As Bloomberg reports. Goldman lost money on more trading days in the first quarter than Lehman or Morgan Stanley, although its winning days outnumbered its losers by more than four times. Thus, the fact that Goldman outdid its rivals on this peculiar metric is a sign of undue caution on the part of its competitors, consistent with a preoccupation with minimizing losses.
From Bloomberg:
Goldman Sachs Group Inc., the biggest U.S. securities firm by market value, lost money on more trading days during the first quarter than rivals Morgan Stanley or Lehman Brothers Holdings Inc., according to regulatory filings.In the three months through Feb. 29, Goldman lost money on 17 days, compared with eight days at Morgan Stanley and seven at Lehman Brothers, the filings show. Goldman’s trading department also had more big wins, raking in $100 million or more on 28 occasions, compared with 20 days at Morgan Stanley. Lehman reported it made more than $90 million on 13 days.
“Goldman Sachs takes a more aggressive posture on trading and feels confident doing so because they have some of the most talented people,” said David Killian, a portfolio manager at Stoneridge Investment Partners….“They’re in the business of trading and taking on risk, and they’ve shown that they’re better than peers over the cycle.”
Goldman, under Chief Executive Officer Lloyd Blankfein, depends on trading for 68 percent of the New York-based firm’s revenue, more than either Morgan Stanley or Lehman. While Goldman’s first-quarter trading revenue slumped 27 percent to $5.66 billion from a year ago, it remained higher than Morgan Stanley’s $5.13 billion or Lehman’s $1.67 billion.
The filings also show that Goldman lost $100 million or more on five trading days during the quarter. Morgan Stanley lost more than $100 million on one day, while Lehman reported that it lost more than $60 million on three separate occasions.
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Thus, the fact that Goldman outdid its rivals on this peculiar metric is a sign of undue caution on the part of its competitors, consistent with a preoccupation with minimizing losses.
How does this conclusion necessarily follow from the facts stated? It could just as easily be the case that Goldman is using Black Swan trading logic more effectively than their rivals. If this is true, I’d argue that it is the latter who are more exposed from a risk standpoint.