Goldman loses money on just one trading day in Q3.

[themickey]

Quote from ASusilovic:

Goldman is world champion in volatility "creation". That's their game...

Interesting comment, respectfully may I ask is this purely conjecture or is this actual reality. If it's real, I don't have an opinion about it as such but how would they know when to throw everything into reverse?
Would they use some type of info on market sentiment such as fear and greed? I suppose they have the very best information of market depth as to which stocks have buyers, sellers, longs, shorts, stops etc.
I suppose were GS to have the greatest firepower, they can lead the way in which direction the market / stocks are headed and us bottom dwellers can only lag along picking up only a small percentage of the move as we get in late and exit late. Add tax to that, slippage, commissions and it's obvious we are in this for the fun, not for the wealth it brings us.

 

[krazykarl]

Quote from themickey:

Interesting comment, respectfully may I ask is this purely conjecture or is this actual reality. If it's real, I don't have an opinion about it as such but how would they know when to throw everything into reverse?
Would they use some type of info on market sentiment such as fear and greed? I suppose they have the very best information of market depth as to which stocks have buyers, sellers, longs, shorts, stops etc.
I suppose were GS to have the greatest firepower, they can lead the way in which direction the market / stocks are headed and us bottom dwellers can only lag along picking up only a small percentage of the move as we get in late and exit late. Add tax to that, slippage, commissions and it's obvious we are in this for the fun, not for the wealth it brings us.

GS, like most IBs(i know, they "don't exist" anymore. *wink*wink*) makes more of their money making markets. They don't care what direction the markets go, they make money on the movement.

 

[Big Money]

Pabst Prime is right on the money. I don’t understand how so many can be so naïve and not understand the basics of how a casino or someone with an edge (i.e. a market maker ala GS) makes money. If you have an edge, no matter how small (and the edge or spread in all but very illiquid markets is pretty small), the more times you apply that edge (i.e. transact trades as a market maker), the closer to mathematical certainty it will be you make a profit. The same applies in the casino. While in the short run, you may lose money as the house on roulette, the longer someone keeps playing against you as the house (i.e. the more trades put on in a trading context), the closer to certainty your profits will be. The math is on your side. It is any wonder the casino makes money consistently or a trader acting as a market maker and a built in edge makes money consistently? It shouldn’t be. How this concept can be confusing to those who supposedly take this profession seriously is scary.

Finding an edge with a positive expectancy is your job as a trader. Then apply that edge as much as possible, just as GS does in its market making actions. Threads like this show why most aren’t successful in financial markets.

Good trading all

BM

 

[Aaron]

From goldmansachs.com:

<b>Trading and Principal Investments</b>
We facilitate client transactions with a diverse group of corporations, financial institutions, investment funds, governments and individuals and take proprietary positions through market making in, trading of and investing in fixed income and equity products, currencies, commodities and derivatives on these products. In addition, we engage in market-making and specialist activities on equities and options exchanges, and we clear client transactions on major stock, options and futures exchanges worldwide. In connection with our merchant banking and other investing activities, we make principal investments directly and through funds that we raise and manage.

I agree with BigMoney and Pabst -- As market makers and specialists they are buying below intrinsic worth and selling above intrinsic worth. Their edge is the algorithms that calculate intrinsic worth. A PhD physicist friend of mine first worked for Hull Trading in Chicago and now for Goldman after Goldman bought out Hull Trading. Hull Trading was the first firm to use Black Scholes on the floor of the CBOE, if I recall my New Market Wizards correctly. Using Black Scholes when nobody else is, is an example of having an intrinsic pricing edge.

good trading,
Aaron Schindler
Schindler Trading

 

[Pa(b)st Prime]

Who is saying Goldman never loses? They had a losing day just this quarter.

I was a trader for a U.S. Treasury Primary Dealer (a Japanese bank) and yes on individual trades you're picked off all the time. Often it's unintentional. After all who's to say bonds can't rally 5/32nds the moment after you sell the offered side. And if it happens on size it may cost you a few days of 1 tick winners on smaller trades. Just like if a whale beats a casino on a 500k hand of blackjack.

The analogies are:just because someone repeatedly makes outlier money ala A-Rod doesn't mean there's chicanery and YES GS and any broker/dealer are no more than Harrah like casinos. Really more like bookies. The edge is the trading equivalent of giving up 5/2 on a bet but getting 3/1 the other way. All day, every day. Any individual bet (trade) can be a loser. I'd guess GS has thousands of losing trades each day just like a casino loses thousands of hands. But over an infinite sample-hell over a typical days sample-the house has a transaction edge that enables guaranteed profitability.

None of this is to say that GS doesn't exploit political relationships, possess inside information or generally behave like scumbags. For example they used privileged information to buy bond futures several years ago seconds before the Treasury issued a statement announcing the suspension of 30 year auctions. But their core business is market making and underwriting-and if one has a HUGE CUSTOMER BASE then the profits from said activities are tremendous, consistent and enviable. I've made a lot of regrettable decisions but leaving Wall Street was probably the dumbest of all.

Quote from Kassz007:

Your baseball player salary example makes no sense in this context. Neither does comparing Harrah's to Goldman Sachs.

There is no question that GS has an "edge". Having an edge is fine; inevitable even. But when that edge becomes so great that YOU NEVER LOSE, one would have to conclude some form of corruption. Especially given the fact that there are laws and regulations in place supposedly to limit this type of statistical "edge".

 

[cleveland45]

The number of Goldman detractors is growing. Every day there seems to be a new article on on them. Why all the attention? Americans are not stupid and know when they are getting the shaft. From the tech bubble of 2000, to the recent mortgage crisis, to God knows what's next. Some of you can sit in admiration of these lying thieves or try explain it away, but these people are a big part of the problem. Period.

 

[the1]

Since when does hiring the top 1% of the top 1% allow you to defy the laws of statistics. That's like saying the top 1% of the top 1% of Physicists can defy the laws of gravity. It just ain't possible. GS performs so well because they ARE the market. Stop being so naive.

Quote from krazykarl:

A better question is how does it compare with Goldman's historical performance? Answer: not much different from 3 decades ago. When you hire the top 1% of the top 1% of schools' graduating classes you tend to do better than most.

 

[the1]

Assuming the Yankees win 100 games in the season that gives them an overall winning percentage of 61.73%. GS is winning 63/64 days for a win rate of 98.44%. C'mon man. Why is it so hard for you to realize that you can only win that often if you own the market? The dealer always wins!

Quote from krazykarl:

They have almost 1 trillion dollars under management and have hired the top graduates from the top schools over the past 50 years. Why should they not be making returns trading like that??? Why would the supposed best firm not act as such? You guys are making this way too complicated. The Yankees have a ton of championships for the same reason: they stack their roster with the best players, paid for with proceeds from previous wins.

If a monkey had almost a trillion to trade with I would expect the monkey to make at least a few mil, law of averages. Use people slightly better than monkeys and I expect better performance.

 

[the1]

This is complete madness. Go out on the market and see how "easy" scaling is. Scaling does raise a win rate but it also raise the risk of ruin. There's a definite trade off and it sure as hell isn't easy.

Quote from krazykarl:

You can easily scale in and out of a swing trade for profits the majority of the time.

 

[spinn]

Quote from cleveland45:

The number of Goldman detractors is growing. Every day there seems to be a new article on on them. Why all the attention? Americans are not stupid and know when they are getting the shaft. From the tech bubble of 2000, to the recent mortgage crisis, to God knows what's next. Some of you can sit in admiration of these lying thieves or try explain it away, but these people are a big part of the problem. Period.

why would they stop without the threat of prison? fines dont matter as they are always less than the money they steal.

I still think most of the sheep naively admire GS.

I certainly do not see the current administration prosecuting them.