Goldman Sachs: Still Mostly A Huge Bond Trading Machine

Author:
Publish date:
Updated on

One of the pleasures of the new openness from Goldman Sachs is getting to delve a bit more deeply into the inner workings of the vampire squid. And one thing that is apparent: the blood funnel was especially thirsty during the first few months of 2010.

Looking at Goldman's new disclosure of operating results by segment, it's obvious that Goldman's traders had a mammoth first quarter last year. The firm's fixed income, currency and commodities traders recorded over $6 billion in revenues for the first three months of the year. The equities traders took in nearly $1.3 billion.

For some perspective about how outside the box that kind of performance is, keep in mind that in the second and third quarters Goldman's fixed income, currency and commodities desk took in just $3.3 billion and $2.6 billion, respectively. The equities traders took in just $312 million and $860 million.

What in God's name happened in the first quarter of this year that had Goldman raking in such outsized profits? This looks like yet another version of the greatest trade ever.

Of course, its worth asking the question the other way as well: what went wrong on the equities desk in the second quarter? Goldman's equities traders earned nearly $1.3 billion in the first quarter and $860 million in the third quarter. But in the second quarter, Goldman's stock traders earned just $312 million.

Goldman says that these traders are not operating some kind of internal hedge fund or a proprietary trading desk. They are engaged in client execution and market making. But these revenues, regardless of how Goldman wants to characterize them, are trading revenues. The fees and commissions are accounted for elsewhere.

No other source of revenue even comes close to what these bond traders make for Goldman. The closest runners up earned a fraction of what the bond traders made in the first quarter. Stock traders took in just under $1.3 billion in the first quarter. The guys running hedge funds and such for Goldman's asset management division also made just under $1.3 billion in their best quarter.

The investment bankers, by the way, topped out at just under $450 million.

Despite all the talk you'll hear about Goldman's new client friendly orientation, keep in mind that what really makes money for Goldman is trading.

Goldman Sachs: Still Mostly A Huge Bond Trading Machine [NetNet]

Read More: Playboy- Private Again, Hef Still At The Helm
Waking up With Nicole Lapin
9 Most Mentioned "Top Picks"

Related

Goldman Sachs Still Bullish, Despite Recent Plunge

Big hedge fund managers my be taking risk off the table, but Goldman Sachs remains bullish on the broader market and notes the recent pullback is totally consistent with a recovery. From the firm’s latest Kickstart report:

Layoffs Watch '12: Goldman Sachs

The cuts aren't said to be too significant but good luck telling that to the people who'll no longer be receiving quality Cohn-crotch time. Goldman Sachs, the Wall Street bank that generated 58 percent of first-half revenue from sales and trading, eliminated 20 to 30 jobs in that division this week, according to a person briefed on the matter. The cuts affected salespeople and traders in the U.S., with most taking place in New York, said the person, who asked not to be identified because the reductions aren’t being announced publicly. The decision is part of a continuous review of staffing levels amid difficult markets, the person said. Goldman Sachs Said To Cut More Than 20 In Sales, Trading [Bloomberg]