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The Eagle

Goldman Sachs Advice Hands Clients Losses In Most Trades

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http://preview.bloomberg.com/news/2010-05-19/goldman-sachs-hands-clients-losses-as-seven-of-nine-top-trade-ideas-flop.html

Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse.

Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who followed the New York-based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday. Clients who followed the tips lost 14 percent buying the Polish zloty versus the Japanese yen, 9.4 percent buying Chinese stocks in Hong Kong and 9.8 percent trading the British pound against the New Zealand dollar.

The struggles for analysts at Goldman, which is fighting a fraud lawsuit from U.S. regulators who accuse the company of misleading investors in a mortgage-linked security, show the difficulty of predicting market movements as widening budget deficits, a fragile global economic recovery and tighter financial regulations increase volatility. Stock and currency fluctuations rose to the highest in a year this month as Europe pledged about $1 trillion to stop a debt crisis in the region.

“This says that Goldman’s guys are only human,” said Axel Merk, who oversees $500 million as president and chief investment officer of Merk Investments LLC in Palo Alto, California. “No one is always right. There are a lot of cross currents in this market.

[...]

So if it's so hard to make money, even following their advice, how come they managed to make a profit every single trading day of the first quater of this year and only made a loss on 11 days in the last 12 months?( See here too:

)

Seems to me like they are rigging the markets, which they certainly could do as market makers...

Goldman Sachs makes more money from trading than any other Wall Street firm. In the first quarter, the bank’s $7.39 billion in revenue from trading fixed-income, currencies and commodities dwarfed the $5.52 billion made by its closest rival, Charlotte, North Carolina-based Bank of America Corp. In equities, Goldman Sachs’s $2.35 billion in revenue was about 50 percent higher than its nearest competitor.

Cohn told investors at a May 11 conference in New York that the firm lost money on only 11 days in the last 12 months.

[...]

Edited by wise_eagle

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http://preview.bloomberg.com/news/2010-05-19/goldman-sachs-hands-clients-losses-as-seven-of-nine-top-trade-ideas-flop.html

So if it's so hard to make money, even following their advice, how come they managed to make a profit every single trading day of the first quater of this year and only made a loss on 11 days in the last 12 months?( See here too:

)

Seems to me like they are rigging the markets, which they certainly could do as market makers...

Not defending GS in any way, but it is possible to make money day trading while not having a correct medium view of the overall economy.

Pretty sure that we have noticed a lot of duff recommendations from Goldman over the years. They pretty much called the previous tops in gold and oil by recommending Buys.

And the view here was I believe that they were trying to squeeze the last bit of juice out before they sold.

Edited by bobthe~

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http://preview.bloomberg.com/news/2010-05-19/goldman-sachs-hands-clients-losses-as-seven-of-nine-top-trade-ideas-flop.html

So if it's so hard to make money, even following their advice, how come they managed to make a profit every single trading day of the first quater of this year and only made a loss on 11 days in the last 12 months?( See here too:

)

Seems to me like they are rigging the markets, which they certainly could do as market makers...

No, it's because they take a commission on each trade or investment. So even if that trade makes a loss, they still get their x% on the initial sum.

They are large and amoral but it's a bit of a stretch to say they control the market to the extent that they can deliberately make trades go their way all the time.

Think about it - taking the commission up-front means they don't have to worry about influencing the market anyway because they've already made their money! This is just about how all investment funds, pensions, share traders work - they take a flat x% off your initial investment (e.g. 0.5% per year, or 0.5% of the value of the shares, min £10). It's all a game, rigged against you without any need for conspiracy theories.

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No, it's because they take a commission on each trade or investment. So even if that trade makes a loss, they still get their x% on the initial sum.

Actually they do A LOT of trading in their own name and mostly pull profits from that, that's what the article mentions too.

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No, it's because they take a commission on each trade or investment.

Nope. The trading record being referred to is in their own account - ie with their own money.

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This is why anybody involved in proprietary trading should be disqualified from trading with clients money and giving investment advice of any sort. It's common sense that they have a clear conflict of interests.

I 100% agree and I assume anyone with an ounce of common sense would too, but banksters obviously don't have common sense when it comes to multiply their profits.

I believe in the past it was like that, a stockbroker was not allowed to trade in his own name, but I don't know when and why that was changed.

Edited by wise_eagle

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Not defending GS in any way, but it is possible to make money day trading while not having a correct medium view of the overall economy.

Pretty sure that we have noticed a lot of duff recommendations from Goldman over the years. They pretty much called the previous tops in gold and oil by recommending Buys.

And the view here was I believe that they were trying to squeeze the last bit of juice out before they sold.

Easy to make money when you do exactly the opposite of what you have advised your client. Greed is good.

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I imagine that a lot of people who lost money following GS advice are currently talking to lawyers with the intention of suing them.

Figures like this make it obvious they were ripped off.

Edit to add: The whole company sounds suspiciously like a huge pump-and-dump boiler-room scam?

Edited by TaxAbuserOfTheWeek

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“This says that Goldman’s guys are only human,” said Axel Merk, who oversees $500 million as president and chief investment officer of Merk Investments LLC in Palo Alto, California. “No one is always right. There are a lot of cross currents in this market.”

[...]

LOL, only human, if they had used monkeys they would have at least had a 50/50 chance of profit.

http://www.dailymail.co.uk/news/worldnews/article-1242575/Lusha-monkey-outperforms-94-Russia-bankers-investment-portfolio.html

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I imagine that a lot of people who lost money following GS advice are currently talking to lawyers with the intention of suing them.

Figures like this make it obvious they were ripped off.

Edit to add: The whole company sounds suspiciously like a huge pump-and-dump boiler-room scam?

Gordan Gekko eat your heart out! Just in time for the release of the new film. :P What could be easier than having an influencial number of investors who can move the market and then trade against them

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Edit to add: The whole company sounds suspiciously like a huge pump-and-dump boiler-room scam?

Yeah, one that has been going on for approximately 100 years... :angry:

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Actually they do A LOT of trading in their own name and mostly pull profits from that, that's what the article mentions too.

Ok, yeah, I stand corrected.

It's still not clear what the article means by "$7.39 billion in revenue from trading fixed-income, currencies and commodities" - I would assume at least some of that is the fees/commission I was talking about, not all of it is from direct trading?

I would also propose that the main reason their own trading is more profitable than the stuff they do for other people is because they can act quicker to the volatile markets. E.g. they can change their holdings in a minute, whereas a customer would probably be getting delayed prices (15mins or so), plus the time to ring up GS and place a trade, then time to do that trade (minus GS' commission of course!). That's assuming they are watching the markets all day and don't have a job or something else to do...

Again, the game is rigged from the outset but I don't see it as a secret conspiracy.

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It's still not clear what the article means by "$7.39 billion in revenue from trading fixed-income, currencies and commodities" - I would assume at least some of that is the fees/commission I was talking about, not all of it is from direct trading?

That's the income from trading in their own name, commissions are not included in that amount at all.

Again, the game is rigged from the outset but I don't see it as a secret conspiracy.

Huh? A rigged game is a form of conspiracy. It might not be secret anymore, but it's still a gigantic fraud.

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That's the income from trading in their own name, commissions are not included in that amount at all.

Huh? A rigged game is a form of conspiracy. It might not be secret anymore, but it's still a gigantic fraud.

definitely not legal!!! Surely people will stop using GS for investment advice.

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That's the income from trading in their own name, commissions are not included in that amount at all.

It doesn't say if that is trading in their own name or on behalf of a customer so I am assuming that it includes both. Unless you can prove me wrong.

Huh? A rigged game is a form of conspiracy. It might not be secret anymore, but it's still a gigantic fraud.

Not it's not. Gambling on the horses is rigged (i.e. the odds favour the bookies), gambling in a casino is rigged (i.e. roulette is not 50/50 red/black - it also has '0') - but they're not a conspiracy.

Just because it's new to you doesn't mean it's a conspiracy.

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It doesn't say if that is trading in their own name or on behalf of a customer so I am assuming that it includes both. Unless you can prove me wrong.

Not it's not. Gambling on the horses is rigged (i.e. the odds favour the bookies), gambling in a casino is rigged (i.e. roulette is not 50/50 red/black - it also has '0') - but they're not a conspiracy.

Just because it's new to you doesn't mean it's a conspiracy.

You seem to have a severe lack of understanding the article posted, ask your financial adviser to explain it to you.

Edited by wise_eagle

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It doesn't say if that is trading in their own name or on behalf of a customer so I am assuming that it includes both. Unless you can prove me wrong.

Not it's not. Gambling on the horses is rigged (i.e. the odds favour the bookies), gambling in a casino is rigged (i.e. roulette is not 50/50 red/black - it also has '0') - but they're not a conspiracy.

Just because it's new to you doesn't mean it's a conspiracy.

Advising clients to buy/sell an investment and then trading the asset in the market in contradiction of your advice its not a conspiracy its dishonest

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Advising clients to buy/sell an investment and then trading the asset in the market in contradiction of your advice its not a conspiracy its dishonest

Absolutely not. They will have "Chinese Walls" in place. You know, like the ones that you see in foxtons and their mortgage advisers Alexander Hall(?)

:lol:

It occurred to me that it opens a huge can of worms if you disallow that kind of conflict of interest.

What if a bank runs a FTSE tracker fund for retail investors and at the same time traders in its IB are busy shorting a load of FTSE shares.

The traders cannot claim not to know they are acting against the interests of the retail clients because it is common knowledge that the bank also runs a FTSE tracker.

I am sure there are many other examples of seemingly innocent actions that would not bear that kind of strict scrutiny.

Edited by bobthe~

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Absolutely not. They will have "Chinese Walls" in place. You know, like the ones that you see in foxtons and their mortgage advisers Alexander Hall(?)

:lol:

It occurred to me that it opens a huge can of worms if you disallow that kind of conflict of interest.

What if a bank runs a FTSE tracker fund for retail investors and at the same time traders in its IB are busy shorting a load of FTSE shares.

The traders cannot claim not to know they are acting against the interests of the retail clients because it is common knowledge that the bank also runs a FTSE tracker.

I am sure there are many other examples of seemingly innocent actions that would not bear that kind of strict scrutiny.

Agreed +1...............have thought for a long while these type of transactions were unacceptable and needed regulating along with the other excesses of banks

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You seem to have a severe lack of understanding the article posted, ask your financial adviser to explain it to you.

I'm commenting on the article per se, but in your OP where you claimed it was all a conspiracy by GS. I hate the 'conspiracy' claim in general. It usually means 'I don't understand it so it must be a conspiracy'.

So, GS making money is not necessarily a conspiracy - it's just that they have set-up their business to always be on the winning side. Just like virtually all of the other big banks and investment firms.

Yes it's not fair (and maybe not technically legal?) but don't go around moaning that it's all some grand conspiracy... :rolleyes:

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Bernie Madoff was protected not by his clients naïveté but by their conviction that he was a crook working in their interest. This was the illusion that failed in the end.

The same appies to Goldman- it's not about actual integrity, it's about being on the right side of the fraud. If they do go down it will be because their clients have finaly worked out who the sucker really was. :lol:

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Bernie Madoff was protected not by his clients naïveté but by their conviction that he was a crook working in their interest. This was the illusion that failed in the end.

The same appies to Goldman- it's not about actual integrity, it's about being on the right side of the fraud. If they do go down it will be because their clients have finaly worked out who the sucker really was. laugh.gif

its not always obvious you are customer of GS.. they have world class Algos to obfusicate their prop trades... they are market making on every exchange... in every maturity and strike they are ubiquitous and they have a list of reallly ******ing loaded clients longer than your telephone number and the positions they runnn are biiig....

and of course they got all that cheap funding... but the CDS still trade 190bps wide...! cos thats how they roll ...

but you can guarentee they are making markets 10-15 bps wide for most of the US trading activity and that is biig numbers day in day out ....

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I'm commenting on the article per se, but in your OP where you claimed it was all a conspiracy by GS.

I never used the term 'conspiracy', you started with that, so better take off your 'tin foil hat' now.

On the other hand if you think a rigged market is something acceptable, then I guess it's all normal for you.

Edited by wise_eagle

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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