Avenue Capital founder and CEO Marc Lasry joined hosts Stephanie Ruhle and David Westin for the debut of Bloomberg TV’s new flagship morning program, Bloomberg <GO>. He spoke about the lack of liquidity in the markets and pressure on investors to show short-term results.

On the U.S. economy, Lasry said: “I actually think the U.S. economy is doing great compared to the rest of the world.  So the first question is where would you want to invest?  Do you want to invest in the U.S., do you want to invest in Europe, do you want to invest in China, do you want to invest in emerging markets?  At the end of the day, the best place to invest is the U.S. So if I was going to be an equity investor, I would be an investor in the U.S.”

On the idea of more Fed stimulus, Lasry said: “I think it would be the worst thing in the world…I think right now, we have been living off of theses low interest rates and having more stimulus isn’t what you need.  What you actually need is you need to get back to a little bit of normalacy and understand that the Fed can’t keep on pumping more and more stimulus into our economy.  Our economy is fine.  Let it grow and let it do what it needs to do.”

Marc Lasry

Hedge Funds: Who’s Winning and Who’s Losing

The ‘Phenomenal’ Buying Opportunity in Energy

Lasry: More Fed Stimulus ‘Worst Thing in the World’

Short-Term Pressure Ends Long-Term Market Patience

DAVID WESTIN: We are now about 30 minutes from the opening bell here in New York.  Welcome to Bloomberg Go. I am David Westin.

STEPHANIE RUHLE: And I am Stephanie Ruhle.  Here with our favorite Canadian, our co-anchor Erik Schatzker.

WESTIN:  Welcome, Erik.

ERIK SCHATZKER:  Good morning Stephanie, good morning David.

RUHLE:  Good to have you.

SCHATZKER:  Great to e here.  The first day of Bloomberg Go, but as you both know, I’m not the only person who’s here.  Marc Lasry is here too.  He’s the co-founder and CEO of Avenue Capital, the $14 billion distressed debt hedge fund.  Marc, good morning.

MARC LASRY:   Good morning.

SCHATZKER:  Great to have you on this inaugural show.

LASRY:  My pleasure.

RUHLE: I would like to point out he is the co-founder with two women.  You get that?  Women.  Important point.

SCHATZKER:  Since we are talking about markets, isn’t this the perfect time to talk about the five stories that matter to markets now, and we have to begin with Trian Fund Management taking a $2.5 billion stake in General Electric.  This is the biggest investment yet for Nelson Petlz, the guy at the top of Trian, and it makes his firm a top 10 GE holder.  What does Trian want?  You probably know by now: faster, deeper cost cuts, more disposals of those GE finance assets, the house that Jack Welch built, and caution on acquisitions, plus an increase of some $20 billion in debt so that GE can buy back more stock.

Here’s my question to Marc Lasry.  Marc, we’re all used to activists sort of swinging for the fences right now, but what does it say to you that a firm like Trian would target the bluest of American blue chips, General Electric?

LASRY: Well, look, I think if you have a day — the reason they’re doing is they believe that there is a lot of value there that they can get to. And because it is GE, GE has been slower. A the end of the day, if I am GE, I would call Nelson and say thank you.  By the way, it’s very kind of you, but you have 1 percent.  In my world, the only way people listen to us if we buy 20 or 25 percent of the debt.  So I always find it amazing that someone who has 1 percent of the debt — of equity is able to get as much attention as Nelson is getting.

RUHLE:  Yeah but —

WESTIN: Depends on part, Marc, on Nelson’s ability to get some of the biggest institutional investors to listen to what he has to say and come along with him?

LASRY: 100 percent.

WESTIN:  Because there have been some instances where people have taken small positions but actually made a big difference in the company.

(CROSSTALK)

RUHLE:  –atJanna (ph).  That guy had huge impact which has taken small stake.

LASRY: Yes, but you’ve got to get everybody else to agree with you.  Right?  So it’s not just — it’s not just — he may have 1 percent, but you’ve got to get all the other large holders.  You ended up saying he’s now one of the top 10.  So if he can get the other 10 guys, then you can put pressure on GE.  But at the end of the day, you can do that whether you have half a percent, a quarter of a percent; it’s just convincing everybody else that you’re right.

SCHATZKER: But how is that — to your point, and what Stephanie said — how is it there is so much symbolic value in just the entry of an activist, not just to a company like GE —

RUHLE:  That’s a good point.  You’ve got activist —

SCHATZERK:  But you mentioned Qualcomm, you talked about — we have to add to that Carl Icahn, Apple, for example.  I want to go back to what you said — thank you very much, Nelson, but I’ve got a business to run.  Why isn’t it more talk to the hand, right?  Like we’re working for shareholders already, in case you hadn’t noticed?

LASRY: They should.  I never understand why they don’t.  It doesn’t make any sense.

SCHATZKER: So you want management and boards, for that matter, to have more backbone when it comes to dealing with activists — ?

LASRY: Absolutely.  It’s just that everybody’s so worried with what the press is going to say.  Everybody’s so worried.  So all of sudden, now GE is in the news and everybody is going to focus on all the things that Nelson has said.  And people are going to focus on that, and then you’re going to ask all the other holders would you agree with him?  Would you not agree with him?  And either Nelson’s going to be able to get everybody else to agree, or GE is going to be getting all  theirshareholders to agree with what they are doing.

SCHATZKER: But what explains, then, why these — why these managements and boards keep rolling over?

LASRY:  Because I think at the end of the day, everybody is worried and nobody likes being in the news.  So when you’re in the news, you feel that there is a lot more pressure.  And I think boards end up reacting to that pressure.  And if I was the board, I would end up saying, look, at the end of the day, we know what we’re doing.  This has been our plan.  Thank you and we’re happy to talk to you because you’re a shareholder.  By the way, we think we’re doing what’s in the best interest of all shareholders, not just you.

RUHLE: Erik, it’s like the Trump effect.  Donald Trump has come out guns ablazing at every other potential candidate, and we’re all sitting there saying stand up for yourself.  Where are you?  And no one is talking.

WESTIN: A lot of board members have never been in the press before, a lot of them.  And once you have been in the press a few times, you learn to let it roll off your back.  Because —

LASRY: Yes, you do.

WESTIN:  Because, you know, the circus moves on to the next town.

RUHLE: Guess what? Being on a corporate board is not just about boondoggles and golf trips and seeing your homeboys every six months.

WESTIN: It is not?

RUHLE: Not anymore.

Okie doke, number two.  The bond market does not trust the Fed.  After Friday’s weaker than forecast jobs report, traders are betting the Fed will wait until at least March before lifting its benchmark rate from zero.  The traders do not fully price in another hike until early 2017.

First of all, do you care — how much of your day is spent, how much time are you devoting to timing the Fed hike?

LASRY: Zero.

RUHLE: There you go.

SCHATZKER: However, if we look further out, and there is a nice chart that helps to illustrate point.  Two lines, as usual.  On the top, right, we have — this is what the Fed says is going to happen to interest rates, the average dot plot projections.  And on the bottom, we have a proxy for market expectations for interest rates, right, the overnight index swap right.

And look — as we get out to 2018, the divergence is huge.  So, the market is saying, effectively, that the economy is going to be growing slower and the inflation is going to be nonexistent.  Who do you trust, the Fed or the market?

LASRY: I actually trust the market.  But part of it is we — people view that the Fed has been much more reactive than proactive and I think that’s why you see that divergence.  If you ended up having a very proactive Fed, I mean, at the end of the day, we’ve had rates where they are for the last four or five years — extremely low.  It’s time for those rates — everybody knows rates are going to move up.  The question is when and how quickly.

WESTIN: So that’s perfect lead-in to number three story that is moving the markets right now.  Minnesota Fed president Narayana Kocherlakota told Bloomberg Radio the Fed could have added stimulus at the September 17 meeting.  Take a listen to what he had to say.

(BEGIN AUDIO CLIP)

NARAYANA KOCHERLAKOTA, MINNESOTA FED PRESIDENT:  Given the inflation outlook, given how low inflation is expected to be, to ensure the credibility of our inflation target, taking more accommodation — taking a more accommodative stance would have been totally justified.

(END VIDEO CLIP)

WESTIN: So, what would that tell you, Marc, if they came up with more stimulus?

LASRY: I think it would be the worst thing in the world.

WESTIN:  Do you?

LASRY:  Yes, I really do.  I think right now, we have been living off of theses low interest rates and having more stimulus isn’t what you need.  What you actually need is you need to get back to a little bit of normalacy (sic) and understand that the Fed can’t keep on pumping more and more stimulus into our economy.  Our economy is fine.  Let it grow and let it do what it needs to do.

WESTIN: We were just talking about this with Paul Tudor Jones.  And sooner or later they’re going to have to come off the zero bound, right?  And (INAUDIBLE) too used to that.  I mean, there is almost a moral risk.

SCHATZKER: But there has to be a justification to get off of zero other than, well, you just got to do it.  You need to see some inflation, you need to see signs that inflation expectations are rising, and there are none.

LASRY: There aren’t, but what everybody’s focused on is how quickly the economy’s growing, right?  And what ends up happening is everybody is happy to raise rates because the economy is growing at 3 percent.  And then everybody gets very nervous if the economy is growing at 1 percent or 2 percent.  So that is why everybody slows it down and why there is pressure to say, no, you need to keep on stimulating.  Maybe the normal is us growing at 1 or 2.  Maybe it’s not us growing at 3 or 4 percent.  And that’s — I think that is where there’s this huge disconnect.

RUHLE: OK, if you think the U.S. economy is doing OK, go global.  What do you think about Europe?  What do you think – I mean, is it doing well in comparison to the rest of the world or do you actually think it is doing well?

LASRY: I actually think the U.S. economy is doing great compared to the rest of the world.

So the first question is where would you want to invest?  Do you want to invest in the U.S., do you want to invest in Europe, do you want to invest in China, do you want to invest in emerging markets?  at the end of the day, the best place to invest is the U.S.

So if I was going to be an equity investor, I would be an investor in the U.S.  For us, since we’re a distressed player, where we’re seeing opportunities is in Europe, in Asia — it’s areas that are having problems.  That is where we are investing because they’ve got issues.  The U.S. has so little issues right now.

RUHLE: Marc Lasry, not afraid to swim in the deep end of the pool.

I’ve got to give you number 4 — the commodity slump is threatening emerging-market corporate debt, which has been pretty resilient until now. Companies throughout the developing world are at an increasing risk of defaulting on dollar-denominated debt as emerging market currencies slide.

So this takes us right back there.  We are seeing investors, who for the last four years were desperate for yields, get into some dicier places.  Now that markets are sliding, are you worried that we are going to have a repeat of 2007, 2008, because things are getting rocky again?

LASRY: You’re not going to have a repeat of 2007-8.

RUHLE: Why?

LASRY: Well, because first of all, with 2007-08, was that the financial system was about to go under.  That’s not going to occur.  The banks all have plenty of liquidity and capital requirements.

What you will have is you will have a number of companies that will have issues.  And that’s fine.  And the reason they’ve got issues right now is simply because of one fact.  Everyone was investing in emerging markets and investing there because they thought there was huge growth.  All of a sudden now there isn’t huge growth, and everybody is now worried about sort of a slowdown. And you aren’t getting paid enough for the risk.  You are only getting paid 200 or 300 basis points for that, and everybody’s realizing that and going, oh my god, I’m not getting paid enough so now —

RUHLE:  Wait. My yields shouldn’t clear at 6 percent?

WESTIN: Erik, you’ve got number five.

SCHATZKER: I do indeed.  First it was the banks, everybody; now it’ the insurers that are facing higher capital requirements.  According to some documents released in Switzerland today, AIG, Prudential Financial, Metlife, and six others insurance companies deemed too big to fail will have to increase capital by an average of 10 percent by 2019.  The regulators want to penalize non-traditional products like variable annuities.

But why I want to raise the topic with you, Marc, is that insurance companies are some of the biggest, if not the biggest, corporate bond buyers out there.

RUHLE: Such a good point.

SCHATZKER: This is a world in which you play.  Now, granted, they are going after investment-grade and you typically are not, but what is it going to mean for the bond market if insurers have to hold more capital?

RUHLE: Corporate bond market.

LASRY: Well, if you’re an insurance company, you’re going to have — you’re going to be pushed into buying riskier investments.  You just have to.

SCHATZKER: To deliver a return to your investors..

LASRY: Yes.  Not only to return to your investors, but to able to sort of meet the obligations that you’re going to have.

SCHATZKER: That too.

(CROSSTALK)

LASRY:  You’ve to pay everything out. So, bBefore, if you’ve got to hold more equity capital and you’ve got to buy more treasuries, which is the safest thing, then at the end of the day, on the rest of your capital, you’ve got to take more risk.  I mean you just can’t sort of say, look, you’re going to force us to buy paper, which is the 10-year at 2 percent.  Well, at 2 percent, why would I invest in an insurance company?

(CROSSTALK)

RUHLE:  All right, we’re going to find out in the next hour, why would you invest in a hedge fund manager?  Ask him.

Tweet your questions at us @bloombergtv. We’ve got Marc Lasry, co-founder of Avenue, with us for the hour.

RUHLE: Welcome back to Bloomberg Go.  We’re going to talk Glencore, up more than 13 percent in London.  Shares jumped as much, get your head around this, as 72 percent in Hong Kong trading.  The company is looking to sell a stake in its agriculture unit.  A new report out by Sanford Bernstein says the business could be worth $10 billion.

Avenue Capital’s Marc Lasry is still with us.  Marc, what have you thought of this Glencore ride?

LASRY: Look, I think for us, because we’re involved on the energy side, I find it fascinating.  Because at the end of the day, the biggest issue Glencore has is the debt that’s on its balance sheet.

Right, so when you’re a bank, you are lending money to an investment-grade company.  And the reason you are is because they’d add $50 billion of equity value.  As that equity value kept going down, that’s the reason everybody was worried about Glencore.  Are the banks going to keep on lending to a Libor plus one.?  So they need to have that equity keep moving up, or they’ve got to get more equity in there.  The reason they’re doing that is because banks are demanding it, right?  Banks are going to want you to have more equity value for them to keep on lending you as much money as they’re doing.

WESTIN: The thing with this (INAUDIBLE), I think their market cap is like $20 billion, or something like that, so they’re well down.  This is my question — is this a problem of strategy, is this a problem of execution, or is this a problem of bad luck?  I mean, they went in this with a new strategy.  We’re going to take a trading company and put it on top of a mining company, right?  It was supposed to be a bold, new, better mousetrap.  So from your point of view, what went wrong?

LASRY: Well I think what went wrong is just, you know, oil went from $100 to sort of $40.

WESTIN: But as a trading company, they should’ve been able to make money either way, shouldn’t they?

LASRY: Yes, they should’ve hedged it, but at the end of the day, nobody foresaw that. Right?  So I’m sure they hedged a little bit, but the problem is if you hedge that much, you’re making a bet.  And if you’re a trader, you’re not — what you’re trying to do is sort of hedge out for small amounts; you’re not trying to hedge out for these sort of events that you didn’t think were going to occur because the cost is too great, the insurance is too high.

WESTIN: So does that mean other (INAUDIBLE) companies take a similar hit?

LASRY: I am sure they did.

WESTIN:  We just don’t know because they’re not as big?

LASRY: Well, if you’re not as public, if you’re like a group within sort of an investment bank, you’ve just lost a lot of money, nobody really talks about it.

WESTIN: (INAUDIBLE) sector. They were just the highest profile in the sector?

LASRY: Yes.

SCHATZKER:  Marc, is there an opportunity for you in Glencore or any of the other big basic resource companies, like Rio Tinto or BHP or Vallet (ph)?

LASRY: No, not right now.

SCHATZKER: Because you’re in oil.

LASRY: We are, but what we’re trying to do is we’re investing in senior debt of companies.  And today you can buy that senior debt at 40 cents, 50 cents, 60 cents on the dollar.  Right, so you don’t need to go play it sort of the 80 cent, 85 cent, which Glencore is right now.

WESTIN: And we just need to say about Glencore, Peter Grauer, who’s the chairman of Bloomberg LP, is a member of the board of directors. You all should understand that.  And we’ll be back shortly with more of Bloomberg Go, because we’re going to see what hedge fund titan Marc Lasry is betting on today, from Bloomberg Go.

SCHATZKER: You’re watching Bloomberg Go. I’m Erik Schatzker, here with Stephanie Ruhle and David Westin.  The opening bell is just minutes away. It’s time to talk investment strategy with Marc Lasry, the co-founder and CEO of the distressed debt hedge fund Avenue Capital.

Marc, my first question to you on strategy.  What isn’t working?  Not just for you perhaps, I think you’re doing OK, right?  But what about Ackman, Einhorn, Paulson, Dalio?  They’re all getting smoked. Nothing seems to be working for anybody.

LASRY:  Look, I think a lot of that is that if you look around the world, I think people have gotten caught flat-footed.  And on the equity side, everybody is either buying the same names.  And when you want to get out of a name, getting out of that name just brings prices down 5 percent, 10 percent, 15 percent.  So for somebody like Ackman, you’ve got to buy such a large block.  And once you’re in, you’re in, and you can’t now change your mind, you can’t get out. And the market, now, there’s just so much more volatility and everybody knows who owns what, because it is all public.  So everybody else is, well, I know he’s going to have to sell sooner or later so I’m going to start shorting that.  And then you’ve got more and more sellers, and the pressure just keeps mounting.

RUHLE:  Has Dodd-Frank and the Volcker rule aggravated this pressure? Even though you’re talking equities as it relates to the same names in high yield or investment grade, no longer can investment banks cushion the blow.

LASRY: And that’s absolutely it.  Look, the biggest issue that’s out there is this lack of liquidity.  Everybody — everybody sort of doesn’t want to focus on it, but whether it’s on the equity side, whether it’s on the debt said, when you’ve got real sellers, prices really move down very quickly and you’re srot of seeing that.

And the reason for that is banks today aren’t allowed to take any risk capital, and so it’s moved over to the hedge fund side, or it’s moved over.

RUHLE: Yes, but that’s also because regulators and politicians don’t trust banks.  That’s how we ended up in this place with new regulations.

LASRY: I agree.  So do you think that is going to change?  No.  Therefore, this is where we are.

WESTIN: Whether right or wrong, (INAUDIBLE) point is there are fewer buyers in the market and therefore it puts downward pressure the prices.

LASRY: The problem today in any market is if you’re not right, and if you’re not right short-term, you’re going to be in a lot of trouble.  Because nobody has the patience anymore for being a long-term investor.  So I can say to you, look, invest with me.  It’s going to take two or three years, and if I am down after six months, what you do?  You’re like I’m out.

RUHLE: OK, then does this make Steve Schwarzman and the rest of the private equity community to have this extraordinary unfair advantage that they don’t have to have short-term goals?  They can say I am sitting on it for ten years? How can you compete against that?

LASRY: Well, you can’t compete against that. But at the end of the day, it’s the same thing, you’ve got to be right. I think part of — you’ve got to have the ability to be right but you’ve also got to have the luxury of time.  So I think what it ends up meaning is that we all need investors who will give you that luxury, and if you’ve got that luxury, that’s great.  But what you’re seeing in the high yield market and you’re seeing in equity markets is people are getting out of the markets, so therefore people are being forced to sell.

RUHLE: Therefore no one has a chance of starting a hedge fund today.

LASRY: It’s harder.

RUHLE:  If I wanted to start a hedge fund today, no one’s going to give me locked up money for a long time.

LASRY: No, it’s going to be very hard, so therefore I have a nice edge.

RUHLE: There you go.

(CROSSTALK)

SCHATZKER: Debt equity keep getting repriced. (INAUDIBLE).

LASRY: Absolutely.

SCHATZKER:  Are you actively investing, or are you waiting right now?  And if you’re waiting, what are you waiting for?  Are you waiting for a turn in the credit cycle? Is it going to happen?

LASRY: Oh, we’re investing.  My view is I don’t think you can time markets.  What you can do is you can time a cycle.  So what I mean by that is that today is a great time to buy.  It doesn’t mean that six months from now is not a better time.  But over the course of the next two or three years, if you’re right, you’re going to make a fortune of money.  You just have to have the patience and you have to be able, really, to have the luxury of time.

So, for us, we’ve got a lot of capital that’s locked up.  So, we buy. And, yes, we bought it at — we bought a bunch of energy names at 70.  Should I have bought them at 60?  Yes, because that’s where it’s driving.  Wait until they got 60.  And now they are trading at 50.  So a lot of these names just keep buying because you know that you’re ultimately going to be right.  You just need to have time.

SCHATZKER: You’re averaging down on the way.

LASRY: Absolutely.

WESTIN: And what about European banks?  That’s an area that you’ve invested in.  You’ve taken positions.

LASRY: So what we’ve invested in is we’re buying the debt that European banks are being forced to sell.  So there’s — here’s a perfect example.

RUHLE: Hold on though.  I feel like Erik is going to agree with me.  I’m going to high-five you right now.  We’ve had distressed investors say this to us for three years straight — well, I’ve got 30 guys parked in Europe, I’m waiting for those banks to just sell us distressed assets, and it hasn’t happened.

LASRY: First of all, it absolutely has happened.  Here’s the thing, and I could show you the figures —

SCHATZKER: There was a billion dollar deal just the other day in fact.

LASRY: First of all, there’s two markets.

RUHLE: But it only happens to the coolest guys in school.  That’s the point.

LASRY: Banks — starting four years ago, banks sold 31 billion euros of debt.  This year it’s 150 billion.  What everybody’s talking to you about is everybody thought you were going to have trillions of dollars of debt.  There isn’t.  What there is is anywhere between 150 billion to 200 billion of debt.  That is a huge amount of debt that’s got to be bought. So firms like ours are buying that debt, and you’re buying at a huge discount.

WESTIN: So let me put the question a different way around.  How far through the process are the European banks? And you have to be specific.

LASRY: Another four to five years.

WESTIN: Greece or in Spain or Portugal. How far through the process are they? Another four or five years?

LASRY: Southern Europe needs a lot more time.  The (INAUDIBLE) that’s happened is in Northern Europe, the banks were able to take reserves.  The reason you’ve got the ECB lending you money at zero is for banks to end up making that spread, and as they make that spread, they have more reserves, they can sell more loans, and that’s what is going on.

So we’re buying — we have one loan.  Five years ago — I won’t say the name of the bank because I don’t want to embarrass them.  They had a loan at 1.1 —

SCHATZKER: No, we’re in the embarrassment business.

LASRY:  Yes, I know, but I got to do more business with them.  They had a $1.1 billion on a real estate project.  We bid them 150 million.  It is about 12, 15 cents on the dollar.  What ends up happening?  It took that bank five years to take the write-down.  It was their largest write-down, from $1.1 billion to $150 million.  We just closed on it last year.  So we got a $1.1 billion loan for $150 million and over the course of four years, we kept bidding the same thing.

RUHLE: Why did it take them that long?  Because they just couldn’t look in the mirror and get real?

LASRY: No, no, they didn’t have the reserves.

(CROSSTALK)

WESTIN: By, the same thing happened in this country with our banks with Latin America debt in the early 1980s.

LASRY: Yes, same thing.

WESTIN:  Where they were really in the whole city and the big guys were in the whole — and they had to build up the reserves over the time so they could —

SCHATZKER:  They couldn’t afford a write-down?

LASRY:  No, you can’t, you don’t have the reserves.

RUHLE: Does that bank rhyme with Seuthcebank?  Just wondering.

(LAUGHTER)

RUHLE:  I’m not asking directly but do they rhyme with that?

WESTIN: Boy, that was something.

LASRY: Oh wow.

SCHATZKER: She’s clever.  She could catch you out, Marc. You’ve got to be careful.

Everybody acknowledges that there are these opportunities in European bank debt.  You know, the difference of opinion is how long it’s going to take, right, for the great profits to be realized.  Oil, everybody acknowledges that.  Coal seemed like a great opportunity.  Some people are getting their clock cleaned.  Where is the next great distressed debt investing opportunity?  Can you see it yet?

LASRY: No.  Why focus on the next when you know you’ve got a phenomenal opportunity right now?  Which is on energy.

(CROSSTALK)

LASRY:  Energy today is a phenomenal opportunity. It really is because if you combine the senior secured debt of all — of a vast majority of this paper is trading at 40, 50, 60 cents.  You’re getting paid a current.  So if it was a 7 percent, 8 percent coupon, you’re no getting the 16 percent.  So you’re getting the optionality to wait.  You’re getting paid to wait for the next two years.

RUHLE: But don’t you have to qualify that with if you can be a long-term investor?

LASRY: Yes!

RUHLE: Franklin Resources surely agreed with you in the spring —

LASRY: They did.

RUHLE: — when they were buying that paper at $70 price.  Fast forward six months, things are trading at $20 and they got outflows coming out of that ears.  So it’s a great investment if you are in your unique position.

LASRY: You need long-term capital because what ended up happening to Franklin and a couple other firms on the high yield side is, as investors demand their capital, you’ve got to sell.  And as you sell, you then put more pressure on those same names and firms like us wait and you sort of give people down bids.  But if you don’t have long-term capital, you’re going to be the disadvantage in a down market.

SCHATZKER: You like the names at 40 cents because, what, you think they’re money good, or you would be happy and — with the debt-equity swap and — ?

LASRY: Because I think I will either get paid par, or I will become the new equity of that company at an extremely low valuation, because everybody else will get wiped out.  So my debt will then get converted into equity in two, three, or four years, and then we will end up owning those companies.

Oil can’t stay at sort of $35, $40.  It just can’t.  So, I know everybody is going to well, look, it coulld go lower.  And if it does, then in essence, what you’re going to find is the vast majority of all these companies will then go into bankruptcy. Because at $35, they just can’t operate at that price.

SCHATZKER: So what about other hedge funds — the other credit opportunities guys, the other distressed players — who don’t have money locked up for as long as you do.

RUHLE: Ding, ding, ding.

SCHATZKER: What happens to those guys?

LASRY: They have issues.  I mean, we will end up buying the paper from them and that’s actually good for us and bad for them.

RUHLE: Are you able to raise money — while those funds are losing assets and we’re seeing it left, right, center, are you then picking those assets up?

LASRY: Yes.  I mean, we just finished raising an energy fund.  So we raised that about six months ago.  It’s a pretty large fund.  We’re raising a new European fund.  So we’ve been able to raise capital.

RUHLE: (INAUDIBLE) good new marketer.

Can I just ask one question then?  Does this mean that you’re going to start to look more like a Millennium, a Balyasny, a BlueCrest?  Those hedge funds that are platforms, where smaller guys who couldn’t have the type of infrastructure you do — could you start to look — I don’t want to say like a hedge fund hotel, but that’s what those firms look like.

LASRY: No, not for us.  I mean, for us really what we’re getting is institutional capital.  I think we have — we are very comfortable with the teams that we have, and it’s going to be those teams that are going to be able to focus on what we’re doing.  We’re not looking to add teams or anything like that.

SCHATZKER: Before we get to find out what is happening in some of the early trading in a moment with Matt, I want to know this — when you say those guys have issues, can you dollar-size the value of funds that have these issues right now?  How much money are we talking about?

LASRY: I would tell you it’s at least $50 billion to $100 billion.

RUHLE: Billion?

LASRY: Yes.  Because if you sort of look at it, think about it, right now —

SCHATZKER: Distressed players in distress?

LASRY: No, no, not distressed players — just player —  people who are buying debt.  The problem everybody has got to day, whether you’re a hedge fund, is you’ve got monthly liquidity or quarterly liquidity.  And most of those funds are down.  So you’re either going to going to go to your investors and you’re going to say, look, give me more time, or give me more money.  And investors have lost 5 percent, 10 percent, 15 percent, 20 percent, most investors who’ve got that quarterly liquidity usually take the capital allowed.

RUHLE: But then you blame investors  — do you blame these hedge funds and liquidity or do you blame the Fed?  The Fed keeping rates where they have, have put so many unsophisticated investors into credit products, specifically high-yield, when deals were clearing it 6 percent.  That has obviously caused pressure.  So what’s the real cause here?  Is it liquidity or is it guys who simply shouldn’t have been in high yeild?

LASRY: It is a mixture of both.  Look, there’s always people who shouldn’t be doing what they’re doing.  Right?  I mean, you want that.  You actually want to be able to take advantage of people.

(LAUGHTER)

RUHLE:  I wouldn’t know, here, right now.

LASRY: That’s what it is.

WESTIN: So Marc, there you have it.  Your woman, your candidate, Hillary Clinton, on “Saturday Night Live”.  She was a good sport, whether you thought it was funny or not.  Tell me what you think about her campaign at this point, if you will?  I mean, what’s the level of enthusiasm that you detect?

RUHLE: He is pretty enthusiastic.

LASRY: I’m biased, so let’s start off that way, OK?

Look, I think she’s doing a really good job.  And the problem is — you know, I always, when everybody asks sort of that question, I always ask a simple question.  Which is, out of all the candidates today, who would you want to be?  Right, who would you rather be?  The one candidate would like to be is the one they keep on attacking, which is Hillary Clinton.  At the end of the day, she’ll get the Democratic national — you know, she’ll be the nominee, and then she will become the next President of the United States.

WESTIN: Well, it’s a challenge for somebody in the same party to have the third term.  Right?  When you’ve got two four year terms of a Democrat, and the third — typically, it’s only if people are  really enthusiastic about what happened with the predecessor.  So how much of this dependent upon the approval rating for President Obama?

LASRY: I actually don’t think it’s going to be that much, at the end of the day.  I think a lot of it is, look, she is — she is a candidate who people know.  I think people want — sort of feel that she should have been the president.  Right, I think you’ve got a number of people in ’08 who sort of looked at that and said, you know, I think she should have done it.  Now I think there’s a lot of people who absolutely support her.

It’s — what everybody is always asking me is why don’t you have more enthusiastic supporters?  She’s got plenty of supporters, and all the supporters she’s got are very enthusiastic.

SCHATZKER: Marc, everybody is debating whether Hillary would be a better president than Jeb Bush, Marco Rubio, Donald Trump.  Would Hillary be a better president than Obama?

LASRY: I think she’ll be a different president.

(CROSSTALK)

LASRY: Obviously.

WESTIN: But tell me what the president should be, because one thing that strikes me, and I have great respect for her, she’s a very able person, she’s done a lot of things.  She has been in the public light a long time.  I’m not sure I understand what she stands for in terms of being president.  I mean, Bernie Sanders, you know what he stands for.

SCHATZKER: Right, the Teddy Kennedy question.

WESTIN: It’s sort of — I don’t know, frankly, I mean what her big issues are, what her big things she’d want to accomplish are.

LASRY: Oh, I think the things — what she wants to do, at the end of the day, is make it easier for the middle class to come back.  And that actually is a huge issue.  What she wants to be is that she wants it to be where people like me, or people like you, or anybody has the ability to succeed.  And I think she is trying to at least do that, whereas people feel like they can’t succeed anymore.  And I think that is the biggest issue out there.  It is trying to get people to believe in that.

RUHLE: OK, now we have to take you to the poll, Hillary versus Donald Trump, because if you’re talking American Dream, anyone can succeed, it’s one of the reasons Donald Trump has gotten so much support already.  Here you go : 46 percent versus 43 percent.  Doesn’t this blow your mind a little bit? Donald Trump kind of —

LASRY: What, that Donald Trump’s that high?

RUHLE: There you go, that Donald Trump is this high.

WESTIN: Yes, it’s early going.  We got a long way to go here.

LASRY: At the end of the day, it’s a great poll but there is no way, in my opinion, that Hillary doesn’t become president.  Because I think it’s exactly what you said — it is a long slog, and as people go through the process, everybody is going to  focus on these daily polls, weekly polls.

WESTIN: And I’m not sure that four years ago that wouldn’t have had Rudy Giuliani way up there.  And what happened to Rudy Giuliani?

RUHLE: That doesn’t mean Donald trump is going to be her opponent?

LASRY: I don’t know who her opponent is going to be.  I think that’s very difficult.

SCHATZKER: If you’re right and she’s the winner at the end of the day, regardless of what happens, is it better for her or worse for her campaign if Joe Biden enters the race?

LASRY: I actually — I could make you an argument both ways.  If Joe Biden — if Vice President Biden enters, then she’ll have an opponent within the Democratic Party and people see the differences more clearly.  The problem, right now, at the end of the day, for all the talk of Bernie Sanders, it to me is irrelevant where he’s leading, he’s not going to be able to win.  America is not ready for the socialist president.

RUHLE: I hope not.  I hope not.  Sorry, I shouldn’t have said that, but I did.  Okie doke, we’re going to be back with more from Marc Lasry.  Word associations when we return.

0950

(BREAK)

0955

RUHLE: Clearly, I was not in charge of the best moments of the day.  For me, what I’m going to post out there was David’s point that there could be times, there could be scenarios, where CEOs actually like activists knocking on their doors, where it actually helps them in terms of cost cutting, acquisitions.  Do you think this is the case?

LASRY: I think you could use it, absolutely. You can use that if you want to make —

WESTIN: It gives them cover for laying people off.

(CROSSTALK)

LASRY: There’s nothing I can do.  It is not my fault.

RUHLE: All right, the biggest force that is sitting with us right now is Marc. So Marc, we’re going to play word association.  We give you a word, your immediate reaction, your response.

I’m going to kick it off.  Private e-mails.

LASRY: They’re good.

RUHLE: They’re good.  They’re good.

(LAUGHTR)

WESTIN: Varied interest.

LASRY: Love it.

RUHLE: Love it.

WESTIN: Janet Yellen.

LASRY: Stubborn.

RUHLE: Stubborn.

WESTIN: That is interesting.  Stubborn.

SCHATZKER: Boston Celtics.

LASRY: Competitor.

RUHLE: Steph Curry.

LASRY: Pardon?

RUHLE: Stephen Curry.

LASRY: Phenomenal player.

RUHLE: You wish you had him?

LASRY: Yes.

SCHATZKER: Jim Harbaugh.

LASRY: Great coach.

WESTIN: Yeah, he’s going to be a big difference I think.

RUHLE: Marc, if you have anything else for living, if you started over, we know you’ve been a lawyer, a UPS driver, what would you do?

LASRY: I think I’d love to be a teacher.

RUHLE: Really?

WESTIN: There you go.

SCHATZKER: There is still time my friend.

RUHLE:  Amazing. Thank you.  Avenue Capital co-founder and CEO Marc Lasry .  Thank you for watching.