A Few Goldman Highlights........

More risk, more leverage ( & some kind of "creative accounting" - see end of the post ) ....... Brilliant!

Mehr Risiko, höherer Hebel ( & ein klein wenig "kreative" Buchführung - siehe Ende des Postings ) ..... Hat ja in der Vergangenheit erstklassig funktioniert.... Rechnet man mal die Jahre 2007 und 2008 heraus......

Reuters

A measure of the bank's trading risk, average daily value-at-risk, surged to $ 240 million in the first quarter of 2009, compared with $157 million for the three months ended February 28, 2008, implying that the bank took more trading risk

Goldman also disclosed that it has set aside $168,901 per employee on average for compensation in the quarter, almost 35 percent more than in the first quarter of the previous fiscal year

Bloomberg

Total assets on the balance sheet rose 5 percent from the end of November to $925 billion as of March 27. Of that, about $59 billion qualified as “Level 3” assets, which are the hardest to value, down from $66 billion at the end of November

For more details see Goldman Sachs Press Release

Für weitere Details bitte einen Blick in die Goldman Sachs Press Release werfen.

This from Zero Hedge fits perfectly.....

Diese Beobachtung von Zero Hedge paßt wie die Faust aufs Auge.......

A very interesting data point, also provided by the NYSE, implicates none other than administration darling Goldman Sachs in yet another potentially troubling development. The chart below demonstrates the program trading broken down by the top 15 most active NYSE member firms. I bring your attention to the total, principal, customer facilitation and agency columns.larger/größer

Key to note here is that Goldman's program trading principal to agency+customer facilitation ratio is a staggering 5x, which is multiples higher than both the second most active program trader and the average ratio of the NYSE, both at or below 1x.

The implication is that Goldman Sachs, due to its preeminent position not only as one of the world's largest broker/dealers (pardon, Bank Holding Companies), but also as being on the top of the high-frequency trading/liquidity provision "food chain", trades much more often for its own (principal) benefit

Also on the same topic via EconompicData

Zum gleichen Thema von EconompicData

If Goldman's Selling... Beware of Buying

Goldman's principal trading amounted to 20%+ of all program trading reported on the NYSE, up from between 3-5% one and two years back. In other words, leading up to a period when Goldman may be issuing several billion dollars in an equity offering, their own principal trading has amounted to 4-5x more volume than what had been typical, in an illiquid market, potentially driving up the value of financial equities in the process... interesting.

larger/größer

I think this comment from Jesse´s Cafe Americain nails it....

Ich denke der nachfolgen Kommentar von Jesse´s Cafe Americain faßt es ziemlich gut zusammen......

The bulk of their profit purportedly came from speculative trading for their own accounts, using 'cheap FDIC guaranteed funds.

There will be no recovery in the real economy until the financial system is reformed and banks are restrained into productive functions within our society.

Make also sure you visit this piece from Floyd Norris and his commensts from the conference call ( seeThe Case of the Missing Month ) or this little rant via Barry Ritholtz How to Puff Up Earnings, Goldman Sachs Style.......

Denke das ein Blick in den Kommentar von Floyd Norris zum Conference Call auch nicht schaden kann ( siehe The Case of the Missing Month). Um das "positive" Bild von Goldman abzurunden noch ein kleiner Rundumschlag von Barry Ritholtz ( siehe How to Puff Up Earnings, Goldman Sachs Style )......

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.

No surprise to hear this update on via Norris......

Diese Erläuterung hinsichtlich der Aufsicht im Update von Norris dürfte keine wirkliche Überraschung sein.....

What About That Other $28 Billion?

Goldman Sachs, as you know by now, wants to return that $10 billion in TARP money it got. And what about the $28 billion it borrowed in the credit markets with a guarantee from the federal government?

A spokesman tells me that Goldman has no plans to pay that back early. Nor will it say if it would have been profitable had it reported on the quarter ended in February, as it traditionally has.The spokesman did tell me something I would have included in my earlier Goldman blog had I known it, that the change in fiscal year was required when it converted to a bank holding company.

The bank regulators did not, however, force Goldman to avoid any mention of the December orphan month in the text of its earnings release, instead relegating it to a table deep in the announcement.

> What esle do you expect from a regulator that is labeling a giant hedge fund like Goldman as a bank.... ;-)

> Was soll man auch anderes von einem Regulierer erwarten der einen gigantischen Hedge Fonds wie Goldman Sachs den Bankenstatus zuspricht.. ;-)

Congratulation ( NO SARCASM ) to Goldman for placing the shares at $ 123 Goldman Sachs Raises $5 Billion to Repay TARP Funds The same kind of "creative" accounting in 2008 and the stock would have tanked 50 percent withing a day...... But at least this time it is the so called smart money ( lets hope not too many pension funds are involved.... ) and not the taxpayer on the hook.....Clearly a sign that the euphoria level is close to a peak ( Here is more evidence of some kind of exuberance ) .....

Man muß Goldman zu der Dreistigkeit gratulieren ( Diesesmal ohne Augenzwinkern ). Die haben es tatsächlich geschafft Ihre Aktien zu 123 $ zu platzieren ( siehe Goldman Sachs Raises $5 Billion to Repay TARP Funds ). Hätten die es noch vor einem Monat gewagt eigenmächtig Bilanzierungszeitrahmen abzuändern und so den äußerst verlustreichen Dezember praktisch aus dem Blickwinkel der Öffentlichkeit zu "verbannen" hätte sich die Aktie wohl binnen 24 Stunden halbiert...... Hoffe inständig das es noch weitere Unternehmen schaffen private Gelder mit welchen Methoden auch immer an Land zu ziehen..... Dann ist zumindest der Steuerzahler ( vorausgesetzt die Pensionskassen haben sich zurückgehalten ) nicht allein der Dumme....... Denke das zeigt einmal mehr das die aktuelle Marktstimmung etwas zu euphorisch ist Hier ein weiterer Beleg für eine zumindest "ausgelassene" Stimmung.......

Financial Firms Taking More Risks With Their Own Capital / Economist

just read the news from the last days. almost every bigger deal has one investment firm putting own capital to work/at risk (alltel, etc...).

da braucht man sich nur die übernahmemeldungen der letzten tage ansehen. fast jeder größere deal hat zugleich eine kapitalbeteiligung der banken zur folge.


Relentless competition is forcing financial firms to take more risks with their own capital

INVESTMENT bankers would hate to admit it, but traditionally they have borne some resemblance to estate agents, matching buyers and sellers of financial assets instead of houses and land and taking a fee on the transaction. Yet investment banks have recently changed out of all recognition. These days, if they were estate agents they would not only suggest a suitable property to buy and offer to handle the transaction but also propose a loan, come up with sophisticated products to offset the risk of rising rates, provide help with the down-payment, sell you funky insurance products and, if they decided the property was a bargain, even buy it from under your nose.


In short, investment banking has migrated from an agency model towards a principal one. The industry is not just offering its clients a growing array of products to buy and sell; it is making bigger bets with its own capital, too. According to Merrill Lynch, in 2005 one-third of the industry's revenues came from principal trading of debt and equity and only 15% from the commissions business, once the industry's bread and butter....

At the same time private-equity firms and hedge funds have mercilessly fished in Wall Street's talent pool. Some, such as Citadel, a hedge fund, have ventured into market-making in securities, an old Wall Street role. Others have gone for niche markets. Star-studded boutiques such as Greenhill and Perella Weinberg compete with banks in M&A. In trading, margins on cash equities, which used to be Wall Street's signature business, have been hit by electronic platforms and by rules to increase price transparency, such as Regulation National Market System (known as Reg NMS) in America.

The result, according to industry leaders, is growing pressure to explore new sources of profit. “I don't know an industry that is more competitive,” says Lloyd Blankfein, boss of Goldman Sachs. “That is what is driving the innovation cycle.”....

Owners beware
Increasingly the firms are buying their own investment assets too. For years they have been using proprietary trading desks to take positions. Now they have ventured into private equity as well, putting a growing proportion of their capital into long-term, illiquid investments, such as property or companies. ....At Merrill Lynch and Goldman they accounted for about half of the firms' equity capital last year, up from just over a quarter in 2005. That could be alarming if markets dry up and asset values plummet.

thanks to http://www.itulip.com/

According to Dominion Bond Rating Service, all five Wall Street firms, Goldman, Merrill, Morgan Stanley, Lehman Brothers and Bear Stearns, almost doubled their equity capital between 2001 and 2006....


thanks to Kevin Duffy http://tinyurl.com/ytgwnt

Shareholders are not entirely sanguine either. Investment banks are mostly measured on their price-to-book value. Unlike the assets of a bank or an industrial company, most of the securities on their balance sheet have a book value that can be calculated daily and can be easily liquidated. That puts a floor under their price. Currently the big Wall Street firms are trading at more than twice their book value, reflecting last year's average returns on equity of about 25%, which is higher than their cost of capital. Their long-run average is 16% (see chart 5). Goldman, with a staggering 33% return on equity last year, has the highest valuation. But with so much more capital now deployed, the banks have to work harder to improve returns.

There is growing uncertainty about future earnings, however, pushing price-earnings multiples close to historic lows. This is partly because investment banking is a cyclical business, which may be peaking. It is also because their earnings are, to put it mildly, opaque. As Mr Hintz (a former chief financial officer of Lehman and treasurer of Morgan Stanley) candidly admits: “We can't be totally confident how they make money trading or how sustainable trading is.”

disclosure: long ubs, short gs

....such an event should not have happened in the history of the known universe

click on the headline to read the piece from the economist about the "grey tuesday". i wanted to focus on the point mentioned in the headline.......gives you a good feeling when something cam´t happen ...and then within 6-8 month the impossible happened twice!...got gold?!

wenn ihr noch ne zusammenfassung zum dienstag lesen wollt bitte auf die überschrift klicken. ich möchste mich hier lediglich auf den o.g. punkt konzentrieren. gibt einem doch gleich ein gutes gefühl wenn einieg sachen nocht passieren können ...um dann doch binnen 6-8 monaten doppelt zu geschehen.....got gold?!

.....But it may be the internal dynamics of the markets, not the evolution of the wider economy, that decides whether this is a brief shakeout or the start of a serious correction. Periods of low volatility tend to encourage risk-taking. Hedge funds have a natural inclination to buy higher-yielding (and thus riskier) instruments and sell low-yielding assets, since this delivers a positive income or “carry”. When the market falters, these positions rapidly lose money. (just ask this person....)

For example, the modest rise in the yen—2.3% against the dollar on February 27th—wiped out about half the annual interest gain accruing to investors who sold yen and bought dollars. ...

Investment banks use “value-at-risk” models which mean that, when volatility rises, they cut the capital they allocate to trading. This usually means selling assets. So a sudden jump in volatility tends to generate further volatility. ....

What matters is how many actors have all made the same bet. One of the oldest market mistakes is the assumption that you can get out of a position as easily as you entered into it.

According to Goldman Sachs, the latest jump in the Vix (a measure of stockmarket volatility) took it eight standard deviations from its average.

If conventional models are correct, such an event should not have happened in the history of the known universe. (read the comment at the end of the post)

Then again, the move in energy prices that caused the collapse last year of Amaranth, the hedge fund, was a nine standard-deviation event.

Perhaps modellers do not know the universe as well as they would like to think.

this sums it up.... :-)

das faßt es ganz gut zusammen..... :-)

i want to highlight this comment
Since standard deviation implicitly assumes a normal distribution, it is completely meaningless for Goldman Sachs to speak of an eight-standard-deviation move in VIX (a claim promptly repeated on CNBC by a stock shill yesterday).

Two possibilities: either the 'analyst' at GS who manufactured this bogus statistic is innumerate, or he's a lying liar. I lean toward the latter.

For the Economist to repeat and broadcast this absurd bit of statistical disinformation showcases its descent from the iconoclastic independent voice of decades ago to today's dumbed-down Matrix mouthpiece.

Maybe they should hire a few economists ... bwa ha ha ha.

thanks for the insight!

goldman sachs. hedge funds or investmentbank?

do the math! investmentbanking and asset management just over 10 b$ and trading and principal investment well over 24 b$!. (have not dig deeper into the numbers. but the trend is obvious.) looks like the guys from the genetiv research dep. can hire goldman..........

die frage ist wohl berechntigt. im ursprünglichen kerngeschäft der bank gerade mal über 10 mrd$ und im traing und beteiligungsgeschäft über 24mrd$.( habe noch nicht alle details der nummern). die typen sollten goldman wg. der anheuern......

to be fair. the numbers are fantastic. but are they sustainable.... i think no.

fairerweise muß man goldman zu diesen zahlen gratulieren. einfach wahnsinn. die frage ist nur ob dies zahlen nachhaltig sein können. da habe ich meine zweifel.




http://biz.yahoo.com/bw/061212/20061212005592.html?.v=1
Investment Banking
Net revenues in Investment Banking were $5.63 billion for the year, 53% higher than 2005. ......... Net revenues were also significantly higher in debt underwriting, primarily due to a significant increase in leveraged finance activity and, to a lesser extent, an increase in investment-grade activity. Net revenues in the firm's Underwriting business were $717 million, 78% higher than the fourth quarter of 2005. Net revenues were significantly higher in debt underwriting, primarily due to an increase in leveraged finance






Trading and Principal Investments
Net revenues in Trading and Principal Investments were $25.56 billion for the year, 52% higher than 2005. Net revenues in FICC were $14.26 billion for the year, 60% higher than 2005, primarily due to significantly higher net revenues in credit products (which includes distressed investing) and commodities. ........ In addition, corporate credit spreads tightened, the yield curve flattened and volatility levels were generally low in interest rate and currency markets.
Net revenues in Equities were $8.48 billion for the year, 50% higher than 2005, primarily reflecting significantly higher net revenues in derivatives, across all regions, as well as higher net revenues in shares. ............
Principal Investments recorded net revenues of $2.82 billion, reflecting a $937 million gain related to the firm's investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC), a $527 million gain related to the firm's investment in the convertible preferred stock of Sumitomo Mitsui Financial Group, Inc. (SMFG) and $1.35 billion in gains and overrides from other principal investments.........

Asset Management and Securities Services
Net revenues in Asset Management and Securities Services were $6.47 billion for the year, 36% higher than 2005.
........Securities Services net revenues were $2.18 billion, 22% higher than 2005, as the firm's prime brokerage business continued to generate strong results, primarily reflecting significantly higher global customer balances in securities lending and margin lending

value at risk!


$ in millions

Three Months Ended Twelve Months Ended
-------------------------- -------------------
Nov. 24, Aug. 25, Nov. 25, Nov. 24, Nov. 25,
2006 2006 2005 2006 2005
-------- -------- -------- --------- ---------
Risk Categories
Interest rates $ 51 $ 55 $ 45 $ 49 $ 37
Equity prices 75 61 44 72 34
Currency rates 14 21 15 21 17
Commodity prices 29 31 25 30 26
Diversification
effect (13) (63) (76) (49) (71) (44)
-------- -------- -------- --------- ---------
Total $ 106 $ 92 $ 80 $ 101 $ 70
======== ======== ======== ========= =========

"Goldman Sachs Group Inc. is paying its employees an average of $622,000 this year", after posting the highest profits ever for a securities firm.
The firm set aside $16.5 billion for salaries, bonuses and benefits for its 26,467 employees in the fiscal year ending in November, 40 percent more than it paid out all of last year, according to Goldman's earnings report today. The firm allocated 43.7 percent of its revenue for pay, down from 46.6 percent.

here is the "Goldman Sachs F4Q06 (Qtr End 11/24/06) Earnings Call Transcript"> (thanks to seeking alpha!)