Gary Cohn

Goldman Sachs Group Inc (NYSE:GS) president and COO Gary Cohn told Bloomberg TV’s Stephanie Ruhle on “Market Makers” today that he doesn’t know what drove the firm’s underperformance in fixed-income trading in the third quarter: “We don’t know precisely why we had a tough quarter, but the results are in, and I can tell you we had a tough quarter in fixed-income…We’re very committed, we’re going to redouble or triple our efforts in fixed-income. We believe ourselves to be a very powerful, very dominant, top-tier fixed-income shop.”

Cohn said that Fed stimulus still makes sense for the economy: “If you look at where we are economically, versus where we were a year ago, we’re virtually in the exact same place…So if quantitative easing made sense a year ago, it probably still makes sense now.

Cohn on how the Fed’s decision to not taper has affected Goldman Sachs:

“For Goldman Sachs Group Inc (NYSE:GS) it meant sort of business as usual. There’s not tapering is the world that we’ve been in for the last year. So what it meant is people continued to migrate to riskier assets. People continued to migrate or migrated back to the equity markets. Some people that had gotten out of the fixed-income markets because they believed that the Fed was going to taper had to rethink about their fixed-income portfolio, and we have seen some more migration into the fixed-income space. So in many respects, it’s similar to what we’ve been doing for the last year.”

On Larry Fink saying that investors should be 100% in equities and who is now investing in fixed income as a part of the migration into the space:

“Well I agree with Larry. Larry and I have been saying for a couple years equities, equities, equities because we believe that the return on equities is going to outstrip the return of the fixed-income asset class. But for those investors that need a long term, long duration, diversified portfolio, they need to have a fixed-income position. Many of them migrated out or rotated out of fixed income when they thought the Fed was going to change monetary policy and go into a more tapering environment. Now that that’s up in the air – and I think that’s up in the air for a

longer period of time…The tapering is up in the air, whether the Fed is going to taper or not or when they’re going to taper.”

Gary Cohn On whether the Fed should taper:

“If you look at where we are economically versus where we were a year ago, we’re virtually in the exact same place. So if quantitative easing made sense a year ago, it probably still makes sense today. The only thing that you might point to that’s different is the actual headline unemployment rate has dropped down 7.2 percent, but we could get into why it’s dropped. And the participation rate is at basically 35-year lows, so we really haven’t created real jobs. So if you look at the economy of the United States and you look at the world economy today and you look at 1.3 percent inflation in the United States and you look at GDP, we basically have the same ingredients that we had a year ago. So if you were a proponent or advocate of quantitative easing a year ago, you probably still are today. So that’s why I tend to think that the Fed is in a tough position. They’re in a position where they know they can’t quantitatively ease forever. They know they’re building a bigger and bigger balance sheet, but their number-one objective is to try and grow the US economy. And they’re stuck in a dilemma of what to do here. They know the economy’s not growing.”

“So look, I do believe eventually they will taper. Eventually can be a very long time. I don’t believe it’s soon. And I – and I do believe that when Janet Yellen gets in there she understands that the dilemma that she’s in and she’s faced with a very tough position.”

“On your second question, you asked me a question about does it matter. And you said Wall Street’s doing well. I think it’s hard to differentiate between Wall Street and Main Street. Wall Street and Main Street at the same street. They are the same street…Our ultimate client, or the client of our client, is Main Street. You referred to our aims conference in here. We’ve got 500 CIOs. Many of them run public pensions. Many of them run private pensions. They run union pensions. They run pensions for teachers and firemen and policemen and that’s their ultimate client. They’re managing stock, they’re managing bonds for Main Street to make sure that their pension and their retirement money is intact.”

On Main Street being the largest shareholders of financial institutions and whether they realize that when banks are punished–like JPM’s fine of $13 billion–it will impact them:

“I don’t know. I don’t know. But ultimately – and look, I’m sympathetic to Main Street. I’m very sympathetic to Main Street. One of our big initiatives, as you know, has been 10,000 small businesses. We’re trying to help entrepreneurs grow their companies and hire people and grow the economy. So we’re very sympathetic to what’s going on on Main Street. I don’t know if Main Street understands that ultimately their retirement savings and their savings that’s being outsourced to be professionally managed is in the financial markets.”

On whether he’s concerned that interest rates are going to rise:

“We’re not concerned. Our business thrives in growing economies. If interest rates are rising because we’ve got a growing economy and world GDP increasing, you have to get very excited about our business because the – the thing that’s missing the most from our business right now is a lack of economic growth in the world.”

Gary Cohn On emerging markets:

“Again, they’re called emerging markets. Why are they called emerging markets? Emerging/growing, more volatile, stops and starts. They are called emerging markets because they’re more volatile than G-7 markets, than developed markets that are more predicable. We’re seeing a natural cycle in the emerging markets. Overall, we still are very bullish on the emerging markets. The emerging markets overall are still outgrowing the G-7 markets. We talk about China and slowing down. A slowdown in China is 7 or 8 percent. We would thrive for that slowdown in the United States of 7 or 8 percent. So it’s still an interesting place where we need to be for the long term. We are investing for a long-term cycle. Our clients need to be there for a long-term cycle, and we are excited about the opportunities in emerging markets. If the industry’s made a mistake or we at Goldman have made a mistake in emerging markets, it is we’ve tended to contract our business at the bottom of the cycle when in essence you should be expanding your business because the bottom of the cycle only leads to the top of the cycle and you need to invest at the

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