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What value does GS provide in return for those $25MM? My underlying question would be: Are they a symptom of a systemic flaw (basically a parasite) or does the
by moe 17y ago
What value does GS provide in return for those $25MM?
My underlying question would be: Are they a symptom of a systemic flaw (basically a parasite) or does their role in the financial ecosystem somehow justify that kind of profits?
- martythemaniak 17y agoIt should be noted it's $25 million profit per day for 63 days, or $1.575 Billion for the quarter. To put it in perspective, that's not very far from Google's quarterly profit (~1.9B)
- cellis 17y agoYes same stated profit, but they pay half their revenues to their employees. Otherwise their profit would be far higher.
- deleted 17y ago[deleted]
- secret 17y agoTheoretically, they are finding inefficiencies in the market and eliminating them through a better allocation of capital (and of course profiting from the effort).This is the role of any trader/speculator in a market. Some will be right in their analysis, others wrong, and all known information gets reflected in an asset price. Not having a single down day an an entire quarter basically means that at the end of each day the aggregate of their bets were on the winning side. Given the presumed stochastic nature over small time frames of the markets, that's quite a feat. That said, given the other headlines they've made recently,I strongly emphasize the first word of this reply.
- cturner 17y agoA lot of the money they make is on high-speed passive market-making, and they value of this is far tighter spreads on stocks. Compare spreads on the NYSE now to twenty years ago. (Moe, we have to stop meeting like this.)
- paulitex 17y agoLiquidity, mostly. They are 'market makers'. If you're a big {pension, real estate, rrsp}fund and want to make a trade, say a purchase, you need to call your trader directly. The trader will sell you some of their own (if they have it on their books), or will contact other people who they think may have extra supply on your behalf. They are the 'grease of the economy'. In theory, it makes markets run smoother, which leads to greater efficiencies for everyone, and makes the world a better place. (in theory)
- mixmax 17y agoThe thing is that it goes both ways. The liquidity that they provide can just as quickly be pulled back as we saw during the Lehman collapse. I'm not sure it provides value.
- arijo 17y agoSomeone has to create the wealth that supports liquidity.
- cturner 17y agoI think you are suggesting that there's something less worthwhile about wealth made via liquidity creation than other forms of wealth. On that theme - would you say that it is more noble to be a mechanic than programmer, and more noble to be a farmer than a mechanic?
- KonaB 17y agoWhat makes you assume that one's profit / revenue / compensation is a measure of the value one created? There's no central authority accounting for the "value" being created. The whole notion of "value" is itself highly subjective. Personally, I find it distasteful when hedge funds justify their profits by claiming that they make markets more efficient. No, no, no. No one works 100 hours per week to make markets efficient nor to add any value to society. People work in order to make money, because having money is great, and the more money one has, the better it feels. It's legalized looting. It's not what you deserve, it's what you can take for yourself. No excuses, no regrets.