like it. On the margin deployment into the equity business, I think for all of 2023 will prove for our industry to be
very, very attractive. So what's really happening? Let me step back and give you my view, at least, on what I think
is happening in markets and in private markets.
And I'll start. I look at my career, which is now 39 years, and I think we have benefited from four tailwinds over this
period of time. We've had rates generally going from high to low. We have printed a massive amount of money.
We have borrowed forward future demand through fiscal stimulus and fiscal borrowing. And we've had the benefit
of globalization. It does not surprise me with those four tailwinds that risk assets, equities, growth, real estate,
things like that did really well. But I ask myself, are any of those four things true today? I think there's an argument
as to whether they're headwinds or just the absence of tailwinds. But everything that I see tells me that looking
backward is not likely to be a good indication of what needs to be done going forward for investment success. In
particular, looking backward over the past 10 years, which I view as an absolute aberration, will not be a good
guide going forward. And the strategies that performed over the past period of time with these tailwinds are not
going to perform in the new environment that we have.
I also think there have been fundamental changes that have happened to markets and market structure over the
past years as well, the most significant of which happened in 2008. 2008, we came very close to an absolute
debacle in our financial system and the rules of how our financial markets work were fundamentally rewritten. We,
not just Apollo, but all of us, we just didn't notice because right after we changed the rules, we printed $8 trillion
and everything went up into the right. Well, now that we are no longer doing that, now that rates are up, now that
there are headwinds, we are starting to notice some of these changes. And I'll stick to three and I'll talk about their
implications.
One is liquidity, public market liquidity. By some estimates, dealer capital, capital that facilitates trading, is roughly
10% today of what it was in 2008. Markets are 3 times their size. That tells me we have just less liquidity in public
markets. We have already seen the first complete breakdown of functioning in market, which was UK LDI last
year. It will not surprise me going forward to see liquidity challenged, public markets challenged, and investors
beginning to understand that liquidity only exists on the way up and does not exist on the way down. We should
expect a more volatile, less liquid world in public markets.
The second is the role of banks, not just in our economy, but in economies around the world. Dodd-Frank, in
theory, was targeted at constraining the power of the four big banks in the US following the financial crisis but the
banking system in general. Guess what, it worked. Banks today in the US markets are roughly 20% of debt capital
to consumers and businesses. All of you investors now supply 80% of debt capital to businesses. In addition, the
changes that are now proposed to occur following the debacle at SVB and First Republic and Credit Suisse will
further lead to de-banking. When regulators ask banks in the US to put up 15% more capital, they're asking the
banks to shrink or to shrink lines of business. When you move from Basel III to Basel IV, they're asking banks to
shrink. This is happening around the world. De-banking is not something that is periodic. It is at its very early
infancy. It does not mean that banking is a bad business. It does not mean the four big banks don't have amazing
businesses. They do. But it means on the margin they will continue to play less and less as a percentage of the
total, and new investors will play more and more. That tells me as investors that you will see over the next decade
a series of financial products that you've never seen before because they have historically been resident only on
the balance sheets of large banks, and they are on their way to you as investment product.
And the third that I focus on is this notion of indexation and correlation. 80% of volume today of trading is S&P
500. 60% of our markets are ETFs. 10 stocks make up nearly 35% of the S&P 500. These 10 stocks are
responsible for 100% of year-to-date returns. These 10 stocks have traded between 52 and 44 P/E over the last
few weeks. Not many of you come in every day looking to buy 50 P/E stocks, yet we feel really comfortable with a