Blankfein: "Central Banks All Around The World Are Buying All The Risky Assets"

We can finally put to rest any financial, economic, ideological or simply philosophical debates why stocks have risen over 300% since the March 2009 post-crisis lows of 666, and we have Lloyd Blankfein's underperformance mea culpa to thank for putting it so simply and succinctly, even a majority of fintwit might actually get it.

From today's CNBC interview:

Frost: Let’s touch on your earnings yesterday, Lloyd, which was a beat on every line and overall EPS,  let’s talk about first of all about the bounceback in trading. There was a lot of focus on trading last year, back this quarter. Can that last the rest of the year or is it a one quarter bounceback, as it were?

Blankfein: If you asked it the opposite way, "this surely would last forever" I’d also discount that. Look, we don’t know. We’re more in the contingency planning business than the forecasting business but the conditions that prevail we’re not top decile or top quartile conditions in the world so, yes, they’re highly replicable I would say. Kind of feels almost standardish.

What didn’t feel standard were the conditions over the last couple of years. People will debate back and forth what’s normal what’s the new normal but conditions where interest rates are zero, yield curves are flat, there's no risk premium. Where central banks all around the world are buying all the risky assets which then therefore put a damper on volatility and the opportunities to perform, that’s not a natural state.

We have not reversed all of that, but we’re walking that back and walking to so the first indications of a withdrawal from what is an unnatural state. The market becomes a bit more volatile, people get compensated for the risk that they're taking. Our clients are doing better consequently we’re doing better with them. So I wouldn’t say we’re popping champagne corks. But we can certainly see what happens when we start to walk back towards a normal financial market.

And in that vein, one almost wonders - but not quite - if having seen his revenue soar during the February volocaust, Blankfein will tell his trading desk to create less volatility in the future, or more...

As excerpted from CNBC's full interview with Lloyd Blankfein this morning.


Ophiuchus ???ö? Wed, 04/18/2018 - 13:34 Permalink

The risky assets are the low hanging fruit. If I create a fiat money with no intrinsic value then what do I care if the paper goes bad? All I care about is how much labor-value can be harvested from the faux asset that I paid nothing for in the first place. 

If I had to pay in gold, then and only then will I have a problem with risk. My gold required labor to produce.

It blows me away that people can't wrap their minds around the lack of authenticity of paper. It's obsolete and was so decades ago. You aren't worth a bag of puss on paper !!!   

In reply to by ???ö?

Dutti spastic_colon Wed, 04/18/2018 - 13:10 Permalink

Listen to what Blankfein says at 2:22:

"Chinese investment in American companies, American jobs to manufacture American goods to ship to China, to sell into China - so this is good, good all around."


American slaves work for their Chinese owners.

Is that really as good all around as Blankfein says, or is it just good for a few (((Americans)))?

In reply to by spastic_colon

brianshell spastic_colon Wed, 04/18/2018 - 15:10 Permalink

Zio bankers who buy real solid assets with funny money are sensible. That is like a mafia family buying a corporation to achieve legitimacy.

The only trouble is, the business model of the mafia involves parasitism. They shun the grunting of real work and the risking of real assets.

So buying risky assets only serves to protect the bankers game until they decide to pull the plug and set the roller coaster on the next stomach churning downhill plummet.

Do the money changers want to get a real job? Not likely.

Especially since the governments that allow them to exist never have time to look up from the trough to care.

So the rinse, repeat cycles of bankers calling in their mortgages and charging a fee for money will continue. Remember, the banks make money on both sides of the trade.

I remember, in a time of solitary boredom while nursing a broken ankle, of playing both sides of a card game. You can't lose.

In reply to by spastic_colon

Disgruntled Goat Francis Marx Wed, 04/18/2018 - 19:19 Permalink



Did you not buy a small thrift someplace so you could qualify for funding at the Discount Window?

And as I recall, you didnt even report earnings in the 4th quarter of that year because YOU CHANGED YOUR FISCAL YEAR IMMEDIATELY PRIOR TO EARNINGS SEASON, GIVING YOU AN "ORPHAN QUARTER"

We remember Lloyd ... we remember....

In reply to by Francis Marx

Pandelis Wed, 04/18/2018 - 12:23 Permalink

yeah risky assets ... what is safe?  goldman and rothchild are trying to push the price of metals up ... they got stuck with tons of it ... no use in a digital age...

Brazen Heist Wed, 04/18/2018 - 12:23 Permalink

Lenders of last resort.

We've been at the last resort for 10 years and counting. Something's fucked up to say the least.

But I'll give them some credit, they've managed to hold it all up for longer than I expected.

Brazen Heist Joe Davola Wed, 04/18/2018 - 12:42 Permalink

I would assume so. They have figured out some mechanism that works, for now. And one of the obvious costs is not having free markets.

At the end of the day, finance always was based on confidence trickery. I'm still a believer in mean reversion. No matter how powerful they may be, the day of reckoning will come. The only question is, whether it will come with a whimper or a bang.

The end game to fractional reserve banking is bankruptcy and the destruction of fiat currency. They still have more tools at their disposal to creatively restructure debt until they no longer can. Just look at all the scenarios that were brainstormed during Grexit. That should give you an idea.

In reply to by Joe Davola