It's Christmas again for financial journalists. Greg Smith, a Goldman executive director, resigned today in a New York Times "opinion" column. He probably didn't hold anything back as he revealed several damaging details about how Goldman Sachs tries to make money at the expense of its clients. According to Greg Smith
, here is how Goldman Sachs screwed its clients:
"a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym."
I wonder what Goldman's "high conviction" stock picks
are right now. I wouldn't want to be the CEO of the company that is about to be included in this list at this moment.
You really have to read this letter. Here are a few other bombs from Greg Smith's confession:
"Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail."
"I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them."
"I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact."
"You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen."
"Goldman Sachs today has become too much about shortcuts and not enough about achievement."