Goldman Sachs' Incredible Trading Returns are Literally Unbelievable

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A long while ago (September 2008), I wrote an article entitled " The Greatest Looting Operation in History"  and followed it up with another entitled "America is Being Looted."

What shocked me at the time was how brazen the perpetrators were being in their efforts, almost as if they had no fear of being exposed or being asked any hard questions.

In an article that came out today, this was confirmed to an extraordinary degree.

The Goldman touch

Goldman Sachs $100 Million Trading Days Reach Record in Quarter
By Christine Harper

Aug. 5 (Bloomberg) -- Goldman Sachs Group Inc. made more than $100 million in trading revenue on a record 46 separate days during the second quarter, breaking the previous high of 34 set in the prior three months.

Trading losses occurred on two days during the months of April, May and June, compared with eight days in the first quarter, the New York-based bank said today in a filing with the U.S. Securities and Exchange Commission.

There is no possible way in a free market system where everyone has the same advantages and information for Goldman Sachs to sport a win-to-loss ratio of 46-to-2.  Ergo, Goldman Sachs is running a gigantic scam at everyone's expense while the SEC, the Fed and everyone else politely looks the other way.


There are mountains of evidence pointing to the fact that markets trade in inherently unpredictable ways.

Because of this, really extraordinary traders are those that can keep their noses slightly, but consistently, above water. Turning in a win-loss ratio of 60/40 is considered extremely good.  Getting to 70/30? Best to stop now and write a "trading guru" newsletter selling your system while it still works.  But 80/20?  Now you are just on a lucky tear that will soon be reversed in a humbling way.  Given this, what would we say about a 96.9 to 3.1 ratio? (Thanks DavidC for the correct figures here).

That's what Goldman Sachs' daily win-loss ratio works out to and it speaks of something other than "being good" or "being lucky." This is just comparing Goldman Sachs' $100 million "win" days against their total number of losing days and I admit I have no idea what their actual win/loss ratio looks like on a trade-by-trade basis.  But on a daily basis alone, this sort of performance cannot be chalked up to anything but an unfair advantage.

Anybody with even a minor appreciation of statistics knows that this represents something other than "being good." This represents an unfair advantage to a degree that is truly mind-boggling.

If this seems esoteric and therefore perhaps unimportant to you, I would like to point out that when it comes to trading, someone's win is somebody else's loss. Trading is a zero sum game.

Money is not created through the act of trading.  It would be a mistake to think that Goldman Sachs somehow created this money through the act of their trading genius. For Goldman Sachs to win $100 million in a day of trading means that somebody else lost $100 million.  Most likely a huge collection of somebody elses.  

I would suggest that the most probable source of these funds, the ultimate loser, is the taxpayer.

This means that as Goldman wins, you lose, I lose, and our future gets diminished so that a pathetically small number of already obscenely rich individuals can continue to game a rigged system to their obvious and magnificent advantage.  While I am sure that somebody, somewhere has convinced themselves that it is a good thing to allow Goldman Sachs to recapitalize itself in this way, obviously rigged markets are not a good idea for a country that depends on the willing flow of foreign funds, and they are also certain to misallocate capital.

Moving along, one thing I truly despise is when unfounded statements or opinions are inserted into an article and presented as fact such as this example.

Goldman Sachs’s trading results reflected the firm’s willingness to take on more risk during the period.

No, the results do not reflect "the firm's willingness to take risk."  This is more likely than not a direct quote from the Goldman Sachs PR department.

If all a firm needed to do to enjoy outlandish trading results was to "take on more risk" then they'd all do it and - presto! - everyone would have higher trading profits!

That's just not how things work, unfortunately. Anybody who is turning in a ratio of winning-to-losing trading days of 46-to-2 is not trading in a fair and competitive manner.

Instead we might reasonably conclude, knowing what we know about how equities markets are supposed to work, that 46-to-2 reflects an unfair advantage, not a taste for risk, as the scribe put it. One could reasonably re-write that sentence to read:

"Goldman Sachs’s trading results reflected the firm’s clever use of lobbying funds and influence to skirt the rules that everyone else abides by. Their gain was your loss. "

What these trading results tell us, as clearly as one could ever hope in this day and age, is that Goldman Sachs (and likely other major recipients of bailout money) is gaming the system to their benefit and everybody else's loss.

I suppose it would be even clearer if we received individual, hand engraved notices informing us of this fact, but, for me, the presence of only 2 days of trading losses in an entire quarter is more than sufficient.

America, you are being looted, and the pirate's name is Goldman Sachs.

This is a companion discussion topic for the original entry at https://peakprosperity.com/goldman-sachs-incredible-trading-returns-are-literally-unbelievable-2/

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Dr. M, your personal PM allocation is looking more and more reasonable with each passing day.

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WOW! …how outrageous is that?
Part of me is saying "…that just can’t be so in this country". The other part is getting angry.

Jeff

 

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This is just unbelievable…
I have heard this store from other sources, but to hear it here makes it REAL.  Thanks.

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Hello Chris,
The data states that GS made more than $100m on 46 days and losses on 2 days. In other words they made gains on the other days but just not as great.

I’ve done a (very) quick calculation and between 1st April and 30th July there are 65 working days (I haven’t accounted for bank holidays). So GS’s actual win-to-loss ratio is 63 to 2 (96.92%).

DavidC

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DavidC - great points.
So what we know is that GS enjoyed 46 days with more than $100 million in gains, 17 days with less than $100 million in gains, and 2 losing days.

So we might guesstimate that they "made" somewhere around $5 billion.

And using the more accurate 63 to 2 win/loss ratio changes the result to 96.9 to 3.1.   Doesn’t change it much, does it? (I’ve amended the post above to reflect this…thanks)

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Chris,
I share your sentiments that collectively we are being ripped off by Wall St and the Fed.  In the heat of the financial crisis, Bernanke stated that "we" have to save Wall St. in order to save Main St.  Nonsense.  After thirty eight years of fiat money and finance capitalism, its very clear that the few on Wall St. benefit mightily while the majority on Main St. get an ever shrinking piece of the economic pie.  And the pie is propped up on ponzi debt.   

Since 1970, nominal GDP has increased at an annualized rate of approximately 7%.  Annualized inflation, as measured by the CPI, since 1970 has been approximately 4.5%.  Hence, 65% of our "growth", and investing for that matter, is inflation gathering/shuffling.  At this point, there is more inflation in the system than actual output.   My father bought his first house in 1970 for ~ $50K.  Today that house is worth ~ $500K.  The house didn’t increase in value it increased in price due to inflation.   In fact, with time, structures depreciate so the inflationary gains are even greater than $450k.

Is it any wonder Wall St. inflation shufflers have thrived while the majority have struggled.   And to add insult to injury, Wall St. used its unearned financial influence to increase taxes on wages and consumer goods while decreasing taxes on financial gains that gather inflation tax deferred. 

You want to know why Bernanke fears deflation.  It’s not because people will buy less if prices fall.  Look at I-pods and computers - falling prices increase demand.  No, Bernanke knows that finance capitalism and Wall St. (founded on ponzi asset prices) will collapse without inflation. 

Right now CPI prices and wages are falling.  Bernanke can’t quickly and easily stop that.  But he knew he couldn’t allow asset prices to fall any further so he handed free money to Goldman and others.  I have no doubts Bernanke also spearheaded suspending FASB 157 (mark to market).  Goldman’s success is due to a beneficent central bank - now more than ever.  What a sham(e).

Allow me to decode the above mentioned claim from Bernanke:  We have to further decimate the middle class in order to save Wall St…

 

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The AsiaTimes has a detailed article on this subject that opens with this:

[quote]

Page 1 of 2 Goldman Sachs, the lords of time By Julian Delasantellis Just for the moment, let's pretend that James Cameron's 1984 The Terminator was being made for the first time today, and, instead of the evil robots emerging from the fatally misguided foundries of Cyberdyne Systems, they came from the dark laboratories of Goldman Sachs. From out of the future, a warrior is sent back in time to warn the present. "You still don't get it, do you? They'll find your money!! That's what they do! That's all they do! You can't stop them! They'll wait for you! They'll reach down into your bank account and tear its f*&^*^g balance out!"

[/quote]

http://www.atimes.com/atimes/Global_Economy/KH05Dj03.html

It’s worth a read as it discusses some of the possible mechanisms used to generate the above mentioned kill-ratio. The author does not mention one interesting quote that appeared in the press regarding the code theft - that "in the wrong hands" the software could be used to manipulate the market…

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And if that’s not enough:
From the Washington Post (you may have to register):

Excerpt below:

 

Dueling Public Interests In Policing Rescued Firms

 

As the SEC pursues numerous investigations into major financial firms, agency officials say they expect to wrestle with the competing demands of punishing wrongdoing and keeping financial firms healthy to support the economic recovery. In particular, they plan to take into account whether companies have received assistance from the government’s signature bailout initiative, the Troubled Assets Relief Program. Officials said they are evaluating the size of fines and redress sought and the impact these could have on the financial system beyond the specific firms.

 

 

In other words, businesses that may have broken the law may not be charged if they owe funds to the government or are expected to contribute to the recovery. So, using that argument,  drug dealers should be left alone because they contribute money to the local economy?!

 

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I wonder if GS’s enormous profits has something to do with GS’s program trading methods, and, maybe some government help:
"That wealth is generated on computer systems that can handle greater trading volumes at ever increasing speeds. These platforms often rely on algorithms – a sequence of instructions used for calculation and data processing – that can spot unseen opportunities in the market and give their users a huge advantage measured in milliseconds.

For banks such as Goldman Sachs Group Inc (GS.N), the codes are worth a fortune and this value also make them a tempting target for thieves – as appears to have happened with Sergey Aleynikov, a former computer programer at Goldman arrested by the U.S. Federal Bureau of Investigation last Friday.

…

"If you happen to have built a model that makes you even 200 milliseconds faster than me, you are in a much better position," said Sang Lee, managing director of research and advisory firm Aite Group. "You may be able to trade a thousand times before I even see what’s going on and act on it."

http://www.reuters.com/article/ousivMolt/idUSTRE5667JR20090707

"At a court appearance July 4 in Manhattan, Assistant U.S. Attorney Joseph Facciponti told a federal judge that Aleynikov’s alleged theft poses a risk to U.S. markets. Aleynikov transferred the code, which is worth millions of dollars, to a computer server in Germany, and others may have had access to it, Facciponti said, adding that New York-based Goldman Sachs may be harmed if the software is disseminated.

“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said, according to a recording of the hearing made public today. “The copy in Germany is still out there, and we at this time do not know who else has access to it.”

<o:p></o:p>

http://www.bloomberg.com/apps/news?pid=20601087&sid=ajIMch.ErnD4

Now, look at this chart of the percent of program trading on the NYSE:  http://www.swampreport.com/investments/program-trading-as-of-total-nyse-volume/ —this is about last time you will see a such chart, because:

"…the NYSE has taken action to make sure that nobody will henceforth be able to keep track of the complete dominance that Goldman Sachs exerts over the New York Stock Exchange. This basically ends our weekly Program Trading updates disclosed every Thursday indicating that Goldman has singlehandedly captured all of NYSE’s program trading.

In an information memorandum released on June 24 (09-31), the NYSE Regulation team has announced the Decommissioning of the Daily Program Trading Report (DPTR)."

http://www.zerohedge.com/article/nyse-halts-transparency-feels-goldman-program-trading-disclosure-unnecessary

"A couple of months ago, we also learned through Zero Hedge that Goldman had profited greatly from a sweetheart deal with the federal government concerning a new program instituted by the Feds known as "The Supplemental Liquidity Provider" Program ("SLP"), launched this past  Thanksgiving, which was supposed to provide "market liquidity" (i.e.: an ongoing, active market) for selected groups of 500 different NYSE stocks per SLP participant.  As Durden pointed out to all who were interested, it certainly appeared to him that Goldman was the only active participant in the program.

http://www.dailykos.com/story/2009/7/6/750420/-Breaking:-FBI-Arrest-Opens-Goldman-Sachs-Pandoras-Box

 Of course, GS itself would never use their program to manipulate the market "unfairly."

Of course,GS would not have told the NYSE to stop the DPTR.

Of course, the federal government would not be using the SLP and GS as a means to manipulate the market (e.g., plunge protection team) . 

Or, would they?

 

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A $100M/day for the next year will have transferred about 1/12 of the combined value of two of the nation's largest pension funds (CalPers and CalSTRS: http://www.latimes.com/business/la-fi-calpers22-2009jul22,0,5416427.story) to the upper scum at GS; in twelve years, they will have it all--every last penny. This seems like a system that will last a long time...

And if the money ain’t comin’ from such places, it ain’t comin’ from nowherz!  Zerosum.

People "just don’t get" GS–and well over a million of ‘em wont be gettin’ any pension because they don’t get GS. Not that the people should be required to get anything: that was supposed to be the function of our "legal" system.

I, for one, have reached a level of rage that I never knew possible; I’m sure there are those who feel at least as angry, but who truly have nothing left to lose. I’m fairly confident that Goldman has created at least a small cadre of Timothy McVeys out there: some scattered individuals, some small and, maybe, large groups. This can’t possibly go on for much longer without there being some horrific consequence…

And the real problem here is not that people "just don’t get GS," it’s that GSians are so insulated in their artificial golden cocoon that they "just don’t get" reality. I’d bet my life savings this is coming to a  head within a very short period of time. The time when I felt like I was one of the few who got GS has obviously come to a jolting end; now, it’s who doesn’t get it?

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This article by a former Goldman insider helps to shed some light on Goldman’s new found "luck". 
http://www.motherjones.com/politics/2009/07/how-you-finance-goldman-sachs’-profits

I know of two sure fire ways to always make money gambling.  The first is to cheat .  The second is to be the house/bookie and match bets. 

 

 

 

 

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Money is not created through the act of trading.  It would be a mistake to think that Goldman Sachs somehow created this money through the act of their trading genius.
 

True, but money was probably "created" via the leveraging that probably took place before the "bets" were placed.  If you’re going to game the system to the tune of a 95%+ winning percentage, then you might as well do it with as much borrowed money as possible.  It would be interesting to see the extent to which they leveraged their assets during this very fortunate streak. :wink:

Brian

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Hi All
I love how GS and the Banksters are getting exposed as the unconscionable crooks they are from many sources now.

Got this in the mail from goldmansachs666.com…maybe one of you eloquent writers can send in your thoughts?

 

Reality TV Wins - I get a lot of comments, emails and phone calls about how mad people are, but it is the kind of mad that passes as soon as their favorite Reality TV show comes on.  Sad, but that's the facts.
 
Maybe it's time to start an electronic petition, with verified email addresses, names and mailing addresses.  I mean a real petition, and not the silly nonsense we see so much of on the Internet.
 
Goldman Sachs Petition Challenge - So if there is a college student, grad student, attorney or sharp cookie out there that wants to draft a petition, we will put together the mechanism to get it on the Internet through this blog and hundreds of other blogs and media sources.  I will have a couple of editors review what (if anything) we receive, and we will compile one comprehensive petition.  As the signatures are collected, we will make sure they get to the right folks in Washington and the right media outlets. 
 
Media Requests - I have turned down all recent media requests, but if the Petition drive falls into place, I will spend the time and effort to make this a national effort. 
 
So think about it.  If you can write a decent petition draft, or you want to put your money where your mouth is, pay someone to write it . . . and we'll do the rest. 
 
You can email drafts to me at Mike@Morgan7.com   Wake up America.  You are allowing an elite group of Banksters and Economic Royalists destroy the very fabric of the United States of America and the future of your children and grandchildren. 
 
Contributors - If you want to write, post or edit posts on www.GoldmanSachs666.com or www.JPMorgan666.com , please contact me: 
 
Mike Morgan - (772) 260-5448 Mike@Morgan7.com 
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bsm20, check out the MotherJones article linked by Angry Saver for some answers and more ugly facts - like the fact that GS asked for, and was granted by the FED, a reserve capital requirement wavier:

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(Edit:  I see I was late to this particular story as the crack team here was posting all about it as I was writing about it.  The edit involves shrinking my post so as not to be repetitive).
An important component of this story as written by a former GS alum and printed in Mother Jones on July 28.  Please pay special attention to the last paragraph:

On February 5, 2009, the Fed granted Goldman's request. This meant that not only was Goldman getting big federal subsidies, but also that it could keep betting big without saving aside as much capital as the other banks. Using VaR gave Goldman more leeway to, well, accentuate the positive. Yes, Goldman is a more risk-prone firm now than it was before it got to play with our money.
I think this explains much.  My read on the entire situation is that the views of GS, et al., are so comprehensively expressed in the halls of power, that is was a foregone conclusion that the public "solutions" would be hopelessly intertwined with the private financial health of GS, et al.

Essentially, GS is being entirely rational.  If given the opportunity to play a game of "heads I win, tails you lose" I too would lever up, apply maximum risk and go for it!

That’s what they are doing and, while rational, it is amoral, immoral and wrong.

This crisis is not over, not by a long shot.  It will be over when these animal spirits are exposed as fraudulent and crushed.  So far, not so much.

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From Briefing.com

Goldman Sachs CEO tells employees to avoid making big-ticket, high-profile purchases - NY Post :

NY Post reports co CEO has warned his employees to avoid making big-ticket, high-profile purchases as the gold-plated Wall Street co hunkers down amid a firestorm of public and political anger over outsize bonus payments. According to sources at the bank, Blankfein says purchases should be toned down in light of the billions in bailout money that banks, including Goldman, have gotten from Uncle Sam. A source within the bank said Blankfein first began calling for an end to the conspicuous consumption late last year, but has stepped up his campaign in recent weeks as the White House has sought to rein in compensation and as the co has gotten dinged by a pair of high-profile magazine articles. "This is a sensitive time for us, and [Blankfein] wants to make sure that we’re not being seen living high on the hog," said one Goldman exec.

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Well,
I heard it on Bloomberg radio today about GS 100 million dollar days…

As soon as I got home I came here to get on this site and see what Chris et. al. had to say…

I wasn’t disappointed!

SO, what is a father to do that has kids to educate and cloth and feed?

I am calling my tax guy tonight to find out how bad a hit I will be taking to expunge myself of the market. ie. 401K 101K

Lack of trust? Confidence? The announcers today on the radio were almost cheering GS for those gluttonous results. And, doing so with OUR money. Hey, how much of that profit will the taxpayers be seeing? I mean, after all, it WAS our capital, right?

C.

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Wow… now I know why GS is slowly becoming known as Gold in Sacks all over the internet…!

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Good one Cat- You’d think GS clients would know a high when they see it and take their money and run. Buy low - Sell High.   =))