Goldman Sachs Posts Strong Profit, Beating Expectations

SteveF, how did I know it would be you? But want to point out that when I posted a while ago that my bank was doing better, everyone just piled up on me.

Yes, at this pace, bonuses will be almost 10% of what they were last year!

absolutely uppereast, you r the man!

And, SteveF, you're not even calling the bottom?

After a year, you finally stopped that???

Steve, 8 months ago-

"I don't know how you stock guys handle all the volatility but if your in this game I would buy some of those solid beaten down financials....all that artificial toxic mortgage money that initially inflated stock prices has now deflated stock prices and that same mortgage money is being written off"

Whoops.

that's right nyc10022 maybe I did dollar cost down USB from $22 all the way down to $8. probably have a cost basis of around i don't know say $13. Hmm am I in the money now i think so.

I'm honored you find me so compelling.

Where's spunky?

GS stole taxpayers money. Let's see, where oh where and how oh how could they have had such a delightful quarter? IPOs?

I think GS will be a wonderful lightening rod for the anger of Americans.

LMAO... you guys are too much.... just keep watching the cash flow statements.... at some point you gotta back up these earnings with cash flow....

SteveF... do you know how many of my friends kept doubling down at their job in Lehman and Bears last year? Oh and don't get me started on GM.... I tried to short the damn thing, but it's on Geitner's no touch cookie list.

aboutready, GS is like the beach front home owner who has to take gov't insurance and promises to not build an extension and allow free beach access for it, but now that it's past hurricane season wants to get a private insurance plan (the funny thing is I'm sure AIG stands ready to sell hurricane insurance again!).

I'm joining the naval seals, hooraH!

Lil Stevie Wonder - GS down 2% after hours...Q1 is a joke because the credit markets traded up big, just wait until the next wave of (cash) write-downs hits the banks

if the dow were still at 6,500 or god forbid goes back there, everyone will be back to singing the january blues.

I find it amusing that somehow a bear market rally or even a new born bull market in stocks will save Manhattan RE. The reality is that the Wall St that spawned the RE bubble does not exist anymore. Those bonuses and many of the overpaid workers are gone(and still going) and not coming back soon. Advertising, law, media all are hemorrahging jobs too. As for people sitting on piles of cash they will deploy their money to a rising asset that is viewed as cheap(stocks) not a sinking asset viewed as overvalued(RE). Prices still way to high and sales volume will not pick up until we get equilibrium. The Goldman/Roubini/shiller peak to trough crash of 44-50% looks more and more likely.

agree completely...gonna take a lot of time and a lot of seeming ups, downs, plateaus, bottoms--you name it. bottom line is incomes aren't here or coming back to support the latest insanity.

you have no faith that wall street will quickly find another way to rape and pillage the american people to fill their own pockets. i do. we already saw it. They raped and pillaged leading to the downfall, then they stuck out their hands for TARP and gave it to themselves in bonuses. it is only a matter of time before the crooks on wall street find yet another way to rape americans to fill their pockets and then buy up some phat Manhattan real estate

americans are out of money. TARP was the end of it. no more blood to suck.

there is plenty of blood left to suck.

Goldman is valuing it's mortgage portfolio.......prime and subprime, that the bank had marked down to only 91 cents on the dollar....fantasy land IMO and we haven't even been hit by the collapse of commercial RE ....I'm sure these bankers can value these assets more accurately than private investors?

blood supply is not infinite.

as long as there's blood the government will let GS suck it:

http://www.ritholtz.com/blog/2009/04/taxpayer-funded-gs-profits/

Ritholtz is at a quant shop, and is not a wingnut.

then there was that frightening ZeroHedge piece on GS's market positions, and the fact that GS might find it beneficial this week to raise billions of dollars through a new offering. these people stink more than Chip & Dale in the Orlando summer sun.

w67th, the AIG readiness to sell cat cover is indeed the more frightening.

here's yet another unfortunate example of what i'm trying to say:

http://www.nytimes.com/aponline/2009/04/13/washington/AP-Laid-Off-Lawyers.html

columbiacounty, as i've said before, the layoffs in the law firms are surprising, but even more shocking to me is that many firms are essentially getting rid of this year's starting class, asking them to start in 01/09, 03/10, 9/10, and i've even seen 2011 (some with partial payment, some with minimal stipends). unless things turn around quickly, they will not be hiring many summer associates next year, portending a possible permanent (for the medium-term, at least) retrenchment.

they're not getting the business from GS's and the other banks' brilliant quarter. what a surprise.

my point from above...what jobs?

I agree that the mortgage portfolios (particularly the CRE stuff) has not been written down far enough, the banks -- at least the well-managed ones, which in my book consists of Wells Fargo and Goldman and maybe Morgan Stanley -- are making their money on the upward sloping yield curve and, at least for the time being, nothing else. In other words, they borrow money from the Fed at 0% and lend it for 4%, 5%, 6%. You don't have to be a genius to make that business model work. The problem is that it is unsustainable in the long run, and it doesn't translate to the rest of corporate america. Personally, I think earnings season is just about to turn negative; those with positive "surprises" have reported early and the real fun is about to begin. I don't know that we'll re-test the DOW6500 levels but I wouldn't be buying at these levels.

Anyway just my $0.02.

sounds about right...think this quarter will look good...don't have a warm and fuzzy about the next one.

And to continue my GS tirade, they took their write-downs in December, a month that wasn't included in any earnings announcements because they changed their fiscal year. With these write-downs, profits are eliminated. Stay classy, Goldman Sachs.

http://www.ritholtz.com/blog/2009/04/how-to-puff-up-earnings-goldman-sachs-style/

> I'm honored you find me so compelling.

Compelling? You serious with that?

Is the fly "compelling" because you need to keep swatting it away?

Short of perfitz, there has never been anyone as consistently wrong on this board as SteveF..

If I was Barak, I'd call Blankhair for a private meeting. This is what I would tell him if he wanted to pay the US back:
1) I'd like the $8B you got from AIG;
2) if you are doing so well, you are no longer going to be able to borrow at Fed's 0%, I'm sure you can find other lenders at 0%;
3) I will instruct the IRS to do a complete audit of all your employees and clients for the last 5 years to ensure GS did not participate in "off-shore" shaninigans.

Have a great day and don't let the door hit your arse on the way out.

aboutready, that is indeed astounding. I don't know how they can get away with not reporting an entire month, especially one so full of write-downs. Did you short GS? They've more than doubled since Barak took office.

The real thing GS did was change its year end from Nov. to Dec. SO they had a one month stub period that they dumped the kitchen sink into. Skewed the results... be careful out there with all the reporting nonsense.

bjw, luckily/unfortunately because my husband is at a large law firm I can't long/short any stock. I can only do mutual funds basically, maybe some commodities, etf's, but not that much.

As such, i've been in cash and have been since the market was over 13000 (I should have gone in a few weeks ago with an spx index but i was too lazy, and frankly, i don't care. I may play the next rally, but i'm tired and i sat this one out).

Right this second, and i could be very very wrong, i'd say shorting GS would be a good play, we'll have to see. bad luck for them having an offering on a day with grim econ news (retail sales), i guess their PPT couldn't save them. couldn't have happened to a more ethical group. they are far more solvent than the other banks, and are getting virulently negative press, so they may be a perfect whipping boy for an administration that has shown absolutely no balls against the banks. we shall see. great piece on nakedcapitalism.com about both Geithner and C going down, if true, the game changes in ways we may not be able to imagine.

GS dropped conviently the reporting on Dec L O L

a) write downs of cause

b) MORE IMPORTANT in that month of Dec they received the billions payoffs from AIG
no wonder they try to hide that
won't work

Yep they received at least $15 billion other figures say $29 billion thru counterparty payment courtesy of the us taxpayer...they should all be shot and stoned

from AIG

Incredible. People are getting excited about banks' strong earnings this year and it is mostly because they are holding their hands to their ears and not writing down losses. Now one bank finally writes down its losses and they throw it all into a stub period which magically does not need to be included in any quarter's earnings. And this is the sign that the economy (and the Ny housing market no less) is about to recover? It should be completely clear by now that the folks posting this trash either have some interest in scare tactics ("buy now or be priced out") or are completely out to lunch ("banks said it so it must be true").

lunch

Kind of ironic, isn't it, that the big banks are making a killing selling government debt that is necessary because of their own prior actions. Banks are also making money with the subsidized money they're receiving to re-fi loans for people who are most likely not the ones who are at any risk of foreclosure (but it's nice that they have a couple hundred extra dollars to spend on consumer discretionary, i guess the thinking goes). Every way you look at it we the people are continuing to pay the salaries of the bankers.

The banker also pay most of the taxes! Get over yourself!

Additionally, aboutready, you chose your profession. Could have become a banker also.

uppereast, i knew you'd take the bait. how's your bank doing? where's it making money? the only reason bankers pay most of the taxes is because their pay has increased inordinately, income redistribution on a massive scale.

when bankers have the unmitigated nerve to pay themselves the types of bonuses they did the last couple of years despite the results, in the face of massive government assistance, i think that the general public has the right to be angry.

why bother? his time has come and gone---he just doesn't know it yet...bankers are going to start to look like fur coats soon...totally socially unacceptable

My bank hasn't accepted any bailout money and I have made much more for the bank than I got paid - and I paid very high taxes for that. Same is the case for most bankers. I give you that I feel there should be some form of claw-back but don't state that most bankers got paid for poor results. In many, many divisions there are hardworking people that got paid for what they brought in.

cc, you will wait for that a long time. Yet again: In what line of profession are you in? How come you don't disclose it? I can proudly say that I have never lost a dime for my bank. I don't do principal business just agented transactions. So if I bring in, let's say $20mm of fee business, don't you think I should get paid $1mm?

The industry in general got paid for poor results. Incentivized pay is a large culprit here.

cc, you're right, and I guess that I took the bait. Geithner's doing his best to keep them well fed, though, even if they are past their prime.

Stiglitz agrees:

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahnPchOxZMh8&refer=home

have some sad stories about guys with the same bs as uppereast. they brought in a lot of fees until they didn't and then the write-offs hit. the problem is that there is no reality underneath most if not all of these deals. so much of it depends on the greater fool theory and we've run out of fools (except for the government).

i will admit that i have been (and continue to be) a signficant beneficiary of a lot of this -- perhaps that's why i feel so strongly now. nothing like a reformed drunk lecturing drinkers.

cc, again: we don't take principal risk, there can not be any write-offs in my business line.

oh god...that sounds familiar doesn't it...hey these mortgages are rated triple A....they can't lose. give it up. why is someone willing to pay you and your firm $20 million? presumably you provide some value?

uppereast, you are at a financial institution that has been, and remains, immune to the securitization issues?

I don't really care about your business line. You work for a company, your profits belong to that company as a whole and your returns should come out of the bottom line (do you have shareholders, perhaps some bondholders?).

That's bullshit. Anyone who complains about how bankers are making these "outrageous" salaries should first acquaint themselves with the facts.

Fact: The bankers who lost money have been fired. The competent ones are now running the show and those remaining are either new hires or veterans who have consistently made several million (or hundreds of millions or billions) in revenue for the firm year after year - including this one.

Fact: Presently, the competent bankers are making higher profit margins than they did in the past for less personal return in order to repay the American people as quickly as possible. Bad press makes for bad business, and moreover the repayment of debt will result in a more stable stock price. Everyone wins.

Fact: High-quality bankers are leaving domestic firms. The creme of the crop has begun to get pushed to its limits due to rash accusations by people who haven't even been on a trading floor. This is no better than a layman directing a surgeon in an operating room.

STEVEF, I don't need to even read a single post of yours. You are wrong about everything you've ever thought. Every thought you've ever had in your life has been wrong.

Now, if you feel you've wasted your entire life, please kill yourself and do everyone you've ever met a favor.

Thanks!!!! And in case you didn't get the point... YOUR ARE A LOSER!

http://www.nytimes.com/2009/04/18/business/18bank.html?hp

Things are getting better...Stop with the doom and gloom, and ride the wave...+15% pre-market..

jsmith, seen the IMF report?

youngbuck, Lewis still has a job.

youngbuck, honesty does force me to admit that I know a number of bankers who I'd consider highly decent people who were nowhere near the eye of the storm and who have nonetheless lost the vast majority of their retirement funds (as of today their accounts are a bit better, but they can't sell their stock until they've left the company for a certain time so they have no idea how much they'll truly have).

But the majority of the bankers I know are complete and utter assholes.

excerpt from article above:

"The earnings were helped by an accounting change that allowed the bank to post a one-time gain of $2.5 billion. Under the rule, companies are allowed to record any declines in the market value of their debt as an unrealized gain."

so...does this mean that they recorded a profit in excess of their total reported profit (i.e. swung from loss to profit overall) because they wrote down the value of their own debt because the market thinks its less valuable?

if that's true, it would seem to change the entire thrust of this press release.

cc, rumor has it MS may "disappear" December as well.

the chartists are saying watch very carefully, get out at the first sign of weakness. options expiration day always makes for a fun week.

8 month fdic insured cd pays 2.4%....looks like a fortune

dmag, please don't ever state that someone should kill himself.

cc, you know nothing about the value that I provide to clients. Just because I am a banker to state I can not possibly add value is foolish to say the least. Yet again, what are you doing for a living? Instead of constantly bashing bankers, let's discuss your profession.

here's exactly what I asked:

"why is someone willing to pay you and your firm $20 million? presumably you provide some value?" i asked, I didn't state anything. I am somewhat amazed that you can bring in revenues with no risk to your firm. it has been my experience in business that the old cliche re: risk and return is actually based in reality.

as i have said earlier, i have enjoyed some significant benefits but never without risk.

cc, I am fed up giving you explanations w.o you providing more info on yourself. I don't need to justify myself, you just demonstrate that you don't understand banking well. There are multiple areas in banks that bring in revenues w/o using the balance sheet or creating risk for the firm. Please first educate yourself.

Interesting analysis that's on point here:

http://krugman.blogs.nytimes.com/2009/04/16/reconsidering-a-miracle/

"so...does this mean that they recorded a profit in excess of their total reported profit (i.e. swung from loss to profit overall) because they wrote down the value of their own debt because the market thinks its less valuable?

if that's true, it would seem to change the entire thrust of this press release."

JMP Securities (not JPM) just came out with a report on this (CNBC reported it).

Turns out, Goldman also adjusted their calendar year... so they got in 13 months, not 12.

This "small" change, if removed from the numbers, actually says Goldman did NOT beat expectations.

The beat came from the calendar change... thats all.

Goldman didn't really beat expectations...

Including those pesky other charges, Citi didn't post a profit either. Reported a per-share loss of .18, better than expected, but that's with a $2.5B accounting gift.

Morgan Stanley is rumored to be eliminating December as well.

Wells results are frighteningly misleading.

But those green shoots are oh so apparent. Bernanke as Chauncey Gardiner.

Ritholtz has a couple of good pieces on this today.

"no one is pricing in low, mid teens unemployment in any of their assumptions." - Meredith Whitney

i'll add that nobody is pricing the NPL resulting from PERSISTENT high unemployment rates. there's a real possibility that many of those above 45 will never find a job again (or one that is comparable to their previous income level). that will hurt consumption through the whole next decade. the walkaways of previous higher income earners that are deeply under water are also not accounted for. banks are not even taking possession of the homes they foreclosed on in many areas. longer periods in which banks have to pay carrying costs before unloading their REOs, lower prices for the same REOs, that's also not accounted for. 1 in 3 of the REOs had been vandalized, not accounted for. ...

phony earnings, that's what they are reporting right now.

see uppereast, here's your problem in a nutshell: credibility. I have no idea whether these earnings are right or wrong but the institutions are all tainted---most likely forever. if i were you, i would follow another posters advice here and keep mum about your profession, reap the benefits as long as you can and plan for a future that won't include the kind of income to which you are accustomed.

Some courts aren't even accepting new foreclosure actions because they are backed up for months.

CRE moves much more swiftly through the system, it shall do major damage. Hotel occupancy rates are down nearly 30%, and there's more product coming on line.

And the baby boomers need to downsize, particularly the ones who, as admin points out, find themselves in the unenviable position of being far less comfortable at 50-60 than they were at 40. That's going to cause one hell of a problem.

cc, yet again another stupid comment. My institution is not tainted, thank you! No reason to be mum about my profession. I have never done anything unethical or hurt revenues of my bank. My income is just fine, enough for my family to live off. I have never spent more than I made, I have enough cash to pay down my apt if necessary. My weekend house and car are paid for as well. I am no snob and just fine with sending my kids to public school if ever necessary. I am very grateful for the money I made so far and no need to worry for me!

And yet again: what is your profession that you can be so proud of?

"Hotel occupancy rates are down nearly 30%, and there's more product coming on line." and revenue per occupied room is down substantially too.

hey, there's no need to crucify uppereast for her profession nor for believing that things might be improving. lets keep the discussion without personal attacks and only with rational points of view. thanks god there are some optimistic people like uppereast that keep on believing, buying property and the like. people would be jumping from bridges if everybody would be as pessimistic as i am.

aboutready, love the Being There reference!

"unenviable position of being far less comfortable at 50-60 than they were at 40. That's going to cause one hell of a problem."

i've seen it happen personally (there's not much about this on jstor, so take it with a grain of salt). but i've noticed that even the consumption patterns of their kids change. it raises precautionary savings not only for them in case that happens to them but also taking for granted that they might have to help out their parents. i will be shocked if the era of confusing discretionary spending with non-discretionary (over consumption, living beyond means, ...) makes a come back any time soon.

didn't everyone who didn't work for Bear, say "hey, not me." then everyone who didn't work for lehman said the same. they only got a couple of weeks till the world fill in on them as well. why do you feel the need to continually brag about your own circumstances? dost thou protesteth too much?

admin, i have no personal problem with optimism. i do have some issues with a general theme of things are improving, based on flawed information. i can't quite buy into the "things are getting worse more slowly" so we should be happy mentality. There's simply too much real suffering out there for me. And, in general, which is how I began the discussion, I believe there is much culpabiliity in the financial world. And I believe that the American people, who have been raped already, are getting the long-term short end once again in favor of the financial world. There are numerous experts that I could cite that show that there has been a systemic redistribution of wealth to the top 1/2% of the income earners. So I'm angry, although not at uppereast personally.

I agree that the conversation ought to be civil.

bjw, I'd love to take credit for it, but I think the people at the WSJ econ blog came up with it. If I can find the link I'll post it. they put in some of the script, and it is hilarious in this context (or not if you're feeling peckish).

the question is determining the razor's edge between optimism and denial. to be optimistic about good weather with a 90% forecast of rain is moving into denial. following the rather rough metaphor, not bringing an umbrella takes denial to stupidity.

the fact that the major banks are all reporting headlines of great news with fourth paragraphs that seem to indicate some shakiness (if not downright shadiness) in these numbers is not helping any of us.

it is not the end of the world if we can no longer buy 90% of the garbage that we have all been so avidly consuming. businesses need to adjust to real levels of demand and not set themselves even lower than necessary. in all situations, uncertainly generally creates overly negative assumptions.

we need to be able to trust our major financial institutions and the recent releases are not helping.

bjw, here it is. who said the WSJ doesn't have a sense of humor?

http://blogs.wsj.com/economics/2009/04/10/fed-chairman-cauncey-gardiner-you-must-believe-in-spring/

very true guys, also if anything, the fake earnings is setting a bad comp for 2010 Q1 which will not be a profitable one in my view as the econ cannot recover by then IMHO and the cost of minimizing obvious provisions for bad loans is going to come to haunt the little real earnings the banks will have. when the little guy fills for bankruptcy the banks HAVE to take the hit, they cannot keep on postponing the recognition forever.

this is unless the accounting geniuses invent something on the lines of "guy filled for bankruptcy but will quickly recover and will come to us paying everything even though he doesn't really have to, just cause he's such a nice guy!... hence, we don't think we should write off that loans completely".

by the same token the stock mkt has yet to price in several quarters of continuing losses in other sectors besides housing and finance.

these are some pretty fugly charts:

http://www.calculatedriskblog.com/2009/04/citi-net-credit-losses-rising-rapidly.html

admin: i like it. a totally new definition of contingent assets.

uppereast -- I've defended you before from the broker accusation, and I clearly recognized that you were not in a trading related function (whether flow or prop) given the times you post on this board and what you have said.

You clearly work in some kind of advisory capacity -- whether it is research or M&A, I'm not certain. I would say that b/c you are in a very narrow slice of the banking world you are unable to see the bigger picture of what is happening to "modern" investment banking.

I agree that there are all kinds of silly things thrown around here and people should be called out on them. Similarly, I think you're typical posting on this board is "I'm in banking so I know more than you" or "my department is doing great so therefore banking is doing great" is also a bit silly.

Modern banking is a multi-headed hydra -- which is one thing complicated the current recession/depression/recovery. Obviously areas like research and M&A generate revenue w/o leverage. But then, perhaps the question then becomes why did these areas yoke themselves to areas that did require vast amounts of leverage? There are pure-play research and M&A firms out there untainted by the current mess.

uppereast, I hope you continue to post, but recognize that you do come off as excessively optimistic.

I admit that I might come across as overly optimistic but I am so tired of cc's posts bashing all bankers and his/her super pessimistic outlook. I sometimes feel that a lot of people here don't have the means of buying apts and try to turn all news into 'apt prices have to fall' and 'if you don't share my opinion, you are stupid'. Tiresome as well. I agree with you that modern banking is a multi-headed hydra but cc is generalizing even worse. My point is that I am feeling better for the first time in many months. Plus I do believe that bankers will always find ways to make money, just take what you said, by switching to a different type of firm.

uppereast, that's what worries me, the modern banker's efforts to "find ways to make money."

i have nothing against wages, even high ones, but there is only so much real wealth in the system. and there's a significantly less amount now, as it is actually being destroyed during the great debt deleveraging. you can't make money out of nothing (selling government debt might be close, however).

we could afford to buy, btw. i am currently a very happy (albeit pessimistic) renter.

"a lot of people here don't have the means of buying apts and try to turn all news into 'apt prices have to fall' and 'if you don't share my opinion, you are stupid'"

hey, just get the feeling you don't have fun watching home prices fall by a whole lot. i assure you these asset price bubbles are going to succeed making us the biggest fools in history (financially speaking). hence it's a lot of fun. believe me, i'm in finance!

uppereast, you are like the hamburger flipper at McD, that says w/o me you'd only sell 1000 hamburgers a/ day versus the 20,000.00 I help you do :)

Let's take a step back, do you think you can "trade" your product w/o your company logo under your name? Let's try it, quit, get an office, take your rolodex and start saying "since there is no capital at risk in my dept, I don't need no stinking capital!" Wake up dude, you "think" there is no capital involved, but the "counter-party" credit is provided by your FIRM and in effect you are allowed to trade b/c there is a ton of capital, insurance and (apparently) tax money to be there is you flew the coop and disappeared. Arbitrage is a misnomer, there is risk bc if there was not the AAA rated bonds would pay-off and Lehman/Bear still would be here.

Here is another example, let's say you are a porsche salesman at Champion (the largest P dealership in the world). You head the department called "trade arbitrage." In effect you funnel trades that are coming in and call a Rolodex of customers and see if you can unload the car b/f the used car check is cut to the seller. You have a great year and none of your trade gets unwound, but what if one "buyer" doesn't show up? or re-negs on his contract? You'd be the first MBA banker trying to talk to your risk management group on why it shouldn't affect your salary.... and again, quit from Champion and see if you can replicate your trades w/o them...
101 Banking, COUNTERPARTY RISK.

Yes, turns out the citi "profit" was actually a $1 billion loss...

>> Citi’s 1Q profit spike: Less than meets the eye
Bank reports its first profitable quarter since mid-2007, topping analyst forecasts, but cut through the accounting haze, and it’s more like a loss of nearly $1 billion.
http://www.crainsnewyork.com/article/20090417/FREE/904179997/1048

"admin, i have no personal problem with optimism. i do have some issues with a general theme of things are improving, based on flawed information. i can't quite buy into the "things are getting worse more slowly" so we should be happy mentality. There's simply too much real suffering out there for me. And, in general, which is how I began the discussion, I believe there is much culpabiliity in the financial world. And I believe that the American people, who have been raped already, are getting the long-term short end once again in favor of the financial world. There are numerous experts that I could cite that show that there has been a systemic redistribution of wealth to the top 1/2% of the income earners. So I'm angry, although not at uppereast personally."

well put...

couple of glasses of wine and a beautiful sunset....wish it weren't the way it is...but I know that wishing doesn't work. first order of business is to end the uncertainty...however bad the news, we need to know the truth. i have no idea, though, how that will happen. i had (and still have) great hopes for the new president but he needs to find a way to give us the truth.

the truth is not, "hey, we're up...but" nor "hey, it used to be .... so it certainly will be." and i am afraid that the truth is going to be real tough for many people but we have to remember that its better than not knowing.