Happy Birthday Lloyd Blankfein!
Mark McGoldrick's Parting Gift Bolsters Profits At Goldman Sachs

Posted by John Carney, Sep 20, 2007, 8:47am

Is it even possible for an analyst to correctly estimate the earnings of a secretive investment bank like Goldman Sachs? If so, someone should tell the analysts how to do it.

Goldman blew them away again this morning. It not only beat expectations. It reported Wall Street's only profit gain, as Bloomberg reported this morning. A good piece of that profit gain was thanks to the sale of Horizon Wind Energy LLC, a Houston based alternative energy company that Goldman bought five years ago for $150 million and recently sold to a Portuguese power company for $2.1 billion.

Ironically, the man behind that purchase was Mark McGoldrick, who headed Goldman's special opportunities group. Earlier this year, McGoldrick left Goldman after becoming convinced that the firm wouldn't adequately compensate him or his group for the outsized gains they were earning.

This morning's earnings report is a nice little birthday present for Goldman topdog Lloyd Blankfein. As he blows out his candles on his ice-cream cake this afternoon, Blankfein should at least make a wish for McGoldrick, the man who helped make this birthday exta-special. Oh, and maybe wish a little something for whoever it was who shorted mortgages at Goldman and turned this summer's subprime-led credit crisis into a profit opportunity.

Goldman Profit Rises 79 Percent as Gain Boosts Trading Revenue [Bloomberg]
Goldman Sachs 8-K [SEC]

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Posted in: Earnings Reports, Goldman Sachs

Comments

Posted by , Sep 20, 2007 9:19AM

... proving once again we are all serfs and they are the true MOUs

Posted by huh, Sep 20, 2007 10:12AM

i know there are ways to do it - usually for small notional and short-term... but, is there truly a way to short size in mortgages for any period of time? i thought not since they are not fungible. now i can put on trades correlated with shorting mortgages, and i can short real estate indices, but those aren't the same thing.

mebbe things have changed since my time in mtg-land. anyone wanna enlighten me in case it is possible? how do you get around the fungibility issue? (unless there's some doof firm that always fails to deliver...)

Posted by , Sep 20, 2007 10:18AM

derivatives BAY-BEE!

Posted by Yawn, Sep 20, 2007 10:38AM

Is it just me? Aren't investment banks supposed to make more money when the markets are volatile? When the markets go up, when the market go down, ect.... Isn't that their whole value proposition? All those distressed bet made in 2002 should be be being sold now that the market is up nearly 6,000 pts. Goldman isn't lehman (with outsized exposure to specific sector of the market)

Goldman should only run into trouble when their counter parties start going under and they're left holding the bag. What, they have CDX to protect from that? Wait what CDX involves counter parties too and the whole argument is recursive?

A well diversified shop like GS should sail along perfectly until it disappears beneath the seas capsize by a rouge wave that they knew would hit them one day but were incapable of predicting.

Posted by , Sep 20, 2007 10:39AM

and who was supposed to be firing their analysts??? oh rumors.....

Posted by , Sep 20, 2007 10:55AM

salespeoples i think

Posted by GTexas, Sep 20, 2007 11:00AM

Shorted subprime?? Archon was buying into subprime at the first of the summer.

Posted by , Sep 20, 2007 11:00AM

What i heard from someone in the S&T training is that they took a bunch and put them in ops (temporarily?) because they needed someone to work on the exceedingly high volume of trades recently

Posted by , Sep 20, 2007 11:42AM

My friend is one of the people moved into ops. He is doing nothing there.

Posted by , Sep 20, 2007 11:45AM

Weird

Posted by GSBS, Sep 20, 2007 12:08PM

GS is the most compassionate shop on the street toward is junior people. Your friend should be happy the lets him work in Ops. I'm sure he's pissed but he can always jump ship. Or ride it out and try to learn something along the way and switch into another group later on.

Its hard to take a picture view when your mini-baller peers are mocking you or other people in ops. But this is a marathon, not a sprint... hang in there guys.

Posted by Jon, Sep 20, 2007 4:50PM

Goldman's executives are some of the best in the business. They are insightful, informative, influential, and well-connected. This map http://www.newsvisual.com/newsvisual/2007/09/goldman-sachs-b.html shows you just how connected they are, some of their Directors also hold directorships at more than 4 other companies. Pretty amazing.

Posted by huh, Sep 20, 2007 8:50PM

Anonymous@10:18: No. Derivatives on individual mortgages? On pools? That's a lot of work. Like I said, fungibility is the issue -- unless you're talking about putting the payoffs into a swap structure. But maybe I'm dense: what derivative structure would let you short individual pools? Not indices, individual pools (or even) individual mtgs.

Posted by , Sep 21, 2007 8:35AM

who said anything about individual mortgages? when these guys say they are short mortgages, in size, they mean they are short anything even remotely related to subprime mortgage with high correlation. short ABX. sell rescap protection. write calls on countrywide. hell, even merrill lynch bond spreads were 90% correlated to ABX.HE during 2007. they have a massive team of wireheads over there, i doubt they had much trouble finding asset classes heavily correlated with subprime failure

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