good morning from bloomberg's headquarters in the city of london. manus: i live from abu dhabi. this is "bloomberg daybreak ."rope anna: red and blue. republicans expand their majority in the senate and democrats take over the house. what will this mean for the president's policies? a sigh of relief following a midterms results. futures in the u.k. point upwards in america. a new -- former u.s. treasury secretary warns of the growing

divide between china and the united states after bloomberg's new economy forum. we are live with a souris -- a series from the conference throughout the morning. good morning, this is "bloomberg daybreak: europe." it is 6:01. ; 01 in paris. we need to go to it -- 7:01 in paris. third-quarter net profit, one billion euros. saudi is in my what the estimate of 1.0 8 billion or ace shade -- or a shade above it. they are ruling backed up by back. in terms of revenue number, that looks to be in line at 4.8 billion euros. over to 4.85. here is the interesting part.

now we get to the fixed income side of the business. fixed income currencies and commodities. the investment bank revenue down by 16% there. as i said, the company is confirming its overall target for 2019. in investment banking we have a new head of investment banking. jack has taken over leadership of the investment bank and we have seen contraction at deutsche bank. perhaps it would not be too much of a surprise if they were on the same path there. joins and bankers jumped in just a week ago or so. they certainly have big plans for the investment banking side of the business. that is at 8:30 a.m. london time. welcome back to the dark side. welcome back to the early's, for one day only.

it looks like third-quarter profits, 700 25 million euros, that be the company estimate of 602 million. when it comes to city operating process, 3.2 billion beats the estimates i have of 2.17. there are a couple of outstanding lines here. are they cutting their way to greatness? income ratio comes down to it 52.9%. it could be in the cost cut. also when you open up the press release, they talk about due process on financial targets. return on equity is 13.1%. dividendsaising the nine-month60% of profits. final decision will be made at the end of the year. the line of profits is important. the line of dividends is particularly important. they talk about supporting the business.

transition to sustainability, reinvesting and building a future proof bank. a final payout ratio will be decided at the end of the year. a couple of changes. stepping downrick from the board. we will get into all of those issues with clifford abrahams, in cfo who joins me later the show to discuss the results. that is at 6:30 a.m. london time. 7:30 a.m. let's get to sticking with these numbers. we are getting numbers coming in earlier than we had anticipated. boosting their gross margin outlook, but bringing down what they are saying about revenue. when you look at these added asset headlines they are increasing the profitability outlook. they are boosting their 2018 outlook from profitability. they see growth margins at 51.4%. that number moving in the right direction. in terms of revenue they see revenue up 8% to 9%.

they have seen it at plus 10%. that is interesting. if you look act words, the keith three revenue asked to be a little lighter than the market was looking for. became an up by .8 7 billion. the estimate was 5.9 one billion. a big focus will be on europe only look at what is going on with this company. august thatck in the company has suffered from complacency in europe. it has not launched the right products at the right time. we will see what he has to say about the resilience of the european business. we will drill down into that geography with the ceo as the company reported its quarter earnings today. we will get a look at where they are trying to guide the market. anna, it is a hill divided. red and blue between the house

and the senate. the consequence of that can be interpreted in a variety of ways. the dollar is lower, treasuries are lower. you have the dollar a little bit of slippage there. j.p. morgan asset management is saying it is a very long and very crowded trait. robert saidfear -- there would be fear and chaos because of trump and those progrowth agenda is. that is very dramatic, but you know i love drama. dollar is down, equity markets are undecided. when you go into your bloomberg first word, 10-year futures in the asian session has the highest volumes of trade for the year. you are just seen treasuries reprice. the dollar coming off. let's talk about the midterms and the results. let's get to our daybreak asia host, shery ahn. what is the state of play right now? it is the hill divided. shery: it was as we expected.

whole showed that democrats would take over the house and republicans would keep the senate. that is what we expected to see. right now we are seeing democrats having a net gain of 33 seats, which is a 10 seat advantage over republicans. the gop still maintain the seats ind, unseated indiana, north dakota and gaining a see and tennessee. that did not leave much leeway for the democrats. a blue wave, but not the blue wave democrats would have liked to have seen. president trump calling democratic leader in the house, nancy pelosi, congratulating her on the majority in the house. but also calling mitch mcconnell, the senate majority leader, congratulating him on his historic gains for the republicans. all in all we can still say it was a historic race. in the sense that 100 women are

now expected to take seats in the house, which would be surpassing the record of 84 in the current congress. anna: another blue wave, maybe a pink wave. shery ahn joining us from new york. let's check in on markets in hong kong. morning, if we can just get our graphics appear. what we are seeing is -- i would not read too much into the equity actions. we did not see a lot of conviction. wewe make our way into where are right now, latter part of the session, we have given up most of the gains. a lot of us are giving up basically everything you japan where the yen is moving from one -- 113.80 to 113.20. that is taking steam out of the equity session. interesting comments. i guess we will highlight how

split analysts are on the midterms. are youbode well for em look at what morgan stanley is saying saying that the gridlock is ahead in washington. it might benefit the most volatile em currency just get your view there from those two. very quickly, let's look at the movers in the asia-pacific. we are at earnings season in japan. a bit disappointing. .ou put it all together we are looking at the worst earnings season relative to expectations. just to give you a sense of what those two are. a lot of the miners in china are gaining. they are halting some of the production of the product, which some people might say bode wells -- bodes well for the price. inglis they're adding to what is going on in the markets.

very early to determine which way the markets will go. anna and myself this morning. what will markets make of the midterm? you can rate -- reach out to the mlive team. democrats, anna, and the republicans may still want to spend. infrastructure might not be dead. we will put that question to david solomon. the ceo of goldman sachs. knowtter person than to what his banks have in the game. exclusively at the bloomberg new economy forum. that is at 7:00 a.m. london time. anna: let's get an update on the bloomberg first word news and we go to debra mao. debra: former u.s. treasury secretary hank paulson has warned of an economic iron curtain dividing the world if

the u.s. and china fails to resolve strategic differences. a new economy forum in singapore argues that the u.s. and china have interest in critical areas that go beyond trade. china entered the wpo, it has still not open its economy to foreign competition in many areas. >> we are leaving here in singapore at a moment of change, challenge and potentially even crisis. today, the region does look at the process that what until now has been a healthy as should competition that could tip into a full-blown cold war. we will bring you the best of the conversations from the second day of the new economy forum in singapore throughout the day here on bloomberg television. italy's populist government has called a vote of confidence in

parliament today as tensions rise between the coalition's allies deputy premier mateo wants curbs on the rights of asylum-seekers. the vote comes as italy continues to spar with the eu over its 2019 budget. boeingberg source says is preparing to send a warning to operators of its new 737 max model. thatwill alert airlines erroneous readings from a flight monitoring system can cause it to aggressively dive. it is based on preliminary findings from its lion air crash, which was the country's worst crash in more than 20 years. global news, 24 hours a day and on tick tock on twitter powered by more than 2700 journalists and analysts in more than 120 countries. anna: debra mao in our studios

in hong kong. what will the markets make of the midterm elections? that is the question of the day. as manusoin the debate was saying earlier. a reach out to us on the mlive team and on bloomberg tv. joining us now is the cio for international fixed income at jpmorgan asset management. what will the markets take away from these midterm elections? you focused on fed inc. -- fed incompletions -- fed implications? it back tobringing markets is probably a little bit treasury supported at the margin , probably a little less growth. it is also probably a little anti-dollar as well. good morning. could the democrats fiscally skir the horses?

money 19. bond risk i read a piece that suggested that democrats want to spend on medicare. they want to spend on infrastructure and so do the republicans. it is a question of how soon we get stimulus rather than if and when. nick: that is certainly the big risk. when you look at the deficit in the u.s. at the moment, things are already 5%. 5% increases to 6% or 7%, in a sense, markets are already prepared for that. the key is what that money is spent on, and if that money is spent on things like infrastructure, it could be very additive when you look at growth. anna: it might be nice to think of the fiscal stimulus package direct it towards infrastructure right now in the united states or other places. in the u.s., given the divided congress, given we know about what gridlock can do and the lack of domestic progress it can result in, do we really

anticipate that we will see a fiscal boost in the u.s.? nick: that is the million-dollar question. ultimately, things like infrastructure are things that plenty of people can agree on. countries liket the united states and others, there is a need for a lot more in the way of infrastructure. the key with that is that it is very additive when you look at economies. it is very additive when you look at economic growth. nick, october the third mr. powell said we are a long way of mutual. we get this statement from the fed. some people are graphing and hoping for a dovish turn. i wonder will there be a slightly more statement in regards to reduction? balancethat it is the sheet in qt that we should be more preoccupied rather than fiscal from the united states.

there is a risk or it when you look at the balance sheets it is something being reduced very much in the background. you could also argue that is the story. it has been this transition year from qe all the way to qt. markets have started to price that in. if you look at that dramatic movie are seeing in things like treasury. the focus with the fed will come back to rate increases. when you look at that neutral rate, we are still off. something like 3% is a lot more appropriate. ceo at jpmorgan asset management. you can follow the bloomberg new economy forum in singapore on the terminal at live go. we have been telling you about headlines coming through. onstage is a real blockbuster panel on financing the next generation. the iff managing director.

david solomon.hs that looks like a fantastic panel. it looks as if it has been a great gathering, just an upside with janet yellen talking about inequality. coming up from the new economy forum in singapore, two issues you simply do not want to miss. the day after the u.s. midterm election, as the house falls to democrats. a first and exclusive with david solomon, ceo of goldman sachs. that is live at 7:00 a.m. u.k. time. by the will be joined former u.k. treasury secretary at 8:00 a.m. london time. already a warning shot from polson/ a reminder if you are traveling to work you can listen to bloomberg. we are live on your mobile device comment digital radio in the london area. this is bloomberg.

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sayt is tempting for me to that people should not invest in china so i have more competition. is aruth is, china terrific place to invest. it is the biggest economy in the world. it has a norman -- it has in on us growth. numbers of consumers. outside of the united states i don't think there is any place better to invest. anna: david rubenstein speaking to us from the bloomberg economy forum in singapore. programmoore from that as we go through. here is debra mao in hong kong. uncertainty over the brexit split has left the city of london reeling from a new blow. the are moving the european market from short-term finance out of london to guarantee they can still use it after no yield

brexit. before they took over the 240 billion dollar a day business from next group last week. it is the first example of a major financial market leaving the u.k. spain's largest bank has escaped the billions of euros in back taxes after the country's supreme court said they should not be liable for mortgage payments. the decision reverses a ruling last month that lender should put -- should split the bill for the tax. passed on tolly customers. it triggered a backlash on social media with an antiestablishment party tweeting, the banks have one, the people have lost. that is your bloomberg is this flash. manus: the former u.s. treasury secretary hank paulson's warning about the consequences of america and china if they cannot resolve their strategic differences. bloomberg's new economy forum in

singapore said that beijing's failure to open up is more to blame been washington's confrontational attitudes. the key to avoiding an economic iron curtain for china is for china to see its interest in making these reforms in changes. does not move quickly, divorce is a real risk. that was the former u.s. treasury secretary hank paulson speaking to bloomberg at the economy forum in singapore. the cio for international thinks --ome at jpmorgan asset fixed income at jpmorgan asset management. they said the probability on a likelihood of a deal getting done, an agenda getting set at the g20 has risen to 20%. are you more optimistic post-midterms that trump will get a blake -- big, glorious win under his belt in regards to

china now that he has lost the house? >> i think when you look at things i'd trade wars, the reality is there is -- is there is an ongoing dial-up. not looking at winners and use -- and losers, it is ongoing dialogue. things get resolved. when you look at underlying levels of economic growth, it is pretty robust. whether you are looking at the united states or china. republicans eyes of are in the eyes of president trump, we can see the rival we just rivalry with china, not just on trade. even if we ironed out all the differences of trade and the agreement, there would still be a battle for leadership in the 21st century going on between these two great powers, at least in the eyes of president trump, and hopefully in the eyes of many in china. nick: when you look at the

history of international relations you always tend to have that dominant power and emerging power. the reality is a lot of things get more interconnect did. one of the huge events we will as a intoear is china the global bond index. that means many more people like me will be managing portfolios that have china on the benchmark. that is yet another example of china becoming a lot more -- into the local financial system. you read my mind. pboc is juicy. what am i talking about? 4.2% for one year of money. tie the two together for me. 4.2%, do a swap, i would say that is juicy. nick: it is juicy. what you get from that is a little bit more diversification.

what a bond that is -- in time,ld want on a structural basis the chinese currency could appreciate relative to other currencies because they have a significantly higher gross rate that has developed at markets. anna: i am not sure if it is anybody's base case, but we were talking earlier in singapore at one of our events about 100 years to the dollar to take over from the pound. maybe we need to give that long-term arrival we talk about china. nick stays with us here on the program. of the speak to the cfo bank as it reports third quarter earnings. we will be live in paris at a conference where we will speak year to the ceo. anna, if anybody is

switching off the tv, you know what to do. we are live on your mobile. we are digital in the london area. this is bloomberg. ♪

>> a panel at the new economy forum in singapore. christine lagarde. mr. david solomon talking. saying, the u.s. will not be the economic dominant power in 10 years time. talking aboutrde the importance of maintaining a world trading system that is open. the bloomberg new economy forum.

commentary available on live go. solomon, saying the world foot print will be different. great session we have had. you do not want to miss this exclusive conversation. we are going to speak to david solomon, the ceo of goldman sachs. let's get into the markets. it is a whole divided -- hill divided. >> let's kick it off with the u.s. dollar. divided congress in the united states. the u.s. midterm election results weighing on the u.s. dollar. the bloomberg dollar, dropping

for the third day in a row. blue, u.s. dollar versus the yen. taking back the house while the republican maintain and troll of the senate. the big question is what impact will this have or president trump's economic agenda? all the focus will be on the fed with the midterms behind us. the second to last rate decision tomorrow. credit squeeze, saying there might be some concern in terms of policy. analysts compared ratios with the 10 year yields. these are the most interest rate of stocks. that gauge is dropping. yield rising.ar could be some fear of the fed in the markets ahead of the

decision tomorrow. manus: read headlines from bmw. moderate fines. estimatebly below the of 1.9 billion. the language they used at the end of the summer was a moderate decline. they are suffering. they have a global recall going on. 1.5 -- half a billion euros. they are missing on the earnings in terms of estimates. they are saying the estimate

will be above 1.7%. missing very slightly. .hey make suvs in the usa they ship those out. 40%. these are the challenges for autos. those are the breaking headlines. let's go to your first word news. democrats will have a house majority for the first time in eight years. republicans have retained control of the u.s. senate after candidates unseeded incumbent democrats in indiana and north dakota and won an open seat in tennessee. u.s. futures point to a slightly

higher option. the results doing the chance for any major fiscal initiative for president trump's administration. former treasury secretary paulson has warned of an economic iron curtain dividing the world if the u.s. and china oil to resolve -- fail to resolve strategic differences. he argued the u.s. and china have divergent interests in critical areas that go beyond and 17 years after china entered the wti, it has not opened its economy to foreign competition. theresa may is set to ask her to approve a draft of brexit deal

in the coming days if she can persuade eurosceptic members of her team. the chance of wrapping up a deal soon seems to be fading. the leaving judge in brazil's car wash corruption investigation said he agreed to expandstice minister to the fight against graft and organized crime. meanwhile, the president-elect has backtracked on some of his proposals.versial day.l news, 24 hours a powered by more than 2700 analysts.s and

thank you. we have broken the numbers, beating the highest estimates. third-quarter operating income, great capital buffers. joining us from amsterdam. welcome on the numbers. what was the driver? you have one of the highest capital numbers in europe. bloomberg intelligence would say you are cutting your way to greatness. what would you say to that? >> we are focused on returns. we have good performance and we want to continue that performance. our strong return on equity. progress on cost income ratio.

are well placed for basil four. in a position to consider additional distribution to shareholders. >> that is what is going to tantalize the market. , 6.2 millionimates euros. which road do you think you will travel more aggressively? >> are capital is above our range. the bass position. we have a preference we think it givesends because us more control.

that is how we are thinking in the short term. >> the cost income ratio, you are beating on that. the question is how far through the restructuring program are you? what more is there left to do? we are delivering on the program of cost we announced. we announced 900 million in cost savings. 2018, 55% for the year. which we think is good, but the story is a little higher with regulatory fees. it is important we sustainably reach the ratio.

we believe we are on track. >> in terms of the dutch market. the domestic market as it were, how is that looking? are you finding it harder? give me something under the hood in regards to that market. as a wholeh economy is very strong. we are one of the strongest economies in the eurozone. markete seen the housing a quite strong over the last year or two. in the mortgage market, that market competition is getting tougher. our clients want long mortgages. areank competitors well-placed to serve the long and. -- end..

you have seen our share come down. we are looking to grow in other parts of the business. we are growing this year in commercial banking. our approach is to deliver returns. we are looking for profitable growth. there are always a few dark clouds on the rise and need to worry about. is what i love about the cfo job, there is always the hint of prudence. dutch regulators have said ing is not the only bank that did not fully comply with money laundering. you need to disclose anything with regards to warnings? anything the market needs to in regards to money

laundering? >> we have an open and transparent value with the regulator. we recognize our role as a gatekeeper. we put a lot of resources behind this. doing,s a lot we are there's always more we can do. nothing specific to report. we had knowledge are key role to play -- our key role to play. >> thank you very much. the cfo of abn. from dutch banking, we go to the question of the day. a global focus on markets this morning. this is the question. what will markets make of the midterm election? the hell is divided.

is divided. join theam, anna -- team, m live. let's go to my next guest and his thoughts on what the midterm vote might mean for markets. he joins us from paris. good morning. what does the midterm elections mean for markets for you? softer dollar? thinkplit capitol hill, i markets will react back to fundamentals. it is not that surprising for an incumbent government to suffer some setbacks in midterm elections. presidential terms, they do make one or two major reforms per

term. you could say this has happened in the first two years of the current administration. markets go back to fundamentals. in may mean there is no longer another leg of fiscal stimulus. were inflation is, i think we are going to get early on into the 2020 election cycle. tokets will react fundamentals. line fear and chaos. does that challenge your u.s. equity exposure? will you change this as a result of the house flipping.

>> it is not the midterm election outcome that will drive our asset allocations today. invest for the long term. economy still has strong fundamentals. argue all the signs we are seeing, there is no recession insight. you may see slower growth going forward. markets are expecting 10% earnings growth in 2019. is it too optimistic? maybe. don'te time being, i think this is going to be fear and chaos in the markets. i'm glad your glass is half-full.

the job in hand, getting assets under management. there is a target of 100 billion euros. is that proving tougher to get there? how do the numbers look? strongave had a very first half. i will not comment on the third quarter. it does have ups and downs. we are expanding the scope of what we do, our strategies. thate looking for managers can add to our strategies. we have announced two such acquisitions. we are looking at others that want to join us. our business model is very accommodating. it can become a mentor he -- can be complementry to our current

roster. where interest rates are, we can see over the next two or three or four years, there will be a need for further opportunity and yield generating strategies. asia remains a big area of focus. talking to management teams that want to join us. the advantage of the business model is it is attractive to management teams. market position in terms of discussions. it takes time. we are careful. we are on track for our three-year plan. >> i can't let you disappear. i want to know what kind of teams you are talking to. what is the size? team finds a glass

ceiling at some point. 2 billion, 20 billion. variety across the spectrum. manus: thank you, sir. leave it there. singapore is calling. good luck to you, sir, with your conversations on the asset management side. this man has skin in the game. the ceo of goldman sachs, david solomon. an exclusive conversation with one team, that is bloomberg. you really want to know markets how -- know how markets play after the midterms, that man

will have the answer. this is bloomberg. ♪

anna: good morning, everybody. a recap of u.s. midterm election results. in the house, democrats win control for the first time in 10 years. in the senate, democrats gain significant ground. markets make of the election? -- posing the question to the blackrock ceo. >> need a coin? >> i don't think the outcome is a big surprise.

big setback.a the market is reassessing itself. we will be part of that we stabilize in process. thet was probably more shrugging of the shoulders. ceo for international fixed income -- some things to clear the decks with. when i look at a couple of different markets that start with high yields, you have the strongest back-to-back growth in a couple years, the fed moving, what does that do to high-yield? >> when you look at high-yield, it is a steel. there are high-yield bonds corrected in october but they did not reverse. the rates and remain low. the average high-yield bond

yielding 7%. >> if i look at debt as a percentage of gdp, many pointing out it has been on the rise since the financial crisis. you look at the amount of delinquencies, we should be seeing more of that. that is in places where companies don't typically go like china? that.re are certainly the other reality, interest rates are still very low. au have this phenomena rolling loan together still lost. with interest rates low, a lot of companies can keep rolling those loans. it keeps default rolled's -- rates as low. keep rolling, rolling. i'm not going to sing it. thank you very much.

that is.ds, thank you very much, we will see you soon. we are live in sing of corporate redneck -- live in singapore. we are going to go back to singapore for our exclusive conversation with david solomon, the ceo of goldman sachs. that is at 7:00 a.m. bell afterclosing new economy forum in singapore. your destination is live read the speakers are our boss michael bloomberg. the founder and majority owner parent companyhe of bloomberg news. also joining him on stage, christine lagarde. let's check in with the panel at

the moment. advanced world, it is not just a u.s. phenomena. the middle of the society, very little improvement in their lives. young people especially are frightened of the future. they are worried about the jobs of the future. they are also worried about the fact that there is no system double solution today for pensions and health care financing. they are going to have to fit the bill. fact it is not part of the political narrative today, democratic all it takes in most countries, is even more worrying. it means we face a major threat down the road to read >> when will that change -- the road. ? when will it change? >> it will change when it gets worse and that is the way things look. the issues which are inconvenient for today's

politics, because they are tough, make it more likely we are putting at risk tomorrow's politics. >> i think that is right. the new york times had a story today about east germany -- ♪

manus: good morning from abu dhabi. this is "bloomberg daybreak: europe." anna: i am live from the city of london. these are today's top stories. red and blue, democrats have retaken the house of representatives after eight years, while the republicans expand their majority in the senate. what will this mean for the president's policies? >> today is more than about democrats and republicans. it's about restoring the constitution's checks and balances to the trump administration. manus: mix markets following the

midterm results, largely preempted by traders. futures in the u.k. are pointing to a higher open at the start of the european trading day. a new iron curtain forming, the treasury secretary warns of the growing divide between china and the u.s. at the bloomberg economy forum. we are live with a series of guests from the conference through the morning. david solomon has some big shoes to fill at the top of the goldman sachs for 12 years. his predecessor established a the second investment

institution in america, delivering an average annual return of more than 4% while competitors were bought out or went under or bankrupt. after a tepid first quarter in 2014, blankfein was expecting to step down. there is speculation he felt like huckleberry finn watching his own eulogy. ceo justomes into the over a month ago and solomon has wasted no time in overhauling management. naming former dealmaker colleagues to the top roles. his reward, and unexpected revenue beat. the investment banking unit he once led himself. since october, so can and moreeep the pace importantly, convince investors goldman sachs has found stability again? let's get to the bloomberg live economy forum in singapore. erik schatzker has the

conversation. good day. thank you. it is great to have david solomon here at the forum in singapore. have just had the results of the midterms, and is appropriate to begin our conversation. i am pretty sure you have been offended in the past by the partisan rancor of politics in the united states. you think a return to balance of power in congress is good for the country, or possibly a step toward something worse? david: well, first if you look at the election result, can'tring get -- i monitor it as closely as you have but from what i have seen and heard, we have landed in a place where the polls kind of right.

democrats took back the house, republicans are picking up a couple seat in the senate. i think you have already seen a little shift in some governorships from what i saw a earlier, but from a market perspective and expectation perspective and even in a context, it was expected. looking forward, i do not believe this will have a huge impact on policy or action or washington or where we are for the next two years as we moved to the 2020 election. erik: some have said the house and thethe committees begin, a never-ending series of investigations with theoena after subpoena into trump administration and trump family, and even the republican party have been doing the past couple of years that would probably slow down the business. it makes me wonder whether it would be bad for the economy and may be bad for the business climate. david: what i say, and it goes

back to where you started, i think balance can be good in government. when there is balance, both sides have to work harder to get rings done. -- things done. i don't think it would be an effective strategy for democrats to go down that road, but if they do go down that road, that would be a missed opportunity and candidly, i would hope the process forward here is one where given balance and shared responsibility in government the next few years, where can we find compromise that will move us forward? the economic environment in the united states remains quite positive and we can talk about that some if you would like but in that context, let's take advantage of that and see if we can move forward. erik: is that sustainable, because markets have been shaky for weeks. to fed seems committed to raising rates. that makes one wonder if there is nowhere to go but down from

here, or whether things can continue at this pace or even faster. david: i think things can continue for a period of time, though i would say we are certainly later in the cycle. it doesn't take a rocket scientist to notice that. erik: people want to know how late. david: i would say the biggest risk and our u.s. economists have echoed this, it is in overheating. can the fed in the context of how it marches forward with monetary policy and continued to normalize rates in a way they strike the right balance and we have a soft landing? i am not a prognosticator. research, it says there is a good chance the fed can manage it that way but as a student of history, i would say at some point in time, this

tightening cycle doesn't create volatility. iswill see that a little bit my guess, but underlying -- the underlying strength of the economy is pretty good. in some way, data points give me a sense of what is going on. one this week that struck me a little, a big financial services conference in new york this week and big banks spoke. if you listen to the consumer reference thethem fact that when they look at the underlying data and consumer behavior, they feel the pipeline for the next 12 to 24 months is pretty good. at is only one data point, but a relatively positive data point of the underlying u.s. economy, while maybe the forward trajectory is going a little, is still pretty strong. . erik: has been a month and a week since you became the ceo of goldman sachs. given what is going on back

home, we might talk about how you are easing into your job. hands, a scandal on your probably the last thing a new ceo wants to confront but confronted you must. department has accused former colleagues of yours of laundering billions of dollars and violating the practices act involving bribes. one has pled guilty. to there any way for you to explain conduct like that, if it is proven, could happen at your firm? it is obviously very distressing to see two former would soachs employees blatantly around our policies and so blatantly broke the law. we take the whole matter extremely seriously and we continue to work with the authorities as they investigate.

erik: two of the people involved, because there are 3, 2 have been named by the justice department and one that is believed to have been involved. the one who pled guilty and the one who was said to know about the schemer goldman partners and in the investment bank that you ran for 12 years. these are your guys. how does that make you feel? david: the investigation is ongoing. about the fact that people who worked at goldman sachs, it doesn't matter whether it is a partner or entry-level employee, would go around our policies and break the law. i feel horrible about that. unacceptable. it was not a lot more that i can say other than we continue to cooperate with the authorities -- erik: as i would expect. david: absolutely. erik: there might be a couple of other things you can say and i will try it if you can't, i get back. there is an investigation under way.

your clients, shareholders, and employees want to be certain that neither you nor lloyd blankfein or any senior management team had reason to illegality in connection to the account. can you offer those assurances unequivocally? david: to take compliance and control in our firm extremely seriously. we always have. the have been around for 150 years and how we control the term, the velocity and volume of transactions that move through the firm is of huge importance to us. huge importance to us. we will continue to operate -- cooperate with the authorities and the process is in place and that will proceed accordingly. erik: you have to be mindful of the potential for damage to goldman's reputation, to its brand. how do you handle this? it will say a lot about your leadership. people say a lot about your

ability as a leader, also your style as a leader. with those things in mind, how do you plan to handle it? david: there is a process in place around this,. and the process will run its course. -- and the process will run its course. erik: there are questions about strategy at goldman sachs and that is inevitable with a new ceo. i want to make reference to something your cfo said the other day. a comprehensive review of the business. what is on the table? david: any time a new leadership comes into a business, that leadership team has a responsibility to work hard at the business, at the portfolio of businesses and make sure you are thinking about and examining every opportunity that you have to approve those businesses for years -- improve those for your shareholders. >> and you are committed to improving benefits to your

shareholders. david: long-term, sustainable returns for our shareholders. that is true north. in that context, goldman sachs is in great shape and doing very well. there isn't a business in the world that doesn't have to involve, that you don't have to constantly take a fresh look and say how can we better serve our clients? how can we make that business better? how can we make changes in a way that will only make the business more potent for our clients and when i was a banker, that was something i advised every new ceo to do. erik: as a banker who has advised many ceos, you know there are, in principle, two ways you can go about improving things. basis on the homegrown and the other, if you want to get somewhere faster, is to do it by acquisition. is an acquisition under consideration? is that something you think goldman may need to do to grow a business it is his or entering

it -- it is in or entering a one? david: we have a terrific portfolio of businesses. i look at the company through the lens of our clients. levels, we serve corporations and governments, institutions, and are starting to serve individuals. we are building organically a digital program -- platform to serve digital clients and tie them to a series of products and services. an institution like goldman sachs can deliver. when we entered that business, we thought about buying something to enter that platform and building it organically let us take out a white sheet of paper and really do something that was special and differentiated. in that case, we chose organic investment process. i can't say there would never be a point in time where we wouldn't buy a business. 150 yearachs's history, inorganic growth has

never been core to our success. if there was an opportunity we thought could enhance our franchise, allow us to deliver better for our clients and was good for shareholders, we would consider it, but at the moment, the bar is very high. erik: goldman has arguably the world's best investment bank. to the degree that it is, i know you are proud of that, it has a top-tier asset management the security business has underperformed the industry for eight or nine quarters. what would you do about that? david: i challenge a little bit what you said. anysecurities business, by metric, is one of the top three global market making businesses in the world. what you are referring to is that our business based on the market shares it had a decade ago in what was a very different world, different regulatory environment, structure, our fixed business on a relative basis.

it is important to point out that the business is an institutional market-making 1300 topand with institutional clients, we have the second leading market share. there is room for us to improve. we are focused on improving, but one of the things we can do is explain more clearly the strength of our business, how that business's division -- positioned at goldman sachs versus other firms and i think we have the best people in the business. i hear that from our clients. , don't think that, erik because i am just thinking it. i travel around and they tell me repeatedly you have the best people in that business. really makingo sure our clients recognize we are in a client service business and we are working to solve their needs, working to -- intellectual capital to help them and seeing our market share growth. last quarter, our market share

was one of the two firms with institutional clients that had the largest share growth. erik: and you say the business has the right people, does that extend to the leadership? david: i have made some changes. obviously, i am very confident in the leadership team we have in place. this team represents a diverse group of people with diverse group of skill sets that range from huge client experience, huge macro and micro trading experience, huge technology experience. technology is important in that business. we have a great leadership team and i am excited about what they will do in the coming years to continue to cement our position as one of the leading institutional market makers in the world. erik: some people measure the importance of trade -- sales and trading at goldman sachs by the percentage of revenue generating. third, not so long ago it was two thirds and in the distant past, well above that.

by virtue of the fact you are getting into other businesses and perhaps some of the factors at play in financial markets, take sales and trading down to 25% of revenue or 50% of revenue? david: the chance of it being 50% is extremely low. is just math. other businesses and those businesses grow revenue, which you expect to do in a consumer business -- we are throughng to think the lens of who are our clients and how do we serve them? in that construct, a more diversified, durable set of revenues -- this is something stephen spoke to as something leadership is focused on. erik: a more diversified set of businesses. you could be doing things that you are not doing now. how do get there is a question of organic or acquisitions. how much could goldman be doing

now that it isn't doing or what more of that could it be doing? david: we talked a little about this. hen spoke about it and i spoke about it in the spring. our relationships with corporations broadly, our relationships with corporations are as strong as anybody's. services a handful of banks deliver that we don't. we are investing in platforms to do that. technology allows you to get in the middle and disrupt and solve clients problems on a bilateral basis. erik: are you thinking of more of a commercial lender or custodial bank? david: a big opportunity for us is cash management and the ability to build a platform that allows additional services that the mainstream players in that business haven't been as receptive to provide and we can go to our clients where we have great relationships and look to solve their problems.

that is an investment opportunity and there is also an opportunity in that our footprint with corporate's actually is not as big as the people we compete with. when you look at the biggest companies, we dominate, but when you look at $3 billion companies, we have market share opportunity and are making investments to expand our footprint into the middle market a little more and we are getting great receptivity. we have been hiring a significant number of bankers. middle market an interesting term, because it can mean a lot of things today to a lot of people, but when i started running banking, someone referred to a little market company as $500 million. today, little companies have one to $5 billion of value. the number of companies out there with a footprint like ours

doesn't get touched or has will opportunities for us. it is something i feel very confident with investment over time. erik: tapping that middle-market opportunity? david: absolutely. erik: if you are successful, what more is it going to require in the way of hiring and resources, and if you are as kessel as would like to be, who are you going to be taking share from? david: when you look broadly at that space, it is pretty dispersed. erik: yes. david: it is pretty fragmented and pretty dispersed. broadly speaking, we have to their.to take share a large cap, our share is at a level where there is not a lot of room for share. there, i think it was room for share and we will see where it comes from. erik: a target? in terms of percentage? david: are not going to give you

a public share target, but there is a lot there. when you look at our growth initiatives, we outlined $500 million in revenue a year coming from ever expanding footprint. that was a step in this expansion. there is a step further. it filters in different -- in interesting ways. we are doing more treasury work for companies that are smaller. even provide lending services to those companies and ultimately capture in your fixed-income business, other flows. citibank reported last year that 45% of its fixed revenue came from its corporate cash management plan. jpmorgan this your reported $3 billion of investment banking revenues, meaning investment banking and sales and trading revenues 3 billion of smaller market companies that we generally don't deal with. there are places that we can expand our banking footprint in a thoughtful way and that is one of many opportunities the firm has. erik: david, thank you for

spending time with us. david: always good to see you. erik: if you want an idea of how goldman sachs may evolve under david solomon, you just got it from the new economy forum. anna: lots of questions answered there. fascinating conversation around the strategy and markets. speaking toer goldman sachs, the ceo speaking to bloomberg. coming up, more exclusive interviews from the new economy forum. after 8:00 a.m., we will speak with the former treasury secretary hank paulson. that will be a conversation you will want to tune in for. later, we will be speaking to the chairman of s4 capital and the former ceo. that is --this is bloomberg. ♪

manus: well, it it happens politics has dominated the theme. democrats are poised to reclaim the house of representatives for the first time since 2010. riding a wave of voter anger and discontent with president trump. they were fueled by strong support from women among suburban voters with higher income and education levels. nancy pelosi spoke as results came in. she is expected to be the next speaker of the house. anna: in the senate, the republicans made gains. in one of the most closely watched races, senator ted cruz fended off a well-funded longshot bid by a democrat. for the first time ever, 100 women have an elected to the house of representatives, including the first native

american woman. some expected,ve but not far from the market's expectations about what would happen in the sam -- house and more women than we have seen before. this is bloomberg. ♪

anna: can to bloomberg markets, the european open. i am anna edwards from our european headquarters in london. congress divided. democrats are poised to take control of the house, while republicans expand their majority in the senate. asian stocks drop and the u.s. futures mixed. david solomon tells bloomberg overheating is the biggest risk to the u.s. economy while playing down the market impact of midterm elections.