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Goldman’s Perfect Quarter Indicates Game is Fixed

Posted by Larry Doyle on May 10, 2010 10:12 AM |

Those involved in fixing the scores of athletic events will intentionally lose every once in a while to give the appearance that the games themselves are on the up and up. For those betting on athletic contests, beating the point spread each and every time would be a strong indication that the games are fixed. Similarly, casinos are happy when players win so that other players will enter the game. If the house always wins, sooner or later fewer and fewer players will enter that casino.

The crowd at Goldman Sachs ,along with their cronies in Washington, may want to heed these lessons. Why do I write this?

Bloomberg reports this morning, Goldman Sachs Has First Perfect Quarter With Zero Trading Loss:

Goldman Sachs Group Inc.’s traders made money every single day of the first quarter, a feat the firm has never accomplished before.

Daily trading net revenue was $25 million or higher in all of the first quarter’s 63 trading days, New York-based Goldman Sachs reported in a filing with the U.S. Securities and Exchange Commission today. The firm reaped more than $100 million on 35 of the days, or more than half the time.

Goldman Sachs, which is facing a fraud lawsuit from the SEC related to the firm’s sale of a mortgage-linked security in 2007, generated $9.74 billion in trading revenue in the first quarter, exceeding all of its Wall Street competitors. Trading accounted for 76 percent of first-quarter revenue.

“This is the first time we have reported zero trading loss days in a quarter,” Samuel Robinson, a Goldman Sachs spokesman, said in an e-mail today. “We believe it shows the strength of our customer franchise and risk management.”

Is that what zero losses indicate? I will not denigrate the talent and expertise within Goldman’s operations; the firm has plenty of exceptionally talented people. But for Goldman to promote its risk management and franchise as seemingly the sole driving forces behind these results, well that is just another indication of dangerously blind arrogance.

The simple fact is the very structure of Wall Street has changed. I have indicated previously and will reiterate that Wall Street has become one massive oligopoly. As such, the ability for Goldman and the other large institutions to control, if not outright manipulate, prices is a simple reality. This price control is reflected in a variety of market segments, including electronically driven equity markets.

The house typically wins in Vegas, as well — but not every day. What happens when the house always wins? Customers stop playing there. While Goldman is fighting to restore its reputation and promote its customer franchise, the question lurks in many investors’ minds, “Can I trust these guys?” That question is not going away anytime soon and is the reason why Goldman’s stock has suffered, even while its daily operations are minting money.

The crowd at Goldman along with their friends in Washington may want to think hard about these structural questions. Without real change on the structural front, the Wall Street-Washington partners should not be surprised as more and more customers choose not to play a game that is inherently fixed for the benefit of the banks and dealers.

Even in Vegas the house will intentionally lose now and then for appearance sake.

LD

Cartoon by Nick Anderson of the Houston Chronicle
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  • Juice

    Would not appear to be a lot of risk in the inherently risky securities industry if Goldman is making money each and every day.

    Come on, give me a hard eight!! Oh, Goldman wins again!!

    Right….what a farce or should I say what a fraud!!

  • Easy Rider

    LD,

    Read your piece on Goldman and I had 2 thoughts.
    1. Last time I remember such a high rate of success was the NYSE Specialists

    2. I would like to see the correlation between their prop desks and their mutual fund and hedge fund products….I suspect the prop desk has better returns

  • Fred

    Everyone’s talking about the market meltdown on Th but what about CNBC’s, GS stooge, Jim Cramer’s call on Friday at about 1:30 PM…..”short cover rally into the close then continued market weakness on Monday”. As of 1:30 PM Monday, if you had followed Jims advice you would have lost more Dow points than were lost in Thursday’s meltdown.

  • Mike

    GSachs only cares about showing that they generate the most money under all circumstances. It doesn’t even matter if their clients start leaving at this point. There is no limit to how much they can make through easy capital from the fed, HFT, stop-loss hunting algorithms, front-running, a golden Rolodex, and loyalty from congress.

    Is there any stopping this beast?

  • Ed Morrow

    The Goldman Saga will continue until the public wakes up – hopefully before they have destroyed the international markets. They have no sense of shame, no ethics, merely rampant greed. In my opinion we should continue to refer to this firm as Goldman Sucks – forever!

    To this end, how do I view Goldman? In the following satirical fashion.

    Financial Presentation

    Sir or Madam:

    My name is Fleece Torme, and I am with the international investment firm of Goldman Sucks. I’m sure you have heard about all the billions of dollars we have made for our clients, such as the government of Greece, and all the American banks who purchased the high caliber Gilt-Edged, Fully Collateralized, Insured and Guaranteed investment instruments. Did you personally make a million or billion on them?

    No? Well, now is your chance. Your profit is limited only by your lack of greed. We here at Goldman Sucks approve of greed. It drives our sense of Ethics. Greed is Good.

    Jot down on a piece of paper the number for the maximum amount of cash you could put your hands on. Be sure to add whatever you can borrow from your parents, siblings or children. Add College and Retirement funds. Now, whatever that number is, you need to simulate investment returns. We are specializing in imaginary derivatives here, so the next step is VERY important.

    Multiply that number by 10 – that is average investing.

    Multiply that number by 100- that is what other Wall Street firms will offer you.

    Multiply that number by 1,000. Now we’re talking about how Goldman Sucks for you!

    This is how much you might have in your account in just a few months. This is how well I, Fleece Torme, and my boss Barney Blankbine have done. Your future is limited only by your level of greed (and ignorance) and your confidence in Goldman Sucks. When you invest with us, you will hear a slight whistling sound. This famous sound had been heard all over the world. It is our firm sucking money out of other pockets into ours. Surely you want to join in this great investment opportunity, don’t you?

    Now, how much can you put your hands on….

    Note this presentation has been compliance and ethics approved by Mary Schapiro, former head of FINRA, and now the head of the SEC which have monitored the performance of Bernie Madoff and Allen Stanford.

  • Randy

    Excellent presentation Ed.. Now all we need to do is get the actor who played Thomas Paine to do it on a YouTube video and give it a little kickstart by getting SenseOnCents and all its BlogRoll buddies to promote it and thus eventually get it seen around the World. It might even get Mary Schapiro the attention she so richly deserves.

  • Matt

    Larry –

    Bloomberg is now reporting that JP Morgan’s traders ALSO had a perfect first quarter, as they also made money every single day of the first quarter. So, both Goldman AND JP Morgan BOTH had perfect first quarters trading. This is now crystal clear evidence that, as you say, the “game is fixed”, the market is rigged, and I think also that the Federal Reserve is working closely with both of these firms (if they are not actually one in the same organization) to manipulate the stock market, while helping these firms make huge money in the process. Absolutely unbelievable.

    http://www.bloomberg.com/apps/news?pid=20601110&sid=azhZ7Nx7UW5M

    Matt

  • LD

    Matt,

    Is there any doubt that Uncle Sam has rigged the systems so the banks can recapitalize? All in the name of trying to repair the economy. Meanwhile American taxpayers are burdened with an ever growing deficit and Wall Street walks out the door with huge bonus payments.

    A huge wealth transfer to the banksters and another huge wealth redistribution to unions and their cronies and is there any wonder why middle America is pissed off!!

  • Randy

    Ok.. so each of you are absolutely spot on with your assessments.. but then when, if ever, do we all finally band together as one and contact our elected representatives to scream at them that we are mad as hell and not going to tolerate it any more?

    I mean just how much more does it take? Have we come to any conclusions on just where and when we will draw the line, or are we all just a bunch of sheep who simply baaaa… at each other out in the pasture and commiserate quietly amongst ourselves over our bad fortune?

    We let them water down the financial reform bill such that the financial reforms that finally come out of Congress will be somewhat laughable and still won’t be enforced, or worse yet will be enforced on the little guys and not the big.

    We let them gut the only real bill designed to thorougly audit the Fed by voting for the far weaker bill that simply has a pitiful “disclosures” alternative.

    We even let them surreptitiously slip in a last second addition to the financial reform bill that gives even greater powers to the FTC that would allow them to go after the health supplements business even more boldly and egregiously than they already do, while crimes against humanity continue to be carried out daily by big pharma and their life-destroying drugs while they remain fully protected by their lapdogs the FDA, the FTC, the National Media and the courts.

    We sit idly by while the big banks are given unfair access to the financial markets and watch as they manipulate those markets with high frequency trading programs protected by the very exchanges who sell them the special access.

    We sit quietly by as the Goverment lies to us on a regular basis about the rapidly improving jobless economic recovery, and watch and listen with rapt attention as they accelerate the falsehoods as we get ever closer to the November elections.

    Need I go on? Isn’t it apparent to any reasonably intelligent citizen by now that the Government and their corporate cronies will do pretty much anything they damn well want to and practically dare us to even consider saying anything about it?

    If you happen to stumble upon Morpheus in the near future I strongly suggest you get your hands on that damn little blue pill and find out just how deep all of this goes. If not, then just grab a beer, recline yourself in front of the telly and down a few more of those freedom reducing red pills so that you can continue to sit there in a dazed fog as they eventually take away everything you hold dear in this life.






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