Get Close to your Friends....and even Closer to your Enemies

Pity poor Goldman Sachs. They forgot the cardinal rule-"don't put it in writing if it might bite you in the ass".

Going through the reports of the Senate Hearings it's clear that Goldman had no concerns that outsiders would ever rifle through their internal communications.

We have Mr Blankfein sending memos asking "are we doing enough to sell off cats and dogs in the books", and then explaining that "cats and dogs" means "miscellaneous stuff...aged inventory...part of the discipline of our business is to manage risk and sell inventory".

All good stuff, until you compare it with an email sent by the Co-Head of Fixed Income Sales Stacey Bash-Polley that Sales should focus on clients that can do "size" given the "size of the risk we could move".

Reminds me of the remark a Goldman trader once said to a client of mine-"your size is my size". This was an institutional house that didn't like to play in odd-lots, and as the market grew the size of their positions grew accordingly.

Goldman never did anything which wasn't in their interest. One year they would top the league tables for corporate debt, and the next year they would barely make the top ten. They had determined that there was no longer an opportunity to make "real" money in corporates, but they would be #1 in another area. And so it went.

The problem was that in order to really understand what they were doing you had to do business with them. The problem with that was that it was like holding the mouth of an alligator shut-sooner or later you would get tired, and then you were toast.

But I only single out Goldman because they were the best. Just compare Mr Blankfein's knowledge of the risk positions held by Goldman with the whinging denials of just about anything by Messrs Prince and Rubin of Citi; by Mr Fuld of Lehman; or by Mr Oneal of Merrill.

They are good at what they do, even if they have no moral compass.