00:00We have trade, we have Fed. Let's start with the Fed. This is a Fed that's been under a lot of pressure to do a balancing act, 25 basis point cut, but he pushed back on December. How are you reading the move?
00:12First of all, I don't think any of us actually really know. I mean, we felt pretty clear that this was going to be a cut, at least in this meeting, and we assume there'll be a cut maybe in December.
00:21But listen, the Fed is trying to balance between employment and inflation, and I think to the date, they've done a pretty good job of trying to balance that.
00:29It's not easy. It's not simple. But I think as more data comes in, they'll have to evaluate what happens in the December meeting.
00:36But as far as we were, from a Blackstone's perspective, we predicted this to happen. Obviously, it's good for us. It's good for the business.
00:42The Fed's cut rates with inflation at 3 percent, not 2, but 3 percent. So 3 is the new 2. Is that correct?
00:49You know, listen, I'm not an economist, but listen, I think obviously what they're seeing in the employment numbers is a softening in unemployment.
00:57And I think that's their job as the Fed is to balance this issue about employment.
01:02And you don't want to be too far behind the curve.
01:04And so what I think the Fed is trying to do is trying to do it just enough to keep a lid on unemployment and not allow it to shoot up in inflation.
01:13I think so far, to date, they've done a pretty good job.
01:16But listen, the chairman's got a very difficult job trying to manage this.
01:20And so I do predict today that he's done a pretty good job.
01:23Now, we talk about those trade deals which are being negotiated right now that has trickle effect into inflation.
01:30People say it is inflationary, right?
01:32And in the end, consumers are likely to pay for it.
01:35If you take a look at the U.S. economy, might that inflation be at 4 percent on the back of the tariffs, on the back of those trade deals?
01:44Well, first of all, as John Gray, who runs our firm, has said, this is basically tariff diplomacy.
01:52Every day we're balancing out.
01:54And the president is trying to balance the needs to get better trade deals.
01:58And so we're right in the middle of this.
01:59As you know, the president's in the middle of meeting with President Xi.
02:03We'll see what comes out of that.
02:04There's a potential deal in South Korea.
02:06We'll see what comes out with that.
02:07So we are watching this in real time.
02:10The impact on consumers is yet to be seen.
02:12Listen, we believe the economy is quite healthy.
02:14As you know, we own 270 portfolio companies.
02:18We just announced our earnings this week.
02:20We had great earnings.
02:21We had $50 billion of inflows of new money.
02:25We have probably $200 billion of dry powder.
02:28We feel really good about where we are today economically.
02:32And as you know, because you reported, the IPO market is open.
02:35So we're seeing a bunch of realizations.
02:37We saw that at Blackstone this quarter, a bunch of IPOs, we think fairly good in the fourth quarter as well.
02:42So we see the combination of our portfolio companies doing quite well.
02:47Inflows coming in quite nicely.
02:48The combination of that would suggest the economy is still quite healthy.
02:52And you're excited about Asia as well.
02:54India in particular.
02:55We are, as you probably know, one of the largest, not the largest private equity investor in India.
03:00We've been bullish on India for a long, long time.
03:02We're actually...
03:03And ramping up, Tom?
03:04Oh, without question.
03:05We have a huge team, not only the people on the ground, but our investment thesis is what we invest in,
03:10between hard assets and logistics and a variety of different activities that we're doing in India.
03:15It's a fantastic investment thesis for us.
03:17We've been there for a long time.
03:19You know, we're celebrating about our 20th anniversary in Asia.
03:21So Blackstone's been in this region for a long time.
03:24This is my third trip to Singapore this year.
03:27I know John Gray is coming next week.
03:29Steve Shortsman was just in Japan and China and India.
03:32Yeah, so we are all over Asia.
03:35We care about it.
03:36We think it's the right place to be.
03:38And it's a great investment thesis.
03:39All excited about the private market.
03:41And the conversation around the private market is actually private credit.
03:45Those cockroaches, where do you weigh?
03:47I mean, the likes of HSBC now putting aside hundreds of billions and millions of dollars just in case.
03:53Well, first of all, you've got to remember where we are.
03:55So Blackstone has been in the private credit business for 20 years.
03:58We've had virtually zero losses in that period of time, okay?
04:02We are fundamentally a big believer in the private credit market.
04:06And the reason why people keep giving us capital, they understand both the thesis of what we want in private credit, which is long-term returns.
04:15And as you know, it performs, it's performed better than the liquid markets.
04:19People understand that.
04:20It's about the underwriting.
04:21And you know, and not to be that guy, those deals that you talk about, those were bank-led.
04:27I mean, again, not to be that person.
04:28But the reality, this is the private credit market, if you underwrite correctly, which we do, as we focus, as we do for the long term,
04:35and the insurance companies that are giving us capital understand who we are as a firm.
04:38It is opaque.
04:39It's an opaque market.
04:40It is illiquid.
04:41And we have the likes of Andrew Bailey saying, you know what, I'm going to stress test.
04:45That must say a lot.
04:47Sure.
04:47Well, as you know, even during the financial crisis, even during the financial crisis, we had virtually no losses in our private credit business, okay?
04:54So, again, I would only stress, we've been in this business for a long, long time.
04:59We care deeply about this business and why our clients are, you know, obviously sending us money to invest in the private credit business.
05:06So, we believe in it.
05:08We think it's important.
05:09We'll be doing it 20 years from now as we were 20 years ago.
05:12So, again, the market's a great market.
05:14Investors understand it.
05:16I want to talk about geopolitics.
05:17It is a shifting dynamic at this point in time.
05:21How are you seeing what's happening right now?
05:24Is a decoupling between the U.S. and China eventually inevitable?
05:28I don't think so.
05:29But, listen, as we know, this is our most important competitor economically and militarily.
05:38China's not going anywhere, nor are we, okay?
05:40These two countries, it doesn't matter if it's Donald Trump was president or Joe Biden or Barack Obama, we're going to have to deal with the Chinese.
05:48And, you know, I like to harken back to our founder, Steve Schwarzman, who started the Schwarzman Scholarship in China.
05:54He understood that, you know, 12 years ago when he started the school there, that the importance between these two countries and students and young people understanding the importance.
06:03Do we have some bumps and some disagreements?
06:05Without question.
06:06But the reality is that is a very important market.
06:09We're a very important market for them, likewise.
06:11And we're going to have to deal with each other in an effective and constructive way.
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