Ares
9th August 2011, 05:57 AM
What a difference a quarter makes. Back in Q1, Goldman reported one (1) day in which it had a trading loss out of 62. It also reported 32 days on which it made over $100 million. Oh how the times have changed. According to the just released 10-Q, Lloyd Blankfein's firm suffered an epic implosion, recording 15 trading day losses out of 63, or a stunning 24% loss rate. And far worse: only 4 days in which Goldman recorded profits of $100 million. And that's why the stock is floundering. The only question is whether this was premeditated to shift the public anger away from Goldman which back in 2010 barely had any trading day losses in the entire year. And if not, what is the systemic change that caused this worst quarterly performance for Goldman in years?
Before (Q1)
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/08/GS%20trading%20days%20Q1.jpg
and After (Q2)
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/08/GS%20Trading%20Profits%20Q2.jpg
As for the formal reason for the drop in profitability, here is the declining VaR. Of course, the real reason is anything but, but don't hope on finding it in the official disclosure.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/08/Goldman%20VaR.jpg
Goldman had some observations on the S&P downgrade of the US as well:
On August 5, 2011, Standard & Poor’s lowered the long-term sovereign credit rating of U.S. Government debt obligations from AAA to AA+. On August 8, 2011, S&P also downgraded the long-term credit ratings of U.S. government-sponsored enterprises. These actions initially have had an adverse effect on financial markets and although we are unable to predict the longer-term impact on such markets and the participants therein, it might be material and adverse.
Other legal disclosures from the 10-Q from Dow Jones:
Goldman also said in the filing it is in discussions with the Securities and Exchange Commission and the Financial Industry Regulatory Authority to resolve proposed charges concerning Goldman's research communications.
In June, Goldman paid $10 million to the state of Massachusetts and agreed to make certain changes to settle an investigation that focused on Goldman's so-called research huddles, and communications between analysts and top clients. Massachusetts alleged certain Goldman clients got special access to the firm's stock analysts and allegedly got information and short-term tips that other clients didn't get. The SEC and Finra have been investigating similar matters, Goldman said.
Also in the filing, Goldman disclosed it had lowered its "reasonable possible" loss estimate on legal charges above and beyond what it has already reserved to $2 billion, from $2.7 billion in the first quarter.
In expense disclosures, Goldman said it would take a charge of $130 million for a U.K. tax on certain financial services activities of large banks, including their subsidiaries, that operate in the region. Goldman said it would take three-fourths of the charge in the third quarter, with the remainder in the fourth quarter and warned that the final amount could vary from its estimate.
In a lengthy legal disclosure section, Goldman outlined the various ongoing legal actions facing the company, including a previously disclosed ongoing investigation by the Commodity Futures Trading Commission into Goldman's role as a clearing broker for an SEC- registered broker dealer and the European Commission's investigation of various firms, including Goldman, in connection with the supply of data related to credit default swaps and profit sharing and fee arrangements for clearing of credit default swaps.
The Department of Justice has been investigating the data supply issues as well, the firm said in the filing. It said it is cooperating with the investigations and reviews.
A new disclosure for the second quarter was Goldman's ensnarement in a European Commission investigation begun in July raising allegations of an industry-wide conspiracy to fix prices for power cables including by an Italian cable company. Goldman owned a stake in the unnamed company in various of its investment funds from 2005 to 2009 and faces liability for part of any fine that may be levied.
In other words, if the Gambino family was forced to release SEC filings, one would probably see comparable disclosures.
http://www.zerohedge.com/news/goldman-crashes-earth-reports-24-trading-day-losses-q2-compared-1-q1
Before (Q1)
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/08/GS%20trading%20days%20Q1.jpg
and After (Q2)
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/08/GS%20Trading%20Profits%20Q2.jpg
As for the formal reason for the drop in profitability, here is the declining VaR. Of course, the real reason is anything but, but don't hope on finding it in the official disclosure.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/08/Goldman%20VaR.jpg
Goldman had some observations on the S&P downgrade of the US as well:
On August 5, 2011, Standard & Poor’s lowered the long-term sovereign credit rating of U.S. Government debt obligations from AAA to AA+. On August 8, 2011, S&P also downgraded the long-term credit ratings of U.S. government-sponsored enterprises. These actions initially have had an adverse effect on financial markets and although we are unable to predict the longer-term impact on such markets and the participants therein, it might be material and adverse.
Other legal disclosures from the 10-Q from Dow Jones:
Goldman also said in the filing it is in discussions with the Securities and Exchange Commission and the Financial Industry Regulatory Authority to resolve proposed charges concerning Goldman's research communications.
In June, Goldman paid $10 million to the state of Massachusetts and agreed to make certain changes to settle an investigation that focused on Goldman's so-called research huddles, and communications between analysts and top clients. Massachusetts alleged certain Goldman clients got special access to the firm's stock analysts and allegedly got information and short-term tips that other clients didn't get. The SEC and Finra have been investigating similar matters, Goldman said.
Also in the filing, Goldman disclosed it had lowered its "reasonable possible" loss estimate on legal charges above and beyond what it has already reserved to $2 billion, from $2.7 billion in the first quarter.
In expense disclosures, Goldman said it would take a charge of $130 million for a U.K. tax on certain financial services activities of large banks, including their subsidiaries, that operate in the region. Goldman said it would take three-fourths of the charge in the third quarter, with the remainder in the fourth quarter and warned that the final amount could vary from its estimate.
In a lengthy legal disclosure section, Goldman outlined the various ongoing legal actions facing the company, including a previously disclosed ongoing investigation by the Commodity Futures Trading Commission into Goldman's role as a clearing broker for an SEC- registered broker dealer and the European Commission's investigation of various firms, including Goldman, in connection with the supply of data related to credit default swaps and profit sharing and fee arrangements for clearing of credit default swaps.
The Department of Justice has been investigating the data supply issues as well, the firm said in the filing. It said it is cooperating with the investigations and reviews.
A new disclosure for the second quarter was Goldman's ensnarement in a European Commission investigation begun in July raising allegations of an industry-wide conspiracy to fix prices for power cables including by an Italian cable company. Goldman owned a stake in the unnamed company in various of its investment funds from 2005 to 2009 and faces liability for part of any fine that may be levied.
In other words, if the Gambino family was forced to release SEC filings, one would probably see comparable disclosures.
http://www.zerohedge.com/news/goldman-crashes-earth-reports-24-trading-day-losses-q2-compared-1-q1