Business

Goldman Sachs lost money trading only
one day last quarter, and only two days the prior quarter.

Come on, how could that be? Their boss does say that banks “Do God’s work.”  I’m not sure that is a sufficient explanation.  When a firm’s trading performance challenges not only all preconceptions of realistic trading, but also of statistical distributions, it’s worth looking into.

Here’s what ZeroHedge has to say about it.  Here is a chart that demonstrates Goldman’s YTD trading track record: out of 194 trading days in 2009, the firm has made over $100 million on 116 occasions! This alone accounts for at least $11.6 billion in revenue (and is likely much more).

Yves Smith, at Naked Capitalism, adds: maybe I am just hopelessly out of touch, or perhaps more accurately, the
Fed has created such a ridiculously favorable environment for banks and traders
that if you are moderately competent, making money is like shooting fish in a
barrel. But a winning streak this consistent looks like a rigged game. Is this
just, ahem, “information advantages”? Greater ease in pushing markets around
that have fewer players? Just a function of those monstrously wide bid-asked
spreads? I’m curious for a sanity check from people closer to the action.

The party line comes in the Financial
Times:

The performance – revealed on Wednesday in a regulatory filing – compares
with two losing trading days in the previous quarter and confirms that the
authorities’ drive to revive markets after the crisis is yielding huge windfalls
for some banks.

Before the crisis, banks regularly recorded trading losses on several days in
a quarter.

Goldman made more than $100m in profits on 36 of the 65 days in the three
months to September and recorded more than $50m in profit on more than eight out
of 10 trading days, the filing shows.

These figures were down from the second quarter, when Goldman reported record
trading revenues and had 46 days with $100m-plus in profits. The smaller number
of days with $100m-plus profits in the third quarter partly reflects the bank’s
decision to rein in risk-taking in areas such as interest rates and
equities.

There is a suggestion here that banks like Goldman might be taking advantage
of the Fed and Treasury (although that might be by design, yet another hidden
subsidy).

Let me know what you think about this.

Here is a how there stock is doing.

Here is a link to a prior Goldman Sachs article worth checking-out.

Goldman Sachs lost money trading only
one day last quarter, and only two days the prior quarter.

Come on, how could that be? Their boss does say that banks “Do God’s work.”  I’m not sure that is a sufficient explanation.  When a firm’s trading performance challenges not only all preconceptions of realistic trading, but also of statistical distributions, it’s worth looking into.

Here’s what ZeroHedge has to say about it.  Here is a chart that demonstrates Goldman’s YTD trading track record: out of 194 trading days in 2009, the firm has made over $100 million on 116 occasions! This alone accounts for at least $11.6 billion in revenue (and is likely much more).

Yves Smith, at Naked Capitalism, adds: maybe I am just hopelessly out of touch, or perhaps more accurately, the
Fed has created such a ridiculously favorable environment for banks and traders
that if you are moderately competent, making money is like shooting fish in a
barrel. But a winning streak this consistent looks like a rigged game. Is this
just, ahem, “information advantages”? Greater ease in pushing markets around
that have fewer players? Just a function of those monstrously wide bid-asked
spreads? I’m curious for a sanity check from people closer to the action.

The party line comes in the Financial
Times:

The performance – revealed on Wednesday in a regulatory filing – compares
with two losing trading days in the previous quarter and confirms that the
authorities’ drive to revive markets after the crisis is yielding huge windfalls
for some banks.

Before the crisis, banks regularly recorded trading losses on several days in
a quarter.

Goldman made more than $100m in profits on 36 of the 65 days in the three
months to September and recorded more than $50m in profit on more than eight out
of 10 trading days, the filing shows.

These figures were down from the second quarter, when Goldman reported record
trading revenues and had 46 days with $100m-plus in profits. The smaller number
of days with $100m-plus profits in the third quarter partly reflects the bank’s
decision to rein in risk-taking in areas such as interest rates and
equities.

There is a suggestion here that banks like Goldman might be taking advantage
of the Fed and Treasury (although that might be by design, yet another hidden
subsidy).

Let me know what you think about this.

Here is a how there stock is doing.

Here is a link to a prior Goldman Sachs article worth checking-out.

Dow 10,000 – Version 2.0.

SNL made a joke that hitting Dow 10K was different this time.  The difference was that 15 million unemployed Americans cheered while they watched CNBC on their couch in their pajamas.

 

The U.S. Equity Indices continue to perform well.  The economy, however, is sending mixed signals.  At this point, some would argue that any positive economic signal is a welcome signal.

Mixed Signals: Two Charts Giving Us Different Views Into a Potential Economic Recovery.

The first chart shows that unemployment is still growing faster than new job growth.  Recent readings show six unemployed people for each potential job opening.  A glance at the chart shows that ratio is usually 2:1 (rather than 6:1).  I'll be watching this indicator, and will take even a small improvement as a positive sign for the economy.

Speaking of positive signs of economic recovery, the next chart does show a hopeful turn of events (based on increasing Capacity Utilization).

 

Utilization has increased for three straight months, and is up from the record low set in June (the series starts in 1967). Capacity Utilization had decreased in 17 of the previous 18 months.  An increase in capacity utilization is usually an indicator that a recession is over.  Let's hope it keeps up.

When In An Up-Trend, Like This, Don't Fight the Fed.

I was reading "A Dash of Insight" and saw this investment hypothesis: "The government is on a mission.  You may not like the policies, but as an investor, you fight it at your peril."  In other words, don't fight the Fed.

Recently,
that has been a painful lesson to Bears trying to short the rally.  The
result, a dramatically declining short interest.  Here is a chart from
Bespoke, illustrating that point.

Business Posts Moving the Markets that I Found Interesting This Week:

• Impacts of High-Frequency Trading – Manipulation, Distortion or Improvement? (Wharton)
• Blue Chips Top 10,000 for the First Time in a Year. (WSJ)
• Loose Monetary Policy: When Will Wall Street's Biggest Gravy Train Slow? (WSJ)
• Goldman Sachs Sees a "Perfect Storm" for M&A. (StreetInsider)
• Venture Capital Exits Dallas and Other Places Outside of Silicon Valley. (WSJ)
• Pessimistic Commentators Remain Anything But Convinced by the Rally. (Economist)
• Bloomberg Buys BusinessWeek From McGraw-Hill. (StreetInsider)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Mossberg Gives Windows 7 a Good Review. (WSJ)
• White House Tells Fox Network News to Take a Hike. (Newser)
• Patent Auctions Offer Protections to Inventors. (NYTimes)
• Facebook Has a Happiness Index Drawn From Posts. (NYTimes)
• Anthropologist: Modern Male Is 'Worst' Man Ever. (Newser)
• Un-Tapped Potential: Autistic Savant Draws Cities from Memory. (Wiltshire)
• Cool Chart of Apple's Path To 2 Billion iPhone App Downloads. (BusinessInsider)
• More Posts with Lighter Ideas and Fun Links.