WEBVTT - Marc Rowan, First Republic, Stagflation, and AI (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.080 --> 0:00:05.280 my co host Matt Miller. 0:00:05.640 --> 0:00:09.720 Every business day we bring you interviews from CEOs, market pros, 0:00:09.760 --> 0:00:13.640 and Bloomberg experts, along with essential market moven news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.520 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.400 --> 0:00:23.239 I would love to be a fly on the wall 0:00:23.280 --> 0:00:26.279 through your weekend because it's no secret that private equity 0:00:26.400 --> 0:00:29.280 interest has been in and around the regional banks. Were 0:00:29.280 --> 0:00:31.479 you interested at all in buying First Republic assets? 0:00:31.720 --> 0:00:32.680 So assets? Yet? 0:00:32.680 --> 0:00:35.120 We're always interested in buying assets, but not in the 0:00:35.159 --> 0:00:38.360 banking business. We like others. We're not banks, we don't 0:00:38.360 --> 0:00:40.559 intend to be banks. We don't buy banks. But if 0:00:40.600 --> 0:00:43.720 we can be supportive of restructuring of the banking system 0:00:43.720 --> 0:00:46.640 through the purchase of assets, absolutely. 0:00:46.520 --> 0:00:49.199 Now I want you to look beyond even just today 0:00:49.360 --> 0:00:51.920 because we have the First Republic sale to JP Morgan. 0:00:52.240 --> 0:00:54.880 But you have Jamie Dimond saying that the banking crisis 0:00:54.960 --> 0:00:58.200 is almost over. Do you see a whole second wave 0:00:58.360 --> 0:00:59.400 of this crisis coming? 0:01:00.160 --> 0:01:02.120 I think part one of the banking crisis is over 0:01:02.400 --> 0:01:04.600 and I would never disagree with Jamie because this is 0:01:04.600 --> 0:01:07.840 his job and he lives it. But if my observation 0:01:07.959 --> 0:01:11.680 is what's happened so far totally predictable, marked to market 0:01:11.680 --> 0:01:14.720 losses and treasury security is well known to everyone, structure 0:01:14.720 --> 0:01:18.440 of deposits above minimum guarantees well known to everyone. Are 0:01:18.480 --> 0:01:22.080 we surprised we shouldn't be. Everyone knew what was happening here. 0:01:23.120 --> 0:01:26.800 Rising rates created the stress. The interesting thing to me 0:01:27.160 --> 0:01:30.000 is not whether these street banks failed, it's what's the 0:01:30.000 --> 0:01:31.759 business of regional banking going forward? 0:01:32.280 --> 0:01:32.880 Think about it. 0:01:33.240 --> 0:01:36.960 Forty two billion left SVB in four hours without a line. 0:01:37.880 --> 0:01:40.039 So you're now the CEO of a big regional bank. 0:01:40.440 --> 0:01:43.960 Your cost of funds is up, your regulatory costs are up. 0:01:45.240 --> 0:01:46.080 Can you lend money? 0:01:46.840 --> 0:01:48.560 Or is your business model going to need to change, 0:01:48.640 --> 0:01:51.960 going to need to evolve. I think that's what's interesting. 0:01:52.000 --> 0:01:53.640 And I think we have a second wave in commercial 0:01:53.680 --> 0:01:54.440 real estate. 0:01:54.600 --> 0:01:57.040 The second wave in commercial real estate. Do you think 0:01:57.040 --> 0:01:59.680 that that wave pertains to the banking system at large 0:01:59.800 --> 0:02:01.640 or a broader set of investors? 0:02:02.040 --> 0:02:02.600 I think it is. 0:02:02.920 --> 0:02:05.440 Look, there are lots of people own real estate across 0:02:05.480 --> 0:02:08.720 the world, across the economy. Investors who own real estate, 0:02:09.120 --> 0:02:12.919 suffer losses. Investors suffer losses all the time growth stocks 0:02:12.960 --> 0:02:15.120 go down, investor suffer losses. That to me is not 0:02:15.880 --> 0:02:19.280 systemic in any way. A banking system which has government 0:02:19.320 --> 0:02:22.960 guarantees where people put their money in a trust relationship, 0:02:23.400 --> 0:02:27.679 if they suffer significant losses, that's what causes concern, and 0:02:27.720 --> 0:02:29.880 that's what we have here. It won't be systemic in 0:02:29.919 --> 0:02:33.200 my view, but it'll be concentrated. Regional banks once again 0:02:33.760 --> 0:02:37.000 are the primary lenders to many of our regional real 0:02:37.080 --> 0:02:37.680 estate issues. 0:02:38.080 --> 0:02:40.880 Now, we just saw this morning the big get bigger, 0:02:41.000 --> 0:02:45.320 JP Morgan buying a massive regional bank. But what happens 0:02:45.320 --> 0:02:47.600 to the banking system moving forward? You mentioned there will 0:02:47.639 --> 0:02:51.000 be changes. What does the new banking system look like 0:02:51.120 --> 0:02:52.399 coming out of these troubles. 0:02:53.040 --> 0:02:55.960 I think it's already changed. We have yet to adjust 0:02:56.080 --> 0:02:58.080 to the changes of two thousand and eight. So if 0:02:58.080 --> 0:02:59.919 you think about two thousand and eight and Dodd Frank, 0:03:00.120 --> 0:03:04.040 ostensibly the legislation was to restrict the exposure of the 0:03:04.120 --> 0:03:08.079 US economy to large, systemically important banks. By the way 0:03:08.240 --> 0:03:11.600 it worked, banks are less than twenty percent of all 0:03:11.680 --> 0:03:14.040 lending in the US. The new banks, by the way, 0:03:14.320 --> 0:03:17.400 are investors. Everyone who's at this conference today, in some 0:03:17.480 --> 0:03:20.320 way or another participates in the banking system. But if 0:03:20.360 --> 0:03:22.920 you ask about banking proper, I do think in the 0:03:22.919 --> 0:03:24.600 short term we're going to see the big get bigger. 0:03:25.040 --> 0:03:27.760 People fly to safety when you have any. 0:03:27.560 --> 0:03:28.480 Sort of crisis. 0:03:28.760 --> 0:03:31.840 JP Morgan is positioned to step into fixed safe first 0:03:31.880 --> 0:03:36.560 Republic should not be surprised. But regional banks are a 0:03:36.680 --> 0:03:38.560 very attractive political entity. 0:03:38.880 --> 0:03:40.160 Everyone has a regional bank. 0:03:40.720 --> 0:03:43.120 It'll be interesting to see how the system deals with 0:03:43.200 --> 0:03:45.400 the fundamental issues facing regional banking. 0:03:45.640 --> 0:03:48.080 Yeah, well, you mentioned banking system has already been our 0:03:48.200 --> 0:03:51.720 only twenty percent of the country's lending here, So what 0:03:51.760 --> 0:03:54.560 does that mean for who will and will not be 0:03:54.640 --> 0:03:56.720 able to have access to credit in the future. 0:03:58.080 --> 0:04:00.880 Look, we are I'll say it at a country level, 0:04:01.160 --> 0:04:04.280 we are fifty percent of the world's capital. We are 0:04:04.920 --> 0:04:08.800 Our businesses benefit, our government benefit, our consumers benefit. We 0:04:08.840 --> 0:04:12.200 already have unrestricted assets to credit. Sometimes it's more expensive, 0:04:12.240 --> 0:04:15.200 sometimes it's less expensive. Go anywhere else in the world. 0:04:15.360 --> 0:04:17.480 We are the envy of the world. No one has 0:04:17.520 --> 0:04:20.280 what we have, So I don't know that it gets 0:04:20.279 --> 0:04:23.600 to who has access to credit. The democratization of credit 0:04:23.600 --> 0:04:28.279 through the investor investment marketplace has already created unparalleled access. 0:04:28.960 --> 0:04:31.240 Now, if you think about the commercial real estate issues 0:04:31.240 --> 0:04:33.000 that we've been talking about, I'm really wondering. I know, 0:04:33.000 --> 0:04:35.760 over at Apollo, you guys look at things security by security, 0:04:35.960 --> 0:04:40.040 sometimes building by building. What are the office vacancies telling 0:04:40.080 --> 0:04:42.880 you about the state of the commercial real estate market. 0:04:43.040 --> 0:04:45.000 It's a bad day to be an office owner in 0:04:45.080 --> 0:04:46.360 San Francisco and Chicago. 0:04:46.800 --> 0:04:47.839 I mean, we could get more. 0:04:47.720 --> 0:04:50.400 Granular than that, but I step back and again try 0:04:50.400 --> 0:04:52.440 to put it in big picture. Every piece of real 0:04:52.520 --> 0:04:55.640 estate everywhere in the world that was purchased pre the 0:04:55.680 --> 0:04:57.800 run up in interest rates as a result of the 0:04:57.880 --> 0:05:00.000 change in interest rates is now worthless. 0:05:01.160 --> 0:05:02.240 We've had such a move in. 0:05:02.240 --> 0:05:05.280 Interest rates and real estate is an interest rate sensitive activity, 0:05:05.720 --> 0:05:08.080 that everything is worthless. It does not mean it won't 0:05:08.080 --> 0:05:10.039 come back, It does not mean it won't ultimately be 0:05:10.080 --> 0:05:12.120 a good investment. But in the short term we have 0:05:12.200 --> 0:05:15.720 significant dislocation. But we also have this change in how 0:05:15.720 --> 0:05:19.360 people use real estate. Office being the most visible, we 0:05:19.400 --> 0:05:20.440 are going to see losses. 0:05:21.440 --> 0:05:23.800 Now I'm sitting here in conversation with Mark Rowan, the 0:05:23.839 --> 0:05:28.200 CEO of Apollop Global Management, now, Mark, you mentioned this 0:05:28.320 --> 0:05:31.000 kind of pain that the office system is still yet 0:05:31.040 --> 0:05:33.680 to see the office buildings and the commercial real estate. 0:05:34.080 --> 0:05:37.240 Now what does that mean not just for investors in 0:05:37.279 --> 0:05:40.320 commercial real estate, but also investors in the regional banks 0:05:40.320 --> 0:05:42.880 as a derivative effect. Do you think the market is 0:05:42.920 --> 0:05:46.520 still under counting how bad things can get? 0:05:47.040 --> 0:05:49.760 I think the market has yet to ask the long 0:05:49.880 --> 0:05:52.800 term question. Right now, the question being asked is is 0:05:52.800 --> 0:05:54.440 the bank safe? Will there be a run on a bank? 0:05:54.480 --> 0:05:55.200 Will it survive? 0:05:55.720 --> 0:05:56.200 Safety? 0:05:56.680 --> 0:05:59.760 I believe has been our primary focus. But we've already 0:05:59.800 --> 0:06:02.400 seen and the government can make this safe with the 0:06:02.400 --> 0:06:04.880 stroke of a pen. I believe the banking system to 0:06:05.000 --> 0:06:08.120 be safe. That is different than what is the business 0:06:08.120 --> 0:06:10.479 of a regional bank going forward? If you don't know 0:06:10.520 --> 0:06:13.480 how sticky your deposits are, if your cost of funds 0:06:13.520 --> 0:06:16.480 is high, your cost of operations is high, what is. 0:06:16.440 --> 0:06:17.880 Your business model going forward? 0:06:18.360 --> 0:06:21.360 Like every other industry that has had to adjust to technology, 0:06:21.760 --> 0:06:24.240 regional banking is going to have to adjust to technology. 0:06:24.320 --> 0:06:26.960 I'll be shocked if five years from now the business 0:06:26.960 --> 0:06:29.839 model of a regional bank looks like what they do today. 0:06:30.040 --> 0:06:32.320 Now, let's take a big step back for a second. 0:06:32.400 --> 0:06:35.200 Because there's this big understanding in the industry that you're 0:06:35.240 --> 0:06:38.880 in that you can't unwind twelve years of easy money 0:06:39.000 --> 0:06:41.360 so easily. And you saw a lot of hiccups already, 0:06:41.400 --> 0:06:45.600 the LDI crisis in the UK now, the regional banking crisis, 0:06:45.640 --> 0:06:51.240 the crypto crash. What else is still yet to break. 0:06:51.480 --> 0:06:53.520 It's hard to be a predictor of what else is 0:06:53.560 --> 0:06:55.800 to break. But I look at places in the world 0:06:55.839 --> 0:07:01.279 where we have mismatches between liquid asset liquid liabilities, like 0:07:01.279 --> 0:07:04.360 a bank borrow short and len long. We have other 0:07:04.400 --> 0:07:06.440 places in the world where that same build up has 0:07:06.480 --> 0:07:10.360 taken place ten years twelve years of easy money forced 0:07:10.400 --> 0:07:13.120 people to do unnatural things to look for yield and 0:07:13.160 --> 0:07:15.880 to look for rate of return. LDI was the first 0:07:15.880 --> 0:07:20.000 time systemically the question was called. LDI was nothing more 0:07:20.040 --> 0:07:23.160 than a misplaced expectation in the part of UK institutions 0:07:23.640 --> 0:07:27.000 that public securities were liquid. They found out they're only 0:07:27.000 --> 0:07:28.640 liquid on the way up, they're not liquid on the 0:07:28.640 --> 0:07:31.920 way down. We have that same in certain open end 0:07:31.960 --> 0:07:34.680 of mutual funds. We've seen it in ETFs in point 0:07:34.720 --> 0:07:37.679 of stress. We've seen it even in some private vehicles 0:07:37.720 --> 0:07:40.440 in point of stress. So this is not a public 0:07:40.560 --> 0:07:43.800 or private issue. This is a mismatch between the underlying 0:07:43.800 --> 0:07:46.360 liquidity of assets and the structure of liabilities. 0:07:46.400 --> 0:07:48.880 Well, speaking of the public markets, there's some question about 0:07:48.880 --> 0:07:50.920 how well the public markets have actually held up in 0:07:50.960 --> 0:07:54.440 the base of some of this. You know, how safe 0:07:54.560 --> 0:07:58.000 can you feel in the fact that you have liquidity. 0:07:59.040 --> 0:08:01.600 Look, I stepped and I think about what's happened in 0:08:01.640 --> 0:08:04.400 the world and the difference between public and private. We 0:08:04.520 --> 0:08:06.640 used to think public was safe and private was risky. 0:08:07.320 --> 0:08:10.400 We now know public can be risky as well. We 0:08:10.480 --> 0:08:12.560 now have found out that private can be both safe 0:08:12.560 --> 0:08:15.880 and risky. What we're talking about is differing degrees of liquidity. 0:08:16.520 --> 0:08:18.640 What we have elected to do in our industry and 0:08:18.680 --> 0:08:19.240 certainly for. 0:08:19.240 --> 0:08:21.320 Apollo, is we focus on private. 0:08:21.640 --> 0:08:23.680 And the reason we focus on private is we don't 0:08:23.680 --> 0:08:28.520 believe there is sustainable alpha excess return in publicly traded markets, 0:08:28.880 --> 0:08:32.640 particularly in publicly traded debt markets. Therefore, if investors come 0:08:32.679 --> 0:08:35.920 to us for excess return, we need to step away 0:08:35.960 --> 0:08:39.439 from daily liquid markets. Fortunately, there's plenty. 0:08:39.200 --> 0:08:40.720 For us to do now. 0:08:41.400 --> 0:08:44.360 Just this morning there was news about arrival of Yours. 0:08:44.400 --> 0:08:47.400 Blackstone facing another wave of redemptions when it comes to 0:08:47.480 --> 0:08:49.520 its semi liquid vehicle. When it comes to the real 0:08:49.600 --> 0:08:53.000 estate market, you know, a lot of big private credit funds, 0:08:53.000 --> 0:08:56.000 big private equity funds are trying to court retail investors. 0:08:56.440 --> 0:08:58.440 When you look at some of the hiccups that some 0:08:58.480 --> 0:09:00.760 of the current funds are facing in the market, here 0:09:01.160 --> 0:09:03.640 some of the challenges when it comes to the investors 0:09:03.760 --> 0:09:08.040 ask for their money back with the for long dated investments. 0:09:08.040 --> 0:09:10.360 You're on the other side. What does this tell you 0:09:10.400 --> 0:09:14.360 about the direction of travel? Is investor confidence in retail 0:09:14.559 --> 0:09:17.760 semi liquid funds becoming dented in disenvironment? 0:09:18.640 --> 0:09:21.440 I don't know about dented. First, I think Blackstone is 0:09:21.480 --> 0:09:24.640 doing exactly the right thing. I think the industry owes 0:09:24.720 --> 0:09:27.559 them a debt of gratitude because they are teaching investors 0:09:27.760 --> 0:09:31.880 that alternatives are not an ATM. Now they're in an 0:09:31.920 --> 0:09:34.480 asset class that is under stressed because people are concerned 0:09:34.520 --> 0:09:37.840 about real estate valuations, and they are redeeming because they 0:09:37.840 --> 0:09:41.720 think valuations are headed down. Blackstone is behaving responsibly and 0:09:41.760 --> 0:09:44.360 doing exactly what they are supposed to do and what 0:09:44.440 --> 0:09:47.960 these vehicles are designed to do. But I look forward 0:09:48.280 --> 0:09:50.600 and I think about the structure of our business. I 0:09:50.600 --> 0:09:53.000 think retail investors high net worth are going to be 0:09:53.040 --> 0:09:56.960 fifty percent allocated to alternatives in the next five years. No, fifty, 0:09:57.800 --> 0:10:01.760 but not alternatives private equity and hedge funds. Alternatives are 0:10:01.760 --> 0:10:03.640 just alternatives to publicly traded. 0:10:03.320 --> 0:10:06.440 Stocks and bonds. They go from double A to equity. 0:10:07.080 --> 0:10:10.160 What do you say to people who criticize the private 0:10:10.200 --> 0:10:13.160 markets the credit markets in particular, is masking some of 0:10:13.200 --> 0:10:15.480 the risks that would be in public credit markets. 0:10:16.080 --> 0:10:17.880 I think the easiest thing to value as a bond 0:10:18.720 --> 0:10:22.679 bonds are cash flows, intrat rate and duration, and bonds 0:10:22.720 --> 0:10:27.320 adjusts quickly. The fact is, better risk reward has been 0:10:27.360 --> 0:10:31.719 available in private markets than in public markets for much 0:10:31.760 --> 0:10:34.160 of the last ten to twelve years. Everyone in our 0:10:34.200 --> 0:10:37.720 industry has picked a different segment. The segment we've picked 0:10:37.840 --> 0:10:41.760 is private investment grade. Private investment grade is something people 0:10:41.800 --> 0:10:44.760 haven't even contemplated. Think about what banks used to do, 0:10:44.800 --> 0:10:47.959 what ge capital used to do. That's the business we've built, 0:10:48.559 --> 0:10:53.240 and at four hundred billion of private credit, mostly investment grade, unfortunately, 0:10:53.320 --> 0:10:56.199 we're not relevant. It sounds like a lot four hundred billion, 0:10:56.240 --> 0:10:58.280 but we're talking about a forty trillion dollar market. 0:10:58.760 --> 0:10:59.560 We have a long way to go. 0:11:00.080 --> 0:11:03.520 Hundred billion, but getting bigger as well. There's a lot 0:11:03.600 --> 0:11:07.000 of discussion in Washington, for example, about regulating non banks. 0:11:07.360 --> 0:11:10.719 Do you think that you will face tighter regulation as 0:11:10.720 --> 0:11:11.400 things to procure? 0:11:11.559 --> 0:11:14.439 I think we all face tighter regulation. That is clearly 0:11:14.480 --> 0:11:18.760 the direction of travel. Ultimately people look for, is the 0:11:18.800 --> 0:11:22.400 information available? Yes, the information is already public. Are we 0:11:22.480 --> 0:11:25.600 mismatched in terms of borrowing short and lending long? No, 0:11:25.720 --> 0:11:29.960 We're actually countercyclical, and the vast majority of institutions countercyclical 0:11:30.000 --> 0:11:30.400 as well. 0:11:30.800 --> 0:11:33.600 Are we levered No? Are we concentrated? 0:11:33.720 --> 0:11:33.800 No? 0:11:34.200 --> 0:11:36.840 Are we a diversifier for the economy? Yes. 0:11:37.600 --> 0:11:40.040 At the end of the day, the US financial system 0:11:40.080 --> 0:11:40.959 is the envy of the world. 0:11:41.440 --> 0:11:43.800 We are fifty percent of all the action everywhere in 0:11:43.800 --> 0:11:46.040 the world, and it's a result of. 0:11:46.000 --> 0:11:49.640 Decisions made along the way to allow investors to be 0:11:49.800 --> 0:11:50.760 suppliers of credit. 0:11:50.920 --> 0:11:52.679 Well, I think that's the other part of the argument here. 0:11:52.720 --> 0:11:55.240 If not you, then who that's the choice? 0:11:55.280 --> 0:11:57.520 The US economy, the world economy will need a certain 0:11:57.559 --> 0:12:00.480 amount of credit, and the choices are you will allow 0:12:00.480 --> 0:12:04.120 it to be supplied exclusively by the banking system, backed 0:12:04.120 --> 0:12:06.840 by government guarantees, as we have in many foreign countries, 0:12:07.360 --> 0:12:11.199 or do we allow investors broadly defined retail investors, high 0:12:11.200 --> 0:12:15.120 net worth investors, pension investors, institutions to participate and get 0:12:15.160 --> 0:12:19.680 diversification and socialization of risk. Investors for the most part, 0:12:19.679 --> 0:12:22.959 are prepared for things that go up and down, things. 0:12:22.679 --> 0:12:24.280 That go up and down. You had mentioned kind of 0:12:24.280 --> 0:12:26.760 the benefits of the private markets in terms of return 0:12:26.840 --> 0:12:30.240 opportunities here in the credit markets. I'm curious about what 0:12:30.280 --> 0:12:33.319 you think about the current state of investment grade when 0:12:33.360 --> 0:12:35.439 you look at the public markets. There has been a 0:12:35.480 --> 0:12:39.400 lot of discussion about how eerily calm that spreads have 0:12:39.559 --> 0:12:42.400 been behaving in the face of what many feel is 0:12:42.400 --> 0:12:45.480 a pending recession. Do you think that there's more risks 0:12:45.520 --> 0:12:47.320 under the surface when you look at public credit. 0:12:48.360 --> 0:12:50.200 I don't think there's more risks under the surface. I 0:12:50.240 --> 0:12:53.040 think that you have a confused market. You have lots 0:12:53.040 --> 0:12:55.280 of talk about recession, and you have a yield curve 0:12:55.480 --> 0:12:56.760 the shape of which is. 0:12:56.760 --> 0:12:57.400 Up and then down. 0:12:58.240 --> 0:13:00.920 So it does not surprise me that investors who are 0:13:00.920 --> 0:13:04.760 being offered yields today of a certain magnitude are active 0:13:04.760 --> 0:13:08.600 in locking them in, especially after a decade of very 0:13:08.600 --> 0:13:09.160 low rates. 0:13:09.240 --> 0:13:10.920 Well, you've mentioned also I've heard you say a few 0:13:10.960 --> 0:13:13.959 times that kind of the era equity is eroding here. 0:13:14.280 --> 0:13:16.760 Does that make a bigger kind of secular push to 0:13:16.800 --> 0:13:17.679 credit in general? 0:13:18.280 --> 0:13:18.920 I think it does. 0:13:19.000 --> 0:13:21.160 I think this is an amazing entry point for credit, 0:13:21.240 --> 0:13:23.800 not just because we're in it, but because of what's transpired. 0:13:24.679 --> 0:13:28.120 Equity we printed eight trillion dollars from two thousand and 0:13:28.160 --> 0:13:31.280 eight until twenty twenty two. Exactly what was supposed to 0:13:31.280 --> 0:13:35.920 happen happened. Now that we've started withdrawing it. Entry point 0:13:35.960 --> 0:13:40.960 for credit is fabulous. Has adjusted very quickly. Liquidity has eroded, 0:13:41.400 --> 0:13:44.280 banking crisis has further roded it. We have a unique 0:13:44.360 --> 0:13:46.960 entry point for credit. It will not always be this good. 0:13:47.600 --> 0:13:50.959 Equity has adjusted somewhat, but not nearly as much as 0:13:50.960 --> 0:13:51.840 credit now. 0:13:51.920 --> 0:13:54.040 Also, I mean we've seen from the banking system that 0:13:54.080 --> 0:13:57.000 what was safe yesterday can be rated as junk tomorrow. 0:13:57.360 --> 0:13:59.880 Do not believe that we would be facing the greater 0:14:00.080 --> 0:14:01.080 wave of downgrades. 0:14:01.760 --> 0:14:04.160 I think all pricement, there's no doubt. 0:14:04.440 --> 0:14:07.320 But if you are concerned about the direction of travel, 0:14:07.360 --> 0:14:10.360 if there's uncertainty, I would almost always rather be top 0:14:10.400 --> 0:14:12.160 of the capital structure, senior secured. 0:14:12.920 --> 0:14:14.040 You tend to get paid back. 0:14:14.840 --> 0:14:17.160 So for our shop, the bet we've made has been 0:14:17.200 --> 0:14:18.800 on private investment grade. 0:14:19.880 --> 0:14:20.680 I like our hand. 0:14:21.040 --> 0:14:23.000 I would rather play our hand than anyone else's hand 0:14:23.040 --> 0:14:23.680 in our industry. 0:14:23.800 --> 0:14:26.240 Now, I'm kind of curious about Apollo's plans throughout the 0:14:26.240 --> 0:14:28.600 rest of this year. You're looking across Wall Street, You're 0:14:28.600 --> 0:14:32.000 seeing a lot of people either slimming back on hiring 0:14:32.360 --> 0:14:35.640 or flat out letting go of thousands of staff. What 0:14:35.680 --> 0:14:38.800 opportunity do you see there? Given Apollo has already tremendously 0:14:38.840 --> 0:14:39.880 added to have headgn in the. 0:14:39.880 --> 0:14:41.480 Last we will continue to grow. 0:14:41.600 --> 0:14:43.760 We've already said our business will be up in the 0:14:43.760 --> 0:14:46.680 asset management side. We've told the street better than twenty 0:14:46.680 --> 0:14:49.680 five percent this year, on the retirement services side, better 0:14:49.680 --> 0:14:52.760 than twenty percent this year. And that's with an overlay 0:14:52.800 --> 0:14:55.880 to our strategy of what we call no new toys. 0:14:56.360 --> 0:14:58.440 And the reason no new toys is not to add 0:14:58.480 --> 0:15:02.040 new things. The upside from simply executing the business plan 0:15:02.080 --> 0:15:05.240 that's in front of us is so high that the 0:15:05.360 --> 0:15:09.560 price of distraction is just very hard to contemplate. So 0:15:09.640 --> 0:15:12.360 I think twenty three for us, we will grow, we 0:15:12.400 --> 0:15:14.600 will add team, but we will do it in the 0:15:14.640 --> 0:15:17.640 context of the envelope of our business that exists and 0:15:18.080 --> 0:15:18.800 no new toys. 0:15:18.960 --> 0:15:21.600 Are you finding it very easy these days to hire 0:15:21.640 --> 0:15:23.920 from the banks or even the technology companies that are 0:15:24.040 --> 0:15:24.720 slums back. 0:15:25.720 --> 0:15:27.880 It's never easy to hire. This is always about culture. 0:15:28.400 --> 0:15:29.080 But we have. 0:15:29.160 --> 0:15:32.640 Grown the team tremendously and in fact is the limitter 0:15:32.960 --> 0:15:35.440 of our growth. At the end of the day, we 0:15:35.520 --> 0:15:38.800 provide our client's judgment, and that judgment comes from people 0:15:38.840 --> 0:15:41.160 being at Apollo for a long time and integrating into 0:15:41.200 --> 0:15:44.280 our culture. We can only grow as fast as we 0:15:44.320 --> 0:15:45.640 can culturally absorb people. 0:15:46.160 --> 0:15:47.920 There's a natural hedge. 0:15:47.800 --> 0:15:50.600 If you will, or a natural limitter to our growth, 0:15:51.200 --> 0:15:53.560 and we watch that balance very very carefully. 0:15:53.920 --> 0:15:57.120 Before I let you go, before Wednesday's big FED day, 0:15:57.720 --> 0:15:59.600 what do you expect in terms of the direction of 0:15:59.640 --> 0:16:01.640 travel when you look at the interest rate trajectory for 0:16:01.680 --> 0:16:03.280 the rest of this year and what it means for 0:16:03.720 --> 0:16:04.840 the state of markets. 0:16:05.480 --> 0:16:08.680 Look, I think there's a there's a push pull. I 0:16:08.720 --> 0:16:11.240 think the direction of travel Wednesday is going to be up. 0:16:12.800 --> 0:16:13.720 It'll all depends about the. 0:16:13.760 --> 0:16:17.120 Language that surrounds it and the activities that take place 0:16:17.160 --> 0:16:19.320 following it. If we have a second leg of this 0:16:19.400 --> 0:16:23.400 banking crisis that I obviously augurs for slower. If we 0:16:23.480 --> 0:16:26.120 don't and we continue to see the wage pressures that 0:16:26.160 --> 0:16:28.480 we just saw, it'll be tougher. 0:16:30.240 --> 0:16:33.680 You're listening to the team. Hen's are live program Bloomberg 0:16:33.720 --> 0:16:37.120 Markets weekdays at ten am Eastern on Bloomberg dot Com, 0:16:37.160 --> 0:16:40.320 the iHeartRadio app and the Bloomberg Business app, or listen 0:16:40.400 --> 0:16:42.480 on demand wherever you get your podcasts. 0:16:44.680 --> 0:16:46.920 Let's bring in Herman Chance, speaking of Bloomberg Intelligence. He 0:16:46.960 --> 0:16:49.960 covers the regional banks here. So Herman, I guess it's done. 0:16:50.080 --> 0:16:53.080 JP Morgan, First Republic. You know, we kind of went 0:16:53.080 --> 0:16:55.520 into Friday thinking something's going to happen. JP Morgan was 0:16:55.560 --> 0:16:59.160 certainly on the list. We kind of wake up Monday morning. 0:16:58.880 --> 0:17:01.120 Here way up there at the time, top of the list. Boom, 0:17:01.200 --> 0:17:04.119 they got it. What a shocker? What did how did 0:17:04.240 --> 0:17:04.800 why did they? 0:17:05.880 --> 0:17:06.280 What did J? 0:17:06.640 --> 0:17:06.920 I guess? 0:17:06.920 --> 0:17:08.040 How did jpmore win? 0:17:08.359 --> 0:17:10.320 What did they do to put them over the top 0:17:10.480 --> 0:17:12.080 to beat out Bank of America and. 0:17:12.000 --> 0:17:13.520 P and C and some others? Yeah? 0:17:13.560 --> 0:17:14.760 Sure, so what Bank of. 0:17:14.720 --> 0:17:17.560 America declined to even participate in the addiction? Okay, so 0:17:17.640 --> 0:17:21.800 did US Bank? And we know that PNC and citizens 0:17:21.840 --> 0:17:23.080 were invited. 0:17:23.280 --> 0:17:25.920 But I'm assuming they probably made a bid, but really 0:17:25.960 --> 0:17:30.199 assumption what really put JP Morgan over the top is 0:17:30.240 --> 0:17:35.520 that they are acquiring all of the assets that are underwater, 0:17:36.160 --> 0:17:39.360 both on the loans and security side, Whereas any potential 0:17:39.400 --> 0:17:41.600 regional bank that would have made a bid probably would 0:17:41.600 --> 0:17:44.800 have just cherry picked the best and most attractive assets 0:17:44.840 --> 0:17:48.720 and left these underwater securities and loans with the FDIC. So, 0:17:48.840 --> 0:17:53.800 in effect, the FDIC made the best choice in limiting 0:17:53.840 --> 0:17:57.199 the losses to the Deposit Insurance Fund by doing the 0:17:57.240 --> 0:17:57.800 deal with JP. 0:17:57.920 --> 0:18:00.080 We don't know, this probably isn't in your remit. But 0:18:00.240 --> 0:18:04.040 the flip side to that is that now we kind 0:18:04.080 --> 0:18:06.679 of set a precedent for a JP Morgan or I 0:18:06.680 --> 0:18:10.119 don't know, somebody else that's of that ILK, that they're really, 0:18:10.960 --> 0:18:13.560 you know, the lender of last resort, that they're really 0:18:13.560 --> 0:18:15.359 the backstop. It may not be the regulators. 0:18:15.640 --> 0:18:18.520 Yeah, we just wrote about a little bit about this 0:18:18.920 --> 0:18:22.119 with respect to PNC, that was in our mind the 0:18:22.160 --> 0:18:26.040 most likely acquire of the First Republic assets and deposits. 0:18:26.640 --> 0:18:31.000 And if the regulators are going to let these systemically 0:18:31.080 --> 0:18:37.320 important banks acquire these failed banks, then it makes the 0:18:37.640 --> 0:18:40.640 region is less likely to be able to absorb these 0:18:40.720 --> 0:18:44.200 these types of deals because the FDIC would most likely 0:18:44.240 --> 0:18:46.520 prefer to deal with the largest banks because they can 0:18:46.760 --> 0:18:50.879 acquire the entirety of these troubled assets onto their own balance. 0:18:50.880 --> 0:18:54.440 Shot, let's parse this out because there's also a lot 0:18:54.480 --> 0:18:58.080 of spin here. There's a lot of politics. The FDIC 0:18:58.320 --> 0:19:00.400 doesn't want to be blamed for bailing out there rich, 0:19:02.080 --> 0:19:05.560 which they did, and they didn't want to take the 0:19:05.600 --> 0:19:08.439 bank into receiver ship, so went to JP Morgan. But 0:19:08.520 --> 0:19:11.639 they had to first take the bank into receivership. Right, 0:19:13.160 --> 0:19:16.520