MY NEXT GUEST IS AMONG THE
PIONEERS THAT HELPED TURN
PRIVATE EQUITY INTO THE
MULTITRILLION DOLLAR INDUSTRY
IT IS TODAY.
A PIONEER ON WALL STREET AS
WELL.
JOHN CASTLE FOUNDER, CHAIRMAN
AND CEO OF CASTLE HARLAN.
OVER THE PAST 30 AS THEY BECOME
A LEADER AMONG MIDDLE-MARKET
PRIVATE EQUITY FIRMS.
INVESTING HUNDRED FIVE
COMPANIES WITH AN ENTERPRISE
VALUE OF OVER $15 BILLION.
JOHN IS ALSO FORMERLY THE
PRESIDENT AND CEO OF -- WHEN I
HEAR DLJ, MY HEART WARMS
PURITIES TO LOVE THAT FIRM AND
I TALKED TO A LOT OF YOUR GUYS
BACK IN THE DAY.
GOOD TO HAVE YOU ON THE
PROGRAM.
>> IS NICE TO BE HERE, MARIA.
THANK YOU SO MUCH FOR INVITING
ME.
>> THANK YOU SO MUCH.
WHAT IS YOUR ASSESSMENT WITH
WHAT'S HAPPENING IN THE MARKET?
AT THE END OF THE YEAR LAST
YEAR WE HAD REAL VOLATILITY.
I THINK THERE WAS A LOT OF
NOISE OUT THERE AND WHAT'S
GOING ON WASHINGTON, IN TERMS
OF WORRIES ABOUT A GROWTH SLOW
DOWN.
WHAT YOU THINK IS DRIVING
MARKETS?
I KNOW THAT YOU HAVE THE
PRIVATE EQUITY FIELD BUT --
>> AT THIS POINT IN TIME I
THINK THE POLITICAL SCENE SEEMS
TO HAVE A MASSIVE IMPACT ON THE
PUBLIC MARKETS.>> AND I KNOW
YOU HAVE A OPINION ABOUT THE
STANDOFF BETWEEN NANCY PELOSI
AND THE PRESIDENT.
>> IT ALSO HAS AN INFLUENCE ON
THE PRIVATE MARKETS.
ISSUES ABOUT WHETHER THERE WILL
BE TARIFFS WITH CHINA AND SO
FORTH.MANY OF OUR PRIVATE
COMPANIES ARE EXAMINING, CAN BE
SOURCED FROM CHINA?
DO WE HAVE TO SOURCE FROM OTHER
PLACES, WE WOULD GO TO VIETNAM
OR MEXICO OR SOMETHING LIKE
THAT?
AND THE RESULT IS THAT BECAUSE
OF THE FACT THAT THERE IS THE
POLITICAL ISSUES AND EVEN
PRIVATE COMPANIES, ARE BEING
AFFECTED IN THAT CONTEXT.
THE VIEW WAS PROBABLY LONGER,
THEY ARE THINKING ABOUT THE
NEXT FIVE YEARS, WE DON'T WANT
TO MAKE MY SUBASSEMBLIES AND
COMPONENTS AND SO FORTH?
>> UNCERTAINTY.
>> EXACTLY.
RIGHT NOW IT IS VERY UNCERTAIN
AND THERE IS A POSSIBILITYTHAT
THERE COULD BE A VERY HIGH
TARIFF , NOT PROBABLY, A
PROBABILITY BUT A POSSIBILITY
AND AS A RESULT, DO YOU WANT TO
BE MAKING THINGS IN CHINA
REMOVE SOURCING ELSEWHERE?
>> IT MAKES A LOT OF SENSE
ABOUT THE UNCERTAINTY.
IT COULD IMPACT THE ECONOMY.
WHICH IS WHAT WE ARE WONDERING
IF THE STANDOFF WILL IMPACT THE
ECONOMY.THE WHITE HOUSE SAID
IT WOULD BE 1/10 OF AN IMPACT
EVERY WEEK.
IN TERMS OF NEGATIVE GROWTH.
WE WILL SEE WHAT THE QUARTER
LOOKS LIKE IN TERMS OF GDP.
HOW ARE YOU ALLOCATING CAPITOL
RIGHT NOW?
YOU INVESTED A LOT IN THE OIL
SECTOR.
>> OVER THE AS WE VISIT IN THE
OIL SECTOR.
FOR VARIOUS REASONS I'VE BEEN
IN THE OIL BUSINESS FOR OVER 50
YEARS NOW.
OF COURSE, OVER A LONG PERIOD
OF TIME IT'S AN EXCELLENT PLACE
TO BE.
ALTHOUGH, AS WE ALL KNOW, THE
PRICE OF OIL CAN BE VERY
CYCLICAL.
IT CAN FLUCTUATE A GREAT DEAL
AND CLEARLY WHEN IT FLUCTUATES
DOWN, A GREAT DEAL, IT HAS A
VERY MAJOR IMPACT ON CERTAIN
SEGMENTS OF THE OIL INDUSTRY.
PARTICULARLY, PLACES WHERE YOU
HAVE PRIVATE DRILLERS AND FOLKS
OF THAT NATURE AS OPPOSED TO
GOVERNMENT WHICH IN SAUDI
ARABIA, THEY HAVE TO KEEP
PLUGGING ALONG REGARDLESS
BECAUSE IT IS NATIONAL POLICY,
BALANCE OF PAYMENTS, ALL OF
THOSE KINDS OF ISSUES.
BUT WHEN YOU GET TO WEST TEXAS
TO GET TO THE BASIN, THE PRICE
OF OIL FALLS TO A CERTAIN
LEVEL.
PEOPLE STOP PULLING.
>> WHAT HAPPENS NOW WITH OIL
PRICES WHERE THEY ARE?
FOR LITTLE WHILE WE LOOKING AT
PRICES OTHER DOWN IN THE 40
DOLLAR LEVEL.
WE ARE ABOUT 50 AGAIN.
WHAT IS YOUR TAKE GIVEN THE
SUPPLY SITUATION?
>> PEOPLE OR CONTINUE TO
OPERATE IN THE CASE OF THE
PERMIAN BASIN FOR INSTANCE,
APPARENTLY PEOPLE ARE ECONOMIC
-- GOOD ECONOMICS AT $50.
BUT THEY ARE A LITTLE MORE
WEARY, A LITTLE BIT MORE
CAREFUL.
WHEN PLACING ORDERS FOR VARIOUS
KINDS OF COMPLETION EQUIPMENT
AND SO FORTH.
THEY ARE NOT QUITE AS ROBUST OR
ENTHUSIASTIC AND THEY ARE NOT
BUYING OVER THE NEXT 12 MONTHS.
SAYING THIS BY 1/4 AT A TIME
AND SEE WHAT HAPPENS.
>> YOUR ALSO INVESTED IN THE
RESTAURANT BUSINESS, IS THAT
RIGHT?
>> ABSOLUTELY.
>> TELL ME ABOUT THAT BECAUSE
IT'S A GOOD INDICATOR OF THE
ECONOMY.
WHEN PEOPLE HAVE MORE MONEY IN
THEIR POCKET AND THEY FEEL
CONFIDENT THEY GO OUT TO
DINNER.
>> AND IF THERE A GOOD
COMMISSION CHECK IF THEY HAVE
EXTRA OVERTIME, YOU ARE RIGHT,
THEY SPEND THE MONEY.
AND I THINK PROBABLY,
RESTAURANTS ARE ONE OF THE BEST
INDICATORS OF THE ECONOMY.
IF THE ECONOMY HAS BEEN OVER
THE WEEK PEOPLE GO OUT AND EAT.
IF IT'S BAD, THEY STAY HOME AND
EAT CHEERIOS.
>> WE SEE FROM THE RESTAURANT
INDUSTRY IN THE RESTAURANTS
THAT YOU OWN?
>> THINGS SEEM TO BE REASONABLY
SOLID, REASONABLY BUOYANT AS
THIS TIME.
THERE IS NO INDICATION WERE IN
ANY KIND OF ADVERSE ECONOMIC
PERIOD.
>> HAVE THINGS CHANGE FOR YOUR
DAYS AT DLJ IN TERMS OF THE
FINANCIAL SERVICES SECTOR?
>> CLEARLY, LOTS OF THINGS HAVE
HAPPENED.
AND AT DLJ OF COURSE, IT WAS
UNIQUE IN THAT REALLY THEY WERE
THE LEADERS IN GOING PUBLIC,
THE FIRST MEMBER OF THE NEW
YORK STOCK EXCHANGE TO GO
PUBLIC AND THE FACT THAT YOU
NOW HAVE PUBLIC FIRMS AS
OPPOSED TO TOTALLY PRIVATE
PARTNERSHIPS, MEANS THAT
THERE'S BEEN AN ACUTE RELATION
OF A LOT BIGGER BALANCE SHEETS
FOR THESE COMPANIES.
AND THEY ARE ABLE TO TAKE ON
BIGGER RISK, THE ABLE TO DO
MORE THINGS AND SO FORTH.
CERTAINLY, THAT IS A BIG
CHANGE.
PRIVATE EQUITY ITSELF IS A VERY
SIGNIFICANT CHANGE.IF YOU GO
BACK TO THE LATE 60S, FUNDS
WERE TENS OF MILLIONS OF
DOLLARS.
TODAY THERE NOW TENS OF
BILLIONS OF DOLLARS.
BASICALLY 1000 TIMES BIGGER.
THE FACT THAT PRIVATE EQUITY IS
SO BIG TODAY, AMONG THE REASONS
THAT UBER CAN BE A PRIVATE
COMPANY, EVEN THOUGH HAS A
MARKET CAPITALIZATION I THINK
OF 70 BILLION.
>> YEAH.
>> NOTHING LIKE THAT WOULD'VE
EVEN SLIGHTLY BEEN POSSIBLE 30