Goldman is getting vilified in the press these days, and I frankly think it's unwarranted. People who have little understanding of how they make their money quickly cry foul.
Hanlon's razor applies here: Never attribute to malice that which can be adequately explained by stupidity.
Oh really? Goldman made a lot of deals with AIG and bought "insurance" from folks who didn't have the ability to pay off. When things went south, Goldman went to the US govt and said "pay off AIG's debts", saving Goldman the trouble and risk of going after the folks it bought insurance from.
What part of that do you disagree with? Do you really think that pointing it out is unwarranted? Or are you going with "it was good"?
> People who have little understanding of how they make their money quickly cry foul.
I have no objection to them making money by being smarter or creating markets. I do think that they should take their losses like everyone else. If they buy "insurance" and it can't pay off, that's their problem.
People who have little understanding of how they make their money quickly cry foul.
this is also completely unrelated to the topic, that they've only had one down trading day in the last quarter. this most recent quarter had nothing to do with government handouts.
I don't blame Goldman. I explained why Goldman is getting villified.
> if you were in this position, you would also lobby the government in the same way.
Speak for yourself. I don't go to the govt to fix my problems.
> this is also completely unrelated to the topic,
My post was a response to the comment that Goldman was being unfairly villified. Said villification has nothing to do with their trading success, so if you think that villification is off topic, start with upthread. (The person who complained about the villification didn't suggest a connection other than both involved Goldman.)
Because its as though I bet someone $999 trillion that there would not be an earthquake in California tomorrow.
Anyone obviously does not have $999 trillion. But instead of eating the losses like any normal business would have to do, they instead tell their friends in the Fed print the money for AIG which AIG then used to pay 100% of their betting losses to Goldman.
Absolutely true.
But there have been plenty of down days, and what's suspicious is that Goldman made money on all of these except one (though see my final statement in this post - I don't fully believe that the numbers that are posted mean what they are supposed to mean).
Since July 3 (random date a few months ago), if you look at S&P 500 returns, there have been 50 up days and 36 down ones. To make money on each and every one of those movements screams "exploited loophole", if that's actually what happened. I'll leave it to other interested parties to calculate the probability of that happening by chance; it depends on your assumptions, but there's no way that it's significant enough to consider.
Or maybe they've fully solved the problem of market timing. But they're really just not that smart (there's not an analyst alive that believes you can nail day to day movements at 99% accuracy).
In this field, another maxim applies: never attribute to genius that which can be adequately explained by malice. Here, we've got motive and opportunity for malice, so I'm very hesitant to believe that they're playing fair...
However, I also don't necessarily believe that these numbers mean what we think they mean, since I don't know how they were generated, or what sorts of accounting or trading tricks may have been played to "smooth out" the risk profile and ensure very few losing days, as long as the long term average was positive. The appearance of zero-risk trading has some very tangible benefits, and there's a lot of stuff you can do to shift a distribution of returns so that it looks a lot less volatile than it really is...that whole CDS bonanza had a lot to do with shifting risk to the tails to snatch at predictable returns the rest of the time, so who am I to say there's not something similar going on here?
Buying down and selling on a down day does not mean a loss is guaranteed. There could have been up days in between, and with the plethora of derivatives available who knows exactly how they took advantage of the strongly trending market.
And don't think for a second that the SEC doesn't have a tent setup at the Jersey office watching every move. GS is the most profitable, and therefore most envied and suspect, financial institution in an economy that was decimated, almost single-handedly, by the finance industry.
So what? That number only gives you an idea of money in long positions on listed company stock at any given moment. GS isn't making their money because the market as a whole is going up (or, at least not directly from long positions), they're making it because they can make some unbelievably large number of bets a day where they have just enough of an information advantage to expect to make fractions of a cent in profit on each.
I'm not taking a stance here. Just clarifying.
Untrue. They're doing so at the expense of other day-traders who try to go toe-to-toe with them in timing the markets. If you're holding long-term positions what GS does in a tenth of a second doesn't affect you.
In reality the people that GS wins money off of on a given day are wearing charcoal grey suits and driving ridiculous cars (just like the GS people).
Your browser won't refresh the etrade website fast enough to even play their sandbox.
Obviously there are nuances to this issue, but my point still stands. The masses aren't pissy because GS turns a profit (as implied by the OP). They're pissy because they believe firms carry out unfair practices that allow them to game the system. This is true. To a degree.
One example: most dealers act as brokers for smaller institutional investors (hedge funds, mutual funds, etc.) and have visibility into their trading volume, including particularly large position movements. Firms leverage this info for their own house positions and have a slight lead time against the market. Intraday the gains may be slight, but over a year they amount to hundreds of millions in profit.
Given the size of their positions, firms can, and often do use their weight to manipulate market prices.
Then theres the issue with the govt bailout and TARP funds...
http://seekingalpha.com/instablog/225427-michael-j-golde/323...