Transcripts For BLOOMBERG The David Rubenstein Show Peer To Peer Conversations 20240715

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Data before making any rush to judgment. Selfproclaimed venezuelan leader has won the support of most of europe as the u. S. Led campaign to out Nicolas Maduro accelerate. The European Union failed to offer its backing. Trading of venezuelan debt has come to a standstill. Stopped trading the note and debt after the treasury issued instructions, banning most transactions. The aussie dollar sliding today, a trade balance more than expected. 3. 7 billion, 1. 5 billion more than forecast. More signs that the economy is slowing. Retail sales in december fell 4 10 of 1 , comparing to the forecast of flat sales growth in november. It is a holiday. Quiet day across the region with many major markets closed for the Lunar New Year celebrations, including south korea and singapore. Mainland hong kong and china are shut down but lets take a look at the markets trading today. Truncated session. Japanese markets, nikkei receiving a little bit. Hanging onto gains at a quarter of 1 . We are seeing gains of over 2 , largely lifted by the miners, but the big financial stock. It is a sigh of relief turning into a relief rally for the big lenders. Some of the stocks jumping the most in about a decade. Asxre looking at the s p 200 closing at a twoyear high. New zealand is up with gains of half a percent. S treatmentng stroke drama continuing to play out. Also, seeing the downside. Economic and Retail Consumer bellwether in japan, seeing some downs. Falling to a fivemonth low on weak sales. Also seeing shares of yahoo japan. David you met your wife in high school . Michael we met in seventh grade. David so you didnt date around in the seventh grade . [laughter] david can you explain how you kind of invented highyield bonds . Michael to derisk america, you dont want to be dependent on a handful of banks. David you came down with Prostate Cancer . Michael i have lost 10 relatives. David what is it you did that helped change the way finance things . Michael first, you collect the data. David do you have regrets in your financial career . Michael sure. Would you fix your tie, please . David well, people wouldnt recognize me if my tie was fixed, but ok. Just leave it this way. Alright. David i dont consider myself a journalist. And nobody else would consider myself a journalist. I began to take on the life of being an interviewer even though i have a day job of running a private equity firm. How do you define leadership . What is it that makes somebody tick . You signed the giving pledge, agreeing to give away half your money. What did your children say about that . [laughter] michael well, it is interesting. They have been involved in our philanthropic efforts since they were young. And my wife, lori, lori defines wealth as that she can buy any book she wants. And so, i think that has been instilled in our children from the very beginning. David you met your wife in high school . Michael we met in seventh grade. David seventh grade, and you have been married for how long . Michael well, we just celebrated our 50th anniversary. [applause] david ok. So you did not date around when you were in the seventh grade . You just [laughter] michael well, we didnt really we dated once in the ninth grade. David ok. Michael but she knew who i was, i knew who she was. She was voted in high school the most likely to succeed. So i wanted wanted to hang around her as much as i could. [laughter] david what were you . You were not voted that . Michael i was voted the most spirited, friendliest at that time. David ok, so you grew up in los angeles, is that right . Michael yes. My father was a lawyer and accountant. And my mom was a homemaker. And yes, i got to work anyone who is the child of a person has his own accounting firm, you get to work on Balance Sheets and tax returns when you are eight. [laughter] david ok. Did you, at the early ages, were you a pretty good student . Michael oh, i was a very good student. But what they did instill in all of us was for us to have a Meaningful Life, at least everyone had to have a chance at a Meaningful Life. And if our children or our childrens children were going to have a Meaningful Life or a good life, then all children had to feel they had that opportunity. And that was instilled with us. David so you go to berkeley and youre going to major in science and be a scientist and so forth. What happened . Why did you change . Michael on august 11, 1965, what became known as the watts riots occurred. So i did not have to go to vietnam. There are armed personnel carriers on the street. The city is on fire. And it took a while for me to convince my dad to let me go and understand what was happening, because i was convinced i knew everything. And i met a young africanamerican man sitting outside looking at a building that had burned down that he worked in. No one would give Financial Support to his father or him because he was an africanamerican. And it struck me that i thought i knew everything, and now everything that i believed, a chance to succeed based on your ability, not who your parents were, not where you went to school, not your religion, not whether you you are a man or woman, that this individual had made a rational decision watching the burning down of the building that employed him, and that he felt he was not part of the American Dream. So i went back to berkeley, changed my major to finance and business. And was determined to change that so everyone felt they would have access to capital based on their ability. David you majored in finance, and then went right to Business School at wharton. Is that right . Michael that is correct. David you had the highest grades in the history of the school, more or less . Michael there is that rumor. [laughter] david ok. David so you graduate from wharton in 1970 and you are working for drexel, a leading, Prestigious Firm then. It is said you discovered the idea or helped to propel the idea that investing in what is called highyield bonds was a better investment than investing in, lets say, investmentgrade bonds. Is that more or less it . Michael it is. One of the ways i was able to convince the firm is i took a look at the stocks they were recommending, and most of the companies were not investment grade. So here they are suggesting you invest in the equity of businesses, but not suggesting you could buy preferred stocks, other part of the capital structure. If we look at it today, david, the rating agencies about the lowest you can be rated before you go bankrupt and get a d is a triple c. Well, lets think of three firms that are in the news today. Uber, the company is worth tens of billions of dollars. It doesnt have a lot of debt relative to its equity. Well, it is rated triple c. You are talking about tesla. Doesnt have a lot of debt relative to its equity. It is rated triple c. And or you can go to wework. They are rated triple c. So what i discovered is that quite often the future in credit is rated low even though it is the future. And the real risk lies often in companies that we think of as establishment or have paid dividends for a long time. David all right, so you are doing reasonably well, living in philadelphia, and you go up to new york, commuting back and forth . Michael well, the person i went to work for, who was the chairman, got into a serious accident, so they asked me to go to new york and set up the Bond Department in new york for the firm. So i had my 2. 5 hour commute each way. David and you are doing that, at what age were you . Michael i was 24. David you are 24 years old and they are having you set up operations to lead the effort in new york . Michael yes. David ok. Did you, like, try to look older than 24 . [laughter] michael you know, it is funny you say that, david. In 1974, i am in hartford giving this talk to the insurance companies. And a person said, we have a lot of young people coming up here. We generally dont like to listen to anyone under 30. I said, i fully understand that myself. And so, i was 30 for a number of years. [laughter] david so you told people you were 30, ok. So ultimately, your father comes down with cancer, melanoma. And you decide you want to move back to be closer to him. So you went to people at drexel and said, im moving the operation to l. A. Whether you like it or not . Is that how it worked . Michael this was an unusual period of time. All these theories that i had at wharton and berkeley, everything that i had studied for from 1965 to 1974, i was able to apply. And all these theories turned out to be true. And the modern Capital Markets began, but my mother in law had Breast Cancer and my father had melanoma. And i could not solve the melanoma problem for my father. So i didnt really get to bask in the sun of your theories in finance, and markets, and change that occurred because i now faced really the first problem in my life that i could not solve. My father was dying. And i made the decision, we had two young children, that they needed to meet my father and spend time with him before he died. And therefore, i was either going to take a sabbatical or i was going to move the whole department to los angeles. David can you explain how you kind of invented highyield bonds for people to get new companies off the ground . Michael growth companies. Were denied capital. And so to derisk america, to derisk the entire system, you dont want to be dependent on a handful of banks. David ok, so everybody moves out to los angeles and they fall in love with the california lifestyle, i guess, and they are probably not wearing ties to work or anything like that. Is that true, or . Michael well, they are not wearing ties to work. But i had the clocks set on new york time, so when you came in, at 4 00, it said 7 00. Psychologically gives you a little boost. David you have to get up at 2 00 to do that or something. Michael 3 00. [laughter] david ok. Michael but then at 4 00, you set them back to l. A. Time and you get your second wind. David if somebody wanted to start a new company like ted turner, rupert murdoch, or john malone, they had to come to someone like you and you would give them highyield bonds. Can you explain how you invented highyield bonds for people to get new companies off the ground as opposed to traditional today Venture Capital . Michael i will take you back to 1974. So what happened in 1974 . The Banking System had to save itself. Growth companies, they were denied capital in this period of time. And therefore, once you saw the performance, the decision was, you do not want to rely on your Financial Institution for access to capital. And so to derisk america, to derisk the entire system, you want to have 10,000, 100,000 institutions like carlisle who could invest. You dont want to be dependent on a handful of banks. In 1998, when the asian crisis started in thailand, there were in five banks that got in trouble, but they were providing the capital to everyone in the country. So to understand the future, so if cable is the future industry, of course it is going to be rated low at the beginning. But if you can find the most talented people and give them capital to grow, and that was really the mixture. Let us go find people that are talented. So you mentioned rupert murdoch. Rupert wanted to build a company. He has passion for what he has done. He almost lost his company when he was in school in england and his father died and they tried to take his family company. He remembered that. But he wanted to build something. Ted turner wanted to build something. And so only you are interacting, craig mccaw, was in cable, radio, television. They were willing to do that all up for cellular. You wanted to find that individual who had passion for what they were doing. And if you believed in them, finding great people and backing them is obviously one of the great decisions. And so bringing capital to them, they might be low rated. And there were only 500 companies in america rated investment grade. So you can imagine, i am am coming to wall street. I have millions of companies. And everyone else is focused on 500. And those 500 dont create jobs. David did you ever have somebody come to you if you did not finance them and they turned out to be successful later . Did that ever happened, or . Michael im sure there were, but there were plenty where the idea did not make sense. You know, i remember we had a presentation on investing in an oil drilling business and an Oil Exploration business. And they brought them in. And we wanted to see their data. And about an hour into the meeting, i asked them what techniques they used closeology. I think one of the things i have discovered over the years is if you dont understand something, ask what it is. A lot of people dont ask. They dont want to show they dont know. But i had never heard of closeology. So their Drilling Technique is they see where others drill and get as close as possible. [laughter] michael there is no geology. Theres nothing going on. David ok. Michael so we decided not to finance that company. David ok, so you are at the height of your power. You are the most important person in finance in the u. S. , i think most people would probably say at the time, and then all of the sudden, some people did not like what you are doing, investigate, and ultimately, you leave drexel at a very important point in your career. Michael ok, you might have thought i was the most important person, but i dont feel that way. The most important person is the person responsible for running that business. We can help create the capital structure, but the other person is responsible for the business. We can coach him. We can talk to him. But, yes, long before i left, in the mid1980s, there was legislation introduced in america to ban the deductibility of interest for noninvestment grade debt. So if you are one of these 500 companies, you are entitled to borrow and deduct interest, but if you are not, then you are not. We were so surprised by the reaction of congressmen and senators. One told us that if their state has to sacrifice to get rid of the scourge of junk bonds by that time they were junk bonds that they would sacrifice at that time. So the idea that you were going to deny capital to small and medium businesses who are creating at this time 100 of all jobs, it reminded me of the nobility in england with the mercantile class. Where you went to the king and said, ok, we can no longer compete with these businesses or these people, so therefore, you have to deny them access to capital. David you ultimately left the company and you started different businesses, and then you came down with Prostate Cancer. You were told that you did not have very long to live. Is that right . Michael it spread through my body. So i actually had to lay down for almost 24 hours and think about it. I have lost 10 relatives to cancer. And so i had to think, ok, what can i do differently than they did . So the first thing i decided was i would stop eating anything except fruits and vegetables. This idea that it may be something that i was eating that was accelerating the growth of cancer. Second, i reduced stress. I had come out of an extensive stressful period. Me versus parts of the u. S. Government. And so i started meditation. And i had to do Something Different to survive. I went and visited doctors in china. Healers from russia. Witch doctors in africa. Indians in the northwest amazon. David what did you conclude . Did any of them know more than western doctors . Michael i didnt have a lot of faith in the healers, but the one that i embraced was from india. And i moved a doctor into my house for six months. And the herbs, the meditation, the chanting, and i took these hormones. I felt that there was an opportunity here using immunology to change my outcome. We need to accelerate research if i am going to save myself, or i am going to have to change how medical research is done. We created camp cure, and the promise was we are going to double the money going into medical research. We are going to triple the money for cancer research. David for Prostate Cancer. Michael and we are going to increase Prostate Cancer tenfold. David today, you are in remission. Michael i am in total suspended animation here, but you could say i am in remission. I have celebrated my 25th year. The death rate from projected levels has fallen by 82 . There are millions of men alive today. I can see the end of cancer as a cause of death with treatment. The changes that have occurred in bioscience are so dramatic, particularly immunology. David what is it that you did that helped to change the way we finance health or look at it . Michael i would say first, you collect the data. If you are going to accelerate science, it has to be based on basic science. So first, data. Lets check your microbiome. Lets sequence your disease if you have it. And then lets give you something that will work for you. David you talked about health. Are you an exerciser . Michael yes. I would say it is two thirds what goes in, and one third the exercise. David so what do you are you a sports person . Do you have a gym . What do you do . Michael here is one of my problems. When i was 12, i was 511. Now at 72, i am 59. 5. And i did not grow one quarter of an inch from 12. So i was a star basketball player at 12, player of the year, then something happened and everyone else grew two inches and i did not. I went from center to forward to guard to the bench to the stands. Ok . [laughter] david do you look back on your remarkable career and have any regrets in your financial career . Michael sure. David lets talk about other things you are doing in philanthropy. You have been very involved in education. Why is education so important . Michael when i was in Elementary School in the 1950s, only 20 of jobs required a skill. Today, whether it is a skill or semiskill, 80 to 90 of jobs require some skill, some knowledge. And i think when we studied education in the 1970s, what we discovered was the United States was the most educated country in the world. And so other countries have now caught the United States and passed. And so yes, we are the leader in higher ed. As you know as the former trustee of so many of them today, but we are strained in many ways in education, so our whole emphasis and foundation was education. And that is why it was launched, and it was really the education i got, that we did not focus on the schools for our employees as much as we should have. David as you look back on your remarkable career, any regrets in your financial career . Michael sure. There are a few people i wish i would have never met. Ok . [laughter] michael or a few phone calls i wish i would have never returned. But i think also i regret that the American Public did not understand. Almost every person is highyield junk. You know, when things started coming from japan in the 1960s and 1970s, everyone said they were junk. It is junk. And then all of a sudden we felt by the 1980s the quality of their products and cars was better. Everything coming out of china was junk. The American Public did not understand they were talking about themselves. 60 million jobs being created by noninvestmentgrade companies in the latter third of the 20th century. Minus jobs being created by investmentgrade companies. And i think going forward, i am going to devote a large percentage of my time here to what i call living the American Dream. David you are creating a center for the American Dream. So why dont we conclude with what do you think the American Dream is all about . Michael i think the American Dream, which is so unique, is the chance to succeed based on your ability, your willingness to work hard, your knowledge, your insight, which is one of the most valuable qualities. Now, i cant tell you how depressed i am when i see that 26 of americans under 30 think they are going to have a better life than their parents. A long time ago, it was 90 . So why do they feel that way . Why do 50 of americans under 30 think socialism might be better than the Free Enterprise system . You can see socialism in venezuela playing out. And so, something is missing. And i think, as i have been focused on it, one, it is hope. What i see is a large percentage of americans dont see that hope. They have their Student Loans that are burdens for their entire lives. Even if you go bankrupt, you cannot get rid of your Student Loans. We have to eliminate Student Loans. We have to find another way to finance college. Two, someone tried to take their parents homes in 2008 or 2009 or 2010, or they lost their homes. So their interaction with our Financial System, they have not seen the benefits of it. We need to make sure that the Financial System is working for them. It needs to and it should. And it starts with education and starts with health, and it starts with access to capital. So for me, i am going back to where i was 50 years ago. David thank you very much for doing that, and thank you for your time today and very remarkable career. Thank you, michael. Michael thank you, david. David thank you. [applause] haidi with your first word headlines. President Trumps Inaugural Committee concerns have been subpoenaed and intend to cooperate. It is not said who sent the papers but abc news reported it came from federal prosecutors in new york. The president is preparing for his delayed state of the union address, with a new Government Shutdown feared. He repeatedly set any Congress Security deal that does not fund his wall would be a waste of time. The investment arm of the abu dhabi government sold 35 million shares in the u. S. Chipmaker amd. It now plans to convert 75 million into equity. The company has been one of the

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