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U.S. Can Expect Recession in 1-3 Years

Economics / Recession 2016 Oct 09, 2015 - 02:52 PM GMT

By: Bloomberg

Economics

David Rubenstein, co-founder and co-CEO at The Carlyle Group, joined hosts Stephanie Ruhle and David Westin on Bloomberg TV's new flagship morning program, Bloomberg <GO>. Rubenstein discussed his call for one or two percent U.S. growth in the next year and explains why the country can expect a recession within the next three years. He also spoke about a transformation taking place in China and unrealistic expectations for 10 percent growth in the nation's economy.

Rubenstein told Bloomberg TV that a U.S. recession is "inevitable." He said "We have not really had a recession in six years.  We came out of the last recession in June of 2009. We tend to have recessions every seven years, more or less in the United States, since World War II.  So at some point in the next year or two or three, you can expect a recession."


On the outlook for this year, Rubenstein said: "I do not think we're likely to grow at more than 2 percent or so in the United States this year. Europe will be about 1 percent.  China is slowing down to probably really 6 percent."

Bloomberg <GO> airs weekdays from 7-10am ET on Bloomberg Television and is also available for free on livestream: http://www.bloomberg.com/live.

**CREDIT: Bloomberg <GO> with Stephanie Ruhle and David Westin**

DAVID WESTINLet's come back to David Rubenstein. Everyone knows you as a cofounder and co-CEO of Carlisle.  A couple of things they may not be aware are No. 1, you are a recovering lawyer.  You actually started out as a lawyer -

STEPHANIE RUHLE: So are you.

WESTIN: Yeah. I'm trying to recover. And the second thing is, you are a real history buff and you own four - count them -- four copies of the Declaration of Independence, a copy of the Magna Carta, and two copies of the Emancipation Proclamation.  Isn't that amazing?

RUHLE: Have you seem "Hamilton" yet?

DAVID RUBENSTEIN: I have seen it and I've read the book on which it was based. It's a great play. Great book.

WESTIN: Great book. Great play. Exactly. So you've heard from Matt, we woke up this morning to hearing it's a $2.5 trillion rally in equity markets.  Oil is up and things. All good news.  So let me try to go to the dark side. 

RUBENSTEIN: OK.

WESTIN: As you look around the world, David, what are you most concerned about.? What are the weak points, do you think, as you look out?

RUBENSTEIN: Well I think you have to put it in context. We have not really had a recession in six years.  We came out of the last recession in June of 2009. We tend to have recessions every seven years, more or less in the United States, since World War II.  So at some point in the next year or two or three, you can expect a recession. 

I do not think we are here now.  I don't think there's any indication of it. But you do expect some slowdown after pretty good growth we've had the last couple of years.  I do not think we're likely to grow at more than 2 percent or so in the United States this year.  Europe will be about 1 percent.  China is slowing down to probably really 6 percent.  So there has been some slowdown. But I do not think we are going into the precipice where it will be a recession.  I just think it will be modest growth for a while.

RUHLE: And generally speaking, are you a buyer or a seller right now?

RUBENSTEIN: Well, we are always a buyer and a seller in our business. But it's been very difficult to buy things the last couple years around the world in our business because prices have been relatively high.  The average cash flow multiple in which buyouts have been done in the United States have been almost 10 times the last couple of years.  Now it is going down a little bit.  So I think it's going to be better to buy things the next year or so than it has been and it will be a little bit tougher to sell things at the prices you want to get.

WESTIN: But if - recession or the possibility likelihood of a recession in the next few years is a concern. Are you also concerned about what tools or weapons central banks, governments have to address that?

RUBENSTEIN: Right. Well I do not want to say that I am predicting recession, I am just saying it's inevitable.

WESTIN: No, no. I was just --

RUBENSTEIN: At some point there would be one. I'd say that the Federal Reserve doesn't have the tool available to it that is normally has. Normally if you worry about a recession you lower interest rates.  Now you cannot lower them any longer.

RUHLE: They put themselves in this position, though.

RUBENSTEIN: Well, I don't think they anticipated this -- I think they'd like to get out of this and every time they say they're going to increase interest rates, something comes along that makes it difficult to do that.

I think the Federal Reserve really wanted to increase interest rates this year, but the recent employment numbers made it more difficult for that to happen I think.

RUHLE: But then should they have done it already? I mean the Fed has always been data dependent, but it is just a  matter of acting, getting gutsy and say I'm going to go for it. So did the window close? Should they have acted?  Because there were many moments where it seemed like, really?  You're concerned whether - I mean, it seemed like every other thing, well, we are going to wait because of this, wait because of that.  At some point you just have to step in. 

RUBENSTEIN: Well, I do not want to second-guess the Fed.  I would say maybe you should be a member of the Fed.

RUHLE: No, no, no, no --

RUBENSTEIN: But I'd say it's very difficult when you get all the data to really figure out exactly what's going on in the economy. Maybe they have too much date in some respects. But generally, I think the Fed has done a pretty good job.  And I know you had Ben Bernanke on this week, and I would recommend highly his book, which I've now read - His book and what he did when he was at the Fed are really spectacular. I think Ben really helped save the U.S. economy that time along with others that were involved with it, and I think Janet Yellen has done a pretty good job in a difficult situation.

WESTIN: Yeah and as you say, Ben has a terrific book out.  But one of the things I think I took away from the book was there is a limit to what monetary policy can do.

RUBENSTEIN: That's correct.

WESTIN: And given the situation where in this country, and largely around the world with central banks and the interest rate levels, at some point you have to look at fiscal policy, don't you?  And we also had Larry Summers on who said there should be a lot of investment in infrastructure, for example.

RUBENSTEIN: Yes. Larry has been talking about, you know, secular stagnation. I think he has made a big impact with that concept. Fiscal policy has been very difficult the last five years or so because Congress has been unable to move very far on anything.  So the Federal Reserve has done a very good job of being the catalyst for the economy because Congress was willing to do virtually nothing.  So all we're really doing is passing debt limit extensions and keeping the government alive. Real comprehensive tax reform legislation or real fiscal policy is not likely to come out of this Congress.

WESTIN: Would you advocate comprehensive tax - if it could be done?

RUBENSTEIN: Well, I think it would be terrific. We last had it in 1986 so we're do for a comprehensive tax reform. Nobody in our country likes the tax system we have or the tax code. It's ridiculous. It's incomprehensible. Comprehensive tax reform takes a president who really wants to do it, a Congress that's functional and about two years to get it done. I think it's not going to happen right now.

WESTIN: If there were comprehensive tax reform, and I know you do not want to have a negotiation right now, but would you be supportive of even reforming the carried interest route - if it was part of a comprehensive package?

RUBENSTEIN: I would be in favor of putting everything on the table. The best thing you can do it put everything on the table and figure out what makes the most sense for the American people.  So I just think you shouldn't pick one thing at a time.  But comprehensive tax reform with everything being on the table is the best policy.

RUHLE: Well let's pick one market at a time. When you look at the credit markets and how we've seen credit back up so much in the last few weeks -- Is this making you rethink what you think the future of the LBO market is going to be like?

RUBENSTEIN: Well people have been predicting the demise of the LBO market for ten years, twenty years, thirty years and so far. Clearly LBOs do a very good job in making companies more efficient.  There is credit out there.  I don't really think it's going to be difficult to get credit for good deals.  So I'm not that worried about it. Interest rates may go up a little bit but I do not think that is a big problem.  Remember, the people lending money to us are not just traditional banks, they are sources all over the world and they could be hedge funds or other kinds of providers of liquidity. So I am not that worried about it.

RUHLE: Do you want to stay in the hedge fund space? When you look at credit hedge funds, you've got Claren Road. Not being able to have long-term investments like you are used to is a very different climate.

RUBENSTEIN: Well our firm has many different products that we do long-term investments as we do them buyouts, we have some hedge funds. We are very  comfortable with what we have, and I do think hedge funds do play a very important role in our society by giving liquidity to kinds of investments that we need.

WESTIN: Are you concerned at all about Dodd-Frank and the (INAUDIBLE) which it doesn't regulate things like hedge funds? I mean, it's really come down to the banks in a long way, but as you say, there's alternative to traditional banks that are providing liquidity.

RUBENSTEIN: That's correct. I do not want to say that Dodd-Frank was too loose and should have done more - I'm not going to say that. I do think they looked at many different things and thought the most important things were the banks and whether they overreacted, I will not say right now. Maybe in some areas they did. But right now I do not think there is a gigantic regulatory problem in hedge funds and private equity.  I think the market is regulating quite well.

WESTIN: And when you -- interest rates go up. Does that actually help you because the prices come down?  The things you might like to buy.

RUBENSTEIN: Well - yes. When interest rates go up, prices go down so it makes it easier for us to buy things because the prices are going to - the interest rates are going to be relatively modestly higher, it's not going to make it difficult to finance things.  And also if prices go up for interest that we have -- money we have to borrow, we just would lower the price of things we pay and sellers will lower their expectations. So  I am not that worried about it. 

RUHLE: How about your share price?  Do you think about  your shareholders and how you should have your company, for example, structured?  Before you went public, you just had to focus on you and your partners and your investments.  You are in a different situation now.

RUBENSTEIN: Yes. When we went public we now have a different set of investors who worry about people who buy our stock and we are not happy with our stock price. Nobody is happy when their stock price goes down.  Ours has been down, but we do have a very solid company. We know what we're doing.  We do think we'd make -- we're earning a fair amount of money. I don't think the market quite recognizes it, but I think we will be telling people about how cheap our stock is and eventually I think the market will figure it out.

RUHLE: Does it make you want to change course in any way?

RUBENSTEIN: I'm always trying to make the company better with my partners than it is, but I do not want to do anything dramatic that will take us out of the public markets or something like that.

RUHLE: All right. We got to take a commercial break. We will have more with David Rubenstein with a look at how stricter bank rules are affecting private equity.  Maybe we're going to get him to do a little rap for us as well because David was not here last year during David's - it was your holiday video.

RUBENSTEIN: Oh, you rap? I didn't know you rapped, David.

RUHLE: Listen  -- Beats by Dre had an effect on this guy and on society really.

Plus, what are your questions for Carlisle co-CEO? Get in touch with us via Twitter. Send us a Bloomberg. Participate with us. Stay with us.

(BREAK)

RUHLE: We are back with Carlisle co-CEO, David Rubenstein.  He may or may not have seen it. I'm guessing you have. Hillary Clinton wrote in a recent "Bloomberg View" op-ed, "My plan would also give regulators the authority they need to reorganize, downsize, or even break apart any financial institution that is too large and risky to be managed effectively."

David, we kind of got into the weeds yesterday as we tried to understand Hillary's new planter she was getting into. High-frequency trading, again, to - in her words - "double down on Dodd-Frank." Are you that concerned or do you have a view on her plan here or do you think this is just politics?  Because doesn't everybody love to take a swipe at Wall Street? 

RUBENSTEIN: It is easy to take a swipe at Wall Street.  I think it is very difficult to run for president and not take a swipe at Wall Street.  I've been in two presidential campaigns and so I know what this is about. The devil is always in t he details in these kinds of regulations. So when you have Dodd-Frank -- that was a very complicated piece of legislation that you cannot just summarize in one sentence or so.  I think it did a reasonably good job for certain purposes, in some cases might have overreacted. But I think that if you are running for president, you're likely to say something negative about Wall Street, so the devil's in the details and we have to see much more detail before we know exactly what she means.

RUHLE: Is that going to be the second chapter of the Donald Trump?  He has had huge success already because people love his claims, his shouting, his jabs, but once we get into the details, is there really going to be much there, in your opinion? 

RUBENSTEIN: Well, I don't want to say that Donald doesn't know exactly what he's talking about, we just have to look at the details. But for example when people talk about tax legislation, presidents no longer even send tax bills to Congress.  Congress writes the tax bills.  The president might say here are some ideas, but we know that the Ways and Means Committee really decides what tax legislation is going to be and Senate Finance Committee and presidential candidates or presidents really have modest impact on tax legislation, in my view. So we really haven't had major tax legislation for a long time. I think it will be a couple of years before we have it, but it's really going to be written in Congress and not probably at the White House.

WESTIN: So you - David, you've been in Washington for a long time. You worked in Jimmy Carter's administration. 

RUBENSTEIN: That's right.

WESTIN: So you have been an observer.  As somebody who is involved in business and in markets and in investing, how much do you want Washington to do, and how much do you want them to stay out of the way?  I mean, what do you really want out of them and what do you -- just as soon to have them not do? 

RUBENSTEIN: Of course, it is expected that most business people would say government leave me alone, but the true is you need to have regulation.  That is what government is about, to make sure you do certain things and appropriately.  The government had to do certain things for society. I just think government should not overregulate.  Obviously nobody wants overregulation. I think right now the Congress of the United States is not probably as functional as we would like. I think business --

RUHLE: That is an understatement.

RUBENSTEIN: Yeah. Well the business community would like certainty. Just tell us what the rules are and we'll try to comply with them and will comply with them. Right now it's unclear what the Congress of the United States really wants to do. Does tell us what the rules are and we will try to comply with them and we will comply with them.  Right now it is unclear what the Congress of the United States wants to do to help the economy.  And I think it would be better if we had more effective Congress.

WESTIN: Well even this morning, we faced John Boehner having stepping down and then Mr. McCarthy has just said he does not want to leave the House. So what could be done?  What is really broken about Congress? And from your point of view - practically what would fix the problem?

RUBENSTEIN: Well it's a very long answer. Obviously people spend too much time raising money for reelection. I that -- money is probably too influential in Congress. Two people are too worried about getting reelected even though they're coming here to really serve the country that sometimes they worry about reelection more than maybe they should, but it is a complicated issue that we're not going to solve this morning.  I do think that it would be good for the country if someone would emerge as the Republican leader very soon who is well respected, and give this country the sense that, yes, Congress knows what it is doing.

RUHLE: Is there someone who you believe that could be - or who you would like to take that position?

RUBENSTEIN: Well it's -- Clearly Republican leaders are trying to convince Paul Ryan to do it. I think he'd be a very good person to do it. He clearly has the credibility and the intelligence to do it and the experience. So I think he would be a good leader.  I gather he is reconsidering his position and that would be probably a helpful thing if he were to take that position.

RUHLE: All right. Let's stand the globe. You mentioned earlier briefly what you thought growth would look like here and in Europe. Let's take a much look in China.  Just this time last year, people were so bulled up just talking about the size of the consumer there, what could be done.  Now we're looking at a very different picture. How do you really see things there?

RUBENSTEIN:  Remember, China grew for 10 percent on average for 30 years in a row.  No economy in the history of the world has ever done that.  It now has an economy -- it's roughly $11 trillion economy.

When Richard Nixon went to China in 1972, that economy was at about $110 billion.  So it's dramatic on how big it's become.  Now it is the second biggest economy in the world. 

It is unrealistic to think it can grow at 10 percent per year any longer on a consistent basis.  Probably it's going to grow at 6.5 percent to 7 percent this year.  That's still terrific.  If the U.S. could do that we would love it but for China that is modest. 

I think China is going through a transformation and it will take some time for that transformation to be felt.

RUHLE:  You sat at the big table, at the state dinner two weeks ago.  President Xi and President Obama, that is a hot seat.

What were your takeaways that night?

RUBENSTEIN:  It was an honor to be there.  Like most people you say, how did I get invited?  And when you look around, you see all these prominent people invited, it is a very good thing.  My wife and I enjoyed being there. 

The president was very happy the at way the dinner had gone and the way the meetings with the Chinese leader had gone, so it was an impressive group of people, I think.

RUHLE:  What did you talk about? 

RUBENSTEIN:  I talked about the relationship between the U.S. and China, how they could be improved.  I talked with some of the Chinese guests that I'd known before.  But there were a lot of Americans at the table that I talked about other matters with.

RUHLE:  But was there a wow?  On the car ride home, did you say, I cannot believe X? 

RUBENSTEIN:  Well, whenever you get invited to a state dinner, you say how did I get invited?  And --

RUHLE:  I think I know how you got invited.

RUBENSTEIN:  Well, I'm not sure.  But I was honored to be there.  It was fun.

Steve Schwarzman, one of your earlier guests, was at the dinner as well.  So we had some private equity representation.  That's very important for the country.

WESTIN:  So going back to China and your investment in China, your commitment to China, there is one, it strikes me, very important thing that is different about China.  I don't think we've ever had an economy close to this large, this centrally controlled.

And the Soviet Union was --

(CROSSTALK)

WESTIN:  And as we have watched over the last few months, their willingness, for example, to intervene in the equity markets, something that even in the worst of the days in 2008 we did not have the government (INAUDIBLE) -- does that give you concern or does that increase a risk premium as you go into China?  Because you're not sure what the central government just might do?

RUBENSTEIN:  Well, the central government there is really controlled by the president.  And typically the premier controls the economy.  But in this administration, the president really controlling the economy, it appears.  It is obviously an economy that moves quickly when it wants to because of central control. 

Sometimes you wish in our country we could move more quickly when we want to get things done.  So there's --

(CROSSTALK)

RUHLE:  Assuming we trust the government.

(CROSSTALK)

RUBENSTEIN:  I think the Chinese realize that trying to prop up an equity market doesn’t work and I think they've pulled back from that because in the history of finance, there's never been a case where a government's intervened in the equity markets and really consistently --

(CROSSTALK)

WESTIN:  So you think the Chinese realized they made a mistake in intervening -- ? 

RUBENSTEIN:  I do think they do feel that way.  I do think they won't be doing that again.  That's my guess and my sense from talking to them.

WESTIN:  Well, that's interesting.

RUHLE:  You mentioned Steve Schwarzman.  So since you opened the door, I am going to step in.  He said earlier that he actually believes the Chinese economy is better than has been represented.  They own loads of shopping malls there.  He says the Chinese consumers are out there shopping.  These aren't so bad.  What do you think of the economy though?

RUBENSTEIN:  Well, the economy is good if you compare it to our economy in the sense that we are growing at 2 percent and they are growing at probably 6 percent or 6.5 percent.  We would love to have that kind of growth.  They are just --

(CROSSTALK)

RUBENSTEIN:  -- are higher.  They're also transforming their economy into a consumer-oriented economy.  That transformation takes some time.

They also have an anticorruption effort going on.  And I think that is probably dampening the economy a bit because people are afraid to spend money because they don’t want to be seen as having money that maybe they shouldn't have had.  So that is slowing the economy down a little bit, in my view.

WESTIN:  To continue the tour around the world for a moment,  even though they are growing at 6-6.5 percent, something like that, it is still less than what it was.  And someone has to take up the slack.

Talk about India.  Because there is a lot of talk about India maybe coming on.

RUBENSTEIN:  In 2001, the phrase "BRIC" was invented or devised.  It meant Brazil, Russia, India and China.  And for many years after that, China was the darling of those four countries.

Now it seems to be India.  While India is a much smaller economy than China, it's probably going to grow this year at a greater rate than China.  It might grow at 7-7.5 percent.  Prime Minister Modi has done a spectacular job of convincing business people around the world that now India is a place in which to invest.  And more and more business people around the world are going to India, investing there.  And we are increasing our investments there as well.

RUHLE:  Look to Russia.  We have spoken to many investors, who have said they simply do not want to be in places where they do not understand or trust the rule of law. 

What is your take? 

RUBENSTEIN:  We were in Russia twice and we pulled out twice.  We just did not think there was the opportunity for Western investors of our type to really get a fair deal or find the best deals.  The best deals were probably going to the oligarchs, so we pulled out and we have no intention of going back.

WESTIN:  Well, continue the BRIC.  Brazil is struggling badly.  Are there opportunities there, do you think, at this point?

RUBENSTEIN:  Well, the price's very low because the real against the dollar is really depreciated by about 40 percent so we have made big investments there recently and we think the bottoms have probably been hit.  You never know exactly when the bottom is.  But we are still fairly bullish on the long-term prospects for Brazil.

RUHLE:  I realize you can't have a favorite child.  But is there a region or an investment or a project right now that you are most excited about? 

RUBENSTEIN:  Well, I think the United States is still the best place in which to invest.  And I do think that buyouts are still an pretty attractive way to make money on a consistent basis for people.  So I am pretty attracted to the buyouts that we've been doing lately in the United States.

RUHLE:  Has it become harder for you because there are more and more people investing, your style, where five or six years ago you were not the only game in town but it was a lot less crowded? 

RUBENSTEIN:  In 1980, there were only 200 private equity firms in the entire world.  Today there are 5,500.  So I wish we were -- had 200 and it would be easier.  But you have to recognize competition is what it is. 

Yes, there is a lot of competition out there but still there are pretty good opportunities for people who know what they are doing.

RUHLE:  You have been doing this for many years. 

Do you still love it or are you ready for the next chapter?  

If so, what do you think it will be? 

RUBENSTEIN:  I love what I am doing.  When you love what you are doing, you do not want to change.  There's no doubt that, given the way the world works, when you're now 66 years old, probably I will not be doing this for another 30 years or so.  But I do look up to people like Warren Buffett. 

WESTIN:  I was going to say, Warren Buffett has a different --

(CROSSTALK)

RUBENSTEIN:  Warren Buffett is 85.  He's still going strong.

(MUSIC PLAYING)

RUHLE:  Or you could say look at this gridlock in Washington; it is time to get into politics, I don't know, again. 

David, please stay with us.  We're government more to cover.

(BREAK)

WESTIN:  Welcome back to BLOOMBERG GO.  We are still joined by CEO David Rubenstein and we also have joining us Tom Keene.

(CROSSTALK)

TOM KEENE, BLOOMBERG NEWS HOST:  What's cool about David Rubenstein is he sneaks up on you.  He has major commitments to American history into the fabric of our society.  So I am at the Ford Theater, very emotional always to go, to see where the 16th president was assassinated.  And they carried his body across the street and they performed a modern miracle, at that deeply emotional house across 10th Street or whatever it is in Washington.

And David and others have invested in explaining to children why it is important.  It's a -- you go up the spiral staircase there.  It's really something. 

How did that come about? 

RUBENSTEIN:  Remember, when our country was formed, there was an idea by Pierre L'Enfant (ph), who was the original designer, that we would have a national theater in Washington for performing arts.  But we ran out of money. 

So ultimately entrepreneurs would begin to build theaters there.  The most famous entrepreneur who did that was Mr. Ford.  And he took a church and converted it into a theater. 

And Lincoln, that very night, had not planned to really go at one point and then decided to go.  He was supposed to go with Ulysses S Grant and his wife.  They decided not to go.  So he went with one of his aides. 

And he went there because although he was feeling ill that day and was not really wanting to go, he had been advertised as going.  He did not want to disappoint people.  So he went there; obviously the assassination occurred.  He could not, in modern technology, with modern technology, would not have been saved. 

A bullet went right into the back of his head and it's unlikely anybody could have saved him.

WESTIN:  But I hear, Tom, it's remarkable experience to be there, because it's a fairly small and intimate theater when you're sitting there -- they have preserved the box. 

RUBENSTEIN:  They have.

WESTIN:  A photo of Abraham Lincoln up there with bunting.  And it's a very powerful thing.  You realize how close it was to the stage.

KEENE:  I urge everyone to go over and see the commitment the business leaders made across the street.  It's (INAUDIBLE). 

But the money question is -- and this is fascinating.  I've never thought of this.

When Abraham Lincoln and Jefferson Davis shared the Nobel Peace Prize back then? 

RUBENSTEIN:  Would they have?  I --

(CROSSTALK)

KEENE:  It is interesting to ask in 1864 or 1865. 

RUBENSTEIN:  But peace didn't get -- you mean, if they had done a deal?

KEENE:  No, but it was so twisted, then you wonder --

(CROSSTALK)

RUHLE:  But wait.  There is another money question.  Think about the philanthropic commitment you have made, not just here but around the country, specifically to D.C.  In the break we were talking the zoo and the pandas. 

Other business leaders in other cities -- and earlier in the show you said, well, it is easy for politicians to take a swipe at Wall Street, the financial industry. 

Does it not frustrate you, given the commitment you have made to this country, to history, that populist opinion remains so anti-your industry? 

RUBENSTEIN:  Well, obviously people want to be loved.  Nobody wants to be hated.  And obviously I would love the private equity industry to be one of the industries where people say to their little children, I hope you grow up to be private equity professional.  But that's --

(CROSSTALK)

RUBENSTEIN:  You can spend your life saying that people should like you more or you can just go ahead and do what you think you should do.  So I am not going to worry about it.  I hope that people will think that people who are in private equity do useful things for society other than doing buyouts.

WESTIN:  So that's -- let's go back to your Nobel Peace Prize.  It took me a moment to figure out where you were going.

KEENE:  I think Abraham Lincoln would have won it. 

WESTIN:  Yes, but (INAUDIBLE) Jefferson Davis --

KEENE:  I don't know; the committee may have done that.

WESTIN:  -- but how come -- why don’t we come forward --

KEENE:  -- this year, it is Merkel, the pope, Merkel, the pope. 

WESTIN:  Yes, but it wasn’t Merkel that got it.

(CROSSTALK)

WESTIN:  -- morning must-read.

KEENE:  My morning must-read is on the wonderful announcement -- this out of Tunisia -- to remind everyone that the Arab Spring really began out of Tunisia. 

And if I can read the quote, "Western analysts and donor agencies may be placing too much weight on civil society as personified by small upstart NGOs or nascent political parties."

They all attend Davos.

"Such groups and disorganized popular movements can apply generalized pressure and help topple governments." 

And, David, the message here is Tunisia was pieced back together by traditional institutions, their national quartet, including the labor unions.  They don't get a credit for a societal coalescence, do they? 

RUBENSTEIN:  They do not.  But Tunisia has some issues, for sure.  I would say that the Nobel Peace Prize is probably the honor that everybody wants to get because everybody is in favor of peace and the Nobel Prize has been around for over 100 years or so.

It's always a surprise who gets it.  The academies in Sweden and in -- really decide who get the various awards.  But it's a special group that decides the Nobel Peace Prize.  It is usually five former members of the legislature in Sweden.  And it's very unpredictable. 

I think virtually nobody who predicted who was going to win the prize today actually got it right.

WESTIN:  But honestly, when I heard this, when the news break broke a couple of hours ago, I was really encouraged because we think about the Arab Spring as having gone hopelessly wrong, after that initial euphoria about how democracy was coming to Northern Africa.  The one standout really is Tunisia.  And we never hear about Tunisia.  We hear about Egypt, we hear about Syria, goodness, as we hear about all the ones that --

(CROSSTALK)

RUHLE:  David, you know, this.  Nobody likes good news.

(CROSSTALK)

WESTIN:  I thought it was good for them.  And it was right.  The labor -- it was also an employer's union, and it was a human rights group and the lawyers.  That was the --

KEENE:  David, do you have investment in Tunisia? 

There is a stereotype in America of chaos.  You know that is not true.

RUBENSTEIN:  After the Arab Spring, we closed down our office in Cairo, which was looking at investments in Northern Africa because it was difficult to find anything that was going to be stable, so we are not looking at that now. 

But I think, have no doubt that if Mr. Nobel were around today and he had a will, he would say there should be a Nobel Prize for private equities.

(LAUGHTER)

(CROSSTALK)

RUHLE:  Wait, one more time.  I want to make sure that did not get lost. 

If he was alive, he would say there should be a prize for private equity.

(CROSSTALK)

RUBENSTEIN:  But obviously, Mr. Nobel, when he gave those awards, it was obviously in his will, people were stunned and obviously his family challenged the will because they did not think that money should go for those purposes.  And the Swedish academies were not convinced they actually had the capability of making these awards.  It actually has worked out quite well.  Now other people want to do similar kinds of awards.

But I think the Nobel Prizes are obviously about the most distinguished thing you can win.

RUHLE:  All right, David, we know what T.K. is reading this morning.  He's got Tunisia on his mind.

Your must-read:  what is it? 

RUBENSTEIN:  Well, I won't say must-read, but I've been reading a few books recently about history.  And this weekend, in one of my capacities -- I am the chairman of the Madison Council, which is the --

RUHLE:  In all your free time?

RUBENSTEIN:  -- which is the support arm for the Library of Congress.  And I'm going to interview a man named Edward Larson (ph) this weekend.  And he wrote a book about George Washington in the period of time between the time that he gave up his generalship and the time he became president.

RUHLE:  I want to just pull out --

(CROSSTALK)

WESTIN:  Pull it back up if we could.

There it comes.

RUHLE:  "About 10 o'clock, I bid adieu to Mt. Vernon, to private life and to domestic felicity and set out for New York."

RUBENSTEIN:  Oh he -- after he left as a general on the --

RUHLE:  George Washington.

RUBENSTEIN:  -- yes.  The most amazing thing is that he's the first general in history that anybody could recall who actually gave up power and didn't try to run a government.  He went back to Mt. Vernon and said leave me alone, I've done what I'm going to do.

And basically this citizen said you're the only person who could President of the United States.  And he gave up living at Mt. Vernon -- which he wanted to do -- and went to New York, which was then the capital.  And he really did not want to do it.  He was happy at Mt. Vernon. 

And the lesson is, when your country calls and you are the only person who really can do something, you really should give that to the country.

WESTIN:  He was elected several times.

RUHLE:  Who is your favorite figure in American -- sorry.

Who's your favorite figure in American history? 

RUBENSTEIN:  Well, there is nobody comparable, in my view, to Abraham Lincoln.  Abraham Lincoln saved the country.  Any other person in that position probably would  have said to the South, "Goodbye."

(BREAK)

RUHLE:  David, we haven't really gotten in to this rake hike.

How important is it to you, David? 

RUBENSTEIN:  Well, to me, personally, I wouldn’t say it's as important as it is to the whole country but I would say if the world's attention has been focused on the fact that the Federal Reserve has been saying for quite some time we are going to increase interest rates and do it before the end of the year and now it looks less likely that will happen. 

And so I think there is uncertainty in the markets.  What the markets really want is certainty.  Just tell us what the rules are, tell us what the game is, tell us what interest rates are going to be. 

Unfortunately, the Federal Reserve is right now probably in a position where they cannot be that definitive for quite some time.

WESTIN:  It is hard for them, having said they're so data dependent to make a change without the data indicating some reason for a change.

RUBENSTEIN:  Well, Stan Fischer at the Jackson Hole meetings made it pretty clear he thought that the Federal Reserve was likely to increase interest rates this year.  Then the unemployment numbers came out and I think it seems less likely.  But people change their minds and things can change.  I do not think whether the Fed increases interest rates by 25 basis points in December or January or March will make that much difference.

But people would just like to know when it's going to happen.

RUHLE:  We have Larry Summers, an academic, to give Janet Yellen a grade.  And he said this point in the semester, he would give her an incomplete because it's too soon to tell.

What would you give her?

(INAUDIBLE).  I don't think he said A but he said, you know, she did very, very well.  Maybe a B+.

WESTIN:  In fairness, Larry said she is doing a really good job but it's just incomplete.

RUBENSTEIN:  I think she's done a very good job.  She was in a difficult situation.  She succeeded a hero, a person who did a terrific job and maybe one of the most transformative Federal Reserve chairmen, it's Ben Bernanke. 

So following in his wake is always very difficult.  I think she has done as good a job as you can in this situation. 

WESTIN:  If you had the same data she had, what would you do? 

(LAUGHTER)

RUHLE:  You know what? 

(CROSSTALK)

RUHLE:  You put me on the Fed earlier.  I am not running for the chair set just yet, just yet.  I'm still in -- but I -- what would I do?

I would raise it.  I think the window was open.  It should have been done.  At this point, the unintended consequence of having rates where they are, we should maybe focus more on that.

But you know what? 

You're the person who knows.  I'm just a girl organizing the party.

David -- yes, sorry.

RUBENSTEIN:  Well, one of my side jobs is I am the president of the Economic Club of Washington.  And we have booked Janet Yellen.  She's coming in December --

RUHLE:  Booked her.  I love it.  He is interviewing someone this weekend, he booked somebody at the Economic Club.  We could use an extra producer here.

RUBENSTEIN:  But she -- for two years or so, I was trying to get her to come and she resisted for a while but she's agreed to come in December so I hope she'll have some news.  Who knows?

WESTIN:  By the way, you've mentioned this a couple times.  But here's a fun fact.

How many boards are you on, David?  Do you know? 

RUBENSTEIN:  I am on -- I know how many I'm on.  I'm on a fair number.

WESTIN:  What would the number be?

RUBENSTEIN:  More than 20 nonprofit boards. 

(CROSSTALK)

WESTIN:  More than 50?

RUBENSTEIN:  Not more than 50, but I'm on more than 20 nonprofit boards.  But I juggle a lot of things and I do a lot of things on weekends and sleep is overrated.

RUHLE:  you know, Arianna huffington, are you hearing that? 

He just said sleep is overrated.  If she were here, she would say, "David, unplug.  You need to unplug."

David, thank you so much.  He's a booker, he's a producer, he's a historian, he's a great American.

David, thank you.  Good luck this weekend, Duke. 

Duke plays Army.

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