“When yields on corporate bonds are lower than dividends on stocks? That unnerves me.” - Goldman's Blankfein

Goldman’s Blankfein on Markets: ‘Things Have Been Going Up for Too Long’
By Liz Hoffman
Sep 6, 2017 2:15 pm ET
34 COMMENTS
Goldman Sachs Chairman and CEO Lloyd Blankfein
Goldman Sachs Chairman and CEO Lloyd Blankfein PHOTO: GETTY IMAGES
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. ​T​hey 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.”

https://blogs.wsj.com/moneybeat/2017/09/06/goldmans-blankfein-on-markets-things-have-been-going-up-for-too-long/