[Vanity]

Goldman adds caution to risk appetite

Hey guys, here's an update to let you guys get a clue of where the big-boys are standing in the game relative to us.

Goldman Sachs’ daily value at risk – a measure of the trading risk assumed by the Wall Street bank – fell to the lowest level since before the financial crisis, surprising analysts and prompting questions over whether the bank is quietly tweaking the way it does business ahead of new rules and regulation.

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VaR attempts to gauge how much the bank could stand to lose from its vast inventory of assets over a certain time period and at a certain confidence level. The measure reached notoriety during the financial crisis when it proved disastrously poor at forecasting extreme losses at big banks.

Goldman Sachs Value at Risk per annum:
2007-2008 = ~$158 Million, reduced risk exposure on it's portfolio before the crisis hit.
2009 = $218 Million, took on ~40% more risk appetite as we rebounded sharply upwards in 09.

Q1 2011 = $113 Million, before the Eurozone crisis
Q4 2011 = $135 Million, when markets bottomed, GS put more money
to work riding the wave up. About an additional 20% more of
their portfolio relative to year-start.

So where is Goldman putting it's money to work now?

Q1 2012 = $95 Million. That's $40 Million down from $135 Million, or about a depreciation of 30%. That's right. Goldman has just taken out 30% of their portfolio and in the VaR you can see this risk decreasing by 30% from 135M last quarter to 95M this quarter. Risk appetite at GS is at a 5-year low. Risk-assumed is even lower than just before the Financial Crisis of 08'

The lower VaR “points to less risk-taking in the first quarter,

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some speculate that the lower VaR could indicate that Goldman is positioning for another rough year in markets. In the third quarter of last year – just before the eurozone debt crisis went into overdrive – the bank suggested to investors and analysts that it was already “de-risking.”

"When I see Goldman Sachs pull back risk that much that quickly, I get a little anxious about what could be around the corner because they’re typically pretty good at predicting that,” said Mr Schorr of Nomura.

This would make sense as for most of Q1, GS had been on the media convincing everyone to be invested in risk-equities. They need to sell their stocks to someone, right? Pass the bag along. Then in Q2 Goldman's official outlook turned bearish, citing expectations of the SP500 finishing around 1250 by year-end, instead of SPX 1500+ in Q1.

Now, this is my own opinion, I think the 4.5% sell-off we had in AAPL the other day was indication of the big-pros pulling out. Think about it, how much money has to leave AAPL for it to sell-off 4.5% when the markets were having an UP day? -4.5% is huge.

Food for thought.