WHEN: Today, Thursday, December 3rd
WHERE: CNBC's "Closing Bell"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Moelis & Co. Founder and CEO Ken Moelis on CNBC's "Closing Bell" (M-F, 3PM-5PM ET) today. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000462699.
All references must be sourced to CNBC.
KELLY EVANS: WELCOME BACK. LET'S BEGIN HERE WITH HOW WE FINISHED THE DAY ON WALL STREET. DOW IS DOWN MORE THAN 300 POINTS AT ONE POINT, BUT WE CLOSED DOWN 252. THE S&P GAVE UP 29, ALMOST 30 POINTS. THE NASDAQ WAS THE WORST PERFORMER TODAY DOWN 85. RATES INTERESTINGLY MOVED UP. LET'S TALK ABOUT THAT RIGHT NOW. MY NEXT GUEST OVERSEES A GLOBAL NETWORK WITH 650 EMPLOYEES IN 17 OFFICES ON SIX CONTINENTS DOING DEALS. MOST RECENTLY, HE HAS HAD HIS HAND IN THE CONTROVERSIAL MERGER OF DRUG COMPANIES PFIZER AND ALLERGAN. JOINING US NOW IS KEN MOELIS WHO IS FOUNDER AND CEO OF MOELIS AND CO. WELCOME TO POST 9.
KEN MOELIS: HI, KELLY. THANKS.
EVANS: GOOD TO HAVE YOU HERE. AND WE WILL GET INTO ALL OF THAT IN JUST A MOMENT. BUT LET'S BEGIN WITH THE BACKDROP OF THE FEDERAL RESERVE EMBARKING PERHAPS ON INCREASING INTEREST RATES. STOCKS HAD A HORRIBLE SESSION TODAY. WHAT DO YOU THINK IS REALLY GOING ON HERE?
MOELIS: WELL, I THINK THE FACT THAT WE ARE ALL SITTING HERE WAITING TO SEE WHAT THE FEDERAL RESERVE WILL DO JUST SHOWS HOW CENTRALLY PLANNED THE WHOLE ECONOMY OR THE WHOLE MARKET HAS BECOME AS IF WE'RE WAITING FOR A CENTRAL PLANNER TO FIX OUR ECONOMY. THE FACT IS THE ECONOMY IS OPERATING ON ITS OWN AND ITS REALLY OPERATING IN A NEW WORLD THAT I THINK IS BEING VERY DIFFICULT TO UNDERSTAND BY A LOT OF PEOPLE.
EVANS: INTEREST RATES WE MENTIONED THIS AGAIN THEY MOVED UP TODAY, THE TEN YEAR IS BACK ABOVE 2.3%. BUT YOU'VE BEEN SAYING FOR SOME TIME THAT YOU ACTUALLY THINK THEY WILL BE LOW, STAY LOW, MAYBE EVEN MOVE LOWER. DO YOU STILL FEEL THAT WAY?
MOELIS: LOOK, I THINK, I ACTUALLY THINK WE ARE IN A DEFLATIONARY WORLD. BUT A DEFLATIONARY WORLD THAT SHOULD NOT SCARE PEOPLE. THE FACT IS IF YOU POLLED MOST AMERICAN PEOPLE AND YOU SAID DO YOU WANT TO BUY MORE FOR LESS, I THINK 99.9% OF THE PEOPLE WOULD GO, YEAH, THAT'S WHAT I WANT. AND THAT IS WHAT DEFLATION IS.
EVANS: THEY DON'T WANT TO MAKE LESS OR EARN LESS.
MOELIS: THEY DON'T WANT TO MAKE LESS, BUT DEFLATION IS BEING ABLE TO PURCHASE MORE FOR LESS. AND THERE'S ONLY A SMALL AMOUNT OF PEOPLE THAT SEEM CONCERNED ABOUT THIS AND IT SEEMS TO BE THE CENTRAL BANKERS OF THE WORLD. I'M NOT QUITE SURE WHY THEY ARE SO – AND BY THE WAY, THE REASON WE ARE IN DEFLATION IS I THINK IT'S TECHNOLOGICALLY LED. I THINK IN OUR WORLD RIGHT NOW, YOU HAVE SO MUCH TECHNOLOGY DRIVING PRICE TRANSPARENCY, PRICING POWER, EFFICIENCY. THESE ARE GREAT THINGS. I MEAN, WHAT AMAZON IS DOING – IF YOU ARE A RETAILER, LOOK, YOU BETTER TAKE YOUR PROFIT DOWN AND GIVE THE CONSUMER AN AWFULLY GOOD DEAL OR AMAZON IS GOING TO REPLACE YOU.
EVANS: AND WE SEE THOSE ARE THE COMPANIES DOING WELL IN THIS ENVIRONMENT ARE ACTUALLY THE ONES DRIVING THIS TECHNOLOGICAL CHANGE, BUT THAT'S ALSO DRIVING THE DEFLATION THAT YOU'RE TALKING ABOUT. WHY DO YOU – SO IF THIS IS HAPPENING, IF THIS IS THE WORLD THAT WE LIVE IN TODAY, WHAT DOES THAT MEAN FOR INTEREST RATES? UPON THAT IS PREDICATED A TON OF DEAL MAKING, A MERGER AND ACQUISITION CYCLE THAT'S BEEN ALMOST RECORD BREAKING, WHAT'S THE UNDERPINNING OF ALL THIS? WHERE IS IT HEADING?
MOELIS: WELL, LOOK, THIS IS WHAT PEOPLE ASK ME. WHAT SECTORS ARE HOT, AND I SAY, YOU KNOW THE INTERESTING PART IN M&A IT'S EVERY SECTOR BECAUSE IT'S NOT A SECTOR – THERE'S NOT A SECTOR THEME TO THIS. THERE IS A DEFLATION THEME. EVERYBODY HAS TO LOOK FOR COST SYNERGIES. EVERYBODY HAS TO TAKE EVERY COST OUT OF THEIR INCOME STATEMENT THEY CAN POSSIBLY FIND. AND THAT'S WHY YOU'RE SEEING LARGE SCALE MERGERS, TRYING TO TAKE OUT CORPORATE OVERHEAD, BRING DOWN COST OF GOODS SOLD, THIS IS ALL WHAT'S GOING ON.
EVANS: BRING DOWN TAXES IN PFIZER'S CASE.
MOELIS: WELL LOOK, THERE'S ONLY SEVERAL PLACES YOU GET SAVINGS IN LIFE, COSTS OF GOODS SOLD, SGNA AND TAXES. AND I THINK FOR EVERY COMPANY HAS TO PAY ATTENTION TO EVERY SINGLE COST ITEM BECAUSE REVENUES ARE TOUGH TO GET. AND IF YOU'RE GETTING REVENUE, YOU'RE GOING TO HAVE TO PUT MORE QUALITY IN YOUR GOODS, YOU'RE GOING TO HAVE TO DELIVER MORE ASSORTMENT, YOU'RE GOING TO HAVE TO IMPROVE YOUR GOODS JUST TO STAY EVEN.
EVANS: I MEAN, YOU EVEN THINK THIS IS SORT OF THIS EBBING TIDE IF YOU WILL, IS NOW MOVING THE OTHER WAY REVEALING TO US SOME OF THE HORRIBLE THINGS THAT HAVE BEEN HAPPENING IN EMERGING MARKETS LIKE BRAZIL. YOU KNOW, AGAIN. SO IF THIS IS HAPPENING, HOW LONG DOES IT CONTINUE HAPPENING AND WHAT ARE INVESTORS TO THEN MAKE OF IT?
MOELIS: I THINK THIS IS A LONG TERM TREND, THIS IS NOT A CYCLE. WE DON'T HAVE LOWER OIL BECAUSE OF A NEW OIL FIELD THAT WAS DISCOVERED IN SAUDI ARABIA. WE HAVE LOWER OIL BECAUSE OF A NEW TECHNOLOGY. AND BY THE WAY, THERE'S PROBABLY A BETTER TECHNOLOGY THAT WILL COME A YEAR FROM NOW. TECHNOLOGY DOESN'T SEEM TO CYCLE. IT SEEMS TO ACCELERATE. SO IF WE ARE IN A TECHNOLOGICALLY DRIVEN DEFLATIONARY MARKET, I THINK YOU WILL SEE IT LAST LONGER THAN PEOPLE THINK. AND THAT'S WHY I THINK YOU WILL SEE RATES STAY LOW FOR A LONG PERIOD OF TIME.
EVANS: AND WE HAVE TO GO, BUT THEN DOES THAT MEAN LET'S JUST SAY, FOR EXAMPLE, INTEREST RATES STARTED TO MOVE IN NEGATIVE TERRITORY IN THE U.S. PULLED DOWN BY WHAT YOU'RE DESCRIBING. SHOULD WE NOT THEN WORRY SO MUCH ABOUT THAT? SHOULD WE INTERPRET THAT AS SOMEHOW A POSITIVE THING?
MOELIS: WELL, I THINK IF YOU'RE LEVERED, YOU MIGHT WORRY ABOUT IT BECAUSE I THINK PEOPLE ARE UNDERESTIMATING WHAT THE REAL RATE OF INTEREST IS RIGHT NOW. THAT THEIR ASSETS MIGHT NOT BE APPRECIATING AS FAST AS THEY THINK, IT MIGHT BE DEPRECIATING. THE ATTACK OF TECHNOLOGY AND REGULATORY ENVIRONMENT REALLY ON EVERY ASSET YOU HAVE IS GOING TO SURPRISE PEOPLE HOW QUICKLY THEIR ASSETS BECOME OBSOLETE. SO I THINK YOU HAVE TO BE CAREFUL AS TO HOW YOU FINANCE YOUR COMPANIES RIGHT NOW.
EVANS: A LOT TO THINK ABOUT, KEN. THANK YOU SO MUCH FOR JOINING US.
MOELIS: THANK YOU, KELLY.
EVANS: ON A DAY LIKE TODAY ESPECIALLY. THAT'S KEN MOELIS HERE AT POST 9.
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