How Goldman Posted a Profitable Quarter: They “Skipped” December

[KILLER_CLOWN]

How Goldman Posted a Profitable Quarter: They “Skipped” December

Washington’s Blog
Thursday, April 16, 2009

Nouriel Roubini wrote in March that Goldman Sachs was insolvent:

So for the Treasury to hide behind the “systemic risk” excuse to fork out another $30 billion to AIG is a polite way to say that without such a bailout (and another half-dozen government bailout programs such as TAF, TSLF, PDCF, TARP, TALF and a program that allowed $170 billion of additional debt borrowing by banks and other broker-dealers, with a full government guarantee), Goldman Sachs and every other broker-dealer and major U.S. bank would already be fully insolvent today.

Yet Goldman reported a $1.7 billion dollar profit for last quarter.

How did Goldman do it?

Well, as Floyd Norris - chief financial correspondent for the New York Times - explains, Goldman simply didn’t report results for December 2008, a month in which it took huge write-downs.

Its easy to look profitable when you can cook the books . . .

http://www.washingtonsblog.com/2009/04/how-goldman-posted-profitable-quarter.html

[jjjayb]

http://www.chiefsplanet.com/BB/showthread.php?t=205835

[orange]

Goldman posts $1.7 billion profit, plans $5 billion offer
Mon Apr 13, 2009 7:25pm
More Business & Investing News... By Dan Wilchins

NEW YORK (Reuters) - Goldman Sachs Group Inc (GS.N) posted higher-than-expected first-quarter profit as it took more trading risk and said it planned to raise $5 billion of common shares to help pay back government funds.

The bank also said it lost $1 billion in December 2008, mainly due to trading and investment losses.

http://www.reuters.com/article/businessNews/idUSTRE53C5G120090413?feedType=RSS&feedName=businessNews&rpc=35

What an amazing bit of sleuthing - finding information "hidden" right there in the second paragraph.

[Hydrae]

Goldman posts $1.7 billion profit, plans $5 billion offer
Mon Apr 13, 2009 7:25pm
More Business & Investing News... By Dan Wilchins

NEW YORK (Reuters) - Goldman Sachs Group Inc (GS.N) posted higher-than-expected first-quarter profit as it took more trading risk and said it planned to raise $5 billion of common shares to help pay back government funds.

The bank also said it lost $1 billion in December 2008, mainly due to trading and investment losses.

http://www.reuters.com/article/businessNews/idUSTRE53C5G120090413?feedType=RSS&feedName=businessNews&rpc=35

What an amazing bit of sleuthing - finding information "hidden" right there in the second paragraph.

Wait a second. I have not followed all of this crap very closely but I could have sworn I heard just this morning on the radio that the CEO for Goldman has said they want to pay the government back but we won't accept it. So do they have the money to pay us back or do they need to do some manuevering to come up with it down the road? Which side of the mouth is speaking today?

[Amnorix]

Goldman Sachs</ORG> wants to repay <MONEY>$10B</MONEY> to the TARP to free itself from restrictions as to how it pays its employees and for other reasons, but the government is focused on stabilizing the financial system and there are plenty of problematic banks, reports the <ORG>Wall Street Journal's</ORG> "Heard on the Street". If Goldman repays now, it will reemphasize how many other banks are in trouble, and so Goldman may have to cool their heels. Regardless, Goldman can still raise new capital, something most banks can't even come close to.

.

[Amnorix]

How did Goldman do it?

Well, as Floyd Norris - chief financial correspondent for the New York Times - explains, Goldman simply didn’t report results for December 2008, a month in which it took huge write-downs.

Its easy to look profitable when you can cook the books . . .

http://www.washingtonsblog.com/2009/04/how-goldman-posted-profitable-quarter.html


Thsi is fundamentally incorrect. Goldman fully reported December -- which was a complete disaster.

It was REQUIRED to change to a fiscal year end reporting system when it switched to a bank holding company, however. That's federal regulations, I understand.

The very profitable quarter ended 3-27-09 was for a full quarter.

Nothing was cooked, and nothing was hidden.

[KC native]

Thsi is fundamentally incorrect. Goldman fully reported December -- which was a complete disaster.

It was REQUIRED to change to a fiscal year end reporting system when it switched to a bank holding company, however. That's federal regulations, I understand.

The very profitable quarter ended 3-27-09 was for a full quarter.

Nothing was cooked, and nothing was hidden.

No it wasn't hidden but it damn sure wasn't disclosed properly. The way these earnings were put forth to the public reeks. They had a kitchen sink December where they took a huge amount of write downs and then conveniently change their fiscal year so that December was orphaned. They should have announced what the results would have been if December was included. This is unethical and an attempt to juice the equity markets higher so they can sell shares and pay the government back so they can continue on with their market manipulating ways. If you think what they did or how the business media (CNBC etc) reported it was in any way appropriate then I'd like to talk to you about an investment opportunity in a huge bridge.

Edit: They were required to change their fiscal year but they knew this well in advance. They definitely used that to their advantage to play accounting games.

How to Puff Up Earnings, Goldman Sachs Style
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By Barry Ritholtz - April 14th, 2009, 8:07AM

Leave it to the clever boys at Goldman Sachs to turn dross into gold: They have come up with a way to hide massive losses so clever, it requires special comment: The Orphan Month.

Yesterday, we noted that the bulk of their profits had come from AIG transfer payments — the theft from taxpayers AIG 100% payouts funded via bailout monies that saw Goldie as one of the largest recipients. Floyd Norris notes that most of the AIG effect was in December. “For the first quarter, the total A.I.G. effect on earnings was, in round numbers, zero.”

How is it possible that this occurred? Isn’t GS on a December to February calendar? Well, there is a small asterisk about that. It seems that GS is moving from a December to a quarterly calendar. Meaning their latest Q is January thru March.

But what of December, with all t he AIG monies and the comparison to the strong December 2007 and all?

In a word, Orphaned:

Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s news release, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ending in February.

The orphan month featured — surprise — lots of writeoffs. The pre-tax loss was $1.3 billion, and the after-tax loss was $780 million.

Would the firm have had a profit if it stuck to its old calendar, and had to include December and exclude March?

Truly astounding . . . the word Chutzpah simply does not do it justice . . .

[Amnorix]

No it wasn't hidden but it damn sure wasn't disclosed properly. The way these earnings were put forth to the public reeks. They had a kitchen sink December where they took a huge amount of write downs and then conveniently change their fiscal year so that December was orphaned.

Did you read what I said. Goldman was FORCED by federal regulations to change to a fiscal year end reporting company by bank holding laws.

And it is extremely common for public companies to aggregate their bad numbers into one period if they can. The thinking is to generate one big stinker and then emerge "cleaner". Is it a perfect system? No, but it's common and not impermissible as long as it's allowed by GAAP.

They should have announced what the results would have been if December was included.

You're operating under the extremely foolish assumption that analysts can't calculate this for themselves. It's extremely easy.

I already saw a report that including December would reduce the quarterly earning per share number from $3 whatever to $1.21 per share or so, which wasn't terribly far off analysts' estimates.

This is unethical and an attempt to juice the equity markets higher so they can sell shares and pay the government back so they can continue on with their market manipulating ways. If you think what they did or how the business media (CNBC etc) reported it was in any way appropriate then I'd like to talk to you about an investment opportunity in a huge bridge.

I'm not interested in your bridge, and they didn't nothing inappropriate. Stub periods aren't THAT frickin' unusual. They disclosed December. Nothing about it was hidden. There's no SEC rule or any other rule that requires them to report a four month QUARTER!

Edit: They were required to change their fiscal year but they knew this well in advance. They definitely used that to their advantage to play accounting games.

Yes. They probably took advantage of what they knew would be a bad stub period and took all available write downs, etc. that they could in accordance with GAAP. It's very common to try to combine your bad news and shed it all at once.

As long as they're in accordance with GAAP and SEC disclosure requirements and all banking regulations, they're playing with the rules.

[KC native]

Did you read what I said. Goldman was FORCED by federal regulations to change to a fiscal year end reporting company by bank holding laws.

And it is extremely common for public companies to aggregate their bad numbers into one period if they can. The thinking is to generate one big stinker and then emerge "cleaner". Is it a perfect system? No, but it's common and not impermissible as long as it's allowed by GAAP.



You're operating under the extremely foolish assumption that analysts can't calculate this for themselves. It's extremely easy.

I already saw a report that including December would reduce the quarterly earning per share number from $3 whatever to $1.21 per share or so, which wasn't terribly far off analysts' estimates.



I'm not interested in your bridge, and they didn't nothing inappropriate. Stub periods aren't THAT frickin' unusual. They disclosed December. Nothing about it was hidden. There's no SEC rule or any other rule that requires them to report a four month QUARTER!



Yes. They probably took advantage of what they knew would be a bad stub period and took all available write downs, etc. that they could in accordance with GAAP. It's very common to try to combine your bad news and shed it all at once.

As long as they're in accordance with GAAP and SEC disclosure requirements and all banking regulations, they're playing with the rules.

Yes, they did play within the rules but the rules are part of the problem. Beyond that, GS has been playing accounting games since 06-07 as well as tons of other unethical sh*t (like selling CDO's to clients and then turning around and shorting them in the market). This one instance while technically within the rules is still evidence of a pattern of unethical behavior from this company. I'm tired so I'm not going to dig up all of the sh*t against GS but for the way this was presented, executed, and reported all reeks. They may not have violated the letter of the laws wrt GAAP however they have definitely violated the spirit of GAAP. BTW I'm very familiar with GAAP (a necessity of the CFA curriculum which I'm studying for) and GAAP can be manipulated. In addition, there is a lot of leeway in applying various standards that cover financial firms and trust me GS has taken all the liberties they can with GAAP.

[Amnorix]

Yes, they did play within the rules but the rules are part of the problem. Beyond that, GS has been playing accounting games since 06-07 as well as tons of other unethical sh*t (like selling CDO's to clients and then turning around and shorting them in the market). This one instance while technically within the rules is still evidence of a pattern of unethical behavior from this company. I'm tired so I'm not going to dig up all of the sh*t against GS but for the way this was presented, executed, and reported all reeks. They may not have violated the letter of the laws wrt GAAP however they have definitely violated the spirit of GAAP. BTW I'm very familiar with GAAP (a necessity of the CFA curriculum which I'm studying for) and GAAP can be manipulated. In addition, there is a lot of leeway in applying various standards that cover financial firms and trust me GS has taken all the liberties they can with GAAP.

I've dealt heavily in securities law and SEC compliance matters. I'm perfectly aware of the fact that GAAP isn't just a bunch of hard and fast rules.