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Goldman Sachs (GS) cut its holdings of Italian sovereign debt by 92% in Q2, according to its...

Goldman Sachs (GS) cut its holdings of Italian sovereign debt by 92% in Q2, according to its 10-Q, with credit-derivative positions actaully giving the firm a near-$1B short exposure. Caveat emptor - as Goldman was getting short, the sales team was busy recommending Italian paper to clients.
Comments (9)
  • losbronces
    , contributor
    Comments (776) | Send Message
     
    And you are surprised that they were recommending the position they were actively shorting? Business as usual at Goldman Sachs.
    9 Aug 2012, 01:33 PM Reply Like
  • wigit5
    , contributor
    Comments (4206) | Send Message
     
    Yup lawsuits pending...
    9 Aug 2012, 01:34 PM Reply Like
  • schatzl
    , contributor
    Comments (391) | Send Message
     
    Ha ha hilarious. Trust GS to bet against their clients or public recommendations. They have become the best contrarian bet out there.
    9 Aug 2012, 01:40 PM Reply Like
  • Lares Capital
    , contributor
    Comments (436) | Send Message
     
    With all due respect, their "clients" are probably hedge-funds. The article says GS is buying CDS on Italian debt from their non-Europe domiciled counter-parties (Cayman Islands would be my best guess).

     

    It's fashionable to trash Goldman but their clients are not exactly unsophisticated individual investors.
    9 Aug 2012, 02:07 PM Reply Like
  • wigit5
    , contributor
    Comments (4206) | Send Message
     
    So because their 'clients' are sophisticated it makes it okay (in any flavor) to sell Italian debt on their balance sheets and push their clients towards it?

     

    or am I looking at this wrong?
    9 Aug 2012, 02:19 PM Reply Like
  • Lares Capital
    , contributor
    Comments (436) | Send Message
     
    That's exactly correct and they are not their clients but counter-parties to the trade.

     

    In a trade like this, by definition, you "bet" against your counter-party. Just like your insurance company "bets" that you will not die next year when selling your family life insurance on your life.

     

    This trade is a two-side bet and both parties understand that it's a zero-sum game: one has to lose for the other to win and both parties perfectly understand that.
    9 Aug 2012, 02:28 PM Reply Like
  • schatzl
    , contributor
    Comments (391) | Send Message
     
    All fine and dandy, but then I don't make public recommendations against which I then actively bet. Whatever way you look at it, it makes them look disingenuous and unscrupulous in the least. And yes it is fashionable, because they have a very long record in such behaviour. Why anyone would try to defend them is beyond me.
    9 Aug 2012, 02:48 PM Reply Like
  • Snoopy1
    , contributor
    Comments (1116) | Send Message
     
    But if the GS sales desk was telling clients that the GS analysts were recommending the debt and GS was betting against it, that is a clear conflict of interest. The salesman/analyst is actively lying to the client saying it's a good investment while GS obviously does not think so.

     

    GS is not just shorting debt with a random counterparty, but is actively telling clients to buy that same debt while GS expects it to drop in value.

     

    Do you see the difference? If not, you're probably a "muppet".

     

    (disclosure: long GS at $97.50)
    9 Aug 2012, 11:52 PM Reply Like
  • WMARKW
    , contributor
    Comments (10672) | Send Message
     
    > Igor. Not "unsophisticated"? That's a gross generalization. Their clients run the spectrum from un-sophisticated to very sophisticated. I suspect their prior dealings with CDS and, was it Norway, were not equal party negotiations. The fact of the matter is that GS, regardless of the sophistication of it's clients, can use those relationships to off load their own junk anytime they feel like it. GS is a whore and will do anything to make a buck. Caveat Emptor is especially applicable with GS.
    9 Aug 2012, 03:16 PM Reply Like
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