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Everything Starts Out as Junk, Says Michael Milken

(Bloomberg) -- America’s erstwhile high-yield-bond king has news for you: Everything starts out as junk.

“Almost every person is high-yield junk,” Michael Milken said in an interview on Bloomberg TV. “When things started coming from Japan in the 1960s and 1970s, everyone said they were junk. And then all of a sudden we felt by the 1980s the quality of their products and cars was better. Everything coming out of China was junk.”

Milken was responding to a question on “The David Rubenstein Show: Peer-to-Peer Conversations” about whether he had any regrets in his financial career. The public didn’t understand that the companies he brought to the capital markets were America’s biggest job creators, 72-year-old Milken said. The interview airs on Wednesday.

“The American public didn’t understand they were talking about themselves,” he said. “60 million jobs being created by non-investment grade companies in the latter third of the 20th century minus jobs being created by investment grade companies.”

Billionaire Milken was a pivotal figure in building the junk-bond market in the 1980s out of the Beverly Hills office of Drexel Burnham Lambert. The market for the risky debt has since grown to more than $1.2 trillion.

“Quite often the future in credit is rated low, even though it’s the future,” Milken said, referring to junk ratings on companies such as Uber Technologies Inc., Tesla Inc. and WeWork Cos. “The real risk lies often in companies that we think of as establishment or have paid dividends for a long time.”

©2018 Bloomberg L.P.