Discussion in 'Stocks' started by a529612, Nov 9, 2007.
When will they come out with their subprime exposure?
That will cause an avalanche of selling everywhere. Hopefully there aren't any, but you never know. GS doesn't have nearly the same exposure of other investment banks to subprime.
Maybe it's me, but I always figured GS has been making its record profits the good old fashioned way - shady transactions in front of upgrades and dowgrades, if not through direct frontrunning by having them help the trading desk unload positions... by knowing about M&A deals and other inside information, and by front running all the hedgefunds they do prime brokerage business for - if not directly front running large orders, at least working orders inefficiently so they can make a ton of money going the other way at the end, most likely though just using basic computer programs to track net exposure of their hedgefund clients so they can see where people are stuck long right to the limit of their risk management, etc though I imagine that too closely resembles productive work to them so simple front running is likely the name of the game. Oh, and of course they make money peddling shady paper.
All GS's "quant boxes" are a scam... they're boxes that buy when a human with inside information tells them to, nothing more.
I thought I read story that GS made money and was short the sub prime paper. I remember reading that on bloomberg a few weeks ago.
Is he hinting something??
Goldman CEO Touts Firm's Risk-Management Prowess
Nov 9, 2007 16:43:39 (ET)
NEW YORK (Dow Jones)--Goldman Sachs Group Inc. (GS) Chief Executive Lloyd Blankfein touted his firm's risk-management prowess, saying the secret to Goldman's success is its ability to gauge the assets it is holding on its balance sheet.
Blankfein, speaking Friday at a New York conference organized by University of Pennsylvania's Wharton business school, said Goldman places special emphasis on mark-to-market pricing of securities and other assets.
"If you rigorously mark to market every day...it's not impossible to have a very big problem, but it's less likely," he said. "It's annoying from time to time, but it's the single most important thing at our firm."
Blankfein spoke at the end of a week in which Wachovia Corp. (WB) and Morgan Stanley (MS) added their names to the list of companies that have said they expect to take fourth-quarter hits of at least $1 billion stemming from the eroding value of assets tied to subprime mortgages. Some banks have struggled to accurately value their mortgage-related holdings, many of which are thinly traded and therefore hard to determine their prices.
Goldman surprised Wall Street in September when its fiscal third-quarter earnings exceeded expectations, even as peers suffered amid the credit crunch and violent market swings. Goldman so far hasn't warned of writedowns in its fourth quarter, which ends Nov. 30, but rumors have swirled in recent weeks that the firm has racked up hefty mortgage-related losses.
Blankfein told the audience of MBA students and others that after the recent "sunny" period for financial firms, the market turbulence that started this summer means nobody is necessarily safe from sudden losses. He said he often cautions Goldman employees against hubris.
"Even with only two weeks left (in a fiscal quarter), there's plenty of time to have the worst year ever...because things can change so quickly," Blankfein said he tells employees.
Blankfein noted that the recent credit crunch stemmed in part from risk being priced at extraordinarily cheap levels. Today, he said in a brief interview after his speech, risk pricing has moved "in the right direction," but he said he is "not sure" if pricing needs to rise further.
-By David Enrich, Dow Jones Newswires; 201-938-2123
(END) Dow Jones Newswires
November 09, 2007 16:43 ET (21:43 GMT)
His comment about marking to market seems to contradict the fact that many of these derivatives haven't traded for months no?
Couldn't agree more as well.
HeÂ´s tellling you that GS stock is a clear risk management buy...Or do you know any other IB CEO visting divisions and reminding employees about prudent risk exposure ?
GS has been known to short their own stock.