Goldman cutting workforce by 10% is a bad omen

Excerpt:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a52GAAq9aOSc&refer=home

GLG’s Roman, NYU’s Roubini Predict Hedge Fund Failures, Panic

By Tom Cahill and Alexis Xydias

Oct. 23 (Bloomberg) — Hedge funds closures will eliminate about 30 percent of the industry, and policy makers may need to shut markets for a week or more to stem panic, according to presentations at an investor conference today in London.

“In a fairly Darwinian manner, many hedge funds will simply disappear,” Emmanuel Roman, co-chief executive officer at GLG Partners Inc., told the Hedge 2008 conference in London today. U.S. regulators will “find a way to force regulation,” said Roman, 45, who runs New York-based GLG with Noam Gottesman, 47. The firm was founded 13 years ago as a unit of Lehman Brothers Holdings Inc. and now manages about $24 billion in assets.

Nouriel Roubini, the New York University Professor who spoke at the same conference, said hundreds of hedge funds will fail as the crisis forces investors to dump assets. “We’ve reached a situation of sheer panic,” said Roubini, who predicted the financial crisis in 2006. “Don’t be surprised if policy makers need to close down markets for a week or two in coming days.”


Goldman has a proven track record of being the ‘smartest’ one within its peers. I do agree they are by far the best informed bank out there, with the strongest infrastructure of information gathering. Goldman has been so far one of the most agressive banks by cutting staff so far although (or because) they are the most sucessful one. The fact that they even speed up the process is a bad omen for the times to come and it’s interesting to see where they cut. It’s said the cuts come in prime brokerage, that’s the division serving Hedge Funds. Although they have lost big competition in that field with Bear Stearns and Lehman, they want to shrink the department. Today GLG and Prof. Roubini have said hundreds of Hedge Funds will fail near by.

The move of GS does confirm that prospect. Hedge Funds have disappointed since they were sold as a hedge against bad markets within portfolios which seems not to work as promised – although also regulatory reasons like the ban of short sales might have generated part of those issues.

Excerpt:

http://www.cnbc.com/id/27333643

Goldman Sachs plans to cut 10 percent of its total staff, or almost 3,300 jobs, a source familiar with the matter said on Thursday.

Goldman Sachs

Goldman Sachs has suffered less than most of its peers from the global financial crisis and remains the leading adviser to mergers and initial public offerings worldwide.

But its transition from an investment bank to a traditional bank holding company means the Federal Reserve will use its new regulatory authority to limit the bank’s risk taking and encourage longer-maturity funding.

 

In June, Goldman laid off hundreds of support staff and junior bankers due to slowing markets following a round of cuts in leveraged lending and mortgage securities jobs in April.

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~ by behindthematrix on October 23, 2008.

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