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These guys are THAT good

Discussion in 'Sports and News' started by poindexter, May 11, 2010.

  1. poindexter

    poindexter Well-Known Member

    Goldman Sachs: profitable trading 63 days out of 63 days in the first quarter.
    JP Morgan: profitable 63 days out of 63 days in the first quarter.
    Morgan Stanley, losers that they are, lost money in four days.


    I am sure there was no rigging of orders, front-running clients, insider information or any other rigging of the market.

    Now trading is a zero sum game. So if Goldman is winning every single day, take a guess who is losing?
  2. Cousin Oliver

    Cousin Oliver New Member

    You're so unselfish with your insight. Thank you.
  3. The Big Ragu

    The Big Ragu Moderator Staff Member

    Goldman's trading gains were made on behalf of clients. They are not betting the firm's own money. So the beneficiaries there are their clients.

    It's also not really that unbelievable to me and doesn't suggest fraud (although that isn't to say that Goldman isn't fraudulent in its business practices). Goldman has only had losing days 11 times in the last 12 months. What makes it much more likely that Goldman is going to make money rather than lose on any given day. is that unlike me, it's a market maker in the FICC products (fixed income, currency, commodities) markets that generated those net positive days. What Goldman and JP Morgan (which reported no days of losses for the quarter) do is act as an intermediary in those markets to help keep them liquid and to make sure there is enough capital at all times. They may be doing something fraudulent--although it's easy to accuse without proof--but if they are not, they are simply guilty of acting as a market maker. And honestly, that doesn't involve much proprietary trading or putting anything at risk. As a market maker, they generate automatic revenue from bid-offer spreads. And with that automatic revenue, it would be really hard to lose money most days. It's basically like a bank charging people fees to do transactions and then reporting that they made money every day during the quarter from those fees.

    You can criticize the market maker system, but as long as that is the system, it's very easy for investment banks to make money in an environment like this. Also, the last year has been a great time to be a trader in general -- whether you are Goldman Sachs' traders or an individual with a trading platform on a desk. I'm not an investment bank, don't have the trading resources of their desks and in the last year, I have found it easier than ever to come out ahead in the commodities I play with, and in most currencies. It's been easy, provided you don't overthink yourself.
  4. Point of Order

    Point of Order Active Member

    End corporate welfare.
  5. poindexter

    poindexter Well-Known Member

    Bank of America perfect as well

  6. The Big Ragu

    The Big Ragu Moderator Staff Member

    People can't have it both ways. When things were really volatile, the banks got killed and they had to shoulder the blame for what their losses did to the economy as a whole. But in a quarter that was marked by virtually no volatility, all they did was make markets and collect bid-offer spreads for profits, and as a result now there will be people who want to excoriate them for running profitable businesses.

    Do those same people get upset when the store down the street makes money every day for three months? Because it's really the same thing. It takes a quarter like this for there to be no days in which they don't come out behind. But these banks certainly have gone many quarters in which you could count the days they came out behind on five fingers or less. The markets are set up for them to make money, and the banks provide a necessary role in keeping them liquid. Criticize the system of market makers if you want (although before you do, you really should have a logical suggestion for how you keep the FICC markets liquid without them), I certainly can, but to criticize the banks for doing what they are supposed to do under that system doesn't make much sense.
  7. waterytart

    waterytart Active Member

    Prop desk trading uses the firm's own capital, not clients'.
  8. poindexter

    poindexter Well-Known Member

    They have zero cost of capital, use of free money, etc. Every advantage known, given to them by just about every regulatory body.

    When things are really volatile, banks got bailed out by the taxpayer. Goldman Sachs becomes a bank holding company (and access to the Federal Reserve) when? September 2008. How convenient.

    Barely skipping a beat to give themselves annual bonuses that would make Caligula blush.

    God bless this country.
  9. Mark2010

    Mark2010 Active Member

    Since they are making so much money, should they bail out the US federal government?

    Street runs both ways, right?
  10. Care Bear

    Care Bear Guest

    Well, shit, at least the bankers know what they're doing.
  11. The Big Ragu

    The Big Ragu Moderator Staff Member

    Proprietary trading gains are NOT accounting for those days. If they were claiming their prop desks were right 100 percent of the time for a quarter, yeah, you could yell fraud. It's an impossibility.

    The profits they reported (and the string of profitable days) came because their FICC and equities units, which in this new world of populist scapegoating of the banks, are dominating their businesses. Those units make their returns by making markets for clients, not by betting the firm's money. What this shows is that in the wake of the hell they have taken over their CBO debacles, they are NOT doing crazy types of propietary trading. Instead, they are sitting back, making markets for clients, and collecting bid-ask spreads for steady (but not the home runs they were going for a few years ago) profits.
  12. poindexter

    poindexter Well-Known Member

    I think you are taking an INCREDIBLE leap of faith by claiming that there is no crazy trading going on.


    Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.

    A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters.

    Excessive borrowing by banks was one of the major causes of the financial crisis, leading to catastrophic bank runs in 2008 at firms including Bear Stearns Cos. and Lehman Brothers. Since then, banks have become more sensitive about showing high levels of debt and risk, worried that their stocks and credit ratings could be punished.

    That practice, while legal, can give investors a skewed impression of the level of risk that financial firms are taking the vast majority of the time.

    Come on dude. The party has never stopped.

    When the congress is bought and paid for; when the white house and fed are staffed with your former cronies; when there were zero repercussions for the fall of 2008; when there is so much money to be made; you REALLY think things are going to change?
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