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How One Goldman Sachs Trader Made More Than $100M

wsj.com

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Re: How One Goldman Sachs Trader Made More Than $100M

#41

Post by teh_klev »

snarfy wrote: post #25
temuze wrote: post #6

How to get around the WSJ paywall: - Copy the URL - Paste the URL into the Facebook textbox where you would create a post - Click on the preview, so the referrer url is Facebook Could probably make a Chrome extension for this...

Or stop posting them to HN? Seriously, would we tolerate any other subscription required site? Why does WSJ get a pass?

I know this has been done to death, but...

https://news.ycombinator.com/newsfaq.html

Are paywalls ok?

It's ok to post stories from sites with paywalls that have workarounds.

In comments, it's ok to ask how to read an article and to help other users do so. But please don't post complaints about paywalls. Those are off topic.

Re: How One Goldman Sachs Trader Made More Than $100M

#42

Post by smallnamespace »

jhulla wrote: post #23
lordnacho wrote: post #18

Like the article says, it's very hard to distinguish between market making and prop trading. Especially in illiquid stuff like corporate bonds, the MM needs to hold positions for extended durations, so they have a valid excuse to not be closed down entirely by Volcker. The real reason they make all that money is flow. The guy on a desk like that knows what customers are calling, what they're concerned about, roughly…

Market making is inherently prop trading - the firm's capital is at risk - unless trades are paired or hedged immediately. For thinly traded stuff that may take a while to unload, it is just prop trading. I personally think Banks should be incredibly boring utilities. But that ship sailed a long time ago. Lots of great stuff was thrown out the window in January. My winning bet for the year was to start buying EWC (is…

If you prevent banks from doing the riskier forms of market making, then that responsibility will move to firms that don't have access to customer deposits.

Because their capital base is less stable, they will be more prone to stop making markets precisely when you need them most. That will probably make extreme volatility events like flash crashes much more likely.

This is already happening today to some extent:

[1] https://www.bloomberg.com/view/articles/2016-10-07/flash-cra...

[2] https://www.bloomberg.com/view/articles/2015-06-03/people-ar...

'In the new system, the market makers are computers, and when things get hairy they just stop buying pounds and walk away with their computer hands in their computer pockets, whistling a jaunty tune out of their computer speakers.'

Re: How One Goldman Sachs Trader Made More Than $100M

#43

Post by draw_down »

edutechnion wrote: post #2

Short version: banker provides liquidity to the markets and buys up junk bonds from panicked sellers at 40 cents on the dollar. Banker then sells the bonds for more money as the panic dissipates. Some people wonder if important banks like GS should still be making volatile bets like this.

Why shouldn't they? If they make risky bets that don't pan out, they will make their losses will the government's problem.

Re: How One Goldman Sachs Trader Made More Than $100M

#44

Post by blahblah3 »

lordnacho wrote: post #18

Like the article says, it's very hard to distinguish between market making and prop trading. Especially in illiquid stuff like corporate bonds, the MM needs to hold positions for extended durations, so they have a valid excuse to not be closed down entirely by Volcker. The real reason they make all that money is flow. The guy on a desk like that knows what customers are calling, what they're concerned about, roughly…

Yeah but the money he made from this doesn't sound like flow, sounds like a large directional bet (similar to the london whale event, except this one happened to work)

Re: How One Goldman Sachs Trader Made More Than $100M

#45

Post by stcredzero »

lordnacho wrote: post #34
jhulla wrote: post #23

Earlier quoted context omitted.

Market making is inherently prop trading - the firm's capital is at risk - unless trades are paired or hedged immediately. For thinly traded stuff that may take a while to unload, it is just prop trading. I personally think Banks should be incredibly boring utilities. But that ship sailed a long time ago. Lots of great stuff was thrown out the window in January. My winning bet for the year was to start buying EWC (is…

The mood among bank staff... everything is shut down by compliance, and if they could, they'd work in a different industry. People I know at banks, anyway.

The mood among bank staff... everything is shut down by compliance

In what sense is "everything shut down by compliance?" Is compliance so cumbersome, that no one can be arsed to do any big trades?

Re: How One Goldman Sachs Trader Made More Than $100M

#46

Post by zaroth »

JumpCrisscross wrote: post #40
dogma1138 wrote: post #28

Earlier quoted context omitted.

GS has about 90 bln in total equity and nearly a trillion dollars in total assets. 100m sounds high but 100m is a rounding error especially if spread across 100s or even 1000s of trades.

Note that they made $100 million. I did not see a value at risk, gross notional or netted, presented.

TFA says billions bought and sold before fading out to ads.

I guess making 5% returns isn't such a big deal when you are playing with billions of other people's money.

Re: How One Goldman Sachs Trader Made More Than $100M

#47

Post by [deleted] »

edutechnion wrote: post #2

Short version: banker provides liquidity to the markets and buys up junk bonds from panicked sellers at 40 cents on the dollar. Banker then sells the bonds for more money as the panic dissipates. Some people wonder if important banks like GS should still be making volatile bets like this.

[deleted]

Re: How One Goldman Sachs Trader Made More Than $100M

#48

Post by kafkaesq »

qaq wrote: post #22
edutechnion wrote: post #2

Short version: banker provides liquidity to the markets and buys up junk bonds from panicked sellers at 40 cents on the dollar. Banker then sells the bonds for more money as the panic dissipates. Some people wonder if important banks like GS should still be making volatile bets like this.

GS seams to run fairly tight shop I doubt they take very large unhedged positions.

Really now?

Goldman Sachs will pay $5.06bn for its role in the 2008 financial crisis, the US Department of Justice said on Monday. The settlement, over the sale of mortgage-backed securities from 2005 to 2007, was first announced in January.

“This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail,” acting associate attorney general Stuart Delery said in a statement.

-- https://www.theguardian.com/business/2016/apr/11/goldman-sac...

Re: How One Goldman Sachs Trader Made More Than $100M

#49

Post by qaq »

kafkaesq wrote: post #48
qaq wrote: post #22

Earlier quoted context omitted.

GS seams to run fairly tight shop I doubt they take very large unhedged positions.

Really now? Goldman Sachs will pay $5.06bn for its role in the 2008 financial crisis, the US Department of Justice said on Monday. The settlement, over the sale of mortgage-backed securities from 2005 to 2007, was first announced in January. “This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew tha…

They made money and later payed a fine , how is this disputes a statement that GS does not take large unhedged positions?

Re: How One Goldman Sachs Trader Made More Than $100M

#50

Post by brianwawok »

kafkaesq wrote: post #48
qaq wrote: post #22

Earlier quoted context omitted.

GS seams to run fairly tight shop I doubt they take very large unhedged positions.

Really now? Goldman Sachs will pay $5.06bn for its role in the 2008 financial crisis, the US Department of Justice said on Monday. The settlement, over the sale of mortgage-backed securities from 2005 to 2007, was first announced in January. “This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew tha…

Your quote is about honesty. OPs quote was about unhedged rusk. They have little to no relation. You can be both a dishonest trader AND a smart one.
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