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Is Goldman hiding something?

Could it be Goldman Sachs isn’t doing incredibly well, and won’t be coughing up copious amounts of cash at bonus time after all?

Fortune magazine suggests Goldman’s 79% increase in 3Q net income was more down to clever accounting than to clever prop traders.

It apparently turns out that nearly 65% of Goldman’s gargantuan 4bn profits were derived from unrealized profits on complex derivatives which were marked to Goldman’s own models rather than to an unforgiving and illiquid market.

Fortune quotes Charles Peabody, an analyst at Portales Partners, who describes Goldman’s accounting as “opaque” and says, “A lot of these losses were real and a lot of their gains were paper, and that’s something we’d like to know more about.”

Goldman is predictably unhappy that aspersions are being cast on its third-quarter levitation act. The Telegraph quotes a bank spokesman who says suggestions of inflated paper gains were “preposterous”, and that “We do this for a living. It is impossible to manage your risk if you don’t know the value of your assets.”

What do you think? Can Goldmanites still count on portly payouts? Or are its profits a question of wishful thinking?

Comments (13)

  1. soon the true will come out…

  2. I think goldmans is running a pretty mediocre accounting and auditing team.

  3. you will see that goldmans profits are based on thin air. the bank makes money from prop trading, which is equivalent to making money out of nothing.

  4. I’m sure the GM will look after their staff. Good luck Goldmannites.

  5. Goldman is the Smartest in the business whereas they may have lost money on sub-prime backed securities. They will have invested in commodities and currencies which have been extremely profitable. This is the true value of a hedgefund and thats why investors were willing to bail out the non perfoming teams in Goldman. The real banks we should be worried about are ones that reported losses.They lack proper risk management systems.In the meantime I will be buying some Goldman shares and regretting why i never qualified to work for such smart guys.What do you think?

    Peter Gold Digger Reply
  6. Much as we all hate Goldman – they are the best in the business. They rarely put a foot wrong. I’m sure they’ll do what’s right for them (top management and stockholders) which probably means paying the ranks

  7. think that some banks/ financials shift their problems to Q4…we will see – not only this sector also on other eco data output will follow much more pain…wanna join EURO currency? :-) USD becomes mex peso

  8. Well, Salomon Brothers used to be the best in the industry, and genius do fail if they do not manage ego appropriately. However, I have to agree that GS guys are very acute with their franchise trading business and they have a strong quant group. They seem to have good reasons to outperform.

  9. It seems that Goldman is cooking something in its book. Whatever it is, I hope it will feed not, only the wolves, but also the hungry sheeps.

  10. Long live Goldman Sachs.. Long live the Greed Machine

  11. I hope this profit is genuine? Anywhere GM is about the best in the industry we would expect they must carried out some smart transactions to generate such good profit. All the best GS

  12. happily a former drone for Goldman Sucks, I know they fudge their numbers…hummmmm when you are #1…there is only one way you can move…down! I hope they all get flown to Chennai in coach for a change!

  13. wink*, what are you saying ?

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