高盛 (GS) 2006 Q3 法說會逐字稿

Good morning.

My name is Dennis and I will be your conference facilitator today.

I would like to welcome everyone to the Goldman Sachs third-quarter 2006 earnings conference call.

After the speakers' remarks there will be a question-and-answer period. (OPERATOR INSTRUCTIONS).

This call is being recorded today, Tuesday, September 12, 2006.

Thank you.

Mr. Andrews, you may begin your conference.

Thanks, Dennis.

Good morning.

This is John Andrews, Director of Investor Relations at Goldman Sachs.

I would like to welcome you to our third-quarter earnings conference call.

Let me remind you that today's call may include forward-looking statements.

These statements represent the firm's belief regarding future events that by their nature are uncertain and outside of the firm's control.

The firm's actual results and financial condition may differ possibly materially from what is indicated in those forward-looking statements.

For a discussion of some of the risks and factors that could affect the firm's future results, please see the description of risk factors in our current annual report on Form 10-K for our fiscal year ended November 2005.

I would also direct you to read the forward-looking disclaimers in our quarterly earnings release, particularly as it relates to our investment banking transaction backlog.

You should also read the information on the calculation of non-GAAP financial measures that is posted on the Investor Relations portion of our website at www.gs.com.

This audiocast is copyrighted material of the Goldman Sachs Group Inc. and may not be duplicated, reproduced or rebroadcast without our consent.

Let me ask our Chief Financial Officer, David Viniar, to take you through the quarter's results.

David?

Thanks, John.

I would like to thank all of you for listening today.

I'll give you a brief overview of our results and then take your questions.

This morning we reported our third best revenue quarter with total net revenues of $7.5 billion.

Excluding FAS 123(R) expenses of $133 million, net earnings were $1.7 billion and earnings per diluted share were $3.45.

Annualized return on tangible equity was 26.5% and return on common equity was 22.2%.

Including the FAS 123(R) non-cash expenses, net earnings were $1.6 billion and earnings per diluted share were $3.26.

Annualized return on tangible equity was 24.9% and return on common equity was 20.9%.

The third-quarter environment was more challenging across virtually all of our business with choppy and uncertain equity markets, range bound markets in most of FICC and general slowing of activity over the summer.

Despite these conditions, we produced the third-best revenue quarter in our history.

These results underscore the breadth and diversity of our businesses and the depth of our client/client franchise.

I will now review each of our businesses.

Investment banking net revenues were $1.3 billion, down 16% from the second quarter but up 27% over the third quarter of last year.

Within investment banking, advisory net revenues for the third quarter were relatively flat on a sequential basis at $609 million despite a decrease in M&A volumes.

A number of important M&A transactions closed during the third quarter including Mittal Steel's $44 billion acquisition of Arcelor;

CarrAmerica Realty Corporation's $5.6 billion sale to the Blackstone Group; and Albertsons $17 billion sale to SUPERVALU, CVS and Cerberus Partners.

We are also advisor on a number of transactions announced during the quarter including the Kinder led consortium's privatization of Kinder Morgan, Mercury Interactive's $5 billion acquisition by Hewlett-Packard, and a private equity consortium including GS Capital Partners on its $8.3 billion acquisition of ARAMARK.

Third quarter underwriting net revenues were $679 million, down 26% from a record second quarter but 49% higher than last year's third quarter.

Within underwriting, equity underwriting net revenues of $270 million were down 44% sequentially but 36% higher on a year-over-year basis.

The decline from the second quarter reflected difficult equity market conditions and weak investor sentiment that drove an industrywide decline in IPO and secondary issuance activity.

Debt underwriting net revenues were $409 million, down 6% from the second quarter but 59% higher than last year's third quarter.

Industrywide underwriting volumes fell from the second quarter across most products.

We were involved in a number of significant underwriting transactions during the quarter including Japan Airlines' $1.4 billion follow-on offering;

Austrian Post's EUR659 million IPO; and BellSouth's $1.2 billion floating-rate notes offering.

Our investment banking franchise demonstrated notable resilience despite challenging markets.

For the calendar year to date, Goldman Sachs again ranked first in global announced and completed M&A, equity and equity linked offerings, and common tock offerings.

Our investment banking backlog was essentially unchanged versus the end of the second quarter.

Let me turn to trading and principal investments.

This comprises fixed income currency and commodities or FICC, equities, and principal investments.

Net revenues were $4.7 billion in the third quarter, down 32% from the record second quarter and 7% from the third quarter of 2005.

Our trading businesses were affected by investor uncertainty and the slow down in customer activity across most of the capital markets.

Despite the more challenging environment, FICC had its third best quarter with net revenues of $2.7 billion, down 37% from the record second quarter but up 4% from the year-ago third quarter.

These results reflect a decreased customer flow and fewer opportunities to transact as FICC products traded within relatively tight bands and volumes declined during the quarter.

Revenues in all major areas of FICC, credit, rates, commodities, currencies, and mortgages, were down versus record or near record performances in the second quarter.

Currencies, rates, and commodities had the largest sequential declines, although the decline in commodities was largely due to the inclusion of a $700 million onetime gain in the second quarter from the sale of the Linden powerplant.

Nonetheless the overall environment for FICC remains constructive as interest rates are low by historic standards, credit spreads remain relatively tight, and much of the uncertainty around interest rate policy in the U.S. seems to have eased for the moment.

Commodities also remain very active, given strong fundamental demand for key commodities and continued investor interest in the sector.

Equities net revenues for the third quarter were $1.6 billion, down 34% from the second quarter and 3% from the third quarter of 2005.

Equities trading revenues were $707 million, down 50% sequentially principally in our customer driven businesses while equities commissions decreased 10% to $844 million.

The third quarter was challenging for equities.

Following the correction that began in mid-May and continued into early June, equity markets fluctuated within tight ranges as investors struggled to understand where the market and broader global economy might be going next.

This market uncertainty led to fewer opportunities and lower level of customer activity over the summer months.

The difficult equity market also affected our principal strategies business, which produced results that were significantly lower than the second quarter.

Average daily value at risk in the third quarter was $92 million, compared to $112 million for the second quarter, reflecting fewer opportunities across most of our trading businesses during the quarter.

Principal investments net revenues were $430 million in the third quarter compared to $293 million in the second quarter.

This increase was driven by the mark-to-market on our investment in Sumitomo Mitsui Financial Group, where we recognized a gain of $261 million or $0.20 per share.

We also generated $169 million in gains and overrides from other principal investments as we continue to benefit from strong investment performance.

Asset management and security services reported third quarter net revenues of $1.5 billion, down 10% from the second quarter but 20% higher than last year's third quarter.

Asset management produced its third best quarter ever, with net revenues of $918 million, down 4% from the second quarter.

Management and other fees were $822 million, down 3% sequentially.

The decline is driven primarily by some upfront distribution fees earned in the second quarter.

Incentive fees were $96 million in the third quarter, down from $104 million in the second quarter.

At the end of the third quarter we had record assets under management of $629 billion reflecting net inflows across all asset classes of $30 billion and market appreciation of $6 billion.

The decrease is net of $8 billion of outflows of private wealth management money market assets that were swept into GS Bank during the quarter.

If you exclude the impact of these sweeps, total net inflows would have been $38 billion for the quarter.

Security services had its second best quarter in history.

Third-quarter net revenues were $537 million, down 18% from the seasonally strong second quarter but up 13% from a year ago.

Now let me turn to expenses.

Compensation and benefits expense in the quarter was $3.5 billion.

For the year to date excluding FAS 123(R) charges, we have accrued compensation in 48% of net revenues, down from 49% at the end of second quarter.

The lower compensation accrual reflects our record revenues in 2006 to date as well as better visibility on expected compensation levels as we approach the end of the year.

Non-compensation expenses excluding consolidated investments were $1.4 billion, up 5% from the second quarter.

The majority of the increase was driven by higher brokerage clearing and exchange fees.

Head count at the end of the third quarter was approximately 25,600, up 9% year-to-date and 7% from the second quarter, reflecting the normal seasonal pattern of college and business school hires starting in our analysts and associate programs in the summer.

Our effective tax rate was 33.3% year-to-date and 32.5% for the third quarter.

During the quarter the firm repurchased 3.8 million shares for approximately $600 million.

Our Board of Directors has approved an increase of 60 million shares to our share purchase authorization, which brings our total remaining authorization to approximately 73 million shares.

Similar to the second quarter, our share repurchase activity continued at a more measured pace in the third quarter.

This slower pace reflected our belief that we had the appropriate level of equity given the environment and opportunities to deploy our capital.

That said, capital management is a dynamic process and we evaluate our equity position on an ongoing basis with the goal of optimizing returns and maintaining prudent capital levels.

We are pleased with our third-quarter results, which were very strong particularly when considered against the overall weak tone of the global capital markets for most of the quarter.

In investment banking, level of dialogue and activity with corporations and financial sponsors remained relatively high despite the uncertainty in the capital markets over the past few months.

We remain the global leader in the most important and high return businesses like M&A equities.

FICC produced its third best quarter ever despite operating in generally slower markets.

A $2 billion plus quarter for FICC revenues was considered an unsustainable result just a year ago and now we have produced it in a less than optimal environment.

Although FICC will always be subject to unpredictability and cyclicality, our continued success to grow this business over the long term underscores the unique depth and breadth of our FICC franchise.

Equities produced solid results despite difficult market conditions in the quarter.

Principal investments continues to produce strong results and our Sumitomo investment was again positive in the quarter.

Asset management and security services also performed strongly.

Assets under management have again reached a new record.

Security services reported its second best quarter despite the challenging environment faced by hedge funds in the quarter.

While our performance in the first and second quarters underscored how much Goldman Sachs could earn in a remarkably strong operating environment, I believe our results in the third quarter are equally impressive but for different reasons.

To produce the returns we did in this quarter despite the environment is a direct reflection of the diversity of our businesses, the breadth of our global presence, the depth of our client franchise, and most importantly the quality of our people.

Uncertainty in the near-term outlook has dominated investor thinking for most of the summer and I can assure you that my crystal ball is no better at predicting the near-term outlook than yours.

However I would tell you that looking out into the medium and long term considering the opportunities we have in virtually all of our businesses in all geographies and knowing the quality of our franchise and people that will allow us to take advantage of those opportunities, I remain optimistic about the prospects and competitive position of Goldman Sachs and our ability to produce above-average returns for our shareholders.

With that, I would like to thank you again for listening today and I'm now happy to take your questions.

(OPERATOR INSTRUCTIONS) Guy Moszkowski, Merrill Lynch.

Just a question first of all on how conditions evolved during the quarter.

Obviously as you said it was a less than stellar environment.

But did you find that conditions with respect to your ability to generate revenue were improving sort of in the second half of the quarter after markets had stabilized or not?

No, I would say it was pretty consistent throughout the quarter.

Remember the second half of the quarter was largely August.

And in a difficult operating environment, not a lot tends to happen during August.

I think it was pretty consistent throughout the quarter.

Okay, that's helpful.

Now you talked about the fact that your investment banking backlog is basically unchanged during the quarter.

Is there any color that you can give us on how the components might have shifted?

I would say that they are relatively stable as well, that there is still a lot of activity, a lot of corporate activity, a lot of dialogue with corporations and it is reflected in the backlog as well.

Thanks.

With respect to the share buyback and the increase in the authorization, just to complete your thought on that, should we continue to expect, given what you know now, that most of that is really going to be directed toward offsetting dilution?

Yes, to a large extent yes.

I think the philosophy at least for the next few quarters should be similar to what you've seen in the last few quarters.

The only thing I will mention is remember in the fourth quarter because we pay compensation and because a lot of that compensation is in equities without a reasonable sized buyback, it would result in a big increase in equity and share count.

And so you might see a blip to offset that in the fourth quarter, but the philosophy will largely be the same that we will be buying back on a more measured pace because we think our equity opportunities are pretty much in equilibrium.

Okay, that helps also.

Finally just with respect to non-compensation expenses.

When you stand back at the quarter sort of a year-over-year basis and we look at the fact that granted you are comparing a quarter when market conditions were a little more difficult with a quarter when market conditions were pretty robust, the year-over-year revenue growth is modest, a couple percentage points.

But your non-compensation expenses are about 26% higher if we exclude the consolidated investment entities cost.

How should we think about that?

The firm continues to grow.

As you said, we had a somewhat -- we had slightly higher revenues in a more difficult environment.

We are growing the firm.

The business is bigger.

It is more global.

We are growing outside the U.S.

We have a couple of businesses like the insurance business we mentioned that we did not have before that contributed somewhat.

Brokerage and clearance continues to go up as we see volumes increase not just in equities but in places like commodities and currencies.

So I don't think you should read much into it other than we continue to think that we are in a growth business.

Okay, fair enough.

Thank you, David.

James Mitchell, Buckingham Research.

Can we talk a little bit just about -- we talk a little bit month-to-month, was there any change in the FICC environment post the Fed decision on August 8?

Did you see any kind of pickup there?

You know, it's really, I'm very hesitant to talk about changes in environments over a few weeks.

You know, I think it is fair to say that within the FICC world there seems to be a little bit more certainty, but I would not say anything about an environment having changed suddenly.

Again, remember as I said to Guy, we had August.

You're not going to see things really change much in August and we have only been back from Labor Day for a week.

So it is just too early to tell.

Can we -- maybe as a follow-up on the fixed-income business, as you mentioned or hinted at, your run rate in fixed income has certainly gone up versus say a year ago and the year before.

How much of that -- not that you can predict the run rate, but the higher level this year has been driven by growth in international versus domestic?

Has it been more of a skew to international?

How much of that in your opinion sort of rough basis was international?

First of all, just to repeat what you said, you will never hear me say the word run rate.

But the FICC business has grown.

It has like all of our businesses, have grown somewhat more outside the U.S. than within the U.S.

We expect that trend to continue, but the business has really grown across the board.

Okay, that's fair enough.

And just one last question on the expense side, you talked about brokerage going up.

That was a bit of a surprise when you think about activity levels generally down.

Brokerage fees on the noncomp side were up pretty dramatically.

It doesn't really seem to jibe with lower activity levels, so what is going on there I guess?

First of all you have to remember it's not just equities.

Brokerage and clearance is not just equities.

As I said, it includes things like commodities and currencies and a lot of places like that where market volumes were still pretty high across most of the quarter, even though there was not a lot of necessarily large customer trades, large hedging trades that we might look to to produce a lot of revenues, just general flow volume was pretty high even with hedge funds as they are getting out of risk as well as getting into risk, that can happen.

Right.

It did that derivative volumes were down a little bit even outside of equities, but you're saying for your business it was still pretty solid.

A lot of volume, yes.

Fair enough, thank you.

Daniel Goldberg, Bear Stearns.

On the asset management side, can you talk a little bit more there?

It looks like specifically on the alternative side almost 35% annualized organic growth rate closed at 13 billion.

Anything in particular there, more color?

Sure.

That is -- we think that that performance is great across the board in asset management; $30 billion of net inflows, $13 billion asset management is just tremendous performance.

The $13 billion broke down to roughly $5 billion from new funds we raised during the quarter including an infrastructure fund, which you've read about, and a couple of others and $8 billion of inflows into the funds that we already had.

I can't tell you that we are going to have that level of inflows every quarter.

We might.

That would be great.

But it has just been a pretty good story in the asset management world.

Okay.

Anything on the equity side there?

Obviously had some pretty solid flows as well.

No, just more flows into the various funds.

Our performance has been pretty good.

We have good relationships.

We think we do a pretty good job and that business has been growing extremely well.

Okay.

Any more color if you look at the equity commission line, it was down 10% sequentially but it looks like it was the second best quarter ever according to our data.

Anything specific there in what we would expect would be a weaker quarter?

No, nothing.

Look, we said this for the last couple of quarters.

Commission rates are obviously not going up, and so the fact that we continue to do pretty well there and as you said second best quarter we've ever had in a tough market, I think we are gaining market share.

We've waited for a long time.

We've thought that there was going to be a consolidation in equity commissions for a very long time.

It did not happen for a long time.

It is starting to happen.

We are starting to get a little bit of share there and I think we are positioned pretty well there.

Okay, and then just on the comp ratio, how should we think about that going into the final quarter? (multiple speakers) % was a bit lower than what we were expecting for the third quarter.

How should we think about that?

Look, when you look at where our revenues are, the fact that our revenues are up 51% year-over-year, that it is the end of a third quarter so we have greater visibility on the year, getting close to the end of the year we have at least somewhat greater visibility on compensation, although that process has a long way to go.

You add all those numbers up, 48% was just a more appropriate place to accrue than 49%.

Meredith Whitney, CIBC World Markets.

I was curious.

You were great about contextualizing the outlook for the investment banking pipeline, but on the principal investment in private equity opportunities, can you contextualize that in terms of sort of a 12-month perspective in terms of where you see opportunities today?

I know you just raised a bunch of money internally.

And then on the flip side if you could contextualize the harvesting opportunities as well?

Okay.

Look.

I will give you the as we sit here right now because the world can change, I always say that.

But certainly from an investing point of view, all you have to do is pick up the paper every day and read about the large transactions being done by private equity investors.

So there are lots of opportunities.

There's lots of things going on.

There's lots more dialogue going on, so I think the investing opportunities are pretty good.

Again that could change, but right now they are pretty good.

Interest rates have stayed pretty low.

Credit spreads pretty tight, so there's lots of leverage available.

So I think the opportunities for investing today seem pretty good.

Again, that could change.

From a harvesting point of view, that's again -- it's going to depend on market environment.

We have harvested a bunch over the last year or so.

There's probably some pretty good opportunities going forward.

If the equity markets stay strong, if the merger environment stays strong, there will be good opportunities to exit some of the investments we made.

But it is really very market dependent.

Okay and if I could just follow up on that for a second, if you look at the Japanese market, you guys made some really plumb investments several years ago and where would you characterize the Japanese real estate market from your perspective in terms of if you want to use the baseball innings context, that works with me too, even though I'm a chick, that works with me?

Look, it is clear that after many years of being down, the Japanese economy has started to rebound.

I think that would be the case with Japanese real estate as well.

We would just -- actually I was talking wit the head of our Tokyo office the other day and he was talking about how tight the real estate market is, how low vacancy levels are across Japan.

So it feels a whole lot better there.

What inning are we in?

That is hard to say.

I would say we are still in somewhere between the third and the fifth inning in the Japanese recovery.

So I think there's still plenty to go.

Okay, great.

Thanks so much.

Glenn Schorr, UBS.

Can we -- your comments on the pipeline are clear that's still a ton of dialogue.

I was wanting to get your thoughts on how financing dependent obviously pretty financing dependent but spreads are still tight, so it seems conducive.

But what can flip that?

How concerned are you that it is more financing dependent than in the past?

Well, you know, I don't think is necessarily -- financial sponsors are a big part.

They are not necessarily more dominant than they have been over the last year, but they are a big part and if you have -- if the financing markets change, if credit spreads widen dramatically, interest rates went up dramatically, then you would see clearly less activity by the financial sponsors because I think that financing is really a key to the great growth we've seen there.

So I think that would be important.

I also think more importantly the issue is what would cause that?

If we saw inflation and regrowth together, which is what could cause interest rates to go up but credit spreads to also widen, then you'd just be in a very bad economic environment and that would be one that would not be good for anything in our business.

So depending on what caused the change in the financing environment, it could have a negative effect on the environment.

Cool.

And inside your printed commentary on equities, you mentioned that the insurance business contributed.

I'm assuming that is the guaranteed death benefit portfolio you bought from All-America?

Yes.

We have done that and we did a couple other small ones and you should not take that to be bigger than it is.

It really it is mentioned more because it contributed to the delta than that it contributed to the actual results.

It is still very small within the context of Goldman Sachs, but it was zero last year at this time.

So it contributes to the delta.

Okay, good.

In securities services, forget the seasonality. 13% year-over-year is still pretty good.

Just not the 30 and 40% that you guys have been doing.

Is that a function of environment, pricing, market share?

Any little color?

I would say yes, no, no.

Environment, yes; pricing, no; market share, no.

The businesses -- you described it very well.

The business is still growing.

We still have a -- basically with us and Morgan Stanley a duopoly.

We still have a very dominant market share there.

There's obviously other competitors too but Goldman Sachs and Morgan Stanley do have the biggest shares.

But growth in hedge funds has slowed in the third quarter.

You saw hedge funds reducing risk, not increasing risk.

So the rate of growth clearly slowed.

Cool.

Last one, a quickie.

Has anything changed in your stance in mortgage land?

You obviously have a big derivatives business but you have seen some of the peers buy on the origination side.

Anything changed on thought process there?

I have been waiting for that question.

I knew it would come at some point.

The answer is, and look, nothing has changed.

We will never say never.

We will continue to evaluate the origination business.

We have two primary concerns.

One is a timing concern, is the right point in the cycle to do it?

The second is the retail concern.

Goldman Sachs is largely an institutional business.

There are different risks when you are touching the retail customer and so far all our valuations have been that the negatives outweigh the positives.

Not that anyone else has made a bad decision.

For them it was probably the right decision, but for us right now it has not been the right decision but we will keep looking.

Thanks, David.

(OPERATOR INSTRUCTIONS) Douglas Sipkin, Wachovia.

Just want to hone in a little bit more on the Asset Management business, considering your results recently.

Just two specific questions.

One with respect to alternatives, obviously continue to see very strong flows there.

How much of that is a market share gain or is it just pensions and institutions and the like are stepping up allocations into that asset class?

Then with respect to fixed income, it is interesting that your flow trends are actually stronger this quarter and year-to-date it looked like they are up a little bit because that's sort of doesn't jibe with some of the comments we've heard from some of the bigger institutional fixed income managers.

So is there a little bit of a share gain going on there in terms of some opportunities with some of the other fixed income managers going through major acquisitions?

Any color around both those items would be helpful.

Let me give the overall comment first.

As I said, our asset manager business has been quite successful.

It has grown very well.

Our performance generally has been pretty good.

Our relationships are very good.

So I think our customers, our clients have a lot of confidence in us and it has allowed us to gather assets.

I think in alternatives it is a combination of those things.

We have been creative in providing the types of products that our clients want, so the types of funds that they want to invest in, and we continue to try and develop new areas where our clients want to invest.

That's helpful and our performance has been over time relatively good, and therefore our clients have wanted to keep investing in us.

I think that has really been the story in alternatives.

And it has been a similar story in fixed income.

We have a wide diversity of fixed income products that we offer.

We have reasonably good performance.

I think our clients and customers have confidence in us and so they continue to allow us to manage their assets.

And I think it is really as simple as that.

Okay.

Just honing in on the private equity for a second, I know it looks like Sumitomo contributed.

Did you get a contribution from Berry Plastics this quarter?

If you could disclose, because I know that transaction was supposed to close in Q4, but I am just wondering whether or not you could have recognized the revenues in Q3?

We do not disclose individual transactions, but you are correct.

The Berry Plastics transaction when it closes -- is scheduled to close in the fourth quarter.

Great.

Thanks a lot.

Michael Lipper, Lipper Advisory.

Good morning.

I assume that the increase in the net interest revenues was on a quarter-over-quarter basis was largely the insurance.

Was there anything else in there of significance?

We generally do not look at our net interest separately.

Our net interest is really part of our business.

So the funding of our positions is really part of the positions.

So from the way we manage the business, we manage it really on a net basis, which is the way were report it.

So that is really the answer I give.

Yes, insurance might have been a small piece of that, but the rest of it is really just the overall way we manage the business has not changed at all.

Okay.

That would indicate that in general your interest producing assets either grew or the rates increased between the second and third quarter.

I guess one way you can think about it, and this might be an answer to your question, is that the part of the business equities kind of came down more than fixed income.

Fixed income would tend to have higher net interest in total, and so that might be a place to look.

Okay, thank you.

Jeff Harte, Sandler O'Neill.

Good morning.

A quick just follow up question on the plethora of private equity questions we have had already this morning, but it lead me to think at what point in time do you think the mass amounts of cash flowing into the private equity space starts to actually reduce the attractiveness of investment opportunities within that space?

That is a very legitimate question.

Obviously a lot of money has been raised.

We always rather -- we had -- there was less competition in the businesses, there's lots of competition there, but at least as of now the opportunities are growing as fast if not faster than the amount of money there is to invest.

So far there continue to be very, very attractive opportunities because there is such a big volume right now.

And as long as that continues and as long as Glenn correctly asked before, as long as the financing markets stay pretty benign, I think that at least in the near term, the opportunities are going to stay pretty good.

It is hard to predict past that.

Okay.

And also in prime brokerage, European dividend arbitrage, was there any benefit from that this quarter or has that really become a second-quarter seasonal impact?

There is a little bit in the second -- the third quarter but it is mainly a second quarter phenomenon, which is why you see that business always have its strongest quarter in the second quarter.

At this time, there are no further questions.

Mr. Andrews, are there any additional or closing remarks?

We'd just like to thank everybody for listening today to our third-quarter conference call.

This will be available on replay on our website early this afternoon and otherwise thanks again for your time.

Ladies and gentlemen, this does conclude the Goldman Sachs third-quarter 2006 earnings conference call.

You may now disconnect.