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Were Goldman Sachs partners slightly stupid?

They may be among the wealthiest high achievers on the planet, but partners at Goldman Sachs don’t seem to have made a particularly good call when it came to selling their own stock last year.

According to the Financial Times, Goldman partners sold almost $700m of stock in the eight months following the collapse of Lehman Brothers.

Much of the selling took place between November and March when Goldman was in receipt of TARP money and its share price was at rock bottom.

During that time, Goldman shares oscillated between $53 and $92. They’ve since recovered to $150.

What made the partners sell? It may have been necessity. Last year Goldman was said to
cap cash bonuses at $220k, with the remainder paid in stock and options. In February, CNBC reported that partners were having to borrow to cover margin calls.

Yves Smith at Naked Capitalism says this isn’t the first time Goldman Partners have been spooked – the same happened in 1994 when many went limited and set their partnership interest according to the firm’s depressed value. That, however, was a smart move which limited their exposure to further downside.

This time, however, there little evidence of such cleverness. If they’d hung for a few months the Goldman partners could have made as much as $1.3bn extra – and even more if prices rise an extra 30% as Meredith Whitney predicts.

Comments (15)

Comments
  1. Yeah, but they are pretty ‘long Goldies’ career-wise. Believe what they did is know as risk management?

  2. Sarah it is called “hedging your bets”. They knew they could easily have gone under at any time during that period hence the quick fire-sale. Capische?!

    Mr. Frank White Reply
     
  3. Yeah Goldmans partners are all ‘slightly stupid’. What a ridiculous article. Still I guess it gives Sarah a chance to write about her obsession-Goldman Sachs.

  4. @Derek – I wouldn’t say I’m obsessed. It’s a little more nuanced than that. Yesterday, for example, I wrote about Bank of America.

    Sarah, Editor, eFinancialCareers Reply
     
  5. To be honest, I agree with above. Sarah, you are obsessed with GS!
    Having said that, they are the daddy though. I must work for them one day……

  6. And now there is another article about Goldmans-No Sarah you are definitely not obsessed

  7. Ok Derek, maybe I do have recurrent thoughts about Goldman Sachs every other minute or so, but even if this weren’t the case I would probably have written something about them today. Nor am I only the only one. I strongly suspect the FT, the Wall Street Journal, Bloomberg, and the BBC of being obsessed too.

    Sarah, Editor, eFinancialCareers Reply
     
  8. I dont disagree with you that you are the only one as of course they are the benchmark. Just glad you finally admitted it. Thats the first step

  9. Thank for being so sympathetic Derek. I will be repeating ‘Morgan Stanley’ under my breath for the next several weeks in an effort to achieve a cure.

    Sarah, Editor, eFinancialCareers Reply
     
  10. So we can expect a flurry of articles on Morgan Stanley?! Cant wait!

  11. Yes, I’ll most certainly write something looking at whether Morgan Stanley is the new Goldman Sachs,

    Sarah, Editor, eFinancialCareers Reply
     
  12. Ah very good Sarah, and yes I imagine that is exactly what the title of the article will be!

  13. Would you 2 please get a room!

  14. after such a dull day you seriously cheered me up! thanks for that

  15. yes, they were stupid not to diversify their holdings earlier… but better late than never. would you call them geniuses if gs was down to 30? when they sold that was also a possibility… they should’ve sold earlier and invest elsewhere…

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