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Goldman Sachs: how is "God's work" so profitable?
invite response
2010 Feb 13, 9:50am 1,103 views 2 comments
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Yes, highly recommended. They did a great job of explaining Goldman in a nutshell, and why every American should be pissed as hell.
It's only 20 minutes of your time. Everybody should see this piece.
What people don't seem to get is that their "Prop Trading" is really larglely "insider trading". It's not so much that they are the smartest guys in the room, it's that having their fingers deeply in every market, they have information that other don't. Trading is mostly zero sum, so for every dollar they make trading, that's a dollar that somebody else lost, such as your pension fund or 401K. The most obvious example of this is when they were packaging up mortgage backed securities of crappy loans in their role as investment banker, and then in their role as trader bet against them with derivatives because they knew they were crap.
justme
2010 Feb 13, 1:52pm
E-man,
No, that is not the correct response. What we all should do is crush their nasty monopoly.
The problem is that for Goldman to make 1B, someone else has to lose 10B. It is not even a zero sum game anymore, because everything has been leveraged and amortized to infinity.
Who should know the truth better than former Goldmanite, Nomi Prins. "Classical investment banking function is a small portion of their revenues, I think it is about 10% or so. So if he is doing god's work, he is only doing it 10% capacity. The rest is prop trading." But wait, according to Goldman prop trading accounts for only 10% of revenue. Why the discrepancy? Simple - because that 80% "vacuum" is really just the client-facing prop/flow fixed income hybrid model, which after the disappearance of all big fixed income trading houses (Bear, Lehman and soon, RBS) Goldman has now monopolized.
PBS part 1:
http://www.zerohedge.com/article/exposing-story-behind-goldmans-record-profits
Part 2:
http://www.zerohedge.com/article/exposing-story-behind-goldmans-record-profits-part-2-role-taxpayer