Rate and Market Uncertainty

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1:43This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Seema Shaw joins us here, Chief Global Strategist at Principal Asset Management. Seema, I'm looking at U.S. equity markets kind of hitting all-time highs. John Tucker in his reporting says almost every day, it seems like, earnings. It's been an earnings-driven market. What is your view of corporate earnings going forward? Because, boy, the first half of 2026 was just extraordinary.

2:24Yeah, good morning. I think you're absolutely right in that the major theme, which has been driving markets this year, you know, there's been geopolitics, there's been tariffs, there's been so much going on. And, you know, actually, what's driving markets continues to be earnings growth, which makes sense, given the tremendous performance to this point, with Q2 being incredibly strong. Now, from here, you know, the math starts to come in and that it's very unlikely that you're going to see this continued pickup in pace when you're already at these 50 percent or so levels. So we think it's still strong growth ahead.

2:56But the pace, you know, that second derivative starts to show through and you get a slight slowdown. Now, remember, for equities, that doesn't necessarily need to be a hiccup. You know, it doesn't imply pullback by any means. this is still a strong backdrop. But to our minds, I think for the rest of the year, there's a number of challenges and you've got earnings growth starting to slow a bit. And to us, that means slightly more modest gains ahead for the remainder of 26. Let's talk about some of those challenges, Seema, because how much are the midterm elections going to be a hurdle? I don't know if I should call it a hurdle for the stock market.

3:33Yeah, you know, we're clearly getting a lot of questions, certainly since the start of the week about the midterms. Look, historically, midterms, they create a lot of noise, create a lot of volatility within the market. But actually, what they're typically doing is just reinforcing the trend that was underway already with that trend, of course, being really being driven by fundamentals. So we may see volatility, we may see noise, we may see some headlines, which create some concerns within the market. But once the midterms are over and uncertainty starts to clear up again, the market typically returns to focusing on what usually drives it.

4:10And then again, that's earnings, that's inflation, that's rates. So unless the midterms are going to be actually impacting any of those fundamental factors, it shouldn't really be something that investors are focusing on. And certainly as we're looking through to what are the key policy perspectives or things that could come out from the midterms, the major one is, of course, around data centres. But at this stage, even then, the midterms themselves are unlikely to be the driving force behind what happens next to that data center build out. See, man, we've got yields higher. I mean, I guess this is the new world order here.

4:43This is the new normal, I guess, 10-year treasury, 480. The 30-year, 5.25%. Is that a headwind for equity markets, or are we close to a point where higher rates kind of become a headwind for the equity markets? How do you think about that? I guess it's a really tough one. I think, actually, to my mind, this is really the biggest question which people are grappling with. Now, typically, you would see that Treasury yields, they crossed like the 475 mark and everyone starts to really worry. But when you've got a lot of that movement being driven by strong growth, again, the fundamentals playing through again, then we actually think that equities can get over that hurdle, right?

5:21The earnings are still there in order to propel equities forward. It does create a bit of digestion problems. So this, again, this is a bit of additional noise volatility being introduced into the market. at what point it really does become an issue for equities. I think it's a little bit higher certainly than what it was before because of that strong growth backdrop. It may be that we need to get the 5 % level, but ultimately what really matters is, one, is why are yields rising? Is it down to growth or is it concerns around inflation? And secondly, what is the speed at which it's moving? We've always seen that when you get a very, very sharp sell-off, that's when equities start to struggle.

6:01So there's a number of factors, But at this point in time, with Treasuries at 480, to us, this isn't a real concern for equity markets. It just means that maybe the speed limit is a little bit lower for equities for the rest of the year. So, you might just want to shift to the upcoming Fed meeting. We had Terry Weissman on just to kick off the show this morning. And he says he thinks the Fed should move to hike rates next week. He doesn't believe they will. He thinks maybe that'll happen in October. What are you thinking? You know, I have to be honest. We go back and forth, and I certainly go back and forth this.

6:34So this is really on a nice edge. Now, at the moment, our team is forecasting that inflation out on Friday is going to be showing it, of course, EPI close to the 0.2%, 0.02%. And that should be enough to keep the Fed standing on the sidelines. And, of course, if it's higher than that, then absolutely, I do think the Fed is likely to hike. I don't actually think they need to. I do think that they should be standing by for a little bit longer, wait to see how consumers deal with oil prices. Are they actually slowing or are they staying very, very robust? I think there's a lot of question marks out there.

7:07I also think that the credibility issue is becoming a bigger one for the Fed. And that in itself raises the odds of a hike next week so that if you were to see an inflation print, which is closer to the 0.0234, whatever percent it is, that it means that the Fed is more likely to hike because it's worried that the market is going to say, look, you don't really have that inflation fighting credibility anymore. Seema, thank you so much for joining us. We always appreciate getting a few minutes of your time. Seema Shah, she is the chief global strategist at Principal Global Investors. Stay with us.

7:41More from Bloomberg Surveillance coming up after this. If you invest, lead a business or allocate capital, one-sided views aren't enough. Join me, Brad Rogoff, the Global Head of Research at Barclays, on the Flipside podcast. Each month, I go head-to-head with one of our expert analysts on my global team to debate the economic and market issues that matter most. From inflation and AI to equity and credit trends, each debate helps you see what headlines might miss. Find the Flipside wherever you get your podcasts. This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Masser. Chinese automakers have become famous for turning cars into rolling smartphones decked out with large touchscreens and flashy software.

8:26Now they're going back to design basics, touting the return of buttons and knobs. The reintroduction of physical controls coincides with a broader push by Chinese regulators to overhaul the EV industry's potentially harmful design choices. China's Ministry of Industry and Information Technology proposed updated national vehicle standards that specify certain functions, like those that control headlights or change gears, should be physical rather than digital. While door handles have been the most high-profile change resulting in millions of cars being recalled, screens have also drawn scrutiny because they can pose a safety risk should they lose power or brake.

9:02The trend of adding physical controls is not limited to China, with Mercedes-Benz Group also introducing buttons in its new models. That's the Bloomberg Tech Minute brought to you by ChachiPT. Get started at ChachiPT.com. The world of business is constantly evolving. Every day, new challenges, new opportunities, new ways of working. Comcast Business keeps you totally in step with secure AI-backed networking built to power the way modern business gets things done today in more than 100 countries around the world. That's some serious muscle. And get this, Comcast business powers over 90 % of the Fortune 500 and millions of small businesses.

9:45Behind it all, network engineers, cybersecurity specialists, support teams, thousands of experts answering your call at 2 a.m. like it's 2 p.m. Always on, always ready. That's a lot of coffee. One partner powering how business gets done for companies of every size all around the globe. When you add it all up, no one does business like Comcast Business.

10:35Jay Hatfield, CEO at Infrastructure Capital Management, in the studios with us live. Jay, great to see you. I know you're a little bleary-eyed, though, this morning, because I want to start with the fact that you were actually at the U.S. Open yesterday for this epic match between Ben Shelton and Carlos Alcárez. This morning. It was this morning. You're absolutely right. It ended at like 3.30 a.m. Did you stay for the whole thing?

10:54Jay Hatfield: No, I wimped out, unfortunately. And I would have stayed, though, if Ben Shelton won the first set. Okay. That was not indicative whatsoever. But I will say, even after the first set, it was clear that he's now in the top elite class, even before the second, third, fourth set, because he was right there with Al Karaz the whole first set. American tennis is in a good spot right now. It really is. So exciting to watch. Four and a half hour match. Amazing. All right. So let's ask a question about business now, shall we? That's why you've come in this morning, and we appreciate it. We've got this inflation data out this week.

11:32And we know that the Fed, at least I'm going to call it the old Fed for a moment, preferred the PCE over the CPI. I know that sounds like an alphabet word salad. But you say that the Fed should be taking a closer look at the consumer price index. Why is that?

11:49Jay Hatfield: Well, we think that the Fed should use real consumption and real prices. The PCE is really not meant as a price index. It's meant to adjust for the GDP. So it's 30 % imputed, which is a fancy way of saying made up. And the methodology is horrendous. So in fact, even the BEA understands that. And they're going to do a revision of their two worst components, which are software, the software component, which is 21%, and the other component, which is total 0.8. So if they had adjusted both of those, then they would now be at 2.5. So just on top of CPI. And just a quick point about CPI. We're actually pretty bold up about CPI because of rounding.

12:43Jay Hatfield: Should tell your programmers don't round the numbers. So the two rounding benefits are we're rolling off 0.31. And the year over year number is 2.47. So as long as CPI for the month is less than 0.28, we're going to roll down to 2.4 year over year. And even this Fed would not raise rates when we've rolled down 0.5 on CPI. Again, the real should be the real index. We went from 2.9 to 2.4 year over year in four months. The four-month annualized number is only going to be 1.8. And if you corrected PCE for those two components that are ridiculous, portfolio management and software, you would also get a 1.8 % number.

13:36Jay Hatfield: So the real data. That's a lot of math for having not slept a lot last night. I'm super impressed. But now you've got me afraid of ever rounding up or down anything, you know. I'm a big rounder. Red headline crossing the Bloomberg terminal. Uber sets size on debut euro bond sale at$4.5 billion. There's another one. I knew the market was going to get cranking right after the holidays, and it sure is. What are you thinking about inflation here this week? CPI, PPI. You know, we got, boy, I got Brent Crude at$100 a barrel, so I got to deal with that. What's the underlying inflation in your mind? It's 1.3%.

14:14Jay Hatfield: Really? So if you take real prices, again, CPI is vastly superior. and Morris was starting to say that, but he wants to appease the rest of the FOMC. So we kind of backtrack on that, but we would not cut rates right now because oil prices do bleed through the core. So for most obviously airline fares, that's about 0.2 CPI right now, but the shelter component continues to be misstated. We publish our own index that is at 1.3 % And we use this thing called the internet. You could also use the Bloomberg terminal and get real time prices for rents. And they're negative year over year. Whereas the CPI is assuming they're about 3%.

15:01Jay Hatfield: So they use deeply delayed data, six months on purpose and longer because they use renewing rents instead of market rents. So we do not have an inflation problem. We do have a political problem because the FOMC wants to demonstrate their independence. And so they possibly could raise rates, but that would be incredibly stupid because they would be raising rates when anybody can see it's declining. Inflation is declining 2.9 to 2.4. So it would make them look political. So they'd be more at risk of losing their independence. I like how Jay doesn't hold back. No. He doesn't hold back. So if they don't move, so what I'm hearing from you is that they should not move in September.

15:41Should they move at all this year, in your mind?

15:44Jay Hatfield: Only potentially a cut if we do get lower oil prices. A cut, okay. Yeah. All right, so your top pick is Marvell. What is Marvell and why do you like it? Well, that was first recommended on this show at less than$100 a share. And then we downgraded it, we got to$300 because Jensen Wong liked it. Then it went to$180. But the most critical thing is they did this transaction with Google with$120 billion of potential revenue. But this is a smaller company. It's not like NVIDIA. So their total revenue for this year is$12 billion. So they announced a deal. And of course, we have a very efficient market, right?

16:26Jay Hatfield: Maybe not. So they announced a deal and then it goes to$200 for no particular reason. There was some disappointment because they didn't guide to$29 yet, which they will on October 6th. And so if you're longer term, I mean, this is going to go up and down with chip stocks and with hedge funds liquidating or not liquidating. But you're going to get in 29, we're estimating$12 of earnings. So it's at least a$300 stock. And with these rapidly growing companies, just hold them over two or three years, going to have fantastic returns. All right. You also like Broadcom, a ticker AVGO. What do you like about that?

17:02Jay Hatfield: I think we're the only ones who like it. But they also announced a 25 % increase in guidance. And the stock went down, I think, 6 % that day. We have this super conservative target. So 15 times 28 fiscal. And they have a short fiscal. And that gets you to 450. We think that's really conservative. It is a bigger company. So all these very large companies like NVIDIA, and particularly on the chip side, are trading more like they're at the top of the cycle. So 15 is possibly the real number. But easy to get to that number. Same thing. Be longer term. Don't look at what happens during earnings. 30 seconds.

17:46Preferred stocks. You guys have a couple ETFs that focus on preferreds. We never talk about preferred stocks. Why should we talk about preferred stocks?

17:52Jay Hatfield: Well, we would recommend if you're going to do fixed income, which is a big sacrifice in a way, if you get 4%, if you have investment grade, If you have non-investment grade and grade management, not sure where you can get that, but great management like PFFA or BNDS, you can get equity-like returns with much lower volatility. So you can get 0.4 betas, 8, 9, 10 % returns. So it's for more conservative investors who like income, tap my IRA. So it's a great asset class. And really, the reason we obsess about interest rates, it's 75 % of our AUM is fixed income. Fixed income. preferred stocks. There you go.

18:31I've seen a bunch of converts come to the market over the last several weeks. Jay Hatfield, CEO, founder and portfolio manager, Infrastructure Capital Advisors, joining us live here in our Bloomberg and Eric DeBroker studio. We appreciate that. Stay with us. More from Bloomberg Surveillance coming up after this.

18:53You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. We love checking in with our next guest, Omar Aguilar, CEO and CIO of Schwab Asset Management. Because nobody sees the market better than the folks at Schwab there. Everywhere when you think of Schwab, you think of San Francisco. You think of San Francisco. You think of Schwab. One and the same here. Omar, thanks so much for coming into our studio today. We appreciate that. should we just be focusing on earnings?

19:26If we just do that, are we okay? Because there's a lot of cross currents out there, but corporate America is putting up some pretty serious earnings over the last several quarters. Yeah. Good to be here, Paul. And by the way, $4.50 a gallon, not in San Francisco. Oh, I know. That's like a bargain in San Francisco. If I could get that, that would be awesome. Yes, I know. But, you know, fundamentals of the market and the economy are still pretty strong. I think, you know, looking at the short term and looking at the volatility that we've seen in the last couple of weeks, you know, clearly it's just a clear indication that obviously things are not in the clear, but the fundamentals are good.

20:04Focusing on fundamentals is always good, a long-term strategy. We focus on Schwab of telling our clients that if you stay in the long run for following the fundamentals, you're going to end up following your investment objectives. Earnings are good. The economy is good. Labor market is good. But yes, there is a lot of questions about interest rates. There's a lot of questions about inflation. But when you look at the whole picture, you know, we're on the right path. How much competition is the bond market giving the equity markets right now? Because the bond market's been providing some meaningful income.

20:37We've been talking a lot about if you clip a coupon right now, 10-year, 4.80, 30-year, 5.25. That means going out long term, right? There's duration there. But is that one way to play the diversification card? And what should you be looking out for if you do? Yeah, there's two components of the diversification. One is income diversification. And the other one is just overall risk diversification. So the bond market plays a great role in both fronts. And it's been the last three years where finally we got some action from bonds. And today, if you actually think about where you actually can get income, You can get it from equities, you can get it from bonds, and you can also get it from just volatility income.

21:19You know, by writing calls, by doing some options, you can actually get income that way. Now, today, you know, there is really not a lot that you can get for having more credit exposure or having more duration exposure. You know, we are emphasizing to our clients to stay close to the middle of the yield curve to make sure that you stay in high-quality bonds. So intermediate high quality bonds seems to be the right spot where you can get nice yields, you can get nice coupons, and you don't necessarily need to extend yourself too much in the risk spectrum. When you think about the diversification with equities, they both play a role.

21:55We have the analogy to say it's like a family that has a van, an SUV, and it also has a sports car. But you use them for different things. You will not put all your family in the sports car, but you actually will use your minivan to basically bring the family to a nice trip. That's the same thing. You know, obviously, our bond guys don't like me to compare them to the minivan, but that's who they are. And that's what it is. And it's a safe place where you want to be there and move them along. And as long as the correlation between equities and bonds work the way they're supposed to go, unlike 2022, then it's a good place for, you know, placing your baits.

22:35I think you've been pretty consistent, Omar, in our discussions over the years of staying fully invested in equities, maybe use some volatility, rebalance the portfolio. Where in the equity markets are you guys focused today? Yeah. So and I know we we talked about this before and I know you have talked to this with other guests before. You know, the AI wave is going into the third phase. So we started with a hyperscaler. So we that was like the big first part of the capital expenditure cycle going into the hyperscalers. Then it moved to the second phase, which was more like the infrastructure to support those hyperscalers.

23:12And that's what was the big momentum trade on semiconductors. semiconductors. And then from there, we're now going through the users of AI, which is, you know, all the capital that is being deployed to use all versions of AI, agentic AI moving into other industries and other sectors that is also, you know, raising money and spending, maybe not at the big headline that we see with the hyperscalers, but we see industries like financials, healthcare, you know, industrials, they're basically now adopting AI and investing in AI to reduce costs, to make it more efficient, more productive, and also to just be more competitive.

23:48And that wave, it basically provides a big tailwind for that AI trade to continue. So we are very constructive on equities. We think people need to be invested. That's probably the number one thing. They need to be disciplined. And they need to continue to have that rotation, diversification, away from just the large cap, mega cap tech names. Does whatever the Fed decides to do with interest rates next week, Does it truly matter for this market? Is it going to move this market either way if they if they stand pat or if they do indeed hike? Yes. So we we don't believe that 25 basis points is going to do anything to anything.

24:25It's clearly going to, you know, just ratify one way or another, you know, what we've been discussing for for the last few months. That being said, the reasons for the hike will probably be more important than the hike itself, which means if the Fed is doing this because they do see that inflation is a big problem and therefore they're trying to just be proactive in trying to reduce hikes, we think that's a lower probability for our standpoint. But if they do it that way, that's a different reaction from the market than if they basically just do it because they have to do it and they don't have data to support it.

25:01So that, to me, is like the biggest difference of what 25 basis points will do next year, next week. What's screening well for you these days on the equity side? Is there certain sectors, certain factors that you guys are looking at these days? Yeah, we look at factors very closely. And what we're trying to do is trying to diversify all our clients for their momentum trade. Most clients, and I would probably say most investors, one way or another, they got into the momentum trade, even if they didn't want to. As long as they held the market, the S &P 500 is still being pretty heavy in technology and large-cap names.

25:33So they are fairly exposed to momentum. So we are looking at the natural cycle rotates towards cyclicals. And what that means is we're looking at higher quality, which is profitability factors that are basically good. The profitability factor is working well, and it will prove to work even better, especially when you see that these return on equities and return on investments will be a big, big play, particularly for those that have extended capital expenditures. The other area that we've seen is, you know, that component where you see, again, health care, you see financials, areas that will benefit from the next phase of the cycle, especially if interest rates stay longer for a while.

26:14Yep. Omar, thank you so much for joining us. Appreciate it as always. Omar Aguilar, CEO and CIO of Schwab Asset Management out there in San Francisco. We appreciate him coming into our studios here in the big town. Stay with us. More from Bloomberg Surveillance coming up after this. This is the Bloomberg Tech Minute brought to you by Chachi PT. I'm Carol Masser. Chinese automakers have become famous for turning cars into rolling smartphones decked out with large touchscreens and flashy software. Now they're going back to design basics, touting the return of buttons and knobs. The reintroduction of physical controls coincides with a broader push by Chinese regulators to overhaul the EV industry's potentially harmful design choices.

26:56China's Ministry of Industry and Information Technology proposed updated national vehicle standards that specify certain functions, like those that control headlights or change gears, should be physical rather than digital. While door handles have been the most high-profile change resulting in millions of cars being recalled, screens have also drawn scrutiny because they can pose a safety risk should they lose power or brake. The trend of adding physical controls is not limited to China, with Mercedes-Benz Group also introducing buttons in its new models. That's the Bloomberg Tech Minute brought to you by ChachiPT.

27:29Get started at ChachiPT.com. The world of business is constantly evolving. Every day, new challenges, new opportunities, new ways of working. Comcast Business keeps you totally in step with secure AI-backed networking built to power the way modern business gets things done today in more than 100 countries around the world. That's some serious muscle. And get this, Comcast business powers over 90 % of the Fortune 500 and millions of small businesses. Behind it all, network engineers, cybersecurity specialists, support teams, thousands of experts answering your call at 2 a.m. like it's 2 p.m. Always on, always ready.

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29:19But we got him back in the studio today. Bill Cohen, he's the author of Money to Burn, the unvarnished truth about Leon Black, Apollo, and the rise of a new Wall Street. Boy, Leon Black is just one of those towering figures in just global Wall Street, you know, and just a handful of folks that you can put into that pedestal, and that's where he is. Bill, thanks so much for joining us here. Pleasure. Talk to us about Leon Black, Apollo. What did you learn doing this? You've been on global Wall Street forever. You know all the players. What did you learn about Leon Black and Apollo? I mean, obviously, I learned a lot.

29:52I'd never spoken to him before, despite all my years working on Wall Street and working with Apollo. But he was always sort of a very elusive figure, you know, mysterious. And I was quite surprised when I started the book and I started talking to Mark Rowan, who, of course, the CEO now of Apollo. And I got a call out of the blue from Leon saying, you know, don't you want to talk to me? and of course the answer is yes uh writing a book about your firm and you're the founder of the firm of course i want to talk to you and then that started sort of a series of maybe 10 conversations all on the record all long uh starting like at the beginning of his uh life and going uh you know through all the vicissitudes up and down as you know it's an incredible story about leon i don't think many people really fully appreciate how complex and mysterious and under misunderstood he is uh you know people have definitely formed opinions about him some of which i had done too right especially after the decker report came out detailing his relationship with jeffrey epstein and i even wrote a piece in vanity fair about how incredulous i was with the explanation that they gave for that all.

31:10Now, you know, I let him have plenty of room to share his thoughts and explain himself. And I guess I'll leave it to readers to decide, you know, what they believe. He really does speak to you at length about his interactions with Jeffrey Epstein. And did he tell you why he was doing that? I mean, did he presumably think this book might actually help his image or clear his name in some way? Word to the wise, I don't ask why someone is talking to me when they are talking to me. I just think, my lucky stars, that the main subject of the book is talking to me. Because if they hadn't, then I can only imagine the criticism that I would have gotten for that, for not having him be a participant.

31:59So he was willing, incredibly open. I mean, I think, why did he ask for the Deckard report, right? He told me that he asked... Can you explain what that report is, the Deckard report? Sure, sure. I've mentioned it twice now. So in 2000, as it was becoming clear, this was after Jeffrey Epstein's suicide, shall we say, it was becoming clear that Leon had a very complex and long-standing relationship with Jeffrey Epstein and some of the details of that were coming out including how much money he had paid to him which turned out to be a low estimate the New York Times wrote a piece saying it was between 50 and 75 million it turned out to be 158 million some people even say 170 million and quibble but uh uh he asked he was then ceo of apollo chairman of the board he asked the special committee of the board of uh of apollo to engage an attorney uh decker the attorney and to do an investigation of his relationship with jeffrey epstein because a lot of uh institutional investors of apollo were asking about it on on quarterly conference calls and so he told me that the reason he did that because i said why you know why would you do that leon uh he said first of all i'm the only one who's ever done that and you know asked somebody to investigate his relationship with epstein and number two because i didn't think i'd done anything wrong so he doesn't uh believe he's done anything wrong and you know i know there's a lot of innuendo around that relationship uh and a lot of you know uh politicians uh ron wyden jim comer are looking into it.

33:42But the Decker report basically exonerated him of any wrongdoing. But obviously, there's still a lot of unknown about it because one of the principal antagonists in the relationship is no longer alive. We're speaking, of course, to Bill Cohen is the author of another book and one that is really topical. It's entitled Money to Burn, The Unvarnished Truth About Leon Black Apollo and the rise of a new Wall Street. Bill, is there any indication or through your reporting, did you come to understand the extent that other leaders of Apollo knew about Leon and his relationship with Mr. Epstein, that it was not just Leon and Mr.

34:24Epstein? What did become clear is that Epstein had this relationship with Leon that went back many years, including with leon putting him on the board of his family foundation which i thought was a pretty kind of intimate act uh um and it's clear that once jeffrey epstein had his hooks shall we say into leon he tried to get his hooks into apollo so he would go over and meet with mark rowan or he'd go over and meet with josh harris or invite them over to his mansion uh and you can see that in the emails, you know, the data dump that we got, the three million emails. But basically, they were, how shall we say, I think, onto his game a little bit, didn't want to engage with him, certainly didn't want him working at doing anything for Apollo and for them personally, although he tried repeatedly.

35:19You know, Leon was already sort of in the web by then. This story, you're really telling two stories, though, aren't you, Bill? One is Leon Black, but the other is Apollo and the firm that he built. Did you learn anything new? I would imagine you did about the firm. What was sort of your takeaway? What do you hope readers will take away? When I was an associate at Lazard, one of the thankless tasks I had was to call on private equity firms back in the early 90s, and one of them was Apollo. So I used to go see Mark Rowan a lot and share ideas with him. It didn't amount to anything. He was much smarter than I was.

35:54So I've known the firm for a long time. So but what I you know, but what Mark has done by creating a theme and using that as a platform to explode his private credit business, that that was sort of I didn't know as much about that. And the story of how he did that with Jim Bellardi is a fascinating story. I know everybody's sort of focusing on Leon and Jeffrey Epstein, and I get that. But but the subtitle is also, you know, the rise of a new Wall Street. And Mark Rowan at Apollo through private credit, which is an important subject on Wall Street now, has really recreated what Wall Street is all about.

36:34And a bunch of their competitors have copied him or trying to emulate them. And you bring up the insurance business because that has been, you know, I think they were the first, certainly the first one in size. Well, Berkshire Hathaway was, you know, the first, but this new sort of wave of. Of funding transactions through the ownership of insurance companies. They were, I actually, when this is all happening, I had no idea what their strategy was. Right. Why are they getting into the insurance? Who wants to get it? Now I kind of understand it. Yeah. What's the future for Apollo here? That new leadership.

37:08What's the future? Where do they want to take this huge firm? Right. So I think they really have institutionalized it. I mean, it used to be a scrappy, sharp elbow. I think we all have our Apollo scars and stories. But Mark, I think, has really tried to make this into a much more institutional firm, normalized in it, made it less rough around the edges. He's, I think, done a really good job of creating a new and different and supportive culture. I don't want to take that too far. I know it's still a rough place, tough place to work. But, I mean, they consider themselves in the same league as Blackstone and KKR, and they should.

37:49And we'll see where this all goes. Is he still a huge art collector? Yeah. I mean, let's put it this way. I'm a big art appreciator. This is the finest collection in private hands I've ever seen. Really? His stuff, though, is in museums, though? He lends it out to museums? He does lend his stuff out to museums, but it's mostly in his townhouse not too far from here. Wow. So I'm just looking. He's still the third largest shareholder. I think he's the single largest individual shareholder. That's exactly right. 85 million shares. That's exactly right. Down from 93. So he's sold a few. What does he think his legacy is, should be?

38:36Does he care? That kind of stuff. Because obviously it's taken a significant hit. But does he care? I think he must care because that's probably why he participated in this. And, you know, I really wanted to give him the space. I know there's been some criticism that I didn't give him too much space. I like to show, not tell. So, you know, readers can decide. I mean, I think he's a much more fascinating character than most people understood because he's been so mysterious. I think he does care. I think he would like, this is me projecting here, a Mike Milken-like rehabilitation. Although, you know, Mike Milken pled guilty to crimes and went to prison and then was pardoned.

39:17Leon has not been accused of, you know, convicted of anything. And one, I mean, I followed Leon's career because I came on Global Wall Street in the mid 80s just when Drexel was just cranking it. Amazing. And what was amazing about that is when Drexel dissolved and went under, how successful the leadership of Drexel was for the next 30 or 40 years on Global Wall Street. And Leon's just one of those people. He's one, probably one of the more successful, and including his brother-in-law, Tony Ressler, who started Aries inside Apollo, by the way, and then it was spun off. Yeah, the Drexel diaspora is amazing.

39:55To me, it's like the Coach K coaching tree, if you'll let me have that Duke reference. Well, I'm a Duke guy, too, so I'll have to go. I was waiting for this to come up. Yes, exactly. Thank you for feeding it to me in the Drexel context. And for those who know, and I think a lot of our listeners do, Elon Black, Leon's dad, met a tragic end when he leapt out a window at the time, I guess, that the firm was under duress. Does he talk about that? Or I guess he has gone on the record about how that's impacted him, because it certainly didn't stop him from continuing his career in finance. Well, it was the catalyst for him having a career in finance.

40:35He had been a philosophy major at Dartmouth and I don't think wanted to go into Wall Street at all. His father had sort of urged him and convinced him to go to business school. He was such a good student at Dartmouth that he got into Harvard Business School relatively easily. He didn't like it. I don't think he wanted to go into finance. But after his father committed suicide, and that's an incredible story, which is how I start the book, had to start it that way because you know it's had such a huge impact on his life as you would expect uh then he felt like you know he was the breadwinner his uh mother was an artist his sister was a teacher so it fell on to him to you know keep the family you know and the that you know the fortune of the family was pretty much lost after his father uh jumped out of the pan am building uh because his fortune was tied to the uh stock of united brands which tanked after that incident.

41:25And so Leon decided, I'm going to Wall Street. And it turned out that he was really good at it. Leon Black, as per the Bloomberg Rich Go function, has a net worth of$18.5 billion. According to Bloomberg, ranks 153rd globally. He's 75 years of age. Is there another chapter for him? What is he saying? Well, he just bought the Woolworth Mansion on like 80th Street or 84th Street between 5th and Madison. I think the plan is to turn that into his version of the Noya Gallery and put a lot of his artwork in there, renovate it, put his artwork in there, open it so that people can see it, maybe even donate it to the Met for a big tax write-off at some point.

42:11And, of course, he has Elysium, his own family office, and he's been active in that. He owns Fidon, the big art publisher. So, I mean, he's not, you know, he gets on the plane and goes where he wants. You know, it's not a bad life. Yeah. He owns the Scream, right? Absolutely. I've seen it in his house. He paid$130 million for it. And he was, you know, there's only four of them. And he has one of them when it became available by the family in Norway that owned it and then sold it. But it's not just like a random thing for him. It goes back to his thesis at Dartmouth, which was all about wearing masks in literature and art.

42:55And he thought this was the opening. So the screen was the opening salvo in the modernist art movement and therefore very, very important work of art. And so when it came up for sale, he basically had to have it. One hundred and twenty million. That was at that time the most ever paid for an artwork. Bill, how many books have you written? This is my eighth. Eighth. Yeah. Global Wall Street. There's so many characters to choose from. I mean, it's almost like, all right, what's next, my friend? Yeah, that's what I want to know. What's next? I got a lot of ideas for you. I'm sure a lot of people do.

43:25You know, I'm open to ideas. I do have an idea that might be a little bit different, sort of, you know, I don't want to make too much of this, because this is not appropriate. But, you know, David Halberstam, the great author, he wrote Best and Brightest and, you know, a book about the big media and a book about. So he would write books that were sort of like, how shall I say this, for them. And then he'd write books for himself, like he wrote about, you know, Bobby Doerr, the second baseman or the shortstop for the Red Sox. And then he wrote about crew. So I think I'm going to write one that's sort of more for me next time.

44:06All right. Yeah, exactly. I've done that before. All right. Very good. Very good. Bill Cohen. Thank you very much. Author. The book is entitled Money to Burn. The unvarnished truth about Leanne Black, Apollo and the rise of a new Wall Street. This is the Bloomberg Surveillance Podcast available on Apple, Spotify and anywhere else you get your podcasts. Listen live each weekday, 7 to 10 a.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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