Leon Black Steps Down Early From Apollo, Cedes Chair

little bit about Apollo. Leon black is the famed billionaire who is one of the co founders of Apollo, but he was tangled up in the drama around disgraced financier Jeffrey Epstein and is stepping down as chief executive of his company a few months ahead of schedule. Shnelly Bassk covers Wall Street for US for Bloomberg News. Shaley, Um, does this mean that Apollo can make an earlier sort of uh restart at It's I guess pr campaign to get away from Epstein? Listen at. That's certainly the hope.

If you look at Apollo shares in the year, they're pretty flat, whereas Blackstone is up more than twelve percent, so they're at a pretty big differential when you compare them to their largest competitor. They have some big things on the horizon for themselves. They agreed to an eleven billion dollar deal to merge with the insurance company that they founded. So there is a hope that they can start moving past the scandal and into a growth phase.

Uh and yeah, that's that is the main hope. It is a big surprise, right because Leon Black initially said he would step back a CEO but stay chairman, and now he's stepping back as chairman and CEO and um, he will be involved in the sense that he will remain the firm's largest shareholder. Sne has anything changed, Has any news come up to maybe, uh, precipitate this move here. I know that the news is generally as it relates to his relationship with Epstein, been very very unsettling for

the firm. But has anything new come out? Well, yeah, the fact that he's stepping back come completely like this begs the question if investors were concerned that he remained it's affiliated with the firm at all. So the thing is he said to the board that really this has taken a toll on him. A lot of this public spotlight in light of his own relationship with Jeffrey Epstein. Remember, Apaulo did not have a relationship, just Leon Black did, and he said that it really took a toll on

his health and that's why he's stepping back. So he did paint this as a very personal decision when when he announced this just this morning. Now you cover private equity for us and talked to the biggest movers and shakers in the industry and half for years, Leon Black paid Jeffrey Epstein a hundred and fifty eight million dollars for financial advice. Does that seem to you, you know, in the realm of billionaires, like something that's at all

normal to do. Listen, it's a lot of money, and it really financed such a large amount of Jeffrey EPP's dean's own wealth that it did raise a ton of eyebrows. On top of that, it was a hundred and fifty eight million dollars, largely for tax advice. Leon Black is a financial genius, right, so that amount of money for tax advice seemed like a lot of money to spend for any type of consultancy, let alone tax advice. What's the impact been on the firm? Has there been any

impact on the firm from um this fallout with Mr Epstein. Listen, Yes, absolutely, investors, large pension funds were threatening to not really continue to invest in some of Apollo's largest funds, right, and which is why a lot of this decision had happened in the first place. Mark Rowan was really who was becoming the CEO of this firm, was behind some of the most profitable bets at Apollo, so it was a really natural choice to take over for the firm. He was

also a co founder, so a lot of consistency. But yes, the the Epstein scandal really did weigh on Apollo. It seemed to very much weigh on Leon black himself. And these people are just looking forward to moving on and moving to the next phase of this firm. Again, they have a lot of catch up to do when you compare them with Blackstone, but this is certainly a big move for a firm that has really become a giant of finance. Ye. Hey, Shinali, thanks so much for joining.

It's just a fascinating story here, Shinali Bostic. She is Bloomberg's Wall Street reporter. We always enjoyed getting the latest we all know of the many, many, many industries that have been disrupted by COVID. I guess we saw first and foremost, you know a year ago right about now, leisure and lodging and just you know, how the consumer goes about his or her daily life. Well, let's take let's think about the insurance industry and what changes it

has had to implement as it deals with COVID. There's nobody better to chat about that than Wayne Peacocky's the president and CEO of U s a A based in beautiful San Antonio, Texas. I spent many, many day as in San Antonio, Texas. Uh. Some great folks down there, Wayne, Thanks so much for joining us here. Again we think about the pandemic disrupting a lot of industries. UH many profoundly give us a sense of how it impacted your

business over the past twelve months. Well again, thanks for having me on this morning, and great to be reaching out from San Antonio. A little more beautiful this week than a couple of weeks ago with the deep freeze, so we're we're thawing out here today. You know, for us, first and foremost was the need to get our employees out of the office and working remotely. UM. And be able to do that without interrupting service. I think we did that pretty well back in March of last year.

But as we think back to last year, two big themes I think that are important to historic catastrophe year UM and the need to be able to serve members in need UM without actually being able to get out in virtually and physically inspect their their homes. So the work we've been doing over the years to build digital capabilities paid huge dividends as we adjusted our model to

do virtual adjusting for catastrophes. And in the auto insurance business UM, as we all went home and businesses shut down, UM folks stopped driving, So a very significant change in the frequency of miles driven UM and accidents that will come as a result of that. So two different stories for us UM in the insurance business last year. And you Wayne have followed the Marine Corps philosophy for making decisions solution. Tell us what that is. Well, I'll tell you.

First of all, a global pandemic was not on my priority list, and I became the CEO on February one of last year. I had about nineteen days of grace before the world began to you know, kind of unravel and it became really clear that we needed to move with speed UM to make decisions as simple as and as complex as getting employees home UM and then just you know, a range of decisions as we adapted and

changed the busines this. So we took on this philosophy of you know, we're not gonna have perfect information, we won't have everything that we need, but we do need to make a good risk managed decision, and we need to make it today. Um SE seems like a good number to start with. And then recognizing this changing environment, that conditions will change and we can rechoose tomorrow if necessary,

but better to choose today UM than not choose. And I think that served us UM really well through the height of the pandemic and thankfully as continuing to serve us today as we kind of taught ourselves that UM, this big organization can move at a much faster pace than maybe we thought possible before the pandemic arrived on

our doorstep. So Wayne USA A serves the needs the insurance needs of US military members and and and veterans talk to us about any special insurance needs they may need here around covid UM that you've had to deal with well, like all of us, uh, you know, the d O D shutdown as well. So we had military folks who were planning to move duty stations, UM, those were halted. In many cases, we'd started to help them with their plans for their new location while they were

stuck in their old location. So just working through some of those challenges as their kind of move was suspended is an example. UM. I think from an insurance standpoint, really kind of being there when they need us most. But what we saw a lot, especially with enlisted folks is um, you know that enlisted soldier or sailor airmen is still getting their paycheck, but their spouse most likely has been disaffected much more so than the average person

in the pandemic. So a lot of under employment or no employment in that kind of second income for a group of folks who are really kind of working paycheck to paycheck every single month. So we had about a million of our members that we helped either by you know, uh, stringing out their payments to on a longer pace or foregoing some of the payments that they owed us, both in terms of banking UM and in our insurance portfolio.

And it's just really helpful to that group to ease the pain m as they work through some of the challenges like the rest of us did last year. And you you provided more than forty seven million dollars to support COVID nineteen relief for families of the military, also fifty million over three years. You have a program to support racial equity initiatives, and your return more than a billion dollars in dividends to members during the pandemic. What

how does that compare in terms of returning dividends. Well, it's something we really have. We we returned dividends every year. It's part of the great part of the Usays Association. When we have funds left over at the end, we return them back to members. But these are special dividends that we did throughout the year in recognition of our auto insurance policy holders, you know, who are not driving

as much. We did a series of three of those during the year, totally, as you said, about a billion dollars.

And then what we realized, you know, we can help you know, members who are in need, but we really needed to take an additional step, so we put almost fifty million dollars into COVID relief, whether it was food and security issues and markets where you know we work and live, or very specifically about thirty million dollars UM that we invested with military aid societies so that they could give low interest loans or grants UM two soldier sailors,

airmen and National guardsman who you know may be having a difficult time through that period. And then with the social unrest um that we all experienced last year, we recognize we need to do more on our part as well, and so we've committed you know, fifty million dollars the first in our history UM to try to attack and address some of the challenges with systemic racism and the inequalities that are kind of built into the fabric of our society. So really interested in making a difference on

that front as well. All right, Wayne Peacock diving into the d pen taking over as President CEO of us A a mere really days before the pandemic hit the show orders the United States of America. Thanks so much for joining us, Wayne. Let's get over to somebody who is clearly an expert in how these markets work. Pete Anderson joins us UH. He is the founder of Anderson Capital management, and he's located in Boston and he beat

the SMP last year by forty point seven percent. Peter, how well, first of all, tell us how you did that, and tell us if your strategy has changed in one I think we're doing a great job this year of distracting ourselves more really matters. More about that later, but listen, I did this by focusing on fifteen stocks. Fifteen stocks only, long holding period, just common sense about what I think is going to go up and value regardless of whether or not we had a lockdown or we're swinging from

the vines with an economic recovery. I picked stocks based on fundamental outlooks and the demand that I or the coming uh for those industries. All right, Peter, you're a long time value investor and that's certainly had its time and sun here really since September. I would suggest give us your sense for kind of the legs you think this trade has going forward. Well, you know, um, I

am both a value and a growth investor. I wanted to just clarify that, and um I actually kind of shunned those labels because, as I said, I just tried to pick stocks that go up and as you know, you know, all kinds of stocks go up. So what's happening now though, is I think we've made the world too complex for our own understanding. You know, this relationship we're seeing it this morning right when the market opened, this inverse relationship with the treasuries. When the yield goes up,

the market goes down. Whoever thought of that? And why is that now the new narrative? I mean, I'm just ignoring those, uh that dynamic and you know it's ainful sometimes because let me put you to this way, if I sell the stock every time rates went up, I wouldn't end up owning anything. So you've got to have a longer term perspective. And I also think that rates

are too low. I'm probably the only person out there that's going to say this publicly, but we're on the We're going to embark on one of the greatest economic recoveries of all time, right, I think we all can agree upon that. And with a ten year you know, hitting perhaps a two yield, I think that's absolutely fine with me. In fact, you know, it hasn't been long where we've seen a three percent yield. People need to think about in perspective a great growth scenario, and you

do have to have yields going up. It's just part of the calculus of the economics. I mean. The concern, of course, is that we get with that great growth scenario, great inflation um and that forces the Fed's hand. Are you not worried as as Sharon Powell um uh calmed you in terms of worrying about rate rises. Well, you know, you asked how I got out to the forty plus percent last year, and a lot of this stuff, um it was all due respect to the chairman and other analysts.

A lot of it is somewhat noise, and I think you have to factor it into a more complex picture, you know. I do say some things are simple, but some things are complex, and in this case, you know, the FT is trying its best to calm h. What I would say is a very emotional market, you know, since the beginning of one I think everything changed. If we look back to January and think of the narratives, you know, space travel, uh, spacts, all these kinds of

really newly focused areas. I think we have to put that in perspective, as you do with the FED and their narrative on rates. I do think the FED is probably saying that they don't want you have this recovery dampened at all. So it's very, very sensitive. But when you just strip all this way, what is driving this. It's this pent up, huge recovery that we're going to have.

We're right on the brink of this, and I think would be shameful for people to think that if rates are going up, um, it's a bad time to invest in growth stocks. All right, So what are some of the sectors that you think or or that you know you're putting some money to work in right now? Well, you know, I've always liked and I continue to like,

you know, growth stocks. So in UM cyber security, that is never going to go away, right So, I think last time we mentioned Palo Alto and cyber Arc, and those are two companies that are dear to my heart, and I think regardless of what will happen rising rates, decreasing rates, you know, slowing development, whatever people want to throw in terms of the narrative of the day, these stocks are going to be survivors. The most recent stock I added though, and I mentioned I did match and SPACs.

You know, I'm negative on most SPACs that are startups bacts in the sense that they buy companies that don't have any operating history. But there are plenty of companies out there that's back will buy that does have operating history. And a company that I'm very excited about is called

Danimer Scientific. They make biodegradable plastic. And I'm not um an E s G investor, but when I do see a company that has a uh tremendously attractive product such as plastic the will biodegrade in your backyard, I do get excited about that because the addressable market is so large. So that is the most recent stock that I've added. And other than that, I still own in video, uh, cybersecurity I mentioned, and data storage basic you know, the

basic building blocks of a starring economy. Hey, Peter, thanks so much for joining us and sharing your thoughts here. Peter Anderson, founder of Anderson Capital Management based in a Boston. UH optimistic outlook on the market there, Um Matt and he's he kind of has a concentrated portfolio of names that again he thinks they're just good, solid names. Uh. And he's got some growth and some value in there. I hope we can get him back for a little

bit longer. I mean, Peter Anderson went to Harvard and Yale and he's an overseer of the Boston Symphony Orchestra, and I do hope we can get back to Boston for the Pops. Hopefully this fourth of July we can see them play live again in the Shell. Well. A big, big trade in the railroad business. Canadian Pacific Railway agreed to buy Kansas City Southern for twenty five billion dollars, creating the only network that cuts through the US, Mexico and Canada in the first year of those nations new

trade alliance. Canadian Pacific Railway CEO Keith Creole spoke with Bloomberg's Ed Hammond earlier today and had this to say about the deal. With the common vision of common operating philosophy, creating a network that can become the true backbone connecting three countries on the hills of the U S M C agreement that enables commerce between the three companies, that at a time that the trade has never been more important,

is compelling. The benefits are compelling. That was Canadian Pacific Railways CEO Keith A. Creole talking about the merits of that deal. Let's break it down with Lee Classical. Lee is the senior transportation analysts for Bloomberg Intelligence. He's been covering these railroad companies for decades. So Lee, thanks so much for joining us here. This deal, when you think about it from a geographic perspective, boy, it really makes a lot of sense, doesn't Yeah, Hey, Paul, thanks for

having me on. Yeah, I mean yeah, we've been a pro both East proponent of this deal for quite some time. Uh, it just makes complete sense. You know, the two railroads and only interchange in one spot. There's not a lot of overlap of their network, and so you know, we don't see it as a huge issue for you know,

hurting competition amongst the railroads and maybe other modes. I think it's the net net in for the railroads because it's really expanding their reach and if you can keep people on your network longer, that's not only good for your your bottom line, but it's also good for service for customers because there's less interchanges happening, uh, and less opportunity for things to go wrong, because that's usually what it does. First of all, I want to say how

cool it is that we're talking about railroads Yeah. I saw this pop up on my daybreak app on on the weekend and I thought, wow, that is so old economy and so cool. Such a big number too. Um, are we gonna see more deals like this? Lee? I mean, we've seen a number of railroad stocks jump in reaction. Yeah. The reality is probably not for a very long time. The industry is extremely consolidated. This will bring it to six class one rails. Those are the biggest railroads in

North America. Um. You know, maybe a longer term and when I say longer term, ten plus years, you could see an East marry a West, or maybe Canadian Nationals try to get deeper into the East. But you know, those kind of transactions will face extreme regulatory hurdles. Um. And it will not be easy to get done. I mean, you know this deal is not is not a slam dunk because it still needs you know, approval from the regulators.

You know, we do think of the things I was mentioned about earlier, about the fact that there's not a lot of overlap with the networks, and we don't think it's going to impact a competition in a negative way. You know, we think that the deal does get done and also Kansas City was exempt for some of the high hurdle rates that the STB has has has kind

of implemented about the teen plus years ago. There is some you know, risk that maybe the STB might revive revised those rules, but we still think, you know, the probabilities that the deal does get done. Lee, talk to us about some of the business you expect to go over this railroad, you know, once they get combined. Here as we think about Canada, the US and Mexico. Yeah, so you know, the reality is is that they are

creating the kind of transportation network for the future. I know that's sounds silly when we're talking about old world economy railroads, but you know, we're we're one of our major long term thesis is that you know, we're going to see a lot more on shoring into Mexico, UH, given UH shippers wanting to be closer to their customers and the fact that they want to diversify away from from Asia and China, you know, given that trade issues

are going to probably continue between the U S and China. UM. And so you know, you have Canada with all the great natural resources. You have the US that consume a lot of stuff and then you have Mexico increasing their manufacturing footprint, so it just seems like it's just a

great deal for future growth. Um. You know, there's one of one of the great things about the KSU network again to the Southern network is their cross board or business that's been a high growth area for the railroad and you know, we can we expect back to continue as more and more stuff are manufactured you south to the border of the US. Lee. Is there any cutting edge aspect to the research, I mean, to the to

the industry that you research. I mean, is there any kind of hyperloop or you know, um, super green people carrier uh stuff going on? Or is it all still old school railroad? Yeah? Outside of me working on a teleporting machine in my shed. H there's really there's really not. Uh the reality is it like railroads good if you think about operate without people because I mean they're on a fixed track, so that there's some of the safety

issues of autonomous trucking doesn't really apply to railroads. There is a benefit to having people in the locomotive, you know, in case something goes wrong or you know, you need to deal with an exemption. But there's no there's not really any any any any out there. The rails are tinkering more with alternative fuels and that's really a kind of a push to try to you know, be more

green and reduced her carbon footprint. Uh. You know, it's a lot of the railroads and I would say even the trucking companies and you know, companies like FedEx and ups have really started to embrace the E S G aspect of their businesses just because it's becoming more and more important to institutional investors out there. Uh, real quick here, precision railroading is important to this deal. Yeah, it is. I mean, so Canadians to fix to have more of

a mature position scheduling railroading. They've been doing it for a long time. They've pivoted towards growth a couple of years ago in Kansas City is kind of in the early uh inning And if you think about it, a lot of the folks to Kansas City, they've done really at Kansas City Southern they've done a really good job at implementing ps ARE. But they can learn a lot from the kind of the doing it for a lot

longer over at DP. So you we believe that because of PP taking over at KS too, which won't happen for probably a year in terms of an operation standpoint, but they might be able to accelerate uh that's mark transformation and just leave five in additional synergies. Lee, Thanks so much, Lee Clasgow, their senior transport logistics and shipping analysts for Bloomberg Intelligence. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews of

Apple podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller V three, pt on Fall Sweeney. I'm on Twitter at pt Sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio