Howard Marks (W’67) & Finance Prof. Chris Geczy: Howard Marks Investor Series

Thank you. All right, so my next guest says, tokenization, you've heard this term, that's the future of finance. I want to bring in now Apex Group, their vice president, Heather Zumaraga. Heather, it's so good to see you. It's been a long time. It's great to see you, too. All right, so first of all, what is tokenization? Because people are hearing the term, and it sounds intriguing, and it's going to save the world. But what is it? Well, I think it's important to simplify it, because a lot of people, even the crowd today at the conference, they hear these terms like blockchain, and they're like, wait a minute, I'm not a blockchain expert, right? It's very simple. Tokenization is actually the process of putting anything, it could be real estate, a stock, a bond, on a blockchain, and you don't have to be an expert to know it's just on a technology platform that's safe and secure, and it's the wave of the future, Charles. Fund managers are starting to tokenize their funds, and I didn't hear Mike's comments, but I assume if you want access to private equity, this is going to be one way to do it. He seemed pretty bullish in this space, and it allows retail access. Here's the thing, though. Here's the thing. I mean, art, anything, any asset could be tokenized, right? Many are saying that this is a real threat to the current financial structure. Like when Circle went public, you saw Visa's numbers come down, you saw MasterCard's numbers come down, because the blockchain is more transparent, less fees, it's easier to use. I mean, is it that revolutionary? I do think this is the future of finance, and at Apex Group, for example, fund managers are keeping their traditional structure and how they manage money, but they're adding another layer, which is that digital asset piece, and putting themselves on chain to open up to public markets and the retail investors. And the biggest piece of this, Charles, is liquidity. People want their money now, right? Remember it was T plus three, then it was T plus, and it was like, oh, this is a big deal, this is great, we can get our money now. People want liquidity. When I started in the business, you had seven days to get the money in. Seven days. I was a broker. Yeah, but it was also long, because what happened, Heather, we would do it, someone would buy a stock at 30, and the next day it would be 28. They wouldn't send a check in, and then it went to 27, guess who had to eat it? Yeah. The broker. Yeah. So we used to sweat bullets. So I could see why. Yeah, people want their money now. Right. And especially with private equity, even if you are a high net worth or accredited investor, your money's locked up for a really long time. Tokenization is allowing people to buy with less minimums, there's a lot less time in terms of that 24-7 capability between different countries, different jurisdictions, all around the world. You don't have to wait. Let's talk about what's happening right now in this market. Regional banks under some pressure, holding up a little bit today, is that an opportunity maybe? Yeah, the buy and the dip mentality still exists. You saw the KWB Banking Index down 6% yesterday because you had some claims of the loans. They were bad, right? With Zion, with Western Alliance, you have Jamie Dimon, he has a $170 million loss, and I'm not going to use the term, I guess cockroach, is that a bad term? That's the term. If you see one, you see many. Yeah, exactly. I don't necessarily think so. I think that from a standpoint of private credit markets, even outside of what the regional banks have, not to say that it doesn't matter, because it does, but it's somewhat contained, right? A $50 billion loss is a big loss, but it's contained where it doesn't pose a systemic risk to the broader markets at this time. Your thoughts on the AI situation, particularly all the worry about circular lending. But are you concerned? Do you think that the hype is justified right now? I think so. I mean, why should it end just because valuations are stretched? I mean, AI is the wave of the future. You have the markets of 319, and I get it. Like 10 stocks dominate the S&P 500, over 40% of the return is from the top 10, most of those tech-related or AI-related, but you know what? It's okay. That's why you stay diversified and have a broad ... You can't exclude. You don't want to be out. Right, right. That's the thing. I just never get it. The people who complain, you know, listen, either you're in or you're out. Right. And if you've been in these, you've had life-changing moves, and I'm not trying to talk anyone out. Would you say, like, sell it now? I wouldn't say to sell it. Listen, I take profits from here and there, but I don't try to tell people what to do unless they're paying me. And if you've done something right that the experts haven't done, why would you listen to them now? People are smart. Everybody in this room is smart. They understand what's going on. We're all human. We push the envelope from time to time, but I think they're smart enough to know this is a once-in-a-lifetime opportunity, and they want to learn tokenization, so ... Thank you, Charles. Thank you so much for explaining it. Good to see you. Yes, sir. Good to see you. Thanks a lot, Heather.