

Goldman Sachs Has First Perfect Quarter With Zero Trading Loss  - px
http://www.bloomberg.com/apps/news?pid=20601087&sid=aHRgsfzJINXw&pos=5

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moe
What value does GS provide in return for those $25MM?

My underlying question would be: Are they a symptom of a systemic flaw
(basically a parasite) or does their role in the financial ecosystem somehow
justify that kind of profits?

~~~
paulitex
Liquidity, mostly.

They are 'market makers'. If you're a big {pension, real estate, rrsp}fund and
want to make a trade, say a purchase, you need to call your trader directly.
The trader will sell you some of their own (if they have it on their books),
or will contact other people who they think may have extra supply on your
behalf.

They are the 'grease of the economy'. In theory, it makes markets run
smoother, which leads to greater efficiencies for everyone, and makes the
world a better place.

(in theory)

~~~
arijo
Someone has to create the wealth that supports liquidity.

~~~
cturner
I think you are suggesting that there's something less worthwhile about wealth
made via liquidity creation than other forms of wealth.

On that theme - would you say that it is more noble to be a mechanic than
programmer, and more noble to be a farmer than a mechanic?

------
lutorm
Not hard to get zero trading loss if the government bails you out when you
lose... ;-)

~~~
KonaB
Pavlovian anti-GS hysteria at its best...

~~~
lutorm
Note the visual indication of what's known as a "joke".

~~~
KonaB
The joke is no longer amusing. Everyone is attacking GS, from utterly clueless
uneducated morons to utterly devious dumb politicians with a private agenda.
By attacking GS in such a gratuitous manner, one reminds others of such
tragicomedy.

~~~
cwp
So everyone who criticizes Goldman is stupid? Is that by definition, or is
there an intelligent critique out there that hasn't yet been made? What, if
anything, would cause you to criticize Goldman? What, if anything would cause
you to laugh at Goldman?

These aren't sarcastic rhetorical questions, I really want to know. From where
I'm standing, it seems that Wall Street is deeply corrupt, and Goldman's
success comes from their unparalleled ability to turn that to their advantage.
Reasonable and more knowledgeable people may disagree, and many do (eg, Warren
Buffet). But I'm puzzled by those who get _angry_ at the suggestion that
Goldman in particular and Wall Street in general are anything less than
paragons of virtue.

Surely this is a legitimate topic for discussion. If these guys screw up we
all suffer, and there are a lot of people suffering acutely right now. I'm
wrong, fine. I'm willing to be educated. But I don't appreciate being
dismissed as a moron.

~~~
KonaB
Thanks for the intelligent comment. Finally!

I am not against intelligent critique of GS, the government, whatever. In
fact, such critique is required to ensure the proper functioning of the
system, closing the feedback loop and providing the required checks. What I am
against is Pavlovian unintelligent critique, and one sees a lot of that when
the topic is Wall Street. And even though a lot of HN'ers are deeply
knowledgeable about Finance, the majority is clearly clueless. This is HN,
after all, not _NucPhyn_.

I am no GS'er, nor am I their _useful idiot_. They are merely maximizing their
utility through whatever means necessary. The one difference between me and
you guys is that I don't claim that I am a saint who would be uncapable of
doing what GS is doing if I were on their shoes. It's easy to be full of
virtue when one does not have the chance to do any evil. Business is hard, but
the players in the financial market are voluntary participants. If GS has an
information edge and rapes everyone else on a regular basis, maybe the prey
should leave the market. It's a winner-take-all scenario, whether we like it
or not.

Change the regulation, they will find a new way of gaming the system. Increase
taxes, and they will find a loophole. The only way of taming these hyper-
motivated people is by eliminating all economic freedom, and I oppose that on
ideological grounds. So, I am happier to have a market where GS pillages their
counterparties than to have the alternative scenarios. No one said that the
best of all worlds was ever attainable. It sucks. One could try to change
human nature, but we all know how that worked in the past...

~~~
borisk
.Replace("GS", "Pirates")

~~~
KonaB
I can't. The trademark is already registered ;-)

<http://en.wikipedia.org/wiki/Pirate_Capital_LLC>

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pwhelan
Impressive feat. I guess that stat arb and whatnot is easier now because
people are no longer leveraged to move the world and the margins can be a bit
tighter. I would be interested to see loss days compared to a quarter of total
gain/loss.

~~~
px
They didn't have a single trading day in which they made less than $ 25
million. And they had 35 days over $100 million.

[http://www.sec.gov/Archives/edgar/data/886982/00009501231004...](http://www.sec.gov/Archives/edgar/data/886982/000095012310046612/y84220y8422002.gif)

(net revenues are in millions)

~~~
pwhelan
I guess I wasn't clear. I mean compared to other quarters where they (or other
firms) made similar or greater amounts of money. Is the constant winning a
side product of less risky bets, less leveraged & more fearful markets or...?

What is it about this particular time that has allowed them to do so well?
(and where can I get me summa that!) I guess we won't know since we don't work
there...

------
AndrewDucker
This means they aren't taking enough risks.

Seriously - the stock market is risk based. If you aren't taking risks then
you're not going to be in those areas that make the most money. Sure, you want
to make more than you lose, but if you never lose any money then you aren't
taking enough risks to really strike it big by finding something nobody else
thought would produce good returns.

------
mikecane
"...how is that possible that they only make money?”

~~~
mikecane
Now wait one minute here. That quote was from the post itself. That someone
down-voted it leads me to suspect GS has trolls here. Stop it.

~~~
jodrellblank
I always downvote comments on HN where someone just posts a quote from the
linked article and nothing else.

I don't just vote on whether I agree or disagree, I vote on whether I want
more comments like that on HN, and I don't want more people quoting the linked
articles without adding anything. If I want to read the linked article, I know
where to find it.

~~~
mikecane
OK, at least that explains why you did it. Thanks.

~~~
jodrellblank
It wasn't actually me originally, and that downvote wasn't me either!

 _paranoia_

------
borism
_"That Goldman Sachs is not a shitty deal"_

------
marltod
Front-Running is currently a legal tactic in trading. GS seems to be very
efficient at it. And the 1/8th point higher you have to pay when you buy a
stock isn't that much anyways.

~~~
yummyfajitas
This is complete nonsense.

Front running your client's trades is completely illegal. Front running on an
exchange is not even possible unless you hack the exchange computers (also
illegal). The first person to place an order at a given price on a given
exchange wins.

The only sort of front running which is legal is guessing ahead of time what a
third party might do and placing orders before they actually do it. I.e., you
might guess that Apple plans to buy Yahoo and buy Yahoo shares in anticipation
of this event. Do you have evidence GS has done this?

~~~
pocoloco
While front running may be illegal it seems that is possible to do front
running if you’re properly placed in the stock exchanges. Max Keiser and
Hellen Brown discuss this in the video [1] regarding how this can be done by
“specialist brokers.”

For good measure read also Hellen’s article [2].

[1]
[http://www.youtube.com/watch?v=V5G7zBWMpIs&feature=playe...](http://www.youtube.com/watch?v=V5G7zBWMpIs&feature=player_embedded#t=03m38s)

[2] [http://www.huffingtonpost.com/ellen-brown/stock-market-
colla...](http://www.huffingtonpost.com/ellen-brown/stock-market-collapse-
mor_b_568164.html)

~~~
yummyfajitas
Your second link has nothing to do with front running. Your first link just
reveals Hellen Brown is full of crap.

In the old days, market makers could potentially front run by _physically_
ignoring the proper market ordering (i.e., in a physical trading pit), perhaps
when the broker ahead of them in the queue is distracted with another trade.
This is completely impossible in an electronic exchange. There is no "front
run this trade" message in either FIX or OUCH (the wire protocols used for
trading).

