Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. I'm Hardie Stradolz here
Speaker 1: in Sydney and we have a very special guest, a
Speaker 1: very special event here in Sydney this morning. It is
Speaker 1: the Golden Sacks Australia Week Alternatives and Macro's Summit, and
Speaker 1: with me here as a seer and chairman, David Solomon.
Speaker 1: Really great to have you with us, and I know
Speaker 1: you've been doing a lot of talking. We're about to
Speaker 1: make you do some more. Welcome to Australia. But of
Speaker 1: course markets, wonderful to have you. Markets are really gripped
Speaker 1: by what's going on Roughly eight thousand miles away right
Speaker 1: the Middle East conflict is still front and center. We
Speaker 1: don't know how extended it's going to be. You said
Speaker 1: yesterday you were surprised Baha benign markets were Your team
Speaker 1: of strategists, led by Peter Oppenheimer, is saying, by the dear,
Speaker 1: do you see complacency at this moment?
Speaker 2: I I don't see complacency. I just I think there's
Speaker 2: a lot of uncertainty around the direction of the conflict,
Speaker 2: how it will be resolved. You know what the off
Speaker 2: ramps are, and you know, I think it's fair to
Speaker 2: say when you're markets market reactions have been relatively benign,
Speaker 2: and I certainly could have seen over the last couple
Speaker 2: of days, you know, a little bit more volatility. But
Speaker 2: I don't think people are being complacent. I think that
Speaker 2: market participants are looking and trying to say, you know,
Speaker 2: how is this going to play out?
Speaker 3: What's the end game?
Speaker 2: You can see you know, good scenarios and more difficult scenarios,
Speaker 2: and as they have more information in the coming days
Speaker 2: and the coming week or two, you know, I think
Speaker 2: that will have an impact on risk premiums. I think
Speaker 2: at the moment, what market participants are really looking at
Speaker 2: is is this going to translate through to things that
Speaker 2: affect economic growth and activity, particularly energy supply chains you
Speaker 2: know so far. I think one of the reasons why
Speaker 2: markets are reacting the way they are is they're encouraged
Speaker 2: that there is you know, strong support for trying to
Speaker 2: ensure that doesn't happen.
Speaker 3: But it's uncertain. You don't know, and we'll see in
Speaker 3: the long run.
Speaker 2: For portfolio allocation, and I know Peter Oppenheimer, Charmin most
Speaker 2: of Barramari, it a call for our wealth clients.
Speaker 3: You know, if you have portfolio allocation.
Speaker 2: There's nobody that's say you should share your fundamental portfolio
Speaker 2: allocation because of what's going on. But for traders and
Speaker 2: day to day market participants to think about risk premia,
Speaker 2: you know, every single day.
Speaker 3: Obviously they're watching very closely.
Speaker 1: What a lot of people that run big, major global
Speaker 1: banks like yours, right, do you worry about the lack
Speaker 1: of predictability when it comes to policy, when it comes
Speaker 1: to how this potentially ends, and when it ends, what's
Speaker 1: going on with your at least operations.
Speaker 2: For anxiety, I worry about a lot of things. We
Speaker 2: run a big global business. We have an extraordinary team,
Speaker 2: and you know, I think one of the things that
Speaker 2: we have to accept is the world as a very
Speaker 2: complicated place. There's always a lot of uncertainty. There's always
Speaker 2: a lot of nuance. But we have you know, base
Speaker 2: beliefs and how economies will perform, how the world will evolve,
Speaker 2: and you know, we operate around that. But we always
Speaker 2: are prepared to risk manage and think about downside risks.
Speaker 2: And I think one of the things you have to
Speaker 2: do when you run a big, large financial institution is
Speaker 2: that when you know fact change or risk come up
Speaker 2: you've always got to.
Speaker 3: Be prepared to pivot, to shift to de risk. And
Speaker 3: you know, we run our business, you know that way always.
Speaker 2: We run a big balance sheet and we you know,
Speaker 2: we think about that every day. But there's there's nothing
Speaker 2: while these are very very significant events and I don't
Speaker 2: want to diminish them in any stretch. You know, we've
Speaker 2: operated the firm through lots of very significant events. You're
Speaker 2: in year out, and that's that's part of what we do.
Speaker 1: Is it business is normal? Then for say, your offices
Speaker 1: in Saudi Arabia, is this travel going on? What's a
Speaker 1: communication with third clients?
Speaker 3: That's that is complex.
Speaker 2: We have We've got a significant number of people in
Speaker 2: you know, in those Middle East countries, and obviously, first
Speaker 2: and foremost we're concerned with their safety and you know
Speaker 2: we're trying to do everything we can to support them
Speaker 2: in their families. I would not say, you know, it's
Speaker 2: business as usual in those markets. You know, all those
Speaker 2: markets for all businesses you know are operating work from
Speaker 2: home and and you know stay safe as a first priority.
Speaker 2: And so we'll just have to watch closely, you know,
Speaker 2: how things play out. And you know, we're very very
Speaker 2: focused on making sure our people and their families are
Speaker 2: safe and sound, and at the moment, that's our primary focus.
Speaker 3: In that part of the world.
Speaker 1: Do you think there is a bit of an existential
Speaker 1: cloud of buy as a financial center, now.
Speaker 2: Well, you know, I do think safety and security, you know, matters,
Speaker 2: And I wouldn't say I think it's a little bit
Speaker 2: premature to talk about existential clouds. But you know, if
Speaker 2: you're living and operating in a place and you didn't
Speaker 2: anticipate this, it's quite scary and it's quite unsettling. And so,
Speaker 2: as I said, our primary focus is on the safety
Speaker 2: and security of our people there were working very hard
Speaker 2: to make sure that we're protecting.
Speaker 3: Them and their families.
Speaker 1: It's not as the background prior to this conflict was
Speaker 1: crystal clear, right, we just came off really trying to
Speaker 1: work out what the AI scare trade is going to be. Like,
Speaker 1: do you do think that when it comes to that
Speaker 1: narrative of sustainability of you know, I know, Jamie Dahmer said,
Speaker 1: there's some players doing dumb things, for example, does that
Speaker 1: still have further to go?
Speaker 2: I'm not sure I understood the question exactly. Are you
Speaker 2: you're talking about kind of AI investment. You know growth. Look,
Speaker 2: AI is a fabulous, fabulous, incredible technology that is going
Speaker 2: to drive massive productivity gains through society. There's a lot
Speaker 2: of capital being deployed to grow AI capabilities around the world.
Speaker 2: Some of that capital is are going to get reasonable returns,
Speaker 2: some of that capital is not.
Speaker 3: They're going to be winners, they're going to be losers.
Speaker 2: As within any technology super cycle, I think we're early
Speaker 2: in that process, but I think it's exciting and I
Speaker 2: actually look at the.
Speaker 3: Glass being half full.
Speaker 2: That doesn't mean that there won't be capital that's burned
Speaker 2: companies that don't work out. But I think overall, the
Speaker 2: benefits to enterprise productivity, you know, the economy broadly as
Speaker 2: this technology gets developed and deployed is going to be
Speaker 2: quite exciting. And I'm looking at the optimism of you know,
Speaker 2: what's ahead from all this, and of course try to
Speaker 2: manage the risk of the downside, the speed bumps that
Speaker 2: will inevitably come along the way.
Speaker 1: I like the earlier saige. You know, in your job,
Speaker 1: you will worry about a lot of things, right, Trade
Speaker 1: Tariff's US policies obviously one of them, And I think
Speaker 1: this is the first time we've spoken to you since
Speaker 1: the Supreme Court passed down their judgment. Does the further
Speaker 1: lack of predictability on trade policy? Is that also a
Speaker 1: concern when it comes to business sentiment, when it comes
Speaker 1: to your views on how the US economy is going
Speaker 1: to cope?
Speaker 2: What? I think uncertainty does affect business sentiment broadly, But
Speaker 2: I just say I don't think that.
Speaker 3: I don't think that at.
Speaker 2: The moment, US trade policy is that uncertain, you know.
Speaker 2: I think this administration has been clear about how they
Speaker 2: intend to drive a trade policy. I think the Supreme
Speaker 2: Court decision affects a certain discharge of tariff's into the economy,
Speaker 2: but there's certainly other avenues for the president. I think
Speaker 2: the President's made quite clear, you know, how he thinks
Speaker 2: about tariff and trade. And I think while this administration
Speaker 2: is in place, that is going to be a construct
Speaker 2: that we have to operate in. Of course, if there
Speaker 2: could be more, it can be more certainty around exactly
Speaker 2: how that looks. And I think the important thing is
Speaker 2: how it will look in longer perpetuity. You know, of
Speaker 2: course the market would appreciate that, but I think the
Speaker 2: market operates knowing that there's a level uncertainty around trade
Speaker 2: and trade policy that we just have to adapt to.
Speaker 3: And we have to live with.
Speaker 1: I wanted to get a bit more while you're here,
Speaker 1: for example, in beautiful Sydney, do times that use of
Speaker 1: increased global and certainty does it make a relatively more
Speaker 1: idiostromcratic market like Australia more interesting?
Speaker 3: Well, Australia's always been interesting market.
Speaker 2: We have four hundred people here, but a lot of
Speaker 2: very very important, you know companies in Australia. We have
Speaker 2: a good wealth business in Australia. You know, Australia is
Speaker 2: an important market and an important economy, not just for
Speaker 2: the world, but also for Golden Sacks. You know, any market,
Speaker 2: any economy that's important is important for Golden Sacks. Given
Speaker 2: our global footprint, I try to get here about once
Speaker 2: a year.
Speaker 3: I try to do it around an event like this.
Speaker 2: So we've got a lot of our clients bort together
Speaker 2: first of all for this conference. But this has always been,
Speaker 2: you know, this has always been an important market, an
Speaker 2: important economy for Golden Sacks, and you know, I think
Speaker 2: that's consistent, you know, in any environment. So I was
Speaker 2: here the same week last week, and I'm excited to
Speaker 2: be back again this year.
Speaker 1: What else are you excited about around the region? Are
Speaker 1: there as a house view Goldmen Sex is very bullish
Speaker 1: on China or it's of course National People's Congress Week
Speaker 1: as well. What's your feel about that market given some
Speaker 1: of the crosswinds on trade, on tech, on geopolitics.
Speaker 2: Is China is one of the largest China is one
Speaker 2: of the largest economies in the world. That's going to
Speaker 2: continue to be one of the largest economies in the world.
Speaker 3: You know.
Speaker 2: At the moment, I'm very focused on the bi ladder
Speaker 2: relationship between the US and China. I'm looking forward to
Speaker 2: President Trump's visit with President Chief that it's planned for
Speaker 2: later this month, the beginning of April. It'll be interesting
Speaker 2: to see what comes out of that, and you know,
Speaker 2: whether or not China and the US can make.
Speaker 3: More progress, you know, on their biladder relationship.
Speaker 2: I think that's important for growth in the world, and
Speaker 2: I think it's important for both the US and China,
Speaker 2: and I think at the moment that's fragile, and so
Speaker 2: I'm very curious to see, you know, how that progresses.
Speaker 2: In the meantime, Chinese markets have done very well in
Speaker 2: the last twelve months. That's increased capital flows, you know
Speaker 2: into the region. We obviously participate in that. But we're
Speaker 2: going to watch those bilateral meetings and progress in the
Speaker 2: Bilader relationship very closely.
Speaker 1: What would you like to come out in terms of
Speaker 1: deliverables from.
Speaker 2: I'd like to see, you know, more certainty and clarity
Speaker 2: around how the Biladder relationship will work going forward. I
Speaker 2: think there are things that the US wants and things
Speaker 2: that China wants. I'd like more clarity around what that's
Speaker 2: going to look like, you know, not just in twenty
Speaker 2: twenty six, but you know, over the coming years. And
Speaker 2: I think that's still relatively uncertain.
Speaker 1: What are we not talking about enough? I know we've
Speaker 1: talked a little bit about private credit. You don't think
Speaker 1: it's a sort of a systemic risk at this point.
Speaker 2: I think credit formation around the world is really correlated
Speaker 2: to you know, economic growth and economic activity. I do
Speaker 2: think that we've gone if I just look at the
Speaker 2: US market, which is obviously, you know, very when you
Speaker 2: talk about private credit, a very very large market. The
Speaker 2: context of private credit, We've got a long time without
Speaker 2: a credit cycle. We've gone a long time without a recession.
Speaker 2: I do think when you have these long dated cycles,
Speaker 2: they're a variety of things that happen. One, credit spreads narrow,
Speaker 2: two lending standards.
Speaker 3: People have more capital deploy they get.
Speaker 2: Aggressive, lending standards deteriorate a little bit due diligent standards deteriorate,
Speaker 2: and so we're watching very closely to see if there's
Speaker 2: been a little bit too much aggression froftiness in those markets.
Speaker 2: But fundamentally, when you look at the underlying credit portfolios,
Speaker 2: particularly below investment grade credit, while there have been a
Speaker 2: bunch of idiosyncratic events where there have been problems, the
Speaker 2: broad portfolios are performing reasonably well. Why are they performing
Speaker 2: reasonably well because the economy is doing fine and it's
Speaker 2: very hard to have broad underperformance and a broad diversified
Speaker 2: credit portfolio. If the economy is doing well. When we
Speaker 2: do have a slow.
Speaker 3: Down in the economy, you will see it.
Speaker 2: I think because of the length of the cycle, you
Speaker 2: probably will find places where the losses are higher than
Speaker 2: people expect.
Speaker 3: We're very, very focused.
Speaker 2: On back leverage and things that could affect or amplify
Speaker 2: in a more difficult economic environment, you know, credit deployment.
Speaker 3: But at the moment when you.
Speaker 2: Look broadly across portfolios. We're not seeing things that are
Speaker 2: super concerning. That's a completely different issue than retail participation
Speaker 2: and retail investors wanting liquidity from what are fundamentally illiquid products,
Speaker 2: and so that's getting a lot of attention. But that's
Speaker 2: different than the underlying credit portfolios. But I do think
Speaker 2: that when there is a slowdown in the economy or
Speaker 2: we do get to a place where we have, you know,
Speaker 2: a recession, you're you're going to see losses and credit portfolios,
Speaker 2: and you know those losses could be meaningful, but you know,
Speaker 2: we'll watch that closely while the economy is chugging along.
Speaker 2: You know, that's that's not the primary focus.
Speaker 1: David, I know we must let you go, but we
Speaker 1: really appreciate you giving us your time in a very
Speaker 1: very busy schedule. Thank you so much for joining us.
Speaker 3: Absolutely great to be with you. Thank you for having me.
Speaker 1: Also Common Sex chairman and CEO David Solomon here at
Speaker 1: the Australia Week event