The latest quarterly earnings results show that Goldman's prop trading is better than that of most other investment banks and better than its hedge fund management (its Global Alpha and other hedge funds have suffered). Can anyone speculate as to why they are so good? I don't think it's just luck, but the quantitative data needed to answer that question is proprietary.

at lunch all the accountants eat with the prop traders

According to me they reached a self-fulfilling status: watch what does it happen when they're giving a buy or sell on stock..... markets follow them! Then they are ahead of every flow, but however they have good minds and moreover they know what is risk, probably better than anyone.. Goldman has a culture of risk inside!!

They have the largest customer base to feast off of

Not sure if their income is driven that much by prop trading. They have some of the biggest clients on their list for flow and that is much much stabler and higher quality (risk adjusted) income than prop trading. In fact, the bigger and more sophisticated banks do considerably less prop than the smaller houses, simply because they do not have to. The smaller fishes have to take more risk, because they do not have the major flows (i work for a small fish). A big client (e.g. more than 200 billion AUM) that trades actively is like a goose that lays golden eggs. No need to take any market risk, when you own such a goose. I personally would happily give up any prop risk limits just to have these clients as a counterparty....

Agreed with Gmike - Goldies reputation as prop house is truly over-hyped. After all, they still had to reserve $1.7bn for fixed income. And there is definitely some feedback - goldies makes a call everyone jumps on-board. In the 1929 crash Goldies was much discredited for investor moeny lost through some very leveraged bets in the stock market. Here is a link to some of the background Goldies

So, is it a fact that most of their profits come from dealing or is it not? I'd say it's not and most of their profits come from prop trading (like in any large investment bank). Feel free to prove me wrong by showing some numbers. As to how they do it, I have a little story, an episode. One time I was talking to a VP in a large bank and he called Goldman "semi-criminal". I still wonder what he meant

Quite frankly I dont think that they have the capital they would have to put up to support the risk required to generate their profits stream from prop trading. The bank is already about 30x levered.

QuoteOriginally posted by: YuraAs to how they do it, I have a little story, an episode. One time I was talking to a VP in a large bank and he called Goldman "semi-criminal". I still wonder what he meant Awww, he's just envious.

QuoteOriginally posted by: daveangelAgreed with Gmike - Goldies reputation as prop house is truly over-hyped. After all, they still had to reserve $1.7bn for fixed income. And there is definitely some feedback - goldies makes a call everyone jumps on-board. In the 1929 crash Goldies was much discredited for investor moeny lost through some very leveraged bets in the stock market. Here is a link to some of the background GoldiesThis is really weird:QuoteAs of the end of the 2005 fiscal year, the Kamehameha Schools' endowment was US$6.8 billion. As of the end of the 2006 fiscal year, the Kamehameha Schools' endowment was US$7.7 billion. Approximately 25% of the Endowment Fund is in real estate and 75% in financial assets. [1] When compared against the endowment funds of major U.S. colleges and universities, the endowments of only five schools (Harvard University, Yale University, Stanford University, Princeton University, and Massachusetts Institute of Technology) exceed that of Kamehameha Schools.And ...QuoteOne of the largest events in the firm's history was its own IPO in 1999. The decision to go public was a tough one that the partners debated for decades. In the end, Goldman decided to offer only a small portion of the company to the public, with some 48% still held by the partnership pool.[7] 22% of the company is held by non-partner employees, and 18% is held by retired Goldman partners and two longtime investors, Sumitomo Bank Ltd. and Hawaii's Kamehameha Activities Assn (the investing arm of Kamehameha Schools). This leaves approximately 12% of the company as being held by the public.

QuoteAfter a brief office-work career which included a stint as a quantitative analyst specialising in index arbitrage at investment bank Goldman Sachs[15], Baron Cohen went back into acting, appearing during 2-minute sketches as his fashion reporter Bruno on The Paramount Comedy Channel during 1998. He shot to fame when his comic character Ali G, an idiotic Junglist, started appearing on The Eleven O'Clock Show on Channel 4, which first went to air September 8, 1998.

Great point - I am sure Goldies today is just like it was 78 years agoQuoteOriginally posted by: daveangelAgreed with Gmike - Goldies reputation as prop house is truly over-hyped. After all, they still had to reserve $1.7bn for fixed income. And there is definitely some feedback - goldies makes a call everyone jumps on-board. In the 1929 crash Goldies was much discredited for investor moeny lost through some very leveraged bets in the stock market. Here is a link to some of the background Goldies