Goldman Sachs Has First Perfect Quarter With Zero Trading Loss

http://preview.bloomberg.com/news/2010-05-10/gold…-trading-losses.html

Goldman traders made money EVERY SINGLE DAY of the first quarter, something that GS has never done before. Some people are saying that GS might have an unfair advantage in the markets, but GS affirms that the success in the trades comes from the strength of their customer franchise and risk management models. Comments?

Comments (33)

 
May 10, 2010 - 1:33pm

How does this prove that GS doesn't have an unfair advantage? If anything... it proves the opposite

looking for that pick-me-up to power through an all-nighter?
 
May 10, 2010 - 2:51pm

Here were the comparable stats for MS.

The trading results during the first quarter handily beat results from
longtime rival Morgan Stanley (MS), which said it lost as much as $30
million daily on four days during the quarter. Morgan Stanley made between
$60 million and $90 million on each of 16 days during the quarter, and
between $210 million and $240 million on one day.

Brett Philbin contributed to this story from New York.

-By Joe Bel Bruno, Dow Jones Newswires; 212-416-2469;
joe.belbrunoATdowjones.com

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.
 
May 10, 2010 - 10:21pm

How can you equate success in trading to having an unfair advantage? I don't work for GS but I tip my hat to the traders that do; good for them and I hope they keep busting their ass to make the money that they do.

 
May 11, 2010 - 12:11am

Of course they have an advantage. They have an army of research analysts, access to a world of information, access to the LATEST information down to the millisecond, the smartest traders, and they are able to execute trades with amazing timing.

The question is, who do they have an advantage over? Over the average American? Yep. Over other banks? Maybe, but I'd be careful about making that assertion. Now, is that advantage unfair? Surely we can't expect the average American to be able to trade as efficiently as GS...

Wall Street leaders now understand that they made a mistake, one born of their innocent and trusting nature. They trusted ordinary Americans to behave more responsibly than they themselves ever would, and these ordinary Americans betrayed their trust.
 
May 11, 2010 - 9:15am

How is daily trading revenue determined? Is this daily profit coming from capital gains from trading within their trading unit before paying out salaries, bonuses, admin, overhead, etc..?

Go East, Young Man
 
May 11, 2010 - 7:14pm

Asia_i_Banker:
How is daily trading revenue determined? Is this daily profit coming from capital gains from trading within their trading unit before paying out salaries, bonuses, admin, overhead, etc..?

Gross Margin which is a MTM calculation. Everyday a trader should know their PnL.

GS has many advantages but if they lose the ability to bet against their clinets no longer will they be able to use both that customer base and their so called amazing risk management models.

 
May 11, 2010 - 9:39am

I haven't been following the trading world very closely this past quarter, but is there any chance that Goldman's impressive returns were due, in large part, to the market being a bit more predictable and possibly less volatile? I understand that the market is inherently unpredictable, but does anyone think that with the current trend of the gov't assisting the economy that maybe it became much more likely for certain outcomes to occur. Thus giving traders at GS as well as other BBs a bit of a leg up this quarter as opposed to previous quarters? Or was this epic zero loss trading just a demonstration of pure dominance?

 
May 11, 2010 - 10:10pm

It seems JP's trading was even stronger than Goldman's:

http://dealbook.blogs.nytimes.com/2010/05/11/jpmorgan-matches-goldmans-…-trading-quarter/

JP's average DAILY trading revenue was 118 M. Couldnt find comparable figures for GS but seems that GS was about the same, maybe a little weaker.

Its becoming clearer to me everyday that JPM and GS are now the top banks on the street in almost every category, with MS, CS, and elite boutiques lagging behind. Does anyone else feel this way?

 
May 12, 2010 - 10:00am

This is going to be big trouble, just wait and see. These politicians are going to go fucking bizerkus. WHY in god's name would you disclose something like this? You're reporting your earnings and sources of such earnings, there's no reason IMO why something like this would/should have to be disclosed unless congress/SEC explicitly asks.

In a world where popular sentiment is that the Wall Street is a fixed game for the benefit of a few greedy fat cats, this doesn't bode well for our case of free markets, promotion of capitalism, transparency, serving clients, etc...

A second question is, exactly why is this possible? Four shops completely independent of each other perform flawlessly? Was there one particular instrument that did so well that it offset any downswings to smooth out any daily runs into the red? Did markets perform in the first quarter in a way that made it easy to read and anticipate? Was there an absence of market anomalies which allowed for more efficient trading of trends? Was there an unprecedented lack of noise in the markets that made trading unusually easy?

Regardless of the answer, and I'm eager to hear your theories, congress is going to go ape shit with this. They're not concerned with the facts/reality. They concerned with what they can sensationalize, get behind and use as ammunition... so come election time they can stake the claim that they were instrumental in bringing greedy Wall Streeter's to justice.

Array
 
May 15, 2010 - 10:43am

Marcus_Halberstram:

A second question is, exactly why is this possible? Four shops completely independent of each other perform flawlessly? Was there one particular instrument that did so well that it offset any downswings to smooth out any daily runs into the red? Did markets perform in the first quarter in a way that made it easy to read and anticipate? Was there an absence of market anomalies which allowed for more efficient trading of trends? Was there an unprecedented lack of noise in the markets that made trading unusually easy?

I'm interested to read what the traders here have to say about these questions also ...

 
Feb 15, 2012 - 8:26pm

Marcus_Halberstram:
This is going to be big trouble, just wait and see. These politicians are going to go fucking bizerkus. WHY in god's name would you disclose something like this? You're reporting your earnings and sources of such earnings, there's no reason IMO why something like this would/should have to be disclosed unless congress/SEC explicitly asks.

In a world where popular sentiment is that the Wall Street is a fixed game for the benefit of a few greedy fat cats, this doesn't bode well for our case of free markets, promotion of capitalism, transparency, serving clients, etc...

A second question is, exactly why is this possible? Four shops completely independent of each other perform flawlessly? Was there one particular instrument that did so well that it offset any downswings to smooth out any daily runs into the red? Did markets perform in the first quarter in a way that made it easy to read and anticipate? Was there an absence of market anomalies which allowed for more efficient trading of trends? Was there an unprecedented lack of noise in the markets that made trading unusually easy?

Regardless of the answer, and I'm eager to hear your theories, congress is going to go ape shit with this. They're not concerned with the facts/reality. They concerned with what they can sensationalize, get behind and use as ammunition... so come election time they can stake the claim that they were instrumental in bringing greedy Wall Streeter's to justice.

I know this is really late, but obviously this turned out to be nothing because congress is in bed with WS and especially GS (not sure why you thought otherwise?)

"In a world where popular sentiment is that the Wall Street is a fixed game for the benefit of a few greedy fat cats, this doesn't bode well for our case of free markets, promotion of capitalism, transparency, serving clients, etc..."

How isn't it a fixed game when 4 major banks posted 63 out of 63 straight 6.5 hour profitable trading sessions? Goldman made over $25 million in trading profits on each of those days. Not one day of less than 25 million in trading profits. I think even the blindest WS apologist will have a hard time explaining it. Oh wait, I already know the explanation: "superior risk management models."

 
Feb 15, 2012 - 8:36pm

anonbob5:
Marcus_Halberstram:
This is going to be big trouble, just wait and see. These politicians are going to go fucking bizerkus. WHY in god's name would you disclose something like this? You're reporting your earnings and sources of such earnings, there's no reason IMO why something like this would/should have to be disclosed unless congress/SEC explicitly asks.

In a world where popular sentiment is that the Wall Street is a fixed game for the benefit of a few greedy fat cats, this doesn't bode well for our case of free markets, promotion of capitalism, transparency, serving clients, etc...

A second question is, exactly why is this possible? Four shops completely independent of each other perform flawlessly? Was there one particular instrument that did so well that it offset any downswings to smooth out any daily runs into the red? Did markets perform in the first quarter in a way that made it easy to read and anticipate? Was there an absence of market anomalies which allowed for more efficient trading of trends? Was there an unprecedented lack of noise in the markets that made trading unusually easy?

Regardless of the answer, and I'm eager to hear your theories, congress is going to go ape shit with this. They're not concerned with the facts/reality. They concerned with what they can sensationalize, get behind and use as ammunition... so come election time they can stake the claim that they were instrumental in bringing greedy Wall Streeter's to justice.

I know this is really late, but obviously this turned out to be nothing because congress is in bed with WS and especially GS (not sure why you thought otherwise?)

"In a world where popular sentiment is that the Wall Street is a fixed game for the benefit of a few greedy fat cats, this doesn't bode well for our case of free markets, promotion of capitalism, transparency, serving clients, etc..."

How isn't it a fixed game when 4 major banks posted 63 out of 63 straight 6.5 hour profitable trading sessions? Goldman made over $25 million in trading profits on each of those days. Not one day of less than 25 million in trading profits. I think even the blindest WS apologist will have a hard time explaining it. Oh wait, I already know the explanation: "superior risk management models."

what are you fucking retarded? this was almost 2 fucking years ago. If you haven't noticed, most S&T divisions are under the axe right now because of shit performance.

shut your fucking mouth if you don't know what you are talking about and just want to bring up 2 year old threads that are entirely meaningless now to promote your liberal bullshit

 
May 14, 2010 - 4:02pm

FX Trader: im obviously not basing that judgement purely on trading results and am considering JP's performance in the league tables as well as in recruiting. Also, BAML and Citi's revenue does not come close to exceeding 100M a day.

I interned in S&T at a BB last summer and they wouldn't stop talking about how JP was killing it in trading, maybe things have changed since then...

 
Feb 15, 2012 - 8:42pm

leveRAGE.:

what are you fucking retarded? this was almost 2 fucking years ago. If you haven't noticed, most S&T divisions are under the axe right now because of shit performance.

shut your fucking mouth if you don't know what you are talking about and just want to bring up 2 year old threads that are entirely meaningless now to promote your liberal bullshit

Someone needs to get laid.... seriously dude, calm down. I acknowledged that my response was extremely late you shit head. Now why don't you tell me how 4 firms posted 63/63 profitable days without a rigged system, since clearly you know what you're talking about...

 
Feb 15, 2012 - 11:44pm

anonbob5:
leveRAGE.:

what are you fucking retarded? this was almost 2 fucking years ago. If you haven't noticed, most S&T divisions are under the axe right now because of shit performance.

shut your fucking mouth if you don't know what you are talking about and just want to bring up 2 year old threads that are entirely meaningless now to promote your liberal bullshit

Someone needs to get laid.... seriously dude, calm down. I acknowledged that my response was extremely late you shit head. Now why don't you tell me how 4 firms posted 63/63 profitable days without a rigged system, since clearly you know what you're talking about...

Because they were using HFT's that at the time were extremely successful. Those don't rely on market direction, just superior technology and programming amongst a few other things.

edit: It's not as crazy as you think. They were making that much money per day, but how much were they managing total? Was it from their sales traders? Was it from SSG? Was it from their prop desk? Was it from HFT's? Maybe, just maybe, it was a combination of everything. You clearly don't know shit about how the "system" works, so please fuck off.

 
Feb 16, 2012 - 12:48am

anonbob5:
leveRAGE.:

what are you fucking retarded? this was almost 2 fucking years ago. If you haven't noticed, most S&T divisions are under the axe right now because of shit performance.

shut your fucking mouth if you don't know what you are talking about and just want to bring up 2 year old threads that are entirely meaningless now to promote your liberal bullshit

Someone needs to get laid.... seriously dude, calm down. I acknowledged that my response was extremely late you shit head. Now why don't you tell me how 4 firms posted 63/63 profitable days without a rigged system, since clearly you know what you're talking about...

so you're saying that these banks had rigged the game for 1 quarter, only to decide to come together and lose a shitload of money together over the next couple of years. If it was so rigged as your dumb liberal ass says, why aren't they as profitable anymore?? they decided to disband their little game after only 1 quarter?

if you hate the fucking system get off of a wall street forum and head back to whatever liberal arts school you come from.

 
Feb 16, 2012 - 12:03pm

It's also important to remember that this was a quarter when bid/asks were still pretty wide and volume was starting to pick up again. Not hard to make money running a book as a market maker that way. The conditions were pretty ideal for the few remaining big boys to profit as folks returned to the market. Obviously this can't (and didn't) last forever, and to cite this as evidence of some kind grand conspiracy is pretty ridiculous.

 
Feb 16, 2012 - 6:32pm

I work at the equities proprietary desk of a large bank (outside the US) and yes, FX and rates traders do have some competitive advantage (some may call unfair) even when compared to hedge funds and asset managers: they can see the client flow and even the asset and liability management flow (which is quite significant sometimes).

Unfortunately, there are regulator rules so that we can't see equities flow at our brokerage house so my desk does not have any advantage like this. Equities prop desk in a bank is just like an ordinary long/short equity hedge fund, but our only client is the bank.

 
Feb 17, 2012 - 1:09pm

Do you guys realize that the trading divisions mainly handle client orders, i.e. they act as an intermediary and don't take much of a position in the market? Every time a transaction is done they are protected by the bid-ask spread and they can be profitable based on the spread alone. That does not take any genius.
Of course they have a prop trading desk and they usually have net long positions due to the inventory they sell. But this is where it gets interesting. A lot of people claim: Markets go up, markets go down - we always make money.
That's simply wrong. The trading desks suck when the market goes down and they outperform when the market rallies - as was the case last quarter.

 
Feb 17, 2012 - 3:53pm

Il Cavaliere:
Do you guys realize that the trading divisions mainly handle client orders, i.e. they act as an intermediary and don't take much of a position in the market? Every time a transaction is done they are protected by the bid-ask spread and they can be profitable based on the spread alone. That does not take any genius.
Of course they have a prop trading desk and they usually have net long positions due to the inventory they sell. But this is where it gets interesting. A lot of people claim: Markets go up, markets go down - we always make money.
That's simply wrong. The trading desks suck when the market goes down and they outperform when the market rallies - as was the case last quarter.

Fuckin genious! Have you ever even been on a trading floor?

 
Feb 17, 2012 - 3:56pm

Il Cavaliere:
Do you guys realize that the trading divisions mainly handle client orders, i.e. they act as an intermediary and don't take much of a position in the market? Every time a transaction is done they are protected by the bid-ask spread and they can be profitable based on the spread alone. That does not take any genius.
Of course they have a prop trading desk and they usually have net long positions due to the inventory they sell. But this is where it gets interesting. A lot of people claim: Markets go up, markets go down - we always make money.
That's simply wrong. The trading desks suck when the market goes down and they outperform when the market rallies - as was the case last quarter.

There's usually a mismatch between buy and sell orders. The difference makes up your exposure. It's not all collecting spreads.
-MBP
 
Feb 18, 2012 - 2:46am

There sure is a mismatch. I'm just saying that the bid/ask spread (especially if it is as large as it is now) provides some good protection.

By the way I haven't been on the trading floor, I'm an IBD/MBB guy. I'm just talking about the stuff people told me / I have read. So I would be more than happy if somebody can provide more insight.

But I think my main point - that most people think banks are making bets on their own - is just wrong. If the average Joe could buy low and sell high, he would have a good chance of having a perfect quarter, too.

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