Steve Schwarzman on Bloomberg Television: Blackstone Could Grow to $500 Billion in Assets
The Blackstone Group (NYSE: BX) Chairman Steve Schwarzman told Bloomberg Television's Erik Schatzker and Sara Eisen on "Market Makers" Friday that he gives the U.S. economy a "good grade" and that "there are some real pockets of strength."
Schwarzman said that he can "absolutely" see Blackstone growing to $500 billion in assets. He also said, "I have no desire" to retire. The video can be viewed here.
Highlights of the interview are below, courtesy of Bloomberg Television.
Schwarzman on today's jobs report and the U.S. economy:
"The economy is moving forward. There are some real pockets of strength. The housing business has been really good and we are the largest owner of houses right now in America. The auto complex -- you are producing around 15 billion plus autos and that is up from about 8 million at the bottom of the crisis. Then you have the energy complex which is almost like an energy revolution. You have three big drivers plus technology. That is all to the good and whether we are growing at 2% or 2 .5%, that is in the face of all the government increases in taxes and sequester, so you have to give us a relatively good grade in the economic arena in that sense."
On whether Blackstone is looking to ramp up hiring:
"We are sort of unusual in that our hiring in the United States over the last several years has been about double what regular companies have been doing in terms of hiring rate. We are hiring on a consistent basis. If the rest of the country did what we did, we basically would not have much in the way of unemployment."
On what would happen if the U.S. government asked Blackstone for information about those it does business with in China or UAE:
"If you are a business in the United States, that has been happening to you without you even knowing it, and the cyber security issues that not just the United States is facing, but the western world is facing, are very, very significant and what is happening is that almost every business is hardening its silos to deal with that issue. It is a major, major concern."
On whether it's a good time to buy or sell:
"Depends on what you are buying and what you are selling. In the buying area there are some very interesting things in each of our businesses. In the real estate area, for example, there are a lot of interesting things all over the world. The U.S. still has a variety of troubled assets that have not been restructured yet…mostly commercial. The number of foreclosures has gone way down. Europe has all kinds of stuff. The banks have really not fully sold their troubled assets the way they have in the States and there are all kinds of other assets available in Europe."
On whether deleveraging in Europe will still be a big opportunity:
"Big opportunity, and also in Asia, where banks have cut back lending and developers are in trouble. In Asia, for example, you are cross-collateralized with your real estate assets, whereas in the U.S. each asset stands on its own. In other words, you can get in trouble with one, but your empire does not come down. In Asia, they are more linked. As you need more equity and as the prices of assets have come down, all of a sudden there are a lot of sellers and that creates great opportunities for us. In private equity, the whole explosion, if you will, of the energy complex in terms of investment opportunities, presents all kinds of unique things you can do. It is an area where there are way more needs for capital than there are capital to make those investments. There are also opportunities in the financial world because of regulation. There are certain things that traditional financial institutions can't do anymore whereas people like ourselves can do them and those present very interesting opportunities. In our credit area there is always the opportunity to recapitalize companies. We've sold out, if you will, of our long-term bonds with fixed yields, but there are opportunities for investment in the leveraged loan market."
On low interest rates and whether we're in for an inflection point related to Fed policy:
"You absolutely will be in an inflection point, but you just do not know exactly where it is. What i have found is when you are in a situation where rates cannot go that much lower, at some point, that will reverse and the issue is: how do you deal with that? What we do is we've refinanced all of our companies, and we refinanced with as much fixed rate debt at very low rates. It has been an unusual time since World War II that you can do that. You make sure you are a taker of capital and you do not get caught with rates going up and hurting your prospects."
On whether there's a point where big is too big for a firm like Blackstone:
"I don't think so because we keep going different places in the world and building out our ability to make investments where there is a need for capital where things are underpenetrated. One of the wonderful things about our world is the volatility that is baked in from the internet and the fact that there is virtually no friction regarding information."
On whether he could see Blackstone being a $500 billion firm:
On how much longer he will stay involved with Blackstone:
"I love what I do. It's one of the most fascinating jobs you could ever have. You meet with people all over the world. You're dealing with constantly changing circumstances, new initiatives and virtually everything from macroeconomic policy to politics to investments of all types to various asset classes. I have no desire to stop doing this."
On whether succession is a legitimate question of interest for shareholders:
"Sure. I could always get hit by a bus apparently from watching the local news in New York -- or a taxi. I have a terrific partner, Tony James, who is president of the firm. Tony is great. If anything were to happen to Tony, we have some unbelievably experienced people on our management committee who could also step up -- who are themselves running individual businesses that are the biggest in the world. It's our obligation to make sure that people are prepared, heaven forbid, if bad things happen to nice people."
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