transcript20 - Financial Markets: Lecture 20 Transcript...

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Financial Markets: Lecture 20 Transcript April 11, 2008 << back Professor Robert Shiller: Well, I have the pleasure of introducing to you today Stephen Schwarzman, who has kindly agreed to lecture our class. Mr. Schwarzman graduated from Yale in 1969. He was at Davenport College. Do we have any Davenport people here? A few, not a lot. He graduated then from Harvard Business School in 1972. He worked for Lehman Brothers as--I don't know if it was his first job, but one of his first jobs, and became Managing Director at Lehman Brothers at age thirty-one and he became head of their Global Mergers and Acquisitions team. In 1985, Mr. Schwarzman, with Peter Peterson, founded the Blackstone Group, which has become the lead manager of alternative assets. In some sense, what he does and what David Swensen does, whom we had heard from earlier this semester, are similar. They're both looking at unusual and different investment assets and they are both very successful in doing this. Mr. Schwarzman's firm has had a return on private equity investments of 23% a year for the last--on average--for the last twenty years. This is a little bit in excess of David Swensen, but I think we have to put them both as remarkable investors. In the real estate group at Blackstone, they've had 30% a year for the last fifteen years and this is after fees. Blackstone Group has been very much in the news recently. It just came out that they are apparently going to be buying $12.5 billion dollars of leveraged loans from Citigroup at a steep discount. So, apparently they've seen a profit opportunity there or they're supporting our economy from the ravages of the subprime crisis. Also in the news, China has announced that it plans to buy $3 billion dollars stake in Blackstone Group as its first effort to diversify its $1.2 trillion dollars of foreign exchange reserves. So, the Blackstone Group was picked by the Chinese government as the most fitting place for it to put some of its reserves. With that, I will leave it to Mr. Schwarzman, who will speak for a while and then we will open it up for questions. I'm going to have to ask--can you repeat their questions because it will be difficult hearing otherwise? I have to move the two microphones. Mr. Stephen Schwarzman: Well, thank you very much for coming out on what's a bit of dreary, slightly rainy morning. When I was an undergraduate, you wouldn't have gotten much of an attendance; people would have been sleeping in. So, it's awful nice of you to be here. There are some dramatic differences from when I was an undergraduate and you are. One of the first differences is that this course wouldn't have existed because no one had an interest in finance at that time. It wasn't a particularly interesting time. In the 1960s, the securities markets actually were regulated, commissions were fixed on the New York Stock Exchange; so, it was very difficult to find some way to compete. It was sort of rigged system, if you will, and it wasn't open. So, there was very little to no interest, really, in finance. There really wasn't an SOM--School of
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This note was uploaded on 03/17/2012 for the course ECON 252 taught by Professor Robertshiller during the Spring '08 term at Yale.

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transcript20 - Financial Markets: Lecture 20 Transcript...

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