Goldman sachs profit up 33 pct, tops estimates

Thrugelmir

Alan_M wrote: »

Well I appreciate the efforts of explanations but I have to admit this goes over my head.

I simply can comprehend why they need any form of financial assistance and then manage to produce figures of this magnitude.

Call me sceptic but I wouldn't be surprised in a generation to find this all some monumental Madof like Ponzi scheme.

In simple terms they make commission on all their transactions.

The average deal size is around $10 - $15 million dollars. Or 5 - 10 million Vodaphone shares in a single trade.

They didnt need financial assistance apparently but were "forced" to accept it. Unlike the British Government which holds share stakes. The US took a different route so the US taxpayers must be choking right now!

sabretoothtigger

Also they changed the accounting rules from mark to market to mark to model

I think thats part of it but Ive no idea how much these dealers actually hold

Generali

Alan_M wrote: »

Well I appreciate the efforts of explanations but I have to admit this goes over my head.

I simply can comprehend why they need any form of financial assistance and then manage to produce figures of this magnitude.

Call me sceptic but I wouldn't be surprised in a generation to find this all some monumental Madof like Ponzi scheme.

Goldmans are an amazing company - they manage to do what other banks just try to do.

They have a genuine control on risk IMO and they will listen to the most junior members of staff if they have something to contribute. For example, they made billions of dollars 'shorting' 'toxic debt'. The reason? A relatively junior employee on the relevant trading desk gave a presentation to the boss showing him that house prices could and probably would fall in the US. Something that simply wasn't built into the credit ratings' models.

They maintain very close links with Governments, often at great financial cost.

An example is that when the banks opened up in Moscow, almost all of them used the model of having a branch office in Moscow which was owned by a holding company based in Northern Cyprus which in turn was owned by the bank. This meant that under Russian law, the bank had no tax liability. Goldmans on the other hand just opened an office owned by the main holding company directly which meant that they were liable for Russian taxes in the normal way. This has cost them a packet but it has removed a lot of political risk for them - Russian Governments have a history of passing retrospective laws and of taking assets from people that annoy them.

They also make it clear that if you work for them and make a lot of money, you can consider your career to be a failure unless you also do something for wider society. Every employee from top to bottom is expected to leave the office for a day and do a day's work for charity, paid by Goldmans. They do all sorts of things - taking kids to the beach, I took some people caring for relatives with Alzheimers disease to Kew Gardens for the day, some people will do environmental stuff like clearing up a stretch of footpath or something like that.

They also do an annual secondment where an employee is chosen to be seconded to a charity in a senior role to add their skills to the administration of that charity for a year. It is also normal for senior Goldmans executives to leave the bank and go and work in a senior position in Government (there is always at least one ex-Goldmans person on the MPC it seems).

They also make an awful lot of money both for themselves and also for their shareholders.

Generali

PS It's interesting to note that the 'average' Goldmans employee will make $770,000 in bonuses after these results while President Obama calls for "restraint" by bankers. I guess a lot of people will be annoyed that these people are earning so much (or more likely envious) but why should the successful lose out because of the failures? The bank employees will already be paying for the bailout in their taxes. Why should they pay twice?

Alan_M_2

I have no problem with people earning bonuses if they've made a lot of money.

I struggle to comprehend where the physical money comes from when trillions appear to be going up in smoke.

Or is it simply that a large wodge of this money that has gone up in smoke has actually made it's way to GS through shrewd decision making? If it is, I take my hat off to them....Still doesn't mean I have the slightest clue about how it all works though.

sabretoothtigger

They have doubled the money supply in america, that'd be one source

When they say trillions wiped off stocks, thats only because people took out in cash instead not really destroyed.
Even bad debts is some guy spending money on something besides what he agreed to, they were optimistic on the wrong things.
Alot of money went on consumer spending which means imports which means america wasnt growing even if it appeared it was, the bad debts is the negative that should have gone with previous positives hence the harsh corrections

Traders can gain either way if they are clever and big enough to be a market maker for debt and capital raising, etc

They'll skim money off the top off every deal and every industry that needs to deal big money and thats alot of business right now it seems


Im not sure if GS was involved but for example the uk government is filing some of its new debt through these investment banks, so maybe they are getting 0.5% of all those billions of uk gilts auctioned off, thats a sweet deal

Look at the lady who setup the barclays deal, all she did was talk to some arabs and she got hundreds of millions I think. Barclays the actual base line business was then estimated for disaster and did terribly in the public markets, but she would have got her money anyway.
Eventually it turned good but deal makers always win if both parties are matched up like they are paid to do

IveSeenTheLight

Cannon_Fodder wrote: »

Being given $10 billion helped...

Which they paid back

Generali

Alan_M wrote: »

I have no problem with people earning bonuses if they've made a lot of money.

I struggle to comprehend where the physical money comes from when trillions appear to be going up in smoke.

Or is it simply that a large wodge of this money that has gone up in smoke has actually made it's way to GS through shrewd decision making? If it is, I take my hat off to them....Still doesn't mean I have the slightest clue about how it all works though.

In simplistic terms, they are taking a larger share of a shrinking pie. They end up with more pie.

In reality it is more complicated than that of course. I'll try to take a look at their results and let you know exactly how they're making money.

Woby_Tide

IveSeenTheLight wrote: »

Which they paid back

Stop letting facts get in the way (didn't they return the $10bn with an extra $524m on top/. Slimy barstewards sucking up to the taxpayer I ask you.....:rolleyes: