In this interview, billionaire Jon Gray discusses the economic environment and where he sees the investment opportunities. Jonathan also talks about the businesses of Blackstone, with a focus on real estate investing.
Billionaire Jon Gray: Investment Opportunities, Real Estate and Economic Environment
Q3 hedge fund letters, conference, scoops etc
Transcript
So what do you do in a world of more violent. How do you invest into it. Well first of all let me start by saying Are we in a world of more volatile. We're certainly in a world with more volatility the data would say that. And I don't think we should be shocked by that. We've had a great run in asset prices for a long period of time. Volatility had been fairly low. The Fed has begun to raise rates. We've got some trade tensions out there we have some issues in emerging markets. We have some issues in Europe as well. You know oil prices have come down sharply. I think it's natural that you have this kind of volatility at some point during a cycle. So I don't think that's necessarily bad for our business. This is generally a good thing because if asset prices keep grinding higher that's hard to find opportunity. And so if you have a business model like we do where you get capital tied up for long periods of time you have discretion when things drop in price you can move quickly and because you're not short term financed or the capital can be called away. You're not forced to sell. So for us we look at this and say wow there are lots of assets around the world that have been repriced. We've got close to 100 billion dollars of dry powder. This could be a more interesting invite investment environment going forward. So they've been repriced already. What was the catalyst there.
Well I'm just saying if you look at the stock market global stock markets you know U.S. stock markets down what 10 plus percent from where it was. I mentioned oil prices have fallen 30 plus percent in a short period of time. Some credit spreads have gone out so I just think an end certain asset classes have obviously traded off more than others. So the energy sector in particular there's been more displacement there so and overall as earnings have grown. When you overlay this decline in prices multiples have actually come down a fair amount. So the stock market on next year's numbers are trading at something like 15 times earnings. All right. So I want to go deeper into each of your lines of business in a minute but before we get there. Help us understand the investing environment versus the economic environment because obviously they're interrelated but not necessarily super correlated. It feels like right. Yes. So I'd say on the economic side people are obviously a little bit nervous given this volatility. I would say if you look down at the numbers are still pretty good. Consumer confidence is at an 18 year high. Small business confidence is at I think an all time high unemployment's obviously very low. Corporate earnings have been strong. And what we're seeing with our companies is generally pretty good. So that's positive. I think the issue back to my earlier comments is as the labor market tightens the Fed naturally is going to move towards raising rates. And that is going to put pressure on multiples and that's really the shift we're facing right now.
So it's very possible you could see a decoupling where economic growth continues to be pretty good but because wages go up that impacts companies bottom lines and becomes multiples come under pressure valuations don't grow at the same rate that the economy may be. So you have a stronger economy less growth in valuation and therefore as an investor you have to become much more selective in how you deploy capital right. So as you look across the world. Let's talk about Europe for one second because Braggs it obviously I feel like every day there are more and different headlines. Italy remains an opportunity. Europe is a place where you guys have invested heavily across a lot of different asset classes what's the opportunity or is there an opportunity there right now in Europe broadly. So interestingly on Europe I'd almost say the opposite I'd say growth in Europe.
