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How Goldman's "Recommended Top Trades" Cost Clients Billions And Contributed To Goldman's Perfect Record
Zero Hedge has long discussed the strange phenomenon whereby Goldman recommends a trade only to unwind it shortly, after institutional clients who have been naive enough to follow it, end up losing millions, sometimes in a period as short as a few days. The observation there being that the only way Goldman scores something like a perfect 63 out of 63 quarter is by literally raping its clients, along the lines of what Goldman is currently facing civil and criminal probes for allegedly doing in the CDO space. And while our rant has been public for quite some time, yesterday was the first time the Bloomberg also decided to join the fray.
Presenting exhibit A: Goldman's recommended top trades for 2010
It may come as no surprise to you that had you followed these 9 trading recommendations, you would have made money on precisely two of them. And here don't even discuss the well documented flipflopping in the FX department's EURUSD recommendations, in which the firm changed its view on the euro three times in the span of a month, being stopped out every single time!
Here is Bloomberg's commentary on this:
Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who adopted the New York-based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday. Clients who used the tips lost 14 percent buying the Polish zloty versus the Japanese yen, 9.4 percent buying Chinese stocks in Hong Kong and 9.8 percent trading the British pound against the New Zealand dollar.
Goldman Sachs analysts made eight trade recommendations for this year in December, including telling clients to buy the British pound against the New Zealand dollar. On April 1, Goldman Sachs added a ninth “top” trade, telling clients to buy Chinese stocks listed in Hong Kong and predicting the Hang Seng China Enterprises Index would rise 19 percent to 15,000.
Since then, the gauge has slid 9.4 percent to 11,426.18. The Shanghai Composite index has entered a bear market, losing about 21 percent this year. That’s the third biggest decline in the world after Greece and Cyprus. The decline accelerated this month on concern Greece, Spain and Portugal will struggle to finance their budget deficits and dismantle the euro.
The Chinese stock recommendation was made by a group led by Dominic Wilson, a senior Goldman Sachs economist in New York. Wilson cited inexpensive valuations and “robust” economic growth. He also said investors have already factored in the risk of higher interest rates in China.
Wilson wasn’t available to comment because he was out of the office traveling, according to an e-mail.
Of course, Goldman's losses are its clients' gains, and more significantly, vice versa:
Goldman Sachs makes more money from trading than any other Wall Street firm. In the first quarter, the bank’s $7.39 billion in revenue from trading fixed-income, currencies and commodities dwarfed the $5.52 billion made by its closest rival, Charlotte, North Carolina-based Bank of America Corp. In equities, Goldman Sachs’s $2.35 billion in revenue was about 50 percent higher than its nearest competitor.
And this is a firm that is now trying to convince pension funds to put more money in the firm, when instead it should be convincing Christine Varney it is not the biggest market monopolist since Standard Oil and Ma Bell.
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Bangkok stock exchange is on fire. Literally !
Yea, but markets don't give a darn about
them.
It's far way from PIIGS.
Wake the markets up if they burn Athens, Madrid,
Lisbon stock exchange.
@Eduardo
Haven't read anything lately on Thailand, so thanks for the update. We may see this "happen" to the NYSE later this year or next. Best way to shut down a falling market.
And I bet Timmay and Ben know how to make a good Molotov.
They have doing this snaky crap for many years, not just recently. I can remember distinictly where I reported to the SEC and FINRA how they would make a recommendation on a tech stock, then 2 weeks later come out with a totally different view. All the while, they were doing opposite of what they recommended guaranteed. That is why I have always said, do the opposite of what they say if you want to make money.
Fuck-the-clients is an ingrained part of the culture.
I have trouble understanding why this isn't more widely understood.
I guarantee that plenty of clients getting fucked will say something like... "Oh, but not my advisor. He/she is a nice person. They would never do anything wrong to me."
Nice brand these guys have...regular people seem to have a correctly very unfavorable view of them, however, elite money movers still seem to think they are the man...how does anyone that tries to raise money or manages money let these criminals anywhere near their money? They have bankrupted individuals, pension funds, towns, countries and themselves...and will likely help in taking out US taxpayer/our currency and people still deal with them, amazing....
Oh man, I just put all my funds in GS knowing they are actually TreasDept North. What to do, what to do?
you are going to experience "leakage" (industry term)
Oh by the way those "institutional clients" are the pension managers and such - you know the ones you probably pay a fee to manage your money. What the fuck do they do to earn their money? Are they children or adults - and if the former whay do they get paid big bucks?
Sure there are always snake oil salesmen, corrupt merchants, liars, cheats etc etc - the guy you are paying to manage your money gets paid a lot - for what? To develop a brain and think and not get suckered by the next scamster he runs into. Direct your anger at the right place.
Your "light bulb" moment as the scam is revealed to you.
Real Money, you know, like savings - are the mothers milk of the makets - everything else is built on this. People with real money and the people who as fiduciaries are managing real money - need to grow a set. You are the kings of capitalism - not the sell side jokers. treat the sell side - like you would treat encyclopedia salesmen, used car sales men etc. If your money moanager has a deferential attitude to sell side sharks - fire him. people with actual capital better start calling the shots.
The world exchanges its pension contributions into bonuses for Goldman. It is kind of funny (if it weren't so sad) how stupid the pension fund managers are while still pulling in huge bonuses for themselves. What a great system - money for everyone except the retiree - OH - the government will cover that..
Why are people with the real money ( yes the little old ladies with a million or two stashed away in a bank ) - whining and wheedling like pussies- huh? get aggressive. Fire your stupid money manager and do it youself. demand justice. You hold capitalism by the balls. Its your capital.
In contrast much of the "capital"/"liquidity" on wall street is - kinda like if you bet the homeles guy down the street a million bucks that it will rain next Tuesday - and it rained - and he owes you a million bucks - sure - yeah right. Or its like you take your old sneakers to Bennie Mae and he provides a one week loan for a million dollars against youtr sneakers. It aint Real Capital. Its just mere liquidity/ vapor.
counterparty risk FTW
homeles s
two s's you fart
Velobabe, it looks like you're sporting a new picture of you flashing your package.
I guess you got tired of various men who couldn't tell that your prior picture was taken with the light source coming from an angle. Thank you for making it "clearer" for those few who need to see things straight on, so to speak.
Maybe you should include a link for those who wish a blow up version. :>)
plus wanted to show off my hair. growing it really long,
so i can donate it to the oil spill in gulf of mexico.
well actually it is in honor of the maglia rosa.
pink jersey,
Giro d'Italia, Italy, GTMy view is that grannie has faith in her "advisor" and the bail out was to cover the losses of the "advisors".
The truth will come out.
jal
The best way to rape someone is if they are a trusting client. Lawyers have known this forever.
The whole industry needs a nuclear bomb to reform these slimy practices. Amazing how doctors pay hefty fees in liability insurance and these investment jackasses get away with pillaging billions. And it's not just Goldman, they all engage in slimy practices. PRESIDENT OBAMA, CAN YOUR HEAR ME?
Keep shorting the market, but I am sticking to my call. When you bend over to grab your ankles, don't tell me it hurts.
Ummmm ... OK, Leo. Seems to me you're the one with his hands on his ankles right now, but be sure to give us a call when that changes, mmmm'kay?
Gold $1,191.00
as for Leo's long positions... verse going short against the Euro trash? well Leo is a Gentleman and that is his choice, the high ground is his choice and I don't think less of the man for taking the high road.
Oh man, I just put all my funds in GS knowing they are actually TreasDept North.
What to do, what to do?
Do what they do, not what they say.
BTW, are institutional investors that stupid to not notice? Or do
they get kickbacks for screwing their stockholders?
There will come a time when it won't be safe to resemble a rich
person. The proletariat will wake up pissed. Better not have
any suits in your closet then. For that matter, better not have a
closet big enough to live in either.
Never mind that the RP is a large institution that has sophisticated, accomplished financial gladiators ready and willing to do battle on the plains of the financial landscape. When gladiators talk around the campfire (Bobby Van's), they are better than the best out there in their respective marketplace. They invest in an asset that reflects their view and are eager to plunk down their millions, or billions, to prove they are correct and generate untold wealth for themselves and their financial institution. Nothing can stop them, not even the Sheriff of Nottingham (the SEC).
But their opponents (and sometimes the market in general) begin to outflank them as they press forward. Reinforcements (additional capital) do not necessarily change the game or the outcome. The RPs are either captured, maimed or killed in the financial arena. But then they claim it was all a mistake; an unfair fight even though they knew their opponents and the rules of engagement.
What is shocking is the apparent lack of responsibility for ones own decisions in today's marketplace. If one is not willing to accept the results of a decision, regardless of who is on the other side of the transaction, be it Goldman, Paulson, Buffet, etc., then capitalism is dying and socialism is starting to invade our markets. That lack of integrity is totally contrary to our entrepreneurial spirit and free market system.
Financial institutions design products and securities to satisfy client demand and to make money in the process. They have a responsibility to their shareholders to grow their business which usually means responding to client needs. They are not in the business of making certain that all clients make money but they do provide the opportunity for them to make money, depending upon their position. Most large institutions are on multiple sides of many transactions, whether for a prop trade, a balancing hedge, inventory as market maker, etc. Views change by the minute and if you can't keep up, don't play the game.
No one forces institutions to play in any specific marketplace or to take a specific view. If an institution is able to express their view, they should also be prepared to bear the potential loss. Why does it matter who is benefitting on the other side of the trade? If you reap a large gain on a trade, does it matter who lost on the trade? Everyone is a big boy in the marketplace or they wouldn't be there. So stop bitching about unfair structures, wide bid-ask spreads, who is on the other side, etc.
If you don't want to be involved, stay home.
The views expressed in this column do not necessarily reflect the views of HedgeFund.net.
I thought it should be shared, balance to this one sided dog and pony show for the ignorant...
And you still have total confidence in the market and it's workings?
ie: You don't believe the game is rigged?
I was re-posting what I read this morning for fodder... although there are some very true statements made... I had hoped it would spark a conversation or two, but those are not my thoughts... When I think its more of a smoke signal type of communication.... because of the smoke pouring out of my ears.
Yes, the game is rigged... without a doubt I can source and site some of my Fav's if you would like Chunk... even though your name does not lend itself to ice cream, for some reason Chunk has me on a chunky, rocky road type of thought process... maybe I need a snack..
I am still part of the family Chunky... Lord Blankman did not flip me to the dark side... he never will either brother... I may go fishing from time to time or take people for a ride to make a point but we are still in the same boat, paddling the same direction... I am sorry you have to suffer me as a co-conspirator… God knows you deserve better than me, but I am happy none the less to have found almost everyone here! That includes you Chunky of course!
We here, whether we all agree on every lil detail are very close to being Pirates… Yes, I sound crazy again I am sure… here’s why… Pirates were the closest thing to a real democracy that even we can imagine today. There were spirited conversations and the points were honed thru a Baptism by fire… Every idea was discussed and then after everyone had a say and everyone was heard from they would go about their business, the caveat being that while the battles were underway… the Captain had the first and last say, but when planning or not under duress all where equal.
I offer… http://www.piratesoul.com/piratelife_detail.aspx?id=1
&…http://www.associatedcontent.com/article/260628/piracy_and_democracy_pirates_have_a.html
One of my Favorites…
***** “Blackbeard and Ben Franklin deserve equal billing for founding democracy in the United States and New World, a new University of Florida study finds.” *****
http://news.ufl.edu/2006/06/28/pirates/
I think that we here are like Pirates, Tyler is the captain of this ship but he allows for everyone to be heard… No censorship! But the thing that amazes me is that my views have not some much shifted since coming here as much as I have become better at articulating my concerns during face to face conversations with or mostly against multiples of people, because of the thoughts… Brilliant thoughts shared here, as many people as I push or the people I do push in most cases are the people I read the most… and that has helped me open the eyes of some people who I care about but could not reach for the life of me on my own… my vernacular causes communication problems you fuck wad Chunky… I don’t know why?
But, once again I think the soup or stew that brews here every day… whether or not it is politically correct at all times or not… makes my explaining issues to others so much easier and I will say Thank You to everyone (who has a brain that contributes) for helping me. This would be most of you that I pick on, either I like you and what you have to say so I push or you’re ignorant… or both… But I Thank You! For helping me stay the course outside of this chat room. I reached no less than over 10 people today… The 19 hole today was given the Red Pill today… sourced and sited… most where absolute fund losers and could not understand how brand names with counter party protections in place could fail them… not being greedy at the time and happy with 4% muni-bonds tax free or 6% debt structures… how could they lose?! Well after doing a little show and tell, after using a LOT! of the arguments here as my backstop… I made significant headway reaching some of the old timers that I would have prior too, written off without broaching the subject matter… I helped reach people who I thought where un-reachable… Thanks to ALL here for that… I am still feeling pumped, like I did something good for them, for me and for everyone really. I sound full of myself, but fuck it… I did a good thing today and I owe everyone here HUGE! THANK YOU!
Enough rambling from me… No Chunky I did not sell you out, not today… Tomorrow or the next day… to infinity and beyond Chunky, I may be a prick but I am a prick who is on your side, mankind’s side!
My best to you and yours Chunky, KW
"Or do they get kickbacks for screwing their stockholders?"
Well there has to be something to it now don't you think?
Old proverb: Hold your friends close and your enemies closer.
I thought there was a "Chinese Wall" between an investment banks' Research & Trading departments.
Apparently, this wall is made out of cellophane noodles.
Yes, it's the most porous wall out there!
Everyone knows that you fade public squid prognostications. When they say buy that means they have something to sell. What is different is that bloomberg isn't playing ball anymore.
Institutional clients == in asylums or prisons.
Hmmm. Sort of like they did with Titlos PLC, too, where they helped Greece pull accounting shenanigans while simultaneously taking out credit default swaps against them.
"Of course, Goldman's losses are its clients' gains:"
That sounds like a mistake Tyler, or maybe it is just too early in the morning.
Having some money/savings accumulated through years of work should make you feel good, powerful, free. You have to have truly lost the will to live - if as an owner of capital you feel helpless and buffeted around by evil forces and most you feel able to do is meekly grumble about things to anyone willing to lend you a ear. You really really need to take charge, organize and fight for the rights to your money and the right to have it invested well.
totally possible...their prop traders (HFT) are way better than their analysts...maybe we automate the analysis too?
Here is the Right way to USE the sell side:
1. For data and analysis - Not for Advice
2. For entertainment
3. To take advantage of if they are willing to sell you something cheap.
You dont have to deal with them at all - and if you EVER get the sense that they are lying to you or cheating - Do Not Deal with them ever again.
There - no need to keep complaining. Take charge and dont expect used car salesmen to deliver you to the promised land.
I believe most ZH posters are hip enough to the game to not make an investment on the basis of a Goldman recommendation.
It just speak volumes about the financial industry's propaganda machine that Goldman can give out recommendations on stocks or bonds for which they have investment positions in the opposite direction and not get laughed at.
Personally, I think they've gone too far this time. I believe that Goldman will eventually have to change its name or be sold because its rep is so FUBARed.
Brett, many of Goldman's employees are its clients!
They're a god-awful crew of stock pickers, little better than a typical urchin broker.
Symptoms of THE American disease:
- McDonalds made me fat
-Diageo made me an alcoholic
-Philip Morris made me adicted to tobacco
-GS made me lose money with their poor investment ideas.
There is a pattern here - of not taking responsibility - for one's own well being - wouldcha say?A desire for Mommy? All important things in life taken care for you by other people and your only responsibility is to whine - ooo its too cold, too hot, not low-fat enough blah blah b;lah. i have no sympathy.
Totally facile analogy.
- We are not paying McDonalds for healthy eating. They bear no responsibility on that.
- We are not paying Diageo for healthy consumption of alcohol. Ditto.
- We are not paying Philip Morris for healthy lungs. Ditto.
- WE ARE PAYING GS FOR SOUND INVESTMENT ADVICE NOT FOR ONES THEY PLAN TO FADE.
Goldman is, currently, the only liar and fraudster in the group.
Iam not in any way defending the Squid. But you bring up an interesting point. As a broker, Squid does not have fiduciary responsibility - ie. it is not responsible for how your investments do. It is only responsible for selling you the product you ask for and providing a bid/ask price on it. At that point , as adults, we can sell/buy at the bid/offer prices the Squid purveys - or take our business elsewhere. If you ask to buy a banana and the squid sells you a turd painted yellow - you have reason to complain/sue etc.
But if you ask for a quote on mega leveraged triple somersault CDOs with a side of curly fries - and GS provides a bid/ask on it and you buy it - it later goes to CDO heaven - sorry - not the squid's fault.
Their "research" is basically a marketing tool - designed to stimulate your appetite for this or that merchandise - treat it as such.
Excellent points. I'd like to add, speaking from experience, any of those 'analyst reports' you either get from your broker or pay for access to from any of the highly regarded shops, is nothing more than estimates layered upon guesses. Oh shit, interest rates WONT stay the same for the next x quarters, damn lets shave off x% off the EPS. Wait, theres a revision on EBITDA? Ok damn, better revise this report for next quarter!
To be frank... you have to be slightly addled, a shiekh, widow, or orphan to trust analyst recommendations.
These guys have been wrong so many times just in the past 15 years alone to give any sensible person pause.
It's perhaps wise to accept that most people don't throw money to the market to make money. It's generally to play out some kind of internal mental drama. (i.e. "I never deserved the money. Rich men through eyes of needles etc).
+1 sing it, LOL
When thinking about how Goldman can have a perfect trading record, yet have its top picks stink up the joint, I'm reminded of an episode of the sitcom "Three's Company" in which Larry, the downstairs neighbor, gives Jack a bottle of whiskey as a birthday gift. Jack opens the bottle and offers a glass to Larry, who responds, "Nah, I never drink that cheap stuff."
If I remember correctly, Larry was a used car salesman.
On the top top trade:
Goldman were huge sellers of variance all the way from 70's back to teens all through 2009. So now they have made up to 50 points, but are still short and need to unwind it to clients.
Its an example of the clients and GS being the same way round, but the clients get the position after all the juice has been extracted.
There are a few lines in the movie "Wall Street" that always stuck in my memory. I'm paraphrasing, but someone tells Marv "Research just recommended ABC" and Marv immediately shoots back "Well dump it."
That was 1987, so I assume it was common knowledge that insiders accumulated positions in equities that would be recommended, and those equities are sold for a profit into the strength of the recommendation.
Anyway, it seems to me the only way you consistenly make money in the casino is by being the house. Being the house in the financial markets mean you are the market maker, or, have computer programs that act like market makers, buying and selling in microseconds scalping sometimes one ten thousandth of a cent per share.
And I guess there's some sort of "liquidity rebate" that one receives from the exchanges for facilitating volume, or some such thing.
But you don't make money every day by reading charts or trading the news or analyzing the fundamentals. The only guaranteed way to make money is to function as a market maker and make money off each trade.
Another guaranteed money maker is to manipulate stocks, options and/or futures in such a way as you take out a position at time A, goose the market/equity such that that position is now profitable, and sell the position for a profit. Then unwind the goose.
Dr. J makes a living ferreting out unusual options activity, following along, and selling for a profit a few days or weeks later. Someone knows something is going to move a stock, he follows along, and when it moves, he rings the register. If you have enough money you can move the stock, I suppose the trick is once you cash in on one end (the options), getting out of the stock without moving the market against you.
But I'm sure the computer programmers figured that out decades ago.
Jewish run Goldman Sachs has destroyed so many lives they make Hitler look like a minor leaguer. Ethnic cleansing along financial lines , putting customers on their train to bankruptacy is worse than death. Its like watching yourself on fire and not being able to put it out. Losing everything and living or gettting gassed and never wake up. Hitler was kind compared to these guys.
Goldman Corporate Moto:
"Wealth without Work
Pleasure without Conscience
Knowledge without Character
Politics without Principle
Commerce without Morality"
Lloyd B. God,
Hank "Nixon Administration" Paulson,
Robert "What Me Worry About Insider Trading at Citi" Rubin, et al
?
Yea but Goldman is a Jewish run establishment, Goldman was a jew and so is Blankfein
It's a valid analogy to get the Blankfeins of the world to think: Am I making my Jewish heritage proud or Hitler proud by ignoring all the pain Im causing doing "God's work"?
Hitler was doing god's work too in his mind. Therefore a valid analogy not an anti semitic statement.
Goldman's culture is more WASP than Jewish-oriented. And banking culture in general is at least mildly biased against Jews. Just like the rest of corporate culture.
Sure, Blankfein is Jewish, but... like... he's kind of the fall guy for a huge amount of post-IPO fucking around.
And Paulson is a Christian Scientist, who made a policy decision that guaranteed the eventual destruction of the United States as a political entity.
Anyway, any serious corporation is effectively areligious. No one sits around praying. They don't wake up every morning at Goldman to say "Baruch atah adonai elohenu..."
How the hell is banking and even corporate culture biased against jews??
Give me a break. And dont mistake this as an anti-semitic statement as i know you would simply love to do, cause its just that easy.
Would it make a difference if Goldman was founded by Christians or Muslims or Buddhists or Atheists? Wall Street is about one religion: money. They do happen to facilitate the American financial empire as well. Why not get ticked off at the off shore hedge funds, the hundreds of billions of Arab oil money sloshing around the globe, the Chinese, the Japanese, the French? They're all in there slogging it out for their own piece of the action.
Sadly this site, for all its relevancy, does focus much of its energy on Goldman, which was and in part still is a Jewish firm. It doesn't look good for the long-held conspiracy that a few million Jews somehow control a world of a few billion people. But when times are bad people look for a defenseless scapegoat.
Why not libel the Arabs that have bankrupted the country with overpriced oil and their OPEC cartel designed to keep the price of oil above market prices? How many trillions of dollars have the Arabs, who produce nothing other than oil, sucked out of America and the west doing nothing other than drilling for and selling oil?
You want to blame someone for being broke, blame the Arab oil monopoly. It cost Saudi Arabia $2 a barrel to pump oil out of the ground.
You're on the wrong page guy .Check the header this is the Goldman bashing page. It doesnt matter though what you say about those other tribes, Goldman was the one who figured out how to refine the raw plutonium (so to speak), turn it into a nuclear weapon , then had the unmitigated gall to pass it out as candy around the world with the timer set by them.
Goldman is the guy that cuts you off in traffic makes your car flip, kills your family and others in the oncoming lane but thats OK because they were just making traffic more efficient by filling that space in front of your car. Thats OK with you right? All perfectly legal.
.
Better cut back on the Nazi kool aid. I think you've overdosed.
20 million Jews in the world. A couple billion Christans, over a billion Muslims. And a few billion others.
Somehow I think the Jews aren't the only people fucking things up.
I fail to see the problem here. Goldman is looking out for #1, just as they always have. They've always been assholes, now they don't even try to hide it. Who's really surprised by this?
Anecdotally, I have heard (unconfirmed, so take with a GIGANTIC grain of salt) that Goldman was on the other end of some large emini orders during the meltdown. Sloppy order, large blocks late in the day, etc. and they promptly saw the flow and got in front of it. Surprised? I'm not.
You're supposed to view the population as innocent victims here.
On the other hand, maybe GS staff watched that movie Idiocracy, and asked themselves, wow, what can we do to stop this pattern?
Christine Varney: Another Eric Holder Empty Suit
Antitrust? Has Varney even shown up at work yet?
Goldman Bats 1,000 for Goldman....
Goldman Bats 150 for its customers?
How can that be, buy what they say buy and you should be batting 1,000 just like them? or are they dumping to thier customers which allows them to own a 1,000 batting average?
Really? that simple? but the SEC's hands are tied? I mean cuffed by the beltway gang becuase of the river of lobby monies that flow thier way? NOOOOOOOO?! not that?!
Its the American Dream! getting ripped off on WallStreet! by someone in a suit!
http://media.wiley.com/product_data/excerpt/92/04717708/0471770892.pdf
Angels of death, are you evil when you weed out and kill the lame of our species?