Goldman Sachs Group (NYSE: GS) reported a $2.12 billion loss for the fourth quarter. So why is its stock up in pre-market? It's the usual reason -- investors expected it to lose even more money. But the real question for investors is whether Goldman will be able to earn a profit in 2009 or 2010. After all, beyond helping to restructure bankrupt companies there does not appear to be an obvious source of revenue growth for Goldman.
Goldman lost $2.12 billion in the fourth quarter due in part to write-downs of assets that it had overstated on its books. But investors expected a $2.5 billion loss so the stock was up 3.8% in pre-market and opened nearly 5% higher. One strange thing I have noticed in recent quarters is that banks report something called "negative net revenues" -- the result from enormous asset write-downs that offset any trading revenues -- which in Goldman's case totaled $1.58 billion.
Goldman's revenues across the board were way down for the quarter. Investment Banking revenues were down 48% to $1.03 billion; Financial Advisory revenues tumbled 54% to $574 million; Underwriting business fell 37% to $460 million; and Net revenues in Trading and Principal Investments had negative net revenues of $4.36 billion. That's not all but you get the idea -- business is bad.
Goldman still has $66 billion in Level 3 assets which are the source of the write-downs that lead to negative net revenues. More such write-downs are in its future, but the real unknown is how much further its revenues will decline in the years ahead and what it will take for Goldman to create a future profit stream. More on that could come from today's conference call.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.
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Reader Comments (Page 1 of 1)
12-16-2008 @ 10:37AM
BHarrison said...
So, these guys . . the CEOs, the CFOs, uppermanagment, the Boards of Directors, the corporate attorneys, have ben paid HUNDREDS of MILLIONS OF DOLLARS while they have orchestrated and perpetuated these pyramid and Ponzi schemes during the last eight years, right?
So, howis it that these INCOMPENTENT, and more likely "CRIMINAL" people being allowed to keep their ill gotten gains that hey have sucked out out the FIs, the corporations and the markets/funds for so many years. UPRECEDENTED TIMES CALL FOR UNPRECEDENTED ACTIONS!
personally, I don't care what it costs to prosecute, to fine, and to imprison these CRIMINALS . . . the costs of it all can come out of thier ill gotten "profits" (FRAUDULENT INCOMES).
The time has come for the government, the U.S. Justice Department to AGGRESSIVELY INDICT and PROSECUTE these WHITE COLLAR CRIMINALS.
Wealth is NOT a crime in and of itself; however, using FRAUD to become wealthy IS A CRIME; and these CORRUPT LEADERS of our business institutions NEED to be prosecuted to the fullest extent of the laws. I could care less as to how many of them are impoverished . . . they DESERVETO BE IMPOVERISHED and to be IMPRISONED for what they have done to our nation.
If Congress will not go after these "bastions" and "leaders" of our business enterprises, then the people need to REPLACE / OUST the CORRUPT CONGRESSMEN.
ALL of the DELAYS todate are merely "buying time" for these CORRUPT people to maximize minimizing THEIR CURRENT LOSSES . . . BUT they have made vast fortunes during the last eight years as they were committing massive frauds.
The USA needs a "capitalists revolution" somewhat similar to the Red Chinese's "Cultural Revolution" during the 1960s. These corrupt "business people" need to be stripped of their ill gotten gains, driven through the streets like cattle, spat upon and flogged by the American people. That is just about what it would take to remedy this entire mess.
Otherwise, these crooks don't sense any type of deterrence to what they have been doing; and are still trying to do by "gaming the economic systems of our nation". That is NOT capitalism; it is FRAUD by any measure.
People need to deluge their Congressmen with demands for "justice" in all of tis BLATANT FRAUD and CORRUPTION. Otherwise these CROOKS are going to get away with their crimes.
12-18-2008 @ 11:46AM
milt tomkins said...
very informative story...... Goldman are still kings of the jungle though...but the jungle is disapearing... in researching hedge funds I came across a few books that I love... Hedge Fund Trading Secrets Revealed by Robert Dorfman... and Confessions of a s]Street Addict by Jim Cramer....both these books take you on a great ride about hedge funds