Goldman Sachs (GS) 01 (Jun 08 - Apr 10)

[winston]

what is it with people about GS.... cant GS be recognized for their superior performance?

I think GS received at least US$6b from AIG who was the counter-party in those CDS.

Dont looked like superior performance to me.

If there's gambler's ruin, then it's too bad.

[kennynah]

maybe one day, that risk of ruin may hit GS...until then, which fund company can outperform GS today?

[millionairemind]

Goldman Sachs denies betting against its clients on CDOs
Goldman Sachs has moved to justify spending millions of dollars short-selling some of the financial products it made and sold to clients.

By Louise Armitstead
Published: 7:10PM GMT 29 Dec 2009

In a rare statement of defence, the American investment bank has offered a detailed explanation of its dealings in mortgage-backed products, particularly regarding collateralised debt obligations (CDOs), in the years preceding the financial crisis.

The explanation was prompted by an article in the New York Times in which former Goldman employees and debt experts claimed that the bank knew the CDOs it was designing and selling to clients were highly risky. The sources claimed that rather than warning clients of the dangers, Goldman spent millions of dollars "short-selling" the instruments, reaping vast rewards when they imploded.

Sylvain Raynes, an expert in structured finance at R & R Consulting, told the New York Times: "The simultaneous selling of securities to customers and shorting them is the most cynical use of credit information that I have ever seen. When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else's house and then committing arson.''

A spokesman for Goldman said: "We respectfully disagree with this view."

The design and marketing of the disastrous instruments - and the degree to which the arranging banks understood the risks in the years up until 2007 - are the subject of an investigation by American authorities including Congress, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority.

Proprietary trading, or the banks' practice of trading for their own gain rather than their clients', has already been widely criticised since the financial crisis. Banks are determined to avoid any suggestion that they were also betting against and at the expense of clients.

Goldman admits that it regularly took short positions in CDOs and other synthetic instruments that it designed and sold to clients, it strongly denies that it was motivated by an understanding of the dangers. Instead it says the short positions were merely a simple hedge against its large long mortgage portfolio.

In its statement Goldman said it had suffered significant losses due to its mortgage portfolio, including a $1.7bn write-down in 2008 and added that "these losses would have been substantially higher had we not hedged."

The bank pointed to the fact for every buyer of a CDO there had to be a seller, due to the way the market was designed. Goldman claims that high demand from investors meant that the arranging banks like itself and others were the "natural shorts" - and that investors were always aware of this.

The danger in the CDOs was not foreseen but instead resulted in losses for "financial institutions including Goldman, effectively putting an end to this market."

Separately, a small Chinese power generator said it is refusing to pay $80m lost on two hedging contracts as part of an on-going row that investment banks produced "extremely complicated" derivative products that were impossible to understand. Shenzhen Nanshan Power warned in a statement that the "possibility of using a lawsuit can not be ruled out."

[winston]

BTW, I heard a rumor that GS is thinking of moving from the UK because of the special tax on bonuses ..

=================================================

Meredith Whitney, an analyst who runs an advisory group that bears her name , cut her earnings estimates for Goldman Sachs Group Inc. (NYSE: GS) for the second time in less than a month, again without explanation.

She now expects Goldman to earn $5.50 per share for the fourth quarter, down from a previous estimate of $6. Whitney also expects Goldman's earnings per share (EPS) to be less for the full and subsequent two years. Shares of Goldman Sachs jumped $3.06, or 1.77%, to close at $176.14

Source: Money Morning

[millionairemind]

Very long article about GS by a former GS banker in Vanity Fair. Good read if you have the time.

The Bank Job
One of the biggest disconnects on Wall Street today is between the way Goldman Sachs sees itself (they’re the smartest) and the way everyone else sees Goldman (they’re the smartest, greediest, and most dangerous). Questioning C.E.O. Lloyd Blankfein, C.O.O. Gary Cohn, and C.F.O. David Viniar, among others, the author explores how their firm navigated the collapse of September 2008, why it has already set aside $16.7 billion for compensation this year, and which lines it’s accused of crossing.
By BETHANY MCLEAN January 2010
http://www.vanityfair.com/business/feat ... rentPage=1

[millionairemind]

Great earnings.. still got hammered.

Jan 22, 2010
Goldman posts huge profits

NEW YORK - GOLDMAN Sachs posted huge forecast-shattering 2009 profits on Thursday as the banking giant moved to deflect criticism about lavish bonuses from US$16 billion (S$22.5 billion) reserved for compensation.

Goldman Sachs, the poster child for public outrage over big bonuses, said it was scaling its money for employee compensation in the face of criticism that it weathered the financial crisis with government aid.

The bank reported net profit of US$4.787 billion in the fourth quarter. For all of 2009, net profit leapt to US$12.192 billion, a sixfold increase from US$2.041 billion in 2008. 'I think the people of Goldman Sachs did a great job this year,' finance chief David Viniar told reporters.

Goldman Sachs said it had alloted US$16.193 billion in 2009 for compensation, including bonuses and benefits, a rise of 48 per cent from a year earlier. Chairman and chief executive Lloyd Blankfein said the year's pay and benefits outlay was 'our lowest-ever compensation to net revenues ratio' - at 35.8 per cent, down from 48.0 per cent a year earlier.

The Wall Street giant said that fourth-quarter compensation had been reduced to fund a charitable contribution of US$500 million to one of the firm's philanthropy programmes aimed at stimulating US economic growth and job creation.

On average, each of the bank's 32,500 employees would have received nearly US$500,000 in compensation and benefits in 2009.

Mr Viniar, who said that the majority of the reductions would affect top executives, insisted: 'We're not blind to the calls for restraint and we heard them.' Goldman Sachs, one of the most successful survivors of the financial crisis, had announced in December it would pay bonuses to top executives in stock instead of cash. -- AFP

[winston]

1) For all of 2009, net profit leapt to US$12.192 billion, a sixfold increase from US$2.041 billion in 2008.
2) Goldman Sachs said it had alloted US$16.193 billion in 2009 for compensation, including bonuses and benefits, a rise of 48 per cent from a year earlier.

Net Profit of US$12b. Bonus of US$16b. Great logic !

[winston]

Just chatted with a friend yesterday. He was not so happy because his bonus was lower than his expectation as he felt that he brought in a lot of Revenue.

I told him that he should be grateful because GS was not supposed to have that US$6b that was obtained through AIG.

Anyway, as far as I'm concerned, Karma would be ripening soon for GS:-

* In Volcker's words GS is going to have to choose if they want to continue with bank charter or not. Seems to Brad like more than 10% of GS revenues at risk - keep in mind if they restrict fixed income, GS will be high ROE firm, but lower growth - if they have to sell private equity investment - will be up front gains, but what will they do with the capital as they cannot invest in trading?

http://www.zerohedge.com/article/trader ... l-weakness

[millionairemind]

Just chatted with a friend yesterday. He was not so happy because his bonus was lower than his expectation as he felt that he brought in a lot of Revenue.

I told him that he should be grateful because GS was not supposed to have that US$6b that was obtained through AIG.

Anyway, as far as I'm concerned, Karma would be ripening soon for GS:-

* In Volcker's words GS is going to have to choose if they want to continue with bank charter or not. Seems to Brad like more than 10% of GS revenues at risk - keep in mind if they restrict fixed income, GS will be high ROE firm, but lower growth - if they have to sell private equity investment - will be up front gains, but what will they do with the capital as they cannot invest in trading?

http://www.zerohedge.com/article/trader ... l-weakness

You friend can just trade on his own la.. if he believes he is that good

I read that 95% of institutional traders that gave up the institutional support and started trading on their own with their own money fail within 6 months.

[millionairemind]

Did Goldman Benefit The Most From AIG Bailout?
January 26, 2010 - 4:53 pm
Liz MoyerBio | Email
Liz Moyer is a Senior Writer at Forbes

Goldman Sachs' AIG-related counterparty securities were worth just 40 cents on the dollar in November 2008, almost half as valuable as the securities held by UBS, which were worth 71 cents on the dollar, according to testimony prepared by the Special Inspector General of the Troubled Asset Relief Program for a hearing tomorrow by the Congressional Committee on Oversight and Government Reform.

The Special Inspector, Neil Barofsky, says the disparity shows how certain banks stood to benefit far more than others from the Federal Reserve Bank of New York's decision to pay the counterparties off at full-value, a controversial decision that is the subject of tomorrow's hearing. A bank that held less valuable securities would benefit more from a complete repayment than a bank that stood to lose less.
http://blogs.forbes.com/streettalk/2010 ... g-bailout/