Wednesday, May 19, 2010

Goldman Sachs Perfect Trading Record is Perfect For Itself Only as 7 Out of 9 Recommended Trades Lose Money for Clients

Goldman Sachs may have had a perfect trading record in Q1, with gains every single trading day, a 100% success feat that is considered nearly impossible in normal markets (as in non rigged markets). The firm has also been acussed of "betting against clients".

The accusations are gaining momentum today after Bloomberg reports that its clients who followed the firm’s investment advice have fared muchworse.

Out of its nine “recommended top trades for 2010”, 7 have lost money for their investors. That's a success ratio of 22.3%.

Says the report:

  • Clients who used the tips lost 14% buying the Polish zloty versus the Japanese yen,
  • 9.4% buying Chinese stocks in Hong Kong and
  • 9.8% trading the British pound against the New Zealand dollar.
According to Gary Cohn, Goldman Sachs’s trading profits come from capturing bid-offer spreads when its traders act as intermediaries for clients, and "proprietary trading is not a main driver of earnings".

In April Goldman Sachs also added a ninth top trade, "telling clients to buy Chinese stocks listed in Hong Kong and predicting the hang Seng index would rise 19% to 15,000". The index is at 11,426.18, or about -9%.

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