An article this morning by Izabella Kaminska at ft.com/Alphaville points out that Goldman Sachs (NYSE:GS), who did so well trading on their own account in the first quarter, has a dismal record in 2010 on advice given to clients. Goldman had positive results for all 63 trading days in Q1/2010. Clients are mostly losing money.
Kaminska quotes Bloomberg:
May 19 (Bloomberg) — Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse.
Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who followed the New York-based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday.
Kaminska suggests that the difference in results derives from the advice being about investing, whereas the proprietary book is about "making money from market-making and flow volume." In other words, Goldman is not investing its own money.
Kaminska uses some very polite words. In view of the fact that Goldman never loses, why not use the terms "skimming" and "front running"? Goldman may object to such terms, preferring to say they are being compensated for intermediation and providing liquidity to the markets.
I'll stick with my suspicions about what the best description of their activity is.
Disclosure: No position.