Goldman Sachs Grp. (NYSE: GS) reported net profits of $8.20 per share on revenue of $9.62 billion. This blew away the earnings per share number which was expected at $5.20, however, missed the revenue number slightly which had been expected at $9.65 billion. When analyzing these numbers, this is just the start.
The key with Goldman Sachs that will worry Wall Street and should truly bother Main Street is that not only did Goldman Sachs not beat revenues which means their earnings beat was due to cost cutting, but, two-thirds of their revenue was derived from trading! That is correct, they made over $6 billion just from trading. Why is that shocking? Well as we know, trading can be up and down. Normal people lose some and win some. Even a great trader has a lousy trade here and there. Granted, Goldman Sachs is way above a great trader, they have computer programs to push the markets in certain directions, buy program abilities and connections to the government that other companies only dream of.
Why should Main Street be worried? Again, because two-thirds of their revenue came from computer trading programs and Goldman Sachs traders. Main Street needs to be assured these trading programs and traders are not manipulating, bullying the markets and pushing the markets in a direction on purpose to take the “little persons” money. If Goldman Sachs is paying billions in bonuses, whether in stock or profits, Main Street needs to know their trading profits are not out of the wallets of hard working Americans getting “played”. Transfer of wealth from the small to the big is not the answer to a recovering economy just a divergence between rich and poor.
This applies to all other major Wall Street firms as well, though Goldman Sachs is by far the biggest gorilla in the room. JP Morgan Chase & Co. (NYSE: JPM), Morgan Stanley (NYSE: MS), Wells Fargo & Co. (NYSE: WFC) and Bank Of America Cp. (NYSE: BAC) are others. Watch carefully the proposals by President Obama on excessive risk taking.
Commentary From A Concerned Chief Market Strategist.
Gareth Soloway
Chief Market Strategist