11/04/2009

Goldman Sachs: A GSE Hedge Fund At Its Best

The Goldman Sachs Group's third quarter report published on Wednesday has some astounding details.

In the 65 trading days of Q3, it lost money on just one, and bagged at least $100 million each on 36 days. Goldman improved its record of just two losing days in Q2.

Another eye-popping data: the interest rate on its long-term borrowings dropped from 3.53% in Q3 of 2008 to just 0.92% in Q3.

Goldman has made the most from the US Federal Reserve's free money policy. The $203 billion of debt is Goldman's largest single funding source, so as its cost plunges, its bottom line benefits, as long as assets it buys yield more and trades pay off - said a Heard On The Street report in WSJ.

In comparison, J.P Morgan Chase's long-term borrowing rate is 2.09%. Morgan Stanley is yet to release its third-quarter data.  

Goldman's revenue streams indicates that it is largely moving from an investment bank-brokerage to a giant trading desk. The equity commissions dropped from $1.2 billion in Q3 2008 to $930 million in Q3 2009, while its equity trading revenues soared from $354 million in Q3 2008 to $1.8 billion in Q3 2009. 

Goldman's trading success comes from perfecting the art of betting on the surest. Critics complain that Goldman's distribution of the trading ideas only to its own traders and key clients hurts other customers who aren't given the opportunity to trade on the information - http://bit.ly/Yu5a5

The Fed's interest rates policy is likely to remain unchanged in the short-term. At this rate, Goldman's long-term borrowing rate could drop down to 0% by this year-end. And it may report 100% success in Q4 trading.   

Goldman's trading revenue in Q3


Goldmantrade

Nov 4, 2009 9:42:16 PM | business, Current Affairs, Hedge Funds, Markets

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Nesil Staney

Master's Candidate, Business and Economic Reporting at NYU. WSJ Fellow.

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