WHEN: Today, Thursday, November 10, 2022
WHERE: CNBC's "Mad Money"
Following is the unofficial transcript from a CNBC interview with Goldman Sachs Chairman & CEO David Solomon on CNBC's "Mad Money" (M-F, 6PM-7PM ET) today, Thursday, November 10th. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2022/11/10/goldman-sachs-ceo-says-he-expects-a-reopening-in-capital-markets-next-year.html.
All references must be sourced to CNBC.
JIM CRAMER: David, everybody wants your view on what's going on in the world. I want to do two things before we get to that. One I just saw young people do amazing things for causes who work at Goldman. I worked at Goldman. We did not do that back then. And then second, I want to congratulate you for hiring as many veterans as you did. It's always been important. It's where I met my first vet other than my dad. These are great things. The culture is quite different from when I worked here.
DAVID SOLOMON: Well, we're, first of all, super proud of what you just saw. Our Analyst Impact Fund where we have thousands of analysts from around the world competing to champion causes they believe in and then the partners philanthropically support those causes and give out awards, you know, based on presentations they make and as you just saw, Jim, the presentations were just extraordinary, really extraordinary makes me proud. And, and as I said, you know, when I see, you know, these young colleagues, you know, so energized by these things and just the way they present and their intellectual, you know, rigor and engagement just makes me proud and very sure that this firm is on the right track.
CRAMER: Well, there's no doubt about it. I am blown away because I know when I was here, yes, it was different time. And I was poor, consumed with trying to do well in a money way and then do well after and you make them do well now. They want to do well now and you let them so with that, let's talk about last time I saw you. The times were little different from this morning, this morning we got what I felt is the first hope perhaps that maybe inflation is peaking because you were concerned. You were very concerned when we sat down here that perhaps things will get very tough. The Fed would have to get very tight and you wouldn't be able to have the full complement of people get to the other side. Where are we?
SOLOMON: Well, I think that today's today's today's print certainly is is a positive sign in the journey that the economic tightening that the Feb's been exercising is starting to have an impact. And I think one of the things that's going to be important to hear is to watch some data. We've tightened economic conditions materially and start to get a sense of where are the declines. I looked at the information quickly. I've been with you for the last few hours so I haven't, I haven't had a chance to really look through it and really understand, you know, what, really what really changed in the CPI data that led to that print but it was certainly better than expected. The markets reacted very positively to it. And so, you know, now we'll have other data points over the course of the next few months. And obviously, the Fed's trajectory from here will be very tied to what additional data points come from here.
CRAMER: It's good that if they are data dependent, it's a good piece of data.
SOLOMON: It's a good piece of data.
CRAMER: When we sat here, you said something and a lot of people didn't believe you. You said look, if we have underperforming units, we have the ability to use and we have levers to make better numbers. Well darn it, you did exactly that and you produced better numbers. Is this an event or are you assessing at all times as some firms are that you may need to let more people go?
SOLOMON: Well, we're always, we're always, we we like to take a long-term view on how we run the business and we we are investing in a number of businesses. We're investing in our asset management business and wealth business platform in particular, we continue to invest to strengthen our core, our core business, and I think we've got the firm in a reasonable position. If the economic environment got tougher, we'd look at the facts and circumstances and make judgments accordingly. But I feel good about where the firm is, and I feel particularly good about the firm's performance, Jim. I feel good about the firm's performance in what is certainly a tougher operating environment than we'd like to see, not a lot of capital markets activity, very little equity issuance. No question from an investment perspective, investment returns have been constrained. And so, it's a challenging operating environment. But I feel like our business is broad, diverse, global. We're doing really well with our clients and as long as we're focused on our clients and serving our clients well, our relative performance will continue to be strong.
CRAMER: Do you think that, are there companies that are ready to come public if we do, if days like today continue?
SOLOMON: There's always a backlog of companies that need to go public. I think what we're going through at the moment is a reset of valuation expectations and that takes some time. We're, you know, we're three quarters into a more difficult capital markets environment. History would tell you 3, 4, 5, 6 quarters you get that readjustment. I think we're going to reach a point in 2023 where people that need to get public, that need to raise capital are going to accept the reset valuation levels. And then that's but it hasn't happened yet but it's coming and, you know, I think we'll see that in the coming months. We'll see a little bit of a reopening in the capital markets when people get used to this valuation adjustment.
CRAMER: Now we just had an election and a lot of people feel that elections chang things. The one thing they don't is that there are agencies and there are agencies that are very powerful this administration, including the FTC, and the Assistant Attorney General Jonathan Kanter of the Justice Department. Do you tell people look this is not the time to merge because these deals will be blocked? What advice do you give people given the fact that these agencies seem to be anti-merger pro competition to a point that you and I may think is extreme?
SOLOMON: Well, I don't think the election this election changes the current tone around around the regulatory environment broadly and particularly with respect to the scrutiny that merger transactions are going to receive, particularly in certain industries. We don't tell people don't merge. But I do think that all companies and all boards that are considering something very transformative, very strategic, are looking at the regulatory lens and some of the hurdles through a, you know, through a, you know, a tighter frame than they would have, they would have been a different administration at a different time. And so that's something we'll continue to watch. I don't expect a big change because of the midterm elections. But ultimately, you know, I think it's important scale matters in the world. We have to strike the right balance in the context of, you know, how we look at these things, but we want to make sure that American businesses are positioned well to compete in a global world.
CRAMER: Excellent. When I was here, the customer's always right. And that's always been the attitude but I must ask you, is the customer right to spend a lot of money on crypto?
SOLOMON: Crypto is a big word and I realize in the context that, I realize in the context of what you're asking, you're probably asking about cryptocurrencies. Jim, you and I have talked about this before. I think the technology is super interesting. I think there's a lot of room for disruption of our financial infrastructure to allow us to be able to move money with less friction, to create more accessible, accessible financial rails to give people more access to the banking system. I think there are lots of opportunities through that. We're spending a lot of time thinking about that. I'm watching obviously what's happened this week with FTX. I think cryptocurrencies are highly speculative. I don't have a strong point of view as to the value of these. I think they're very speculative and I think investors should be very cautious as we watch this, this this sector and this infrastructure develop as we move forward.
CRAMER: Well let me ask you, is this the time for Goldman now that it seems to be collapsing or you could say coming down, back down to earth? Is this the type of Goldman to move in and to be a stable force, a stablecoin, or is that just not what Goldman does?
SOLOMON: Well, there's, there's an enormous amount of regulatory friction for banks to participate, regulated banks to participate in this ecosystem. Most of the activity in this ecosystem is outside of the regulatory banking system. There's obviously a significant discussion in Washington about how the regulatory infrastructure around a variety of these things including tokens, stablecoins, etc. should evolve. Certainly what's happened to FTX this week is only going to accelerate the focus on making sure we have a prudent regulatory structure for all these activities. It's going to be very, very important to make sure our regulatory structure protects, you know, individuals in in these markets and I'm sure this week will bring more scrutiny and focus to that.
CRAMER: Where is Goldman and wealth management, I mean, I'm on the Apple call Goldman's with with the credit card. Goldman has Marcus. A lot of my friends are in Marcus, I of course, look for the best rate at all times. But when I always worked here, I was told listen, don't go in and don't go after anyone who's got less than $10 million dollars. What is the right place for Goldman in the firmament of wealth management?
SOLOMON: Well, we have a broader wealth management platform than when than when you were at the firm, you know, a number of decades ago. We of course have an extraordinary private wealth network for for very, very wealthy people. That's been a core business to the firm for a long time. But we've expanded meaningfully and really, it's through our access to employees in corporate environments, you think about our relationships with corporates, we've attracted more what I call high net worth clientele to our wealth platform and also because we now have a deposit platform and people can leave deposits here, etc. We're finding ways through digital applications to help people with their financial wellness more broadly. And so, I think we'll continue to expand who we serve but we generally are serving people that have some investable assets and so by definition, that's people that are a little bit further up the the wealth chain.
CRAMER: Last thing we have, Dave Kostin, friend put out a great piece every Sunday, he actually got a little negative on the market, got negative on where the S&P could be. Everyone has their own view of Goldman. I always love that. But do you share the idea that perhaps next year could be a tougher year? Maybe the Fed should stop this what is, as you and I both know, huge percentage gain Fed, Fed funds, should they go slower? Should they be more concerned about what you see out there in the environment if they keep rolling like this?
SOLOMON: Well, I think you said it before Jim, the Fed has to be very data dependent and so I'm a student of the data. I know that that the Fed will be a student of the data. And I think the Fed's trajectory from here is going to depend on what the economy delivers. With respect to David Kostin who I know cut has S&P earnings his S&P earnings estimate, you know, I would say that David's view is more in line with my view when you when you when you look ahead to next year. I, I think in an environment with tightening economic conditions, you have to ultimately slow down economic growth to some degree, not sitting here saying we're absolutely going to have a recession and given that given some of the constraints and as I talked to most big companies, they're feeling margin pressure. And if you feel margin pressure, and you have a slower economic environment—
CRAMER: They're acting like there isn't.
SOLOMON: Okay then, then you probably have slower earnings growth and so I'm not surprised that people are coming to a view that earnings growth could be slower or sluggish in 2023.
CRAMER: Last thing I want to say is congratulations on the new partners. I absolutely love the fact that the partners look like the world. It's not like, yes, you said a few decades ago. Salute.
SOLOMON: Well, thank you. We're very excited about our new partner class. It's the most diverse class we've ever had. It is a true representation of our people all over the world in 45 different countries and, you know, still Jim and I know you know this and I made a bunch of calls yesterday to these new partners to congratulate them. It's a really aspirational thing. We're going to keep it that way and it's something that's really special at Goldman Sachs and it really helps us serve our clients well, attract great people really, really keep our organization strong.
CRAMER: Diversity and veterans charity, Goldman Sachs I, I salute the way you've driven this company because these are all the values that we need to be good Americans, good citizens of the world. David Solomon, Chairman & CEO of Goldman Sachs. Thank you, David.
SOLOMON: Thank you very much, Jim. Really nice to be with you and appreciate those comments.