The top Global Business stories. Another sign of progress in the labor market, u. S. Companies 000 workers last month which is the seventime in the last eight months payrolls have climbed by at least 200,000 according to adp research. The payroll report is a out officially friday and it is expected a gain of 230,000 jobs. Record. Nday set a sales according to Research Firm com score, shoppers spend more than 2 billion online monday. Growth is officially slowing and consumers of and spreading out there shopping two other days during the holidays. On ready for fireworks again capitol hill. This morning, congress will question an executive from the airbag maker who is refusing to issue a nationwide recall. Rejected the recall demand by u. S. Regulators and the airbags are lame for at least four deaths and they have recalled cars only in states with high humidity which is partially blamed for the malfunction. Ralph nader says takata thinks it can get away with defying the government. They think the department of transportation is a patsy and it will not throw the full force of the law against them. They have been sitting on these airbag defects for years now with deaths and injuries and anxiety levels going up. Safety regulators say they are now considering their next move. It looks like has lot owners are true believers. Model s arehe tesla more likely than porsche owners to say they would buy their car again according to the Consumer Reports survey. Its the second year in a row that tesla has topped that list. Some might call tony blairs holiday greeting card the nightmare before christmas. I feel bad for him. The card shows the former british Prime Minister and his wife is burning up the internet. They said it looks creepy and terrifying and odd. Cut him a break you can judge for yourself in one observer said the oddest thing is that this mustve been the best photo of the two. He looks fine, give the guy a break. He looks startled. Who cares . Do you expect a full glamour shot . It was a professional photograph, almost certainly. I had to get three kids and a husband and a picture in front of a tree. That is hard. Who cares that much . Its a christmas card. Next year, they are not doing a photo card for sure. Lets talk about blackstone which has become so big in everything from real estate to hedge funds and distressed debt, it is easy to forget the firm started in private equity and remains one of the biggest in the business. Their 285 billion in management is under private equity. Its a great time to be in alternative assets. Private equity has its share of challenges. There is regulatory scrutiny and joe barata is back with me and stephanie. Ar15 problems facing our business. You have a world of problems. Oil is at 67. You are energy investors. You have two discrete Energy Investing funds. How viable are those investments with oil at six to seven dollars . What we do in the energy area is agnostic to the oil price. We are investing in Energy Transportation infrastructure. We are earning a rent on using the assets in heaven offtake agreement. Its agnostic to the underlying price of natural gas. We are investing in merchant power plants in the United States. Renewablessting in projects. We are investing in fossil fuel andr Plant Developments renewables in emerging markets and they have nothing to do with the price of oil. We also do a lot in natural gas. We have been more bullish on natural gas. Natural gas is down this year only about 9 compared to the 30 drop in oil. We have exposure to oil somewhat. However, we think this is a momentary decline in the price. It will not be structural. This is not a demandside problem. Demand is ok globally for refined products. It is a supplyside issue. In thely, the shale United States is well understood and opec is not cutting productions. Will stop being drilled and that will reduce the amount of supply. Prices will snap black and we view this just prices will snap back and review this as volatility which we love. It allows us to invest at better moments in time. Buying oilbably be assets at better prices over the next 12 months. Really . You view this as a buying opportunity . Longterm, we still believe the forward price deck for oil will be well above 80. If you look at the demand side of the occasion of the equation relative to the supply side like shale in the United States, we continue to be bullish much longer term on the price of oil. Are there already forced sellers . There will be, bonds are trading down, significantly in some instances. It is a sector that needs enormous capital in the credit markets. Credit investors are impatient if they are not getting their coupon on time. There will be distress and an opportunity to recapitalize some of these overleveraged situations and we will stand and as we can to make clever investments. Do you think there will be multibilliondollar opportunities . I do, if you look at the scale of capital required to extract the hydrocarbons and transport them around the world, it is many hundreds of billions of dollars if not more and private equity has an Important Role to play in that. Some of these things are not readily financed in the public debt equity Like Development oriented products projects. You have to have longterm money . You have to have a certain degree of risk. Projectd the sheneer than it needed 15 billion of capital of something that did not exist and you will not fund that in the public debt equity markets of private equity was required to develop that and it will be a great thing for the country and great for the recipients of that lowercost natural gas in europe and asia. Longerterm money means you dont have to worry about the volatility and the ups and downs in the oil prices. Can drill as long as you have a liquidity would you do. Does that suggest that the model that has been dominant in the shale oil and gas business is to vulnerable . You have independent expiration companies financing themselves with junk hans junk bonds and overnight can become viable . There is bollocks there is volatility in the oil and gas area. We have heard that since the 1970s. The thing with Financing Oil and Gas Exploration and development is that people know what they are signing up for. And itslobal market financed through junk bonds, not through Investment Grade credit or banks using depositors money. Its reliance on the Capital Markets and the risky and of the Capital Markets. We like the volatility it creates is opportunity for us to enter more aggressively when prices are down and there is distress. Do you think junk Bond Investors today have the Risk Appetite for volatility . They did five or six years ago. There could be some surprise to the downside in terms of default rate. In terms of default rates, spiking is a narrow measure. I dont know the facts on how much of the junk bond universe is in energy. There has recently been more issuance in the energy area but if you look across the whole oriented junk p bonds would be relatively small. If this lasts, this could create opportunities for you. That would not be a bad thing. So far as i can tell, you have not been as busy perhaps as you might like. Why does it seem from a distance that it is so hard for blackstone to find good private equity deals . Im pretty sure you can look at his travel schedule and say he is busier. My family would say that. Lets put it in numerical terms you have been committing at three times capital . Thats right, this youre a bit less but thats right. We had been pretty busy on the buy side. In this market, you have to navigate carefully. The prevailing market prices are high as a result of whats happening in the equity markets. That is prettye big right now among investors. Prices are a high and you have to find companies you can transform postacquisition. This is so you can be more in control of your destiny rather than relying on high multiples at exit to make your return. You are used to hearing about large public to private but those are not happening now. We are not finding compelling value and the ability to transform these companies once we buy them. We are tiptoeing in different areas. We are doing midcap deals where there is a great Platform Company hoping to double or triple the size through addon acquisitions and consolidating industries. Half the deals we have done this year have been the buy and build which is one of our best areas. We continue to become a strategic buyer. Invest in some of these development and Energy Infrastructure projects particularly on the power side. If you are not buying, does that suggest that they are overpaying . We dont see the same value. Theyve got a different model or different capability to intervene postacquisition. ,e have a slightly higher bar our risk tolerance is lower maybe that was 1. 5 years ago. Does that mean you are less bullish on the u. S. Economy than you were two years ago . Where quite bullish on the u. S. Economy and we see that through our Portfolio Companies. We are growing at about 10 . The snp has grown about 5 so we are doing a bit better. Are seeing a preview robust u. S. Economy. It is range bound and i think Consumer Spending has to be the big engine of the u. S. Economy, 70 of gdp. I dont see that in place for that to pick up. You need to see a resumption in the housing cycle and construction. We are not seeing as much of that as we thought we would. U. S. E confident in the economy. Our Portfolio Companies are doing pretty well. Based on what you see in your Portfolio Companies, you have a slightly different view of what you will get through the lens of the s p 500. The s p 500 is trading at 17x forward earnings. Do you believe the outlook for gdp growth justifies a valuation like that . Perhaps not. It depends on what you think Interest Rates will do over the very long period of time. Interest rates stay low, i think the market is valued fairly. We expect a couple of years of continued reasonable compounding in the equity markets and i think that will continue. Global cost of capital has to go back to the way it was for the last 50 years. I would assume that. Maybe it doesnt but you need to assume that it will. To make sure our portfolio is protected in the eventuality that happens and the tenyear treasury goes back to e multiples are 15 instead of 18. We have to make money in that cycle everything we are doing in our portfolio now inoculated us against that happening eventually. If it does not happen, it will be fine, too and our companies will be worth more and we should have invested more but i will take that bet. If we absolutely have to protect the downside for the investors. Why are take away is people putting so much money into private equity . Heads he wins, tales he wins, i get that. Lets take a quick commercial break and we will back in two minutes. Welcome back. We are talking with the global head of private equity at blackstone. You told us that blackstones risk tolerance and love and private equity is lower than it was and you are taking a conservative approach to the will win. Als you our private equity returns going to compare with the returns from the other Asset Classes that blackstone is in . You got real estate and Credit Opportunities historically, our returns have been able to compound over longer. As time because we hold the assets for longer, five or six years. The multiple of money we are able to generate in our funds is typically a bit higher. The real strength and private equity is that we have this locked up committed capital so when the world gets bad as it nobody calls us up and says send me my money. They do not force us to sell things at the wrong time. If we manage the fund properly, we have undergone capital and nobody did that better than our real estate guys. Brought a lot of good assets and we had less undrawn capital but we backed up the truck as much as we could in 2009 and 2010. Not having to sell things when the world gets bad and people want liquidity is a real asset for our investors. Where yount like this are worried about looming volatility on the horizon and having money in private equity is a really intelligent thing to do. Lets talk about your hedge fund is fund. Does it make sense given how poor hedge funds are doing across the board . It does because the large Institutional Investors have to deploy largescale capital. They need balanced and hedged equity exposure in an intelligent thoughtful way. Are we still making the argument that hedge funds are balanced and hedged . When you look at the best , they are just long or short. Our team designed to certain kind of risk that the investors demand. Its much more active in creating a program and finding a solution for problems that are big push and fund clients. Here tohedge funds are stay and they do protect capital. To generate the returns that you do, you need leverage. The fed has brought a lot more scrutiny to leveraged loans over the past year or so. How is that affecting the blackstone access to dad . It affects a little bit on the margin. We have not yet had a problem getting a transaction we want financed financed. Anything that constrains leverage which lowers purchase prices, i am more or less in favor of because as a buyer of would like to see things get cheaper. It is ironic that the fed is regulating something that is basically an outcome of the Monetary Policy they have created. The High Yield Bond Fund it performed externally well even through the downturn. I think it will continue to do so. Even right now . I think default rates will pick up. I think the business is being funded have staying power. The sponsors have proven an ability to keep these Companies Alive by investing more capital and extending maturity. The High Yield Bond Fund was foretold to have been gone in 2009 and it did not happen. Maturities and sponsors stepped up and put more equities in the toinesses and did things improve the operating performance of the company. I think the highyield bond and costse is toppy are historically low but it will be ok over time. A year agoold us that before the financial crisis, blackstone was contemplating a 100 billion deal. I know we are not there any longer. What is the biggest deal you can finance today . Probably probably 12 billion. That is in this market with the fed scrutiny. The capital is there, its a question of seeing the value. Can you make the returns . How many of those deals have you looked at over the past year . Probably five or six actually. You passed on all of them . For one reason or another it did not come together. A couple of them we saw the valuable could not make the deal happen in a friendly manner. Still out there plugging away. We did a large deal in februarymarch. We have to run but it is great having you. We will be right back. What adjusting to the price of oil means for the energy industry. And howthe bond king bill gross lost his empire in a bloomberg exclusive. Live from bloomberg headquarters in new york, this is market makers. The fall of the bond king, bill gross. Thanks to mary childs, we have or heardore seen details of what it was like at pimco before his forced departure. First of all, good on you. Thank you. It took months but what surprised you most . It was the mole aspect and the fact that he got fixated on somebody being a mole within the company. I think it drove him crazy and he had no ability to let it go and management was confused by that and there was friction over that. It ended up being a major breaking point and its very surprising. Not readyone who did it, youve got to read of this story. What was going on there that last year . I i was a pimco investor, would think inside that firm they were focused on bull markets and investing but it does not seem like that. I think they got distracted by a lot of the personal issues. When Mohamed Elerian left who had a comanager role, that ate away at bill gross and he had a hard time coming to terms with it. He took over the managing responsibilities but he did not like that stuff. Also, it was genuinely hurtful and he was upset. As he saw these things making it into the media, he felt betrayed because he fell people with them the firm were spies and were leaking and undermining the firm. Arent they supposed to be focused in investing in the Global Markets . It ended up being a gossipy and bill thought like he was always on tv so his image was important and having that undermined and interior it hurt him. Who did he finger . He seemed to fixate on mr. X and mr. Y. Thenw ball in london and josh timmons who through the Going Away Party for Mohamed Elerian which may have put a target on his back. Doesnt this sound like gossip girl . It became very distracting and i think the overriding thing over the year ended ended up hurting peoples ability to stay focused. Else,l more than anybody the total refirm fund relative to his peers was not doing so hot and people like dan iversen were still knocking it out of the park on their funds. That might be attributable to the asset class. Right, but it is a catch 22. Total return underperformed, he saw it as a reflection of himself. It hurt his own view of himself so than it hurt his ability to manage people and it builds on itself. What does this mean for bill gross in his new role at janus, what are people saying . Hes off by himself and has some i. T. Guys and secretaries. Magneto in histo own little world anyone it to be in a sidecar vehicle and wanted to manage a couple of billion dollars. Did he want that or did he want to control everyone in his universe . He dead but the universe got too big so he noticed has a small universe. That sounds crazy to me. Who is Charles Xavi