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Let's just talk through this series of initiatives that you've done in the region over the past twelve months, because for what I can see, you're really doubling down in your asset management business. Earlier this year, UNLS a partnership with PIF in asset management. Last week you ANDLS that you were expanding wealth management in Saudi Arabia as well. So you know, what's the vision here and what's the kind of growth that you're looking.
To Chief, Well, we're certainly excited about what's going on in Saudi Arabia and what's going on in the GCC more broadly. I think it's a big opportunity for our business. We've been here for a while, but we've certainly been investing in expanding. You know, here in Saudi Arabia. We
opened a new office this year. We've got about twenty people on the ground here, but we're probably headed to about sixty and the big reason for that expansion is we've recently launched the initiative of our high end private wealth business here in the region, and so that will bring more resources, more attention, and more focus. We've been in the region for quite some time. We've been active
as a member of the TATTLE. I think we were one of the early participants in the equity markets here, and so we've been very, very involved in the equity markets as an international firm. We've led some of the largest IPOs in the region. I think you're going to continue to see an influx of capital markets transactions, and I.
Think that's something that certainly we want to sit in the middle of those flows.
Financing has always been core to Goldman Sachs strategy in any part of the world. You mentioned our partnership with a private investment fund around private credit. That's something we're certainly excited about too. So when you step back and you think about the progress here in the Kingdom, the need for foreign direct investment to come in to continue to allow the population here to participate more economically, the changes that are coming from the investment that the Kingdom's
making in infrastructure and the local economy here. We think it's great opportunity for Goldman Sachs to continue to partner.
With the Kingdom.
Do you see that investment coming in.
I think there's great opportunity.
I think it's one of the things that the Crown Prince is very focused on is how do you look at when you think about, you know, the exports, particularly of energy here, how do you create a more localized economy.
And so I do see signs of.
An increase in that activity, particularly on things like tourism and investment infrastructure that can support tourism, but also in certain manufacturing areas. And I do think one of the things that's interesting is AI and the ability for there to be AI infrastructure here that can be used and can be exported to different places in the region.
Yeah, and certainly many people are eyeing up the opportunities there. You also opened up an office in Kuwait as well, so talk us through the plantin sure.
We have a partnership with Kuwait, and we've actually we've actually been in Kuwait and have done business in Kuwait going back to the nineteen seventies, so it's a long term partnership. What I think is interesting about what's going on in Kuwait at the moment is there's a real effort after a period of time following the war in the nineteen nineties where they really did not put the capital into the infrastructure and growth locally and they had
a legislative branch that was stopping progress. The emir now is taking action to really spur significant investments, significant growth, and we're very proud to partner with the leadership there and helping them think through strategically how to expand that growth.
So Golden has offices now in pretty much all of the financial hubs of the region. And I just wonder whether you think it is necessary or it helps to get access to these types of pools of capital, you know, to these long term commitments. Actually having a physical presence.
In the country, I think it helps enormously.
And you know, the world changes and there's lots of technology and there's lots of flexibility, but showing up matters.
You don't have to look much farther than outside of us.
Here today, they're an awful lot of people from all over the world that have shown up here because they want to build relationships, partnerships, they want to participate. And so whether it's here in this region or you can go back to the United States. You know, why do we have localized offices all across the country in the United States, Because in those communities, people want presents, they
want direct connectivity, They want to show up. While technology in the world evolves, human to human contact is not going away.
Yeah, no, that's true. That's a fair point. But do you think it's it's also fair to say that, you know, in the old days, and typically you know, funds would come here to get capital and then offer investment returns, and nowadays socceral wealth funds are saying it's not just enough to offer us investment returns.
Well, I think the whole economic the whole scope of economic activity has has really changed enormously. There's no question if you go back, you know, you know, my old days are a lot older than your old days. But if you go back, if you go back, if you go back a while, these nations were exporters of capital around the world, and they had not built the infrastructure of professional investment capabilities here locally, and so they were
outsourcing those capabilities to institutions like ours and others. Now they're really making long term investments to build their economies, to allow their populations to participate, to attract investment here, and so what they need, and they've got incredible investment infrastructures here localized on the ground. What they need or ideas What they need are liquidity and capital. What they
need is strategic initiatives. And so we're just in a moment in time where they have the capacity to do many more interesting things to.
Build their economies.
Think about Saudi Arabia here in the kingdom, thirty five million people. You know, there's an enormous opportunity given that population to continue to expand the economic activity on a localized basis here, and they're looking for partners that can help drive them.
Do you think alternates of assets are going to pick up here?
This part of the world has always allocated a significant portion of their surpluses to investing in privates. If what you're asking is will there be interesting investment opportunities on the ground.
Here in these local economies.
Yes, absolutely that as these economies grow, there will be more interesting investment opportunities here on the ground that attract international capital from around the world. And we've obviously been seeing that in a more significant way over the course in the last five years.
Yeah, okay, let's broaden this out a little bit. You know, your earnings came through again. You know, it seems as though the bank is really firing on all cylinders. Whether it's trading, markets, activity, deal making, advisory, wealth management. You know. So everything seems to be going quite well at the moment. Now, how long do you expect these favorable market conditions to last?
Four Well, I appreciate that we certainly had a strong
quarter in our client franchises in terrific shape. But I really think that the firm is benefiting from a bunch of strategic decisions that we made five, six, seven years ago to reposition the firm for growth, to really grow our core business of investment banking and markets, put more financial resources into the business so that we could take more wallet share with our clients and be in a position to better serve our clients as they were increasingly active,
and also to pull a group of businesses together to create our asset and wealth management platform, which now supervises three and a half trillion dollars. We've said publicly we think it can grow in terms of its durable revenue high single digits. It's growing better than that, and the combination of those activities has materially uplifted the returns of the firm. So the environment is conducive at the moment. There will be times when the environment you know, is
a little less conducive. We live in a cyclical world, but we think we have the firm position that over the next five ten years, we can continue to grow our earnings, grow our client footprint, and continue to compete at the highest levels and the businesses that we're in.
So one thing I was thinking about this morning. You know, if you just took a snapshot of where everything is trading, you have equities at all time highs. You have you know, US economy tracking north of three percent. If you look at the real time indicators, you've got inflation at three percent as well. And yet somehow the FED are going to be cutting interest rates by twenty five basis points tomorrow.
Do you see this as the beginning of a sequential easing cycle or just more of an insurance cut?
What I what I would say with respect to the FED, is the Fed, you know, world cut rates tomorrow and then we'll see I know, the can censuses. You'll get another cut before the end of the year. But the policy rate has been higher. I think they're looking to move more toward neutral, and so we'll take a step in that direction.
But I think the FED.
Always is an observer of what's going on in the real time economy. The real time economy can shift very quickly. At the moment, I would say the US economy is in quite good shape.
But I wouldn't. I wouldn't jump forward.
There are lots of forward prognostications about the path of interest rates. I would just highlight mostly, you know, i'd look at the moment, you can project forward. But just because there's a forward projection, it doesn't mean that's why where we'll wind up.
There's a lot of uncertainty.
Do you believe that this is a case shaped economy? Lots of academic circles have been talking about that, and since that, you know, upper income earners seem to be thriving, whereas lower income earners are struggling to keep up with inflation and they're worried about potential job cuts to come.
I wouldn't. I wouldn't use that term.
But what I would say is businesses that are particularly sensitive to lower income or paycheck to paycheck consumers have been a little softer. And I would say, you know, consumers that our paycheck to paycheck feel more pressure in an environment with three percent inflation, and so there's no question inflation is very, very difficult for people who live paycheck to paycheck, and so it's something I think we
have to watch very carefully, you know. I know there's been progress from where we were a few years ago on inflation, but it's important that we get inflation back to target because in any environment where it runs hotter, certainly people in that income strata feel it more acutely. But I'd still say overall, the US consumer is in good shape. Most of the data that I see around
the US consumer is still quite constructive. But I think you're highlighting something that needs to be watched carefully.
Yeah.
Another thing that needs to be watched carefully is perhaps, you know, the credit situation. A couple of weeks ago, we were talking about Tricolor first brands. You know, one of your peers in the industry described there being cocker, which is potentially cockroaches around. I don't know if you know there's a certain insect reference that you want to pick up on, but ultimately, you know, how worried are you about some of these individual idiosyncratic credit incidents actually becoming systemic.
I would put the the three situations that you mentioned in the category at the moment of idiosyncratic events. But what I would highlight is I think there's a great opportunity for people that are in credit businesses and are deploint significant capital as lenders and credit businesses to look at the procedures, the practices, their underwriting standards, look through their portfolio, and really take a strong evaluation of where
they are. You can't separate the fact that we've been in a very, very long easy credit cycle, one of the longest I've seen in my career, without a real credit pullback, without a without you know, an economic environment that's really put an enormous amount of pressure on credit. And in that context, credit spreads are historically tight, and I know at some point there will be a credit cycle.
It will probably come at a period of time when the economy slows more acutely or there's some sort of a macro event that changes confidence we have in growth in the trajectory of the economy. And when that happens, given the lossity of lending activity, there will be losses and credit and those losses will be felt across the system.
But that's different than a systemic, you know, a systemic crisis. And I don't see anything in the context of a handful of.
Bad credit situations, it's leading me to say that we have a systemic.
Issue around the corner.
Unfortunately, you know, lenders make mistakes. There is fraud and markets, and you know that's something that is lenders we off to try to protect against. But we should not be fooled by the fact that this is a very robust credit environment. Credit spreads are tight, and when we do have a cycle, which probably will come when there's an economic slow down, there will be losses and we'll feel that across the economy.
Yeah, and that's trickling down to private credit as well. We spoke about that a year ago, and I just wonder whether you think the easy money, so to speak, in private credits, those days are behind us now, just because of you know, how much interest is mean and how much spreads have compressed there.
I don't.
I don't think about when I think about lending, I don't. I don't think about you know, easy money. You know, lending is an activity, whether it's private credit or it's banks lending activity. Lending is a through the cycle activity. There's no question when spreads are tight, you actually learn earn lower relative returns. But the real alpha for credit market participants comes in the tough cycles when you have to restructure credits. You have to have more conviction to
enter credits because you can earn higher returns. And so the real alpha in long cycle credit investing comes for being able to manage not just at times when credit is credit spreads are tight, but also when there's a difficult cycle. And so, you know, I don't think about it easy money. If you're a lender, you're a lender.
You participate, and you hopefully have good underwriting standards, take good reserves, and so when there is economic pressure and there are losses, you can smooth through the cycle your returns to a reasonable place.
And that's what good lenders do.
Okay, so we've talked about equities fed the credit. Let me ask you about the dollar. The dollar, you know, is done almost ten percent a year. Today has been a challenging year for the USD People who are questioning this theme of US exceptionalism. Do you worry that the US is perhaps somehow losing its relative status?
I don't. I think the US.
I think US pre eminence, especially from an investment perspective, is a theme that's still firmly in place that you can walk around here and talk to capital allocators that are here from all over the world and they're not
fundamentally changing their allocation, you know, across the globe. And if you think about what are the more interesting places in the world to invest at this point in the time, the US is still at the top of the list and is the largest, most important economy, the largest most important tech innovation center in the world. You know, I
think that's firmly in place. The dollar has been softer this year, the variety of reasons for it, but a perspective would be it's certainly much stronger than it was ten fifteen years ago when we saw, for example, you know,
dollar forty, you know, euro dollars. So everything's got to be put through a longer term lens when you think about the dollar, But don't I don't worry about the US and it's pre eminence as an attractive place to invest, the growth in that economy, the tech innovation ecosystem, you know, I think the US is a is.
In a pretty good place.
Okay, David, I've got to round up asking you about AI and sort of how you're incorporating it incorporating it into your bank operations. You know, are you seeing efficiency gains there?
Sure?
This is this is an enormous opportunity for every enterprise in the world, and I think it's one of the reasons why I'm very excited about growth in the world over the course of the next few years, because I think the productivity opportunity for enterprises large, even to very
very small businesses is enormous. We made an announcement last week or ten days ago around our earnings about Golden Sacks one Golden Sacks three point zero, where we laid out six things that we wanted to accomplish around better client service, more efficiency, and ability to really improve our.
Risk management across the firm.
And we are looking at a handful of processes where we can really re underwrite these processes, create automation and efficiency, but not just to take cost out, to allow us to invest in growth.
In the business.
And so this is a theme that I think most CEOs of large enterprises are looking closely at, and the productivity benefit to the economy broadly as people execute on this is very meaningful. It's starting, We're still early, but I think over the next twenty four to thirty six months, you're going to see real benefits from these efforts.
Is AI going to replace entruy level jobs, Analyst dolls.
I mean will it will replace?
It will change certain jobs, the same way technology has changed certain jobs for my entire forty two years in the business. So you think back when I started as an analyst, I was required to do something.
I had to go to the library, I had to go to the microfiche, I had to get data. It took hours.
Things that take five that take five seconds now, like doing a common stock comparison took six hours. Yet we still have lots of very productive people doing more to serve our clients. I think the lens that you have to look at is technology is always changing work, changing jobs, adjusting the mix of different kinds of jobs. But it doesn't mean that businesses don't grow, economies don't grow, and
opportunities for very productive people don't grow. And I don't think it's going to be different this time, although I do think there are jobs that will be different, and there are jobs that will go away, but that doesn't mean new jobs won't be created.
Take me back to my banking days, M D would send me an email at six pm on a Friday to pitch a fix a pitch book by Monday morning, and you know that your weekend was going to be good.
But that's long gone yet people are still working very hard on the kind of work they do changes.
And here's the thing that I think is really really important.
Yet. You can teach investment bankings. You know this, you are an investment banker at Golden Sex. You can teach investment banking skills, but you can't teach relationship building, trust advice giving. That's a apprenticeship, skill based business, and that's something that I think is very sustainable. But technology tools make the people that do that much much more productive.