>> the following is paid for by skybridge media llc. >> welcome to "wall street week." the show about long-term investment. financial instability in europe is one of the biggest stories in the summer. there are numerous opportunities in europe right now. >> he has over $14 billion on the management with a large commitments in the energy sector. it makes sense for you to invest in these assets as well. plus, he co-owns an nba team. we will also talk about the business of basketball. >> this show has never been solely about investments. we' ve talked about anything that

affected people and their money. >> from times square in new york city, the new "wall street week." >> i' m pleased to welcome the chairman and ceo and cofounder of a capital group. it is great to see you. we started the show fairly typically by asking the origin story. tell us about your background and your immigration from morocco. >> when i was six years old, we went to paris for a little while. i was there for a year. we came to the u.s. hartford, connecticut. i grew up there. until i went to college. >> you have family members there? >> my mom has nine brothers and sisters. two of her sisters were at

husbands used >> you started school. you went to public school? >> public school. i played basketball. i thought i would go pro. [laughter] lack of talent was a problem. >> where did you go to college? >> i went to clark university where i played basketball. >> basketball scholarship? >> i would like to say it was a basketball scholarship. [laughter] >> then you went to law school. why did you want to become a lawyer? >> in my family you were either going to become a lawyer or a doctor. i wasn' t too keen on medicine you that summer i worked for ubs as a truck driver. i actually loved it.

-- ups truck driver. i loved it. it was a blast. i told my mom, i' m going to stay at ups. i think i could have a career there. she said, you have got no choice. i don' t want to hear about it. i decided to go to law school. i did well. that was a great job. i ended up working for a firm which is purely bankruptcy law. within a couple of months i did investing. from there i had a job to run about three $5 million of partners capital. >> what made the timing right for investing in bankruptcy? >> it was a time when you could make a lot of money. the problem is people were still

scared of bankruptcy. even the earth there was a plan, you could buy that debt. the word bankruptcy that people scared. there is this massive arbitrage you could do. saw that. give us a bunch of capital. we made about 60% plus per year. >> there are these areas of the market where you could take advantage. is anything like that out there today? >> it is much, much smaller. there is so much capital out there. there are huge opportunities we are able to invest in. the problem is we are running a lot of money. >> you made a decision. launching your own firm. you did that with a family member. that is interesting.

when did you make that decision? how did that work? >> what happens is i ran money for the bass brothers. i loved it. i decided to run my own money. i started with about $10 million. i invested in capital good the next five years, we had 77%. we sort of double the money every year. we started avenue in 1995. i started with my sister. >> you took your own personal capital and your sister and rolled it into revenue. -- avenue. why did you name it avenue? >> we named it avenue as we were on madison avenue. [laughter] we try to name it madison partners. that was taken. we thought lexington partners. that was taken. [laughter] >> and assets the day started was? >> $7 million.

>> you went from $7 million to tell us how you managed the growth in a business alongside managing capital. >> back then if you got to $500 million, that was a huge amount of money. we quickly grew. i think we did very well. by 2001, we were running about $1 billion. from 2001-2006, we got to about $22 billion. in 2010, we returned the money to investors. we had too much money. >> tell us about the thinking that went into that. >> it was a hard decision. i think a lot of it is our capital grew and grew. the biggest decisions we have to make was is this too much? well that hurt our returns? we thought it was. it was less to do. as luck would have it, this is right before the european crisis in 2011.

investors were thrilled. then things started getting bad again. it wasn' t an easy decision. it was very hard. >> the resonating feature is the -- >> what is the right thing to do? that was the right thing to do. i get involved a lot. i do a lot on the investment side. my sister was the firm. it has been phenomenal. it has worked out. >> we will be right back. >> we paid about $550 million. it seems a lot. >> the money side. >> i absolutely got it for the money side. >> sign-up for the free "wall street week" newsletter. we recap what is happening in

the markets. we dies deeper into wall street episodes with feature articles and investment primers. go to wallstre et.com and sign up today. >> i was done. >> i was tired of being a starving artist. >> i kind of wanted to do something more green. >> they help me create a business lan and help me -- plan and help me. >> they help me to think big. >> i' m here. >> i' m here because of score. >> get your free business mentor at score.org. >> were capital creates change. >> we are back. let' s talk about the main philosophy that you have when you' re looking at brand-new investments. what are the tenants of the criteria that you use?

>> we' re trying to why something that we think is worth 100 cents for $.60 on the dollar. you are buying from noneconomic sellers did somebody has to -- noneconomic sellers. somebody has to sell. 2008-2009 come a great time here at 10 to 11, also a great time. viewers get nervous during crises and recessions. you take the opposite tack. >> it is hard. you develop a temperament. it is hard when you buy something. i remember in 2008-2009, the ford company. as it keeps going down, everyone goes you are buying a cheap. that is great. it is hard to buy when the world is telling you you are wrong. it is not an easy thing. you have to really believe in

your analysis. we did that. i' m not going to tell you it is easy. >> traditional equity investing >> history says you don' t , average down your average up. i think the bankruptcy training leaves you comfortable. were you speaking to the company? were you talking to suppliers? what made you feel comfortable at that period to continue to average down? thinking the debt would be whole. >> we knew if the company went into liquidation -- what >> bankruptcy. >> if it liquidates, you are fine. you never want a company to liquidate. we had done a huge amount of due amount of time understanding ford. we needed time and the luxury of time. had enough cash to get through. if it had to go to bankruptcy,

we would get our capital back. by the time we bought that bank -- [no audio] >> you take the profit. >> anything you' re looking at? >> on the energy side? huge opportunities. you could buy debt at $.40, $.50, $.60, $.70. massive opportunities. oil has gone down. you look at that from an equity you want to be a senior debt holder. it becomes the new equity are -- or you get paid. >> it is also traded down in terms of its value. there is more risk.

>> a lot more risk. >> you have the cash to support it. that is what makes you comfortable. >> think about it. a bond is currently trading at and ends up having -- you' re getting 20%. >> can you tell us about your view over oil? >> at $50, which is roughly where it is, we cannot tell you work goes. we look at where the debt of those companies are traded. we don' t need to make a commodity play. we are doing a credit play. because of all of the issues that the company is having, you are able to buy that debt at a discount. >> stress in the energy sector. those bonds are probably traded off a little. there is enough support in the economy in the oil price. were those bonds --

>> less transition to europe. you' d apply a lot of capital. what are you seeing that makes you comfortable? how does this play out in the end? >> the greatest thing of europe today is you have a huge amount of regulatory pressure for banks to sell. they want things to deleverage by $2 trillion. in 2008, do you remember bear stearns? 18-1 it was goldman. bear was 40-1. do you know what that means? >> [indiscernible] >> that is exactly it. 3% you are gone. to deleverage. >> let' s explain this to the viewers. the banks go out and aro money to help their balance sheet.

it creates -- borrow money. a lot of these banks in the financial crisis had 40-1, 30-1 leverage. when things got rocky, the equity got wiped out. they lowered the banking system. these banks are now being required to sell assets. talk about that. >> you have got noneconomic sellers. you have got to sell. we are buying from people who are buying more because they' re being forced to instead of thinking it is a good decision. we are able to buy that somewhere around $.60 $.70. you get paid part. you have got to do a whole restructuring it takes two or three years, you take a lot less risk. >> i wouldn'

t a bank just wait to do that themselves? this is the real opportunity in the hedge fund space. >> the ecb told the bank, i want you to reduce your leverage. any a company goes into bankruptcy or has an issue, the ecb forces you to take a hit to your capital. you got to take a $.50 into your capital. it is better for the bank to end up selling that loan at $.70. they are only taking a 30% hit. >> given the fact that a chase in the quantitative easing, any thoughts on the equity market? >> i think it probably makes sense. you are going to have this qe1 or qe2 out there.

to generate an equity return. >> be looking at any chinese debt that could be more opportunities out there? >> there is. the opportunities there is you have got to buy. you are buying from those state owned enterprises. state owned bank. you' re buying the debt of the state on enterprise. we buy that debt after it has defaulted. able to recover. >> that is the essential question. >> we are comfortable with it. at the end of the day, china has one of two choices. have got to follow the western legal system.

if they decide not to come no one will invest in china. >> your quest for ownership. >> i think it is extremely fun. it is a blast. it is a dream come true. >> anyone 18. -- and you bought a team. >> about a year ago. >> the bucks was one other franchises on sale? >> at the time, he was put up for sale and we looked at it. without we were buying a media company -- we thought we were buying a media company. tv contracts were coming up. breakeven. million. [laughter]

nba sports teams were not trending at the stress price. >> no, . evilness analyze that team. -- people ms. analyze that team. >> you didn' t buy it for the money side, did you? >> no. the money side. >> "wall street week" will be back. >> who has the highest level of bankruptcy post career? >> nfl. >> an unobstructed view. >> imagine putting forward financial advice is the right thing to do. investor trust at its foundation. rising above the discord by compex of interest. hightower is the new blueprints

for financial advice. a legal pledge to put our client' s interest first. net because it is the latest fad, but because it is what we were built to do. >> life taught me a lot. i' m ready for more. >> you are exactly what i' m looking for. >> your company could be missing out on the candidates it needs the most. >> high. you' re watching "wall street week." -- hi. you' re watching "wall street week." >> for more on the business of the sports business, we are joined light another guest. -- by another guest. let' s start out with what is the sports entertainment division. >> thank you for having me. a new division be created at morgan stanley to work with

athletes and entertainers. and challenging needs when it comes to finance is planning for their lives as it relates to different areas. we want an opportunity to do something that focuses on key areas that these individuals need support and attention with. >> how important is it to understand the long-term thinking when evaluating players in terms of all these people you want to be associated with? >> what ends up happening is the minute they make money everybody is after them for money. we try to explain to our players to save their money. save your money. just save it. we are happy to help you. i' m getting paid, but my money goes here.

i do have access to that money. -- i don' t have access to that money. >> having the capability of saying no is a big area that these individuals need to incorporate to their day-to-day lives out of the gate. the strategy we put together that relates to what these individuals heal with day in and day out. look at the scope of their careers. we call playmakers. and blue chippers. wildcards. looking at specific strategies. the more conservative. aggressive. starting out with a discipline plan. the market indicator and being able to say no. a lot of pressures that these individuals have from family members and others that they may have been connected with. >> do you think some of the lower paid athletes on a professional sports team are in competition with some of the

higher aid athletes. >> a lot of them are pulled in the parking lot and will look at the individual who has the guaranteed contract. they feel like they have to keep pace with the what a lot of these folks are doing. a lot stems around education and not knowing. they all have -- they don' t have a plan. >> they think that pay is coming. it will stay coming. what are additional mistakes? >> imagine when you went to college. we all went to college. i will pay you $4 million for

the next four years. that is what rookie contracts are today. >> you think you' re going to live forever. spend my money. that is where a lot of the mistakes are. they focus on the dollar numbers and forgetting about the taxes. there are different things you need to do. as they learn that, towards the end of their career, i that time a lot of that money is gone. i have known plays that made close to $200 million and probably have about $5 million in the bank. >> everything that has been done -- >> definitely. people see the glory of these big contracts. that is the big miss out there. -- myths out there.

>> newfound money athletes -- >> when you look at lebron james , he has created an empire. he has done a lot of smart things with the dollars he has made on the court and off the court. businesses he has invested with and others. >> other athletes were not lebron james or magic, they are some of the best in the world that have been responsible. >> you think about individuals. they played a number of years ago. >> big-time. [laughter] junior came out and had an extremely successful career in the business world. but again, having that discipline and opus. >> -- focus. >> who has got the highest level of bankruptcy post career? >> nfl.

in terms of looking at nfl players, the career spans are typically an average of 2.5-three years. the amount of financial distress they have coming out of the lake is medically higher -- league is dramatically higher. your average nfl player within 4.5-5 years have financial distress. >> a lot of what has been going on right now is the rookies come in putative huge amount of education. what ends up happening is you have a bunch of players who end up talking. don' t make the same mistakes. the nba' s going out of its way to try to teach a lot of some of the mistakes. >> "wall street week" will be back.

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real news. better talk. >> what they learn? there are number of similarities. >> it will take a longer period of time and more predictability around their -- being disciplined. >> sort of paying themselves first. >> are you getting good financial advice? >> they take an active interest in not just find the best player to put the most fans in this

seat. >> terrific. thank you for spending time with "wall street week." that is it for today. until the next sunday, having prosperous week. >> the preceding program was