THE DOT - if this turns orange or red be alert

Thursday, January 21, 2010

Goldman profits the earnings miracle ?

I had written in earlier posts that the profits shown in earlier quarters may not reflect the full extend and they may hide some profits for later on - I think that's is just what happened this quarter by no means they could have made those profits explicitly this quarter with lower VAR. On the other hand the final quarter has different marking requests and they use this situation now to show a relative low payout compared to other firms especially that they now even have not added despite the record quarter any money to the bonus pool. The 16 bil at the end of Q3 for the bonus pool stays put f or political reasons. Mr Blankfein tries to calm down the public outrage but still most of those profits were not earned decently by smart investments. The surprise of Q4 is also due to the fact that no bonus is paid from that earnings which kind of doubles the net figure as usually about 50% might have gone to the bonus pool of the 5 bil declared as net income. Just the AIG payout to Goldman matches the entire profits plus the fact that they as a bank have a 150-200 bp lower financing cost with a 1 tril on books would make another 15-20 bil profits - those 2 ( far more perks they got ) make up for 35-40 bil in profits. Deduct them and Goıldman is not that smart anymore - its a hyped myth as bank profits are in general.

Excerpt

Goldman Sachs Profit Beats Estimates on Cuts to Compensation

By Christine Harper

Jan. 21 (Bloomberg) -- Goldman Sachs Group Inc., the most profitable securities firm in Wall Street history, reported earnings that beat analysts’ estimates as the company slashed the percentage of revenue allocated to compensation.

Net income of $4.95 billion, or $8.20 per share, for the three months ended Dec. 31 compared with a loss of $2.12 billion, or $4.97 per share, a year earlier, when the fiscal year ended in November, the New York-based company said today in a statement. The average estimate of 21 analysts surveyed by Bloomberg was for $5.18 a share.

Goldman Sachs, under Chairman and Chief Executive Officer Lloyd Blankfein, relied on gains from trading and investments with the firm’s own money to help it recover last year from the worst financial crisis since the Great Depression. Earnings reports from Morgan Stanley and JPMorgan Chase & Co. showed that trading slowed in the last three months of 2009 as clients pulled back and credit spreads narrowed.

“There’s a lot of leverage to control expenses or if bonus accruals come in a little bit lower,” Jon Fisher, a portfolio manager at Fifth Third Asset Management in Minneapolis, which has $18.3 billion under management, said before earnings were released.

While last year’s profits helped Goldman Sachs’s stock double, the firm also became the target of outrage from politicians and pundits who blamed company executives for profiting from taxpayer support.

Rolling Stone

Labor unions led a protest demanding bonus payments be canceled, a Rolling Stone magazine writer labeled the firm a “great vampire squid wrapped around the face of humanity” and the bank was lampooned on the television comedy show Saturday Night Live.

On the first day of hearings of the Financial Crisis Inquiry Commission earlier this month, Blankfein, 55, was the target of questions about the firm’s products and its relationship with American International Group Inc., whose bailout by the Federal Reserve in 2008 funneled more cash to Goldman Sachs than to any of AIG’s other trading counterparties.

Goldman Sachs’s business model, which includes deposit- taking as well as trading for its own account and managing hedge funds and private-equity funds, may be affected by a proposal expected today from U.S. President Barack Obama. Obama is planning to announce new rules after meeting with former Federal Reserve Chairman Paul Volcker, who has advocated separating deposit-taking from proprietary trading and other risky investing, an administration official said.

Last month Goldman Sachs said its top 30 executives, including Blankfein, Chief Financial Officer David Viniar and President Gary Cohn, wouldn’t receive any cash bonuses for 2009. Instead, their bonuses will consist entirely of restricted stock that they can’t sell for five years.

No comments:

About Me

I am a professional independent trader