We knew that Goldman Sachs had been very successful shorting the mortgage market;
we also knew that Goldman’s asset-management arm was very unsucccessful
this summer playing the stock market. And we’re also used, by now, to Goldman
setting new records for investment-bank profitability.
So the fact that Goldman Sachs earned
$3.22 billion between September and November is incredibly impressive but
also somehow unsurprising. The bit which jumped out at me was the way in which
equity trading revenues soared by 22% in the quarter, to $2.59 billion, even
as global stock-market prices and volumes were more or less flat. While the
Goldman Sachs special sauce is hard to export, it seems to be as potent and
pervasive as ever within the confines of 85 Broad Street. Just look at how they’re
doing in M&A, which helped drive financial-advisory revenues to $1.97
billion for the quarter:
Goldman, the No. 1 adviser in worldwide announced mergers and acquisitions
for the seventh consecutive year, arranged $417.9 billion of takeovers completed
during the fourth quarter, more than double a year earlier, according to data
compiled by Bloomberg.
In a way, it’s easy to understand how the likes of Ben Stein will look at these
kind of numbers with suspicion. How is it possible that Goldman can mint money
while everybody else – including Goldman’s clients – is taking a
bath? Surely there must be something nefarious going on!
But of course these numbers also prove that the last thing Goldman wants or
needs is an economic slowdown – there’s no way that Goldman is going to
arrange $400 billion of takeovers per quarter if the US economy slips into a
recession. Note that essentially $0 of that $3.22 billion came from economic
research. If you do want to look for dodgy dealings, I really don’t
think that Goldman’s economists are going to be a particularly fruitful place
to start your search.