Assets. H sell luxury first up we go to d. C. , a facing an budget deal the first vote in the house this afternoon. Our chief washington withspondent peter cook is me with more on this modest deal, i think we can call it prevent another Government Shutdown the next two years but is the vote going to clear . Democrats and republicans i pretty o seemed confident in the house and in the senate this measure will despite the ress fact it faces criticism from conservatives that it doesnt do make a dent in the deficit and criticism from it ral democrats that doesnt do enough to help those hurting on unemployment and doesnt extend unemployment benefits. Nobody likes the deal for one reason or another despite the fact it sets the next two s years and turn off the sequester kwu cuts, some of them. Oesnt deal with taxes or entitlement programs. The leadership say it is better than the alternative and that is another Government Shutdown in january and another cloud of crisis. I dont like it, much more could have been done to invest create jobs. It is an ok thing to vote for. Pelosis blessing, House Democrats a good number will vote for it. Republican said it is paul ryans job to sell fellow it. Ers on he said it is not perfect but he ade a compelling case that republicans think a majority of House Republicans will back it. Pass in the d to house and be taken up in the senate where the expectation is will pass. Outside conservative groups. Ot on board i know theres been tension with that group and john boehner. It has been fascinating, maybe the most interesting boehner for the second straight day calling out the outside conservative groups criticizing the plan before they read the final details and rging republicans to vote against it. You can tell his fuse has basically run out. He let them have it. I think they are misleading their followers and pushing our in places they dont want to be and i just think that they have lost all credibility. Exposing a rift among republican groups, house ative groups and speaker. First time hes pushed back and. Emocrats are encouraged breath of called in a fresh air. We know this congress is the ineffective one on record ever in the history of the united states. Latest on gridlock . Is this tone going to continue what is to govern going on . There were hopes maybe this bipartisan agreement can lead to other things but last night they had to pull a full nighter an use they couldnt reach agreement, the nuclear option. Republicans insisting on using minute of time between nomination votes. Of cant block the votes the president picks because of change in rules but they can low the clock and that is what they are doing. Bringing out every procedural a p to bring the senate it stop and they are going to get the votes done but it will push pretty much until christmas. Peter cook, thanks as always. You back up north here and focus on our real estate theme. Hospitality one because Hilton Worldwide holdings trades h. L. T. , raising nearly 3 billion. It is a record i. P. O. For the company. The. E. O. Spoke about plans. It is simple. Talked about this. Win everywhere. E think we have the best pwrepb dominant we have a market share, 115 average and if we are intelligent about how deliver those brands and layer those brands around the them for the t different opportunities we can row at an accelerating pace in good times and bad times. The biggest i. P. O. On record lodging company. Banner joins me now. As we mentioned, this is a 3 billion. What is blackstone going to do this . As of this afternoon it is now a 9. 75 billion game. We saw the trading chart. After the we heard quiet period the stock is trading so some plans. Thing he was asked about is which hilton l to subscribes. All of the big Hotel Companies franchise out their hotels and own just a properties. The what is the plan that they own . To look at time shares and Residential Opportunities for these roperties and more retail opportunities, putting stores, for example, in these properties. Looking for ways it mine as much value as they can. Is really his successful but every single industry is changing. Things like home away, all of these tech what wes could threaten understand as a Traditional Hotel face. That is true. And these properties hilton owns contribute more fixed costs to model. With eric and t said in the near term they are going to hold them and get as but over maybe after the threeyear horizon they may goingselling some of them to more asset like models like starwood and marriott. What is clear is hilton its side and e on you cant ask for a parent with deeper pockets. Stoefrpbmine and black said it wont sell any shares few years. As the company pays down the its big is one of blockstone. Ill have blackstonehilton story. If you want a comeback this is investment cash made. Tone at one time hilton was left for dead. Was marked me it down around 70 around 2009 and more in and ut increased the equity to 6. 5 put in, the most it ever a single detail in its 28year history. The economy has recovered and occupies rates have come back more said they have Pricing Power because demand for picking up. Jonathan gray for head of real estate at blackstone. He covers private equity at bloomberg. Real estate lodging to edge funds and legal woes, Jpmorgan Chase has at any time actively agreed to pay 2 into its end probes deals with Bernie Madoff who ran ponzi scheme. I know this week is the anniversary since madoffs arrest and he banked with jpmorgan two decades before fraud was uncovered . Exactly. This raises questions about what whether it should have reported it. This potential settlement and his estimony in a trial of former employees is almost five years to the day of his arrest duping clients in a 17 billion ponzi scheme. 150year ing a sentence and he banked with before ther 20 years fraud was uncovered. The bank also facing investor is close to resolving a Justice Department ignored o whether it warning signs. Jamie dimon touched on the issue yesterday. Litigation lot of behind us. We have more. You read about made after. We have to get there behind us. Our job is to serve clients. Get it behind us. Address he tkpdidnt specifics yesterday or today a person briefed on the matter 2 billion accord could be announced by yearend. What is the latest on the trial . Key witness testimony is fascinating details of madoffs final days. Is former finance chief testified that madoff cried at the end, meticulously planned arrest to avoid being handcuffed in front of staffed programers wanted to be paid in diamonds in the end. How much money has been recovered so far . More than you think when not clear where it went. He trustee has recovered about 9. 5 billion and there are legal maneuvers that can result in a recovery. Su keenan with me on the latest between Jpmorgan Chase penalties it may pay for banking for Bernie Madoff. A real estate and finance pioneer with 500 million plus commitments. He says there are many opportunities out there. Sees them. Ere he and where media and ntertainment moguls turn when they need more creative space. Bitcoin startup catching he attention of venture capitalists. My next guest has more than in real in experience estate. He created a lot of financing that the industry uses today. Managing partner at monday partners and says there are numerous opportunities in the new year. I know that you look for outofthebox opportunities. See that you consider out of the box . I think as you said there are always opportunities, deirdra. To be a better borrower, sometimes better to be. Lender and the way the Capital Markets one modified the businesses can choose to be a lender or borrower. One of the best things i have an investor the last year has been to invest in some commercial mortgage reits. Particularly starwood. Hat has been a tremendous investment the last year. Reflected in the fact it is still a relatively mis understood area. What discrepancy are you and other smart investors able to of . E advantage when you say it is misunderstood, what is being mispriced . There is a need for more leverage. Part is this intermediate of the structure that needs to be addressed that as regulations traditional industry gets morphed because of regulatory unable to ey are meet. The preferred equity slice of structure somewhere between First Mortgage and an ty has historically been area of tremendous opportunity and some of these mortgage reits to fill that ged gap have done well. Talking about blockstone and the blockstone part of the estate business is growing. We met at a conference and Jonathan Gray was there. What do you make of these bigger and bigger countries getting estate . D in real well, theres is a nuance the to that question. I think that blackstone has done job. Mazing they have gotten everything right for most of the last ecade, which is hard to do because there have been some serious bumps. And where they have gotten things wrong they have been able to fix them. Hilton is a tkpwraegreat story huge up. They did it by paying attention. Think that you mentioned blackstone on the heels of my reits. Ts about mortgage they just careful out with a mortgage reit and that will probably be a very successful investment. I would say that is a pretty good vehicle to get involved with now because it is rather the next year or two will prove to be a very rewarding investment. Blackstone model in real estate, the private equity has benefitedthat from the fact that Real Estate Asset ome a more stable class the last two decades and a thatas to do with the fact the Capital Markets have become a part of the real estate prior to that they were not. There is more of a steady of capital there. I know we talked about the box you look for out of the opportunities. Ou also talk about intersections and we spoke about crowd funding with real estate. We know that crowd fund something changing a lot of businesses. Real estate . Hange i think some of the best deals today are probably smaller rather than larger deals. The ecute smaller deals, reason is with blackstone it is and realin real estate estate has become a business dominated by giants. A dozen or more firms with massive amounts of Capital Real Estate d for investments. Those firms cant do smaller deals. Smaller deals are less after and ss chased will offer better risk adjust the return opportunities. Funding has crowd lready begun to enter that field and bring capital to local easyrs who may not have as access to capital as blackstone Market Knowledge and expertise and the marriage of the individual investor to be a very or can rewarding one. Ethan, thank you for coming in. When we come back, the bitcoin startup that has secured the people is straight ahead. We are celebrating 12 days of bitcoin at bloomberg television. For day er is back four. Ar you have we are only on day four . Day four. I have done so much already. I have gone shopping with bitcoin, tried to explain how a transaction works. Hen i have been looking into exchanges last night and today and fortunately for us great piece of news. Invested in coin base which company. Oin 25 million. Money d wilson put more in. O a 31 million round of funding. It is not really an exchange. Consumer osed to be spacing and helps on the merchant side. Exchanges are the ones that you tphknow already. Gox, bit stamp. B. T. C. China. Their growing ains like coin base in that they dont always work as quickly. You have to put in a lot of ersonal information and it is not terribly easy to get the dollars back out after trading currency. Ar oday im going to the Satoshi Square which is easier to trade because i will be there with a bunch of actual people at we will be and buying and selling bitcoins from each other. Remember the editor of the tried to h review he go and it was mysterious because no one was there. Will be a there number of people there. In a nice ing is growing stage. Have had no problem all week at least since monday living on bitcoin. Are sending them to you . And i y send fractions have sent fractions of bitcoins to others t. Is part of the way works. Munity if you want to know more about bitcoin and a lot of people have sending me questions, what he id is immerse myself in t subread it. If you dont know read it. Com is one of the bill continue boards. You want to go all the way to bitcoin fficial foundation is a place you can 0. 06 bitcoin. That is where the big programers sit. Waiting tomorrow to hear about webster hall. I hope there are people there. Could be cloak and dagger. Who knows what they will have. It is 26 past the hour and we will get you out to the newsroom. Is there with the latest on trade. A lot of not seeing buying when it comes to stocks. Except theng selling nasdaq. S p has come way back from the declines. Data. Economic investors are weighing it. We will have more in 30 minutes. This is money moves where turn us on in tphnovative investments. M. Severing ties with the financing arm selling stake in allied financial for a total of 900 million. According to the auto maker there will be a 500 million quarter. The Fourth Center bridge is going it by light squared. 3. 3 billion. Harbinger his capital have been battling for late squared assets. Is broadening acquiring after mopub in october. Based the San Francisco startup that helps Company Match publishers with ads on devices. Twitter will safer native advertisements because they contents around them. Hedge funds are on track for the performance relative to stocks since 2005. They are underperforming the s p more than 2,000 basis points yet the industry to attract new capital. With us. E c. I. O. At you are on two devices, on tv. You are unstoppable. Im about to tweet your photo. So glad. You said you went to harvard, subject d about this and people there were blown away. Is it a fair comparison with the up 25 i shouldnt say air absolute returns doesnt matter what the market is supposed to do. At the Kennedy School at harvard they hold this look at the d various issues that face public states, unds including private, et cetera. And a big part of the problem is been getting nt the returns in equity, bonds are yielding nothing or next to so the temptation is lets look at the alternatives, a yale model which includes lot of private placement and equity and hedge funds and the generating for a lot of big Pension Funds is that class misknown as hedge funds just has not been done. G the job when you say misknown as what do you mean . It is a legal structure that limited partners, two and 20 Fee Structure and not cash but a leverage trading vehicle. Seem to expect hasnt been happening with hedge funds. Get mean reversions with stocks and bonds you wont ecessarily see that return to prior greatness just due to the mathematics of it. The industry does continue to attract new capital. Desperate for o yield, no one will run to get into a bond fund, this is how it to perpetuate . Some of it is expected returns. Reasonably expect 3 in bonds and 6 in equity. The way the accounting is done for hedge fun they could say our return 9 , 10 ,ion are for 8 , which means they dont have to year. At much cash up each so, the situation gets worse not only are they not keeping up markets, after fees they are to dramatically under performing they are making the bigger. S much you mentioned this two and 0 Fee Structure which is industry standard. If the performance is so lackluster maybe that needs to revisited. At least for private equity here are some Institutional Investors who have managed to get the fees moved down. Will we see that more with hedge funds . Yes and no. The old joke is khroufp chose to be tell i dont want a member of any club that will have me. Fee down ou can gosh you probably dont want to be in it. Are not of people cutting fees because their lagship funds are doing fairly well and that is the paradox. He distribution of alpha amongst hedge funds we tend to think of a bell curve. It is nothing s look that. There are a handful of outliers, old pros who he have been doing it a long time, emerging managers. The old pros if you dont have a dollars you wont get in and good luck select emerging manager will outperform. There are a lot of good funds that are midsized. 10 million who dont want any capital. Ide that is true for a handful. What we found and studies show a new er will discover a portion of the market that they can generate alpha from. Like a giant t vein. A smaller piece market ragarbitrage, a inefficiency, which is good when they are 100 million, 300 million. When they scale up beyond 1 the ability itse identify an inefficiency and the with two and 20 if somebody is outperforming who cares. The returns were stronger. There are questions about those returns. Sure, that is the larger picture. If you could get into a fund has been and continues to out perfo their orm in excess of fees, the s p is up 25 year to date. That is e in a fund rossing plus 30 net of fees you are only up 22 . To get above that bogey and do a real stently is challen challenge, especially as funds contextt it in the best in 1997 the industry was a over 100 billion. Now it is 2. 5 trillion. Alpha to go enough around and there are not 10,000 talented managers. The niche and be a best in breed and execute like a rock star. Love when are here. When we come back l. A. Based leasing creative properties. L. A. Are focusing on an based reit that has property in orthern and southern campbell and seattle. It is the goto landlord of biggest names. S square, amazon, uber. Founder, eman is the chairman and c. E. O. Of Hudson Pacific properties. He is with us from l. A. Glad to have you with us. These are arguably very good times for the reit for anybody serving the tech community. How much are you concerned about company being a pony. Trick these industries and businesses hat we are seeing and growth are really not only in the inception stage but proven companies. I think we are pretty excited about that but it is tech, entertainment, social media. It is a whole basket of companies. See the do you particular growth . We talked about northern california, southern seattle. You have a lot of hot areas. But what are you seeing as far what Companies Want that you are going to make money on . What we are seeing is the desire of these companies is to the external footprint in Creative Office space. San francisco has been a great indicator of that and in pacific california and northwest you are seeing the development and growth of the and now how do you get the space for the tenants when you see the to tenants ff going who have captured it earlier. Of is the next phase Creative Office space . How do , midrise and you convert it. We are hearing about some tech money drifting a little bit farther south and valley to silicon l. A. As far as the demand that you are getting. Confirm that . Not only drifting but ompanies are starting here and growing from her. You are seeing virtually every Major Tech Company in southern now that have come from San Francisco and silicon looking in hey are the pacific northwest. They are looking for the major gateway he cities on the west coast and we are seeing that. Do they want . Here in new york there were some world versus new world, a lot of Tech Companies in builds where they could break down walls and kinds of demands are you seeing in this fashion . Is you are seeing the desire to have everybody in the same loor plate so the larger the floor plate. That is the aspect of all open space. About you that is creative and what people are looking for. I dont know how much more you that will be Cost Effective so i think there will be a shift to taking some maybe buildings and modifying plates that are smaller. Since it is the ends of the one looking become what was thing that surprised you about 2013 . Tell you to something, i think what we have seen, the collaboration of tech, entertainment and growth we have seen in our on an s is really still upward mobility and a lot of people in the beginning of 2013 out and re petering technique Companies Wont grow. We saw multiples of that grow. We have seen rental Rate Movement at levels that i think are shocking almost everybody. All pretty good. I have some pictures here of some pretty Impressive Properties properties, met park north in seattle. Market Market Street in San Francisco. Which one did you think seeing ts what you are now as far as the live market goes . I will take that. Take where we have the asset in San Francisco where uber just went in and square is there. Large floor plate midrise Office Building and converting it open space. Come down to element we did a big deal with ride and it will campus feel, it is very desirous. Of tenants that want to be there. I think that is the dichotomy of right now. Seeing two distinct differences. With us. , glad you are Victor Coleman chairman and Pacific Hudson properties. The pawn shop ck for the 1 , the c. E. O. Of borrow be with me. Telling me how the rich are luxury. To loan against. Pawnbroker and luxury may not be terms you put together but earners are looking for ways to get extra cash. Borrow paeubgs loans against everything from uxury watches to fine wine to vintage cars to gold and precious metal. Founder and the c. E. O. Thanks for coming in. Get this idea . Luxury items and being a normally you dont think of putting them together. I first came up with the idea in mid 2008. The credit crunch was starting. A contextual s point . Yes. The principle was the people who have luxury assets, very nice diamond high end jewelry, things like that, they were not leveraging them. F you have millions of dollars of assets you can go to a private bank. If you are borrowing a couple there is rill pawn shops. Who was serving those in the middle. Does this work . When you say loan against, is it letting somebody borrow for a certain number of and the person rents it . People come to us and bring the assets to us. Of the asset sion and give them. Is a loan. And it is typically six months, about rage loan is 10,000. High lower end on the worth spectrum. Are most of the people using global . Ondon, here, it started in london about five years ago. Opened it new york in january of 2012. We have done about 45 60 on of lending and london and 40 u. S. Items,ar as the types of we went down the list, fine wine, watches, jewelry, cars. Do you see the most . In terms of volume it is watches. Elry and but we get a lot of fine art, pieces and they are worth more. We do a lot of fine art. We dont quirkry assets like golds, oscars. Beatles first record contract. Is an interesting angle with memorabilia in movies and sports. 20082009 you alluded to i bankers hink all the and guys in the city who my god im not going to get the bonus got and i want to take a cool trip or do whatever. Using it . O is theres been a shift since the early days. Got a lot of Small Business owners, one to 20 size retailers, Property Developers and a lot of people or have in construction construction type industries where they struggle to get they use usedit and for working capital to recognize a business opportunity. Im sure they can get a better deal through you than buying the assets outright. The thing for us is the speed at which they can get access to money from us. The same day or techniques day or serve next homes, they l go to can come to us or use courier partners to get the assets prior funds. Ng them a pleasure to see you, paul. C. E. O. Of borrow. When we come back we will give update, l trading everything you need to know on the markets. Tomorrow on money moves the future of tv using social media mobile streaming. Jay fisher will be with us. Hour. Almost 56 past the that means it is time for market. On the julie hyman is here. We have a little bit of a picture. We had mixed Economic Data this morning. Etail sales better than estimated, jobless claims worse nd Bloomberg Consumer comfort index increasing the third month in a row. Seeing in t we are stocks. Individual movers that we want to highlight we look at facebook. Instagram application allowing videos send photos and directly to friends as facebook ries to fend off snapchat and being added to the s p 500. Warehouse. Hing mens the c. E. O. Reported an earnings a. Banks aid joseph offer is compelling although it a. Now offering to buy joseph bank. Theres been a lot of back and forth between the two companies. Optimism that g the talks are continuing. The retail or Industry Report facing more price conference shoppers with bringing in black friday bringing in less last year. The high end market is feeling the same. A person m joined by who covers all things retail. Interesting. This is a change from what we have seen. Held up opper has pretty well. What is changing . The economy is getting a little right . , the economy is Getting Better and you look at the balance nsumer and up. Et and it a stocks are i think it is not that they dont have the propensity to spend. Fickle. Just being do i need this or want this. O i have to have this 2,000 dress or can i get a 400 dress 200 handing th a about. How are we seeing the and how of this dramatic is it . Is it not to say it is luxury wont have a good christmas. What they the past is in is ount, whether it nordstrom with 40 off or saks discounts to ing get customers into the store which they dont do that much. Everybody else has been doing it outside of luxury, does same ean we will see the margin and earnings pressure on the luxury guys they are not see to that we will elsewhere . You probably are. What about when you look the higher end spectrum . Be winners ing to and losers, those that are not discounting as much to bring in traffic . Are seeing discounting at retailers that is probably a ign that either sales are not materializing or they need to get the traffic into the store or jane. Aggressive discounting i doubt it is planned. It is something they are probably chasing. Reactive. Yes. , one ou see full price said traffic was weaker and they discounting. So there is no discounting mean that you are doing well is . Mean that you are not doing well . It is mixed bag. Ou have to look at each retailer individually. Thank you so much for talking Luxury Retail market. E willing on the markets in 30 minutes. Street smarts is next. We have stocks falling. P could be on track for the lowest close in a month. Minutes to go in the close. Interesting reversal we have seen. A reversal we have seen today. I want to go to the big three s p first u the because there is a lot to talk about what is happening right now. At one pointtoday
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