Plus, the real estate empire blackstone has built. More on the investments putting it in the category of its own. The gray allocation nation guest. The cio of the 5. 5 billion endowment. Tell me how much more of the University Policies money is going in. Take you into d. C. Julianna goldman has learned the former bank of israel governor danley fisher is the leading candidate to become vice chair at the fed. Giuliana, i know you broke the story. Great scoop as always. This was the pic . We know president obama is elitist leading choice to be the fed vice chair. He would be replacing janet postn, who is leaving her because she is the president pick for fed chair. A history for fisher. In june. D down also number two at the imf. Brings academia, crisis management, and centralbank experience with him. I was speaking with a former administrator earlier saying the combination would be the most impressive academic onetwo punch in the history of the fed. It puts top scholars in charge of monetary policy. Also, fisher has some ties to some of the most prominent economists in the world. He was a thesis advisor for ben bernanke. Andlso taught mario draghi was also a teacher for larry george w. Ho headed bushs council of economic advisers chair in the person i spoke with who is familiar with the process says there is no plan to make an announcement for fisher this year this week that they are not ruling out an announcement. It could be pushed to next year as well. It is worth noting the post would require senate confirmation. Thank you. Bloombergs white house correspondent, julianna goldman. We moved back from macros. Stands to make a paper profit. It would be one of the two biggest private equity profits of all time. Devon is with me now and he covers private equity for bloomberg. First of all, before we talk about pricing or timing, we know, this, the secondbiggest take ever. Blackstone has will not this. Ly sell any part of right. It is paper profit. At the midpoint of the expected pricing range, blackstone shares would be worth about 14. 5 billion. Put in 6. 5 billion in equity in total into the investment. We have talked a lot about hilton and its ups and downs. This was a huge bet for blackstone which could have gone very wrong at some point along the way. It has turned into the poster child of everything td is supposed to do. It was going wrong until 2009 where it was marked down as much as 70 . Until then, there was a combination of blackstone is operational stepping into the company, and also, the recovering economy is an occam occupancy rate, and pricing, that all contributes to what has grown in high Single Digits every year since 2009. As far as what lacks him put into hilton, this is their biggest single investment. Is . 5 billion of equity from blackstones funds. It was basically split between blackstones real estate and business and its private equity business. This Funds Investment was marked down in will soon bend probably marked up after the offering. Getting to the hilton and pricing, what are you hearing . It was originally expected to price tomorrow and they moved it up a day. That is always a good sign because it means they do not need another day to talk to Institutional Investors. We are hearing the offering is several times oversubscribed. Several times as much demand for these shares as there are a shares available. 18 to 21 per share. Range, it end of the will raise 2. 4 billion. What happens next . Blackstone is actually not going to sell at least they said it. What is next for hilton as a Public Entity . As a public company, it will raise 2 billion in change and it still has a lot of debt. About a quarter of its earnings, going towards servicing its debt right now. It will take another few years to pay down the debt. About 76 oflds shares after the offering. It has incentive to keep working on the Operational Plan it has put in place. Be the ceo. Still he has put a lot of his own plan in place. Hearing in midcycle it has grown out of the crisis and still has growth to go. A good time for ipo. Also means there is growth ahead. Thank you. We love having you with us. Our feeds pex hurt here at bloomberg. Hilton,ne step deion real estate is huge. It is blackstones biggest does this if you measure by assets management. 70 billion, 40 in revenue last quarter. Last month, lack stone but extendedstay public. Those shares 25 . Bob rice is with me now. Bloomberg contributing editor with me on blackstone and the empire that blackstone has built. You and i sat down with donna thin gray recently who runs the business. Fill us in. You had an interesting conversation with him. Yes, and about their global approach to the whole industry. The first thing to say about blackstone, very interesting, is they are leading the charge with large private equity firms into real estate. Everyone else wants to copy them. Now they do before they in 20 fiveilt percent and turned it into a 8 billion profit. There were not so many people so interested in it. It is suddenly looking like a good strategy. For all these big traditional pe firms sitting on mountains of dry powder, people are saying how would they spend it . Blackstone was smart and diversified into a real estate empire early. In someplace some cases, a lot of people credit Jonathan Gray for not getting out during the credit crisis, not taking unnecessary risk, and there were a lot of other players on wall street who did do that. They do not have a franchise anymore. That is right. It is very basic. You have to look at what it will cost you to buy the thing and what you can fill it up that. He is a blocking sort of guy as big and sexy as all of this sounds. A very down to earth business. Regardless of where you are doing it. One of the big areas doing it is in asia. What do you think is next for alluded in as you asia. They have risen a new four point 4 billion fund. The timer it timing is interesting because they are going into asia and a lot of people are coming out. The number of new funds in the by Something Like 50 right now. Very interestingly for the blackstone strategy, a lot of freezes in private equity funds are coming to the end of their lives. They will have to develop themselves of the properties they have. Blackstone is looking at the data and saying, a lot of sellers and not so many buyers. It might be a good time for us to increase our size of the stake. Most people look at these firms and say, when is the smart money buying and selling and when a firm like blackstone stars to sell, markets Pay Attention and investors Pay Attention. They do, especially with blackstone. Now, they are being countercyclical in terms of common wisdom in asia. They will look like a place at a place like china. With socialle unrest. I asked them explicitly about that and he said, maybe. But they have got a great entrepreneurial cultural. It is hard to believe things like warehouses will not need a lot more warehouses. Demand. Ll be increasing there are not many bidders on the asset class now. In andk we can go capture them now and make a nice coffin over a couple of years. Thank you. Always great to see you bringing us the highlights of the conversation with Jonathan Gray, who runs real estate for blackstone. When we come back, the cio of cornells five and 5 billion endowment will be with us about strong returns the endowment has locked this year, where they are putting more all caps that money, plus, a fork rest for private Equity Fund Raising next year. The ceo will join me. Digital Payment Options that may end up replacing it coin and at the very least, challenging it. We are back in just a few moments. The rsc hopes it will continue when new laws come into dual listingsg for mongolian companies. The whole idea of all the changes is actually to open up the doors for foreign capital, particularly for foreign Institutional Investors. One of those investors is oscar mendoza. Chris we realize mint mongolia is one of the hotspots for Economic Development in the next two decades. He is so convinced, he opened a Mexican Restaurant in the heart. Cornell university has one of the biggest endowments in the u. S. 5. 7 billion under management. It has returned more than 10 over the past three years. For money gets used to pay scholarships, health care, research, and the endowment contributes about 11 of cornells overall budget. Aj edwards is with me now and he became cio last year. Glad to have you with us. I know you have implemented a managementd research program, which is obviously working. We alluded to, you are your longterm investments are up more than 11 so far this year. What are you doing that is going right for you . Thank you for having me. I would say, obviously, with , we have done well with that. I would have to say we have strong managers with a lot of ,alue here in the u. S. Particularly internationally, a lot of alpha added on top of beta we have seen. Are you basically allocating more assets than you are talking about managers . It sounds like you are getting Committee New funds included. Hedge funds included. The entire endowment, about 65 is in alternatives, broadly defined, that includes private equity, real estate, hedge funds, as well as natural resources. I would also like to say, something called enhanced fixed income, a value driven portfolio. 55 is pretty strong in all. I haveve consumed to assume, is in increase in the past. If you look back over five years ago, we have seen more of a transition there. One of the things i would say is that we are at 6 billion today. A decent amount of money. Not so big that we still cannot type management. Far . W is it going so it is going well. How hard is it to pick these managers that give you these kinds of returns . Not easy. I started picking stocks early in my career. Picking managers is more difficult. Being said, we have great managers in the portfolio. It is not easy. I have a great staff. 19 people in the office. A very dedicated that. They do a great job. Just out of curiosity, how toh time does it take you kick tires . . Re you going to meet managers are they coming to you . Do get a lot of face time . Both. New york is not the central hub of activity in the investment world. A lot of managers come up there. We spend a lot of time traveling. We have well over 1000 meetings in any given year with managers both in person and phone call. We spent 25 to 30 of our time on the road traveling, including international. We had a member come back from europe in the spring. Other members in asia. We are out there and all over the u. S. As well. I know you were not at the helm of the endowment. How are you preparing . We talked about how the s p 500 is up so much this year. More than 25 . This is a relatively easy year. For the next wildcard . How are you positioned for that . I started march 10, 2008 and was in a number two position. What i would say is if you look ago, relative to 5. 5 years the portfolios position is better, we understand the risks better, the university, financially, is in a much better position today than it was 5. 5 years ago. That allows us to do different things. You were not the only endowment that got hit. Bunch of hedge funds, everyone was affected for the most part. Quest that is right. The biggest difference in terms of where what were thinking today, we take a longerterm view. We are thinking seven years to 10 years. We are real willing to ride out some of the volatility. At the same time, we have a better understanding of the risks across every asset class than we did five years ago. A pleasure to have you with us. Thank you for coming in. Aj edwards, the cio of Cornell Universitys endowment. We are going to continue on this buye, capital offering to japanese Online MarketResearch Company macro mill for just over half 1 billion. The board supports the offer and according to data, yahoo japan is currently the biggest shareholder of the company, establishing its tokyobased in 2006 and investing in japanese companies. A tech headline, we are monitoring for you. The manufacturer of apple iphones and ipads is launching to financein fund startups, developing new kinds of Wearable Computers according to people familiar with the matter. Almostuld minister the 7 million fund and select as many as 20 participants for a child in first quarter. When we come back, the cost of maintaining u. S. Nuclear weapons is likely to swell to 350 billion over the next decade. We are going to have a guest with us who recently published a book saying the u. S. Should cut. More on that when we come back. Some research sos maintaining Nuclear Warheads and their Delivery Systems will cost the u. S. Taxpayer over 300 and 2 billion over the next 10 years. With more on the topic, we bring in the president of plowshares fund. He is also an author of the new book called nuclear nightmares. Congratulations on the book. Nuclear disarmament is an extraordinarily complex subject. So passionate and dedicated to writing this book . Why is this message so important . No one wakeup in the morning thinking about Nuclear Weapons. They think it is something of the past and there are policies in place to take care of the dangers. They are dead wrong. There are ticking time bombs that could go off at any moment. Especially. There are dangers from terrorism, states getting weapons, but there is the cost of Nuclear Weapons. This is not a cheap weapon to hold. How is the Obama Administration doing from your point of view with Nuclear Disarmament . Questionnaire falling behind. They say they want to reduce the number of Nuclear Weapons but they have not put the policy in place to do that. Meanwhile, contracts are moving through congress, locking in weapons programs that could cost us 1 trillion over the next 40 years. Congress will be making those decisions in the next 34 years. When you say any moves through congress, i am fairly impressed. I actually know statistically, this is the least Effective Congress ever if you measure by that havelegislation gone through. There is a reason they are called the donothing congress. But these move. Quest these are actually moving through. I know you make a case in your book for very specific programs which are the biggest offenders . Class we have a new Navy Submarine program that will cost 300 50 billion. A huge ticket item. If you cut it to eight, you could save billions of dollars. We have a bond redesigned to defeat the soviets. The be 61 bomb. What are we still doing with this . A program will cost 11 billion just for 200 bonds. You could build them out of gold and it would be cheaper than what the pentagon is planning to spend. What is the pushed back then, security concerns . If we can make any slight cut, someone else would have an advantage . Is that basically an argument of fear what you hear . Yes. Iran, there is no logical connection between 5000 weapons we have and the possibility iran might get one or two. Politically and psychologically, there is. On ending is riding that Nuclear Program than just the threat to the persian gulf era you mentioned the submarine program. How optimistic are you your arguments will be heard and that spending will actually be cut . These arguments are being leaders in the senate for example. Dianne feinstein, who has the appropriations committee, very critical of some of the wasteful spending she sees on nuclear issues, even though she has Nuclear Facilities in her home state of california. That is the kind of Senate Leadership you want. To keep what we need and not waste a dime on obsolete weapons from the last century. Quest thank you for bringing us a financial point of view of Nuclear Weapons. Always an interesting angle. Thank you very much. Joining me here, author of this new book. It is 26 minutes past the hour. It is time to get you out to the newsroom. Julie hyman is there with everything you need to know on trade. What are you seeing . Declines for stocks. For the dow, triple digit declines. We have come back from that. 75 points. The s p falling back 8 10 of one percent. Seems to be with progress being made in washington, it could mean tapering is coming from the fed sooner rather than later. In terms of individual stocks, i just want to mention cisco, the Networking Company losing its bid to block the approval of microsofts take over of skype. We will be back in 30 minutes with more on the market. Money moves his next. Is next. This is money moves. I am deirdre bolton. Here are Bloomberg Top headlines at this hour. John boehner weighing in on a new budget deal. He says it is for those who believe in Debt Reduction and criticized some conservative groups that came out against it. They are using our members and the American People for their own goals. This is ridiculous. More deficitr reduction, you are for this agreement. Quest politico is reporting reporting a vote could come tomorrow. Bmw considering building engines in north america for the first time according to three people familiar with the matter. The luxury carmaker is said to be weighing locations in mexico or the u. S. Bmw may decide on the project next year. Time magazine has named hope francis the person of the year. Time calls francis a superstar poised to transform an institution that measures change by the century. Hebecame coke last march and has elevated the Healing Mission of the Catholic Church and also warned of the dangers of income inequality. Shifting away from world and national headlines, we focus on private equity. Our next guest advises Institutional Investors such as texas teachers on the reserve and Investment Management board on which firms are is deserve new capital. 21 billion in discretionary assets. Cio ofrsch is the hamilton lane and is with me now all the way from snowy philadelphia. Great to see you. Role. E in a gatekeeper you advise, basically, institutional clients, which pe thes are worth the time and investment. Which ones are right now . Class it is interesting. It has been a great year for the asset class returns are up in allocations are up and distributions. We always like getting cash back. It is also up there it has been strong across market segments. We have made money in energy funds and turnaround funds and in europe, surprisingly. A lot of different places. You have access to the top quartile of pe firms. Out of curiosity, if somebody does not, is the asset class worth a lot . It is. Interestingly, if you went back a few years ago, everyone said, if it is not top quartile, the asset class is not worthwhile. They have not been terrific over the last five or 10 years. Investors have been searching. Quest they have to. If you are a pension fund today, life is hard. They are underfunded. It is really hard to actually exist in todays his world and it has been driving them to alternatives. Bigate equity has been a beneficiary. Quest fundraising wise, this year, it is one of the four best on record, which i find interesting when the s p 500 is up 25 . What is driving that . A few things. If it willre weary last. It has been a good couple of quarters, but they have been seeing the volatility has been so extraordinaire i am not sure investors have totally bought into, this is it for the long haul. Private equity has been delivering more consistent rates of return over those time frames. People have been gravitating back. Youome of the areas where have been able to get the money back. What are you seeing geographically. A shout out to an extra dash energy, but break it down geographically. The u. S. Is sucking up the most capital. A stable market. The biggest number of managers in this space. No question the u. S. Is dominating in terms of capital coming in and capital coming out. That has been the market. Is really drifting off. People are spending a lot more money on the emerging markets today than they are in europe. What about the stress . Pe firms looking for assets in europe and feeling like 2014 will be a good year or that. Quest that is right. That is exactly where we made money in europe. More contrarian looking for value plays and managers to go in there and buy assets that need real operational turnaround. We have had people be successful with that. How desperate do you think the average pe executive is getting . It has been a great fun are you fundraising year. A lot of dry powder. Our people making stupid mistakes where they want to invest the money so badly maybe they are not doing all the Due Diligence necessary e necessary . Fundraising has been so hard is where thethis Public Market helps us. Most tensions are allocated to public equity. As that goes up, so does our overall plan value. Therefore, it needs to follow suit area a lot of executives are cheering on the rally even classivate equity it is a little bit of a calm her rise. When you look back at this year, it is december. To you as and out surprise . Fundraising has been a surprise third for the shouts of doom and gloom and the asset class and people worried about it, the money has been steadily. Institutions, this will be the record year of the suspect. Thank you for coming in. Andcio in discretionary nondiscretionary assets. When we come back, the future of money. How mobile and technology are transforming transactions and changing the way consumers spend. The future of money. Digital currencies such as square. Antonio is with us now. And i. With matt miller joining us from cave cambridge. Matt has been reporting on the 12 days of bitcoin. I do not know if you have seen any of my fine calis eporting reporting on how people keep sending him bitcoins. How do you feel like it coin theks up to competitors . Price keeps going up. It was at about 1000 today. A currency put on the internet anonymously and is starting to take off. It is looking to go mainstream. A lot of investors are interested. It is as much a casino as it is a currency. Very unpredictable. Quest you are on the third day of 12 days of the klein. Quest i have been i have gotten so many questions, and influx of questions on my twitter account. I am explaining to people the basics of how it works. I do not need to take you or antonio through that right now. He makes a good point. It has been volatile and i have heard from a lot of people who are big players. Paypal himself, david marcus, has said, right now, it is more of a commodity and they think of it as more of an Investment Opportunity than a currency. Both of them think it will get there eventually. It is just in the early stages now. Cracks are Digital Currencies here to stay or will they become mainstream . What is a Digital Currency . Is a credit card a form of it . There are a lot of ways to. Ransfer money digitally i think were just going for bitcoin and competitors. Quest the idea is i should be will to trans word value to you and anybody else instantaneous we thought all these intermediaries. It is a great idea, the kind internet entrepreneurs really like. There are obstacles. What are they . What are the obstacles . Obviously, for people who want to get involved with it right now, you have got to educate yourself and it is not as easy as 123. What do you think long term over the next years or decades, the obstacles are . A great question or at one of the huge ox goals is the security of bitcoins. Today, an article about a guy who lost his hard drive on that with the coins on it and then went to the dump and he lost it. To get your bitcoins, you still have a password or key. It is something you have to write down and people can and are stealing it. Bitcoins,ist, losing it is a problem. It does not happen with credit cards or bank because banks are insured and credit cards, if there is fraud, they are liable. , if youtting 6 million had it in cash, for example, in one place, would be silly. Friday, we will go through this. There are a number of different ways to keep bitcoins say. Offline while its. Have 6 million, you should diversify a little bit. Anybody looking for invest in, i want to bring you back in on services. ,here are tons of services bitcoin ecosystem, and the idea is to kind of reduce some of this volatility. Will that help Digital Currency payments become more mainstream. It definitely could there there is a company, a Second Generation bit line companies. They are working with the kind bitcoin or things like it to improve the parts that are not working as well. A lot of people want to see Digital Currencies. The wallah,d another company. More conventional, it wants to simplify bank transfers. The result would be, digital money you could easily share and share from your mobile phone. That is what people are looking at. Whether money is not of my phone and why can i not send it easily to anyone i want. One of the advantages of bitcoin over that and other systems is that, you could transfer value from one prison to another anywhere in the world with no intermediary and very little, unemployed and amounts of transaction cost. Point, is there a Tipping Point . How do we get to it where people are starting to accept it more and demanded more, rather than paying a 20 wire fee or working with the currency that has a central bank controlling it . That is one of the great things about bitcoin. It makes us think about what money is. Money is a brief believe system. We believe it will hold its value. The volatility in the bitcoin price is totally related to how many people are believing it. As more people get involved, the price keeps going up here it is fascinating. Inhas to do with confidence these currencies and it has to do with whether people believe they are secure. The more people believe it, these things have a chance of really taking the chance of cash and credit cards. I would guess people at m. I. T. Have a higher concentration of it coin users. Would that be the case . It maybe. M. I. T. Is the place you walk around and people are wearing google glass, a lot of nerds and proud of it. I went to the bitcoin meet up and founded on the internet and went up today for at 6 00 p. M. Of the Computer Science building a manic and i could not find the meet up. Bitcoin remains mysterious. I cannot actually find them. Cloak and dagger. Thank you very much. Joining us there, Business Editor at m. I. T. Tech review. And matt miller, with the 12 days of the coin. I wanted to point out tomorrow, i are going in new york. Webster hall. You might be the only one. From zero to 60, thank you very much. Coming back, the ceo and cofounder is going to be here, one of the fastestgrowing filesharing providers. We will show you what is next for this fastgrowing startup. He being in the cloud is big business. Ignite shares 40,000 big instances, including ikea, depot, financial, home and numerous others. It allows companies to store and share sensitive data. With me now is the cofounder and ceo with us from san francisco. Welcome back there in i know ignites revenue has doubled yearoveryear. For the fast past two years, you have done another fun race. Money . Ll you do with the this is a great valuation of the consistent believe that a cloud only solution will not suffice given 90 of the data is behind firewall. As it makes its way through the cloud, a significant percentage will remain on premises with the cloud. This approach has been handsomely validated not just by customers but new investors. It is all about expanding sales and marketing, including sales offices in the u. S. Others. E think of quest before you think of other parts of the world, what is in i am very proud of the fact we have accomplished the current run rate, with only 33 million raised. We are on track to profitability in q4 next year. Possible 2015, three quarters of success of profitable growth. That is a trajectory in 2015 ipo. Just out of curiosity, are you hiring . That is one of the biggest challenges. My biggest focus area. Hiring will be one of the largest and in fact my most important ird now. People, including our team in eastern europe, and we plan to have at least 100 people added next year. Quest prepare to be contacted by programmers. For all the larger talking we do for the pitcher here in the u. S. , thank you for joining us. Cofounder and ceo of ignite. When we come back, a full update on markets them in your way right ear. Ray stier. Right here. Tomorrow, the leading the business of building and leasing Creative Office space will be a focus point tomorrow. You do not want to miss that conversation. In the meantime, 50 minutes past the hour, that means it is time for bloomberg television. Julie hyman is joining me now from the newsroom with everything you need to know. What is going on . What is going on as we are seeing declines in the markets again today. It down 42worst of points. One percent. Again, it seems like people are talking about tapering and the negotiations progressing in washington. It is also affecting bond yields. We are seeing yields actually down for the first time. I should say, prices down for the first time in four the four days. It is affecting the appeal of gold and we are seeing gold prices pullback less than one percent. Nonetheless, little bit of a pullback today. Look ahead a little bit and talk about we are entering the holiday isnt an entering what is going on with christmas shopping. Two leads to go until christmas. A lot of the bar watching for gifts online retailers like amazon. T is a time for the year cory johnson got a look inside one of 96 film and tetris. Heinz ketchup. The bagel bite bagel slicer. Every product sold by amazon. Way, in athe same loading dock. An army of workers unload boxes and scan each item. While there is automation everywhere, this is largely a job performed by people and not robots. The itemsworkers anywhere. No rhyme or reason. Products are stowed in the first empty space. Hello kitty next two vans sneakers and alpines sneakers. Tracked byn is all complex software. As soon as something is sold, another worker gets a notification on a wireless device almost like a gps. Of jokes andks brain teasers is picked from the shelf and sent packing. Software selects just the right box, even cutting off just enough tape to seal the box. Stanton labeled on a fastmoving Conveyor Belt or they zip down a complicated series of slides. Routing the box to the right truck, where another set of workers pack the truck in an impossible tester tetris task, squeezing as many as possible into it. An incredible architecture the likes of which business has never seen before. Cory johnson, bloomberg, phoenix, arizona. Be on the markets again in 30 minutes. Street smart is next. Investors weigh yesterdays budget deal in congress. We have got 60 minutes to go until the closing bell. Your first trade for tomorrow, the market is down again. Yes. A second day in a row we have seen the market down. Still within one percent of the high. Three charts you need to see to tell you exactly what is happening now. The s p 500 down 9 10 of one percent. 1787, the last of the s p 500. A big story here. Less of a deficit, monthly deficit numbers from the government. Revenues are up. It means we might taper sooner. That means a 10 year rally. 284, the last on the 10 year