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Goldman's Discount Window Backed "Hedge Fund" Trading Revenue Drops 40%+ Sequentially And QoQ
The biggest surprise in Goldman's Q2 8-K was the firm's disclosure that Trading and Principal Investment revenue plunged by 43.2% sequentially, and 42.4% quarter over quarter. The firm's once unbeatable trading operation is finally showing cracks. If a firm backed by the full faith and credit of the risk free discount window is not showing record trading revenue growth quarter over quarter, what can the rest of us do? One wonders if the firm may have finally started following guidelines on prop from flow information segregation. While the 8-K does not disclose profitable trading day information, we are confident that when released, the 10-Q will demonstrate that this quarter Goldman had at least 10 trading days in which it lost money in the current quarter: a stunner compared to the recent near flawless performance in the past several quarters. Either Goldman's Achilles heel has been exposed or the firm is blowing money on purpose.
The chart below demonstrates the firm's total quarterly revenue and revenue from the all important Trading and Principal Investment group of the Discount Window backed hedge fund.
Goldman increased headcount by 1000 even as the compensation ratio was flat at 43%.
Lastly, one headscratcher is the firm's Q2 tax rate, which came in at 57.7%, certainly an outlier. We believe this may be associated with the UK bank payroll tax issue this quarter, although we have not yet validated this assumption.
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GS is a pig. Their stock has come off it's lows and down <2%. I wish they'd move overseas or just outright die. They've done more to harm america that most anything I can think of.
Who the fuck would junk you? You're damn right. GS should be joined by JPM on the river styx.
Probably a clown named "No Mas".. He's only around when the fraudulent market is up big..
+2
Move overseas?? Uh, they've been wreaking havoc worldwide for quite awhile now.
Don't lose sleep. GS is a $200 stock next year, $150 at the lows. That whore is going private. If you read FinReg (all 2000+ freaking pages) you'll see why. They are going to revoke the CB charter, liquidate all non-investment banking divisions and trading desks, and go private. Their attitude will prevail, watch and see. And that attitude is "piss on these ahole socialists" running the show now.
FinReg was the final nail.
Market making constitutes very little of Goldman's trading P&L. A slow down in institutional client orders would not translate into that kind of drop in revenue. Try again jackass.
Ding dong the witch is dead?
They've lost their mandate to prop the market, as apparent by the recent decline in equity markets, so a lot of their mono-directional guaranteed trading has been halted. With the elections coming they will soon be re-Marshalled for the good of the country.
I figure they can't front run a bear as easily without crashing the market.
this
Simply put, word came down: "Let's Cool it, dudes". Don't take out fire insurance on every deal you sabotage. Don't snooker teacher's pension funds into doomed, opaque structured products, don't engineer bond sales for foreign governments with a self-destruct jack-in-the-box built in. And let's lighten up on frontrunning clients.
Goldman is paying the integrity factor in its revenue.
In laymans term, stop ripping people off with your double dealing.
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It's a good day.
Goldman Sachs Profit Drops 82%, Missing Analysts' Estimates
http://www.bloomberg.com/news/2010-07-20/goldman-sachs-profit-falls-82-misses-estimates-on-trading-revenue-drop.html
No shit their trading revenue declined. Most of their clients have already lost all their money thanks to listening to GS's calls.
Reverse Repo 105
Recognizing the purchase of an asset, for which they overpay, only to sell back again after the end of the reporting period, at the original price, thus magically understating profits over the reporting period. Now that would be evil genius...
@A Man without Q : You´re reading my mind ! Somehow this GS earnings report "feels" fabricated. I think Blanky wants to be out of the headlines after settling with SEC. Good for business and good for the employees...
Somehow this GS earnings report "feels" fabricated. I think Blanky wants to be out of the headlines after settling with SEC. Good for business and good for the employees...
+1
They want to go private right before the government runs out of money...
You may be on to something!
A gambeling house back by tax payer funds, what in the would is going on.
And despite the big miss, GS still managed to make $613 million in positive net income. Not bad for being humble.
I think they were told to "cool it" regarding their egregious trading activity. Who in their right minds wouldn't raise a red flag when daily trading profits go 62 for 62 during a quarter?
Perhaps between the legal fine and the lack of invincibility shown this quarter in the trading operation, GS will try their best to do "God's work" in relative obscurity.
Of course, it's not going to work out that way... but it will at least keep the Feds off their backs for a while.
+1
"They're easing up on the 'ripping everyone off' thingie"
WTF? Theres nothing much left to rip off!
There's plenty there to be "ripped off", but the Joe Retail has decided to sit this one out for awhile.
mabye they are advising customers the right way so that GS themselves can take the losing side of the trade ... quite a sea chance and tricky .. i mean they haven't done that like millions of years
Goldman is Evil
GS solidly green now:
The latest results were the worst for the Wall Street giant since the fourth quarter of 2008, according to FactSet.
See, all is well there.
Tyler,
How much is the extra 24% taxes in dollars?
There's something about that change in their tax rate, maybe if we knew why it shot up as their profits slipped, things would be more clear? If I were GS, it would be something to fix.
Low volume pump to regain the gap down, seems now GS has placed full naked shorts on itself, just another day in Fraudmerica!
Great idea. Move Goldman, lock, stock, and barrel.
To IRAN.
problem solved.
Just remember what we have learned here folks,
On a long enough timeline
the survival rate for
everyone drops to zero
July 20 (Bloomberg) -- Goldman Sachs Group Inc. lost money in the second quarter by betting on a drop in stock-market volatility just as a gauge of equity price swings surged to a one-year high.
“Primarily in response to our client needs, our equity derivatives business was short volatility entering the second quarter and posted poor results,” Chief Financial Officer David Viniar said on a conference call with news media today. The firm didn’t break out the size of the loss or the overall results from the equity derivatives group responsible for the business.
The Chicago Board Options Exchange Volatility Index, known as the VIX, is the most widely used measure of volatility. The index, which started the second quarter at 17.47, rose as high as 45.79 on May 20 before ending the quarter at 34.54. The index, which measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index, has averaged 20.38 over its two-decade history.
Goldman Sachs, which posted the highest equities trading revenue on Wall Street last year, said the division’s revenue slumped 62 percent in the second quarter from a year earlier to $1.21 billion. Still, the unit’s revenue beat equities divisions at JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. in the quarter.
Clients wanted to hedge against an increase in volatility, Viniar said on the call. “We took the other side because you know we deal with our clients all the time,” he said. “We had that position going into the quarter and volatility just spiked.”
Second Quarter
Goldman Sachs, which set a Wall Street profit record for a U.S. securities firm in 2007, reported today that second-quarter profit tumbled 82 percent from a year earlier as revenue from trading equities as well as fixed-income, currencies and commodities dropped 44 percent from a year earlier.
Viniar said the firm reduced the size of its market bets during the quarter to the lowest in three years as measured by value-at-risk. VaR, a statistical measure of how much the firm could lose in a single day of trading, dropped to an average of $136 million in the quarter from $161 million in the first quarter and $245 million a year earlier.
“It’s kind of hard to fault them for being wrong every now and then,” said Alan Villalon, a senior research analyst at FAF Advisors, which owns Goldman Sachs shares. “They’ve kept raising the bar themselves, but there’s going to be a hiccup every now and then.”
The Squid actually 'try' to make a loss on daily trading to disguise the easy-money world they live in?
They just couldn't live with that, even if they tried their very very best -honest injun. It's a disease, people that greedy just can't resist. Another 61/62/63 days of green, green grass I'm sure. The most they could do was take the money, and create some offsetting theoretical, notional loss that they could erase later.
Plus ca change, plus la meme chose.
maybe the 10,000 hour group is cleaning their clock.
Have the Hedge Funds leaned how to game the HFT Computer Programs?
Have Retail Traders left the Market for good? Leaving the Computers to trade with themselve and there are no marks?
Has everyone left the Market because of HFT, including some of the Floor Brokers on the NYSE?
Appears to me that because of the HFT everyone is now gone. Gs has no one to trade to. Very profitable at first but now no more suckers in the rigged Market. They actually shot themselves in the foot this time.