Earnings season is upon us again, and one of the most momentous of these reports came from Goldman Sachs, which announced its earnings had dropped a whopping 52 percent. Since Goldman is the biggest investment-banking firm still standing, it's worth taking a closer look at why their earnings have plunged so far, and what it might mean for the larger economy.
Although people often think of Goldman Sachs as an investment bank, the bulk of its profits in recent years have come from fixed-income, currency and commodities trading. Goldman's profit from stock-trading activities slipped by 5 percent and investment-banking revenues fell by 10 percent, but those three other trading desks - known collectively as FICC - were off by 48 percent. The European debt crisis depressed the market for bond buyers, and Goldman's CEO blamed uncertainty about the economic recovery for investors' reluctance to buy more securities.
At any rate, the concerns seem to be either temporary or isolated to Goldman and other investment banks. In the 1950s, people used to say that what was good for General Motors was good for America, but Goldman Sachs' problems don't seem to fall in that category.
No comments:
Post a Comment