Four billion dollars is a lot of money, even when you're Goldman Sachs (NYSE:GS). An article in The Wall Street Journal today pegged Goldman's windfall from betting against the mortgage market at roughly that $4 billion mark for its 2007 fiscal year.
Now, $4 billion isn't chump change under any circumstances, but the number is particularly impressive given that many Wall Street firms have been chalking up losses in the $4 billion -- or greater -- range. As the Journal noted, Morgan Stanley (NYSE:MS) and Deutsche Bank (NYSE:DB), which correctly identified the potential for the market to fall, missed the mark because they didn't hang on long enough. Merrill Lynch (NYSE:MER) and Citigroup (NYSE:C) both lost CEOs in the melee, while Bear Stearns (NYSE:BSC) watched a couple of its hedge funds go down the toilet.
The question we're left with is whether Goldman really is populated with an army of mutant traders who are so smart they will forever make others look silly (which I've suggested in the past) or if the firm just happened to flip heads here when everyone else came up tails. Surely the answer is somewhere buried in between the two. The article suggests that the culture at Goldman may have a hand in its success.
While cowboy culture -- where top traders are allowed to take outsized risks -- reigns supreme at many financial institutions, it's rare that individuals are highlighted at Goldman. While this may not suit some type-A personalities, it seems to be working for Goldman and should help the firm avoid disasters that can be brought on by a single overconfident trader (insert Amaranth meltdown comment here).
On Tuesday, Goldman will announce its fourth-quarter and year-end results. Should its numbers be as impressive as investors are expecting, the market will likely shrug them off with a grin and an "I knew it." The firm will then be put back on the chopping block as Mr. Market, never satisfied with the past, says, "Now what can you do for me in 2008?"
More financial Foolishness:
- Feelin' All Right at Lehman
- The Impending Destruction of the U.S. Economy: Part 1
- The Next Black Monday
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