tv Maria Bartiromos Wall Street FOX Business September 21, 2019 9:00am-9:30am EDT
i'm jamie colby for "strange inheritance." and remember, you can't take it with you. ♪ here on monday. ♪ many. ♪ >> from our nation's capital, this is the special edition of maria bought romo's -- bartiromo's "wall street." maria: happy weekend. welcome to the program that analyzes the week that was and helps position you for the week ahead. i'm maria bartiromo. thanks for joining us. coming up in just a few moments, blackstone founder chairman and ceo steven schwartzman is our special guest this week. but first, i sat down for a first on fox interview with vice president mike pence and asked him about the economy and the federal reserve's decision wednesday to lower interest rates by a quarter point. watch. >> the american economy's booming everywhere you look. jobs are up, confidence is up. more than six million jobs created, and it's all a result
of the leadership that president trump has brought to this economy over the last two and a half years. maria: so if the economy is booming, why do we need a bigger cut than a quarter point? >> well, i think, i think we certainly welcomed a 25 basis points cut, but what the president's been calling for is a level playing field with our trading partners and competitors. maria: and markets are very close to record highs on the heels of the cut in interest rates this week. i also had a chance this week to get the chairman and ceo and founder of the blackstone group, steven schwartzman's, take on interest rates in this exclusive sit-down. >> what that's telling us, that the global economy is slowing down. and central banks are trying to get in the way of that and stop the rate of decrease. maria: yeah, but is it going to work, steve in i mean, a lot of people feel like what is a quarter point going to do, and can monetary policy do anything more significant at this point? >> well, i think it depends what
part in the world. when you get interest rates so low, at a certain point they really don't have an effect. maria: exactly. >> in other words, if you look at europe, i don't know the exact statistic, i think it's about a third of the countries have negative rates. i don't want even understand what negative rates -- i don't with even understand what negative rates are. why would i pay somebody -- maria: to hold your money. >> i could just hold it. [laughter] you know, most of those countries that are doing that aren't experiencing any significant growth at all. so i think when you go below a certain absolute level, my own view, it just really stops being effective because, because savers don't get much in the way of rates, and the real problem is that financial institutions need some kind of yield curve so that they can earn money. if financial institutions don't
really earn a lot of money, they're not as healthy, they can't expand given the capital constraints on them. and if they can't expand, they can't lend you money. they can't lend somebody money whether it's a company or consumers. and without credit extension that's pretty robust, countries don't grow. and so i think we've gotten ourselves into a bit of a, bit of a global trap. and the way out of this isn't continuing to lower rates, although you get a little shot in the arm. it's like going for a vitamin shot to a doctor, and you feel good evidently. i've never had one, but, you know, for a little bit. and then it stops working. so you're going to end up needing, you know, fiscal stimulus. i don't know that qe works in any material way. maria: no. i think in europe you're talking about the need for fiscal stimulus like labor reform and, you know, things that are
structural, not monetary. >> right. well, one is, in effect, simply running deficits. and the second is to have reform of your system. which is hard to do, but you're going to need that. maria: and and can the u.s. not be a part of this sharp slowdown we're seeing across the world? i remember when we were talking about decoupling, i know you do too, it's in your new book, but what's your take there? is the u.s. headed for a recession? >> i don't think so. the u.s. has roughly 70%, maybe 72% in a consumer economy. we've got roughly around 11% manufacturing. manufacturing's going down, there's no doubt about that. it's quite soft. but the consumer has the advantage of full employment the way we measure it. and so now we're getting
compensation for workers that are going up faster than inflation. and that's a good thing for workers. maria: yeah. >> and so typically when they get money, they mostly spend it. so that is a pretty virtues circle -- virtuous circle. so as long as that's going on, you won't have a recession. it depends upon what can shake the confidence of workers and consumers to spend. and usually those are geopolitical types of events that scare people. maria: does it bother you that cap-ex was down in the last reading, this stalemate with china, cap-ex is down. managers are sitting on cash again. does that bother you? >> well, that would make sense if manufacturing is down. so that doesn't surprise me.
maria: okay. >> and these things happen when you go into that cycle of decreased manufacturing. that's global. but the u.s. consumer strength is domestic. we own that, and that's a good thing. that's our buffer today against a recession. maria: stay with us, much more of my one-on-one with blackstone ceo steven schwartzman when we come back. ♪ ♪ [ applause ] thank you.
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they're at the vice minister level. and the reason they're important is they're coming over to basically tell us what they have in mind. it's really important as the senior negotiators, you know, bob lighthizer, who's the trade representative and steve mnuchin, who's the treasury secretary, to have a grounding to know what's coming at them, to know what china's prepared to do. so the job of the meetings on friday with the vice minister level people and u.s. people on the other side is to communicate what china's willing to put on the table. you would think that would happen at the big meeting coming up, but that big meeting should be to resolve points. you have to know what you've already got in your own pocket, and i think that's what the vice ministers are coming over. so that sets the table.
maria: what would be victory, in your opinion? because i think they reneged the last time, back in april, because they didn't like the enforcement action and the enforcement mechanism in place whereas if we were to see chinese companies continue to steal intellectual property, there would be some kind of enforcement mechanism place. was that it or what do you think a good deal would look like? is it just china buying more stuff, or does it have to include some of those big ticket items like intellectual property theft? >> i think just buying stuff doesn't get you, you know, sort of what the objective of the exercise is. this started out, trade issues, because china for 40 years has been the most rapidly growing company in world history, and they've done an amazing thing. their income per capita was well below $1,000, and now it's $10,000. and so they've developed a system to do that, and that
system has very, has been very successful. the problem for them now is that the developed world has had a bad time over the last 10-15 years, and our bottom 40% of people -- and it's not just in the united states, it's in europe as well -- feels disenfranchised. they're struggling financially. they have not had a good situation. they're angry and they should be. and that anger is, it's communicated politically. and so now there are different proposals within the united states, but nothing's working. and so there's the anger going towards china. and china knows that. and so the question for them is can they keep their system exactly the way it is, which is a winner, and what our government's looking for is much
more equivalency. so, for example, the tariff plus taxes before these current tariff wars, it cost a u.s. company three times as much to bring goods into china as for a chinese company to bring it into the united states. so that's really sort of unfair. there's no one who would think the it wasn't unfair. their markets have been closed relative to what we with allow them to do -- maria: right. market access is key, right? >> so all our government's trying to do is say, hey, can't we get closer so the best product wins? the cheapest product wins? you could win a bunch, that's okay. we'll have a chance to win a bunch. but now it's so uneven, it's not fair. and so the chinese recognize this, they know they're going to have to change. the question is the rate of change and how much change at one time. so what we would like is for
them to be completely compliant with sort of the developed world's standards. what they are saying is we'll get there eventually, but we don't want to do it right away. [laughter] and there are many different pieces that go with that. enforcement is an important thing, as you mentioned. why? because people agree to something, but if they never do them, what do you do? and so the reason why china pulled out of those talks is that was one of numerous issues that they didn't like. they didn't like it at the last minute, which was quite surprising to the americans. so the advantage of the vice minister is that they're going to tell us what from the old agreement, you know, still holds -- maria: i see. >> -- and it's not going to be just we'll buy some more stuff. and if that's all it is, that doesn't, that doesn't really accomplish the rebalancing.
maria: coming up next, schwartzman identifies where the big bubbles are in the market today. more of my one-on-one next. ♪ ♪ ♪ ♪ award winning interface. ♪ ♪ award winning design. ♪ ♪ award winning engine. ♪ ♪ the volvo xc90. our most awarded luxury suv. ♪ ♪ ever since you brought me home, that day. i've been plotting to destroy you. sizing you up... calculating your every move.
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♪ ♪ maria: with welcome back. stephen schwartzman is our special guest this weekend. he's out with a new book called "what it takes." it details his career from i growing up in a philadelphia suburb to building blackstone into the world's largest private equity firm. he also identifies where the bubbles are in the market today. >> pete and i did a lot of business together, and what we were trying to do was, you know, start the best parts of lehman brothers in a way without
people. and i've always liked doing big things with few people. and, you know, that's a very profitable kind of model. i had no idea that, you know, the firm would grow to this scale. i always wanted it to be really successful, but, you know, part of life is you go where the river's taking you, you know? it's hard to swim upstream x this is a powerful river. and we had a excellent strategy to start an advisory -- this was 1985 strategy, we never changed it, ironically. maria: interesting. >> start advisory, we did that until a few years ago. we pun that off, it's now called pjt. then the second piece was go into the buyout business which we started raising money for in 1986. and the third part of the strategy was to go into new business areas where they were very depressed in terms of
values where we thought there was a huge upside, where even i couldn't mess it up as a manager if we could attract somebody to run that as a ten out of ten in terms of talent. and that business itself would generate intellectual capital that would make the rest of the things we do stronger. and we've executed that strategy. the other people in our industry for the most part were just doing leveraged buyouts, which is a great business. and a lot of them did it very well, and they didn't quite understand why we were like these restless people doing all these other things. and the reason we did them, the reason we had this strategy is that in finance there are no patents, there is no protection. anything that we invent somebody else could do the next day. maria: wow. >> so it's a business of invention and innovation. you always have to have new things you're doing. so when we set up, besides doing
what we were doing, we always had, like, radar out there. what's happening, what could with we go into, is and we went into real estate in 1991. now we're the biggest owners of real estate in the world. maria: by the way, you recently went into a c corp., you changed the structure of the firm. >> yes. maria: is the stock still underowned, or do you think it's catching up? one of the reasons you did this was because you wanted to make sure individual investors, pensions can all buy blackstone stock. >> we had handicapped ourselves. i give myself a d. we had a great corporate structure, you know, which minimized tax by passing it through to investors. but we found out that only about one-third of investors could buy us compared to buying all these other things. so we whittled away two-thirds of the demand for our shares. so when we converted to be a regular corporation even though
we pay a little bit more tax, that, all of a sudden that two-thirds is looking at us, and, you know, they're not sellers of it because they don't own it. they're only buyers. and so the stock's got a really great lift. maria: do you see any negative signals right now in terms of where we are? >> well, sometimes people ask me about bubbles because i once said bubbles are easy to see, and somebody else said they weren't. and, you know, we can sort of see things better than most because we have so many different businesses and so many different areas. right now one of the signs which was there to be seen probably six months to a year ago are some of the valuations on private tech companies. and, you know, whenever companies don't make money or have no prospect of making money, that's usually a sign that perhaps this is not so good. and people explain why the
models have changed, and amazon basically proved that, right? maria: that's true. >> the most astonishing company -- maria: and google. well, amazon, for sure. right. >> right. amazon, for sure, their model. so everybody looks at that and says i want to be one of those. if i can go in instead of books and then instead of retail, i can dominate that, you know? i'll be amazon jr. and so people willing to pay enormous amounts of money in terms of valuations. you look at some of these valuations just as, you know, like a nontech pensioner but i know something about -- person, but i know something about that, a little of this is you just keep passing the thing around, and everybody thinks it's worth astonishing amounts more, and everybody's happy because what they put in before becomes worth more until there's nobody to validate it anymore. maria: so does the private market today worry you? >> i think the private market for a number of these tech
companies is demonstrably high. so you hook at things like uber -- you look at things like uber, you know, you look at a company like we works, you know, which is -- i don't know the company the way some people do, but the absolute value that people were talking about given what the company actually does, you know, sort of really surprised me. it's just sort of like an uber valuation would surprise me. and, you know, i'm not entirely inexperienced on these things, right? [laughter] so the fact that sort of we works just sort of collapses when it meets a broader investment set than the people who are playing that other game -- maria: yeah. >> -- of bidding something up because there's something attractive about the company. obviously, that's why it happens. maria: right. >> so that's an area where you
can see clearly that valuations are in a position of excess. maria: my thanks to stephen schwartzman, founder e of the blackstone group. don't go anywhere, more "wall street" right after this. ♪ we trust usaa more than any other company out there. they give us excellent customer service, every time. our 18 year old was in an accident. usaa took care of her car rental, and getting her car towed. all i had to take care of was making sure that my daughter was ok. if i met another veteran, and they were with another insurance company, i would tell them, you need to join usaa because they have better rates, and better service. we're the gomez family... we're the rivera family... we're the kirby family, and we are usaa members for life. get your auto insurance quote today.
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what might seem like a small cough can be a big bad problem for your grandchildren. babies too young to be vaccinated against whooping cough are the most at risk for severe illness. help prevent this! talk to your doctor or pharmacist today about getting vaccinated against whooping cough. maria: welcome back. coming up next weekend right here on the program, join me for the founder of papa john's pizza, the former chairman and ceo, john. >> nodder, is my special guest right here. also this weekend, sunday morning futures on the fox news channel, senate judiciary chairman lindsey graham and california congressman, devin nuñes, my special guests this
weekend. catch the show live at 10 a.m. eastern on sunday. also this sunday, a special program on fox news, please tune into my one-hour special artificial intelligence: the coming revolution. catch the special at 8 p.m. eastern sunday night. here's a preview. >> routine white collar jobs like customer service, telemarketing and loan officers and tellers and jobs like that will be the first to be challenged. then repetitive blue collar jobs like dishwasher, assembly line workers and a little bit later drivers also will be challenged. maria: lee says in the next 15 years 40% of jobs will be displaced by machines. he believes any job which relies on data is vulnerable. things like mortgage brokers value waiting your eligibility or radiologists reading a mammogram. meanwhile, start smart every weekday on fox business from 6-9
a.m. eastern, "mornings with maria" right here on fox business v. a great rest of the weekend, everybody. that'll do it for us now. i'll see you again next time. ♪ ♪ gerry: hello and welcome to "wall street journal at large." this week we're going to be taking a deeper look at how technology is revolutionizing health care. in the last few years major advances have been made in diagnosing if treating disease. vast amounts of money are being raised in silicon valley and elsewhere to finance companies developing innovative means to make radical improvements in our health. later in the program i'll be talking to head of one start-up that's finding ways to bring the best treatment directly to us. but first, one of the most promising areas of medical ch