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According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

Thursday, July 9, 2009

Goldman Sachs Trading Revenue Breaks Records

Ok, enough is enough. Really.

I equate Goldman Sachs to a rapist who has the audacity to leave a $20 on the garbage can in the alley after he's had his way with you. You kids with me? I certainly hope so.

First we hear that Goldman is on track to pay record bonuses this year after paying off their TARP cash, and now what? Record trading revenue? When does it end? Seriously! I'm almost out of words on this.


Goldman Sachs Group Inc. is on track to beat its 2007 trading-revenue record, enabling it to boost compensation by an estimated 64 percent from last year, according to Bank of America Corp. analyst Guy Moszkowski.

Goldman Sachs has “unmatched risk-taking/risk-management skills in a market that strongly rewards these because of decline in competitor risk appetite,” Moszkowski wrote in a note to investors today. The New York-based firm “appears on track to accrue significantly more comp than ‘08, despite little change in headcount.”

Six months ago, Goldman Sachs was supported by $10 billion from the U.S. Treasury and relied on government guarantees to issue debt. Moszkowski predicts the company will reap $26.45 billion from trading this year, a gain from $25.36 billion in 2007 when the firm shattered Wall Street profit records.

Moszkowski said the firm will set aside 44.2 percent of total revenue to pay compensation and benefits, letting it pay workers $17.92 billion compared with $10.9 billion last year. Goldman Sachs had 27,898 employees at the end of March. If that number remains unchanged and Moszkowski’s compensation estimate is correct, it would mean an average of $642,447 per employee.

So who exactly is rewarding Goldman's behavior? Icing traders in the open market with their firehose of doom and somehow this equates to record trading revenues? I don't get it, I just don't get it.

Speechless. Just speechless.

Read the full article - click here.


Finance Guy said...

All is not lost. A modest proposal to deal with the surfeit of Goldman Sachs bankers:
Hungry? Eat a Goldman Sachs Banker

Anonymous said...

This Is Outrageous
But first, I want to direct the attention of those in the US finance industry to a white paper written by Themis Trading, called "Toxic Equity Trading Order Flow on Wall Street." Basically, they outline why volume and volatility have jumped so much since 2007; and it's not due to the credit crisis. They estimate that 70% of the volume in today's markets is from high-frequency program trading. They outline how large brokers and funds can buy and sell a stock for the same price and still make 0.5 cents. Do that a million times a day and the money adds up. Or maybe do it 8 billion times. It requires powerful computers, complicity of the exchanges (because the exchanges get paid a lot), and highly proximate computer connections. Literally, the need for speed is so important that to play this game you have to have your servers physically at the exchange. Across the river in New Jersey is too slow. Forget Texas or California. This is a game played out in microseconds.

The retail world doesn't get to play. This is a game only for big boys who can afford to pay for the "arms" needed to fight this war. But the rest of us pay for the game, as that half cent is like a tax on transactions, not to mention the increased daily volatility, which skews pricing. Think it doesn't affect you? That "tax" is paid by mutual funds, your pension fund, and every large institution.

Frankly, this is outrageous. The more I read the madder I got. And it is going to get worse as computers get faster and software more intelligent. We need rules to level the playing field. Themis suggests one simple one: just make it a rule that all bids have to be good for at least one second. That would cure a lot of problems. One lousy second! In a world of microseconds, that is an eternity.

Goldman Sachs went after an employee who stole some of their latest and greatest software this last week. The US assistant attorney general said in the courtroom that the software had the potential to manipulate the market. Imagine that. I am shocked. There is gambling going on in the back room? Gee, commissioner, I had no idea.

All this "algo" (algorithmic) trading also gives a very false impression of volume. If you are a fund and see 10 million shares a day traded, you might feel comfortable that you could hold one million shares and exit your trade easily. But if 80% of the volume is false "algo" trading, that volume isn't really there. You may have a position that will be a problem if you want to exit, and not know it.

"High-frequency trading strategies have become a stealth tax on retail and institutional investors. While stock prices will probably go where they would have gone anyway, toxic trading takes money from real investors and gives it to the high frequency trader who has the best computer. The exchanges, ECNs and high frequency traders are slowly bleeding investors, causing their transaction costs to rise, and the investors don't even know it." (Themis Trading)

We are literally talking billions of dollars here. The SEC needs to step in and stop this, and soon. This is a lot more important than the salaries of investment professionals, for which the Obama administration today suggested new rules, which would allow the SEC to oversee salaries at member firms. Seriously? They don't have enough to do already?

The link to the white paper is Themis Trading is at

Read the paper. Then, if you like, drop the very nice folks at the SEC your thoughts at And now, let's start off with Japan.

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