Goldman Sachs Asset Management recently fired about twenty people from two teams managing Global Alpha and Global Equity Opportunities and, according to Charlton Heston, the victims were the analysts who “do all the actual work,” as opposed to names slightly higher on the roster who, beyond being involved in poor day-to-day decision making, do jack and cost a ton to employ. If you want to be all cynical you could chalk the canning methodology up to the groups (and GS at large and, you know, the entire Street) being boys clubs whose members have each others’ backs and who won’t let their brohamsters get fired for petty little things like shitty performances, and I guess if you’re looking at it like that, then, yeah, it seems kind of bad. But that’s because you’re looking at it all wrong– these firings actually cast GSAM in a positive light, because they underscore the division’s commitment, above all, and at all times, to lose as much money as possible. Getting rid of co-head Peter Kraus the other day doesn’t really seem in line with the aformentioned bottom line, so tut tut there, but we cross our fingers that his replacement will be paid more for less competence. I don’t think we need to tell you who’s in total agreement on this one:
Here’s a fun one: at the end of January it was reported that Goldman would be cutting 5% of its global workforce, because (pick one) a. These bottoms weren’t living up to the Goldmany Goldman standard b. As it turns out, Goldman’s not better than everyone else (well, better than Citi but who isn’t?) c. Someone knocked over the printing press GS uses to make the money and with the new one on back order and the Kinkos employees on break, the firm was forced to take desperate measures.
Either way, 5 percent globally, not that big a D. Now some rumors going around the city’s biggest shuls seem to imply that things are worse than previously imagined. Apparently unexpected firings at 85 Broad today have people panicked that Goldman could layoff an overall 25 percent of its workforce.
Meanwhile, Peter Kraus, who took over as head of investment management in June 2001, just retired, according to sources familiar with the matter of making a firing look involuntary (We kid!…).
Remember Mark Spilker? He was the guy who cut down Kynikos founder Jim Chanos’s hedges in the Hamptons without asking first this summer. He was just added to Goldman’s management committee, the small coterie which runs the bank. That can’t be good.
Goldman, of course, had no comment (unless you consider the sound of someone laughing and crying at the same time a comment).
A friend o’ the fired fills us in:
“It’s more than just a hiring freeze – yesterday in IBD an MD, VP, and Associate were shown the door in Industrials and two Associates were canned in NR.”
The Wall Street Journal’s influential Heard on The Street column calls Goldman Sachs “pricey compared with other Wall Street securities firms” and predicts After that Goldman’s long run of climbing earnings may be coming to and end. The M&A slow down, so carefully documented in our weekly M&A wrap-up, should hurt revenues from fees while exposure to leveraged loans may drag down profits.
“Goldman could post in mid-March its smallest quarterly profit in three years,” HotS writes.
Analysts have been hammering away at Goldman for the last few weeks, predicting a climb down from its elevated status on Wall Street. While no-one thinks we’re going to have a surprise subprime write-down, many think the widening credit market crisis is finally about to take a piece out of the Goldman Sachs money mint.
So do the analysts and HotS have it right? Or does Goldman have yet another surprise up its sleeve, like when they revealed they had gone short subprime and made a bundle? Over to the right, at the top of the center column, we’ve created a poll for you to cast your vote. Goldman: long or short? You decide.
Goldman’s Profit Magic May Be Fading [Wall Street Journal]
–Thursday is Steve Schwarzman’s birthday. He claims he doesn’t want to do anything big, just a few close friends over to the manse, and if it turns be mostly couples, perhaps they’ll put some keys in a bowl, but nothing too crazy. He’s also supposedly telling people “no gifts”; this is a trap. You know he’s full of it and if you don’t READ HIS MIND and tally ho on over to Brookstone and snatch up one of those fancy $200 ass-hair trimmers he’s been eyeing for months (sources say Crab Hands was just relating the other day how he needs to ‘deforest the Schwarzwald’) and hand deliver it to l’office, along with the perfectly worded card, you’ll be looking at the business end of a hissy fit.
–The Fox Business commercial. Remember? We found out that it only costs $250-$900 to buy a 30-second spot on FBN, depending on when it airs, and delineated tasks to the group. I repeat: You: Make a video and send it to us. We: Pick the best and our publisher will send it to Fox’s ad sales team. They: Either a) air it, and earn you a piece of quasi-immortality along such leading FBN lights as Fat Boy Cavuto; or b) shitcan it, and we’ll reprint a transcript and audio clip of how Fox, who would blow a goat for a few extra shekels, all of a sudden got all ‘integrity’ on us. I love the idea of sending the ValueStockTips guy, and it may very well come to that but seriously, show me what you can do.
– Goldman Sachs is still firing people. So sayeth:
A friend and associate in equity derivatives got let go from GS this morning. He’s on his way to Maiden Lane to get his severance package. The reason? “Re-organization”
The source said the last thing he saw was a few schmattas throwing the guy in a car with Eddie Dane, who told him, “Everyone’s so goddamn smart. Well, we’ll go to Maiden Lane. And we’ll see who’s smart.”
Bear Stearns has more than $1 billion of short positions on subprime, up $400 million from the end of November, Bloomberg reports. Of course, since Bear Stearns got the subprime trade so wildly wrong last year, people are already wondering if this might be a signal that it is time to go long subrime.
Over at The Big Picture, Barry Ritzholz writes, “While I do not expect us to be done with the subprime slime yet, I do get a ‘Is this a bottom indicator?’ sense from Bear on this.”
JPMorgan Chase, which emerged relatively unscathed from the credit market debacle, is apparently taking the opposite position. Yesterday Jamie Dimon was reported to have said that the bank plans to expand its role in the subprime mortgage business. Goldman is also rumored to have reversed it’s position on subprime, taking a net long position.
Bear Stearns Is `Short’ Subprime Mortgages $1 Billion [Bloomberg]