Combating Goldman Sachsophobia: Two resources for making Vampire Squid Calamari

Hiss...

In 2010 Rolling Stone's Matt Taibbi infamously referred to Goldman Sachs as a Vampire Squid, a term that has since then become something of an overused meme (even Taibbi has expressed ambivalence about it). He's but one individual who's tapped into disturbing imagery to describe Goldman though: For example, the other day I picked up Money and Power: How Goldman Sachs came to Rule the World by Steven Cohan, repleat with a golden snake on the cover, poised to strike. The sentiment was echoed by Alesio Rastani, the trader who upset everyone by saying Goldman rules the world.

I have no doubt that Goldman is a powerful company, and yes, they've been involved in some corrupt-as-hell deals (check out Senator Carl Levin's scathing report about them), but I sometimes suspect that the public hype around the company merely helps to reinforce it's existing self-image - presented in sanitised form in their graduate recruitment videos - as a repository for society's 'best & brightest' destined for  ubermensch greatness. Let's face it though: The average Goldman employee is statistically more likely to be a meek PhD student than a bad-ass Gordon Gekko, or for that matter, a balls-to-the-wall Richard Branson. When I ask "what kind of person aspires to work for Goldman", I see someone who seeks acceptance by the winning team. Would underdog  rogues like Chuck Norris apply for their graduate recruitment programme? Hell no!

Resource 1: What does Goldman Sachs do? An epic pearltree organisational chart
In the interests of breaking down some of the mystique around the Vampire Squid though, I made the following Pearltree diagram (Click on the title to open in a new tab):

It's not rocket science - I just went through their website and put all the pieces in order. Click on any division to expand it and see what they get up to. Over time I'm going to add more information to this, and do it for other banks too, so I'll keep you posted on that. Their securities division is the most important division in the firm, with their investment banking, investment management and 'investing and lending' (direct investing) divisions coming in tie after that. I'd say the 'investing and lending' section is worth more investigation - it's now reputed to be a source of undercover proprietary trading activities. I've included something called the 'nerve centre', which is all the departments (such as treasury and IT) that normally get overlooked, but that make the whole edifice work. Ping me a message if you think anything else should be on there.

Resource 2: Who's wants to watch Blankfein dance!

For anyone with an hour & a half to spare, I've created a Goldman Sachs video list on Youtube called, Goldman Sachs: A List of Diverse Opinions. It includes the CNBC documentary Power & Peril, which is pretty decent if you're looking for something substantial, but if you're looking for some shorter pieces, I comissioned a music video by a new band called Government Sachs, entitled Me and my Bitches. Of all the theories as to Goldman's success - superhuman talent, witchcraft etc - I think the strongest theory concerns its immense lobbying power, and the accompanying internal culture that encourages their people to seek positions of power later in life. The subtle dynamics of this process are brought out in this exchange between James Altucher and Jim Cramer (starting at around 1:20). Whatever the case, I'm going to join David Attenborough in continuing to observe the actions of the vampire squid (vampyroteuthis). If you have any insights on how to understand it's behaviour, or any other interesting videos, please do comment. Cheers

New Fund: RHB-GS US Equity Fund

Yet, another US fund is in town now. More and more new fund is focusing on the US market, given its relatively attractive valuations currently after the 2008 global financial crisis. If you want to invest in US market, you may consider this fund which is managed by the US "tai-ko" - Goldman Sachs.

The fund's objective is to seek to achieve long-term capital appreciation through investment in a collective investment scheme, which invests primarily in securities of United States of America companies. This a feeder fund, where 95% of the fund's NAV will feed into the Goldman Sachs US Equity Portfolio (Target Fund).

Information of the Target Fund

The Target Fund is a portfolio of Goldman Sachs Funds, a public limited company qualifying as an investment company organized with variable share capital, in which Goldman Sachs Asset Management International is the investment manager of the fund. The Target Fund is domiciled in Luxembourg and denominated in USD and regulated by Luxembourg Supervisory Authority.

Why is this fund different from other funds?

1. The Best of both worlds. A portfolio that balances the best ideas of Growth and Value to provide US market exposure without style bias.
2. A disciplined investment process. The Goldman Sach's Investment Committee constructs a US large cap portfolio thoroughly researched companies that exhibit quality characteristics and compelling valuations.
3. A proven history. The portfolio draws on the best ideas of the US Growth and US Value Teams with proven track records going back 30 and 11 years, respectively.

Source: Prospectus

As at 31 March 2011 (Goldman Sachs Asset Management)

As at 31 March 2011 (Goldman Sachs Asset Management)

Source: RHB Investment Management

Click here to download prospectus

Goldman Sachs: Creating and Profiting from US subprime crisis?

Warning: This article is very complicated, and, DO NOT read if you aren’t a curios person…

The story:
Goldman                 = Goldman Sach
I                              = Hedge Funds
You                         = Investors
Apples                     = CDOs
Bet                          = Credit default swap
Hal ehwal Pengguna = US Securities and Exchange Commission (SEC)

Goldman sells you a packet of good and bad apples. You buy a packet hoping that the apples are good and can share with your friends later. Then, I placed a bet with Goldman that those apples are bad one. Before this, I actually is the one who had hand-picked the apples, then sold to Goldman, before Goldman sold it to you. Finally, the apples unfortunately come out as bad ones, can’t eat either.

Who is the victim?
You

Who is the gainer?
I (Hedge Fund)

Who is Goldman then?
The intermediate person, who is pretending do not know anything. And, successfully provides his “good” service to both parties.

What is the news now?
Hal ehwal Pengguna is suing Goldman for his wrong-doings.

Last week, US Securities and Exchange Commission (SEC) lodged civil charges against world’s leading investment bank, Goldman Sachs & Co. for performing a complex deal.

Goldman is being charged for not adequately informed buyers that another client helped select the securities linked to the investment, with the goal of profiting if their value tanked. However, Goldman denies that it did anything wrong as an intermediary only.

The securities linked to the investment are called “Synthetic CDO”, which can be explained as follows:

Wikipedia: “A synthetic CDO is a collateralized debt obligation (CDO) in which the underlying credit exposures are taken on using a credit default swap rather than by having a vehicle buy physical assets. They generate income selling insurance against bond defaults in the form of credit default swaps, typically on a pool of 100 or more companies. Sellers of credit default swaps receive regular payments from the buyers, which are usually banks or hedge funds.”

In short, synthetic CDO is a portfolio of credit default swaps, which is a form of insurance on a bond or other obligation.

Some more, Warren Buffet said Goldman Sachs is one of the finest banks in the world.

I did my best to tell the story, are you clear now?