“The difference between this recession and 2008 is that it is a liqudity issue. If companies have the liquidity to last until people come back, they will be fine.”
Marc Lasry is the Chairman, Chief Executive Officer & Co-Founder of Avenue Capital Group, as well as the Co-Owner of the Milwaukee Bucks. Marc expressed confidence and optimism in the post-pandemic future. “Companies are talking about hiring back over 50% of employees. With two-thirds of GDP being consumer spending, it will be much more difficult for the economy to recover with high unemployment.”
Today’s biggest opportunities can be found in companies entering bankruptcy or those looking to restructure. Turning to Hertz as a prime example, “Four months ago they were investment grade. They then filed for bankruptcy due to liquidity issues. Once filed, their stock went from $1 to $5. They can now last for a year or two, which is the amount of time until demand comes back.”
On the NBA, Marc reiterated health and safety as paramount to the success of the season.
LISTEN AND SUBSCRIBE
SPEAKER
Marc Lasry
Co-Founder & CEO
Avenue Capital Group
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie (00:08):
Hi, everyone. Welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance technology and geopolitics. What we're trying to do with these SALT Talks is the same way we do at our global conferences is provide a platform for big, important ideas and provide our audience a window into the minds of subject matter experts across investing, business, entrepreneurship, and politics.
John Darsie (00:38):
Today, we're very excited to welcome Marc Lasry to SALT Talks. Marc has been to several of our in-person conferences, and we thank him for joining us today. Marc is the co-founder, chairman and CEO of Avenue Capital, which is a global alternative investment manager, focused on distressed and undervalued debt and equity opportunities across the U.S., Europe and Asia. In 1995, Marc formed Avenue with his sister, Sonia Gardner, with less than $10 million in capital from friends and family. And today Avenue is one of the largest distress debt investors globally, managing around $9.7 billion as of May 31st, with headquarters in New York City, three offices across Europe, five offices throughout Asia, and an office in Silicon Valley. Marc is known as a pioneer in distressed investing, which has been the focus of his professional career for 35 years and will be the focus of our conversation today.
John Darsie (01:33):
Marc is currently a member of the Council on Foreign Relations and serves on various boards as an advisor and director for both for-profit and non-for-profit enterprises. He's also a co-owner of the Milwaukee Bucks, which currently own the best record in the NBA, as the season gets ready to resume. They also have one of the best players in the NBA, the Greek Freak, Giannis Antetokounmpo. If you have any questions for Marc during our talk today, please enter them into the Q&A box at the bottom of your screen.
John Darsie (02:01):
Marc, thanks again for joining us. Conducting the interview today is going to be Anthony Scaramucci, the founder and managing partner of SkyBridge Capital, which is a global alternative investment firm. Anthony is also the chairman of SALT. Anthony, I'll kick it over to you for the interview.
Anthony S. (02:16):
All right, well, I'm going to give you a big shout out Darsie, for being able to pronounce that player's name. I know you practice it all evening and it was very well done. It was well executed. So Marc, first of all, congratulations on the season. And I just found out that your beautiful daughter is expecting twins shortly. So mazel tov is off on that. Wish you great success always, and you're a terrific friend. But a lot of people that are joining us, and they're joining from all over the world Marc, they don't totally know your background. I think you have one of the more fascinating backgrounds in the hedge fund industries. I just wondered if you could talk to us a little bit about your background first and then we'll get into the markets discussion.
Marc Lasry (02:55):
Sure. I was born in Morocco. We came to United States when I was seven, and I grew up in Hartford. Went to college on a scholarship, went to law school. Practiced law a little bit. Then I went to work for the Bass Brothers, then I ran money for them. Then I went off on my own, ended up doing that for awhile. And then we started Avenue in '95, mainly with my money and that of the Bass family. The firm grew pretty big. We got to be as big, I think in five years, we were a billion dollars. And five years later we were $22 billion.
Marc Lasry (03:45):
After the crisis hit, I think we were down $25 in '08. Then between '09 to '11, we doubled the money back. And then I gave back about half the capital, big chunk of the money that we run is mine right now. And really what we try to do is find special situations. Got lucky in that about five years ago, I was able to buy the Bucks. That's actually been a blast. We got very lucky and Giannis ended up blossoming into one of the best players in the NBA. And then starting in three weeks, no six weeks, we start up in three weeks in Orlando. And in six weeks to seven weeks, the season restarts. So hopefully we'll win an NBA championship.
Anthony S. (04:37):
Well, good for you. We're certainly rooting for you guys. And I have a lot of my friends are limited partners of yours in the Bucks and so-
Marc Lasry (04:44):
Yep.
Anthony S. (04:44):
... And you guys built a brand new, beautiful arena a few years ago. And so God bless you guys on that. Let's shift gears and talk about the markets. And let me take you back to 2008, you're down $25. The world's a different place 12 years ago, of course, but this was a financially-focused banking crisis that spilled over into the rest of the world. Take us through your thought process there, then I want to do a comparative analysis to where we are today.
Marc Lasry (05:18):
Sure. Look, you were there. The biggest worry in '08 was, were we going to be around? And what I mean by that is, was the financial system going to be there? And that, when you invested, you just didn't know. And that was the big fear was, were the banks going to be there? And if the banks were there, that was great, then you'd have issues, but it wouldn't be that big of issues. But if the banks weren't there, then you were going to go into a huge depression. So you just didn't know. That's the big difference between today, to be blunt. The biggest difference between today and then is that today, we all know everything will be fine in two years. People will be back out. There'll be a vaccine, so on and so forth. But, the question is how long does it take to get back to normal?
Anthony S. (06:14):
Is 2020 worse than 2008? Similar? Different? How so? What's your opinion?
Marc Lasry (06:23):
I feel more comfortable investing today than I did in '08. In '08, I was petrified as to whether or not we'd still be in business. Today, you know you will. It's just a question of timing. Today is really a liquidity issue. Does a company have enough capital to last until people come back? So, what you want to do is you want to invest in companies that have that liquidity, because if they don't, they're just going to have issues.
Anthony S. (06:53):
I know your principle focus is in the bond market, in distress debt, but usually the credit analysts, the best credit analysts, make very good equity analysts as well. What are your thoughts on the equity markets right now? Their recent run-up, the current valuation and your one to two-year time horizon on equities?
Marc Lasry (07:15):
Look, I think at the end of the day, the equity market is telling you that everything is going to be fine. And part of that is if you look at the Fortune, the companies that are in the market. They've got the liquidity to last. So they're actually gaining market share. And the reason they're doing that is they've cut costs by a huge amount. So, I get all that, but the problem is cutting costs means that you fired a ton of people. And so, I would ask you, you talk to people and I talk to people, how many people are getting rehired? Like there's 40 million Americans that are unemployed. How many do you think companies rehire? They rehire half of them? Three quarters? What I'm hearing is, they'll hire 50 to 75%. Well, if you think about that, 25% of Americans are unemployed. That's 10 million, two thirds of GDP is consumer spending. There's no way that in essence, people are going to be spending money the way they did when they're unemployed. So I think the market is ahead of itself. I understand it, because it's telling you everything's going to be fine in two years. But I think between now and the next two years, you're going to have a huge amount of issues.
Anthony S. (08:31):
So you worry about the markets then? The valuation of equities then is probably fully priced. Would that be fair to say?
Marc Lasry (08:39):
Yeah. Would you want to be an equity owner today? It's moved ... I wouldn't.
Anthony S. (08:44):
Me personally, like you, I spent my life in the bond market, but unfortunately we've been in structured credit, and so you know that was like the ground zero target [crosstalk 00:08:55] for pandemic.
Marc Lasry (08:56):
Yep.
Anthony S. (08:56):
So people will say to me, "Well, why can't I just own Tesla and the FANG stocks, why do I need to own structured credit? Obviously it's been a good part of my day explaining that, which I think is a great long-term, conservative investment. But, my worry about the equity markets, it's just very thin. You've got 12 to 15 stocks driving that market. You take those stocks out of equities, the equity market is down. Yes, there's been some rotation recently, but it's not clear how durable that is. But you look-
Marc Lasry (09:29):
[crosstalk 00:09:29] I agree with you. I don't think it's durable. It doesn't really make sense with all the issues, but I think it's all going to become clear in the next couple of months. In the next couple months, we're going to see this reopening of the country, and how much are people going to be spending. And that'll tell you how quickly we're going to get back to normal. I think it's just going to take time. And as soon as the market realizes that, I think you're going to see that the market's going to come back in.
Anthony S. (09:59):
... Well, and you've spent your life in the distress credit markets. Somebody said to me yesterday, and I'm curious to your reaction, that this is a great time for distress because you've got non-performing companies, but you have huge governmental stimulus going on. And where those companies are really a victim to the pandemic, more too then they're bad decision making. And so they're getting some available capital and access from the government for help. What are your thoughts on that? Where do you see this distress cycle versus other past distress cycles that you've trafficked in?
Marc Lasry (10:40):
I think there's a huge difference between today and the past. The biggest opportunity today is really investing in companies that are in bankruptcy, or that you're going to get involved in restructuring. I'll just give you the most recent example. Think of Hertz. Hertz, four months ago, was investment grade. The bonds traded 25 basis points above U.S. Treasuries. That was the premium you were getting for investing in Hertz. Hertz then ends up filing for bankruptcy because they couldn't get any liquidity. They didn't have excess collateral. So nobody was willing to lend them more money. All their collateral was in those bonds. So the banks and the bond holders were like, "Don't care. We've got our collateral. We don't care what's going to happen."
Marc Lasry (11:33):
Company filed. All right. Do you know where the stock ... because now that the company has liquidity and they can last, the stock has gone from a dollar to five. The unsecured bonds have gone from 5 cents to 25 cents. So for us, what we do is we get involved when the company files, because at that point they've got the liquidity to do what you just said, which is to last for another year or two until people started coming back. So today is a far, far better time, because I could invest every time today at a liquidation value. Normally you can't. And I'm getting paid a premium if things turn out, I'll do exceptionally well. I can make two, three times my money. If the company has to liquidate, that's okay, then we'll end up making our money on that liquidation.
Anthony S. (12:24):
Well, yeah, I think that's brilliant and specific to Hertz, but let's talk more broadly about opportunities you see. Are they mostly in the U.S., Marc? Or are you looking internationally as well?
Marc Lasry (12:37):
They're everywhere. I think for us it's, what you're finding is, you've got a huge opportunities in Europe. Same thing in Asia. The biggest difference is a ton of money is being raised here in the United States. So you don't have as much money being raised in Europe or in Asia for the same thing. So you're finding that the returns you can generate there are, Asia I would say it's sort of 25 to 30. Europe is 20 to 25. And U.S., I would tell you is 15 to 20. But U.S., just in the last couple of months, almost every retailer you know, JCPenney, J.Crew, Neiman Marcus has filed. You've got a telecommunications company Intelsat has filed. Frontier has filed. You've just got over and over again, anybody who's had issues ... people are actually taking advantage of this. They're saying, "Now's a great time for me to go into bankruptcy, clean up my balance sheet, and come out a lot stronger." So at least us, I think you're going to have anywhere between $500 billion to a trillion dollars of opportunities, worldwide.
Anthony S. (13:51):
So that in some ways then, it's better than the 2008 crisis, right?
Marc Lasry (13:56):
Yeah, [crosstalk 00:13:55].
Anthony S. (13:56):
Because the banks are firm. The Fed has already started the process way earlier. They're hitting it with way more capital, way more stimulus, coming from the Congress. So what's the worry then when you're sitting around saying to yourself, "Okay, I see the opportunity, but what are the risks associated with that opportunity?"
Marc Lasry (14:20):
Look, I think ultimately at the end of the day, what's actually been shocking, and I think for you as well, I was surprised at what the Fed did. I hadn't envisioned that they could do that. And you're seeing that there's bipartisan support to end up getting money to Americans through unemployment and through the [inaudible 00:14:41]. I think ultimately at the end of the day, the risk really to the system is that you've got these zero interest rates, and there's just so much capital that's being put in there. But, that's not a problem for today. It's going to be a problem five years from now. I think for us today, we could take advantage of that and we can do really well. So I'm not really worried about the risk today. I think you're going to have some fundamental problems five years from now.
Anthony S. (15:13):
Okay. So let's elaborate on that. What are those fundamental problems? And inflation is obviously a huge potential issue. What are some of the other issues?
Marc Lasry (15:22):
Look, I think what you're going to have is, the Fed's just going to have too big a balance sheet. And then as you try to unwind that, you're going to be in an area where you've got unemployment, you've got lower receipts. The biggest risk that we run is one simple thing. It's where are interest rates? Rates right now are at zero, and yet our deficit keeps growing and growing, I'm sorry ... where we're owing money. So when you think about that, if rates just moved up to 1, 2, 3%, the amount of money the United States is going to be spending on interest is going to be huge, so you're going to have less for social services and for everything else.
Marc Lasry (16:06):
So I think we're creating a problem 5, 10 years from now. But look for today, with rates at zero, I mean, I think people have no choice but to invest in the market. If you're going to go out and buy a corporate bond ... when you were talking about structured credit, on the structure credit side today, you could make 20% plus. So what's your choice? Are you going to make 20% plus, or you going to leave it in a U.S. Treasury to make a half a percent?
Anthony S. (16:37):
Let's focus on that for one second, as I want you to explain to our viewers and listeners how you make 20% plus in structured credit and what that real opportunity is. And then I want to ask you about our deficit. But, back to structured credit for a sec.
Marc Lasry (16:51):
Look-
Anthony S. (16:51):
Which is near and dear to my heart, Marc.
Marc Lasry (16:54):
... Look, a lot of it is, what's the price that you can buy that at today? So, the problem that you ended up having on the structured credit side is people were being forced to sell and you had leverage. So if you think about it, even if you were two times leveraged, or three times leveraged, and all of a sudden something drops by 10 points, that means you're down 20 or 30%. So, that's just taking a little bit longer to come back, but in an environment today where you can go buy that debt anywhere between 50 to 80 cents on the dollar, you've got your interest component that you're going to make. And then you're going to make your capital appreciation. I think on the structure credit side, I was being nice in saying you're going to 20. I think you're going to make substantially more than 20%.
Anthony S. (17:52):
We think so. We had a 60% move over three years, 2009, '10 and '11. Our portfolio right now, it's yielding over 11% if you took a snapshot of the whole asset. But, you're making an important point about five years from now. You and I see the same sort of thing. Fed is flooding money into the marketplace that cures the temporary ills of the market, dislocations of prices and so forth. I have stipulated, and I've gotten a reaction to this, that unfortunately, monetary policy being a blunt instrument, it helps people that own the assets.
Marc Lasry (18:32):
Yeah.
Anthony S. (18:32):
And so if we own assets, the assets go up. But the people that don't have the assets, if you really analyze their wages, they never really catch up. And so, it's a bit of an irony, but the Fed sort of created Donald Trump and Bernie Sanders. The rise of populism and that whole nationalist movement is coming from that separation. And so what I'm worried about is, we're doing it again, but we're doing it on steroids. This is like QE infinity. It'll certainly impact asset prices, help large-scale corporations, but there's been a transfer of wealth from small businesses to places like Amazon, frankly, that have the scale and the durability and their survivability in a crisis like this. What's your reaction to that?
Marc Lasry (19:19):
I totally agree with you. I don't see the benefit that is going down to the middle class or lower middle class. Because if you don't own a home. If you don't have these hard assets. If you didn't own stock, which people aren't owning, it's not. So, I think everybody sees that things are getting better, yet they're not participating in that. So I think you're dead right. I think that's what creates all these issues that we're ultimately having.
Anthony S. (19:55):
Let's address the deficit for a second, because I know you're politically-minded as am I. We're looking out. We're going to print the three plus trillion dollar deficit now. The CBO is talking about $3.7 trillion for this year. You're obviously going to be printing a deficit in the next couple of years to that magnitude, if not slightly smaller. Is this sustainable? There's a modern monetary theory, as we both know. Stephanie Kelton, we're going to be interviewing her next week on her new book, The Deficit Myth. We just had Zach Carter on yesterday talking about the Life of John Maynard Keynes. And the notion from those intellectuals are that you can get away with this, sort of forever. Do you think that that's the case? Or do you think it comes home to roost?
Marc Lasry (20:46):
Look, can you get away with it forever? Sure, if rates are at zero. It's not really that complicated. If you're paying 25 bips to go borrow money, it's actually pretty easy to keep on borrowing money.
Anthony S. (21:01):
Well what would cause rates to go up? Inflation would be one factor. Demand for the money would be another factor. Do you think demographically Marc, we're in the specter of deflation due to the upside down nature of the way the world is aging?
Marc Lasry (21:17):
I don't know. I'm not an economist, so I don't know. But when I look at it, what I find is that, there comes a moment in time when people believe you can't pay your bills. So if you think of what happened with Greece, and if you look at other countries, what always ends up happening is when you borrow money, nobody ever thinks you can default. The only reason somebody's lending you money is because they believe you're going to pay it back. It's only when that perception changes. So all of a sudden Greece went from borrowing money at 2-3%, to borrowing money at 20%, and you had European crisis. So today, the demand for safety is so great, that I think at the end of the day, this could last five or 10 years where you're able to borrow money at ... in Europe today, you're paying negative rates. Somebody's paying you. So, I think that in of itself, if that'll continue for five or 10 years, yeah, your deficit can keep on growing.
Marc Lasry (22:26):
So I could see it lasting for awhile, but I just don't understand intellectually, and maybe part of it is because you and I grew up with rates at 20%.
Anthony S. (22:37):
Sure. Yeah. Mm-hmm (affirmative).
Marc Lasry (22:39):
So, it's kind of hard for us to fathom that something can only go down, that it can't go back up. So, maybe we're wrong.
Anthony S. (22:48):
This is why you and I are in the same camp on a lot of things. But the MMT people, what they would say, "Well, Greece is a different situation because they ceded the drachma to the Euro and they ceded the control of that currency to that sort of central [inaudible 00:00:23:03].
Marc Lasry (23:05):
Yep.
Anthony S. (23:05):
The United States has its own currency. And I'll give you a quote from Stephanie Kelton, "One stroke of a computer key, we could create $23 trillion and wipe out our deficit." So we're going to get into that with her next week in terms of what that would mean to society and what that would mean to confidence in fiat currency. But, let's take it around the horn before I open it up to questions to our listeners and viewers. Equities, decidedly neutral, fully-priced there. What's your opinion, equities?
Marc Lasry (23:38):
Not a buyer.
Anthony S. (23:39):
Not a buyer. Distress debt, huge opportunity?
Marc Lasry (23:43):
Today, I think on the debt side, massive opportunities. Yep.
Anthony S. (23:47):
What about investment grade, Marc?
Marc Lasry (23:50):
I think it's fine. I don't know if you're getting paid enough of a premium for it, but, you're making what, 3 to 5%? 2 to 4%, whatever that number is? So I think that's okay, but I don't think there's a lot to do there.
Anthony S. (24:07):
High yield?
Marc Lasry (24:09):
High yield I think it's, you'll be doing okay. I think there's still a little bit of room to go on that, but I think in today's environment, trying to make 5 to 8% on that, I think makes sense.
Anthony S. (24:23):
All right. We've already discussed structured credit. You and I are both obviously very favorable and bullish on that. What about digital currencies? You ever look at those? Have an opinion there? Think anything of them?
Marc Lasry (24:36):
I did. I used to own a few. I think I made a little money on it and then I got out. I think today, look, I get it if people want to do it, I just, I think-
Anthony S. (24:54):
Well, why'd you get out? Tell our people why you got out. Why'd you get out?
Marc Lasry (24:57):
... Oh. I bought it mainly because I thought it would be good hedge for what I was doing, and I wanted to see if I could make some money on it. When it doubled, I realized I still didn't understand why it doubled. So that's the reason I got out. I try to only invest in things I understand. And I realized, look, I fully didn't comprehend everything that was happening on the digital side. So since I didn't, I was just going to sell.
Anthony S. (25:32):
Okay. So, let's give that one an incomplete or, you and I are still trying to figure that out. It could be a sign of our age, that we don't know what the hell is going on in that. Before I turn it over, a quick political question, because you've been involved in politics a very long period of time. This is going to be a very interesting theatrical event come November. Are you raising money for Joe Biden or are you involved there? What's going on?
Marc Lasry (26:03):
Yeah. Raising money for Joe. I've been pretty involved in it. We've done a bunch of fundraisers. So, so far so good. I think the election, and you get it, the election is going to be pretty simple. Are you happy with the way things are? If you are, you're voting for Donald Trump. If you're not, you're voting for Biden. I think Americans, when everything is going well, Americans they weren't [inaudible 00:26:38] to the noise in Washington, and they were focused on what was happening with them. So I think Trump had advantage there. Now that things aren't going well, the question is, do I think he is the person who's going to help me? I think most Americans are coming to the conclusion, I can't deal with all this noise. You've worked for him. You know what it is. He loves more noise. And the more noise there is, the better it is accepted. Seems like in this environment, that's just not working.
Anthony S. (27:10):
Well, he's losing, and I want to be objective on a call like this. He's got a very ardent base of support, sort of that hard to believe 35 to 39%. But the numbers, if I was still involved with him or involved in the campaign, the numbers on women over the age of 50, Marc, and I'm talking about the national numbers, the swing state numbers, he's put himself almost in an irreparable position there. Anything's possible with him. I was with him on the October 7th Access Hollywood debacle. And we did flash polling that weekend into the next week prior to the second debate, down 13-14%. And he came back and won the election. So anything's possible. I wouldn't rule anything out. But those are very big numbers [crosstalk 00:27:58].
Marc Lasry (27:59):
To come back from. Yeah.
Anthony S. (28:01):
Yeah. Very hard to come back from those numbers. But again, it's Donald Trump, so we'll have to see what happens. I'm going to turn it over to John Darsie. I know we have some questions from our audience out there. So go ahead, John, what do you have for Marc?
John Darsie (28:19):
Yeah, we're going to start with the NBA. Marc, you mentioned that you had a mini training camp that's starting in three weeks and the season's going to resume in six weeks. As an owner, what was the process like of figuring out how the NBA was going to come back and how do you think this pandemic is going to affect the league going forward?
Marc Lasry (28:39):
Well, I think the biggest question was the health and safety of the players. So, how could you do that? And the way we ended up doing it was to do everything in Orlando so that ultimately you could have this safe environment. We ended up deciding to have 22 teams to try and have about eight regular season games. And the reason for that was to get the players in shape for the playoffs. So that they would get into game shape by the time the playoffs started.
Marc Lasry (29:12):
The real question, is a little bit of what you said. What happens next season? You can't have a season without fans. You really can't. For most teams, they can't survive that way because a lot of their revenue comes from ticket sales. So, I think that's why the league has pushed back the start of next season. And we've pushed it back to December or January. And the hope is that by doing that, that people will be able to come into stadiums and, whether there's a vaccine or, there'll be more information regarding this. And maybe people just come into the stadiums now. You're seeing it in all the marches and the protests that are going around the country. Everybody's walking around with a mask. I think for the vast, vast majority of us, the idea of wearing a mask a year ago was unthinkable, and today you're seeing everybody wearing one. So that may be the way that people start coming into stadiums.
John Darsie (30:19):
Thanks Marc. The next question revolves around, you talked about how you've been very successful internationally, including in Asia. How do you see the current international climate, which is shaped by distrust, lack of international controls and cohesion, bringing the economy to a more nationalistic versus globalistic framework going forward? And how do you think it affects general investment opportunities in Asia given U.S.-China tensions in particular?
Marc Lasry (30:48):
Well, really what it's doing is it's creating more opportunities for you. And the simple reason for that is, when things are more global, there's just more capital coming in, so that everybody wants to invest in a region. When things are more nationalistic, all of a sudden, capital's moving out because people are nervous. So for us, that's actually why we try to invest in countries that follow English law. So you'll invest in Singapore, you'll invest in Hong Kong, you'll invest in Australia, you'll invest in India. You'll invest in regions, South Korea, where the capital, that if there's a problem, you've got a legal system that's going to help. So I think for us right now, I would say to you a year ago, there was a lot of capital, there was more competition that we were seeing in Asia and in Europe. Today, we're seeing much less competition.
John Darsie (31:49):
So within the distress space, obviously energy has gone through a major dislocation due to a variety of different factors. What do you see as the opportunity from a distress perspective within energy?
Marc Lasry (32:03):
Energy has been a bloodbath. I think you're absolutely correct. The opportunity today is you're coming into companies that have had huge issues, mainly because of where the price of oil is. And can you invest today based on, saying that oil is going to stay at $30? And if you can do that, you're going to make a fortune of money if oil moves back. Even if it stays where it is, you're going to have companies that are going to be able to survive. So you've got to pick those survivors. But it's gotten lot harder. I think on the energy side, you've got a lot of opportunities, but you could still have a huge amount of problems.
John Darsie (32:48):
Looking at the distressed space in particular, if you could pick one financial instrument or one sector or one specific trade that you think is the most compelling right now, what would it be?
Marc Lasry (32:57):
I think you want to be in the secure debt of a lot of these companies, because that's become the fulcrum security. So in the past, you were trying to figure out what was the fulcrum security. And today, because of what's happened with the virus, and companies needing capital, that senior secured debt has become that fulcrum security. And you're either going to get paid off, or you're going to create the equity of that company at a pretty cheap price. So, that's been the big fundamental difference today.
John Darsie (33:32):
You recently launched the Avenue Dislocation Fund. You talked about the size of the opportunity set that you see in distressed right now and moving forward over the next couple years. Just talk a little bit more about that. Do you think the Fed's actions to help support the junk bond market, for example, has trimmed that opportunity set, or do you think there's going to be a large volume of opportunities in distressed?
Marc Lasry (33:57):
I don't think the Fed, to be blunt, has really done much for the distressed market. It's done a lot to provide liquidity for investment grade companies. So when Anthony and I were talking about that earlier, that's why you're not seeing as much opportunity on the investment grade side. If you think, the same thing, structured credit if you think on the mortgage side. The Fed didn't come in and help those markets. So in those markets, you still have huge opportunities. That's the reason why we're raising a new fund, is that we're seeing that at least today, you're going to have anywhere close to half a trillion to a trillion dollars of opportunities over the course of the next year. So for us, we want to take advantage on the small cap, mid cap, and large cap. That's going to be a once in a lifetime opportunity.
John Darsie (34:48):
Going back to politics for just a moment, Barack Obama came out and said that if he were running on a platform based on today's societal conditions, economic conditions, that he would run on a different platform and he would govern in a different way than he did during his tenure in office. How do you think knowing the Biden camp, and knowing other people within the democratic party, what do you think a Biden administration would look like from a policy perspective?
Marc Lasry (35:15):
I think at the end of the day, what Biden's going to do, he's going to move a little left, and you'll see that. Because it seems like the country that I think was center, is moving a little bit further to the left. So I think you'll start seeing that. And I think that's what Obama meant. It seems like the country is moving, but you would've thought it was moving more into the middle. I think it's moving, if you think the middle is 50, the country seems to be closer to 40 than it was at 50 before. So I think that's what he's talking about.
John Darsie (35:56):
All right. And one final question about the NBA. We have a question about, what's your sales pitch going to be to keep the Greek Freak, Giannis? And I'll say his last name again for Anthony, Antetokounmpo, in Milwaukee? He's going to be a free agent. I don't know if it's next off-season, but-
Marc Lasry (36:12):
Next off-season.
John Darsie (36:12):
... what's your sales pitch to him?
Marc Lasry (36:16):
Well, it's actually pretty simple. I think one, he loves Milwaukee. I think he loves the team, loves the coach, loves his teammates. But at the end of the day, we're going to be able to offer him, I think it ends up being about $70 million more than any other team. So, $70 million is a lot of money, and especially for players. Because their lifespan, if you think about it, ends up being about, to play in the NBA, is about 10 years. 10 to 15 years. So, the goal is to try to make as much money as you can. So I think at the end of the day, in any tie, I think he's going to give it to us. And then when you add the financial aspect, I think it's kind of hard for him to turn it down.
John Darsie (37:11):
All right. Well Marc, thanks again for joining us today. Anthony, I don't know if you have any parting thoughts?
Anthony S. (37:16):
I want to go on a stretching machine so I can make $70 million from Marc Lasry. That's my parting thought.
Marc Lasry (37:22):
I know.
Anthony S. (37:23):
But Marc, thank you. You're brilliant investor. You're a great friend. And you're a patriotic American and I hope you'll come back to SALT Talks as we get geared up for the election season. You and I have always had some spirited discussions in that realm. So, we wish you the best at Avenue and the family, and God bless Sophie, and hopefully we'll see you soon.
Marc Lasry (37:47):
Take care my friend.
Anthony S. (37:48):
All right. God bless. [crosstalk 00:37:48].
Marc Lasry (37:49):
Bye. Bye.