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On the conversation with Lori Cavassin, a head of US Secretary Strategy at RBC Capital Markets, lor the headline in your most recent piece gif for a pause, Giff for a pause. What does that mean, Laurie.
So look, I don't want anyone to come away from this thinking that Lori Caalvasin is turning super bearish. But we don't like where we are, you know, sort of in the intermediate term, and we're seeing a couple of things we went you know, every few months, right, we make sure we publish an update on our targets, our price target for the SMP. A couple of my cross asset models are deteriorating. They were improving back in so, in other words, the appeal of stocks relative to bonds is worstening.
And also our sentiment model is really bothering us.
It's really back at one standard deviation above its long term average. If you look at that fullishness on the AAII survey, typically you see you know, kind of mid to low single digit gains in the SMP over the next twelve months when that happens, and this just feels to.
Me like a market.
While I think everything has been deserved in terms of what we've done so far, it just feels like this market needs to stop, pause, have a little moment of digestion, and catch its fross.
Okay.
I like the analysis, and the idea is you got to pull back to get things, you know, like get the fear click in and you know, you know, we've all done this and studied it. Can you just stay flat out or through the bear market?
I never really subscribed to that thesis to begin with. Tom, You know, I never liked this whole concept of we're in a bear market, therefore we have to do X. We're having a bear market rally, it's faults, don't believe it. I just was never in that camp. I think we priced in a recession last October, and we've basically been having a plain old fashioned recovery trade, and now we're seeing some of the things that we're really telling us
to hold your nose and buy. At the beginning of the year, I go back to that sentiment model is telling us we need to calm down.
For a little while.
Ben Ladler over to Etro writes up on the Lord Calvacina World this morning. He talks about value, talks about what's out there away from seven Chosen stocks as well color or shape the value of mid caps right now.
So it's interesting.
Tom.
We do a lot of work on small caps, but we've also been getting increasing questions on midcaps. In our big chart deck we published this morning, we actually added a midcaps section for the first time in quite some time, and it's a pretty similar story to small caps. They tend to.
Benefit when you're in recovery mode.
They started to do that a little bit, but not
as much as we would have expected. The valuation story is pretty reasonable if you look at the multiples versus history, the midcaps look very cheap versus the megacaps right now, and if we get a recovery in twenty twenty four, there should be more upside there, so we do feel like, similar to how we feel in small caps, we feel like that MidCap part of the market where large cap managers actually can gravitate down to, we feel like that's right for a catch up trade as well.
Laurie, We're going to be speaking with Michael Soon of Morgan Stanley later in this morning, which I'm really looking forward to.
He has a no doubt.
Talking about the fiscal backdrop and how much of a variable that is with respect to stock performance. How does that factor into what you're expecting going into an election year which tends to be tumultuous.
So, you know, when we were going through this targeting, you know, kind of refresh last weekly, so we looked at one of our political tests, which is just a simple election cycle test, and one of the things we noticed is that the current year that we're intends to be one of the strongest for the markets, so it's been you know, kind of one of the more positive signals. And next year, the election year itself, for a presidential year, tends to be one of the weaker years in the
election cycle. And I just juxtapose that with what I've been hearing from investors. They keep asking me, well, when are people going to start paying attention to the election.
There are a lot of questions that are starting to come up, And my response to the investors I'm speaking with is, I think it's starting now because you're all asking me about it, and it seems to me that this is emerging as just a very very big source of uncertainty as to what is going to happen with the election next year, both in terms of the presidential race and Congress.
So then, what is the election cycle playbook? What is how you played this particular type of uncertainty versus the uncertainty of where we are in the inflation cycle and the federal reserve.
Well, I think there's a lot of, you know, questions that are starting to emerge about the outcome. One of the things I'm hearing from investors are, you know, they're trying to probe whether or not.
They're alternatives to Biden.
I'm hearing a lot of questions about that from international investors in particular. You know, I think there's a lot of head scratching over what's going going on on the Republican spide especially with DeSantis.
There was some excitement there early on.
Now that seems to have faded a bit, but I think this is just really an air pocket of uncertainty that's starting to emerge. We're not even really having detailed conversation with clients yet about what either side would want
to do policy measures. It's really you know, I think just frankly, this over of not knowing what the outcome is going to be that could push investors to the sidelines for a little bit, and I think that's going to weigh heavily once we get to the fourth quarter, when everyone starts putting their outlook discussions out right, they're going to be talking about bed cuts in the back half of the year, but they're also going to be talking about the election, so we kind of see those
things starting to come into the conversation.
We have more outlooks to come.
Oh joy, Well, some of those outlooks are being revised pretty quickly. The recession calls on Wall Street dropping like f ck Mike Gapan in the last week, Mike Feroli, JP Morgan gone into the weekend dropping his recession call too.
Can you see Calvacina on the deck with a fam working on her outlook? Gin and Tonic on the table next door.
In the summer, the summer, the mid year, the mid year, the summer, the summer time, summer, the summer time outlook, Laurie, can I finish on a single name? Forgive me? What does it say about the market when the biggest waiting on the S and P five hundred has had three quarters of declining sales, trades at thirty times earnings and is up forty percent yeah today? What can you take away from that? What's the signal you take from that.
One of the.
Reasons why I think people have been gravitating towards these megacap growth stocks is that we are in recovery mode and the shape of that recovery doesn't look so fantastic. I think the price we're going to pay for a short, shallower, skipped recession is subpar economic growth for a few years. If you look at consensus forecast is tracked by Bloomberg, basically for next year and twenty twenty five, GDP is expected to be in kind of that zero to two
percent range. Well, guess what growth stocks typically do well when economic growth is scarce. And I think that's one of the reasons why people have been just plowing so much money into these big megacap names because despite some of the near term challenges, they have faith that the longer term growth opportunities are still there.
Lurie, thank you. Lori Cavasena of MBC on somebody Tech stories so far this year.
Our Conversation of the Day now on the equity markets of stock Market with Michael Wilson, Mike Wilson's CIO and chief US Equity strategy at Morgan Stanley. Mike, you go over and you study Ellen Zettner's notes and you look at fiscal tightening. Describe fiscal tightening, Describe what it means for the standard im ploors five hundred.
Yeah, good morning guys. Yeah, look, I think you know, I don't think we've hit a wall completely here, but I think it's fair to say that the physical impulse that we've experienced over the last twelve months caught a lot of people off guard, including ourselves, and it has really kept the economy going in a way that most people were not projecting, and that has led people to believe that this can continue. Now, there's been a confluence of events for why interest rates have risen. I wouldn't
blame it all on the downgrade last week. In fact, probably none of it is. I think the bigger issue is just simple supply and demand. We have an enormous amount of supply. The fund all is spending at a time when perhaps some of the natural buyers are not there anymore. For example, the banking system pretty full fun treasuries, and of course the Bank of Japan's changed last week,
So you know, I think the interest rate move. Look, first of all, stocks are already expensive on their own cost of capital going up now think about it this way. The the the recovery we've had since COVID has been funded by the government for the most part, okay, and now their cost to capital is going up, So that has to have some sort of a you know, some sort of a knock on effect evaluation. If we were trading at a lower valuation here, I wouldn't be so
concerned about the growth outlook. But you know, given our growth, our growth outlook, which is more customistic than most, that's where the that's where we have a real issue. And look, you can still make money picking stocks. It's just a harder game, and I think that's what most clients are having trouble with.
That's where I wanted to go, Michael, So, I think this is so important. If we get a fiscal tightening and whatever your matrix is of equity dynamics folded into economics, if you will, does it lead to a more aggregate summed index or is it where sectors and selected stocks, including the glorious eight tech stocks, they're partitioned out, they do great while everybody else struggles.
Well, that's been the bet that has worked so far this year. But now even those stocks seem to be tiring. I mean this, you know, this earning season has been to sell the news so to speak, if you want to call it that, even though even with companies that put up good numbers, it's been kind of a faded because the market anticipated, you know, kind of this stronger economic bounce this year and perhaps earning is not being as bad as people were thinking, and then we kind
of muddle through. So now the question I think for the you know, for this rally to continue, it has to happen internally, right, We have to have breath improve. We need to see a rotation into some of these lagging areas. We've started to see that. We're not convinced yet that the breath. That way we measure breadth is not convincing to us yet, but we're open minded to it. But that's that would be the next stage of the bull market. If you want to be bullish, you have
to be buying laggers here. You can't just keep chasing, you know, the magnificent seven and forget about everything else. That's not a healthy outcome.
What about what Kareron Dawson was talking about, especially at a time of rising yields in part due to the fiscal backdrop, the supply and demand that you're talking about, It turns out that stocks become not a teen of trade but a little bit. There isn't another alternative that's much better. Revenues are going up in an inflationary environment. Yes, multiples look high. Well what are you going to do go into bonds that are losing value at this point?
I mean, how much do you buy that type of argument?
Well, we don't buy it because our view is that inflation's coming down much more rapidly from you know, at the company level than it is and the government statistics. And this is where I think it can get really interesting in this or tricky in the second half of the year. Which is we have government statistics reporting inflation still at three or four percent, So the FED is
going to continue to hold or maybe even raise more. Yet, what companies are actually seeing in their businesses least that are, you know, deterioration, Like we have negative price now in many of the good sectors. Right the PPI finished goods is in negative tearatory export pricing, import pricing. So it's the opposite of twenty twenty one. Think of it this way.
In the back and half of twenty twenty one, companies were getting fifteen to twenty percent price if the FED was on hold, because they were saying, well, we're not sure yet this is going to be permanent. Of course they relate to the party, and companies got to overearn at a very low interest rate. Now you have the exact opposite. Interest rates are being held very very high at a time when company earnings for the majority, not all,
but the majority of companies is deteriorating. I means sales growth is not increasing, especially going down, and we have zero percent sales growth in the second quarter. And if we're right on this pricing dynamic, then that's going to be something that catches folks off guard. That's why we're not going into small caps and the lower quality parts in the market. If you're going to go to the laggers, make sure you go to the laggers that have good balance
sheets and good margin structures. Okay, so it's still a quality play, just you know, just different quality names.
If inflation is going to come down and come down rapidly, then why wouldn't that really favor a FED rate cut that could turbo charge some of the trade into big.
Well, because I think I mean the FED no, I mean, they know they made a mistake, and they've said it right. They know they were a little bit laid on the transitory call. Okay, fine there. I mean, why would they cut rates if we have full employment? I mean, there's no reason to do that. Unemployment is three and a half percent, you have inflation still north of three percent, so now anywhere near their goal?
Just hold.
I mean, I'm not making the case they need a raise race here. I don't think they need to do that, but I think they're going to want to see the whites of the eyes to make sure that things are down. I'm not I don't work at the BED. I don't know what they're going to do. But my prudence would say that's what they should do. They should they should pause and see what happens and not try to anticipate too much here because that's gonna be in trouble.
Last time, Mike, can we just finish with your framework post pandemic framework? We'll remember it well, it was hot and short. The cycle would be hot, but ultimately it would be shorter than what we'd seen previously. Now, Mike, it certainly was hot, and you've got the equity market call coming out of the pandemic dead on. But Mike, does anything lead you to question the short part? Because I think that's where the conversation is quickly shifting, as you know, over the last couple of weeks.
Yeah, I mean this is going to sound ironic, Okay, So, as you remember back in January, I was concerned that everybody was too bearish, including ourselves, and that proved to be the right. You know, I should have gone with my instinct. And now though, I think the fact that everybody is saying that the recession risk is eliminated for the most part, including the FED itself. Right, they had called for recession back in March. They just staffed it,
and they backed off that too. I don't know if we need a full blown recession, but I'm pretty convinced that growth is still flowing like we're in a down cycle now. Whether that leads to a full blown labor cycle or not remains to be seen. I think most people have pushed out the recession called the twenty four Ilean day set. It's eliminated, so it may be a four year cycle as opposed to a three year cycle.
That's very plausible. I still really, I really like our boombust, you know, short cycle thesis based on the forties, because I've seen the data really supporting that. John and part of our note over the weekend, and you can appreciate this because you've followed it the whole time, is that we you know, we got you know, we kind of missed this fiscal impulse, right. That was a big miss on our part. We thought the fiscal impulse would come at the time that they really needed it. And think
about this way they're doing. They're doing eight percent budget deficits spending when you have three and a half percent unemployment. I mean that's really unprecedented. So what's going to happen if we do get a slowdown next year, And I just think that I just think this boom bust thesis is so correct, and maybe the market's looking through it to the to the other side. Look, that's that's a risky proposition given where valuations are. It was a great
idea to buy stocks last fall. We traded it. We didn't stick with it long enough, Okay, But I think at this stage you need to be very selective, very selective for some sort of retlacement, at least back to the tuner day moving average.
Mike Wander for to get your thoughts. An update on the team at Morgan Stanley and Equity Research. Mike Wilson there of Morgan Stanley.
Apple had a solid two standard deviation, moved to a lower weaker price, unlike some of the success stories that were out there last week. But with that, you know, it's not like it's a technical breakdown. I thought Sarah Hunt when we spoke to her, was on fire. I thought she was just great.
Dan I was of Wetbush still bullish, Tom still bullish on the start. Despite a week Earning's report raising their price target from two twenty to two thirty. iPhones and services will accelerate in the June quarter with the softness OL Mac and iPad driven when excluding FX and focusing on the hearts and lungs, iPhones and services. This was a strong performance and guidance in our view, and we would be strong buyers on any weakness with Tom. I can tell you in the last week we've had some
of that. We've had some weakness.
Doing some important research. Now joining us from hirsh gibu Leedspillion twenty five ten seventeen PS Amsterdam, where Apple says vil javent and vat vor Joe. The best scus East is Daniel ives he is in Amsterdam and joins us by phone this morning. Dan, I does Apple sell in Amsterdam like it sells in New York, like it sells in Chicago, like it sells in La They do?
I mean, I can tell you by what I've seen here and what Apple has always had, the presence, not just an Ansen, but across Europe. And I think if you look at the quarter, like Pharaoh was talking, I focus on iPhones, services, China, grouse margin. That was all better than expected, Mac and iPad. We have viewers noise Dan in Europe.
They want to go after Google. They want to go after Microsoft. Indeed the evil Apple as well. Let's say that they are in a sense anti technology. That's the political elites. Are the people of Amsterdam, the people of Berlin, et cetera. Oslo Are they anti Apple, anti Google, anti technology?
They're not an anti Apple. They're actually pro Apple, and I think investors are pro Apple. I think when it comes to the EU and when we see from a regulatory that's a whole nother situation. But I think it just comes down to find for big tech companies like Apple, Google at this point, that's like drinking a cup of coffee, and I think the investors are going to continue vida as background or is even though the heat gets hotter.
In the kitchen, Let's talk about the hot and lungs of it. Dan. I think over the weekend someone at Parents said something like iPhone zero zero growth. Now, Dan, we've had three quarters of that. The stock's training at a multiple thirty thirty times earnings, and is that forty percent year today? What's the argument still that this is a growth stock?
Well, first, you have four hundred bibs of that back sidewind, So the zero per se when I view it from a concurrency perspective where they're growing, and then you look at now what goes into the iPhone fifteen, which i've used basic Mini supercycle. You have twenty five percent of the install based that's not upgrade four plus years. So even though they've gone through what what i'll call conservative growth, that's going to now start to be high single digit,
potentially double digit. And then at the same time services that is the key to the rereading. Now you're starting to see double digit services growth, and I think that's the perfect storm positive that I see going twenty twenty four.
Part of your bullish theasis for a long time has been this base that haven't upgraded their phone down. At some point, does that base get big enough that actually that's no longer a bullish thesis, that they've just been sitting there and they're not upgrading year after year after year after year. Do you start to chraine your mind about why they're not upgrading.
Yeah, it's a great question. I think the other thing is they're they're adding iPhone. I mean, they've added over one hundred and fifty million iPhone user. It's just a view of the last eighteen months. So I think what's starting to happen Now that's one point two million, which to one point was blow a billion before COVID. So I think what's starting to happen is they're gaining more
and more share in China. They've gained three hundred bits of market share in China in the last two years, despite the geopolitical and I think it just comes down to you'll see the bears come out on Apple, especially over the last week, but I believe this is just a pause selling Apple into this iPhone fifteen cycle. In my opinion's leaving the super Bowl at half time.
I love I love iPhone zero. I've got to say, John, I'm still thinking about that. Are you going to get an iPhone fifteen? No, I'm going to get an iPhone zero zero growth. That's sort of what a Barrs was going after them for. There is a question, though, Dan, of what you do with the multiples, with the valuation of a stock at a time where some people are speculating that there is a lot of growth in the smartphone industry and nothing really wrong against Apple just in general,
there has been this real slowdown. At what point can you continue to be bullish on Apple shares if you continue to see longer term rates creep higher, if you continue to see the valuation proposition challenged on a more macro front.
Sure and an excellent point. I'd also say it's some key and I've talked about a lot the grows margin store, I mean the highest gross margins ever, because what we see on the M two chip and the innovation, the margin there, and that's going to continue to go higher. That's just hire from a margin perspective, and I believe services is the key. Services, in my opinion, is worth
one point three to one point four trillion alone. And even though we have this from a tech multiple headwind perspective, I think it starts to abate, and I think service is ultimately key to how this thing re retire. Along with an I and fifteen cycle that i'd be it's going to be massive.
This really speaks in this question around what the content will be that really feeds some of their services. This idea that Lyle no Messi was name checked on the call as one of the reasons why they've seen a real increase in subscribers. So what are they going to use with that cash pile to acquire more content? Are they going to buy you know, I don't know a Loton football team.
Well, I mean I think and I think you've seen it a bit in terms of some of the things that they've talked about. They're going to continue expand Apple TV. I think from a streaming perspective, they're going to go after more right job Snake pac twelve story that we solved with the last week. But I think the big
thing is going to be AI. I mean, I think ultimate They're going to further build out this AI what I believe is going to be an AI app store, and that is going to be the next wave of growth as they further monetized and unparalleled install based in Kupertino.
MESSI making the mlslate like chance play you see that we can't honestly thinks I saw someone tweet something like it's like easy mode. It's like cheap mode for Messy in the MLS, just different standard. Dan, Thank you, sir, Dan. I've a webber's still constructive optimistic on this name. Head of the launch.
Tom Lisa on the American economy, I think it's real simple as to say, the biggest part of the algebraic function is a consumer and our guest is definitive on consumer dynamics.
Which is really the key mystery point that people are trying to hook into. So there is no one better to speak to the Michelle Meyer, who has grown up under Ethan Harris at Bank of America during the whole mortgage situation. Currently chief Economist for North America at the MasterCard Economics Institute. Michelle always wonderful to see you. I want to start there are people overestimating or under estimating the strength of the consumer.
Well, I think that was the story for the past year and a half has been this underestimation of the US consumer. The consumer has been able to spend, the consumer's been willing to spend. The consumer's been eager to engage in the economy and come back after this pandemic. And you think about why, it's actually pretty simple. There's
been a lot of purchasing power. Whether it's the strength of the labor market that's continued we saw that in Friday's jobs report, or it's been the health of the balance sheet, which was really improved in the pandemic period as households paid down their debt, and even now in a higher rate environment, debt service ratios are still fairly reasonable and kind of back to where we were prior to the pandemic.
That said, that said, you have seen a decrease in income relative to spending. In other words, people are spending more than they're bringing in at this point, and a lot of it has to do with credit cards. They're increasing the amount of revolving debt, credit card debt that they have outstanding. How long can that continue?
Well, the way I think about it is, throughout last year, when we had high inflationary environment, it was certainly the case that consumers were augmenting their income with other sources, whether that's drawing down savings or taking on more debt, and that was to help support the inflationary environment. But now inflation is a lot more subdued. So if you look at real wages or real purchasing power, it has certainly turned positive where consumers now have a lot of
support simply from the lab of marketing. They don't necessarily need that same buffer that they needed when they were facing such high inflation.
No doubt. It just puts out on is it Twitter? We call it something different.
Now X the platform formally known as Twitter.
The platform formally known as Twitter, and he does what I like to do, which is take three months data, ninety days of data and annualize it. And the real GDP statistic, the American consumer statistic looking three months back, is extraordinary. It's a five point three percent number. That's just absolutely stunning as well. Does your consumer data and MasterCard validate a resiliency to that ginormous five point three percent trend?
Yeah, you guys are throwing out all my old colleagues, Ethan Neil. It's a party here.
We'll get to that. Tell me about real g got some persistency?
Yeah, I think it does. I mean, if you look at the first half of the year and you think about GDP growth and consumer spending, even measures of business investment, it's been above expectations, which is partly I think because expectations were set too low, but also showed a consumer that does have this persistence. Look, the consumer shifting, the economy is shifting. We're entering a different stage in this business cycle. It is a stage where there's more of
a moderation, there's more of a normalization. There's still a debate of what trend growth is or potential growth is coming out of the pandemic, but it's not an economy that is moving towards, you know, a proper deceleration, which was the fear of a lot of people earlier in the year.
So given that, do you stand on the side of soft landing or do you side is on the side? Do you stand on the side where we're underestimating how much strength there is and how much potential for inflation to keep going at really elevated levels.
So we've been in this soft landing camp and I still hold to that view. And I think when you think about soft there's going to be bumps, and for certain sectors it could look bumpier than others. Right when you think about the manufacturing sector that's struggling a bit more when you think about housing, which was in a big adjustment throughout this year and this year, is actually reaccelerating,
which is somewhat problematic for the Federal Reserve. But yeah, it does seem like this is an economy that's readjusting, and it's doing so in a way that has been a lot less problematic than I think people feared.
We were talking earlier with Mike Wilson and Morgan Stanley and talking about the fiscal impulse, and that has been one of the drivers of the strength that we've seen, the resilience, this belief in a soft landing that we have currently in the market. How much do you lean into that that what we're seeing, this strength of the consumer, the strength of the economy has been driven entirely by fiscal spending that has been delayed and has really come into effect after the pandemic was over.
Well, look, there was an extraordinary amount of fiscal and monetary stimulus that boosted the economy. So when I think about the stages, you had a pandemic that created an abrupt shutdown of the economy, a reopening stage that was hot. The economy was red hot because you had this pent up demand, fiscal stimulus, monetary policy. And now we're in a stage where the economy is creating more of a
normalization of rebalancing, an adjustment, pick your phrase. But whichever way you cut it, I think there is still some support from the stimulus that we had enjoyed, and that could be from the consumer with a household balance sheet that's been improved, or could even be part of the manufacturing sector. When you think about the infrastructure spending that's going through the economy now, which is quite important.
Without giving away the crown jewels. You at master Card have incredible consumer data. Is there resistance to twenty nine or thirty percent credit card interest rates? Do people go no, I don't want to do that.
Well, you know, we're every we're kind of the economy in general. Is figuring out what that level of interest rates is. That is a challenge, right. So when you think about the FED bringing interest rates close to six percent on the policy rate beginning of this cycle, there was a view that was impossible. You can't have a six percent policy rate and the economy will break under that environment, and it hasn't because you also have to think about in terms of real rates, not just that
nominal rate. So that, I think is what the FED is trying to engineer and figure out, is what is the level of interest rates that's the appropriate level that doesn't cause the economy to roll over, but does cause the economy to slow down, because that moderation is important. It's part of getting over.
Very quickly here. And you mentioned Neil Dutt earlier and all that you did at Bank of America with doctor Harris. Ethan Harris is retiring, and I would suggest what Ethan Harris gave you, which is a sense of look at history and the answer is where we are now is where we were. I'll let you decide to where are we early two thousands? Is this a nineties analog that we're in right now?
I mean so yes, Ethan time series, that's his thing. That's been huge. I still't bring that back. In terms of the comparison. You know, it'd be great if it was a nineties comparison, because that was a cycle that enjoyed productivity gains. It was a cycle that had a lot longer duration than anticipated. If I was able to hike rates and then gradually normalize or reduce interest rates without creating a huge business cycle. So there's a lot
of parallels to that. But it's hard to just take this business cycle and fit it into a box or say this is exactly like this past cycle because it was a pandemic with extraordinary stimulus. So so much has changed. Think about the structure labor market, how much that has changed with a more hybrid workforce. Think about how much we've embrace technology. There's a lot that is different about this.
It'd be great to get you, Neil Dudd and Ethan Harris on the desk at the same time, although folks that are not in speaking terms. Oh no, no, we'resa Meyer with us with MasterCard Economics Institute. Right now. We are going to jem up a story here on Goldman Sachs. Yes, it's about Jeff Curry leaving head of Commodity as a former professor at Chicago Microeconomics. But it's far, far more on that. And I want to go to a story from six days ago Golden Sachs family office partner a
Poku to leave, because maybe that's a bigger story. Sheanat a rogen for all of Global Wall Street, is expert on this, and he joins us and reports this morning. I'm sorry, there's some going on here. Don't give me here. Well, we don't know. It's just speculation, blowny. They're walking out the door, aren't they.
So let's start with some numbers. This Jeff Curry would perhaps be the sixth partner to leave in the last couple of weeks in late July early August. That's not the usual time when you see a lot of partners leave. To me, it still feels like Jeff Curry's departure might be slightly different from some of the other recent departures we've seen, the likes of Lisa Poku, the likes of Julie Salisbury. These were some of the people who were on the up and up. For them to leave was
a surprising bit. We have to remember. And over the years, this is what Goldman has told us to maintain their pool of four hundred or so partners. Every couple of years, some thirty five some seventy partners leave. More recently, a new spokesman has said that's about eighty partners every two years, so there's clearly been some inflation in that figure. But the fact of the matter is there's always a bunch of, to put it politely, undesirables in the Goldman partner ranks.
They don't get fired, but they've certainly shown the door. They walk out, they're tired, they leave. But what has been surprising in the last year, in the last eighteen months, in fact in the last couple of years, is the type of partners leaving. People who were picked for better roles, people who were picked for much greater things that Goldman deciding to walk out the door because of some of the issues that parmacy and.
So dark, and she is going to be reporting on this for Global Wall Street through all of today and then tomorrow. What's the why? What is the set of whys? If you will, this is going on that's not going on in Morgan Stanley right.
We certainly haven't seen anything of this space at any other firm. It's fair to say that there is a bit of tumult in the higher ranks of Goldman. There's no denying that. AE are the rank and file big fans of the CEO David Solomon. Even David Solomon probably tell you that's not true. The reasons for that are perhaps debatable. You have come off a great high of twenty twenty one only to see profits and earnings just completely get decimated in twenty two fall further in twenty three.
That could be a factor. There are others who would say there are strategic missteps, and there are others who say that this CEO just does not inspire faith.
Is there a certain area of the company where a lot of the departures are focused, a certain type of asset class, a certain type of practice.
I think we should acknowledge it front on that we don't have full visibility into all the partner departures. What we do see is some of the prominent names who leave. That is why people inside the firm, people outside the firm talk to us about those departures, because these are names that are recognizable. It's hard to draw statistics from that. We don't know that their banking and trading business has
been doing quite well. That has always been the crown jewel of gold and Sex that has done really well. Unfortunately for David Solman, he can't take a lot of credit for that because that was already doing really well. The kind of areas he tried to drive the firm into consumer banking turned out to be a major flop, and that unfortunately sits on his head.
If you take a.
Step back, it seems as though there are a number of sort of big seismic changes in the banking industry. There's Credit SUITEE that has gone away, ubs acquiring not gone away yet, But you know what I'm saying, you have a real kind of shifting in the baton with respect to Gommetzas and Morgan Stanley, or at least people are thinking about that. Where does Goldman Sachs fit into this especially at a time very much a talent war.
I'm so glad you mentioned that because Goldman kremnolology aside, forget the palace industrigue at Goldman sach the changes, the structural changes we've seen in the global banking industry. You know, what has happened with the big European banks has meant that if you are a large US bank, if you've been doing well, and you have a strong presence in what you're doing, you will gain market share. The competitive mote around the likes of JP Morgan Stanley and Goldman
Sachs continues to grow, continues to become deeper. So they have benefited from that.
Given that, where has Goldman Sachs not benefited to the extent where people are seeing an opportunity to leave, perhaps to go somewhere else that is benefiting, or perhaps to go off on their own.
Well, twenty years ago, if the bank was performing as well as it is performing right now, would have made a lot more money. That's not the case anymore. And the opportunities on the buyside that kind of money Goldman's acts just cannot throw at its top executives, and loyalty is just not such a binding factor.
And I'm not going to mince words here. Private equity is taking over the strena to Roger and act doctor Curry is worth his weight in gold to some private equity shop. Right.
Well, you've seen a prominent move like that. Remember towson' slocke, who's now at Apollo. He moved from the cell side to the buyside. We don't know what Jeff Curry is doing. It would appear that he is taking some time out, spending some time a family. He has two young kids, so he could potentially be taking some time. He's just fifty six, so it's hard to say that he's retiring old.
He's ancient. You nailed it this morning. You said that Jeff Curry was tired of waiting, tired of waiting for you.
That was you talman, that you you.
King.
He financed Ray Davies's latest move.
So at least with Jeff Curry, you know about his part time job, which is a little bit of commodities research. But he's perhaps more famous for, at least we'd like to think, for helping produce a movie, a documentary on this journalist trying to reunite the King some forty years after those guys broke up.
I love that, and I've got to say that I love that you try to put the song into Shree's mouth, basically saying you came here singing.
Will you look forward the.
People you talk to and you do have a lot of sources. Are there more to come?
Yes?
Unfortunately, it doesn't look like this is something that's going to stop again. The people exiting Goldman Sachs is the number of people. You want to keep a track on that, but there isn't anything in that quantity that suggests a problem. What we want to see is the type of people leaving the building set very quickly.
Here it's August, but it doesn't feel like August to me. On New York Wall Street. It feels like late October, bonus season, February they're doing fiscal planning for next year. Mckinn like larger sixty thousand Bologne. It's out the window. This seems to be a unique August. How unique is this August for the players in Manhattan?
It's very important. You've had five very slow months, six very slow months, seven very slow months to start there. Sorry, I was just trying to figure out where July falls in the calendar, but you've had seven slow months to start the year. The question is now when we're seeing a little bit of a pickup, we head into the
late summer lull. You're hoping for a pickup after Labor Day, but then that giant US government shutdown threats start coming into the fray again start of October, and then you're close to the end of the year. So is there enough time to rebound?
Ten seconds David from the Hampton's emails and goes, when's she published it this morning? What are you publishing this morning?
Nothing else for now?
Tom the day.
Yeah, David, there you go, She'll be publishing later today. We believe she not orogen with us Bloomberg News. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and anywhere else you get your podcasts. Listen live every weekday starting at seven am Easter. I'm Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and this is Bloomberg