Goldman Sachs came out with stunning results. Is there something to see what the eyes cannot see?

Well the profits have come (nothing unusual) from trading and merchant banking. GS of course quickly converted itself into a Bank – when it saw the fall of its friend and competitors – like Bear Sterns and Lehman Brothers. And it got a bail out of US $ 10 billion (remember Ratan Tata is asking the UK government – for a far lesser amount.

Be that as it may, GS profits come from – derivative trading, credit risk derivates and the likes. Will there be any investigation into GS being too big to fail (OK, GM has failed and 60% of the company is owned by the funder who will call the tune, but no such luck at GS). Credit swap derivative market is becoming too easy to manipulate – easy low hanging fruits! Then is the compensation pattern of GS – nothing changes if they repay all the bailout money.

Surely there is something which is not meeting the eye

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  1. Everybody is shouting hoarse about an economic slowdown AND then there is Goldman Sachs.

    Certainly there is something amiss, but watch the catch is would be hard to figure out, unless another crisis forces someone to spill the beans.

    Till then enjoy the merry-go-around.

  2. To me the risk in Goldman Sachs is the shareholder angst risk. The GS shareholder has just not made enough money and he keeps seeing these great bonuses. If a company gets bailed out, takes money from TARP, does not reward the shareholders, but pays the employees – at some stage it will give way. The only hope is all the shares are owned by the employees. Then the employees run a concentration risk!!

  3. - Financial Planning Demystified

    Maybe what is not meeting the eyes is the change in some accounting rules that has quietly happened on the US…

    Now, instead of mark-to-market, comanies are allowed to value certain assets at “fair” values. This means many “distressed” assets are valued at “fair values” instead of market values!!

    This props up the balance sheets of the companies as well as profit and loss accounts, as the companies don’t have to make any provisions any more!!

    (Now we know where the drafters of AS11 standard in India got their inspiration from!!)

  4. So it is an accounting coup that has lit up GS and the rippling effect on the markets.

    Oh Free Markets – what crimes are committed for thy name?

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