GS Picked Solomon To Tap Modern Market, Young Blood: Schatzker

boardroom drama continues. Golden Sachs said that David Solomon will become the sole president of the bank, elevating him over Harvey Schwartz as the eventual successor to Chief Executive Officer Lloyd blank Find. Of course, as follows at reports on Friday by The Wall Street Journal that Lloyd blank Find was planning to step down as CEO as early as this year. Later in the year, Eric Shasker joins us

now he's editor at lar for Bloomberg. Eric, I want to start with denials by Lloyd blank Find that this news came from him over the weekend and he was sort of saying, it's sort of like Huckleberry Finn watching his eulogy. Why the pushback If Goldman Sachs is just going to fan the flames with this announcement today. Well, let's be careful. What Lloyd said was that, as you as you phrase it, that the news did not come from him, which is to say he wasn't the source

of the Wall Street Journal report on Friday. But that's all. I'm not sure that I would call that a denial. Um. What it does tell us is that this did not go according to script, and that Goldman Sachs to a certain degree clearly wasn't in charge of the cadence of events. They might not have proceeded exactly according to Goldman's plan,

but nevertheless, here we are. Goldman Weather by hook or by Crook was forced to say that David Solomon is the soul sole president excuse me, and the likely successor to Lloyd blank find a CEO if and when that happens. But they decided this a while ago. It wasn't like this happened over the weekend a short while, but it

was not on Friday. My understanding, having recently spoken when I say recently in the last few minutes to a person UH with direct knowledge of the situation, is that Lloyd Blank find met with the rest of the board on February twenty one, regularly scheduled board meeting, at which point he recommended that David Solomon be the sole president of the firm and be his chosen successor, and the

board endorsed that recommendation. So shortly thereafter we can presume Harvey Schwartz was informed of this decision, and then it was up to Harvey to decide what his next move was going to be. Most people under those circumstances on Wall Street choose to leave the firm. There's not much point hanging around the hoop, right if you're not going to be the centerman. And uh, the problem here is that February when he first is what almost three weeks ago.

Goldman could have done this more elegantly by doing it a little faster. In the end, someone presumably in the boardroom, although we may never know, decided to have a conversation with a Wall Street journal and speed things along. At the very least, that's what that conversation resulted in a pace that Goldman itself perhaps had not signed onto and was not entirely in control of. Eric shares A Goldman sacks. They're up about one and a half percent right now.

Market seems pleased at least by this news, however, it has been disseminated. What can you tell us about Mr Solomon in terms of what the future of the bank or indeed the financial I should just say it's not just a bank, because while it has an investment bank, they also had now the online lending platform Marcus. They've invested in uh kind of online blockchain cryptocurrency Bitcoin. Those are those are still very very small parts of Sacks. Right.

It's still principally an advisory firm, right that does principally M and A work, but also equity capital markets and debt capital markets, and it does sales and trading. What can I tell you about David Solomon? He is a leverage finance banker. That's how he started his career at Drexel. He went on to do it at bear Stearns. He came into Goldman Sacks as a partner, hired as a partner from the outside, very rare, and went on to

build Goldman's debt capital markets business. The firm was almost nowhere in d c M until David Solomon showed up on the scene, and that's why he was hired. He did so so successfully that he became the president at least the head of investment banking at Goldman Sachs. He's not in that sense an m and a guy like

Hank Paulson was. He's more of a financier. He belongs, if you will, more in the modern financial market, perhaps than the kind of M and a guy who grew up as Paulson did under Gus Levy and perhaps under Steve Friedman and Bob Ruben back in then, so what can we infer from the fact that Harvey Schwartz was kind of pushed aside? I mean, he was head of

the trading death. We know we can do more than infer because the same person who told me about the February twenty one meeting also shared with me some of the reasons why David Solomon was chosen over Harvey Schwartz. He's a better client guy. Even though Harvey Schwartz was the CFO prior to becoming co president and spent tons of time to be with you might say that he gets He's Look, I've spent lots of time with David Solomon. When I say lots enough time with David Solomon to

know what kind of a person he is. He is a fun guy to be with. He's gregarious, He is an infectious personality. He's good at making conversation. Harvey is a little more buttoned up and buttoned down, if you will. He isn't as emotive as David is. These are my

own personal observations. Furthermore, David worked very hard to get in front of Master's Over that fifteen month period when he and Harvey were co presidents, he had some one on one meetings with major investors um They like the fact that he has been pushing for diversity at the firm and also spending a lot of time getting to know the younger cohort at Goldman Sacks, which of course is the firm's future, as it is at any firm.

They like the fact that Goldman is at a point in its trajectory where it's going to have to start building again. If it wants to grow, Goldman is going to have to find new things to do. To go back to your point, him, Goldman is going to have to light a fire into this consumer finance platform Marcus that they have online. They're going to have to make a choice is to have big his business they want

to build in crypto. They're going to have to rebuild to a degree to fixed income, currency and commodities business, not because it's broken, but it isn't performing as well on a relative basis as Morgan Stanley's, a JP Morgan's,

or City Groups or even Bank of America's. These are some of the things that Goldman is going to have to do, and the board appears to have decided that David is a better guy to get that done than Harvey Schwartz or together, so David's the sole president in line to succeed Lloyd Blank find We still don't know when that's going to happen, and if we do, you're going to be the person I'll be here You're going

to tell us. Thanks very much. Eric Shatzker, editor at large for Bloomberg News giving us all the details about Goldman sacks what we want to visit now with Stephen DISSANCTUS. He is managing director for small cap and mid cap stocks at Jeffreys. He's managing director there, and I want to thank you very much for being here in our

eleven three oh studios God mornings, for being here. Go ahead, make the case for UH small and mid cap stocks, particularly in this kind of rate environment and in where we are in the business cycle. Great, So you know what I think? The first thing is that UM we actually got more positive on small cap stocks in UM in February after the big sell off. I think a lot of the run in January was big inflows into large cap ETFs into passive try to get exposure. So

is that trade unwinds itself. I think that's gonna be beneficial for for small amid. And then relative valuations have really come in pretty dramatically. Really small cap stocks of underperformed since of course I had a big run in in sixteen, but relative to large caps, the valuations got better. Earnings growth in this kind of environment, when you're gonna get three percent GDP, you're gonna see better earnings growth

down the market cap. And then the interesting thing on on the rate side, Yeah, higher rates will lead to lower overall returns. But if rates are going up for the right reasons, better economic growth, that's generally better for small MidCap companies. So how much do you expect, for example, the Russell two thousand to perform this year. So we've got a target of sixteen sixty four, so so about

eight percent on the upside there. I think you've got a little more room to go since really we made our call small as outperform large by a little over two percent, and I could see that kind of continuing

to widen. One of the things that we pointed out for this year was that, you know, last year was such a calm market that volatility is going to pick up, and so with that you get more opportunities to play small MidCap versus large cap style, more second rotation, A whole host of things are going to happen this year that probably didn't happen last year. Let's talk about some

specific industry groups. In order to narrow down the areas, people should focus on discretionary technology industrials uh more, materials yea. So the so what we're looking at is trying to base it on our sort of themes. So one theme would be growth stocks over value stocks, just real general there. And the argument here is that growth is still a lot cheaper than value. And now everybody says tech has

had great performance in seventeen, it's continuing eighteen. People tend to forget that in sixteen tech was a week performer, and so you're kind of getting back what you lost in sixteen and then the earrings growth has been really good, So we like tech to sort of represent our more growth oriented kind of biased. Materials and energy are two groups that we like as well. That kind of gives

us a cyclical bias. So global growth gets better, you should see commodity prices rise, including oil that gives you the bad on energy to play higher interest rates. I think the way we would look at this would be financials, and the smaller banks generally do a lot better with rates going higher from a profitability standpoint. I think it comes also more down to deregulation. Deregulation where are o's

have been suppressed? Now they can rise, and then maybe we get a little M and A. And then for consumative discretionary I just think the earnings numbers have gotten pretty low, and so the bar is is really low. So the companies are beating numbers by a pretty wide margin. We're starting as he sent them in turnaround, and quite frankly, it's the only area that's really a value. You kind of look through the universe is okay, what's cheap? You

got to think about it from a relative perspective. Now, that's a group that actually looks good on an absolute basis as well. A lot of people say that a mid and small caps actually offer some protection from even trade skirmishes just because they depend less on international types of revenues. Is that one argument as well for you? I don't use that particular argument, so I'll go too things. One is that, well, the way we think about it is more from a positioning standpoint. I like companies that

do have overseas exposure. However, I've not found a good relationship between the dollar and small MidCap performance. I mean, it's kind of an easy thing to kind of go to. I think again, people sort of forget that a lot of small cap companies and MidCap companies are suppliers to the large cap companies, So the large cap companies have problems there in the supply chain, there in the there

in the hair, you know, the cross hairs. The other thing is a stronger dollar generally means that if the dollar starts to appreciate for whatever reason, you end up it's usually a risk off environment. Think about fifteen and sixteen, the dollar appreciated and small really took it on the chin in that period. So I think you kind of think about it from more of a position standpoint, kind of the positioning on on materials, a weaker dollar gives

you better you know, backdrop for materials. A weaker dollar gives you potentially higher oil prices. That's kind of the way I think about it, so real quick. What keeps you up at night? What could undermine your thesis? You know, first of all, I think, you know, any kind of big pull back in the market small cap is just not gonna hold up, right if it's a risk off environment. When we get a VIX index of thirty nine, that is definitely something that you know, makes me a little

bit worried. The other thing is that you know, we've got this pro growth biased and growth is outperformed for fourteen or fifteen months pretty consistently. Here, you do get those moments where you get a big reversal where all of a sudden you say, you know what, I don't want to own the fang stocks or miracle grow is something that our firm we talk about the miracle growth stocks.

But if you get a reversal just because they've worked so well, and that kind of worries me because you see that, and then it kind of builds on itself. Thank you so much for being here. We'll have to have you back on to reassess in a in a little bit. Thank you again. Stephen Dissenttist, managing director and small and mid cap analyst at Jeffreys in New York, joining us here in our eleven three oh studios. What does the US want out of talks with North Korea

leader Kim Jong un? And who is poised to potentially lose the most? Here to talk about those issues, as Errol Cohen, Senior Fellow at the Atlantic Council, also principle with International Market Analysis Limited, based in Washington. D c Ariel, thank you so much for being with us. I want to just start with what is the latest that we know? There were some reports about Kim Jong un wanting some sort of peace treaty. What what he desperately needs is

a recognition of his regime. If you remember, during the Cold War, the US recognized East Germany and West Germany. We have an embassy in Soul, South Korea. We don't have an embassy in pyong Young. We don't recognize this murderous regime. And from our point of view, from the American point of view, the most important thing, of course is disarmament. But we made a mistake. The US made

a mistake. The Obama administration made a terrible mistake when we did not demand and did not insist on dismantling the Iranian nuclear program. They can reboot and start enrichment. And we also did not insist on uh destroying and dismantling the missile program. We should learn from our mistakes. The Korean nuclear program should be dismantled, possibly with the exception of civilian nuclear reactors that do not enriach, and

the missile arsenal should should be dismantled. Beyond that, if the administration comes to the conclusion that we need to recognize them and South Korea is cool with that, we can do that. There are presidents, as I mentioned is Germany is a president. Beyond that, I think they're reaching out not because they're doing well. Um. The labor that they were exporting, uh, slave labor essentially was kicked out of Europe and kicked out of the Middle East, two

tens of thousands of people. Um. The fuel supply to North Korea is being squelched, including by China. Uh so, yeah, they're hurting. But in the past, they try to go to negotiations to see what kind of concessions they're going to get. And here here is a test of Mr Trump. Is he Mr Deal? Is he um the author of the art of the deal? And is he going to

apply this to Kim Chong? Arriol Cohen. Would it be considered a positive development if the United States were to in some way a seed to Kim Chong's desire to be made to feel that he is not going to be threatened by outside forces in terms of his control of North Korea, and that we could live with a nuclear armed North Korea. Would that be an objective that would be regarded as positive. There's two elements to your question, uh pim I would say, Yes, it's okay for him

not to feel threatened. No, it's not okay for him to have nuclear weapons. Full dismantlement of rockets, of rocket producing capacity, and of the uranium greade, the the high grade uranium enrichment or plutonium enrichment. Anything shorter than that, they can go back to threatening Arts and Japan and South Korea with nukes, and that is not acceptable, uh Ariel. We were speaking a lot last week about China's role

in potential negotiations between the US and North Korea. They are hanging out in the background, and they really are the only ones that could really enforce some kind of permanent to Fagman. Without their involvement, this won't work. So where are they on this and what would be or could be their role in ongoing negotiations with the US North Korea. Anybody who dealt with China, with a Chinese bureaucracy, with Chinese government knows there are many many layers of

meaning UH that UM China communicates. So to us, they're saying, yes, we do not want a war, we do not want threats UM. But at the same time, UH, strategically and geopolitical is they are using North Korea as a battering ram against Japan, as a threat against the United States. It's very convenient for Beijing to have a nasty Imagine a pitbull on the leash. The question is do they keep the pitball on the leash or not? And there were many reports UH that UM chairman c president for life.

Now it looks like of China and the Young Kim did not have a good relationship to what extent it's true. I think this is many, many levels of security clearance above my access or your access. But it looks like China is not interested in distabilizing the Korean peninsula. It's not interested in reunification of Korea, it's not interested in the war, and they're just in the sort of balance of what I just described lies the national interests of China. So, yes,

they're going to squil us North Korea. No, I don't think they're going to support us in our demand of full nuclear disarmament. Of any thoughts arel on the export of nuclear technology from North Korea? Would that be considered a positive development if that were to be curtailed. I'm glad you asked that question. North Korea exported nuclear technology

to Iran. We know that, we're sure, and we know that they're built in two thousand and five six and nuclear reactor with the sole purpose of producing weapons great plutonium UH in Syria. That reaction was destroyed UH in Narrate by the Israeli Air Force. UH So they are a proliferator, they are a poor country, and they have nuclear technology other countries may want. So yes, absolutely, we need to insist that UH exports of nuclear technology would be a scenic one on an absolute condition for any

kind of a deal. By the way, I'm not sure Trump is going to go to that meeting unless North Koreans agree to the list of demands more or less what I just described, nuclear disarmament, missile disarmament, uh an embargo on exports of nuclear technology. And I want to say one more thing, and I think it's very important if this works. Number one, it would be a tremendous uh foreign policy achievement for Trump if he manages to

dismantle the North Korean nuclear arsenal. But secondly, it would be the model of what needs to happen Visavi Iran. In other words, nobody says we should not have any agreement with Iranians, but clearly the dismantlement of the potential that threatens all of our allies in the region Saudi Arabia, Gulf States, Israel and potentially Europe and in the far future the United States. That has to happen visa vi Iran and their nuclear enrichment capacity needs to be stopped.

And if we can do it with North Korea, we can do it with the run. Thank you very much for being with us. Ario Cohen is a senior fell Off for the Atlantic Council, also a principle for international market analysis, based in Washington, d C. Well, the New York Antiquarian Book Fair has just concluded its four day stint at the Armory, and here to tell us more about the show and some of its rare offerings is

Jonathan Hill, the founder and owner of Jonathan A. Hill Bookseller. Jonathan, thank you so much for coming in uh tell us a little bit about this year's book fair and some of the differences you noticed, not only just about the books and the offerings, but the attendees. Well, this year we hired a really good publicist at last, and we had three times the normal attendance we ever had before um,

which was great. And what was particularly wonderful it was filled with young people, young people with blue hair, piercings, tattoos. So I would say that the printed book is alive. And well, I'm just trying to reconcile the concept of paying thousands of dollars, in some cases tens of thousands of dollars for books at a time when most people seem to say books are increasingly obsolete with the nook

or kindle. I disagree. First of all electronic books are paying the neck to go through to get to the index to find where you were book. The printed book is so easy to to get around. Also, anyone as a youth learning to read and their first book that they fell in love with it took them to a different world or taught them something essential, they will always have a sentimental feeling about that book, that object, and that continues as they grow up. Now it's not just

the sort of love of the specific book. When you talk about the object, it can be its value because it is rare, it is important, it has some his storical uh context speak if you can. Let's use an example of one book that I know that you have on offer, and I got a chance to see it and touch it and hold it in my hands yesterday. And this is a book from I believe it was fourteen fifty three. I know I was gonna get it backwards fifteen forty three b before Gutenberg, that was the case.

And this has this is a book by Copernicus, and uh it tested my my high school Latin because I could actually read it. Tell us about this particular volume and why it's relevant and what it exemplifies about rare books. Well, the book printed in fifteen forty three and entitled Day Revolution on a Bus is the first book which demonstrated scientifically that the Earth is no longer the center of

the solar system, but that the Sun is. And this upset the entire worldview which had existed for two thousand years previously. It turned everything topsy turvy and got the Catholic Church immediately upset and just changed everything. And there was a scientific method demonstrating something fundamental for the first time. Jonathan, there certainly is a sentimental and historical value with a lot of these books. There's also, uh, an investment value.

And I'm wondering how much you've seen sort of the investment aspect of the book business grow, especially as people look for alternative assets. I mean, we're seeing auctions with uh, you know, the Christie's of the World increased dramatically. I mean, have you seen an in dramatic increase there? Yes, Um, the first copy of Copernicus I sold was about thirty years ago, and that was for a hundred and twenty five thousand dollars. And this copy I'm offering now for

two million dollars. And yeah, and and this is one of three hundred, one of about three hundred. Yes, it's rare in the sense that not many of them are not not in private collections, so that it's not like you can just go and order up one of these. Correct, it's the only copy on the market now, and then there's a census of all the copies of Copernicus and most of the Urne libraries. There are very very few remaining in private hands, so you have to act if

you want to get one. And it's a fundamental book. So how many what's the pool of investors like to spend two million dollars on this book? Well, there are number of private people, but another client who's seriously considering it. It's a it's a library, an institution, right, absolutely, the

book it's something. Do you believe that the connection to its ownership the fact that it can be traced all the way back in simple forms, almost like a modern day version of blockchain, that you know exactly who had it, where they had it, and how it was sold on. Yes, that's a very important thing. It's past history can be traced from the sixteenth century shortly after it was printed, up to today and we know exactly where it's been and throughout in a series of owners. And that's a

very important thing. Is we call that provenance where it's been and then you don't have to spend two million to be a rare book collector. You can spend ten dollars. There are a lot of fascinating collections that you can spend five and ten dollars and you can have a tremendous fun and education as well. You can learn as well. Thank you so much for being with us. Jonathan Hill is the founder and owner of Jonathan A. Hill Bookseller and they did just complete their New York Antiquarian Book Fair,

uh at the Park Avenue Armory. Thank you so much for being with us. And I will say, Pim, when I think about children's books in particular, I think about the physical copy, and you know, I think about my children and the physical experience very much. Is uh. Well, it's important, yeah, and it can also be quite remunerative if you collect them carefully and collect what you love. Thanks for listening to the Bloomberg P and L podcast.

You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bluebirg Radio