these programs that are remarkable for 0:17:43.520 --> 0:17:46.560 people like that. And I first heard about him through 0:17:46.600 --> 0:17:49.520 my friend John Paulson, who you know famously put a 0:17:49.520 --> 0:17:52.040 lot of money down there too, very good result of 0:17:52.080 --> 0:17:56.040 my dad. So, uh, when I looked into these programs, 0:17:56.119 --> 0:17:58.840 I realized that a professional investor, what I was going 0:17:58.880 --> 0:18:02.480 to mostly do is is by things and then at 0:18:02.520 --> 0:18:06.480 some point get capital gains. And Puerto Rico is a 0:18:07.119 --> 0:18:10.960 is an exception to the global tax regime of the US, 0:18:11.000 --> 0:18:14.280 so that when you made new investments, that means that 0:18:14.520 --> 0:18:18.040 from when you move there, the future capital gains are 0:18:18.040 --> 0:18:21.840 not taxed. And you know, this is like heaven. And 0:18:21.880 --> 0:18:25.280 then the other part of the heaven is that uh, 0:18:25.400 --> 0:18:29.960 notwithstanding uh, having lived in Malibu for forty two years, 0:18:30.680 --> 0:18:33.480 uh part time the last four. Uh, you know, I 0:18:33.560 --> 0:18:35.600 live it at the beach, and down there we got 0:18:35.640 --> 0:18:38.359 a lot more beach and we've got these big palm 0:18:38.400 --> 0:18:42.280 trees and uh we live in a beautiful resort that 0:18:42.440 --> 0:18:45.840 John Paulson controls, by the way. But you know it's 0:18:45.880 --> 0:18:48.320 to me, it's it's heavenly. You know, I've got two 0:18:48.359 --> 0:18:50.960 dogs who when you throw the tennis balls in the pool, 0:18:51.000 --> 0:18:53.680 they dive after them. And it's okay. You know, no 0:18:53.760 --> 0:18:56.080 one comes around and tells me I'm making too much noise. 0:18:56.640 --> 0:18:58.600 But what about I'm just curious. I mean, you live 0:18:58.640 --> 0:19:02.080 through a couple of hurricanes down there, um, and just 0:19:02.119 --> 0:19:05.880 the problems, the economic problems, the financial problems in Puerto Rico. 0:19:05.960 --> 0:19:08.920 What's the solution you see it? You know firsthand. I'm 0:19:08.960 --> 0:19:11.920 just curious what you think. Well, you know, Puerto Rico 0:19:12.119 --> 0:19:15.239 is not unique. You could look at certain states here 0:19:15.280 --> 0:19:16.800 in the US, and I don't want to get a 0:19:16.800 --> 0:19:20.880 lot of hate mail. Who are extraordinarily poorly run where 0:19:20.880 --> 0:19:24.200 there's waste and my suspects, I used to think someone 0:19:24.320 --> 0:19:27.600 was done. Now I realized they were crooked. Right, So 0:19:27.640 --> 0:19:32.040 there's corruption, and there's incompetence and all political units almost all, 0:19:32.119 --> 0:19:37.000 I should say it that way. But Puerto Rico was 0:19:37.600 --> 0:19:41.320 extraordinary and they brought that to a high level of 0:19:41.320 --> 0:19:48.680 of accomplishment. And Puerto Rico has extraordinary uh merit. It's 0:19:48.680 --> 0:19:52.840 the only large Caribbean island's also a commercial center, so 0:19:53.400 --> 0:19:58.320 and and manufacturing is maybe of the of the g 0:19:58.440 --> 0:20:02.879 n P. Mostly technology, it's uh, people don't realize this. 0:20:03.359 --> 0:20:08.920 It's in medical devices, pharmaceutical So I saw really terrific 0:20:09.000 --> 0:20:14.960 possibilities there in terms of tourism and agriculture and technology, 0:20:15.640 --> 0:20:19.520 if only it were run well. And uh, we did 0:20:19.640 --> 0:20:22.800 very well investing in the bonds because there is basically 0:20:23.480 --> 0:20:27.240 something down there that has merit. Now we've had something 0:20:27.359 --> 0:20:31.000 rather unusual, you know, a tropical country that had a 0:20:31.040 --> 0:20:35.800 bloodless coup and and and don't be mistaken, this was 0:20:35.840 --> 0:20:38.679 a bloodless coup. People went out in the streets. They 0:20:38.720 --> 0:20:42.480 didn't break windows. They didn't burn cars. I mean, hell, 0:20:42.560 --> 0:20:46.280 in Paris they do that on Saturday. So uh, and 0:20:46.359 --> 0:20:50.040 the governor, who was very tenacious, was forced to leave. 0:20:50.800 --> 0:20:53.280 And we've got lucky because just prior to that, his 0:20:53.400 --> 0:20:56.560 key aids quit to trying to save him. Right, so 0:20:56.640 --> 0:20:58.639 they fell on the sword and then he got pushed 0:20:58.640 --> 0:21:03.120 on one. So now we have a reluctant governor and 0:21:03.160 --> 0:21:05.760 she is said she's not running for re election and 0:21:05.800 --> 0:21:08.760 wants to do what's good for Puerto Rico. This strikes 0:21:08.800 --> 0:21:12.080 me as in a unique opportunity in the history of democracies, 0:21:12.800 --> 0:21:16.359 and uh, where someone who didn't have to pander to 0:21:16.640 --> 0:21:20.480 the voters and maybe can do what's needed. And you 0:21:20.600 --> 0:21:23.080 have this independent commission like we had here in New 0:21:23.160 --> 0:21:27.119 York years ago when New York didn't have discipline, and 0:21:27.200 --> 0:21:29.639 to the extent they can get a truly balanced budget 0:21:29.680 --> 0:21:32.280 and they can make the reforms they need. It could 0:21:32.320 --> 0:21:34.840 be exceptional. You know, I'm putting more of my money 0:21:34.880 --> 0:21:38.600 into Puerto Rico. We'll see. And what about Wall Street today? 0:21:38.680 --> 0:21:41.040 You know this many decades on. You know, I think 0:21:41.080 --> 0:21:46.960 about the various issues, to say the least big questions, 0:21:47.040 --> 0:21:51.040 both existentially but also more minor. You know you cross 0:21:51.119 --> 0:21:53.680 paths over the course of your career with Jeffrey Epstein. 0:21:53.760 --> 0:21:57.640 That clearly is one of the threads and narratives that 0:21:57.960 --> 0:22:00.760 is very much talked about on on Wall Street. Right now, 0:22:00.760 --> 0:22:02.960 we're ten years on from the financial crisis. There are 0:22:03.040 --> 0:22:08.360 questions around income inequality in Wall streets role in all 0:22:08.400 --> 0:22:11.320 of that. What do you make a Wall Street right now? Well, 0:22:11.359 --> 0:22:13.480 are we gonna talk about the upstain of Wall Street? 0:22:13.520 --> 0:22:20.920 Come on with all right and just talk about threads. 0:22:20.920 --> 0:22:25.639