Sunday, November 15, 2009

Goldman Sucks as a Trading Firm

ZeroHedge has conducted a forensic reconstruction of Goldman's proprietary trading detail throughout 2008. Bottom line, their proprietary models suck. Here's ZeroHedge:
In essence Goldman's prop group is woefully bad when it comes to trading, or at least it was in 2007 and 2008...The observations above are troubling: Goldman's trading is by no stretch of the imagination better than average. In fact, in 2008, the firm's prop trading was on par with some of the worst performers on Wall Street. Which begs the question: just how has Goldman managed to transform itself into a behemoth that over the past 6 months has had only three trading days of losses?
ZeroHedge than attempts to answer its own question:
The answer is simple: with no Lehman and no Bear to curb its tentacular dominance of all aspects of the Fixed Income market, Goldman can now rely almost exclusively on its monopolist agency position vis-a-vis mutual, pension, and hedge funds who are desperate to maintain a good relationship and an open dialog with the firm which rewards its best clients with market moving information ahead of all others peasants. In exchange, Goldman can collect an arm and a leg in the form of wide spreads, child algos that get executed efficiently and, always, profitably, and a trading platform (REDI) which has become ubiquitous, and in which Goldman preaches the mantra of VWAP trading...
It should further be noted that earlier this year Goldman bought a ton of paper from AIG at hugely discounted prices, and it is likely that the Fed sold them paper at hugely discounted prices.

Bottom line, these guys aren't traders, they only make money with the heavy hand of government swatting everyone else away and then stuffing Goldman's pockets with money.

Goldman doesn't appear to have the ability to profitably sell, in front of the Vatican, holy water blessed by the Pope, unless they could work out some kind of angle to close down by government decree any type of water selling in front of St. Peter's Basilica and all of Vatican City, to gain a geographic monopoly and then, on top of this, they would have to have the central bank of Italy which is headed by Mario Draghi, a former Goldman man to actually buy the water.

No comments:

Post a Comment