Goldman Sachs (Symbol-GS)

[kcowan]

What makes you think the posted numbers are real?

They are probably "un-audited" which really means, "our guys did the numbers and they all came from Lehman."

Suspicions confirmed:

Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s news release, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ending in February.

The orphan month featured — surprise — lots of writeoffs. The pre-tax loss was $1.3 billion, and the after-tax loss was $780 million.

Would the firm have had a profit if it stuck to its old calendar, and had to include December and exclude March?

I'll bet someone will eventually tell us but it sure won't be GS.

The Case of the Missing Month

Net loss for December is 1.028 billion, or -2.15 / share. Reported quarterly net earnings were 1.659 billion. Adding the two numbers, GS really netted 631 million.

So the surprise good earnings of $3.39/share (consensus $1.64) is only $1.24 for the 4 months ending March 31. To normalize to 3 months, it might be only 1.24x3/4=0.93!

Who is buying those shares being offered?

[EmperorCoder]

* Bear Stearns died...
* Lehman brothers has been all beat up...

I think you've got these two mixed up. Bear Stearns was absorbed by JP Morgan. Lehman Brothers disappeared.

Emp

[kcowan]

The recent secondary offering by Goldman Sachs, could well mark the top of this bear market rally because GS, we believe would only issue equity at these valuations for two reasons, namely because it needed to as losses on its highly illiquid Level 3 assets continue to mount, or because it saw its equity valuation as being grossly overpriced.

Bubble waiting to be pricked? (BNP Parabas)

[kcowan]

Goldman Conspiracy

We already reported Goldman Trojans in the Bank of Canada

All 13 episodes promise to be exciting reading/viewing.

[jimmyjeblonski]

I'm looking to add some GS here. Waiting for a pullback to 120 if I can get it.
Apparently they are once again adding risk to their holdings, which is what they do better than almost anyone. Their proprietary trading accounts for most of their earnings, and this is something that they can do - although at lower levels - in sideways markets. Their investment banking and wealth sides will have to wait for a real recovery.
So many arb desks have blown up around the world that people that survived like Goldman have vastly less competition, and will have for years.
I agree that their numbers are almost comical as was their mystery disappearing month. But make no mistake - GS is chock full of the smartest money-making sharks in the world.

[randomwalker]

From BNN today,

"A story in Rolling Stone magazine asserts that Goldman Sachs has engineered every major market manipulation since the Great Depression, and that they are about to do it again. BNN interviews Matt Taibbi, contributing editor from Rolling Stone Magazine, and the author of this much talked about article."

http://watch.bnn.ca/the-close/july-2009 ... clip189690

[newguy]

Read the whole article here, bring your reading glasses .

newguy

[adrian2]

But, if you research till your head hurts, then scream Banzai! and charge fearlessly to victory or death, you can clearly see that:

It's a cool sounding name to have in a portfolio. "Goldman" sounds good, everyone knows gold is good and valuable and Goldman has a nice ring to it. "Man" isn't bad, when you stick it together with gold, I'm a man and want gold, works for me and sounds good. "Sachs" is pretty near to the word sexy, so that works! Yeah, definitely a sound reason to buy. I can think of myself as a gold man that's sexy with that in my portfolio -)

Plus some other more serious stuff, including how "Mike Schimek upgraded it to a buy today and bought some for long term buy and hold", which lasted a month or so...

[WishingWealth]

Goldman & al are in the news today.

@ The Big Money:
http://tbm.thebigmoney.com/articles/hey ... us-bonuses

Banks' Bogus Bonuses
Is Wall Street pay really bouncing back?
By Heidi N. Moore
Posted Thursday, July 2, 2009 - 2:23pm

Suddenly, big bucks are back on Wall Street. Analysts believe that bank bonuses will hit new records this year, with Goldman Sachs (GS) shelling out $20 billion and Morgan Stanley (MS) due for $10 billion to $14 billion. That easily tops record levels in 2007, a year that was, for its first half at least, the Shangri-La of record profits for many banks.

After two years of bank runs, government intervention, fears of nationalization and the fall of two securities firms, it's tempting to believe that our long national bank nightmare may finally be over. As PIMCO strategist Bill Gross mentioned in his widely watched outlook, "There is a developing optimism that we can go back to the lifestyle of yesteryear."

But at a time when other industries are suffering, the economy continues to languish, and today's job report was dismal, record bonuses on Wall Street seem shameful, if not laughable. And they are. Indeed, any insistence that record bonuses are on the way should be met with considerable skepticism, particularly if the implication is that Wall Street banks are now healthy and creating sustainable profits.
...

Why did 'the crisis' end so soon; there clearly wasn't enough hurt!

WW

[Mike Schimek]

Plus some other more serious stuff, including how "Mike Schimek upgraded it to a buy today and bought some for long term buy and hold", which lasted a month or so...

I remember that one. I bought in at something like 180ish and sold at 160 something, lost around 8%.

What was most memorable about it is that I bought right in the face of a triple well known analyst downgrade; Meredith Whitney, Dick Bove and some other analyst all downgraded the stock within a day or two of each other and the stock started its long decline. I jumped ship pretty quick, but certainly got battered and bruised.

I guess the lesson was not to try to row a boat upstream when people are blowing up the dam.

[wolf411]

Read the whole article here, bring your reading glasses .

Somebody posted a text version of the article here.
No reading glasses required...

[kcowan]

Is GS Stealing $100 million a day from NYSE investors?
Suspected preferential treatment as a part of the Plunge Protection Team has created a loophole that GS is suspected of using for its benefit. FBI is investigating.

[beluga]

Keith, something doesn't jive with the link. Here's a different one:

http://market-ticker.denninger.net/arch ... SHELL.html

Funny that people were asking at the beginning of July

http://seekingalpha.com/article/146521- ... ts-clients

turns out that they should be asking: "Is Goldman frontrunning the whole market?"

[jimmyjeblonski]

Goldman just had their high frequency algorithms stolen...ie. their black box computer trading programs...uh oh...

[Mike Schimek]

...GS, through access to the system as a result of their special gov't perks, was/is able to read the data on trades before it's committed, and place their own buys or sells accordingly in that brief moment, thus allowing them to essentially steal buttloads of money every day from the rest of the punters world.

I remember placing bids for some smallcap company, and every time I'd hit the submit bid button, I'd immediately check the bids/asks.

Another bid would instantly supplant mine (by a penny higher), before mine got any exposure to the market.

I was puzzled by how it could be that my bid wouldn't even make it to market before that other bid would know its amount and be able to trump it by a penny before my bid could even reach the market.

The assumption I made at the time is that my "competitor" was using some form of superior platform that detected competing bids extremely rapidly, and that in the time I'd place my bid and it hit the market and I hit the button to check its status, his platform would detect the new high bid and place a higher bid to trump mine, before I even had time to hit the check bids button.

The article above on Goldman makes me wonder if what ocured above was my competitor reading my bid before it even made it to market.

The second time I ran across this, I decided to have a little fun with my "competitor". I kept placing my bid, watching it get trumped before it even reached the market... then kept upping it again (3-4 times), effectively driving the bids up. When I finally saw the competing bid stop trumping mine, I "changed my mind" and pulled my bid immediately, leaving the competitor sitting there waiting for a fill at the inflated price. Looks like his program didn't take the possibility of some spiteful person doing this. "Have fun Charlie" I thought to myself. If you want to play games with some program that is probably illegal and screws me over by intercepting my bids before they reach market, maybe I can find a way to play your game and have some fun too!

[deaddog]

I remember placing bids for some smallcap company, and every time I'd hit the submit bid button, I'd immediately check the bids/asks.

Another bid would instantly supplant mine (by a penny higher), before mine got any exposure to the market.

This isn’t unusual with thinly traded stocks or stocks with a wide bid ask spread. I’ve had it happen several times. Could actually be traders at your brokerage narrowing the spread.

Anyone with a direct access platform will see your bid and can change theirs with a mouse click while you are waiting for confirmation of your order.

If I thought I really wanted the stock I would chase it up till I got filled and then invariably watch it come back to the original bid. One of the reasons I like to see lots of volume, it’s tougher to play the games.

Never thought of it as a conspiracy, just normal market action.

[kcowan]

My broker at Canaccord does the same thing when we are unloading thinly-traded stock. Put some out. When some nibbles happen, raise the Ask a penny at a time. Eventually you can get a better yield.

Sometimes there will be some real movement the next day when programmed traders detect an upward trend. Then we drop the rest of it on the way up. And he will consider it all one trade for commission.

[Norbert Schlenker]

The second time I ran across this, I decided to have a little fun with my "competitor". I kept placing my bid, watching it get trumped before it even reached the market... then kept upping it again (3-4 times), effectively driving the bids up. When I finally saw the competing bid stop trumping mine, I "changed my mind" and pulled my bid immediately, leaving the competitor sitting there waiting for a fill at the inflated price.

Except that the program is easily modified to pull its own bid occasionally, check the market, and then re-enter at a penny over the then best. I have seen that behaviour myself.

But let me suggest a way of truly taking advantage of this sort of nonsense. Most of these programs operate on both the bid and offer, so they will break down if you enter "competitive" orders on the side opposite to the way you actually want to trade. If you want to buy a few shares, enter a sell, let the competition beat your offer by a penny, and then take the shares he offers. Vice versa if you want to sell.

[Shakespeare]

If you want to buy a few shares, enter a sell, let the competition beat your offer by a penny

And if your sell offer is accepted?

[Mike Schimek]

But let me suggest a way of truly taking advantage of this sort of nonsense. Most of these programs operate on both the bid and offer, so they will break down if you enter "competitive" orders on the side opposite to the way you actually want to trade. If you want to buy a few shares, enter a sell, let the competition beat your offer by a penny, and then take the shares he offers. Vice versa if you want to sell.

Oh that sounds like fun -)

If I come across this again at some point, I'll try that out with some play money and see what happens.

[jimmyjeblonski]

Janet Whitman, Financial Post
Published: Thursday, July 09, 2009

NEW YORK -- Goldman Sachs Group Inc., long envied by its rivals for its money-making savvy, probably won't be making any friends this year.

The Wall Street banking titan appears poised to report record profits from trading in fiscal 2009, boosted in part by the fact that many of its competitors aren't in strong enough shape to take the same risks.

Goldman's robust earnings from trading operations are expected top its 2007 record of US$25.36-billion and allow the company to jack up its bounty for bankers this year by 64% to US$17.92-billion, according to a forecast by Guy Moszkowski, a bank industry analyst with Bank of America-Merrill Lynch. Goldman will put aside more than 44% of its total revenue to pay compensation and benefits, Mr. Moszkowski said in the report, which was obtained by Bloomberg News.

"Goldman Sachs is arguably the most well-respected investment bank, especially after deftly navigating the 2007-2008 credit crisis," wrote Mr. Moszkowski.

Analysts said that other big banks are likely to see nice profits from their trading operations, which include commodities, equities and fixed income, as those markets explode with activity after all but shutting down in the middle of the financial crisis.

But Goldman is expected to lead the pack.

Mr. Moszkowski, who upgraded the banking giant's stock to ‘buy' from ‘neutral' on Thursday, expects its trading operations to earn US$26.45-billion this year, which would blow past any previous record on Wall Street. Goldman has "unmatched risk-taking/risk management skills," Mr. Moszkowski wrote.

Shares of Goldman surged nearly 4% to US$143.66 a share following the upgrade.

The strong results are bound to fuel more conspiracy theory talk about Goldman. With its myriad of political connections, Goldman has long attracted criticism, including the accusation in a recent Rolling Stone article that the bank has made its fortune by engineering "every major market manipulation since the Great Depression."

"People have been crawling all over that notion that they've got to be crooked," said Roy Smith, a professor of finance at New York University and former partner at Goldman. "But this may just be an example of a firm that has followed a good business model all along and hasn't gotten distracted by other lines of businesses or mergers...In a sense, Goldman has benefited from being a simpler, less complicated business than many of its competitors. They're focused on trying to be the best institutional securities dealer."

It's fairly easy for Goldman or any healthy bank to rack up gains in trading these days.

"The money supply keeps expanding so there's more and more going into trading," said Richard Bove, a banking analyst with Rochdale Securities. "They've just had one of the best underwriting quarters in history."

That doesn't mean the end of the banking industry's woes, however.

"Trading matters, but what really determines how the bank industry performs is how their loan business performs and there's still a lot of pain to come there," said Douglas Elliott, a former investment banker and now a fellow at the Brookings Institution.

But here again, Goldman finds itself in an enviable spot because it has the good fortune of having much less exposure in that area than most of its rivals.

"It's more of an investment bank and less of a commercial bank," said Mr. Elliott. "It's commercial banks that got stuck with most of the bad stuff."

Indeed, while most of its rivals posted gigantic losses and wrote off huge chucks of capital, Goldman has reported only one money-losing quarter since the financial crisis began.

-- with files from Bloomberg News

[jimmyjeblonski]

...and not even a hint of Goldman-is-the-Wall St-wizard-behind-the-curtain or Goldman-created-and-then-shorted-the-crash commentary for once!
(Both of which have some truth to them IMHO)

[tidal]

Hehe... don't know where the right thread is, but the editorial page of the WSJ has taken to referring to Goldman Sachs as "Goldie Mac".

Goldman will surely deny that its risk taking is subsidized by the taxpayer -- but then so did Fannie Mae and Freddie Mac, right up to the bitter end.

The WSJ editorial board (:shock: ) is also proposing a tax ( ) on the “too big to fail” types…

[adrian2]

The WSJ editorial board (:shock: ) is also proposing a tax ( ) on the “too big to fail” types…

IIRC, so does our own James Hymas in his prefblog...

[jimmyjeblonski]

Reports over $5 per share, beating estimates...

Oct. 15 (Bloomberg) -- Goldman Sachs Group Inc. reported a surge in third-quarter profit driven by trading and investments with the firm’s own money. The shares declined as earnings fell short of the bank’s record.

Third-quarter net income more than tripled to $3.19 billion, or $5.25 a share, in the three months ended Sept. 25, from $845 million, or $1.81 a share, in last year’s third quarter, the New York-based company said today in a statement. Some investors were expecting per-share earnings of as much as $6, the so-called whisper number.

Revenue compared with the second quarter dropped in every division except principal investing and asset management, and earnings declined 7.2 percent from the second quarter’s record $3.44 billion. Lloyd Blankfein, Goldman Sachs’s chairman and chief executive officer, stuck with the firm’s focus on advising, trading and investing after converting to a bank last year to win the Federal Reserve’s backing.

“I think the expectations were somewhat unrealistic,” said Peter Sorrentino, who helps oversee $13.8 billion at Huntington Asset Management in Cincinnati, including Goldman Sachs, its largest financial holding. “It’s gotten more competitive.”

Goldman Sachs, the best-performing stock this year among the 15 biggest U.S. banks, fell $3.65, or 1.9 percent, to $188.63 in composite trading on the New York Stock Exchange at 4 p.m.

Whisper Number

“Obviously the net figure beat consensus estimates, primarily driven off the trading books, but the whisper was $6,” said Ioan Smith, a vice president at Knight Capital Europe in London.

The average estimate of 22 analysts surveyed by Bloomberg was for $4.18 a share, with forecasts ranging from $3.48 to $4.75.

“Our second quarter was a record in virtually every single business,” Chief Financial Officer David Viniar said on a conference call with reporters. The third quarter was the firm’s third-best in equities as well as fixed income, commodities and currencies, Viniar said. “So it was a fantastic quarter, just not as fantastic as the second quarter.”

Compensation, the company’s biggest single expense, accounted for 43 percent of revenue to total $5.35 billion in the third quarter. So far this year, Goldman Sachs has set aside $16.7 billion to pay employees, compared with $11.4 billion after the first three quarters of last year.

2007 Pay

The firm allocated $16.9 billion in the first three quarters of 2007, a year that proved to be an all-time high for pay.

The prospect of record year-end bonus payments at Goldman Sachs has sparked criticism from lawmakers even after the firm repaid $10 billion it received from the U.S. Treasury last year plus dividends. Goldman Sachs has also benefited from Federal Reserve support, government backing on about $30 billion of debt, and was one of the largest recipients of funds from the bailout of American International Group Inc.

Viniar said Goldman Sachs is giving compensation “a lot of thought.”

“Our competitors are paying people quite well,” he said on the conference call. “We’re very focused on what’s going on in the world. We’re also focused on our franchise and the performance of our people.”

‘Biggest Challenge’

Goldman Sachs’s “biggest challenge and the thing that seems to get the most press is how much they put aside for comp expense,” said Michael Hecht, an analyst at JMP Securities LLC in New York, who rates the stock “market outperform.” “A year ago we were talking about whether they would survive and now they just have too much damn money.”