Goldman has record profitability while their recommended trades lose

For those of you with Goldman worship syndrome, this may hit hard.  Reggie Middleton is out there on Zero Hedge saying that Goldman is manipulating their clients for their own profitability, via Zero Hedge.  This comes on the heels of a two facts.

First, Goldman knows how to trade.  They had trading profits every day last quarter.  Way too good to be normal.  If Vegas casinos could somehow manage 75% odds in their favor, it be able to print money.  If Goldman Sachs can pull a profitable trading day every for 66 days in a row, its either fishy, or divine. That would imply that 99 out of 100 trading days would be profitable.  Since I don't belive those guys are Gods, I would tend to believe the fishy thing.  One thing is for sure, I would be doing any trading with Goldman.  If a company were profiable 75% of the days in the quarter, which is very good, the odds of them doing 66 profitable trading days in a row is 0.0000006%.  Sounds too good to be true.

Second, Goldman clients are losing money on their trades as recommended by Goldman, via Bloomberg:
Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse.

Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who followed the New York-based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday. Clients who followed the tips lost 14 percent buying the Polish zloty versus the Japanese yen, 9.4 percent buying Chinese stocks in Hong Kong and 9.8 percent trading the British pound against the New Zealand dollar.

The struggles for analysts at Goldman, which is fighting a fraud lawsuit from U.S. regulators who accuse the company of misleading investors in a mortgage-linked security, show the difficulty of predicting market movements as widening budget deficits, a fragile global economic recovery and tighter financial regulations increase volatility. Stock and currency fluctuations rose to the highest in a year this month as Europe pledged about $1 trillion to stop a debt crisis in the region.
That is fishy.  Goldman is not giving their clients the best trades, they are keeping them for themselves or worse, recommending them to their clients after they had their run to provide a decent exit. Again via Zero Hedge:

...Goldman literally had a perfect trading quarter recently, with not one day losing money. Yes, the guys at Goldman are only human, but they are front running humans!

Or you could have been following BoomBustBlog which had this European Sovereign thing down pat since early January with option returns in the deep three digits and still running strong! I bet the Goldman trading desk had the same positions that I did. Why didn’t they recommend them to their clients???? Probably because they needed someone to sell their trades into…


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