As many of you know, here at Dealbreaker we consider ourselves the preeminent scholars on Goldman Sachs president Gary Cohn’s grundle. Specifically, the grundle-to-face conversations he reportedly enjoys having with employees on the trading floor. So we were more than a little delighted to hear that Greg Smith’s book, Why I Left Goldman Sachs, contained a passage describing Cohn’s preferred position to assume while havin’ a chat. Sayeth Smith:
Gary had a very distinctive signature move, one he had become famous for within the firm; I must have seen it ten or fifteen times in action. It didn’t matter if the person he was talking to was male or female; he would walk up to the salesman or saleswoman, hike up one leg, plant his foot on the person’s desk, his thigh close to the employee’s face, and ask how markets were doing. Gary was physically commanding, and the move could have been interpreted as a very primal, alpha-male gesture. I think he just thought it was comfortable.
Having pored through every piece of empirical evidence regarding GC’s G-T-F tendencies at least 500 times, one of our research assistants noticed that Greg’s prose sounded moderately familiar. Read more »
Financial product salespeople, if they know what’s good for them, should be thankful for car dealers. Not used car dealers, either, new car dealers: because of the world’s familiarity with their business model, if you sell a client a product at 100 and then tell them the next day that it’s worth 95, you have at least some outside shot at pacifying them by explaining, slowly and patronizingly, “it’s like buying a car: the price drops as soon as you drive it off the lot.”
I mean, that’s true of buying a toaster or a bunch of carrots, too, but nobody marks those to market, so. I guess people do mark their cars to market? That seems to be a thing. In any case, “mumble mumble mumble drive it off the lot” sounds much better than the alternative, which goes something like “yeah, we thought it was worth 95 but we sold it to you at 100, problem?”
Remember Timberwolf? Timberwolf was an RMBS CDO that Goldman Sachs marketed. It was also “one shitty deal,” in Tom Montag’s immortal words, and some of it was sold it to some Australians with the buzzword-salad name Basis Yield Alpha Fund (Master), and Tom Montag was right, so, that worked out poorly for Basis Yield Alpha Fund (Master). Working out poorly was a feature of a lot of Basis Yield Alpha Fund (Master) investments; before they bought Timberwolf they bought another MBS CDO called Point Pleasant, also from Goldman, and whereas a Timberwolf will of course rip your face off – that’s just evolution – the face-ripping they experienced from a Point Pleasant seems to have come as some surprise.1 Anyway, they sued, and while Goldman has engaged in marvelous jurisdictional kerfufflery that got it tossed from federal court, they are still in New York state court, which refused to toss it late last week.
Here, from the opinion refusing to toss the case, is Basis Yield Etc.’s core allegation: Read more »
Something you may have picked up on is that next week, Grand Central Publishing will release Why I Left Goldman Sachs: A Wall Street Story, by former employee Greg Smith. Should you buy the book? That depends on you ask. Some people, like the ones who made Smith famous, say no. Others, like those who enjoy vivid descriptions of a naked Lloyd Blankfein and edge-of-your-seat ping pong matches, would probably say yes. One group of people who’d prefer you save your money? Goldman Sachs. As previously mentioned, the bank embarked on a Discredit Greg Smith tour last month which has involved equating him with a first or second or third-year analyst who thinks people care about all the crazy stuff he or she was privy to when in fact it wasn’t crazy and no one does; leaking unflattering performance reviews that suggest he was “unrealistic” about his abilities and earnings potential; and generally painting a picture of someone who was a nobody at GS (“My first reaction [to hearing about his Op-Ed] was, who is he,” Edith Cooper, head of HR told Bloomberg TV this morning), who wrote his public resignation letter and book out of spite for not receiving the bonus he thought he deserved, and whose claims re: The Firm are baseless and not be trusted.
For the most part, a number of people– from current to former employees to those familiar but not intimately familiar with Goldman– have concurred with the bank’s assessment of young Greg. Of course, every now and then you have some individuals who speak out of turn, who threaten to fuck up the mission, and who should probably consider sleeping with one eye open. Read more »
Goldman Sachs found no support for claims by Greg Smith, a former employee, that the firm has stopped putting clients first, said Edith Cooper, global head of human capital management. “As we looked into his claims I was very pleased to see there wasn’t merit,” Cooper, 51, said on Bloomberg Television’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. [...] “Quite frankly, he got to a point where he was not comfortable being at Goldman Sachs. We have done everything we could to make sure his claims were not valid. I am confident in suggesting that we have not found anything substantive. Instead, we have moved on.” [...] Goldman Sachs says that Smith, before he resigned, was denied a promotion and a $1 million pay package he had sought. The firm also says that Smith was the lowest-paid among the vice presidents who started in the same training class, and that a third of those classmates had been promoted to managing director. [BloombergTV, Bloomberg]
So how’d Harvey do? I found Goldman’s co-CFOed earnings call this morning a bit awkward but the awkwardness was a bit overwhelmed by IS LLOYD GETTING FIRED TOMORROW?? No, I’d guess?
You can look at Goldman’s results from a variety of distances. Up close, EPS estimates were $2.28 and actuals were $2.85 ($3.33 ex-DVA); $2.85 is more than $2.28 and there’s a dividend increase to boot so, yay there you go.
In the middle distance, you could have some concerns. Core, recurring revenue growth was so-so relative to peers, and costs were high, partly due to pleasing comp accruals, which I guess could concern you if you were a mean ungrateful shareholder and/or a former Goldman employee who for whatever reason is no longer accruing said accruals. Most of the outperformance came from appreciation on investing and lending positions.1
In the far distance, what do you make of it? The most awkward moment of the call for me was when the UBS analyst asked the CFO tag team to try to give him a sense of future Investing & Lending profits. You can’t do that! Investing & Lending is like the stochastic slush fund; revenues were $1.8bn this quarter versus $200 last quarter and ($2.5bn) this time last year. If you could predict those revenues you shouldn’t be a banking analyst. The tag team went like this, paraphrasing wildly: Read more »
Lesson 1, according the first chapter of Why I Left Goldman Sachs (“I Don’t Know, But I’ll Find Out”): the difference between a sandwich and a salad. Read more »
Three years after Fabrice Tourre was sued by the Securities and Exchange Commission for allegedly misleading investors, the (soon-to-be) Dr. of Economics and Love will go to trial, assuming finals don’t pose a conflict. Read more »
But will he read select passages at Dealbreaker Dramatic Reading night? These are the questions that need answering. [Bloomberg TV]