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Goldman’s Blankfein on Markets: ‘Things Have Been Going Up for Too Long’
By Liz Hoffman
Sep 6, 2017 2:15 pm ET
Goldman Sachs Group Chairman Lloyd Blankfein on Wednesday sounded a warning about the markets, saying that some of what he sees “unnerves” him.
Mr. Blankfein said the current market environment “doesn’t feel like tulip-bulb-mania,” a reference to the famous speculative bubble in the Netherlands in 1637, but was nonetheless concerning.
“Things have been going up for too long,” he told attendees at a Handelsblatt business conference in Frankfurt. “When yields on corporate bonds are lower than dividends on stocks? That unnerves me.”
Those remarks came near the end of a question-and-answer session with the Goldman chief. Mr. Blankfein participated via a video link, speaking from Goldman’s headquarters in New York.
Here are some other highlights from his remarks.
On speculation that Goldman alum Gary Cohn could become the next chairman of the Federal Reserve:
”I think Gary is very very capable. He would be a different kind of person. Not an academic. I don’t know that he reads a lot of policy papers, let alone writes then, but there’s nobody who understands markets better.”
Relative to current chair Janet Yellen, Mr. Cohn is “much less theoretical.”
“Who’s to say what’s better or not?” he said, noting that past Fed chairs have had more of a markets bent. “I’d be willing to give that a try. I think he would do a different job, but a great job.”
On the Trump administration:
“Things could have gone better but I’m not without hope. A lot of what [President Trump's] trying to accomplish I’m friendly to. There are a lot of layers of protectionism and regulation that have been built up that impede progress. I think his good intentions are to take a lot of that away. I have some disappointment but also some hope.”
On the “Government Sachs” moniker and the perception of a revolving door between Goldman and the U.S. government:
“We have a lot of people who are civically minded…I’m proud of it. Their qualities are recognized. They make a sacrifice and we feel the cost of that sacrifice, because they’re very capable people.”
On the Volcker rule, which limits proprietary trading by banks:
“You have people sitting on desks who are paralyzed out of fear… It has had chilling effect in people’s willingness” to make markets.
On declining revenue at the firm’s securities-trading division:
“We have always had periods of time where we haven’t done well. I’m not terribly aggrieved by it. It’s a level playing field for everyone. I think we can do well in this environment, and we can do well if they relax the rules.”
“We’re running in a horse race against our competitors. If it rains, it rains for everyone and we’ll run in the mud. If it’s sunny, we’ll all run in the sunshine.”
CORRECTION: An earlier version of this article misspelled the name of former Goldman Sachs President and Chief Operating Officer Gary Cohn. It has been corrected above.
By Liz Hoffman
Sep 6, 2017 2:15 pm ET
Goldman Sachs Group Chairman Lloyd Blankfein on Wednesday sounded a warning about the markets, saying that some of what he sees “unnerves” him.
Mr. Blankfein said the current market environment “doesn’t feel like tulip-bulb-mania,” a reference to the famous speculative bubble in the Netherlands in 1637, but was nonetheless concerning.
“Things have been going up for too long,” he told attendees at a Handelsblatt business conference in Frankfurt. “When yields on corporate bonds are lower than dividends on stocks? That unnerves me.”
Those remarks came near the end of a question-and-answer session with the Goldman chief. Mr. Blankfein participated via a video link, speaking from Goldman’s headquarters in New York.
Here are some other highlights from his remarks.
On speculation that Goldman alum Gary Cohn could become the next chairman of the Federal Reserve:
”I think Gary is very very capable. He would be a different kind of person. Not an academic. I don’t know that he reads a lot of policy papers, let alone writes then, but there’s nobody who understands markets better.”
Relative to current chair Janet Yellen, Mr. Cohn is “much less theoretical.”
“Who’s to say what’s better or not?” he said, noting that past Fed chairs have had more of a markets bent. “I’d be willing to give that a try. I think he would do a different job, but a great job.”
On the Trump administration:
“Things could have gone better but I’m not without hope. A lot of what [President Trump's] trying to accomplish I’m friendly to. There are a lot of layers of protectionism and regulation that have been built up that impede progress. I think his good intentions are to take a lot of that away. I have some disappointment but also some hope.”
On the “Government Sachs” moniker and the perception of a revolving door between Goldman and the U.S. government:
“We have a lot of people who are civically minded…I’m proud of it. Their qualities are recognized. They make a sacrifice and we feel the cost of that sacrifice, because they’re very capable people.”
On the Volcker rule, which limits proprietary trading by banks:
“You have people sitting on desks who are paralyzed out of fear… It has had chilling effect in people’s willingness” to make markets.
On declining revenue at the firm’s securities-trading division:
“We have always had periods of time where we haven’t done well. I’m not terribly aggrieved by it. It’s a level playing field for everyone. I think we can do well in this environment, and we can do well if they relax the rules.”
“We’re running in a horse race against our competitors. If it rains, it rains for everyone and we’ll run in the mud. If it’s sunny, we’ll all run in the sunshine.”
CORRECTION: An earlier version of this article misspelled the name of former Goldman Sachs President and Chief Operating Officer Gary Cohn. It has been corrected above.