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Monday, 06 July 2009 05:00

A closer look at the recent Goldman Sachs loss that everyone seems to have forgotten about...

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For those that haven't been following my market manipulation rant, see "More on market manipulation, guess who..." and be sure to follow all of the links therein. I have been following the program trading activities of Goldman, et. al. in an attempt to trace the cause of significant, non-fundamental movement of US eqity prices. I am also posting this reminder Goldman performance for the "lost" month of December to remind all that when one takes risk, one eventually has to pay the piper - even the golden boys.

In December 2008, Goldman Sachs net revenues from trading and principal segment stood at $507 mn as the company recorded $801 million loss from principal investments and $320 million loss from Fixed Income, Currency and Commodities (FICC), which together were partially offset by $614 million net revenues from equities.

Principal Investments recorded net losses of $529 mn from real estate principal investments and $501 mn from corporate principal investments, partially offset by a gain of $228 mn related to its investment in the ordinary shares of ICBC
FICC segment reported negative net revenues of $320 mn including $1 bn loss in credit products of (net of hedges) related to non-investment-grade credit origination activities (primarily due to $850 mn write-down relating to the bridge and bank loan facilities held in Lyondell Basell Finance Company). In addition, the segment results included a net loss of approximately $625 mn (excluding hedges) on commercial mortgage loans and securities.
During December 2008 net revenues from equity trading and commissions were $363 mn and $251 mn, respectively, lower than average monthly levels observed during 2008.
According to Goldman Sachs conference call during April 2009 although the company received cash after the government bailout of AIG, but it did not impact the operating results of the company as the transaction was not passed through profit and loss account though it was treated as part of cash.

Trading and Principal Investments Operating Results	Dec-08	Three Months Ended March 2009	Three Months Ended Feb 2008
FICC	(320)	6,557	3,142

Equities
Equities trading	363	1,027	1,276
Equities commissions	251	974	1,238
Total Equities	614	2,001	2,514

Principal Investments
ICBC	228	(151)	(135)

Gross gains	213	672	552
Gross losses	(1,243)	(1,933)	(962)
Net other corp & real estate investments	(1,030)	(1,261)	(410)

Overrides	1	4	13
Total Principal Investments	(801)	(1,408)	(532)

Total net revenues	(507)	7,150	5,124

Operating expenses	(875)	4,873	3,743

Pre-tax earnings/(loss)	(1,382)	2,277	1,381