Goldman Sachs at Deutsche Bank Conference Notes

Gary Cohn – President & Chief Operating Officer

Capital markets have started to re-open

“Moving to Equity Underwriting. Capital markets have started to re-open a bit after a period of substantially lower activity. We remain positive on the long-term outlook for our equity underwriting franchise. If markets continue to be relatively stable we expect to see more client demand in equity capital markets.”

Seeing more electronification in FICC

“While electronification has been unfolding in equities for some time, we have also seen an electronic evolution across certain FICC products with regulation helping to accelerate this shift. In the future, we expect fewer voice trades and more automatic pricing and execution. This slide shows the growth in electronic volumes across a variety of products with higher growth rates in fixed income products where electronic trading continues to evolve and lower volume growth in more mature electronic markets.”

Two constituencies: shareholders and employees

“We feel like it’s our obligation as a management team to run the firm as efficiently as we can, understanding we have two constituencies. We have a shareholder base where our job is to optimize returns for our shareholders, but understand we’ve got a human capital base, our property, plant and equipment is our human capital. And we have to attract and retain the best human capital in the world to drive the organization to be able to facilitate our client’s needs.”

Active vs. passive debate is cyclical

“I think the electronic trading is much more secular. Many of the products that go electronic probably stay electronic and there is no reason for them not to stay electronic.

The passive – the active to passive to me could be much more – much, much more cyclical. Because if we ended up in a world where you saw active managers outperforming index by many, many basis points, net of fees, you would clearly see a migration back into those active portfolio managers.

One of my part time jobs is I run a couple endowments, and we look at performance net of fees and we’ll tend to go where the performance is. And it’s not that the endowment committees say, look, we’re only going to passive, we’re going to go to where we think we get the best risk-adjusted returns net of fees for the longer period of time.

So, I do believe that that is much more cyclical. And you will see active management at some point potentially outperform index.”

There will always be some voice trading

“There is always going to be some equilibrium. I mean even in the equities market where Harvey and I have both lived through the migration from 0% electronic to 90% plus electronic, we still have a voice overlay component where there is certain transactions that don’t work in the electronic system. Whether they be large blocks, whether they be swaps, derivatives, certain type of transactions that don’t work in the electronic system or the algorithmic system. So I do believe there will be an equilibrium between voice and digital.”

Harvey Schwartz – Executive Vice President & Chief Financial Officer

Goldman Sachs 1Q16 Earnings Call Notes

Harvey Mitchell Schwartz – Chief Financial Officer & Executive Vice President

The environment in Q1 was much different than in 2015, putting pressure on revenue

“The environment in the first quarter of 2016 stands in stark contrast to the environment in the first quarter of last year. Consequently, there was a substantial downward revenue pressure year-over-year.”

We don’t control the opportunity set

“this is the first quarter in a while that we faced significant headwinds across each of our business segments. Given that we operate in a cyclical industry, it shouldn’t be surprising that there will be difficult quarters.”

This is the first quarter in a while that we faced significant headwinds

“this is the first quarter in a while that we faced significant headwinds across each of our business segments. Given that we operate in a cyclical industry, it shouldn’t be surprising that there will be difficult quarters.”

We don’t manage for a quarter

“That being said, we don’t create deep client relationships in a quarter, we don’t hire our people for a quarter, and we certainly don’t build businesses for a quarter. Our success has been predicated on having a strong culture that promotes both a long-term perspective, while simultaneously being very focused on managing to the current environment. That long-term focus has been the foundation for building a leading global investment bank and creating superior results for our shareholders.”

It feels like many factors impacting the market have abated but it’s still fragile

“It’s early in April, so it’s obviously pretty early in the quarter, but I would say that it really feels like many of the factors that were impacting the market in the first quarter, particularly early on, seem to have abated and although the market feels a little fragile from all that, it feels like – for the most part, that feels like that’s behind us. But we’ll see how the year progresses.”

There may be a slow reaction function but it feels like things have abated

“So something that I think you’re certainly seeing a pickup – if you look at IPOs, I think there were something in the first couple weeks of April approaching 40 IPOs during the first couple weeks. So certainly elements of the marketplace which obviously slowed down very specifically. But I think after a tough first quarter like the whole market has experienced, I think that there may be a slow reaction function in terms of how various market participants engage the marketplace. But it feels like, as I said before, the most significant factors impacting the first quarter seem to have abated, at least for now.”

M&A dialogue feels better but “we’ll see how it goes”

“the dialogue and level of engagement feels quite good at this stage. Certainly there was an element to the first quarter which had a bit of a chilling effect for a period, but right now the dialogue feels good. We’ll see how it goes in the future.”

The big banks are 2-3x our size

“the big universal banks, they’re two or three times our size, they have a much bigger lending profile and a bigger retail commitment. So they will naturally participate in some flows that, given their size, we won’t participate in.”

Hedge funds are an important part of the client base

“we think of all of our clients as important, but obviously, we’ve had a big commitment to the hedge fund industry across equities and fixed them for a long time. We’re always rooting for their performance, and so to the extent to which they have improved performance, it may be a catalyst for increased activity. ”

High yield markets are receptive to solid transactions

“In terms of the high yield markets, over the last couple of weeks, still a bit selective, but they seem quite strong, one of the largest transactions was done just last week and so the markets are quite receptive to good solid transactions”

We’d love to grow the balance sheet if we could but there’s not a demand for it

“To the extent to which there was demand for the balance sheet and client activity picked up and that demand was accretive to returns, we’d be happy to grow the balance sheet, given the strength of our capital ratios. But we just haven’t seen that, so you’re not seeing us do this. But over time, the system is going to have to balance liquidity needs and I think that will happen. It just may take a while.”

We don’t believe that the environment is going to stay like this forever

“We can’t control what happens in terms of the environment. We don’t believe negative interest rates are going to be here forever. We don’t believe the client activity is going to be low forever. And you really have to look at this over long periods of time. Look, I will go back to book value, Dick. If you look at it over the past decade, we’ve grown it by threefold. I think that’s contributing value.”

Goldman Sachs 4Q15 Earnings Call Notes

Harvey Schwartz

Kind of a non-answer answer to the question of credit cycle

“look obviously the first couple of weeks of the year have been difficult from a market perspective and the last half of the year and continuing the dramatic decline in commodity prices broadly has been disruptive for the market. I think if you talk to our folks, obviously that sector of prices remain where they are, it’s going to be under stress, that’s an inevitability. But it does feel at this stage where perhaps the market is discounting some of the benefits of the declining commodity prices, we’ll have to see how the market evolves. Look, these things are never going to be a straight line and so it’s not surprising to some extent that the markets responding to China, reduced activity volatility in markets this way.’

It’s the kind of market where your clients really want you to stay close to them

“So, from our perspective we feel well positioned and in this kind of market environment, its type of market environment where your clients really want you to stay close to them and that’s what we’re doing.”

There’s certainly an upside case for fixed income

“Look, as we go through parts of the credit cycle it’s very natural for spreads to widen after having a period of such strength in the contraction. But even right now you’re seeing the market, which has been under stress, be thoughtfully selective about those transactions and there’s been a lot of appetite for certain parts of the market. So I think as we look forward over the next couple of years, when you start adding in things like the competitive environments. For all the potential activity around hedging and other activities, I think you could construct a pretty impressive bull case for fixed income and again it’s not the way we generally run the businesses, we’ll react to that as we see it. But there’s a — there certainly is an upside case.”

We think we’ve taken share this year

“it’s pretty obvious we took share in Investment Banking over the course of the year. I mean assuming you saw the big uptick in M&A, you saw a big outperformance by our team. In terms of the FICC activity, it’s hard to see it when activity is low but certainly really not in comparison to commodities where activity has been high to us, we’ve picked up significant share but that’s probably not surprising given how much people have pulled resources out of their commodity businesses or least they said, they have over the last couple of years globally.”

We feel like markets are not paying attention to thh degree to which lower oil prices are a long term tailwind to consumption

“When we talked to our people internally, it feels like the degree to which the market is focused on energy exposures has managed to discount the long term tailwind to the consumer and a reduction in cost across the globe. But that’s how the markets we act into are now. So there maybe information content in that too.”

It was a tough year for trading micro products, but an improved year for trading interest rates and currencies

“one of the things that shouldn’t get lost about the fixed income discussion in 2015 for our Firm is that, while it was a difficult market for the micro products for credit and mortgages, it was actually an improved year for interest rates for currencies. ”

Financial services is a cyclical industry

“one of the things that we haven’t talked a lot about, we haven’t talked directly about is our philosophy and how we manage cyclical businesses. Everyone has to acknowledge that financial services is a cyclical industry and one of the things that we’ve been very thoughtful about is not over investing at the top of the market. So, you didn’t see us do that in 2009 when FICC had a record year and making sure that we don’t overshoot in the bottom part of the cycle. Now we were early to the cost cutting because we felt the activity levels declining after 2009 and that’s how we managed through the cycle and you’ve seen us do this in the equity businesses and sometimes these cycles are long.”

The things that drove M&A last year haven’t really changed: low organic growth

“I think you have to take a step back and you have to ask yourself what are the factors that drove the M&A environmental [chord] over the past 18 months and are they still in place? And those core factors, is really limited organic growth, companies were struggling to find top line growth. You had positive but modest economic growth in major economies and companies had done quite a bit of work both on cost and refinancing going into that cycle and there was high level CEO and Board confidence. Those were the factors that drove the big pickup in activity. As we sit here today after couple of weeks of volatile markets, we wouldn’t say that those factors are significantly diminished.”

I don’t think two weeks of volatile markets would stop a powerful M&A trend

“I think that we’ll have to see obviously if markets stand the stress and you get into questions about finance-ability and other headwinds and then if we saw a loss of confidence, but we wouldn’t say that two weeks of volatile markets would stop a pretty powerful M&A trend”

There needs to be confidence

“I think look again at its core, we’re correlated to long-term economic growth and what we’re really seeing in the markets in the second half of the year was really general concerns about economic growth that might be isolated to specific markets but really that’s what was driving activity levels. I think more than anything else client conviction and I mean that in all spaces, whether we’re managing a client’s money, their conviction, their confidence, whether we’re advising on a merger transaction, the CEO and the Board and the CFOs, their confidence levels. The same thing exists in the capital markets businesses and fixed income and equities. Now what leads to that, confidence in economic growth, reduced uncertainty. And so those are the factors that fuel activity.”

Goldman Sachs at BAML Conference Notes

Goldman Sachs Group (GS) Presents at Bank of America Merrill Lynch Banking & Financial Services Conference
Harvey Schwartz – Executive Vice President and Chief Financial Officer

You don’t have a lot of transparency into firm specific operations

“I know you don’t have a lot of information in terms of transparency into firm specifics and we don’t have a lot of transparency into competitors, so I know we all tend to rely collectively on revenues. But I think it is fair to say revenues and activity for the entire industry have been generally declining for a number of years.”

Now it doesn’t seem surprising that we’re in an M&A boom but it would have been looking back

“it doesn’t seem surprising to people that we are in an M&A boom, but if you were talking in 2009 and 2010, and 2011, we might have not seen that formulating. I think looking back is it surprising.”

Chain of interconnectivity across businesses

“Small company needs capital. We provide either equity capital to private enterprise. Equity capital could be mezzanine financing, could be some form of preferred but let’s call it the lower part of the capital stack. Over time, that company growth it becomes public. They may elect to use Goldman Sachs as one of their firms that takes them public. When there is monetization event, the entrepreneurs that created that enterprise now have a personal wealth event. So, they may become a client in our private wealth business and then we may lend to them.”

We’ve never really stress tested the rules that were put in place

“I think the biggest question for all us out there is we never really been stress tested truly through a more volatile market environment. And we don’t really have a good way of assessing the collective impact of all the rules whether it’s capital liquidity derivatives, regional rules. I think that’s a very hard thing to assess and so collectively I think over a number of years we are all going to have to keep a very close watch on it. “

Golman Sachs 3Q15 Earnings Call Notes

China and monetary policy came into focus

“Both the Chinese economy and the country’s monetary policy came into focus. Our clients evaluated the potential implications of a slowing Chinese economy, the decision by the People’s Bank of China to devalue its currency, and the resulting volatility in global markets. As it relates to the U.S. economy, our clients remain focused on the Federal Reserve’s interest rate policy.”

3Q served as a reminder of the fragility of markets

“The third quarter served as a reminder of the fragility and sensitivity of markets, investor sentiment, and the path to strong global economic growth.”

Even though we’re in a deep cyclical down cycle in the fixed income markets, clients still need trading services

“your thesis is our thesis, which is we’re in a deep and somewhat long cyclical part of the fixed cycle. But when you think of the forward, our construction simplified is twofold. Our level engagement with our clients tells us clients still need the services.”

People said that M&A wouldn’t come back in 09 and 10 either

“M&A, the services weren’t active in 2009 and 2010, people questioned whether or not M&A would come back. But our dialogue told us that client engagement and the services we provided to the liquidity provider were important.”

The whole world is adjusting to lower commodity prices in the intermediate term

“I think the whole world is adjusting to basically a longer-term consideration of commodity prices being lower in the intermediate term. And ultimately, that will be a catalyst for activity, as clients considered hedging strategies, as they think about financing alternatives, as clients and companies struggle for refinancing.”

The M&A Pipeline is good

“the pipeline is good. And as I said it was up at the end of the third quarter and then really the most significant information component for us is the level of dialogue that board’s CEOs are having and the dialogue feels quite good. I think it’s always natural for folks to question when the market has been robust, whether there is information content in the actual activity level as peaking and maybe that’s a factor.”

Earnings Call Notes & Investor Presentations – Monsanto & Goldman Sachs – 10.8.2015

Monsanto (MON) CEO Hugh Grant said the company performed well in spite of a challenged macro environment and headwinds in the agricultural sector

“Despite weakening global currencies and commodity prices, we continue to view this as a time of opportunity, but a balance of innovation and discipline can grow our long-term competitive position. There’s always the possibility of fluctuations in the short-term market conditions, but that doesn’t define the overall opportunity or the continued long-term growth trends.  We fully recognize that these are tough times in agriculture and we are committed to continue to drive these advantages in our core business through renewed discipline and focus.”

But went on to say that secular demand for their end products remains healthy

“Macro demand remains robust. In fact, the world is consuming the current oversupply at a record pace with demand for corn growing by an average of 1.3 billion bushels per year over the past three years. More than 90% of this growth in demand over this timeframe has been driven by feed and underpinned by middle-class protein consumption, which we expect to continue.”

Monsanto (MON) CEO Hugh Grant said his firm was unable to acquire competitor Syngenta so they will move on and compete with their current assets

“Our competitive advantage leverages the know-how that we’ve assembled across our industry-leading capabilities in breeding, biotechnology, digital ag, next-generation biologicals and crop protection solutions. The proposed combination with Syngenta would have been complementary to our vision, but now we move confidently forward with our leading position in seeds and digital agriculture to pursue other options to build on our existing crop protection portfolio and in our partnerships.”

Monsanto (MON) COO Bret Begemann says the firm maintains a market share and technological lead over competitors  

“Regarding share, we held or grew share in every major market in 2015 and are seeing significant momentum with our license base in both the U.S. and Brazil.  We expect to repeat this share performance in 2016 and the early read on the U.S. branded corn yield data suggests that we have held or expanded our yield advantage for the 10th consecutive year.”

Monsanto (MON) COO Bret Begemann says the company wants to focus on the growing digital opportunity within agriculture

As we look at the next decade for digital agriculture, one thing is clear. This platform will change the way farmers manage their operation; it will change who we are as a company; and it will transform the industry. In fact, we are targeting expansion of the platform into new crops in the next three to five years, including, but not limited to, soybeans, wheat and canola. “    

Monsanto (MON) CFO Pierre Cordoroux said the company has increased its debt substantially to buyback its own stock 

With the successful completion of our $6 billion accelerated share buyback program, we’ve repurchased more than 10% of our share outstanding since June of 2014.  Our share count now stands at 468 million shares and our net debt to ongoing EBITA ratio sits at 1.1 at the close of the fiscal year.”

Monsanto (MON) CEO Hugh Grant says consolidation in the industry is inevitable

 We continue to see duplication in R&D in the sector. We continue to see the low effectiveness of R&D with some of our competitors and we continue to think that consolidation in this space is inevitable. So we are going to focus on the near term. We are going to drive the near-term performance of our business, but we are going to keep a weather eye on the horizon and we are going to keep our ears close to the ground because of the market realities.”



Goldman Sachs (GS) Chief Information Officer Marty Chavez says the firm is leveraging software to automate previously time intensive manual processes

“There are 160 steps and processes a company must do from the time leadership decides they want to do an IPO to the time the company starts trading on an exchange.  We are working on automating that entire process and making it more efficient with software.”
Goldman Sachs (GS) Chief Information Officer Marty Chavez said even though the company only has 35,000 employees, they hope to be able to transact with a larger base of customers by leveraging open architecture software
“We are greatly increasing the surface area of Goldman Sachs with API’s and software.  We will allow more people to transact with us.”

Goldman Sachs 2Q15 Earnings Call Notes

Opportunities in 2Q15

“The second quarter of 2015 provided its share of opportunities and challenges. On one hand, our results reflect a continuation of some positive macro trends. Our Investment Banking clients remain focused on their strategic alternatives. There is also a strong demand for financing solutions. We see solid client activity in equity products, particularly outside of the United States, and there was a growing need for active investment management options.”

Challenges in 2Q15

“On the other hand, the operating environment for our FICC clients was more challenged in the second quarter. The combination of current concern surrounding Greece’s widening credit spreads and the reversal of certain macro trends led to lower client activity and a more difficult operating environment. More recently, market participants have been focused on the Chinese economy. This follows the more than 30% decline in the Shanghai Index during the early part of July from peak levels in June.”

Focus on clients, people on long term trends

“our management team isn’t overly focused on any one quarter or, for that matter, any six month period. Our focus is on the strength of our global client franchise, the quality of our people, and the long term trends driving our businesses.”

The world changed in 2008

“The world changed after 2008. We began to adapt to this new world immediately, and particularly to comply with new regulations. As part of this process we also scrutinized each of our businesses with the goal of both improving the client experience and our ability to generate appropriate shareholder returns.”

Greece certainly weighed on spread sensitive parts of the business

“Greece in the headlines continuously. And that certainly weighed on spread sensitive parts of the business like credit and mortgages.”

Hopefully the trends are behind us

“Too early to tell in terms of where we are in this quarter, Glenn, but obviously, the news around Greece has been obviously very positive in the last couple of days. And so hopefully some of these trends are behind us.”

Equity market trading environment has been good

“Environmentally, for the first half of the year, the environment has clearly been better, both from a activity level and also from a market-making perspective, and so you’re seeing that.”

Headcount growth driven by investment management and compliance

” the 1% increase in the quarter and the longer term increase it’s really happening in two places. Part of it is driven by our growth in the Investment Management business and people that we’ve been adding there as that business continues to grow and our ongoing investment there. And really the other large portion of it relates to resources that we needed to deploy as we come into the more significant part of regulatory compliance. ”

Regulation has actually been good for the industry, it’s made capital more expensive

“capital, while obviously very good for the system and significant improvement for all firms. For example, Goldman Sachs was carrying 85% more capital than we did prior to the crisis.

As we said, they have leveled the playing field a bit, but even without the leveling of the playing field, it makes balance sheet at one point, depending on the metric, and capital itself more expensive. And so, I don’t know if it’s an intended or unintended consequence in terms of the regulation, but the regulation does reprice things. And the vast majority of the industry is really a handful of us that are earning above the cost of capital, whatever you want to call it – 8%, 9%, 10%.”

Businesses that require the balance sheet are being repriced

“And so we’re starting to see repricing come through now. We saw it mostly in balance sheet. Came a little slower than we would’ve liked, but it’s starting to come through in balance sheet. By balance sheet I mean things like those businesses that were maybe most mispriced relative to the new requirements. Things like the repo business, it’s extended into the prime brokerage business. Again, that’s a regulatory heavy business. We’re world-class in that business, but it is regulatory heavy business. And you have seen it in parts of the derivative business particularly in things like those transactions requiring or not requiring collateral. So I’d say it’s slow. These are not huge needle movers, but this feels like a trend that’s in place for a number of years.”

Over time there will be repricing and potentially firms that can’t deliver will have to go away

“what we think will happen over time is potentially repricing, but also the competitive dynamic looks like one where those firms that can’t deliver or can’t respond or don’t have the same quality franchise, they get removed. But anyway, this is going to be a – this will be a long process.”

We don’t think what’s happening in China has a long term effect on liberalization policies

“I think longer term, what we’re really focused on is the extent to which the recent events, do they really have a significant negative impact from an economic perspective or in terms of the liberalization policies, because obviously we have a very big focus on China, a big commitment there.

And our early read of all this is that it’s not going to have a big – when we talk to our research folks, it’s not going to have a big impact on the local economy, and we don’t expect a major change in sort of the focus on liberalization.”

FICC liquidity was challenging in Europe

“it was most challenging in Europe. The credit market in particular, and let’s just say the spread sensitive product, the markets aren’t as deep there, obviously, as they are in the United States. And then, with all the issues with Greece, liquidity was quite challenging for all of our clients, and quite challenging for market makers.”

M&A business strong

“when we talk to our M&A bankers, the momentum in the advisor side of the business feels very strong. The CEOs and boards are obviously going to incorporate all the relevant news and so not surprising to me that when you see Greece dominating the headlines and lots of volatility in the markets that you might see some dip in confidence. But in terms of the degree of conversations we’re having in the activity levels, it feels quite good. ”

More questions than answers on the state of liquidity in markets

“obviously, there has been a whole host of discussion around liquidity in the markets. And I think in the end, I think it leaves us quite frankly all with more questions more than answers.’

Goldman Sachs 1Q15 Earnings Call Notes

14.7% ROE

“Net revenues were $10.6 billion; net earnings $2.8 billion; earnings per diluted share, were $5.94, and our annualized return on common equity was 14.7%. ”

The first quarter was dominated by one theme: central bank policies

“The first quarter was dominated by one primary theme, central bank policies. In the United States, the market heavily debated whether 2015 would be the year that the Federal Reserve raises rates. On the other hand, the European Central Bank announced the creation of a €1.1 trillion quantitative easing program that kicked off in March.”

Prospect of divergent monetary policies had significant impact

“The prospect of two of the world’s largest economies, implementing divergent monetary policies had a significant impact. Market participants reassess the implications for both global economic growth, and as a consequence, the performance of various financial assets.”

M&A Advisory revenues were the highest since 2007

“Breaking down the components of Investment Banking in the first quarter, advisory revenues were $961 million, the highest since 2007. This 39% increase relative to the fourth quarter reflects both the increase in completed M&A, and the strength of our leading global franchise.”

This quarter reflects numerous efforts to adjust our business

“Our performance this quarter, well just a quarter, reflects numerous efforts over the last several years to adjust our business. We sold several businesses due to regulatory capital implications. We transformed our financial profile, significantly improving our risk based capital. We revamped our capital allocation processes, improving our decision-making and efficiency. We took a hard look at our operating cost, fundamentally changing our expense structure by eliminating costs, reallocating resources, and leveraging technology. We made all these changes, while at the same time, continuing to invest in our global client franchise.”

While you were beating us up, we were spending a lot of time focused on clients

“In terms of us, through this part of the cycle, while you were beating us up, we were spending a lot of time focused on the clients and staying very-very committed to the businesses, and we are seeing it translate through.”

It’s taken years of hard work to put this operating leverage in place

“in terms of the operating leverage, this has been years of hard work, in terms of managing expenses, really thinking about how to most efficiently use the resources. And so, when you have that in place and you get the revenue uptick, obviously, its much — you can more easily translate that into the bottom line, and that’s what you’re seeing this quarter.”

The trend in banking feels like it’s still in place

“the trend in banking, does it feel like its still in place? The short answer to that is yes; when we talk to CEOs and Boards, CEO and Board confidence continues to be high, and you’ve even seen in the last couple of weeks in announced transactions, there is a fair bit of activity out there, and we feel very well placed for it.”

Our commodity business is very important to our clients

“I think it really reinforces the needs for firms like Goldman Sachs to be in a position to provide our clients with liquidity, with financing capacity, and so for us, as you know, we have been in the commodity business forever. We know how valuable it is to our clients, we are hugely committed to it.

In terms of regulation, we will see how the regulation evolves, and again, we will stay in active dialog with the regulators. But I think at this stage, everybody sees how critical it is, and how important it is to clients. That’s what I would say.”

Greece has been in view for a long time. THe environment in Europe is a lot different today than it was in 2011

” I would say, first of all Greece has been in view for a long time for folks, so people have had an opportunity to digest it. I think that, on the plus side, the environment in Europe versus 2011 is dramatically different, in terms of — if you think about the discussion around other peripheral countries relative to 2011. And so I think, those are all things on the plus side.”

Goldman Sachs 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Global economic challenges in 2014

“If we take a step back and assess 2014, there have been challenges to the global economy and therefore the operating environment for our clients.”

When you see that much pressure on credit markets…

“I don’t think when you look back in the fourth quarter, any of this should be particularly surprising. When you see that much pressure on credit markets, in terms of the ability as a market maker on the course of the quarter, to manage liquidity, I don’t think its particularly surprising, particularly the stress that came under high-yield as a result of the energy decline. ”

If things can stay here, it seems like a reasonable environment

“But it does feel like at least if the marketplace and asset prices can stay here, it feels like a reasonable environment to me for the coming year. But again these things can change on a dime.”

Our commodity franchise is about hedging for our clients

“In terms of our commodity franchise, which we’re as you know very committed to. The focus there is on the hedging of commodity price exposures and working with all those clients globally whether they be corporates or investors. And so that’s really how we think about the strategy. Obviously ownership of physical commodities is getting — we think is actually a good review by the Federal Reserve. We are very focused on safety and soundness. We think its perfectly understandable that they’re doing the same. But that’s our strategy in commodities.”

Oil price declines create opportunities

” As it relates specifically to the industry, if we go through a period of sustained declined prices around this level, then clearly its going to put certain parts of the industry under stress. There will be opportunities to help those clients, work through those stresses. There will be opportunities to deploy new hedging strategies, there will be potentially merger opportunities as the organization works through what is really a case of excess supply.”

You can’t draw conclusions about liquidity in credit markets quite yet

“It will be very difficult to anticipate whether or not this is kind of a new credit regime in terms of liquidity trading or it is — these are sort of one off factors. Its always hard to assess that when you’ve had multiple years of timing credit spreads, very low default rates. I will say when you look to the data I don’t have it on top of my head particularly in Europe where liquidity was little challenged in the third quarter and then it got worse in the fourth quarter. I think because if market moves in terms of price movements they were pretty significant. More significant than you would have thought in terms of the underlying credit itself. And so clearly liquidity played a role in terms of the degree of price movement. But I wouldn’t say at this stage you could draw any firm conclusions from that in terms of any long-term structural changes.”

Goldman Sachs 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Goldman’s foundation

” Our success begins with a fundamental approach of engaging our clients, understanding their challenges, and then addressing their needs. That is the foundation for expanding the breadth and depth of our existing relationships and the basis for building new ones. ‘

GS’ balance sheet has changed dramatically since coming public in 1999

“We went from $250 billion in assets in 1999 to $1.2 trillion in 2008, and then back to $870 billion today. And along the way, we made Goldman Sachs a stronger firm. We increased our common equity from $10 billion to over $70 billion. And substantially increased our liquidity pool, which now sits at $180 billion.”

This week’s trading reminds us how fragile markets can be

” just before I take your questions, I would like to make one additional closing comment about the market environment we’ve seen over the past week, and particularly yesterday and this morning. It’s clearly an environment that reminds all of us about the power of investor sentiment and how fragile it can be at times. Yesterday in particular, it’s clearly a mark in the morning where investors were, quite frankly, shooting first and asking questions later. We have seen this market reaction in the past, and while painful, it’s somewhat a normal part of how markets function.”

From our economist’s point of view, nothing material has changed

“Clearly, investors are now debating whether we will see lower rates for longer, and more importantly, whether the global economy is slowing or continuing to grow. These are questions that the market has certainly debated before. We have always believed that over the long-term, markets follow fundamentals. And speaking with our economist only yesterday, they would argue that nothing has fundamentally changed the past few weeks, or certainly the last 24 hours, regarding the long-term outlook for the global economy. That doesn’t mean it will continue to grow, but it certainly doesn’t mean it will stall.”

The collective impact of all of these rules is enormous

“Again, the impact of the collective rule sets of all the rules: balance sheet, leverage, risk-weighted asset, liquidity, it’s pretty enormous. And I don’t think we can only have positive effects from that over the next three, four, five, 10 years. I wish that was case.”

The last 48 hours has been concentrated position liquidation

“And so I think there’s healthy periods of volatility and less healthy periods. And really what we’ve seen in the last 48 hours is concentrated position liquidation, obviously triggered by stop-loss selling in multiple markets, and at times, as we’ve always seen, selling can begat selling.”

A very interesting thought on M&A advisory vs. Goldman’s personal take on M&A

” I think we are the leading merger and acquisition advisory firm in the world. It would be somewhat inconsistent philosophically for us; I just think it would be inconsistent with our core being if we said we weren’t willing to consider acquisitions. And so I think you should assume philosophically and culturally that as a management team we would consider any acquisition if it was accretive, in any area of our firm. I do think that as you point out, I do think that the ongoing nature of the regulatory environment probably just make that more difficult for the industry generally. But we’ll see over time. But we’re always open-minded. Having said all that, I think we’ve benefited us as a firm over many years by keeping our culture intact and doing nothing major. But you have seen us do bolt-on acquisitions from time to time. So – but that’s how I would describe the philosophically.”

Volcker is not affecting market liquidity at this stage

“o I just want to be clear, because I thought – you may have misheard me or I may have misheard you. There’s nothing that I saw about Volcker compliance that I think is, at this stage, preventing people from providing liquidity. Volcker has been pretty visible for a while now.”