00:00:02
Speaker 1: Bloomberg Audio Studios.
00:00:04
Speaker 2: Podcasts. Radio.
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Speaker 3: News. Pleased to say that joining the show now is Evercourt Chairman Emeritus Ralph Schlossstein. He is also the co-founder of BlackRock and former Deputy Assistant Secretary of the Treasury in the Carter administration. Ralph, no one we'd rather talk with this morning. You're an entrepreneur, you're a business person, you've had experience in government too. You have constant conversations with CEOs. For CEOs who are waking up in America today following a blue wave, what if anything changes for them?
00:00:33
Speaker 1: I think a number of things. Number one, I think the vote last night was a vote for centrism, a vote for checks and balances, a vote for a less volatile world, and obviously a vote for paying attention to the needs of of the vast majority of American people who are, in their minds and in reality, paying too much for their lives. For the CEOs, I think number one, it bodes for a pretty good economy. I really believe that. And historically, if you look at divided government, Congress being in one party's hand, the presidency in another. Those have been periods of some compromise, economic growth, and good for markets. And one other thing, if you're sitting there, and this affects obviously Evercore's business particularly, If you're sitting there thinking about that big strategic deal that you want to do, I think it's reasonable to conclude that the regulatory environment will be a little more receptive over the next two years than it might be after that.
00:01:51
Speaker 2: So then how do you think this current political environment could change where global capital flows and how companies invest them?
00:01:57
Speaker 1: I think the.
00:02:01
Speaker 1: Global capital flows will continue to go to America. We have the single, we have the strongest capital markets, the most liquid capital markets. We have the greatest creative entrepreneurship in the world, by far. You know, I wouldn't trade America's hand with any country or continent.
00:02:28
Speaker 3: Today. and it's still a country with incredible growth, too. We see that in all the figures. This idea, Ralph, that this was a vote for moderation, for a more centric government, I just wonder how that also squares, though, with this big pull from the left, with very far left candidates upsetting in the primaries, winning their elections last night. Does that sort of change the dynamic, at least for those coming in, and just how center this current Democratic Party looks?
00:02:56
Speaker 1: Well, I would say that in reality, they get a lot of publicity, but they're a very small minority of the Democratic caucus in the House and in the Senate. We have exactly... one Democratic senator who ran with a somewhat more left than I would be comfortable with. And so that's out of 54 or 55 or 56. In the House, I think you have 12 or 15 senators It looks like there are going to be somewhere on the order of 250 Democratic House members. So you've got literally somewhere between five, six, seven percent of the caucus. And very importantly, Hakeem Jeffries, who will be the new speaker, can actually get the majority of his caucus to go for something without any of those members. So I think the size of the victory in the House gives Speaker Jeffries a lot of flexibility that he might not have otherwise hoped for, and certainly more than Speaker Johnson had in the previous Congress.
00:04:14
Speaker 2: Do you think the results we saw overnight is a preview of what 2028 could look like?
00:04:19
Speaker 1: Well, I think the Democrats in the Congress have a really important decision to make. There are two temptations. The first, which I very strongly support, is put on your policy hats, pass legislation that's important and relevant to the things that the American people care about. Energy prices, food prices. housing availability, health care availability. And the president may compromise on some of those. He may veto some of those. But I am a democratically inclined business person. That's what I hope we do. There will be some who are tempted to have a little bit of a more investigative approach persecution-oriented, because obviously we've seen a period of time when the Justice Department has been weaponized a bit in the eyes of many. And there's a temptation to respond to that somewhat in like kind. I truly hope that the Democrats in Congress resist that and that they focus on doing the right things for the American people.
00:05:44
Speaker 3: When it comes to the fiscal trajectory of this United States, it's something you've long spoken out against and you're concerned there. That's one of the things that notably wasn't on the ballot, deficit spending. Maybe the bond market has fits and starts about what it cares. If it cares about that bond market notably rallying today. Is there anything that puts a brake on this Congress? Again, especially because that was not on the ballot. They came in with no one talking about deficit spending in the United States.
00:06:09
Speaker 1: Well, if I have a concern about the next couple of years, I think our fiscal trajectory is totally unsustainable. It will end. I've often said this. It will end. When it ends, it will end badly. I just don't know what will precipitate that and when it will happen. If you look back historically at periods of divided government, particularly centered around the fiscal policy and budgets, the method of compromise between the Democrats and the Republicans has very often been no new taxes for the Republicans and some more spending for the Democrats. That would obviously exacerbate the concern that I already have. I think it's a very low probability, but what would be a remarkable thing would be if we actually had something along the lines of, I don't think you could do a real Simpson-Bowles, but a mini Simpson-Bowles where there's an acknowledgement on both sides of the aisle that we have to start bending the curve on our fiscal trajectory.
00:07:20
Speaker 3: Do you think the bond market could force markets to do that? Again, notably not reacting today, but it has this year had past episodes that has gotten the attention of this government.
00:07:28
Speaker 1: Yeah, I ultimately believe it will be the bond market that is the trigger but it will be something else that triggers the bond market. It won't be the bond market alone.
00:07:39
Speaker 3: You were getting into this before. Part of the reason that a lot of corporate America has said we are going all out with M & A is because it's a more friendly regulatory environment. You were saying that you expect companies, basically, they're now having a two-year ticking clock. Is that fair to say that we don't know what's going to happen in 2028? This is still favorable. Let's get deals done.
00:07:57
Speaker 1: Yeah, I think you have to look at the fact that a huge amount of what business deals with is not adjudicated in the legislative world. It's adjudicated in the regulatory world, which is controlled by the executive branch. So if you look, if you're sitting here today as a business person, you're going to say, well, the political world has gone a fair amount more democratic, which traditionally has involved more regulation, more antitrust oversight. But the executive world still has two years to go. And I basically, even before this, nobody would have anticipated the degree of the blue victory here. But even before that, and it's not clear to me that this changes what I said earlier, which is if you look at what Trump has done in his first two years, there's only one piece of meaningful legislation, the big, beautiful bill. Everything else he has done by executive order, by fiat, and the really only check and balance on him has been the courts. And in some cases, he's ignored that.
00:09:14
Speaker 3: What do you then make of the incoming overhouse committee chairman saying two words, lawyer up? I mean, for companies, is this just more investigations, especially Trump-aligned ones?
00:09:24
Speaker 1: In the world I live in, that's a very disappointing statement.
00:09:27
Speaker 3: Do you want to say anything more about that, Ralph, or do you want to just leave that there?
00:09:31
Speaker 1: You know, I think disappointing is a very strong word.
00:09:33
Speaker 3: Okay, it is a very strong word. Okay, but not just that, because again, this idea that you get pushback. The states have been quite active as well. I mean, all you need to look at is the Paramount deal and what California did. Excuse me, considering some of the local elections, do you expect states also to continue to push back against various deals that get done?
00:09:51
Speaker 1: Well, in these areas, states have de minimis standing in reality.
00:09:58
Speaker 2: And.
00:09:58
Speaker 3: you.
00:10:00
Speaker 1: Know, I think I was not involved in the Paramount discussions or the transaction. But my guess is that Paramount, even though they probably would have won in court, made a decision. We want to get on with this and let's make a, you know, a set of milk, which was of modest proportions. And that California probably agreed to that because they knew their legal case was not as strong as they would want. So I don't, you know, in a lot of areas, the states and the localities have huge influence, including over elections, but in antitrust, not really.
00:10:43
Speaker 2: If we choose to stay local, let's go to Texas, because that saw the first Democratic win since 1990s, and Bloomberg Invest had a conference there. Danny was the headline for much of that. And entangled with Texas is data centers, and roughly a third of the data centers that are set to be built are in Texas. What do you make of that? Do you think that we will see more roadblocks ahead?
00:11:01
Speaker 1: I don't think this is going to be a black or white thing. I mean, I think, you know, AI is the single biggest thing that's happened in my business lifetime. It's incredibly important to America's competitiveness, and we're not going to stop progress. I do think things will slow, but even in the Democratic leaders, I mean, you look at Josh Shapiro, for example, in Pennsylvania, His position is let's have them slow down, but I'm not against them as long as they don't cause higher utility bills and higher taxes for the localities. So the position I think that the Democratic Party, leaders will ultimately come to is not, you know, let's go back to the railroad ball, you know, to ball bearings, but let's have progress, but let's have progress that doesn't hurt the less well-off and less able to defend themselves, people in our society.
00:12:11
Speaker 3: While slowing down doesn't derail AI progress, it certainly has in past instances, and certainly today injected fear into markets, core weave, all the data center plays down quite significantly. Is this slowly becoming, or maybe quickly becoming, a less favorable environment for Anthropic to IPO into?
00:12:28
Speaker 1: Well, I think you look at what stocks are doing today, you couldn't say that's an unfavorable environment.
00:12:34
Speaker 3: Sorry, I'm always looking for the doom and gloom. I'm a skeptical journalist, Ralph, but please continue.
00:12:39
Speaker 1: And look, Anthropic is a fantastic company. And, you know, I hearken back to the 1999-2000 2001 period when we had a much more of a bubble than we have today and I remember doing an analysis you know I was at BlackRock at the time and Cisco which is a great company in order to justify the valuation that they had they had to capture 150% of the global router market that obviously was not going to happen so Clearly, there are some companies that have too frothy evaluation. And there are some companies who are going to, you know, will become the pets.coms of the world.
00:13:30
Speaker 3: Where should we look for the froth? Where do you see it?
00:13:32
Speaker 1: You know, right now, almost anything AI attracts some amount of money. Not all of these companies are going to.
00:13:48
Speaker 1: Grow into their valuations. But there will be some, 10 years from now, we're gonna be sitting here staring at a several trillion dollar value company that didn't exist 10 years ago.
00:14:01
Speaker 2: And earlier you said that there's no place you'd invest in other than America, and I'm sure many would agree.
00:14:05
Speaker 1: I didn't say no place, I said it's the best.
00:14:07
Speaker 2: Best place, yeah, distinct difference. So let's take a best place. Do you think that investors should prepare for higher corporate taxes and also more regulation? under this new administration?
00:14:20
Speaker 1: That is certainly a possibility two years from now. And I remember in 2016, I was in Paris election night, and I was awakened at five in the morning by Ed Hyman, who was the head economist at Evercore ISI at the time, and he was in Japan And he said, I have to speak to a bunch of institutional investors in an hour. What should I say? And at that time, the S & P was down 100 points, 5%. And I said, Ed, I just woke up. But if you want to be provocative, here's what I would say if I were delivering that speech. I would say that by the time the New York Stock Exchange closes at 4 o'clock in New York, stocks will be up. And he said, really? Why are you saying that? And I said, well, because we're going to have lower corporate taxes, we're going to have a stimulative fiscal policy, and we're going to have lower regulation. Those things are very good for stocks, and people will quickly realize that. Last night at 1 o'clock, I switched very briefly from CNN to Bloomberg and saw the S & P was down 30 points. And I said, gee, I wish I was on the show right now so I could say that stocks will be up.
00:15:41
Speaker 3: Next time you call in, I'm going to give you my phone number after this because I was there. You should have called me and told me this. Ralph, thank you so much for joining. Great to see you. Ralph Schlossstein, Evercore Chairman Emeritus and BlackRock co-founder. This is Bloomberg.
Speaker 1: Bloomberg Audio Studios.
00:00:04
Speaker 2: Podcasts. Radio.
00:00:06
Speaker 3: News. Pleased to say that joining the show now is Evercourt Chairman Emeritus Ralph Schlossstein. He is also the co-founder of BlackRock and former Deputy Assistant Secretary of the Treasury in the Carter administration. Ralph, no one we'd rather talk with this morning. You're an entrepreneur, you're a business person, you've had experience in government too. You have constant conversations with CEOs. For CEOs who are waking up in America today following a blue wave, what if anything changes for them?
00:00:33
Speaker 1: I think a number of things. Number one, I think the vote last night was a vote for centrism, a vote for checks and balances, a vote for a less volatile world, and obviously a vote for paying attention to the needs of of the vast majority of American people who are, in their minds and in reality, paying too much for their lives. For the CEOs, I think number one, it bodes for a pretty good economy. I really believe that. And historically, if you look at divided government, Congress being in one party's hand, the presidency in another. Those have been periods of some compromise, economic growth, and good for markets. And one other thing, if you're sitting there, and this affects obviously Evercore's business particularly, If you're sitting there thinking about that big strategic deal that you want to do, I think it's reasonable to conclude that the regulatory environment will be a little more receptive over the next two years than it might be after that.
00:01:51
Speaker 2: So then how do you think this current political environment could change where global capital flows and how companies invest them?
00:01:57
Speaker 1: I think the.
00:02:01
Speaker 1: Global capital flows will continue to go to America. We have the single, we have the strongest capital markets, the most liquid capital markets. We have the greatest creative entrepreneurship in the world, by far. You know, I wouldn't trade America's hand with any country or continent.
00:02:28
Speaker 3: Today. and it's still a country with incredible growth, too. We see that in all the figures. This idea, Ralph, that this was a vote for moderation, for a more centric government, I just wonder how that also squares, though, with this big pull from the left, with very far left candidates upsetting in the primaries, winning their elections last night. Does that sort of change the dynamic, at least for those coming in, and just how center this current Democratic Party looks?
00:02:56
Speaker 1: Well, I would say that in reality, they get a lot of publicity, but they're a very small minority of the Democratic caucus in the House and in the Senate. We have exactly... one Democratic senator who ran with a somewhat more left than I would be comfortable with. And so that's out of 54 or 55 or 56. In the House, I think you have 12 or 15 senators It looks like there are going to be somewhere on the order of 250 Democratic House members. So you've got literally somewhere between five, six, seven percent of the caucus. And very importantly, Hakeem Jeffries, who will be the new speaker, can actually get the majority of his caucus to go for something without any of those members. So I think the size of the victory in the House gives Speaker Jeffries a lot of flexibility that he might not have otherwise hoped for, and certainly more than Speaker Johnson had in the previous Congress.
00:04:14
Speaker 2: Do you think the results we saw overnight is a preview of what 2028 could look like?
00:04:19
Speaker 1: Well, I think the Democrats in the Congress have a really important decision to make. There are two temptations. The first, which I very strongly support, is put on your policy hats, pass legislation that's important and relevant to the things that the American people care about. Energy prices, food prices. housing availability, health care availability. And the president may compromise on some of those. He may veto some of those. But I am a democratically inclined business person. That's what I hope we do. There will be some who are tempted to have a little bit of a more investigative approach persecution-oriented, because obviously we've seen a period of time when the Justice Department has been weaponized a bit in the eyes of many. And there's a temptation to respond to that somewhat in like kind. I truly hope that the Democrats in Congress resist that and that they focus on doing the right things for the American people.
00:05:44
Speaker 3: When it comes to the fiscal trajectory of this United States, it's something you've long spoken out against and you're concerned there. That's one of the things that notably wasn't on the ballot, deficit spending. Maybe the bond market has fits and starts about what it cares. If it cares about that bond market notably rallying today. Is there anything that puts a brake on this Congress? Again, especially because that was not on the ballot. They came in with no one talking about deficit spending in the United States.
00:06:09
Speaker 1: Well, if I have a concern about the next couple of years, I think our fiscal trajectory is totally unsustainable. It will end. I've often said this. It will end. When it ends, it will end badly. I just don't know what will precipitate that and when it will happen. If you look back historically at periods of divided government, particularly centered around the fiscal policy and budgets, the method of compromise between the Democrats and the Republicans has very often been no new taxes for the Republicans and some more spending for the Democrats. That would obviously exacerbate the concern that I already have. I think it's a very low probability, but what would be a remarkable thing would be if we actually had something along the lines of, I don't think you could do a real Simpson-Bowles, but a mini Simpson-Bowles where there's an acknowledgement on both sides of the aisle that we have to start bending the curve on our fiscal trajectory.
00:07:20
Speaker 3: Do you think the bond market could force markets to do that? Again, notably not reacting today, but it has this year had past episodes that has gotten the attention of this government.
00:07:28
Speaker 1: Yeah, I ultimately believe it will be the bond market that is the trigger but it will be something else that triggers the bond market. It won't be the bond market alone.
00:07:39
Speaker 3: You were getting into this before. Part of the reason that a lot of corporate America has said we are going all out with M & A is because it's a more friendly regulatory environment. You were saying that you expect companies, basically, they're now having a two-year ticking clock. Is that fair to say that we don't know what's going to happen in 2028? This is still favorable. Let's get deals done.
00:07:57
Speaker 1: Yeah, I think you have to look at the fact that a huge amount of what business deals with is not adjudicated in the legislative world. It's adjudicated in the regulatory world, which is controlled by the executive branch. So if you look, if you're sitting here today as a business person, you're going to say, well, the political world has gone a fair amount more democratic, which traditionally has involved more regulation, more antitrust oversight. But the executive world still has two years to go. And I basically, even before this, nobody would have anticipated the degree of the blue victory here. But even before that, and it's not clear to me that this changes what I said earlier, which is if you look at what Trump has done in his first two years, there's only one piece of meaningful legislation, the big, beautiful bill. Everything else he has done by executive order, by fiat, and the really only check and balance on him has been the courts. And in some cases, he's ignored that.
00:09:14
Speaker 3: What do you then make of the incoming overhouse committee chairman saying two words, lawyer up? I mean, for companies, is this just more investigations, especially Trump-aligned ones?
00:09:24
Speaker 1: In the world I live in, that's a very disappointing statement.
00:09:27
Speaker 3: Do you want to say anything more about that, Ralph, or do you want to just leave that there?
00:09:31
Speaker 1: You know, I think disappointing is a very strong word.
00:09:33
Speaker 3: Okay, it is a very strong word. Okay, but not just that, because again, this idea that you get pushback. The states have been quite active as well. I mean, all you need to look at is the Paramount deal and what California did. Excuse me, considering some of the local elections, do you expect states also to continue to push back against various deals that get done?
00:09:51
Speaker 1: Well, in these areas, states have de minimis standing in reality.
00:09:58
Speaker 2: And.
00:09:58
Speaker 3: you.
00:10:00
Speaker 1: Know, I think I was not involved in the Paramount discussions or the transaction. But my guess is that Paramount, even though they probably would have won in court, made a decision. We want to get on with this and let's make a, you know, a set of milk, which was of modest proportions. And that California probably agreed to that because they knew their legal case was not as strong as they would want. So I don't, you know, in a lot of areas, the states and the localities have huge influence, including over elections, but in antitrust, not really.
00:10:43
Speaker 2: If we choose to stay local, let's go to Texas, because that saw the first Democratic win since 1990s, and Bloomberg Invest had a conference there. Danny was the headline for much of that. And entangled with Texas is data centers, and roughly a third of the data centers that are set to be built are in Texas. What do you make of that? Do you think that we will see more roadblocks ahead?
00:11:01
Speaker 1: I don't think this is going to be a black or white thing. I mean, I think, you know, AI is the single biggest thing that's happened in my business lifetime. It's incredibly important to America's competitiveness, and we're not going to stop progress. I do think things will slow, but even in the Democratic leaders, I mean, you look at Josh Shapiro, for example, in Pennsylvania, His position is let's have them slow down, but I'm not against them as long as they don't cause higher utility bills and higher taxes for the localities. So the position I think that the Democratic Party, leaders will ultimately come to is not, you know, let's go back to the railroad ball, you know, to ball bearings, but let's have progress, but let's have progress that doesn't hurt the less well-off and less able to defend themselves, people in our society.
00:12:11
Speaker 3: While slowing down doesn't derail AI progress, it certainly has in past instances, and certainly today injected fear into markets, core weave, all the data center plays down quite significantly. Is this slowly becoming, or maybe quickly becoming, a less favorable environment for Anthropic to IPO into?
00:12:28
Speaker 1: Well, I think you look at what stocks are doing today, you couldn't say that's an unfavorable environment.
00:12:34
Speaker 3: Sorry, I'm always looking for the doom and gloom. I'm a skeptical journalist, Ralph, but please continue.
00:12:39
Speaker 1: And look, Anthropic is a fantastic company. And, you know, I hearken back to the 1999-2000 2001 period when we had a much more of a bubble than we have today and I remember doing an analysis you know I was at BlackRock at the time and Cisco which is a great company in order to justify the valuation that they had they had to capture 150% of the global router market that obviously was not going to happen so Clearly, there are some companies that have too frothy evaluation. And there are some companies who are going to, you know, will become the pets.coms of the world.
00:13:30
Speaker 3: Where should we look for the froth? Where do you see it?
00:13:32
Speaker 1: You know, right now, almost anything AI attracts some amount of money. Not all of these companies are going to.
00:13:48
Speaker 1: Grow into their valuations. But there will be some, 10 years from now, we're gonna be sitting here staring at a several trillion dollar value company that didn't exist 10 years ago.
00:14:01
Speaker 2: And earlier you said that there's no place you'd invest in other than America, and I'm sure many would agree.
00:14:05
Speaker 1: I didn't say no place, I said it's the best.
00:14:07
Speaker 2: Best place, yeah, distinct difference. So let's take a best place. Do you think that investors should prepare for higher corporate taxes and also more regulation? under this new administration?
00:14:20
Speaker 1: That is certainly a possibility two years from now. And I remember in 2016, I was in Paris election night, and I was awakened at five in the morning by Ed Hyman, who was the head economist at Evercore ISI at the time, and he was in Japan And he said, I have to speak to a bunch of institutional investors in an hour. What should I say? And at that time, the S & P was down 100 points, 5%. And I said, Ed, I just woke up. But if you want to be provocative, here's what I would say if I were delivering that speech. I would say that by the time the New York Stock Exchange closes at 4 o'clock in New York, stocks will be up. And he said, really? Why are you saying that? And I said, well, because we're going to have lower corporate taxes, we're going to have a stimulative fiscal policy, and we're going to have lower regulation. Those things are very good for stocks, and people will quickly realize that. Last night at 1 o'clock, I switched very briefly from CNN to Bloomberg and saw the S & P was down 30 points. And I said, gee, I wish I was on the show right now so I could say that stocks will be up.
00:15:41
Speaker 3: Next time you call in, I'm going to give you my phone number after this because I was there. You should have called me and told me this. Ralph, thank you so much for joining. Great to see you. Ralph Schlossstein, Evercore Chairman Emeritus and BlackRock co-founder. This is Bloomberg.
