As promised, Let's take you to the World Economic Forum in Davos. Bloom we're experiencing lackwise doinged by Blackstone Chairman and CEO Steve Schwartzman Brand.

As promised, Let's take you to the World Economic Forum in Davos. Bloom we're experiencing lackwise doinged by Blackstone Chairman and CEO Steve Schwartzman Brand.

Yeah, thank you so much, Alex. I'm really delighted to be here by see well, joined here by Steve Schwartzman. Stay four. So we're struggling to talk a little.

Yeah, thank you so much, Alex. I'm really delighted to be here by see well, joined here by Steve Schwartzman. Stay four. So we're struggling to talk a little.

Bit, Steve.

Bit, Steve.

I mean, it's been like NonStop this year because there's been so many people. The talk is of course about the conflicts the impact that has on the economy. Are you confident about twenty twenty four.

I mean, it's been like NonStop this year because there's been so many people. The talk is of course about the conflicts the impact that has on the economy. Are you confident about twenty twenty four.

Well, I think twenty twenty four will be a good year.

Well, I think twenty twenty four will be a good year.

It'll be start out slower in the sense that, you know, interest rates are still pretty high and the Fed will keep.

It'll be start out slower in the sense that, you know, interest rates are still pretty high and the Fed will keep.

Them that way.

Them that way.

Everybody has their own guests, you know, probably till the second half at some point in there, so that'll sort of have a little bit of.

Everybody has their own guests, you know, probably till the second half at some point in there, so that'll sort of have a little bit of.

Sort of a baffling effect.

Sort of a baffling effect.

Stock market had such a run in the fourth quarter that you wouldn't expect that to really take off and go, and the economy is slowing a bit.

Stock market had such a run in the fourth quarter that you wouldn't expect that to really take off and go, and the economy is slowing a bit.

That's normal with high interest rates. So on the other side of the Ledger.

That's normal with high interest rates. So on the other side of the Ledger.

The expectation that interest rates are going down is creating animal spirits again, and we did at Blackstone. We did six private equity investments in six weeks at the end of the year after a slow year. We're much busier now. In a way is represent some type of capitulation for people who are holding back for two years. So we're optimistic for this year.

The expectation that interest rates are going down is creating animal spirits again, and we did at Blackstone. We did six private equity investments in six weeks at the end of the year after a slow year. We're much busier now. In a way is represent some type of capitulation for people who are holding back for two years. So we're optimistic for this year.

See, are you worried that if actually we don't get those cuts promised by the Fed, because a lot of the good users already priced in markets, that people will start waning on the deals a little bit. So for the moment, you're optimistic. His second half of the year a little bit trickier, we will get.

See, are you worried that if actually we don't get those cuts promised by the Fed, because a lot of the good users already priced in markets, that people will start waning on the deals a little bit. So for the moment, you're optimistic. His second half of the year a little bit trickier, we will get.

The cuts because the way we measure inflation Blackstone, we're already right around the two percent. The fact that the FED is using different numbers for rents in real estate, we think they're sort of looking at six percent inflation and rents in residential real estate, and we're the largest donor of residential real estate.

The cuts because the way we measure inflation Blackstone, we're already right around the two percent. The fact that the FED is using different numbers for rents in real estate, we think they're sort of looking at six percent inflation and rents in residential real estate, and we're the largest donor of residential real estate.

We think it's zero to one.

We think it's zero to one.

Let's bet on us on this one because with the people actually doing it, and if you correct the index for that difference between what's really going on, and they're saying it's six point two get you get around two percent, So I think it's I'm quite confident that they'll be lowering rates. Some people are like overly enthusiastic about when they do it. We don't really care when they do it. It's just the fact that we're going to go from a period of rising rates to a period of lowering rates.

Let's bet on us on this one because with the people actually doing it, and if you correct the index for that difference between what's really going on, and they're saying it's six point two get you get around two percent, So I think it's I'm quite confident that they'll be lowering rates. Some people are like overly enthusiastic about when they do it. We don't really care when they do it. It's just the fact that we're going to go from a period of rising rates to a period of lowering rates.

So where do you see the best deals, Where do you think that the market is really ripe and kind of ready to go.

So where do you see the best deals, Where do you think that the market is really ripe and kind of ready to go.

Well, there are different different things. You know, data centers now are really interesting. Energy transition, you know, that's more of a book value kind of think because you're building things typically and we've done extremely well in that area. We have healthcare types of things where you're inventing drugs through stage three trials. That's uncorrelated. We're looking at very interesting things in European real estate. Now that's counter right, counterintuitive. So there's always an actual reason why it's interesting, not an assertion. So the reason is that people who own real estate in Europe used to be paying almost nothing in interest because rates were negative for governments and even deposits, and now it's costing them about five hundred bases points more to carry their positions. If you are highly leveraged, then you're having a lot of difficulty holding your positions, and and the actual interline real estate isn't necessarily.

Well, there are different different things. You know, data centers now are really interesting. Energy transition, you know, that's more of a book value kind of think because you're building things typically and we've done extremely well in that area. We have healthcare types of things where you're inventing drugs through stage three trials. That's uncorrelated. We're looking at very interesting things in European real estate. Now that's counter right, counterintuitive. So there's always an actual reason why it's interesting, not an assertion. So the reason is that people who own real estate in Europe used to be paying almost nothing in interest because rates were negative for governments and even deposits, and now it's costing them about five hundred bases points more to carry their positions. If you are highly leveraged, then you're having a lot of difficulty holding your positions, and and the actual interline real estate isn't necessarily.

Growing that much.

Growing that much.

So the way out of this dilemma is to sell assets. And there's hardly anybody in Europe who wants to buy them, but Blackstain. We're the largest owner of commercial real estate. We've got plenty of money. We want to buy that real estate, but only the good kinds of real estate, the data centers, the warehouses, the student housing, which is all doing well. So what we normally do is tell them to go back and just bring us that stuff and we'll buy all of it to give them liquidity. And we're finding that that's happening a lot, and that's creating things because we only buy them at a price we think makes sense.

So the way out of this dilemma is to sell assets. And there's hardly anybody in Europe who wants to buy them, but Blackstain. We're the largest owner of commercial real estate. We've got plenty of money. We want to buy that real estate, but only the good kinds of real estate, the data centers, the warehouses, the student housing, which is all doing well. So what we normally do is tell them to go back and just bring us that stuff and we'll buy all of it to give them liquidity. And we're finding that that's happening a lot, and that's creating things because we only buy them at a price we think makes sense.

So we now have.

So we now have.

Not only willing sellers who have to sell, and at a very willing buyer. So we're going to create a lot of very interesting investments. So what you find fran scene in almost every environment, if all you're doing is what everybody does, it's not so interesting. If you have different inputs, you can create things with very good rates of return.

Not only willing sellers who have to sell, and at a very willing buyer. So we're going to create a lot of very interesting investments. So what you find fran scene in almost every environment, if all you're doing is what everybody does, it's not so interesting. If you have different inputs, you can create things with very good rates of return.

How do you look at AI? So is AI something that's embedded in the future of what you're buying or do you go straight for airplay.

How do you look at AI? So is AI something that's embedded in the future of what you're buying or do you go straight for airplay.

There are certain types of things when you look at them, you have to, as part of an analysis say if AI was more developed, is that good or bad for this type of business? So there are certain types of businesses really not good for certain types can really be improved.

There are certain types of things when you look at them, you have to, as part of an analysis say if AI was more developed, is that good or bad for this type of business? So there are certain types of businesses really not good for certain types can really be improved.

And so that's now on the.

And so that's now on the.

Checklist, if you will, or due diligence and AI itself, we've marshaled almost all of our portfolio companies.

Checklist, if you will, or due diligence and AI itself, we've marshaled almost all of our portfolio companies.

I gave a zoom with all of.

I gave a zoom with all of.

Them, all the CEOs, about six months ago, and I told them AI is no longer an elective course. This is core curriculum and you're going to learn to love it and the reason and understand it well, understand it as best you can, and it will help you and affect Blackstone Parent and a lot of companies. We embed data scientists to serve as a.

Them, all the CEOs, about six months ago, and I told them AI is no longer an elective course. This is core curriculum and you're going to learn to love it and the reason and understand it well, understand it as best you can, and it will help you and affect Blackstone Parent and a lot of companies. We embed data scientists to serve as a.

Link and.

Link and.

One of the things that we really want to do is to make sure that every company has a plan, because if you don't and somebody else does, this is an area where if you're not the first mover and your competitor implements AI and they have bigger margins or more new products, then you're going to start losing your market share. And some people, some businesses who aren't in the game, are going to be really adversely infected. And I explained to them that can't be you. You want to oversee somebody else taking your market share and hurting your business.

One of the things that we really want to do is to make sure that every company has a plan, because if you don't and somebody else does, this is an area where if you're not the first mover and your competitor implements AI and they have bigger margins or more new products, then you're going to start losing your market share. And some people, some businesses who aren't in the game, are going to be really adversely infected. And I explained to them that can't be you. You want to oversee somebody else taking your market share and hurting your business.

They all understand.

They all understand.

This, This is a good thing. Do you worry about liquidity crises in certain pockets? I know Carson Block was talking, for example about VXMT.

This, This is a good thing. Do you worry about liquidity crises in certain pockets? I know Carson Block was talking, for example about VXMT.

No not no. You know we have I think ninety seven percent of loans.

No not no. You know we have I think ninety seven percent of loans.

Paying and.

Paying and.

You know we've done our own analysis on that, and we're not particularly concerned about that. In terms of liquidity. There'll be office buildings which will have that issue. Although office buildings, particularly the United States as a rule, are a lot lower leveraged than they used to be. When you were covering the global financial crisis, then office buildings were seventy five to eighty percent leverage. Now they're fifty five to sixty percent leverage. So to the extent that those buildings get in trouble there's much more equity in them, so this is going to be an unfortunate moment for the actual owners rather than just the banks.

You know we've done our own analysis on that, and we're not particularly concerned about that. In terms of liquidity. There'll be office buildings which will have that issue. Although office buildings, particularly the United States as a rule, are a lot lower leveraged than they used to be. When you were covering the global financial crisis, then office buildings were seventy five to eighty percent leverage. Now they're fifty five to sixty percent leverage. So to the extent that those buildings get in trouble there's much more equity in them, so this is going to be an unfortunate moment for the actual owners rather than just the banks.

Do you think private equity have a has a place in people's for a one case?

Do you think private equity have a has a place in people's for a one case?

Oh absolutely, geez.

Oh absolutely, geez.

You know, we're selling a lot of money to private wealth twenty five percent of Blackstone's assets or to private wealth customers. So that's two hundred and fifty billion dollars. And you know that that is a little cyclical because private wealth customers sometimes get you know, affected more than institutions when markets go down and their threats of that type. On the other hand, there's eighty trillion dollars with probably that says a market opportunity with probably only two percent penetrated when I started in nineteen eighty five back in the Middle Ages. That that's just the way institutions work. Institutions now are twenty five percent. And the reason is you get much higher returns over time than the stock market. You know, probably around five hundred and six hundred basis points. You give up some liquidity and now we're inventing new products that can be put into liquid form, if not daily liquid, periodic liquid. So you give up some liquidity, but you make a lot more money.

You know, we're selling a lot of money to private wealth twenty five percent of Blackstone's assets or to private wealth customers. So that's two hundred and fifty billion dollars. And you know that that is a little cyclical because private wealth customers sometimes get you know, affected more than institutions when markets go down and their threats of that type. On the other hand, there's eighty trillion dollars with probably that says a market opportunity with probably only two percent penetrated when I started in nineteen eighty five back in the Middle Ages. That that's just the way institutions work. Institutions now are twenty five percent. And the reason is you get much higher returns over time than the stock market. You know, probably around five hundred and six hundred basis points. You give up some liquidity and now we're inventing new products that can be put into liquid form, if not daily liquid, periodic liquid. So you give up some liquidity, but you make a lot more money.

See you've talked mem about the US elections, so you've you've always had a candidate and you're on defense for the moment, like what will how will you make up your mind?

See you've talked mem about the US elections, so you've you've always had a candidate and you're on defense for the moment, like what will how will you make up your mind?

Well, you know, all I do is read polls and media, and you know, we've only had one election and it wasn't even an election, it was a caucus. So I think, you know, I'd like to see what the public thinks rather than what I think.

Well, you know, all I do is read polls and media, and you know, we've only had one election and it wasn't even an election, it was a caucus. So I think, you know, I'd like to see what the public thinks rather than what I think.

So that'll take a little bit.

So that'll take a little bit.

Is that because you want to back the winner or because you want to see someone that that could possibly be Trump?

Is that because you want to back the winner or because you want to see someone that that could possibly be Trump?

Well, I just want to see how the game plays. And you know, the world's complex with all of this presidential politics now, and you know, so I've always learned to trust my instincts. But when I want to see more, I just want to see more, and you know, obviously I'll make some decisions at some point. But this is the start of the game. For people who've been covering this like a blood sport.

Well, I just want to see how the game plays. And you know, the world's complex with all of this presidential politics now, and you know, so I've always learned to trust my instincts. But when I want to see more, I just want to see more, and you know, obviously I'll make some decisions at some point. But this is the start of the game. For people who've been covering this like a blood sport.

It's it's been going on.

It's it's been going on.

For a year, year and a half already, but the actual game has just started.

For a year, year and a half already, but the actual game has just started.

But New Hampshire is a big one, right New Hampshire is going to be interesting. That's next week. But do you know, is there a chance that the Republican nominee is not Donald Trump?

But New Hampshire is a big one, right New Hampshire is going to be interesting. That's next week. But do you know, is there a chance that the Republican nominee is not Donald Trump?

I've asked the pollsters, ask the political experts.

I've asked the pollsters, ask the political experts.

You trust the pollsters.

You trust the pollsters.

You know.

You know.

What's amazing, having had such a bad record in the twenty twenty elections, and even in the midterms, they got Iowa virtually identically.

What's amazing, having had such a bad record in the twenty twenty elections, and even in the midterms, they got Iowa virtually identically.

What as to what happened?

What as to what happened?

So i was actually kind of like a major victory for polling, you know, as well as the winner.

So i was actually kind of like a major victory for polling, you know, as well as the winner.

See, we talk a lot about, you know, what would happen to the economy, to domestic policies, to foreign policy until Donald Trump. What do you think will happen under a second term President Biden?

See, we talk a lot about, you know, what would happen to the economy, to domestic policies, to foreign policy until Donald Trump. What do you think will happen under a second term President Biden?

Well, we've seen a lot of that, and we've now got too brillion dollars deficits with no end in sight. We've got our debt to GDP going up. We've got open borders with eight million people coming over. You know, I don't know that the country frankly is prepared for four more years of that because those things all pull very negatively. So I can't really project, you know, what would happen.

Well, we've seen a lot of that, and we've now got too brillion dollars deficits with no end in sight. We've got our debt to GDP going up. We've got open borders with eight million people coming over. You know, I don't know that the country frankly is prepared for four more years of that because those things all pull very negatively. So I can't really project, you know, what would happen.

See when the debts becomes an issue, would it be a failed treasury auction? Like, could there actually be a big financial event that makes people, you know, wonder about the future of this.

See when the debts becomes an issue, would it be a failed treasury auction? Like, could there actually be a big financial event that makes people, you know, wonder about the future of this.

Well, theoretically, Usually financial crises come when you don't expect them, and they come quickly. I think we have a ways to go, you know, in terms of people buying treasury bills. I don't worry about that as a practical issue. You know, you have a country like Japan, which you know is like two hundred and fifty three hundred percent from GDP. They're still there now. Most countries who have that situation self finance, and the US is dependent upon more global finance. So it would be good if we could get our financial house in order.

Well, theoretically, Usually financial crises come when you don't expect them, and they come quickly. I think we have a ways to go, you know, in terms of people buying treasury bills. I don't worry about that as a practical issue. You know, you have a country like Japan, which you know is like two hundred and fifty three hundred percent from GDP. They're still there now. Most countries who have that situation self finance, and the US is dependent upon more global finance. So it would be good if we could get our financial house in order.

Steve, thank you so much for joining us today. That was, of course, Steve Schwartz and Blackstone Truman and chief Executive

Steve, thank you so much for joining us today. That was, of course, Steve Schwartz and Blackstone Truman and chief Executive