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Very happy to say alongside me David Solomon of gomaz SAX David, good afternoon.
Good Afternoon's good to see you.
Fantastic to see in Paris as well.
At Paris, France.
I think we need to talk about France first and we'll move our way through the business and talk about the United States as well. Typically, I can say as a brit that we used to look at France as sort of anti business, not a place you'd want to put an employee. Perhaps you'd choose London over Paris. That seems to have changed, am I right, Well.
It's involved a little bit, and Brexit had a big impact on that evolution. You know, we have between three hundred and fifteen four hundred people in Paris now, that's triple what we would have had, you know, five six years ago, So there's been an evolution. I do think it's still a complex place for a professional services person to put an employee. In our dialogues, you know, here we've talked about that. It's one of the things, you know,
I'm encouraged by. I think the administration is looking to do things here that actually improve you know, this is a business environment. I think one of the things that is interesting is we've chosen France. It's a very very important hub for us here on the continent. But I'd also say, are people like living here? And one of the things in a competitive world for talent is we give our people much more latitude to work and operate out of places that they want to live.
And it's certainly a very attractive place.
So I wanted to ask you directly, have you chosen France because somewhere else is getting worse or because France and the continent is getting better.
Well, I think it's a combination.
France on the continent has gotten better, the regulatory structure requires that we have more people here for certain functions that are important to our business. Our clients are here, and we want to be near our clients, and so you know, it's a combination of things that make this an appropriate place for Golden Sacks to continue to grow.
I think a lot of us going forward through twenty twenty four into twenty twenty five feel like we're flying blind a little bit. You have more clarity, more visibility on the future of Europal, the future of the United States.
I don't have a lot of visibility on the future of the world, let alone Europe and the United States. I know there are a lot of people that you talk to that are very sure as to how things will play out as we go forward. I tend to look at things and think about risks. How do we manage risks? What are the tails that are out there that we need to be concerned about. When I think about economic outcomes, I think about distribution of those outcomes, and so you know, there's a perception of the.
Direction of travel.
We can certainly talk about that, but I certainly I certainly don't you know what the direction of travel is. I will say, going back to what we were talking about here in France and just listening to you know, a number of officials that spoke at lunch today. They're talking about ways that they can accelerate more entrepreneurship, more investment, more flexibility, and also more strengthening and interdependency in Europe.
Those things are hard to execute on, but I think they are very important.
The White House is doing something similar, but it comes at a cost. I think the budget deficit was six percent of GDP note to six percent last year at a time when unemployment is sounth the full speaking of risks is not WMP.
It's certainly one that I'm very focused on. I think the level of debt in the United States, the level of spending is something that we need a sharper focus on and more dialogue around than what we've seen. We obviously had a pandemic, we made a bunch of decisions, you know, in that pandemic, but we're long out of that pandemic, and the spending levels, you know, are continuing at a pace that I think is raising our debt
level and creating issues for us down the road. So I think this is something that deserves a lot of attention. It's not getting as much attention as I'd like to see it yet right now. We're obviously in an election year, so I'm not you know, I don't have my head in the sand. I don't think you're going to see that get a lot of attention prior to the election. But I do think it's something that requires focus.
We need to deal.
With the debt and the deficits, and you know, hopefully there'll be a lot more discussion as we come through the election and move into the next administry.
Well, let's give it a bit of time, now, can I think I often say that the United States has the privilege of behaving recklessly sometimes that maybe the likes of the Europeans do not have. You sense this's been any kind of pushback from the treasury market, from investors against the backdrop and this risk that we're talking about currently.
Well, the.
Reserve currency is a great privilege, and you know, I'm not going to sit here and say that I see in the near term, you know, a threat to that in any way, shape or form, but it's not something that you can take for granted. And the United States' ability to spend without constraint is not unlimited. Ultimately, the market will challenge that hasn't challenged it yet. Not saying that's something that's coming soon, but it's certainly something.
That we should be very cognitive of and very protective of.
If you think the experience of the UK A company years bank was maybe a case study for what we could face in America.
You know that that was a disruption to the guilt market, and it's one of the things I think you need to be concerned about.
It's a risk issue. I've highlighted before.
You know, at the time the Bank of England to reserve had to reverse its course and become very accommodative to deal with that blip in the markets. We've had disruptions of the treasury market before. We certainly had a disruption in March twenty twenty. To the degree that we had a significant disruption in the treasury market sometime in the future, we don't have a lot of capacity through the banking system to intermediate that. It would require very
accommodative policy. If that came at a time where that was not right for the Central Bank to be accommodated, that would be a risk issue that would have to be monitored.
We've had some big moves in the last three four months. I can just think about the start of twenty twenty four, we were looking ahead to maybe seven rate cuts priced into markets from the Federal Reserve went all the way down to none. I think Jan Hatzis and the team are down to two July and November. Big swings and equity markets too, David, can we talk a little bit about that. I think we're seeing ten percent swings in trillion dollar names post earnings. Is that good for business
that kind of market environment. It's not what you want to see.
You know, the market's the market, and you know, I think there are a handful of things that are driving these platform worms to grow earnings very significantly and gain a larger importance in the overall market capitalization.
These hyper scalers, as they're.
Called, I think have enormous competitive advantages in the world that we're operating in. And it's you know, it's not been surprising, given some of the changes in technology in the last twelve months, that their market caps have accelerated, don't I don't worry about that. From a market perspective,
I think markets are relatively efficient. I do worry that the structure of the equity markets, particularly in the United States, but this is true all over the world, are bringing fewer and fewer public companies, and that is concerning.
That is concerning.
There's obviously an abundance of capital available in private markets, but I do think it's important that we have open, accommodative, strong public markets. There's tremendous disclosure transparency in public markets. I think that's good for capital deployment, and you know, I am concerned that the breadth of the public markets is getting a little bit more narrow and I think that's something first of all, to watch and think about.
The Eavego visits on the pint.
Do you see that improve it at all?
Well, it's easy to improve when it was zero, So the IPO market closed, it has opened up. We've seen some very successful IPOs during the course of the first few months of the year.
I think the level of.
IPO activity will pick up in the second half of the year into twenty twenty five. It's not going to be as robust as it was during twenty twenty one, but I think we'll move back to what i'd call a more normalized environment for IPOs. That said, the overall size or number of companies coming public. Companies are staying private longer, they have more access to capital, and that's something I think is important for us to think about. There are consequences associated with that.
Let's think about M and A as well. It's difficult in my position to understand which deal can get done and which deal can't get done based on current regulation. Tapestry cap pre apparently that's the problem. The deals can go forward. How much is that holding back M and A activity in the United States.
I think there's no question that the regulatory environment has been a headwind to M and A active I'd say, for example, a large cap tech has kind of closed out because of the regulatory environment from making significant acquisitions. And I do think the you know, the regulatory environment has made it harder to understand or really expect exactly how it will intervene. And so I think that's how a chilling effect. That said, the world's a competitive place.
Scale matters everywhere you turn. People are going to do what they need to do strategically to advance their position, and if they have to litigate it.
To litigate it.
You know, generally those companies that have chosen to litigate have generally made progress. Nobody wants to go down that path. But I you know, I think at the end of the day's scale matters and confidence matters, and so confidence has been improving over the last twelve months.
Certainly in twenty twenty two and twenty twenty.
Three, you didn't have high CEO confidence that affects M and A. But based on the indicators that we can see, some that are visible, some that aren't, I think dialogue's picking up in my GUS is we'll move.
Back to what i'd call more normalized levels as we.
Finished the year, and these stock is picking up on that up double digits YERE today up something like sixty percent from the lows of October. I think Hopenheimus said the first quarter was a near perfect print. You must be fit and better, almost vindicated about where this business is going now, and how appreciated that is. Well.
I've always felt good about Goldman Sachs and the way the businesses has been positioned for a.
Long long time. We have a plan.
We've made a bunch of decisions over the last five or six years to execute on that plan. That plan has included our one GS operating ethos. That plan has included putting more financial resources toward our client franchise and banking and markets, which has allowed us to meaningfully take market share from some of our competitors. We've grown our financing business financing our clients, which is plays to our
strength given the way we're positioned. And we've also made some very strategic decisions over the last five years to bring a variety of businesses together in our asset wealth management business, so we now have a real scale platform and asset and wealth management supervising a little less than three trillion dollars of assets, and we're seeing margin improvement and growth in that business given the way we positioned it.
So I think the firm is very well positioned. We're executing on our plan, we're staying focused on our clients, and we've always been confident. What we can't control is the environment. So you know, i'd say twenty twenty two and twenty twenty three was not a great environment for our business. The environment's improved.
I wouldn't say we're back to kind of you know, average environment before.
We're getting there, and we're going to continue to stay focused on our clients and execute on our plan.
Let's talk about leaning into certain postsitive business. Would you be open some more acquisitions, particularly for asset management.
We're we're we're always you know, looking to grow and extend our franchise. Great asset of wealth management businesses.
You don't buy them.
They're generally for sale at certain points in time. You don't get to pick when those points in time are. At the moment, we're very focused on our execution the bar to do something you know, very significant or transformative. I say this all the time when I'm asked, would be very very high. But if something came along at some point that we thought could accelerate our journey and asset wealth management, bring a creative return, strengthen our.
Position, we'd certainly consider it.
But at the moment, we've got a lot to do to drive our organic growth strategy and we're making good.
Problem and she you think those alpachitess might be in Europe or else sweat well.
We made an acquisition in Europe a couple of years ago, an NIP, which has been a good acquisition for us. It doubled the size of our asset management business in Europe, and it added certain capabilities, particularly around sustainable finance, that we felt were strategic for us.
So we will you.
Know, it wasn't in the context of Golden Sachs was a two billion dollar appetition.
It wasn't. But we're going to look.
We have a strategy around our asset and wealth management business.
We're executing on it.
We've been very very clear that we have room to grow and that we think we can grow this business high single digits and continue to improve the margins. And so we've got room to run and so we're going to continue on that execution path.
You've been acquiring town as well. They full m Dallas President, mister Kaplan. Is Mike going a comeback? What's he going to be doing?
Uh?
Well Rob, you know, Rob at a long and you know, a very very important career at Golden Sax.
He ran the investment banking business. Yeah.
Uh for a significant period of time. You know, Rob was looking to come back into the business, and you know, we decided he should come home to Golden Sacks and we're thrilled that'll spend time with our clients. Rob has deep client relationships. He'll spend time with our people. He's always been a leader as a mentor, uh, you know, to people. He believes deeply in Golden Sacks culture and so will be another senior leader that can spend time with all of us, you know, on the culture of
Golden Sacks. We have four thousand people in Dallas, Texas now, and he adds it puts another senior leader in Dallas, which is obviously very very important for us. And he certainly has a view on the macro that our clients are going to want to hear. And so having Rob coordinated with our research team and and you know, able to talk to our clients about what we see going on in the macro is another area where we can contribute.
So we're thrilled to have Rob back as a senior statesman at the firm, and and excited that he was excited to come back to Golden SEC.
When I die one a hundred goldman full of left fet col do I called Jan Hatzias or mister Kamplin?
Can you call Jan hatzik down to lead economists? But Rob is certainly somebody you should call to. And by the way, I'd be happy to give you opinions on that also, as with John Waldron and you know forty other parts.
How they spend a lot of the teens right now.
You know the range of opinions we have. We have a research opinion, but the range of opinions, it's one of debate. I think one of the things I feel so lucky there's so many smart partners at Golden Sacks that are out in the world talking to people. And as you do that, you learn, you bring perspectives to the table, and all those perspectives kind of go into
the you know, into the mindset factory. Yana Hatzias is really really good at taking data and information and digesting it, and he sits in a very powerful place inside Golden Sacks, and all of us contribute to that and from flow, and so I think that's one of the advantages of the firm. Now we have a great ability to kind of listen and learn and talk to very smart people, and that gets incorporated into our views.
We'll get a ton of information this week, we get CPI, we get retail sounds, a bit more dates, tons more fet speak. Can we finish on one of the business is telling you about the state of the US economy? But tronic age if we're slowing down, full en off a cliff or booming but well.
And that pointing out we're definitely not falling off a cliff. I think the US economy is chugging along pretty well. I think the market is set up for pretty much what you see now is what you'll get.
Throughout the rest of twenty twenty four. There have been a bunch of data.
Points that indicate a slowing in what i'd call the bottom twenty five or thirty percent of the consumer economy, where people are making different choices and starting to tighten up on some of their spending choices.
You've seen some earnings reports in the.
Last few weeks that indicate that, But broadly speaking, the service sector is still relatively strong, and I think the economy is still in pretty good shape. You know where it'll be in six months. How much of that slowed down we see in the bottom quartile. We have to watch the data very very carefully.
Just to final question, we alluded to it in a conversation a lit bit earlier. She still personally vindicates it about where the business is now versus some of the comforts to business going over the last twelve months.
Goldman Sachs is a visible organization.
The team that I have that helps us, the broad partners that help us serve our clients, run the firm move forward. We've had a high degree of confidence in our strategy over the last five.
To six years.
We continue to execute on that strategy. You know, when times are good, you know, things feel good. When times are tougher, things don't feel as good. But we kind of take a long view execute against that strategy, and we just know that if we have really really smart people working together, working collaboratively, really driving.
For excellence to serve our clients. We're going to do just fine.
And that's kind of true North serving our clients with excellence.
We'll do just fine, and so we remain focused on that. David Solomon, thank you from very much for your time. We appreciate it. Thank you for France, and we'll catch up in New York next time. Absolutely stay with the flight, thank you, thank you. That was David Solomon of Goldman Sachs