Goldman Sachs Profits In Credit Crisis

[South Lorne]

They appear to be the only one's so far....

"But Goldman’s absence from the mortgage debacle and the strong performance of its other businesses made up for the write-down associated with the loans. The firm reported $2.85 billion in profit in the third quarter, up 79 percent. Mr. Moszkowski estimates that investment and commercial banks in the United States have taken $50 billion in write-downs related to mortgages, with more coming; Mr. Blankfein said at a conference last week that he expected to take none."

http://www.nytimes.com/2007/11/19/business...mp;ref=business

[Guest tbatst2000]

They appear to be the only one's so far....

"But Goldman’s absence from the mortgage debacle and the strong performance of its other businesses made up for the write-down associated with the loans. The firm reported $2.85 billion in profit in the third quarter, up 79 percent. Mr. Moszkowski estimates that investment and commercial banks in the United States have taken $50 billion in write-downs related to mortgages, with more coming; Mr. Blankfein said at a conference last week that he expected to take none."

http://www.nytimes.com/2007/11/19/business...mp;ref=business

I find it really hard to believe that Goldmans have absolutely nothing of this sort sitting on the books somewhere. I'm prepared to believe that the majority of it will be client funds rather than their own but it's implausible that they didn't end up with a few 100 million so some tranche of some CDO or similar in the pipeline that they couldn't shift quickly enough. I predict this statement will come back to haunt them.

[South Lorne]

I find it really hard to believe that Goldmans have absolutely nothing of this sort sitting on the books somewhere. I'm prepared to believe that the majority of it will be client funds rather than their own but it's implausible that they didn't end up with a few 100 million so some tranche of some CDO or similar in the pipeline that they couldn't shift quickly enough. I predict this statement will come back to haunt them.

..their explanation is

"Goldman’s good fortune cannot be explained by luck alone. Late last year, as the markets roared along, David A. Viniar, Goldman’s chief financial officer, called a “mortgage risk” meeting in his meticulous 30th-floor office in Lower Manhattan.

At that point, the holdings of Goldman’s mortgage desk were down somewhat, but the notoriously nervous Mr. Viniar was worried about bigger problems. After reviewing the full portfolio with other executives, his message was clear: the bank should reduce its stockpile of mortgages and mortgage-related securities and buy expensive insurance as protection against further losses, a person briefed on the meeting said."

...this time last year would have been a good time to unwind from any heavy mortgage exposure...but we can only wait and see.....

Edited November 19, 2007 by South Lorne

[ccc]

Funnily enough their share price over the last 3 months has done exactly the opposite of most other financial organisations.

Goldman Sachs Share Price

[South Lorne]

Funnily enough their share price over the last 3 months has done exactly the opposite of most other financial organisations.

Goldman Sachs Share Price

...I wonder who was buying ..?..the astute....?....or people with insight.....?...or are they both the one and the same..?...

[Guest_chris c-t_*]

...the notoriously nervous Mr. Viniar was worried about bigger problems. After reviewing the full portfolio with other executives, his message was clear: the bank should reduce its stockpile of mortgages and mortgage-related securities and buy expensive insurance as protection against further losses, a person briefed on the meeting said."

Saw something in the Sunday Times; Swiss Re RUKN.VX took a big hit for a client who insured against sub-prime CDO losses.. Goldman??

RUKN.VX

87.55

Trade Time: 11:30AM ET

Change: Down 10.00 (10.25%)

[South Lorne]

Saw something in the Sunday Times; Swiss Re RUKN.VX took a big hit for a client who insured against sub-prime CDO losses.. Goldman??

RUKN.VX

87.55

Trade Time: 11:30AM ET

Change: Down 10.00 (10.25%)

....if so ...smart boys....

[FreeTrader]

I find it really hard to believe that Goldmans have absolutely nothing of this sort sitting on the books somewhere. I'm prepared to believe that the majority of it will be client funds rather than their own but it's implausible that they didn't end up with a few 100 million so some tranche of some CDO or similar in the pipeline that they couldn't shift quickly enough. I predict this statement will come back to haunt them.

Yeah, I think the jury's still out on this one.

Certainly got to give them credit for steering clear of the worst of the subprime stuff, but with $72 billion of Level 3 assets it's hard to believe there isn't some sludge lurking in there somewhere, even though they claim to have a fair handle on valuations.

Good point about client funds too - the Global Alpha fund performance this year is just awful, and with Q4 redemptions I'm surprised they don't call it a day (but that would be admitting failure). I wonder how their clients feel when Goldman smugly boasts they've been short the market and have come out ahead.

Were they shorting their own customers while encouraging them to stay long?

[South Lorne]

Yeah, I think the jury's still out on this one.

Certainly got to give them credit for steering clear of the worst of the subprime stuff, but with $72 billion of Level 3 assets it's hard to believe there isn't some sludge lurking in there somewhere, even though they claim to have a fair handle on valuations.

....I would think this is covered by them dealing with the unknown or difficult to measure exposures as follows:

"the bank should reduce its stockpile of mortgages and mortgage-related securities and buy expensive insurance as protection against further losses, a person briefed on the meeting said"

...at least they read the situation well and progressed with positive action even with the situations which could not be unravelled....I like success stories to balance with the lemmings who followed each other over the cliff as they fought for market share (of disaster)......and of course with the following which overlaps part of the previous quote:

"but the notoriously nervous Mr. Viniar was worried about bigger problems. After reviewing the full portfolio with other executives, his message was clear: the bank should reduce its stockpile of mortgages and mortgage-related securities"

...one must remember the paranoid always survive....!...

[?...!]

The top of Goldman is the best meritocracy on the street and for that reason alone they tend to come out ahead time and time again when it comes to strategy.

[FreeTrader]

....I would think this is covered by them dealing with the unknown or difficult to measure exposures as follows:

"the bank should reduce its stockpile of mortgages and mortgage-related securities and buy expensive insurance as protection against further losses, a person briefed on the meeting said"

Yes, but who is counterparty to the risk? The bond insurers have been tumbling recently because of concerns that they are undercapitalised. This is the Street's big fear at present, and the insurers had another bad day yesterday when the Swiss Re writedown was announced (personally I doubt that loss was due to a GS claim BTW).

If the bond insurers are downgraded by the rating agencies (or even go under - look how close ACA Capital is for example) then the banks will have to downgrade the insured bonds accordingly. We just don't know at the moment how secure any of these level 3 assets are (or even some level 2 for that matter). Cascading default could ultimately render any insurance worthless.

[The Colour]

That;s effin hilarious! Sell all the crap onto some unsuspecting clients then short the same crap! Classic!

[South Lorne]

That;s effin hilarious! Sell all the crap onto some unsuspecting clients then short the same crap! Classic!

......that's been the name of the game and as the regulators have stood on the sidelines....are the FSA getting involved ..?....not to date...they have said...self regulate.......now the EU have called on Finance Ministers to come up with proposals by January .....sad that the UK regulators need to be brought into line by the EU.....