Tuesday, March 2, 2010

Government Sachs Under Fire!

Poor ole Government Sachs (sarcasm intentional!).  Now, because of all the bad publicity, it seems that they have to disclose, as a "risk factor" of the company, the increasing drumbeat of negative publicity.  We, at Marko's Take, are proud to have done our share to contribute to that negative publicity.  Could the timing be more than just coincidental (immodesty intentional)?

Recall that just a couple of days ago, we took a hard, long look at the boys behind the curtain (http://markostake.blogspot.com/2010/02/government-sachs-how-big-menace-is-it.html).

Now, Goldman Sachs (GS) has been forced to whine that adverse publicity has become a "risk factor"  in its annual report that any investor need to take into account before making  an investment in the company (http://online.wsj.com/article/SB10001424052748704754604575095313135203110.html?mod=djemTMB_h).  I can't recall such a disclosure in decades of being a professional investor!

In its annual report, the New York company said "adverse publicity" could have "a negative impact on our reputation and on the morale and performance of our employees, which could adversely affect our businesses and results of operations."

The unusual disclosure in a 12-page section of "risk factors", ranging from rocky financial markets to natural disasters, is the latest sign of Goldman's whipping-boy status among rivals, lawmakers and angry Americans because of the firm's giant profits.

Some corporate-governance experts said the move isn't surprising given all the unwelcome attention Goldman has received since the financial crisis erupted.  In July, a Rolling Stone article compared Goldman to a "great vampire squid wrapped around the face of humanity."  The phrase has been widely repeated in other publications and online, along with Chief Executive Lloyd Blankfein's comment to a U.K. newspaper in November that the firm is doing "God's work."  (GOD'S WORK???)

But, before you feel TOO sorry for the boys, GS just released a report, filed with the Securities and Exchange Commission (SEC), confirming what Marko's Take reported in our piece last Friday:  they make their money from proprietary trading, not traditional banking or investment banking activities

According to the report, GS made at least $100 million in net trading revenues on 131 days last year! – equivalent to once every other trading day, according to the filing with the SEC. 

Goldman managed the result even as it took greater trading risks in 2009 than in the previous year.  Its daily “value at risk” (VAR) – the most that the bank estimates that its traders could lose on a given day – was $218 million in 2009, up from $180 million during the previous fiscal year, which closed in November 2008.

Helps to have friends in high places, NO?

Goldman’s 131 $100 million trading days in 2009 shattered its previous high of 90 days, set in 2008.  In last year’s 263 trading days, the bank lost money 19 times, Goldman said in the filing.  Its daily losses never exceeded $100 milion.  “It’s impressive, but it’s not unexpected,” David Hendler, an analyst with CreditSights said.  “They were one of the few games in town in 2009.”

Trading and principal investments, which includes Goldman’s merchant banking activities, account for more than 75%  of its total net revenue.

Once we at Marko's Take stop sobbing for poor GS, we would love to field your comments.  Think we're picking on them?  TAKE ME ON!

Marko's Take

Episode 3 of our new YouTube series is now posted at (http://www.youtube.com/markostaketv).  Look for episode 4 exposing the internal machinations of the Federal Reserve to be posted shortly.  Federal Reserve?  Or do we mean Goldman Sachs?  It's tough to tell the players apart without a scorecard!

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