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WHEN: Today, Tuesday, October 18th
WHERE: CNBC's "Fast Money Halftime Report"
Following are excerpts from the unofficial transcript of CNBC interviews with Jamie Dinan, York Capital Founder, and Marc Lasry, Avenue Capital Group Co-Founder & CEO, on CNBC's "Fast Money Halftime Report" (M-F, 12PM-1PM ET) today, Tuesday, October 18th. Video of the interviews available on CNBC.com.
All references must be sourced to CNBC.
Jamie Dinan, York Capital Founder
DINAN ON DEMAND DEARTH
THERE IS JUST A DEARTH OF AGGREGATE DEMAND REALLY IN THE GLOBAL ECONOMY. IN LARGE PART BECAUSE THERE'S AUSTERITY IN EUROPE, THERE'S A DYSFUNCTIONAL, I GUESS,GOVERNMENT HERE IN THE U.S. WE ARE NOT GETTING THE FISCAL SPENDING WE NEED TO REALLY JUMP-START THINGS. THE MONETARY AUTHORITIES, THE CENTRAL BANKS, THEY'VE GOT RATES DOWN TO ZERO. THERE'S NOT MUCH MORE THEY CAN DO AND NEGATIVE RATES THAT HAVE UNINTENDED CONSEQUENCES AS WE HAVE ALL SEEN. AND I THINK UNTIL YOU GET SOMETHING JUMP-STARTED, WHICH I THINK HAS TO BE GOVERNMENT SPENDING, WE ARE GOING TO BE IN THE DOLDRUMS OF LOW GROWTH ENVIRONMENT, GLOBAL SAVINGS, AND REALLY LOW INTEREST RATES.
DINAN ON NET LONG
I HAVE NET LONG EXPOSURE. I'M BASICALLY KIND OF FLAT EXPOSURE IN JAPAN WHERE WE HAD SOME OTHER ISSUES. U.S. WAS STILL NET LONG. EUROPE WAS SLIGHTLY LONG, BUT NOT AS MUCH. BUT MOST OF WHAT WE ARE LOOKING FOR IS IN REALLY IDIOSYNCRATIC CREDITS, DISTRESSED CREDITS BOTH IN THE U.S. AND EUROPE. U.S. ENERGY, EUROPE MOSTLY REAL ESTATE. THE AVERAGE PERSON REALLY CAN'T TAKE ADVANTAGE OF THAT. EQUITIES WERE BIG IN MERGER ARBITRAGE DEALS. A LOT OF COMPLEXITY THERE, LOT OF BIG SPREADS, LOT OF TIGHT SPREADS. BUT STILL LOT OF BIG SPREADS. YOU CAN ACTUALLY FIND OPPORTUNITIES THERE.
DINAN ON ST. JUDE
THEY CAME OUT ACTUALLY LAST NIGHT WITH SOME NEW PROTOCOLS DEALING WITH THE WHOLE CYBER SECURITY ON MEDICAL DEVICES. THIS IS AN ISSUE FOR EVERYONE,YOU KNOW, OUT THERE. SO WE LIKE IT. AND WHAT WE LIKE ABOUT THESE THINGS IS YOU CAN TAKE EXTRANEOUS KIND OF INFORMATION THAT REALLY DOESN'T CHANGE, YOU KNOW, THE ULTIMATE OUTCOME AND STEP IN AND TAKE ADVANTAGE OF THAT. SO THE KEY IS FIND THINGS THAT ARE CAUSING DISLOCATIONS THAT ARE BASICALLY NOT GOING TO BE DEAL KILLERS. THAT'S WHAT WE LIKE. WE LIKE THE COMPLEXITY OF THE UNCERTAINTY. WE LIKE THE NOISE.
DINAN ON QE
I THINK AS INVESTORS AND NEWSPAPER REPORTERS TEND TO LOOK THROUGH, WHAT I CALL, THE REAR-VIEW MIRROR. WHAT HAS BASICALLY HAPPENED AS OPPOSED TO WHAT WILL COME. AND I THINK WHAT INVESTORS NEED TO REMEMBER IS THE LAST SEVERAL YEARS – ALMOST THE LAST SEVEN YEARS – WE HAVE BEEN LIVING IN A WORLD OF QUANTITATIVE EASING. WHERE BASICALLY ASSET PRICES, PARTICULARLY RISK ASSETS, STOCKS, HAVE IN EFFECT BEEN MANIPULATED – IN A GOOD WAY, TO SOME EXTENT, BY CENTRAL BANK ACTION…RISK HAS BEEN BASICALLY MISPRICED IN THIS ENVIRONMENT FOR THE LAST SEVERAL YEARS BECAUSE OF THIS QE AND ZERO INTEREST RATE WORLD.
DINAN ON EXPECTATIONS
EXPECTATIONS FOR THE U.S.? 2.2%. THAT'S GOOD. HIGHEST OF ALL THESE BIG COUNTRIES. GROWTH? 2.2% EXPECTED NEXT YEAR. 18 PE? THINK IF YOU PUT IT ALL IN CONTEXT, MARKETS ARE FAIRLY VALUED. NOT CHEAP, NOT SUPER EXPENSIVE. I THINK THE KEY IS FIND OPPORTUNITIES, FIND ALPHA, FIND INDIVIDUAL STOCKS, FIND INDIVIDUAL CREDITS THAT YOU CAN MAKE MONEY.
DINAN ON RAISING RATES
I THINK THEY ARE GOING TO RAISE, BUT I THINK IT IS AN OK RAISE. I'VE SAID THIS BEFORE, PEOPLE OFTEN GET SO NERVOUS ABOUT SOMETHING HAPPENING. EVERYBODY ADJUSTS ANYWAY.
Marc Lasry, Avenue Capital Group Co-Founder & CEO
LASRY ON TAKING RISK
THERE IS NOTHING THAT SEEMS TO BE THAT APPEALING. YOU'VE GOT TAKE A LOT MORE RISK. YOU NEED TO SORT OF FIND INDUSTRIES THAT HAVE GOTTEN HIT OR AREAS THAT HAVE GOTTEN HIT AND NOT INVESTING. SO IT'S NOT BROAD BASED. IT'S ACTUALLY PRETTY SPECIFIC. AND WHEN YOU ARE RUNNING THE CAPITAL THAT I THINK WE ALL RUN, IT ENDS UP BEING HARDER. SO WHAT YOU HAVE TO DO IS SORT OF FIND THOSE SPECIFIC AREAS.
LASRY ON RATES IMPACT
THE FACT THAT INTEREST RATES ARE GOING TO MOVE UP BY A QUARTER OF A BASE POINT ISNT GOING TO MAKE THAT MUCH OF AN IMPACT. I THINK IF YOU ARE BUYING BONDS AT PAR, THAT'S GOING TO HAVE MUCH MORE OF AN IMPACT. OBVIOUSLY, IF YOU ARE BUYING TREASURIES, THAT'S GOING TO HAVE MUCH BIGGER IMPACT. BUT I THINK FOR WHAT WE DO, IT'S VERY LITTLE. I THINK RATES WOULD HAVE TO GO UP AT LEAST SORT OF 2% OR 3% FOR IT TO START HAVING A REAL IMPACT ON WHAT WERE DOING.
LASRY ON ENERGY DEBT
DO YOU KNOW THE AMOUNT OF DISTRESSED DEBT THAT NOW IS IN ENERGY? ITS $300 BILLION PLUS. WHY? BECAUSE ALL THESE CAPITAL STRUCTURES WERE FOR COMPANIES – WERE MADE WHEN THE OIL WAS AT $100. OIL TODAY IS AT $50. SO REALLY, YOU HAVE HUGE OPPORTUNITIES BECAUSE YOU'RE ABLE TO REALLY GO OUT THERE TODAY AND DO ALL THESE RESTRUCTURINGS. AND THAT'S WHAT WE ARE DOING.
LASRY ON DYNEGY
I THINK IT IS MASSIVELY UNDERVALUED. WE END UP LOOKING AT IT – YOU KNOW WHAT THE CASH FLOW IS GOING TO BE BECAUSE IT IS ALREADY CONTRACTED OUT FOR THE NEXT 3 TO 4 YEARS. AND WHAT IS ODD, AND I DON'T THINK THE MARKET FULLY APPRECIATES IT BECAUSE EVERYBODY IS NEGATIVE ON ENERGY, THE CASH FLOW THAT IS COMING OUT OVER THE NEXT 3 YEARS TO 4 YEARS IS THE MARKET VALUE OF THE COMPANY TODAY. SO THAT SEEMS ODD. IT WOULD BE A GREAT COMPANY FOR SOMEBODY TO BUY, EXCEPT FOR ONE THING. THAT ALL OF THAT DEBT WOULD COME DUE BECAUSE YOU'VE GOT TO CHANGE YOUR CONTROL. AND I DON'T THINK YOU COULD TODAY GO OUT AND BORROW THAT MONEY.
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