Goldman Sachs is going nuts (Q42008).

Wat the meuk is dit.....

Derivates report Q42008 van OCC.gov
Check pag 13....



Percentage of total credit exposure to risk based capital.
Check de tabel hieronder..... valt jullie niks vreemds op ? Is dit een kado van AIG (= lees overheid) dat GS niet mag omvallen als de stekker bij AIG eruit gaat.

[ Bericht 10% gewijzigd door Drugshond op 03-04-2009 07:42:38 ]

Nieuwsberichten hierover zijn nog schaars... dat verandert nog wel.

News from the front: Bank losses spreading
Online Journal Associate Editor


Apr 1, 2009, 00:26

Last Friday, the Office of the Comptroller of the Currency reported that for the first time in history commercial US banks have suffered a $3.4 billion quarterly loss in a giant sector that they thought, until now, was solid: that is, bets on interest rates. The loss was more than seven times worse than their previous quarterly loss in that category.

Of the total derivatives loss, only 7.8 percent was in credit default swaps, the instrument that brought down AIG. Notably, 82 percent of total losses were in interest rate derivatives, the solid category. The remainder is in “other.” U.S. banks, alone, control $204 trillion in derivatives today. These facts came from the notable Dr. Martin Weiss. A more detailed look is linked here.

But first, consider the most breathtaking losses of the Wall Street casino came from America’s five biggest banks. In fact, Bank of America’s total derivatives risk is at 179 percent of its risk-based capital; Citibank’s was at 278 percent of its risk-based capital; JPMorganChase was at 382 percent of its risk-based capital; and Goldman Sachs’ total credit exposure at year-end was at a whopping 1,056 percent, or over ten times more than its capital. Do you get the picture now?

Wall Street and the investment banks mostly have messed up this economy so badly it is unbelievable. So you have to get out the Glass-Steagall Act and look at each one of these monsters and let them live or die, depending on whether their assets exceed their debt. I doubt if any of the above would pass the test. They should be closed if they can’t. And the 7,000 other banks in the country that did not play derivatives roulette in the Wall Street casino should be helped, loaned money, after a bankruptcy reorganization.

We should even consider reinstating the law against interstate banking, and allow banks just to operate in one state, all the better to serve their communities. And that should go for foreign banks as well.

This kind of austerity seems in order. As to the Fed, it should be printing money in red not green ink for what it’s worth.

Obama is turning out to be economically dumber than dirt. And he’s playing with the worst people in the world, all related to Goldman Sachs: Geithner, Summers, Emanuel, and briefly Paulson. Their sole object is to recapitalize their losses with taxpayer money via bailouts, handouts, and steal-outs. They don’t care about you and me or anyone. I hope the NSA is reading this communiqué and that they pass it on to Obama.

We are in deep trouble, and the least of it is using IMF currency as a substitute for US currency. A single currency won’t work anyhow. We need to restore the dollar if we want to have a US economy. This isn’t an argument. It’s real. Plus the Fed is in the middle of creating another bubble, this time with its cockamamie Treasuries. Okay, that’s all I have for today, which should be quite enough.

Deze link is spot on.
http://www.moneyandmarket(...)sses-spreading-32910

quote:

Op vrijdag 3 april 2009 07:04 schreef Lyrebird het volgende:
Wat betekent dit in dagjesmensen taal?

Ben nog bezig met dit topic.....



Hoe komt GS opeens aan 30 triljoen aan uitstaande derivaten ?!? En ja nu zijn ze ook too big to fail .

[ Bericht 1% gewijzigd door Drugshond op 03-04-2009 07:22:16 ]

Is Goldman Sachs Running a Derivatives Casino?
November 25,2008

State-owned enterprises such as Shenzhen Shennan Circuit Co.(SCC) and Air China have recently suffered big losses in international derivatives trading, focusing investor attention on derivatives market and structural options. The situation is frightening investors by reviving the ghosts from the CAO (China Aviation Oil) incident of 2005.

Three years after CAO ran up $550 million in losses in derivatives speculation in oil prices, domestic companies such as SCC have become the target of J. Aron & Company, a wholly owned subsidiary of Goldman Sachs. Now losses from a "small probability event" are spreading and spreading.

Let us look at the contract between SCC and J. Aron & Company.

The contract is valid is from March 3, 2008, to December 31, 2008. When the floating price of oil is higher than $63.5/barrel, SCC will receive a monthly income of $300,000 (200,000 barrels × $1.5/barrel). When the floating price is lower than the $63.5/barrel but above $62/barrel, SCC will have the proceeds of ( floating price - $62/barrel) × 200,000 barrels per month. When the floating price is below $ 62/barrel, SCC has to pay ($62/barrel - the floating price) × 400,000 barrels.

The contract was signed on March 12, 2008, and its code is 165723967102.11. On that day, the futures price index for light crude oil on the New York Mercantile Exchange closed at $106.81/barrel. In light of the situation at that time, the risk of the contract seemed very slim, most insiders believing it was not likely the futures price of crude oil would fall below $62/barrel before Dec. 31.

By March this year, the price of oil had risen to over $100/barrel. Forecasting oil prices became the focus of industry insiders. Goldman Sachs, which before had accurately forecast that oil would reach $95/barrel by the end of 2007, predicted that month that the average price of crude oil would continue to rise to $141/barrel in 2008. The oil price hitting $147/barrel in July made Goldman Sachs

Look positively magical in it prescience.

At the time SCC signed its contract, insiders said that $100/barrel had opened a new era and that the days of cheap oil were gone forever.

And that agreement looked like cash on the barrelhead---as long as by the end of this year oil price didn’t fall below $62/barrel, SSC was set to rake in the cash. At the time, "oil falling below $62/barrel" seemed a microscopically "small probability event."

Though really, not so much cash. Regardless of how high oil prices might soar above $63.5/barrel, the maximum monthly earning for SSC is only $300,000. However, if oil prices fall below $62/barrel, losses can mount up quickly and almost without end. It’s a trader’s nightmare—a position with a limited upside and an unlimited downside. Positing that, by the end of this year, oil falls to $40/barrel, SSC will be paying out $8.8 million per month. The total net profit of SSC in 2007 was just over $17 million.

This contract is designed to be similar to a game in casino. The market maker pays for losses due to “great probability events,” and usually costs are modest; the market player must cover losses due to “small probability events,” and these can be massive. When the market maker faces many players, the odds of “great probability events” against “small probability events” and the ratio of compensation will favor the market maker.

Moreover, when the market maker has a certain impact on the bet, it is the least conducive to players.

In this oil price gamble, Goldman Sachs has played at least three roles------predictor, speculator and gambler. The research center of Goldman Sachs plays the role of predictor, Goldman's fund plays the role of speculator, and J. Aron & Company plays the role of gambler.

Since July this year, turning points of commodity prices such as crude oil have occurred. Goldman Sachs issued a forecast, greatly surprising the global market, that oil prices may drop to $40/barrel. Oil is currently trading at over $53/barrel, but it has been below $50/barrel and could well drop to $40 or even less. It should be noted that Goldman Sachs fund has played an important role in the ups and downs of the oil price, and, with companies such as Morgan Stanley, has been referred to as one of the large organizations influencing the futures price of oil.

It is reported that the marketing team of J. Aron & Company also contacted a number of domestic companies, which have the same demand for hedging risk as SSC.

J. Aron & Company is not always the winner in these gambles, but it can control the risk according to the design of "small probability event and great earnings," and if it plays well only a few times, it can reap great profits. It is clear that with the support of its parent company, which has strong “research ability” and “ability to participate in the market," it is not so difficult for “small probability events” to occur. However, under this “business model,” Chinese enterprises, only beginners in international financial markets, are doomed to pay expensive fees to learn the ropes.

The designer of derivatives in Goldman Sachs is perhaps a casino master. In this gamble of oil prices, it seems that one Chinese firm hit the tables at Vegas and left without his shirt.
==================================
Owke..... GS is dus aan het gokken. Nieuwe grote speler in derivaten land. En neemt aardig wat risico als percentage van zijn eigen kapitaal.

Bloomberg

Converted to Banks

The notional amount of derivatives rose 14 percent to $24.5 trillion as Goldman Sachs and Morgan Stanley, both of New York, were included in the report for the first time after converting to banks in September.

The top five banks were New York’s JPMorgan Chase & Co.; Bank of America Corp. of Charlotte, North Carolina; New York- based Citigroup Inc., Goldman Sachs, and London-based HSBC Corp. Wachovia Corp. of Charlotte, was pushed out of the top five by Goldman Sachs.

The five banks accounted for 96 percent of the $200 trillion in derivatives contracts held by U.S. banks, according to the OCC report.

Goldman Sachs

Goldman Sachs had revenue of $40 million in the fourth quarter from cash and derivative trading, OCC said. That compares with a $1.79 billion loss at JPMorgan, a $2 billion decline at Bank of America and Citibank’s $4.49 billion shortfall. HSBC lost $1.46 billion in the quarter.

JPMorgan remained the largest user of derivatives among its competitors, with $87.4 trillion in notional value, more than Bank of America and Citibank combined. Goldman Sachs held $30.2 trillion in derivatives at the end of the fourth quarter, OCC said.

The OCC reports shows the comparable size of the privately traded over-the-counter market and what is traded on regulated U.S. exchanges. About 97 percent of JPMorgan’s trading in the fourth quarter occurred in the over-the-counter market, with Bank of America at 94 percent and Citigroup at 98 percent.

Behind Insurer’s Crisis, Blind Eye to a Web of Risk

Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.

Is Goldman Tempting the Interest Rate Black Swan with 1056% Risk Exposure ?

Yep, Goldman Sachs (GS)... Looks like Blankfein's minions went from a TCE/RBC ratio of 4% to 1,056% in the span of one quarter! In fact, Goldman is so enamored with Interest Rate Swaps that it has almost the same notional outstanding as Bank of America (BAC), and more than Citigroup (C).

The thing to note, is that unlike both Citi and BofA, which actually are real consumer banks with a depositor base, Goldman is a consumer bank only in name (when is the last time you deposited your cash in a Goldman retail branch?). Consequently, BOA and C have total assets of $1.5 trillion and $1.2 trillion, both more than 10x the assets of GS, which is at $162 billion (and this excludes the incremental assets at the Bank Holding Company level for both BOA and C).

Has Goldman, in its pursuit to catch up with the imaginary PIMROCK decided to chew off a little more than its assets would allow? 1,056% more in fact? Or, alternatively, has the company bet a little too much in its bet that it can easily anticipate interest rate moves?

As pointed out, over $160 trillion in Interest Rate contracts exist currently. What the credit crunch taught us is that the risk management of credit derivatives was woefully inadequate in a time when credit was flowing freely and the system was nice and liquid. After the bubble burst, certain entities (wink wink AIG) ended up having to commit capital to a sizable amount, more than half at times, of the total notional of derivatives the company had underwritten - a scenario previously never thought possible. And the massive reduction in global CDS notional outstanding over the past year and a half (from over $60 trillion to under $30 trillion today) has been a direct result of financial companies realizing they did not provision well enough for the "black swan" day, and thus rushing to unwind as much of these ticking time bombs as they could.

In the meantime, the interest rate black swan is growing. Do not misunderstand us: Zero Hedge has no idea what, if any, a black swan in Interest Rates may be. It is - by definition - an unexpected, unpredictable, outlier, aka fat-tail, event. Its prediction would immediately render it a grey swan at best, if not beige. However, instead of focusing so much on CDS as the financial system bogeyman, is it not time to look at some of these other derivative instruments that may soon plague the Basel I/II and whatever other risk consortia appear in the future.

At $200 trillion in total derivatives, and $160+ trillion plus concentrated in Interest Rates, a fat tail event here, whether due to a paradigm shift in US monetary policy (that whole thing about Greenspan focusing on inflation instead of deflation now might raise a few eyebrows), or something totally different, even partial needs to satisfy these contracts will result in staggering and unmanageable repercussions to the global economy (tangentially, is it even physically possible to print $200 trillion in one year?)

Of course, as everything is smooth sailing in IR Swaps for now, I doubt anyone will even think about potential issues in this space... until it is too late.

quote:

Op vrijdag 3 april 2009 07:52 schreef edwinh het volgende:
ze gaan fungeren als bad bank heb ik het idee, ik heb nog geen tijd gehad om alles door te nemen, maar dat is het eerste wat in me opschiet.

wederom weer goodstuff Drugshond

Mijn gok is dat ze zichzelf helemaal hebben vastgespijkerd op eventuele toekomstige renteverhogingen.
M.a.w. niks deflatie.... bij (hyper)inflatie gaan ze dik cashen.

Fenix from the flames noem ik zoiets.

quote:

Op zaterdag 4 april 2009 02:54 schreef Dinosaur_Sr het volgende:

[..]

dan zou Goldman Sachs na de actie van Obama en co (monetairy easing, waardoor de rente als een baksteen zakte) de afgelopen weken nu technisch falliet moeten zijn

Het feit dat ze contracten in de boeken hebben staan, wil niet zeggen dat ze ook echt exposure hebben. Kan zijn dat ze alleen als doorgeefluik fungeren? Ze geven een bond uit, en swappen dat naar een andere rente. Of een swap in en uit, back to back.

Vanzelfsprekend hebben ze door de hoeveelheid derivaten een hoop meer counterparty risk dan anderen (en degenen die swaps met Goldman aangaan dus ook), maar het feit dat ze veel van dit spul in de boeken hebben staan wil nog niet perse zeggen dat ze een speculatieve positie hebben ingenomen. Voor hetzelfde geld (en dat lijkt me waarschijnlijker) zijn het neutrale posities.

Goeie....

ff een side artikel die eigenlijk een eigen topic verdient maar wellicht hier meer voedingsbodem vindt/

JPMorgan Chase, Goldman Sachs, Citibank, Wells Fargo and More Than 1,800 Other Institutions Believed to Be at Risk of Failure Based on Fourth Quarter 2008 Data

New Data Topic of Audio Press Briefing

JUPITER, Fla.--(BUSINESS WIRE)--Several of the nation’s largest banks, including JPMorgan Chase, Goldman Sachs, Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, plus more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts, according to Martin D. Weiss, Ph.D., president of Weiss Research, Inc., an independent research firm.

The analysis is based on Fourth Quarter 2008 data from TheStreet.Com and the Comptroller of the Currency (OCC). Several large institutions received significant ratings downgrades from the prior quarter, including Citibank, downgraded from C- to D; Wells Fargo, downgraded from C- to D+; and SunTrust Bank, downgraded from C- to D+.

_{In addition, Dr. Weiss will provide updated commentary of his white paper issued on March 19. Titled “Dangerous Unintended Consequences: How Banking Bailouts, Buyouts and Nationalizations Can Only Prolong America’s Second Great Depression and Weaken Any Subsequent Recovery,” the white paper names U.S. banks and thrifts believed to be at risk of failure, using that data to demonstrate that the U.S. government greatly underestimates the scope of the debt crisis, while overestimating its ability to effectively save troubled institutions without severe adverse consequences.}

The debt crisis is much greater than the government has reported, according to the white paper. The FDIC’s “Problem List” of troubled banks includes 252 institutions with assets of $159 billion. The updated review by Weiss Research, however, shows that 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.

Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular — JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank — taking especially large risks.

At year end 2008, Bank of America’s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank’s was 278 percent; JPMorgan Chase’s, 382 percent; and HSBC America’s, 550 percent, according to the Comptroller of the Currency (OCC). In addition, in the fourth quarter, Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital. Although the banking authorities have not defined how much exposure is considered excessive, Weiss believes that, as a rule, bank exposure to any single risk category should be limited to 25 percent of capital. Goldman Sachs has exceeded that limit by a factor of 42 to 1.

“Equally alarming,” writes Dr. Weiss, “is the fourth quarter OCC data demonstrating that record bank losses are spreading to interest-rate derivatives. Until now, bank derivatives losses have been limited almost exclusively to credit defaults swaps (CDS), which represent only 7.8 percent of the notional value U.S. derivatives held by all U.S. banks. In the fourth quarter, although the CDS losses continued at a near-record pace, we also witnessed record losses in the interest-rate sector, which represents 82 percent of the derivatives market: The nation’s banks lost $3.4 billion in interest-rate derivatives, or more than seven times their worst previous quarterly loss in this category.”

Dr. Weiss continues, “In the face of such enormous risks and losses it’s entirely unreasonable to expect the U.S. Government to offset them without unacceptable damage to its own credit, credibility and borrowing power.” !!!! W000t !!!!

Dr. Weiss points to early signs that the credit of the U.S. Treasury may already be suffering some damage in the wake of government bailout programs such as the $700 billion Troubled Asset Relief Program (TARP), the Federal Reserve’s recent $1.15 trillion commitment to purchase bonds, and the $1 trillion Private-Public Investment Program (PPIP). For example, the cost of credit default swaps traded by international investors to insure against a future default by the U.S. Treasury recently surged to 14 times its 2007 level; while, more recently, the price of the 30-year Treasury bonds has fallen by 24 points.

“The ‘too-big-to-fail’ doctrine has failed,” concludes Weiss. In its place, he recommends the following steps to build a firmer foundation for a future recovery:

Abandon the unrealistic goal of saving all failing financial institutions, focusing instead on the goal of rebuilding the economy’s foundation in preparation for an eventual recovery.

Pro-actively downsize or shut down the weakest institutions no matter how large they may be; provide opportunities for borderline institutions to rehabilitate themselves under a strict regulatory regime; and give well-capitalized, liquid and prudently-managed institutions better opportunities to gain market share.

Seriously consider breaking up the weak megabanks, following the model of the Ma Bell breakup in 1984.

Build confidence in the banking system with better disclosure and transparency, including the public release of the confidential official ratings on all banks called CAMELS (Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk).

Switch priorities from the battles we can’t win to the war we can’t afford to lose, such as emergency assistance for the millions most severely victimized by a depression.
================
M.a.w. de banken willen eigenlijk niet dat de rente koste wat het kost laag blijft, en nemen hierop enorme risico's. Wie gijzelt nu wie... is de betere vraag ? Als de inflatie eraan komt mag de FED het verschil gaan bijbetalen. Dit is een nog subtielere bailout dan het PIPP program.

[ Bericht 0% gewijzigd door Drugshond op 11-04-2009 14:18:24 ]

quote:

Op zaterdag 11 april 2009 19:05 schreef edwinh het volgende:
intressting

http://www.moneyandmarket(...)king-white-paper.pdf

Executive Summary lezen zegt feitenlijk al genoeg over het hele stuk

Nice one.