Speaker 1: This is Bloomberg Wall Street Week.
Speaker 2: The global push into infrastructure, breaking the IPO logjam in tex.
Speaker 1: The financial stories that sheep.
Speaker 2: Are were cutting inflation without losing jobs. Do we need
Speaker 2: rate cuts and if so, how many? Investing in a
Speaker 2: time of geopolitical turmoil.
Speaker 1: Through the eyes of the most influential voices.
Speaker 2: Ten Rogueff Economists of Harvard, former FDIC had Shila Bert
Speaker 2: ge CEO, Larry Kulp, San Francisco FED President Mary Daily.
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 2: From Beverly Hills for the Milkin Institute Global Conference. This
Speaker 2: is a special edition of Bloomberg Wall Street Week. I'm
Speaker 2: David Weston. This week Karen Carneal Tambor of Bridgewater on
Speaker 2: the geopolitics of industrial policy.
Speaker 3: Everything you're seeing in industrial policy officially, it's doing something else.
Speaker 2: Former Treasury Secretary Stephing the noution on his plans to
Speaker 2: buy TikTok.
Speaker 4: I do believe the algorithms could be rebuilt. So my
Speaker 4: plan if we were to purchase it would be to
Speaker 4: rebuild the technology under US leadership.
Speaker 2: And Barry Stern like the Starward Capitol and why he's
Speaker 2: so unhappy with his alma mater, Brown University.
Speaker 5: They should be shown the door, and I don't want
Speaker 5: to pay for them, so I don't want to support
Speaker 5: university houses that language.
Speaker 2: We began the week at Milking with Mark rowan Apollo CEO,
Speaker 2: on the surge in private credit and why he believes
Speaker 2: it's a better way to go.
Speaker 6: If you look over time, we had eight thousand plus
Speaker 6: public companies in the US. We now have just over
Speaker 6: four thousand public companies. We should logically expect, therefore, to
Speaker 6: be more in the private arkets. And I don't think
Speaker 6: people actually appreciate the scale. And this is not just US,
Speaker 6: but it's US and Europe. Eighty percent of companies over
Speaker 6: one hundred million revenue are private, eighty percent of employment private.
Speaker 6: Why would we not expect a growth in the private marketplace?
Speaker 2: So why is it a better mousetrap? I mean fundamentally,
Speaker 2: I think about banks as being intermediaries, sort of between
Speaker 2: people putting capital up and people needing capital. Why is
Speaker 2: private a better intermediary than the big banks?
Speaker 7: So let's work, let's work in reverse. What needs?
Speaker 6: What are the needs for financing today? We're financing infrastructure
Speaker 6: long term, We're financing, energy transition, really long term we're
Speaker 6: financing the new economy, data centers, power really long term,
Speaker 6: long term financing needs. What a banks do well. Banks
Speaker 6: borrow short and then long. They are not ideally situated
Speaker 6: to be investors in long term assets, and so regulators
Speaker 6: when they look at the funding for the economy, they
Speaker 6: only have two choices, the banking system or the investment marketplace.
Speaker 6: Increasingly since two thousand and eight, regulators have chosen the
Speaker 6: investment marketplace to provide financing. Now you come to the
Speaker 6: investment marketplace and you have two more choices. You have
Speaker 6: daily liquid fonts or you have long term investors who
Speaker 6: are trying to match long term liabilities and long term assets.
Speaker 7: I think the choice is obvious.
Speaker 6: Do we really want to create more instability in our
Speaker 6: public markets by matching long term financing needs with short
Speaker 6: term daily liquid files?
Speaker 7: I don't think so.
Speaker 6: We are watching the logical outgrowth of changes that started
Speaker 6: in two thousand and eight, that accelerated through a zero
Speaker 6: rate environment, that were exacerbated by COVID, that were then
Speaker 6: refreshed by SVB and FRV.
Speaker 7: And this is not just happening in the US.
Speaker 6: It's happening everywhere in the world, regulators are looking at
Speaker 6: the choice of how they fund their economy, and they're
Speaker 6: choosing investors over banks. That doesn't mean bank's shrink, It
Speaker 6: just means on the margin, the growth is going to
Speaker 6: the investment market.
Speaker 2: Plitz. Are there some things that public markets do better
Speaker 2: than private markets? You've described some of the things private
Speaker 2: does better than public. Are there some things that public
Speaker 2: really does better.
Speaker 6: Look, we have in the US, in particular, a focus
Speaker 6: on daily liquidity. You want something that is daily liquid
Speaker 6: if you want pricing every single day, you can only
Speaker 6: accomplish that in public markets. Private markets are not going
Speaker 6: to give you daily pricing. They can give you an
Speaker 6: indication of pricing, nor are they going to give you
Speaker 6: immediate liquidity. So if you want something that's immediably liquid,
Speaker 6: you're talking about the public marketplace. If you want access
Speaker 6: to vast amount of capital today, because that's where the
Speaker 6: capital is, you're talking about the public marketplace.
Speaker 7: But if you're look at.
Speaker 6: Talking about matching long term capital needs, you're really talking
Speaker 6: about the private marketplace.
Speaker 2: When you talk about daily pricing. Some people here transparency.
Speaker 2: That is to say you have transparency in the public
Speaker 2: markets and not in the private markets. Is that right?
Speaker 6: I don't really think so. So let's start in the
Speaker 6: fixed income market. You own a public bond, Can you
Speaker 6: sell that public bond?
Speaker 7: Maybe?
Speaker 6: On average, it takes about five days to sell an
Speaker 6: investment grade public bond today when you see a price
Speaker 6: or a quote that's for a very small subset of
Speaker 6: the bond market. In the private market, can you sell
Speaker 6: your bond?
Speaker 7: Yes?
Speaker 6: On average, probably takes you about five days to sell
Speaker 6: your vont What we're watching is we're watching as private
Speaker 6: markets get bigger. We're actually watching increased liquidity in private markets.
Speaker 6: It's not to say it's the same as public markets,
Speaker 6: it's not. But this notion of transparency is actually itself
Speaker 6: an interesting thing. Are private market's not transparent? This is
Speaker 6: the argument that i'm the regulators make. They talk about
Speaker 6: private credit as a threat to the system. Well, every
Speaker 6: dollar that moves out of our US banking system makes
Speaker 6: the system more resilient. Banks are leveraged ten to twelve times,
Speaker 6: investors zero leverage, mutual funds zero leverage, BDC's one point
Speaker 6: five times leverage, retirement services companies eight times leverage. Everything
Speaker 6: that moves out of the banking system deleverages.
Speaker 2: So we've been talking about structural changes within the financial
Speaker 2: industry actually that have made private markets evolve. What about
Speaker 2: larger forces what we're looking at right now. We've gone
Speaker 2: through a period of extraordinarily low interest rates, a lot
Speaker 2: of liquidity. As I say, some other places have pumped
Speaker 2: a lot of money into the system for good and
Speaker 2: sufficient reason. We had a pandemic, we had a great
Speaker 2: financial crisis. As that tightens up, as I assume it will,
Speaker 2: how does that change the equation for private It.
Speaker 7: Is absolutely the driving force.
Speaker 6: I mean, this is focusing on the urgent, which is
Speaker 6: what we were talking about before we came on Era
Speaker 6: versus the important. This is the important thing that's happening
Speaker 6: in our business. At our recent partners off site, I
Speaker 6: put up a slide that said, in two thousand and eight,
Speaker 6: Apollo forty billion of AUM twenty twenty three, six hundred
Speaker 6: and fifty billion of AUM, we grew fourteen times. We
Speaker 6: outgrew Apple, We we outgrew Microsoft. Pretty impressive stat next slide,
Speaker 6: were we lucky or smart? We were lucky. You can't
Speaker 6: possibly plan on growing your business fourteen times, but you
Speaker 6: can position the business in a way that you take
Speaker 6: advantage of powerful tailwinds or trends.
Speaker 7: What were the tailwinds?
Speaker 6: Two thousand and eight, we had a financial crisis which
Speaker 6: puts most financial institutions in the.
Speaker 7: Western world on defense.
Speaker 6: People who had made promises to retirees, to pensioners, and
Speaker 6: had other obligations that were fixed all of a sudden
Speaker 6: needed to look elsewhere for rate of return. They were
Speaker 6: willing to consider that perhaps private markets offer an alternative.
Speaker 2: So Marco's turn to a different subject that you've been
Speaker 2: involved in. That's what's going on in the university and
Speaker 2: college at campuses right now. You've been involved, particularly at
Speaker 2: Pennsylvania and the Wharton School for a good long time
Speaker 2: on the board. Have things changed on college campuses or
Speaker 2: has there always been thus and it's just been triggered
Speaker 2: by this Israel Guiza Phenomona.
Speaker 6: Look, I think we've actually seen a lot of change
Speaker 6: take place over time. So I have a very favorable
Speaker 6: memory in my experience at the University Pennsylvania campus. But
Speaker 6: think more broadly, US universities were the were and are
Speaker 6: the envy of the world. We can destroy that, we
Speaker 6: can lose it. Why are kids there? Why did we
Speaker 6: think they were there? Be exposed to different points of view,
Speaker 6: learn how to think, critical reasoning, critical thinking, maturation. Is
Speaker 6: that what they're getting today. I think in some places
Speaker 6: it is what they're getting, and in some classes it
Speaker 6: is what they're getting. But what I saw at the
Speaker 6: University of Pennsylvania and when I spoke out against, was
Speaker 6: a dominant narrative that was taking hold on our campuses.
Speaker 6: Call it a post colonial education, call it what you will.
Speaker 6: It gave rise to an institutionalization of a point of view,
Speaker 6: that there were favorite groups and disfavored groups, that there
Speaker 6: was acceptable speech and non acceptable speech. I'm not sure
Speaker 6: that's the job that we all signed up for, or
Speaker 6: that's the university that we signed up for. Where we're
Speaker 6: watching today on these campuses is nothing more than the
Speaker 6: outgrowth of twenty years of bad management. If you have
Speaker 6: a dominant narrative on campus, do you have academic freedom?
Speaker 6: Do you have freedom of speech? I have seen over
Speaker 6: the past few years, as I've really stepped up my involvement, professors,
Speaker 6: department chairs who are afraid to speak their mind because
Speaker 6: their thoughts, their speech goes against the dominant narrative. What
Speaker 6: we're watching today on campus is we're told are leftists.
Speaker 6: We used to think leftists were liberal. This hardly seems liberal.
Speaker 6: This actually seems illiberal in the most extreme way. Why
Speaker 6: haven't they been cleared out? Won't listen to Ben Sas
Speaker 6: at the University of Florida. We're all about free speech,
Speaker 6: We're all about the right to protest. But there's a
Speaker 6: time and a place and a way you violate and trespass.
Speaker 6: There are consequences. Why would we not deal with them
Speaker 6: everywhere and that way. Certainly protests that were inconsistent with
Speaker 6: the narrative that we find on our campuses have and
Speaker 6: will be dealt with in that manner. Speakers are regularly
Speaker 6: shouted down, Professors, euersy administrators who did not react in
Speaker 6: that way without that kind of moral clarity. They now
Speaker 6: have encampments. Once you have encampments, you have the potential
Speaker 6: for violence. You have other considerations that come into play.
Speaker 6: But make no mistake, outside agitators, not mostly students, trespass
Speaker 6: danger to our the rest of the students and the
Speaker 6: rest of the community. This is what twenty years of
Speaker 6: a dominant narrative has done.
Speaker 2: Having seen it from the inside, where is the failure?
Speaker 6: The failures in multiple places, But I think it starts
Speaker 6: with me and with us as trustees. We were asleep
Speaker 6: at the wheel for twenty years. Part of our job
Speaker 6: was to provide balance. I do not think the popular
Speaker 6: frame of a campus today where trustees and alumni are
Speaker 6: fighting professors over academic freedom.
Speaker 7: Is actually correct.
Speaker 6: I actually think the appropriate frame is university administrators who
Speaker 6: maintain this dominant narrative are fighting professors for academic freedom.
Speaker 6: Trustees and alumni are here to provide balance. We have
Speaker 6: been asleep at the wheel. We have not done what
Speaker 6: we were supposed to do. We did not object as
Speaker 6: these dominant narratives took hold, and it is our job
Speaker 6: I believe to support long term excellence in education, academic research,
Speaker 6: freedom of expression, freedom to disagree. That's not what we
Speaker 6: have on many of our campuses today. We've got a
Speaker 6: long way from academic excellence.
Speaker 2: How is that corrected without the trustees overstepping their boundaries.
Speaker 2: I mean, you know, and I know when you sit
Speaker 2: in a board there are certain things you really need
Speaker 2: to do. You don't want to run the thing day
Speaker 2: to day. You don't have trustees there to be micromanagers.
Speaker 2: How do you have the proper role for the trustees
Speaker 2: without overstepping boundaries.
Speaker 7: There's a question of overstepping.
Speaker 6: I think the danger right now is far from trustees
Speaker 6: overstepping the bounts. I think trustees, for the most part
Speaker 6: of these big institutions, myself included, have failed to act.
Speaker 6: We have not done our job in the most fundamental way.
Speaker 6: I don't think we are anywhere close to the line
Speaker 6: of overstepping our balunts. Most universities operate in a shared
Speaker 6: governance manner. Transparency is often the best disinfectant. I do
Speaker 6: not believe at the University of Pennsylvania or a many
Speaker 6: of these campuses, the vast majority of professors actually believe
Speaker 6: in this dominant narrative. We as trustees can assure anonymous
Speaker 6: polling representation across the faculty, lots of other things that
Speaker 6: we can do to developing a strategic plan goes a
Speaker 6: long way. And as you said, it is not the
Speaker 6: job of the trustee or the alumni for that matter,
Speaker 6: to run these universities.
Speaker 7: This is best left to professional administrators.
Speaker 2: Mark, thank you so much, really great to have you
Speaker 2: on wolsterby as Mark Rowan, he is CEO of Apollo
Speaker 2: Global Management. Coming up, we've turned from the politics on
Speaker 2: US campuses to the geopolitics of industrial policy around the
Speaker 2: world with Karen Carneal Tambour of Bridgewater. That's next on
Speaker 2: Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is a special Milk And edition of Wall Street.
Speaker 2: We're coming from Beverly Hills. One of the subjects of
Speaker 2: this year's Milk And Conference was how investors respond to
Speaker 2: an increasingly fractious world. We host a panel of major
Speaker 2: chief investment officers, including for Bridgewater and Timasik, and we
Speaker 2: start with Karen Carneal Tambour on how geopolitics may be
Speaker 2: driving the move toward industrial policy.
Speaker 3: And I think we've gone to a world where it
Speaker 3: almost seems desirable to people to see lack of convergence,
Speaker 3: to see diversions. You talk to businesses and you know
Speaker 3: there's the ups and downs every day of what's happening
Speaker 3: in the US China relationship.
Speaker 7: But they get the direction.
Speaker 3: They understand that they need to get out of having
Speaker 3: that much relies on China, and they're setting up for
Speaker 3: constantly talking about resilience. What is resilience means? It basically
Speaker 3: means you got to double do what you're doing and
Speaker 3: make it more expensive than it was before because you
Speaker 3: weren't in China for no reason. You were in China
Speaker 3: because it was the cheapest place to be, because that's
Speaker 3: where you had capital, because that's where you could set
Speaker 3: up most efficiently. So to go set up a double do,
Speaker 3: to go create resilience such that if there's a problem,
Speaker 3: you have a different way of you know, getting your
Speaker 3: goods or creating them. That's expensive. So I think the
Speaker 3: biggest implication for investors is that we were kind of
Speaker 3: in this world where there is like almost a gravitational
Speaker 3: pull like all else equal of inflation to I don't know,
Speaker 3: zero one percent, and that was that kind of underpinned
Speaker 3: a lot of the investment landscape because it meant that
Speaker 3: central banks could always be easier than usual because.
Speaker 7: They didn't really have any tension.
Speaker 3: If there's no inflation, you might as well just be
Speaker 3: as easy as you can at all times. What's the downside,
Speaker 3: there's no inflation, And this shift in geopolitics has been
Speaker 3: one of the really important drivers kind of smacking us
Speaker 3: out of that world to a new era where the
Speaker 3: gravitational pull of inflation is higher. Maybe they're more like
Speaker 3: two percent. Not a disastrous number, but one where that
Speaker 3: tension actually starts existing because you have all this structural
Speaker 3: spending that people feel they have to do whatever the price.
Speaker 3: Some of that is just remilitarization. Without some of these
Speaker 3: geopolitical pressures, you wouldn't have that. But countries around the
Speaker 3: world are basically saying I need to spend more on
Speaker 3: military activities. Some of it is corporate spending on redoing
Speaker 3: their supply chain, and the third type I'd mentioned is
Speaker 3: everything you're seeing in industrial policy. Officially it's doing something else.
Speaker 3: For example, the ira is going after climate, but I
Speaker 3: don't believe that spending would have been there without that
Speaker 3: backdrop of geopolitical competition and that sense that if China
Speaker 3: is willing to spend so much state money going after
Speaker 3: their strategic goals, why aren't we.
Speaker 2: Karen Bridgewater has been thought of in terms of China
Speaker 2: for some time. You have a long history there, and
Speaker 2: when you were talking about Asia, I don't think you
Speaker 2: mentioned India.
Speaker 8: So I'm curious about China with respect to India and
Speaker 8: for that matter, other wlads like Vietnam and Indonesia as
Speaker 8: foreign direct investment has seemed to fall in China. How
Speaker 8: do you assess India as an alternative to China and
Speaker 8: for that matter, Indonesia other Asian countries.
Speaker 3: I think India is fascinating. It is still meaningfully smaller
Speaker 3: than China, as you know, just kind of what the
Speaker 3: markets are like, and more difficult than China to transact in.
Speaker 3: So if you look at China, I don't know, seven
Speaker 3: years ago or something, it was very difficult for a
Speaker 3: global player to practically be in China. And so even
Speaker 3: if you weren't worried at all about geopolitics, about them
Speaker 3: confiscating your assets or anything, just logistically the question of
Speaker 3: like how do you buy a bond or how do
Speaker 3: you buy a stock was a challenging one to work through,
Speaker 3: and now a lot of that shifted and it's significantly easier.
Speaker 3: Though it's obviously still harder to buy a Chinese asset.
Speaker 3: I shouldn't say obviously they could have made it easier,
Speaker 3: but still easier to buy a Chinese hard to buy
Speaker 3: a Chinese asset than say a European asset, but a
Speaker 3: lot of areas have come down, so today China is accessible.
Speaker 3: You can as a global investor build up a relatively
Speaker 3: meaningful allocation if you want to, and you would get
Speaker 3: this like extremely uncorrelated exposure that, in my view, even
Speaker 3: with pretty disastrous outcomes in China, may have reasonable return
Speaker 3: because the pricing is just so pessimistic.
Speaker 2: Geopolitics went to court this week as TikTok sued the
Speaker 2: US government over its forced sale. We talked at Milkan
Speaker 2: with someone who wants to buy it. Former Treasury Secretary
Speaker 2: Stephen Minuchin, missus Sager, give us your sense of the
Speaker 2: US economy right now?
Speaker 4: How strong is it?
Speaker 2: Where do you see weaknesses?
Speaker 4: For the parts of the economy have continued to be
Speaker 4: quite strong, and obviously we're seeing inflation still being very sticky.
Speaker 4: So you know, the market has moved towards less great
Speaker 4: cuts this year. I do think we're going to continue
Speaker 4: to see a slow down of the US economy at
Speaker 4: these levels of interest rates.
Speaker 2: So you always worked for President Trump. President Biden's a
Speaker 2: different man, different economic policy. Is there anything you see
Speaker 2: in the Biden ofpal policy that you approve of you
Speaker 2: think they've done a good job with Look.
Speaker 4: I think there's certain things that they've done that have
Speaker 4: been okay, But I think there's been a very different
Speaker 4: economic adject and prior to COVID, we saw the Trump
Speaker 4: tax cuts were really working. I think to the extent
Speaker 4: that we hadn't had COVID. We were seeing an increase
Speaker 4: of the economy and the cuts would have paid for
Speaker 4: themselves and we were seeing very robust economic activity. Now,
Speaker 4: obviously in COVID we had to spend a lot of money.
Speaker 4: I think had we not spent the first two trillion dollars,
Speaker 4: we would have had a worldwide depression, not recession. But
Speaker 4: I think in hindsight, we went on to spend too
Speaker 4: much money, and I think when the Biden administration came in,
Speaker 4: they continue to spend too much money, and I think
Speaker 4: these deficits are going to come back and be a
Speaker 4: real problem.
Speaker 2: We have a very strong US dollar. Is that a
Speaker 2: good thing for the economy.
Speaker 4: I think it is a good thing. I mean, for one,
Speaker 4: the dollar is the reserve currency of the world, and
Speaker 4: that's allowed us to finance these very large deficits. But
Speaker 4: over time this is something we can't be reliant on.
Speaker 4: I think the dollar will continue to be the reserve
Speaker 4: currency before the foreseeable future, but we have a responsibility
Speaker 4: to get our financial situation back in shape.
Speaker 2: What are the issues is pending right now? Are the
Speaker 2: Russian assets central back assets that have been seized in
Speaker 2: Europe and the United States? What should be done, if anything,
Speaker 2: with those. Do you have a view about whether we
Speaker 2: actually should be taking those assets and basically giving them
Speaker 2: to Ukraine for rebuilding Ukraine because of the war.
Speaker 4: Well, first of all, I think the sanctions programs are
Speaker 4: very important, and it's a major foreign policy tool that
Speaker 4: the US has, And I've always said, because we are
Speaker 4: the reserve currency, we need to be careful about how
Speaker 4: we use it. So the first part of this is
Speaker 4: making sure we put in place sanctions and re enforce them.
Speaker 4: I'm very concerned that the Russian Oale sanctions and the
Speaker 4: Iran oil sanctions are not being enforced. We're seeing laborant
Speaker 4: violations of those, and I think that has to be
Speaker 4: enforced now. In regards to what you do with the money,
Speaker 4: the money needs to go through. They're a legal process,
Speaker 4: score a legislative process, and I think there should be
Speaker 4: a healthy debate. But I think using the Russian money
Speaker 4: to rebuild Ukraine after the war is something should be
Speaker 4: seriously considered.
Speaker 2: Since you left the government. One of the big moves
Speaker 2: you made, least the New York Community Bank buying it.
Speaker 2: I give us here says to why that was a
Speaker 2: good move. There's a lot of concern about regional banks
Speaker 2: right now, although you know regional banks personally pretty will.
Speaker 4: I've been in the banking business for a long time.
Speaker 4: During the financial crisis, I've bought three banks from the FDIC.
Speaker 4: We've branded the largest bank actually headquartered here in southern California,
Speaker 4: one West. I've known New York Community Bank for the
Speaker 4: last ten years. You know, this was a merger of
Speaker 4: three institutions, and in them coming together, they didn't tap
Speaker 4: the proper procedures for one hundred million dollar bank. They
Speaker 4: ran in some issues with real estate. So we raised
Speaker 4: over a billion dollars of capital. A very large portion
Speaker 4: of that will be to build robust reserves. And we've
Speaker 4: come out with a three year plan to restore profitability
Speaker 4: to the bank, and by the end of twenty twenty six,
Speaker 4: the management team is we'll deliver on a plan that
Speaker 4: gets the bank to an eleven to twelve percent return
Speaker 4: on tangible common equity and eleven to twelve percent CET.
Speaker 4: Want to make it a well capitalized bank.
Speaker 2: One of the things you've expressed interest is in TikTok
Speaker 2: or by buying it from byte Dance. We now have
Speaker 2: legislation with any years I send less than a year
Speaker 2: now that unless they do something different, they're going to
Speaker 2: have to sell it.
Speaker 4: Are you still incident TikTok Fond's still very interested in
Speaker 4: buying it, and to the extent they want to sell it,
Speaker 4: we're spin it off. We very much want to pursue that.
Speaker 4: I support that Congress passed the bill and has now
Speaker 4: been signed into law. I will say this has had
Speaker 4: just incredible overwhelming support with Republicans and Democrats. This may
Speaker 4: be the only thing that everybody agrees on the fact
Speaker 4: that it's on one hundred and sixty million phones. I
Speaker 4: do think it's the security issue in the US, and
Speaker 4: I'm glad I see it it's being addressed.
Speaker 2: One of the big issues is the algorithm. Right, this
Speaker 2: is very powerful for TikTok. Does the deal still work
Speaker 2: if the algorithm doesn't come with Tikta Well.
Speaker 4: The Chinese government has been very clear that they won't
Speaker 4: give an ex work license on the algorithm, and I
Speaker 4: understand that we have sensitive technology that we don't want
Speaker 4: to transfer to them, and they don't want to transfer
Speaker 4: this to the US. I've actually spoken to a lot
Speaker 4: of tech companies I'm working about rebuilding this. I do
Speaker 4: believe the algorithms could be rebuilt. So my plan, if
Speaker 4: we were to purchase it would be to rebuild the
Speaker 4: technology under US leadership, make sure that it's all disconnected
Speaker 4: from bytdance going forward, and that it is very rope
Speaker 4: Boston secure.
Speaker 2: I understand at one point you says you might talk
Speaker 2: to the former President Trump about this possibility. Do you
Speaker 2: have a sense of where he is on this deal.
Speaker 4: I haven't spoken to him since the law has been
Speaker 4: passed on this. I've spoken to him on other issues.
Speaker 4: But you know this started under his leadership, so I'm
Speaker 4: sure he understands the national security issues and it was
Speaker 4: under this his leadership that this really started.
Speaker 2: You now are very active as a probate basket banker.
Speaker 2: We have TikTok as a possibility, we have your community
Speaker 2: bank done. What's the theory of the case, what's the
Speaker 2: connection you what sorts of deals are you looking at?
Speaker 4: So we have three areas that we focus on, which
Speaker 4: are areas that we have a lot of expertise. The
Speaker 4: first is technology with a big focus on national security
Speaker 4: and cyber Along with myself, General Dunford, former Chairman of
Speaker 4: the Joint Chiefs, is one of our partners. We also
Speaker 4: have the person who ran the Cyber Task Force for
Speaker 4: the government. The second area is spintech and financials. Again,
Speaker 4: my General Council was General Council at Treasury and understands
Speaker 4: all the regulatory issues. I've obviously been around banking for
Speaker 4: forty years. And the last area is entertainment and where
Speaker 4: you know, in my previous life I made a lot
Speaker 4: of entertainment investments and where we're a big believer and
Speaker 4: what we call new content and TikTok fits right in
Speaker 4: with that.
Speaker 2: Boy, you talk about a lot of turmoil the entertainment industry,
Speaker 2: there's a lot of turmoil in media. We see it
Speaker 2: everywhere we look right now, concluding with Paramoid most recently,
Speaker 2: but Mileshop Disney, you know, has had some difficulties. There's
Speaker 2: a lot of challenges Water Brothers Discovery as well. What
Speaker 2: do you make of that? What is the future for
Speaker 2: the media entertainment business?
Speaker 4: I mean, I think to the extent these companies can
Speaker 4: execute properly, there are very very good opportunities, particularly given
Speaker 4: how low some of the values are on traditional media.
Speaker 4: I don't think the traditional media is going to go
Speaker 4: away overnight, but there's no question there's a complete transition
Speaker 4: in the market from the way when we grew up
Speaker 4: from network TV to streaming and not just streaming to
Speaker 4: you know, short form video and lawn form video that
Speaker 4: we see on TikTok, we see on Instagram, we see
Speaker 4: on YouTube. So there is a whole new distribution model.
Speaker 4: Having said that, you know, great content has a lot
Speaker 4: of value, and a lot of these media companies have
Speaker 4: an enormous library of great content that can be my
Speaker 4: So I think distribution is a very important issue that
Speaker 4: there needs to be a transition.
Speaker 2: Coming up, we turned for a former Treasury secretary to
Speaker 2: a former House Speaker, and that's Paul Ryan about what's
Speaker 2: at stake for global Wall Street in this year's US elections.
Speaker 2: That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David west and we
Speaker 2: are here in Los Angeles from the Milican Conference, and
Speaker 2: one of the subjects is the election coming up on
Speaker 2: particularly what it means for the economy and for investors,
Speaker 2: so they get through that we have somebody who knows
Speaker 2: the economy terribly well as well as no I telling
Speaker 2: about elections. He's Paul Rhime, former Speaker of the House,
Speaker 2: is also at TENEO and now is partner of Solomeir Capital. So,
Speaker 2: mister Speaker, thank you so much for jebet.
Speaker 5: It's going to be with you, David.
Speaker 2: The most basic question for a lot of Bloomberg viewers
Speaker 2: is we have the election coming up, President's election, other election,
Speaker 2: the entire Congress. What is the biggest economic issue at
Speaker 2: state what could make a difference to the most of
Speaker 2: the economy.
Speaker 9: Number one would be tax policy. What's the tax go
Speaker 9: to good to look like? What's tax policy looking like
Speaker 9: in the future. Number two, I'd say tariffs. So number three,
Speaker 9: I think it's reasonable to assume the next president is
Speaker 9: quite possibly get to face a debt crisis.
Speaker 4: You don't know when that is or.
Speaker 9: Exactly what fulm that takes place, but a lot of
Speaker 9: physical policies, online, tax policy, trade policy, debt policy, therefore
Speaker 9: interest rates.
Speaker 2: Third thing you mention was debt crisis. Debt crisis for
Speaker 2: the next president. Whoever the next president is, take us
Speaker 2: through that. We've all been talking about the debt and
Speaker 2: the deficit, how much it's growing. He says, it's a problem.
Speaker 2: Nobody does anything about it. It hasn't really come home
Speaker 2: to loost yet.
Speaker 9: It doesn't see it's what's a debt crisis loop like
Speaker 9: bond auction failures. I mean, it's not inconceivable that once
Speaker 9: the Fed's done cutting rates and people aren't buying bonds
Speaker 9: is readily and you've got us and all these other
Speaker 9: industrialized countries with the same problems, aging baby boomers, entitlement programs,
Speaker 9: unfunded papering this, you know, floating all this paper in
Speaker 9: the world markets. You could have an oversupply of bonds.
Speaker 9: And it's not inconceivable on my mind. In a handful
Speaker 9: of years next presidency, an auction or two fail and
Speaker 9: then the Fed steps in and buys our paper, and
Speaker 9: then they're really monetizing debt. It's bad for the dollar,
Speaker 9: that's bad for dollar dominance.
Speaker 4: That's an interest rate problem.
Speaker 2: You know this terribly well, can we get our fiscal
Speaker 2: house in order without increasing taxes. I'm not saying we
Speaker 2: shouldn't cut some spending due. But can you do just
Speaker 2: one and not for the other?
Speaker 4: Yes, you can. For sure.
Speaker 9: I can show you how to do it. I passed
Speaker 9: four budgets in Congress that did it. But in politics
Speaker 9: is that's a political question. My guess is if you
Speaker 9: have divided government, there's gonna be a mixture of both.
Speaker 9: I believe you can have a better, faster growing tax
Speaker 9: code that still gets you higher revenue lines than what
Speaker 9: we have today without doing damage to economic growth. Now,
Speaker 9: the way I would do it would be a cash
Speaker 9: flow tax to actually form. That's not the way Joe
Speaker 9: Biden would do it. The question is can you get
Speaker 9: more revenue for the federal government to get our debt
Speaker 9: under control, hoppled with entitlement reforms, and do it in
Speaker 9: a way that doesn't sacrifice economic growth. I think the
Speaker 9: answer is yes to that, but nobody's talking like that
Speaker 9: these days. I guess the question is what could you
Speaker 9: do now, knowing we have debt problems in the future.
Speaker 9: I think there's a couple of things Congress could do.
Speaker 9: They're not but maybe they'll get something done. I think
Speaker 9: stable point legislation would be a good step in the
Speaker 9: right direction. That could be helpful that could be done
Speaker 9: this year, but I don't see anything other than that
Speaker 9: on the horizon.
Speaker 2: Okay, a speaker, thank you so much for joining us year.
Speaker 2: That's Paul, Ryan Tanail and Solomere happening. Real estate has
Speaker 2: been something about punching bag for investors, and one of
Speaker 2: the topics for discussion this week has been whether we've
Speaker 2: seen the worst of it. Barry Stern looked off. Starwood
Speaker 2: Capital was outspoken at the Milkon conference, and we asked
Speaker 2: him about where he is looking for pockets of opportunity.
Speaker 5: The good Fox Data senors are good blocks today, anything
Speaker 5: with power. It's true. I think it's just interesting to see.
Speaker 5: You know, the real estate is not you can't use
Speaker 5: one word to describe in real estate, there's you can
Speaker 5: play up and down the capitol side. You can make mortgages,
Speaker 5: mezzanine mortgages, preferred equity, equity investments. You can buy homes,
Speaker 5: you can buy students housing, senior housing, you can buy land,
Speaker 5: you can buy a single fan for rent, build to rent,
Speaker 5: you can buy industrial. I mean, there's so many different
Speaker 5: flavors and it's hard. The one thing that is true
Speaker 5: about the real estate market today is because of Powell's
Speaker 5: rate movement. We have a sort of a balance geat crisis.
Speaker 5: You know, we don't have an asset level crisis. For
Speaker 5: the most part, the asset classes, at least the United
Speaker 5: States are fairly in balance supply and demand. There's a
Speaker 5: little bit of oversupply of multi family in some of
Speaker 5: the growth markets, but that will get absorbed over the
Speaker 5: next eighteen months and we'll be back to a very
Speaker 5: healthy rent profile, I think. But for the most part,
Speaker 5: people are gonna have trouble refinancing their debt because interest
Speaker 5: rates shows five hundred basis points, and also many of
Speaker 5: the traditional lenders, like the banks, are backing out because
Speaker 5: they're full up to their gills in real estate loans.
Speaker 2: Markets react to things like interest rates, like we're from home,
Speaker 2: they also often overreact. Have there been overreactions on the
Speaker 2: downside for office for example some places, or on the
Speaker 2: upside for data centers because we hear so much about
Speaker 2: data centers because they're a danger getting overbuilt.
Speaker 5: There's a regulator in data centers because the project is
Speaker 5: so expensive that if you don't have at least you
Speaker 5: can't finance the construction. So it's almost impossible to overbuild it,
Speaker 5: they will be people will buy land in the hope
Speaker 5: of getting power, in the hope of getting a tenant,
Speaker 5: and they may wind up losing a bunch of money
Speaker 5: if they paid too much for land and it has
Speaker 5: no alternative use other than their dream of someday getting
Speaker 5: power power source. So I don't think.
Speaker 2: I think.
Speaker 5: I think with Stanley Druckenmiller was at this conference and
Speaker 5: he said, like, it might be over hype short term,
Speaker 5: but it's under hype long term, and I think that's
Speaker 5: probably true. What we try to think. I try to
Speaker 5: spend time thinking about is AI's implications on the real
Speaker 5: estate markets, power things going to change, and then what's
Speaker 5: going to do to de stabilize or support some of
Speaker 5: our tenants? Right, so, which ones will go the way
Speaker 5: of the Dodo bird, what industries will be heavily impacted,
Speaker 5: and will they come up with new applications that require
Speaker 5: them to keep as many people just doing different things,
Speaker 5: or will they just have people do everything. I was
Speaker 5: listening to Jenson Wang speak at a conference the other day,
Speaker 5: and he showed how they can build a boat through AI,
Speaker 5: a very complicated supertanker, and then he said, we can
Speaker 5: build the factory that builds the boat, and then we'll
Speaker 5: build the robots that build the boat in the factory.
Speaker 5: And I'm like, where are the workers? What do we do?
Speaker 5: I was thinking, well, I'm going to continue to best
Speaker 5: heavily in resorts because everyone will have all this time
Speaker 5: off and they'll be working from our hotels in Hawaii.
Speaker 5: I think Ai, I think it is just the beginning.
Speaker 5: I can I know how it's going to change so much,
Speaker 5: and it's very exciting. And also, Terri, is.
Speaker 2: There a day of reckoning coming in real estate?
Speaker 5: The great thing about our system is capital willjust and
Speaker 5: find the opportunities. I do think it's going to be
Speaker 5: a rolling wall of thunder and you're going to every
Speaker 5: time alone matures, it's a negotiation or an explosure. There's
Speaker 5: an extension. A barer tries to come up with money,
Speaker 5: he doesn't have it. He has to go to people
Speaker 5: like us or in the old days there are doctors
Speaker 5: and lawyers and friends and raise the money to pay
Speaker 5: down the debt rather than give the asset back. It'll
Speaker 5: be market by market, asset by asset.
Speaker 2: You mentioned return to office. It wasn't that long ago.
Speaker 2: It wasn't return to office in New York. It was
Speaker 2: just leaving New York all together and moving to Miami. Yeah,
Speaker 2: have we seen peak Miami for the time being, because
Speaker 2: there was a time that everyone's rushing down there with
Speaker 2: their employees and things that and now you're here, maybe
Speaker 2: not so fast coming back a little bit.
Speaker 5: Miami has an issue because of schools. It doesn't have
Speaker 5: enough schools, and that that's probably the reason Miami's slowing.
Speaker 5: But Amazon just announced they're moving taking fifty thousand feet.
Speaker 5: There are a lot of companies that would move down
Speaker 5: if they could get their employees' kids into schools, which
Speaker 5: is impossible. So you got to be very bullish as Citadel,
Speaker 5: which obviously left Chicago. I mean, they alone have decided
Speaker 5: they're going to make Miami into the financial capital of
Speaker 5: the United States, and they have the power to do that.
Speaker 5: Ken is very philanthropic, and he's moved a lot of
Speaker 5: fifteen hundred people into the market, and that affects the
Speaker 5: housing market. We still were waiting. I mean, if I
Speaker 5: was really smart, I'd just buy all the houses and
Speaker 5: coral gables and sell them to the Citadel employees as
Speaker 5: they moved down. I don't think Miami's peaked. I think
Speaker 5: with Miami in Florida have sort of cycles because they
Speaker 5: get overbuilt, but they're ever higher cycles. You just have
Speaker 5: to have stamina and stay with it. The housing market,
Speaker 5: you know, a four million our house became a ten
Speaker 5: million dollar house, and now it's an eight million dollar house,
Speaker 5: but it's still twice what the guy paid for it
Speaker 5: four years ago, and really good stuff. I mean recently,
Speaker 5: Barry Dillar moved down. Jeff Bezos has moved down. I
Speaker 5: anticipated the climate, you know that obviously the weather's bettering
Speaker 5: the winner. I anticipated the tax savings, and obviously for
Speaker 5: the darkness Blue States, it's material. I didn't anticipate how
Speaker 5: welcoming the state is to business and how success is
Speaker 5: actually a praud and not vilified. So I think for
Speaker 5: businesses that's that's a nice thing. The state wants you
Speaker 5: to succeed, and they want to attract business and maybe
Speaker 5: the Blue States. I mean, the governor of Larida said,
Speaker 5: I guess he got on a phone call with the
Speaker 5: governor of York and said, you know, stop taking my
Speaker 5: peoples all. He says, every time you talk, I get
Speaker 5: another ten.
Speaker 2: Barrier made the news this week about Brown You've been
Speaker 2: a loyal supporter of Brown. Have done awful lot of
Speaker 2: good for that school. You said for the time being,
Speaker 2: as I understand, you're going to really suspend further diasans.
Speaker 2: Why were you so upset about what they data is?
Speaker 2: I understand what they did is they agreed with the
Speaker 2: students they would talk about divestment. They just talk about it.
Speaker 2: What's so wrong about talking?
Speaker 5: I think schools and the country needs to get back
Speaker 5: to facts, get to the truths. One in one is two,
Speaker 5: It's not four, even if the students tell you it's
Speaker 5: forwards two. And I think I think the only place,
Speaker 5: the number one place you should seek the truth teach
Speaker 5: the truth is universities and schools of our education. If
Speaker 5: in fact, these universities don't approve bds, they don't divest
Speaker 5: from Israel, the kids will say, people like me influence
Speaker 5: the board. They need to know the facts first. I
Speaker 5: am about the facts. And if you know the facts,
Speaker 5: and then your pro Palasini or pro Hamas. I'm not anti.
Speaker 5: I think I believe in Tuesday solution, but I don't
Speaker 5: believe in the right to return because there'll be no Israel.
Speaker 2: So given what we know, what should Brown have done
Speaker 2: it for that matter, not just Brown Colombia, my alla
Speaker 2: man of years in Michigan. This is a problem across
Speaker 2: a lot of Hollywood.
Speaker 4: If they should the adults.
Speaker 5: Do encourage free speech and debate, not violence, not hate speech.
Speaker 5: No child should have a fear for his safety walking
Speaker 5: around a university campus. Get rid of the agitators. I
Speaker 5: mean it should occur to somebody that the first the
Speaker 5: attack on Israel on October seventh was right. The rumor
Speaker 5: was the Saudi Israeli peace conflict was going to be solved.
Speaker 5: This well orchestrated campus demonstration happened after I ran shot
Speaker 5: three hundred missiles into Israel, and Israel responded with sort
Speaker 5: of a light touch, like we can get you, but
Speaker 5: don't you know where here? And then they pulled back
Speaker 5: right because the administrations that don't do anything, and they
Speaker 5: kind of did, but nothing right. The world sentiment was
Speaker 5: shifting against Israel. Unleashed the krack and let the kids
Speaker 5: protest all across the United States campuses. It was well
Speaker 5: orchestrated by these SJAP and all these organizations that are
Speaker 5: being funded by some left wing organizations. If I were
Speaker 5: the president of Brown, I would say we stand with
Speaker 5: the democracy and free speech. We stand Israel's not an aparte.
Speaker 5: I'd state, here's the proof, Israel's not committing genocide. Here's
Speaker 5: the proof. If you don't like it, I understand, that's great,
Speaker 5: leave your keys on my desk and go to another university.
Speaker 5: You know, my father survived Germany, so I have a
Speaker 5: lot to say. I'm just not going to be quiet
Speaker 5: about it.
Speaker 2: It's clear you feel strongly about it, and a lot
Speaker 2: of people feel strongly about it. But when you make
Speaker 2: a decision like I'm not going to contribute for the
Speaker 2: time being, is that an expression of your views, your
Speaker 2: principles to the phils was talking about, or is it
Speaker 2: an attempt to change behavior? Do you think it go
Speaker 2: beyond an expression to actually change behavior?
Speaker 5: Like I don't. I don't think these universities. Christina Faxson
Speaker 5: is a great president at Brown University. She's trying really hard.
Speaker 5: She's got she's got. You know, these universities have very
Speaker 5: left leaning faculties. You know, you should not have a
Speaker 5: preten year professor who said there was no Holocaust. How
Speaker 5: can that person how can you teach that at Columbia University?
Speaker 5: How could that person have a job. And if you
Speaker 5: thought that was fair, If you had a professor who
Speaker 5: said there was no slavery, it didn't happen, would you
Speaker 5: have him as a tenured professor. Or if a professor
Speaker 5: who's saying celebrates and thinks that the at Cornell who
Speaker 5: thought the Hamas should be celebrated killing innocent children and parents,
Speaker 5: I mean they should be shown the door. And I
Speaker 5: don't want to pay for them. So I don't want
Speaker 5: to support a university of houses. That language.
Speaker 2: That was Barry Sterling of Starwood Capital. That does it.
Speaker 2: For this special episode of Wall Street Week, coming from
Speaker 2: the Milkene Conference in Beverly Hills, I'm David Weston. This
Speaker 2: is Bloomberg. See you next week from back in New York.