

Goldman Sachs loses money on just one trading day in Q3 - yan
http://www.zerohedge.com/article/absolute-perfection-goldman-loses-money-just-one-trading-day-q3

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tamas
I haven't lost any money on investments in 3 years, and I'm nowhere near being
an educated economist. With a diversified portfolio, I could always find an
equity to sell above the buying price when I needed money, and this way I
could ride out the bear markets without realizing losses.

Of course I'm nowhere near Goldman Sachs in volume (about 6 trades a month on
average), just telling that it is actually possible to achieve a "perfect
score".

I know Goldman Sachs is not really popular right now among the people, and I
have absolutely no intention to defend them, but this seems a bit like a witch
hunt.

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biznerd
This is not a very good analogy.

* You are one individual that averages 6 trades in month . GS has hundreds of traders, many of which do average that amount in a week (if not a day). The law of averages applies to GS, while your experience is anecdotal evidence.

In fact, if after 3 years with an average of 6 monthly trades you haven't
liquidated a single negative position I'd say that most probably are making a
classic investment mistake - holding onto your losses too long.

* GS trades much more volatile investments than you - futures, derivatives, etc. Traders have a much shorter time-horizon than you as well. You sell when you need the money while they're trying to meet their quarterly numbers.

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tamas
Wow, apparently I expressed my point poorly, as you guys seem to pick up that
I'm advertising how awesome I am and how I kick GS' ass on the markets.

What I wanted to say is that it's hard to find an index that went down during
Q3 so those hundreds of traders could actually manage to not lose money but
only one day, so that post and the comments really seem to be... subjective
and biased.

As your note of my "strategy" being a mistake, I'm actually fine with my
results and I'll keep going long, thank you.

~~~
loganfrederick
You make a good point about comparing their performance to the index. If the
market as a whole is rising, and there are always other people willing to take
the opposite position of you (or Goldman), it is conceivable that you could
only have one negative day.

If this was during a negative quarter for the market as a whole, that'd be a
different story. Like the other poster noted, the likelihood that Goldman
would consistently be on the positive side of millions of trades for ninety
days is probably pretty slim.

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dmillar
Did he watch the market over the past 3 months? It's been doing a pretty
steady incline. If you got in low, it's been really hard to not make money.

Goldman is getting vilified in the press these days, and I frankly think it's
unwarranted. People who have little understanding of how they make their money
quickly cry foul.

Hanlon's razor applies here: Never attribute to malice that which can be
adequately explained by stupidity.

~~~
ewjordan
_If you got in low, it's been really hard to not make money._

Absolutely true.

But there have been plenty of down days, and what's suspicious is that Goldman
made money on all of these except one (though see my final statement in this
post - I don't fully believe that the numbers that are posted mean what they
are supposed to mean).

Since July 3 (random date a few months ago), if you look at S&P 500 returns,
there have been 50 up days and 36 down ones. To make money on each and every
one of those movements screams "exploited loophole", if that's actually what
happened. I'll leave it to other interested parties to calculate the
probability of that happening by chance; it depends on your assumptions, but
there's no way that it's significant enough to consider.

Or maybe they've fully solved the problem of market timing. But they're really
just not that smart (there's not an analyst alive that believes you can nail
day to day movements at 99% accuracy).

In this field, another maxim applies: never attribute to genius that which can
be adequately explained by malice. Here, we've got motive and opportunity for
malice, so I'm very hesitant to believe that they're playing fair...

However, I also don't necessarily believe that these numbers mean what we
think they mean, since I don't know how they were generated, or what sorts of
accounting or trading tricks may have been played to "smooth out" the risk
profile and ensure very few losing days, as long as the long term average was
positive. The appearance of zero-risk trading has some very tangible benefits,
and there's a lot of stuff you can do to shift a distribution of returns so
that it looks a lot less volatile than it really is...that whole CDS bonanza
had a lot to do with shifting risk to the tails to snatch at predictable
returns the rest of the time, so who am I to say there's not something similar
going on here?

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adamt
When looking at S&P 500 returns etc, I think you're missing the fact that GS's
Fixed Income business is far larger than their equity business. Given the huge
amount of government borrowing going on around the world etc, the bond markets
are probably quite active. Given that much of the big competition in the bond
markets has collapsed, GS is having a field day there.

~~~
dmillar
It is also worth noting that GS has more cash on hand right now than ever
before.

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biznerd
Goldman serves as a "prime broker" to many hedge funds. Not to mention
intimate financial relationships with the largest corporations in the world.

It would be naive to think that it did not have any advantage because of its
position in the financial industry.

Having only one losing trading day in a quarter could not be accomplished
without insider information.

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andylei
actually, it's entirely possible. i know of prop trading groups that have been
around for ten years with only one or two down months.

in dislocated markets, making markets is actually relatively easy, so it's not
that surprising that they usually don't lose money. they also have hundreds of
traders. each one of them probably had many losing days, but in aggregate,
they have good traders and systems, so they rarely have losing days now.

also, how do you know that it's impossible without insider information? what
reason do you have to back up your claim?

~~~
biznerd
months, yes this is possible. But only one day, that comes to almost a perfect
score. And no one else has a perfect score.

GS has turned into a giant hedge fund. And their numbers are consistently
better than any other fund or investor. Better than Warren Buffet or George
Soros. They're impossibly good.

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ivenkys
The article doesn't go into any details and that site is pretty well known for
its negative coverage of GS but the wide connections of GS to the Financial
Authorities and with other large companies is quite well known.

Anyone who thinks that there is nothing at least slightly illegal in the way
GS does prop trading is naive at best.

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yan
Another look: [http://www.zerohedge.com/article/another-view-goldmans-
tradi...](http://www.zerohedge.com/article/another-view-goldmans-trading-
perfection-and-statistical-improbabilities)

