James Cayne would probably love it if he could place a hand on Lloyd Blankfein’s incredibly soft, smooth cheek (or head) and say, “You and me, we’re not so different,” but, according to Bloomberg, that’s never going to happen. Because Goldman Sachs and Bear Stearns *are* different, despite the fact that both investment banks have guided their internal hedge funds through a sea of major-dare we say embarrassing-losses over the last few weeks. For starters, stocks and bonds-in GS’s corner, stock is trading at 2.2 times book value, and the risk premium on bonds is 35 percent lower than for Bear, whose shares are now radioactive and whose A+ rated debt is viewed, and this is just clinical terminology, as a pile of junk.
Another topical difference between the two concerns their approaches to failures. Now, you’re probably saying yourself, “Bear Stearns has A LOT more experience managing things that are the opposite of successful. So it should stand to reason that they’re better at it than Goldman, who, up until recently was perfect.” And you’d be wrong. Because when Bear Stearns fails, it sees its failure as an opportunity-to fail yet again. First, BS attempted to stave off a collapse in June by locking up money and unloading securities in order to meet lenders’ requests for more collateral. This strategy, not unlike the hedging strategies employed in the first place Bear Stearns’s High-Grade Structured Credit Strategies and High-Grade Structured Credit Strategies Enhanced Leverage, failed. When Goldman lost several hundred truckloads of money, it turned to fellow money-changers Hank Greenberg and Eli Broad to take advantage of its “not a rescue.” While it’s certainly not winning any awards for excellence in hedge funditry, Goldman has managed to keep its funds afloat, while the Bear Stearns funds, for all intents and purposes, exist only on paper in bankruptcy court.
Let’s keep going with the diffs: you’ve got geography-Bear’s in midtown, Goldman’s way down on Broad Street. And confidence–people have some in Lloyd Blankfein/Goldman (in lieu of “confidence,” terms “respect for”, “fear of”, and the like work, too). The answer to the question, “Where can you find the bank’s CEO at approximately 3 pm on a Tuesday?” (A. Blankfein-his office; Cayne-the golf course, except on the last Tuesday of every month, when it’s “at a bridge table, not doing a very good job of earning the title ‘championship bridge player’.”) Laxity versus stringency regarding health codes. Company-mandated hairstyles. Etc.
Blankfein-Cayne Spread Widens to ’01 High in Flight to Quality [Bloomberg]