Saturday, May 15, 2010

Goethe on Wall St Proprietary Hyper Trading and circle of profit traceable and owed to PUBLIC customers

The philosopher comes with analysis
And proves it had to be like this:
The first was so, the second so,
And hence the third and fourth was so
And were it not for the first and second here,
Then the third and fourth could never appear.
This is what all the students believe,
But they have never learned to weave.
-- GOETHE, Faust

Four Wall St's banks (Goldman, JP Morgan, BofA, Citigroup) reported PERFECT trading records during the first quarter, an unbroken string of daily trading profits OVER $100 million per DAY on many of the 63 such trading days.

Mr Cohn at Goldman stated after posting these results - The company’s fixed-income, currencies and commodities businesses and equities unit generate those returns by making markets for clients REALLY? rather than betting the firm’s own money, Chief Operating Officer Gary Cohn said yesterday at a financial services conference in New York.

“There is often speculation that proprietary trading revenues drive our outperformance in these businesses,” Cohn said. “Over the last 12 months, we have only recorded 11 loss days. It is implausible that a proprietary-driven business model could be right 96 percent of the time.”

OK Mr Cohn - I'm confused a little - please help - you report record TRADING profits - for and ONLY for customers' desired exposures - so then why not simply break out - riskless agency trades SEPARATE from principal - where firm capital is AT risk - perhaps that will help me and the rest of America and Congress understand - stay tuned sports fans.

Back to Goethe: So Goldman is +$B a fact - undenied.
So - who was on the losing side, if these banks were PERFECT in making money?
Who was Goldman making markets for? Or is it really fully, sometimes or never against public customers - Mr Blankfein?
Or is it more accurately just itself - under its "LTG (long term greedy) rubric"?

How can the public writ large, investors, public customers ascertain fair good quality executions, how can other fiduciaries ensure best execution to their principals, what effects are the derivatives markets subtly or not influenced by soft or hard dollars of trading commissions, directed brokerage among and thru prime brokerage arrangements?

Profits of Proprietary Trading owed to the Public - call in the intellectual support from Mr Stiglitz' Assymmetric Information skews markets. Information advantage is essential in order to make profits on trading, one side has to have SUPERIOR information, control or ability to influence the or a subject or related market(s); AND by definition the less well informed "dumb market order" traders also may not be possessed of similar market control, influence or risk management arbitrage techniques.

Is it any wonder that mutual funds, especially larger ones, have to try to conceal their buy / sell intentions by executing more position trades piecemeal and or thru ECN's and does this enhance the returns to mutual fund shareholders NET of costs of such trading? Or is it just the way it is - defined by only certain market makers? To suit appears ONLY certain narrow purposes.

Ending the BFD (Breach of fiduciary duty) by only certain Wall St entities upon not limited to the US public, Congress, Public and Private Pension plans, 401k plans participants - one little blog at a time.

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