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Speaker 1: Bloomberg Audio Studios, podcasts, radio news, and we welcome our

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Speaker 1: TV and radio audiences.

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Speaker 2: I'm Shinali Bassik at the Milken Institute Global Conference in

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Speaker 2: Beverly Hills and joining me now Apollo CEO and co

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Speaker 2: founder Mark Rowan.

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Speaker 1: And what a time to be speaking with you.

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Speaker 3: Just a few things going on, A few.

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Speaker 1: Things going on, but a lot today alone.

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Speaker 2: We have the Treasury Secretary speaking at eight o'clock here

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Speaker 2: Pacific time. We had Elon Musk speaking last night, and

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Speaker 2: the President of the United States changing his tune on tariffs.

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Speaker 1: Where do you think the endgame is.

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Speaker 2: Given that tariff the tariff talk is taking up so

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Speaker 2: much of the discussion here.

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Speaker 4: Look, what the administration wants to do, in my opinion,

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Speaker 4: is not wrong. We are the freest trading country in

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Speaker 4: the world and have been since the end of World

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Speaker 4: War Two.

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Speaker 3: It is not clear to me that we have to be.

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Speaker 4: Or that we should allow allies and strategic competitors to

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Speaker 4: phibit our access to their markets. We can take issue

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Speaker 4: with how it's being done and the uncertainty it's creating,

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Speaker 4: but the President and the administration start with a really

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Speaker 4: strong hand. Low unemployment, good job growth, massive capital investment

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Speaker 4: over the last four years and continuing in the US,

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Speaker 4: So now is actually a good time. But we have uncertainty,

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Speaker 4: and in the face of uncertainty, people do not make

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Speaker 4: new investments, they do not hire, they do not make moves.

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Speaker 4: We likely will cause two quarters of negative growth if we,

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Speaker 4: in fact don't resolve the uncertainty. So until we have

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Speaker 4: resolution of what the rules of the game are, it's

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Speaker 4: going to be slow.

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Speaker 2: A lot of people talk about the potential for a recession,

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Speaker 2: but little are people talking about the severity that could

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Speaker 2: exist in the potential for a recession.

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Speaker 4: Look now we're talking about forecasts and projections in our firm.

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Speaker 4: When we were raising rates three to four hundred basis points,

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Speaker 4: we talked about a non recession recession, which is a

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Speaker 4: correction and asset prices, but not necessarily in labor. We

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Speaker 4: kind of see the same thing happening again. It's not

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Speaker 4: to say we won't have some fallout in some adjustment,

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Speaker 4: but we're starting from a place of four percent unemployment,

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Speaker 4: good job growth. We are building infrastructure, we're building semiconductor plants.

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Speaker 4: We're absorbing massive amounts of foreign direct investment. Like it

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Speaker 4: or not, We're building Inflation Reduction Act factories, and now

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Speaker 4: the president is channeling capital from around the world to

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Speaker 4: come back here.

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Speaker 3: Some days I wake up and worry about capital.

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Speaker 4: Most days I wake up and worry about where will

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Speaker 4: we get all the people to do this?

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Speaker 2: Now, you mentioned that you agree with what he's doing,

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Speaker 2: but maybe not how in all the ways. To the

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Speaker 2: extent that you think that this should be done differently

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Speaker 2: to the extent that you don't like the method of

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Speaker 2: the change.

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Speaker 1: What needs to change.

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Speaker 4: Look, this is now the toughest job in the world,

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Speaker 4: or is now? Scott besant As I said, we want

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Speaker 4: this administration to succeed. Every American should want this administration

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Speaker 4: to succeed. So how I would do it is not

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Speaker 4: really relevant. I will point out the following. US and

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Speaker 4: Mexico together should be the driving economic force in the

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Speaker 4: world for the next fifty years. We have not been

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Speaker 4: able to get there, despite two or three rounds of

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Speaker 4: massive free trade agreements. The issues that separate US from

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Speaker 4: Mexico are not existential to Mexico. As one leading Mexican

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Speaker 4: industrialists said to me, if it takes tariffs to make

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Speaker 4: Mexico great again, so be it.

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Speaker 3: Inside of Mexico, there's a need for change.

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Speaker 4: Imagine coming to the world with Mexico and Canada resolve

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Speaker 4: first and then taking people piece by piece or country

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Speaker 4: by country. We would just be in a much stronger

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Speaker 4: position to do what we need to do to reset

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Speaker 4: the terms of trade.

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Speaker 2: But in the meantime you had mentioned it as well

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Speaker 2: that people are on hold, businesses are on hold. A

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Speaker 2: lot of businesses are at risk of layoffs if this continues.

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Speaker 2: How long can this uncertainty continue without causing much greater damage.

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Speaker 4: Look, we're going to have uncertainty. We have uncertainty already.

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Speaker 4: Until we see critical mass of trading partners agree to

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Speaker 4: ongoing new economic relationships, we're going to have uncertainty.

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Speaker 1: But if that could take years, couldn't it?

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Speaker 3: That could take years.

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Speaker 4: I don't think the administration will allow it to take years. Clearly,

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Speaker 4: what they are trying to do is to create positive

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Speaker 4: momentum by getting country after country to agree to new

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Speaker 4: terms of trade.

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Speaker 3: If that happens, this could be very short lived.

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Speaker 4: If it doesn't happen, uncertainty could continue for a period

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Speaker 4: of time. But we also have to take into account

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Speaker 4: short term and long term uncertainty will eventually resolve itself

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Speaker 4: longer term. The way we've done this, we have done

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Speaker 4: damage to the US brand, the brand for stability, for predictability,

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Speaker 4: for regularity, that will eventually have some cost to us.

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Speaker 3: Right now, it does not.

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Speaker 4: What I've said is I've see US moving from what

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Speaker 4: was hyper exceptionalism to merely exceptional because I don't think

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Speaker 4: there are good alternatives to the US today.

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Speaker 3: But that can change overtime.

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Speaker 2: Let's talk more about the US brand for a moment,

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Speaker 2: because you have businesses across the globe, from Europe to Japan.

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Speaker 1: Now, what are they saying?

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Speaker 2: What are your investors in different regents saying about their

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Speaker 2: willingness to put money into US capital markets. Your deputy

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Speaker 2: John Zido had written a letter to investors talking about

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Speaker 2: the risks to the US brand as well, the risk

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Speaker 2: to US capital markets. Right are you seeing any of that?

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Speaker 4: We will see it, but we're not seeing it yet.

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Speaker 4: But think about that, the US is still sixty plus

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Speaker 4: percent of all the capital raised in the world. We

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Speaker 4: are in the absolute best position from a capital.

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Speaker 3: Formation point of view. No one has what we have.

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Speaker 3: That does not mean they will not want it over time.

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Speaker 4: Everything that we want to do here, build infrastructure, next

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Speaker 4: generation manufacturing, add energy, defense, next generation data and power.

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Speaker 4: Europe wants to do exactly the same thing, but lacks

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Speaker 4: any real source of long term capital. In the Drahi Report,

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Speaker 4: Mario Drahi lays out what Europe needs to do to

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Speaker 4: be competitive, and most of the board is focused on

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Speaker 4: revisions to capital formation.

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Speaker 3: Will euro up do that? I don't know.

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Speaker 4: I think what John Zieto points out in his letter

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Speaker 4: that they have the best chance relative to the US

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Speaker 4: to create this kind of positive momentum.

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Speaker 2: So then there's a question of what you do in

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Speaker 2: this uncertainty. Now, recently, you told investors just last week

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Speaker 2: that you're willing to sit things out, You're willing to

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Speaker 2: reduce leverage.

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Speaker 1: However, you believe that you were one of.

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Speaker 2: The largest active buyers of assets post Liberation Day, that

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Speaker 2: is twenty five billion in April alone alone.

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Speaker 1: What are you buying?

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Speaker 3: So let's start. Let I talked to investors and I

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Speaker 3: asked three questions.

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Speaker 4: Our price is low. No, I do not believe prices

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Speaker 4: are low. They are lower, But we're still talking about

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Speaker 4: an average Pe as a reference in the mid twenties

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Speaker 4: versus sixteen over time. Are rates likely to plummet. I

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Speaker 4: don't think so. On our firm does not think so.

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Speaker 4: Most of what we're doing is inflationary. Third, do we

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Speaker 4: have heightened geopolitical risk? Listen to our conversation. There's heightened

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Speaker 4: geopolitical risk. What do you want to do if those

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Speaker 4: three things are true? I think you want to reduce risk.

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Speaker 4: In credit, we're going up the capital structure senior secured,

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Speaker 4: investment grade, trying to reduce risk. We're not trying to

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Speaker 4: make money by being a good credit selector in a

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Speaker 4: volatle market. And in the equity market, moving from things

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Speaker 4: that are growthy and things that are venturing to things

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Speaker 4: that are cash flow based and more hybrid in their outcome.

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Speaker 3: So what did we do in April? We bought mostly

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Speaker 3: investment grade.

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Speaker 4: Ironically, mostly in the public markets, I think we will

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Speaker 4: see this interesting dynamic take place. We have a perception

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Speaker 4: that what's public is safe and what's private is risky.

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Speaker 3: But what if we're wrong?

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Speaker 4: What if public is safe and risky and private is

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Speaker 4: safe and risky. In private, most people are set up

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Speaker 4: to hold things for the long term. In public, we

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Speaker 4: have this belief that we can sell something every day.

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Speaker 4: In equities that is true in fixed income, It is

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Speaker 4: not true in the best of times. It is certainly

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Speaker 4: not true under stress. Takes five days today to sell

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Speaker 4: an investment grade corporate bond. We should expect in every

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Speaker 4: risk off moment public credit to trade poorly.

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Speaker 1: So what about the future.

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Speaker 2: If you think that we saw some moments of market let's.

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Speaker 1: Say seizure, right, you did see full moments where there

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Speaker 1: were weeks at a.

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Speaker 2: Time where the new issuance market was closed. Do you

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Speaker 2: worry about liquidity into the year given the way things

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Speaker 2: are going, and do you think that the FED would

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Speaker 2: need to step in?

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Speaker 4: So I worry about liquidity, but in a different way

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Speaker 4: than you're asking asking. I think there's plenty of money

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Speaker 4: in the world. If we use that as a proxy

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Speaker 4: for liquidity, could we have tough treasury auctions around political events? Absolutely,

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Speaker 4: I don't think that is actually fundamental. What I worry about,

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Speaker 4: and the biggest build up of risk I see in

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Speaker 4: the world is we are brought up with an expectation

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Speaker 4: of being able to trade everything every day. Everything is

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Speaker 4: daily liquid, your ETFs, you're open ended mutual funds, and

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Speaker 4: so on and so on. In the equity markets, it's

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Speaker 4: actually liquid in the credit markets.

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Speaker 3: It's not actually liquid. We just don't know that yet.

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Speaker 4: We've seen it in the UK and something called LDI,

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Speaker 4: where people thought they could sell something and it turned

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Speaker 4: out they couldn't.

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Speaker 3: We're going to see that. We saw it in the

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Speaker 3: run up to COVID.

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Speaker 4: We saw a little blip in the market over the

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Speaker 4: past few weeks, which is why we ended up buying.

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Speaker 4: But again, this notion that everything that's daily liquid is

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Speaker 4: somehow safe is just a notion. It's just not true.

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Speaker 2: So I want to go back to something you were

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Speaker 2: saying before that this environment that we're facing could be

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Speaker 2: very inflationary.

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Speaker 4: Right.

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Speaker 2: If you believe that we are facing an inflationary environment,

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Speaker 2: what do you make of President Trump's bid to try

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Speaker 2: to get the Fed to lower.

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Speaker 1: Interest rates at this juncture? Do you think it's possible?

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Speaker 3: Good news. I don't have that job.

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Speaker 4: It's not not even in the realm of possible ability

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Speaker 4: for me to do. Look, we are moving things from

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Speaker 4: low cost labor countries to higher cost labor countries, particularly

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Speaker 4: to the US.

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Speaker 3: There are strategic reasons.

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Speaker 4: To want to do that, but we can't deny that

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Speaker 4: that is an inflationary In some ways, we are not

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Speaker 4: relying on a global trading system to the extent we

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Speaker 4: have previously that is inflationary.

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Speaker 3: In some ways.

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Speaker 4: We are a tight labor supply, four percent unemployment, We

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Speaker 4: have good job numbers.

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Speaker 3: We have no legal or legal immigration.

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Speaker 4: That is inflationary in some ways, Yes, are there countervailing measures.

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Speaker 4: Energy prices are lower at the moment. Technology will eventually

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Speaker 4: introduce savings, the keyword being eventually. At the moment, the

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Speaker 4: policies we're following have a risk of being more inflationary

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Speaker 4: than otherwise, which generally will lead to higher long term

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Speaker 4: rates even if short term rates come down.

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Speaker 1: Mark get macro.

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Speaker 2: I know it's the macro world that we're living in,

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Speaker 2: and we will be watching you closely because we are

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Speaker 2: waiting for that that pitch investment. Mark Growan of a

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Speaker 2: of course, joining us here at the Milken Institute,