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Goldman Crashes To Earth: Reports 24% Trading Day Losses In Q2, Compared to 1% In Q1
What a difference a quarter makes. Back in Q1, Goldman reported one (1) day in which it had a trading loss out of 62. It also reported 32 days on which it made over $100 million. Oh how the times have changed. According to the just released 10-Q, Lloyd Blankfein's firm suffered an epic implosion, recording 15 trading day losses out of 63, or a stunning 24% loss rate. And far worse: only 4 days in which Goldman recorded profits of $100 million. And that's why the stock is floundering. The only question is whether this was premeditated to shift the public anger away from Goldman which back in 2010 barely had any trading day losses in the entire year. And if not, what is the systemic change that caused this worst quarterly performance for Goldman in years?
and After (Q2)
As for the formal reason for the drop in profitability, here is the declining VaR. Of course, the real reason is anything but, but don't hope on finding it in the official disclosure.
Goldman had some observations on the S&P downgrade of the US as well:
On August 5, 2011, Standard & Poor’s lowered the long-term sovereign credit rating of U.S. Government debt obligations from AAA to AA+. On August 8, 2011, S&P also downgraded the long-term credit ratings of U.S. government-sponsored enterprises. These actions initially have had an adverse effect on financial markets and although we are unable to predict the longer-term impact on such markets and the participants therein, it might be material and adverse.
Other legal disclosures from the 10-Q from Dow Jones:
Goldman also said in the filing it is in discussions with the Securities and Exchange Commission and the Financial Industry Regulatory Authority to resolve proposed charges concerning Goldman's research communications.
In June, Goldman paid $10 million to the state of Massachusetts and agreed to make certain changes to settle an investigation that focused on Goldman's so-called research huddles, and communications between analysts and top clients. Massachusetts alleged certain Goldman clients got special access to the firm's stock analysts and allegedly got information and short-term tips that other clients didn't get. The SEC and Finra have been investigating similar matters, Goldman said.
Also in the filing, Goldman disclosed it had lowered its "reasonable possible" loss estimate on legal charges above and beyond what it has already reserved to $2 billion, from $2.7 billion in the first quarter.
In expense disclosures, Goldman said it would take a charge of $130 million for a U.K. tax on certain financial services activities of large banks, including their subsidiaries, that operate in the region. Goldman said it would take three-fourths of the charge in the third quarter, with the remainder in the fourth quarter and warned that the final amount could vary from its estimate.
In a lengthy legal disclosure section, Goldman outlined the various ongoing legal actions facing the company, including a previously disclosed ongoing investigation by the Commodity Futures Trading Commission into Goldman's role as a clearing broker for an SEC- registered broker dealer and the European Commission's investigation of various firms, including Goldman, in connection with the supply of data related to credit default swaps and profit sharing and fee arrangements for clearing of credit default swaps.
The Department of Justice has been investigating the data supply issues as well, the firm said in the filing. It said it is cooperating with the investigations and reviews.
A new disclosure for the second quarter was Goldman's ensnarement in a European Commission investigation begun in July raising allegations of an industry-wide conspiracy to fix prices for power cables including by an Italian cable company. Goldman owned a stake in the unnamed company in various of its investment funds from 2005 to 2009 and faces liability for part of any fine that may be levied.
In other words, if the Gambino family was forced to release SEC filings, one would probably see comparable disclosures.
h/t London Dude
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Looks like Goldman needs TARP 2. Hookers in the Hamptons cost $$$. I wonder if they accept being paid with gold after turning a trick...
Just a case of markets adjusting to Goldman's algos, fewer suckers playing a rigged game and better oposing algos.
In any case the stock market is not a place that I feel comfortable anymore.
yes, that's the most plausible reason; competing algos are destroying each other.
http://www.youtube.com/watch?v=wqy1bDf9fVo
Yeah, now I remember why I jumped out of the markets half a year ago. Woke up this morning to see green futures. W.T.F. Liquidated my bear positions right away. End result, three days of bear action I am ahead with an anti-climatic end. Guess I have to make money the old fashioned way: PRODUCTIVE WORK. heh
if the payment is weighed in grams, they might just want to snort it
Sometimes I don't know WTF is wrong with Zero Hedge. Is a 24% rate of losing-trading days supposed to represent a threat to the firm? Is it even supposed to be "bad"??? A 24% rate of losing trading days means that on 76% of days Goldman made money.
Does anyone here trade at all?
I'd love to see GS collapse. But a 76% rate of profitable trading days isn't the road to bankruptcy... or even loss... it's the road to insane wealth.
Hello? There are enough nightmarish scenarios to contemplate today without inventing them.
are you aware that they where basically perfect ? The odds are similar to the New York Rangers winning all 82 regular season games and the stanley cup. Rigged game maybe ?
You are right, if it's not a hoax, I would be worried about the systemic risk that may continue at the trading desk. I tend to fall on the side of a hoax to deflect the public eye. When the crash is bottomed out a bit, they will again be preparing positive Q results!
This right here is the reason the banks will demand QE 3.0. The banks must be saved, even from themselves.
Don't know who is and is not a bank or TBTF any more, but my first thought was that they "knew" some or all of this down grade stuff was coming and they needed to:
1. Look like they are doing bad to help the drama along
2. Needed to look bad so that they could have their hand out for a hand out.
3. Last time they did it under the cover of not needing it but needing to take it so that bad banks could take it and not look bad. The took shit for that when it was revealed later they were sinking.
Seems to me that the downgrade sets up the TBTF's to blame what follows upon a "spendthrift government." It will then be "only fair" that the government should once again cover TBTF losses when the SHTF . . . while, of course, social spending gets cut past the bone 'cuz "we're broke." They'll get to play the victim this time.
Exactly.
I suggested over the weekend that S&P was allowed to downgrade for ulterior reasons. I was booed off stage. If people want to believe that the rating agencies are not tools of state then go ahead and believe whatever you want. But during a time when plausible deniability and moral suasion needs to be re-manufactured, the downgrade opens up all kinds of doors to places previously closed.
Yup. This looks to me like a manufactured "moral reset," where government becomes the scapegoated bag man. There will be no shortage of tools desperately appreciative of the opportunity to impose austerity upon a population manipulated to blame itself for its unrepresentative government's actions.
I wonder if this is how things played out on the ground level in Greece and Ireland.
Of course the ratings agencies are tools of the state... look at the backlash from China (starting its own) and Europe [I think we needz some criminal probez, bitchez (aka fuck off uncle sam and let us breathe)]... If other countries/economic unions believe ratings agencies to be tools of our state, why can't we? Maybe they're trying to tell us something...
If that wasn't evidence enough, I think our administration's reaction to the downgrade should have removed all doubt.
They got desperate, needed to try and save some face or else be discarded into the dust bin of time and they decided to fire away with a downgrade. This reminds me of FOFOA's concepts of credibility waning prior to hyperinflationary explosion...
apart from those in the know backing away from the Goldman--maybe the charts of Nanex will give us a clue
The loss days were a PR action to keep the anger away from Goldman.
AA+
i wonder who is on the other side of the "winning" bets
Goldman
Goldmans SPVs in the offshore banking centers
they no longer have the big prop groups
brain drain at G-Scrote
Who exactly prosecutes the filing of a PHONY 10-Q ? ... Let me see ... a CORRUPT federal "regulator"? ... Yeah! ... I believe it.
His name is arthur levit. He just took the job at GS like the corrpted regulator he always was
this is bullshit and everyone should know it, nothing but a pr stunt, and quite the coincedence about hft investigations at the same time, and Greece, and Timmy, and, and, and, ...
http://www.google.com/search?hl=en&source=hp&biw=1280&bih=858&q=goldman+...
haha so Morgan Stanley's 8 days of losses is starting to look damn rosy in comparison!!!
Mustn't have been getting the Government memo's.
The answer is easy. There is nothing left for them to loot. Now they are just eating their own tail.
If you actually believe Goldman hasn't offset it's "losses" in ways you will never discover, it's best to just ignore their pronouncements about what they "lost".
Believe Goldman Sucks at your own peril.
GS is a manufacturing company. As such is can make anything it wants any time it wants.
Test of Naivete: If you asked---- and I told you---- I lost $10,000 on gold this morning what should your next question be?
I'll play.
Test of Naivete: If you asked---- and I told you---- I lost $10,000 on gold this morning what should your next question be?
A: Did you double down?
They are just whining to get the QE3 cash
Test of Naivete: If you asked---- and I told you---- I lost $10,000 on gold this morning what should your next question be?
What have you been drinking?
Mad dog 20/20. Next question
Does this mean Blankfein will have less Bonus then the over $15 Billion last year to hand out to deserving GS Execs?
Looks like the party is over. NO Blankfein! Stop licking those empty Sterno tins! Bad Blankfein, BAD!
IF this is true, it would appear their tradding algos are a generation behind. Have they lost the edge? Well, they can always change the rules. Watch for trading, margin, reporting, etc rules to change in order to "level the playing field". Protectionism: its not just for governments anymore.
Situation where my algo is better and faster than yours!
In Goldman we trust...
jealousy is an ugly quality.
Cramer says to buy preffered shares in BAC.
Sell shares in BAC
Too funny that man. Prefs go to zero in liquidation as well, mezz and jr debt way under par. Might be lucky with some senior, then again we dont know what kinda credit event were talking about are we.
Why is that guy looking at the lifeboats with a measuring tape?
That senior had better be secured, because derivatives exposures need to be factored into recovery.
I cannot take Cramer in the morning. It is like waking up and you go to get your coffee and you have Richard Simons in your living room telling you to do jumping jacks.
With Cramer on CNBC all day now, CNBC should be renamed the Stock Market according to Cramer.
He pushes his agenda (and Goldmans agenda), plus all of the stocks HE ownes in his Company (thestreet.com) and his Charitable Trust.
All CNBC announcers are not allowed to own Stocks but Cramer is an Owner in thestreet.com which ownes stocks and his Charitable Trust. This is a definate conflict of interest. Plus, I would love to see how much of the money in his Charitable Trust goes to Charity and how much goes to Cramer for managing that Trust.
that helps
Good one!
Yep, Leonard the Monkey is still running circles around Cramer.
POMO! In Q1 they were still buying from retail to sell to fed. In Q2 they were buying from treasury and selling to Fed. Think this hurt daily revenues?
HFT Computers do not work when the Market goes down. That is probably were the losses came from.
That is why they want QE3. Guaranteed up up up Market. Algos make tons of money.
I am not sure about that. I would be shocked to learn Waddell and Reed did not emerge from a 600 point drop making a boat load. These alogs make money either way.
Shorty Buttercups' (Lloyd Blankfeins) days are numbered . . .
Because the Fed wasn't printing as much money for them to steal.
My two guesses.
1-The Dodd Frank bill may have actually somehow caused a modest reduction in their insider (pardon proprietary) trading activity.
2-In spite of the fact that they claim to be doing God’s work, not even their clients believe a god damned thing they say anymore.
I agree, combination of factors:\
regulatory scrutiny
client abandonment
HFT market has gotten more competitive
breakdown in DC favors
lack of coherent strategy
brain drain (some of the guys that work at GS nowadays I find not very sharp).
Speaking of crashing, why does silver suck?
well who would be the biggest sucker in the Silver market? ..oh there it's JP Morgan (again!) who were just fined $230m for rigging the US Muni debt issuance market. Golds a bit big even for these bailed-out Fed reflated bankrupts to rig so the much smaller Silver market is their choice for playing games with (see May Parasite Club takedown)
best advise i have is hold onto your Silver for a short while, should hit $42 soon
*****What Business is Wall Street in?
""Wall Street Doesn't Know What Business It's In.
Regulators don’t know what the business of Wall Street is. Investor/shareholders don’t know what business Wall Street is in.
The only people who know what business Wall Street is in are the traders. They know what business Wall Street is in better than everyone else......""
http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/08/wall-street-d...
******OT: Festival Film Short
The Creek.......
http://www.youtube.com/watch?v=BLRAqfN48zo&feature=related
Do you bealive the "Landing on the Moon" was a setup. GOLDMAN they do God's work.
The HFT algos are learning -- and starting to bilk the Squid now??
Boy, that's grand if true..
I go with the premeditated theory. After this came out, they needed to make themselves look legit.
http://hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisRe...
If the economy/markets go really really bad, I think the president will make heads roll on Wall St in a last ditch effort to get reelected.
Goldie still isn't losing squat. They're sitting on tremendous unrealized gains on everything from sugar to industrial metals, and they own the FED. QE3 won't make them reach for the calamine lotion in real terms.
Goldman warehouses bitchez.
So, I take it from this loss admission that Goldman's insider information is no longer working, from which one may surmise that the insiders have lost control of this.
just fewer people to front run
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