Blackstone at Goldman Sachs Conference Notes

posted in: Notes | 0

Blackstone Group (BX) Presents at Goldman Sachs US Financial Services Brokers Conference

Steve A. Schwarzman

US is slowing a bit but not tragically so

“the way we see things is the U.S. slowing a little bit, not tragically so and we have interest rates going up in the currency, looks like it will be going up for while and that sort of impacts U.S. economy a bit, It’s harder to export. So those types of companies aren’t doing as well and it also hurts the general stock market, because to the extent that you have earnings being translated from outside the United States that slows down growth rate, because the translation. But the U.S. is moving ahead on a pretty orderly basis and all probably have set increase in December and future increases I would assume will not be too robust, because that would slow the economy too much which I don’t is the Fed’s objective.”

We exist to buy things and add value

“The reason why we exist is to buy assets and do something do them rather than watch them and that’s what is called adding value, and if we’re good at it, we will end up with super performance and for our major product we earn about double the stock market over the 30 years. ”

We know oil prices are going to be somewhere in the range of $20-$120

“I had a funny conversation with ahead of to give this person some protection. The head of one of the largest companies in the world in the energy business and any business and I asked him what he thought about energy prices, he said “well we plan for somewhere between $20 and $120” and he said “I know it’s going to be some more in that range” and I said well that’s very precise.”

Over the last 26 times that rates went up the value of houses went up too because of inflation

“Well 25 over the last 26 times in history when interest rates went up the value of houses went up almost nobody. You have got a smart group here, yes, a third of you thought that but two thirds of you didn’t. And that’ the way it works. Why? Because you have inflation or you have people making more money with the economy growing and that tends to push up the value of houses. So that’s like the standard concern, oh, interest rates are going up, your real estate assets must be collapsed.”

We’re not guessing. When we buy an asset we have access to inside information

“it’s not like a trading business we are guessing. When we buy an asset, we have access to inside information. We study this stuff, we get consultants and we can accelerate the growth of these businesses and we can put some leverage on top of it which amplifies that a bit but it’s basically the improvement over business.”

People usually fool themselves that they want to buy value. They really want something that’s going up

“People more or less only fool themselves that they want to buy value. Basically they just want to buy something that’s going up and because they are looking for physiological comfort of things going up, things at bottoms people hardly ever buy”

This is an art form

“So I think somehow I must be a tragically bad communicator and somebody thinks this is some little business that somehow gets lucky. I mean we have 800,000 people just working in our private equity area. This is an art form, this is a business and people will see it as such when maybe we get somebody better than me explaining it, but it’s really a wonderful, wonderful business and it’s growing at quite a rapid rate and customers can’t get their money back as a rule because these long-term commitments. So it’s infinitely better than any kind of mutual fund complex or anything like that.”

Investment analysts are behaving in the exact opposite way of capital allocators here

“what’s fascinating to me is that people like yourselves who are looking at our stock are behaving just the opposite as the people who give us these monster amounts of money where we’re penetrating every asset class. ”

At some point people who don’t own this will wake up and say what was I thinking

“at some point in the next ex-years people will wake up and say, what was I thinking, what was I thinking and the smart people like you, who own it, you will be heroes and the other people will say, “yes, yes, yes I know I should have bought it.” So that’s demand.”