The DJ’s Spinning Gold, Man

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What's going on?

Goldman Sachs reported second-quarter results on Tuesday that knocked the socks off investors’ expectations – and announced that it’s getting a new CEO. But the party atmosphere was killed somewhat by its stock falling by 1%.

What does this mean?

Goldman crushed expectations, growing its profit by 40% from this time last year. This was thanks in part to its investment banking division – which advises companies on mergers and acquisitions and helps them sell their stocks and bonds to investors – outdoing itself and bringing in 18% more moolah. This helped offset Goldman’s weaker-than-expected sales growth in its trading businesses – an area where competitor JPMorgan was making hay as investors bought and sold stocks there.

Why should I care?

For markets: You gotta trade to win.

The fall in Goldman’s shares was perhaps because the bank didn’t take as much advantage of the booming trading environment as some of its peers did. Goldman’s weakness was JPMorgan’s strength, which means there was business to be done – it just wasn’t being done at Goldman. Goldman’s stock is down some 9% so far this year, trailing behind both of the Morgans (JP and Stanley) and Bank of America – all of which have reaped more from trading.

The bigger picture: There’s a new sheriff / DJ in town.

After 12 years at the top (and 36 at the bank in total), Goldman’s faithful CEO is going to be replaced with a newer model: a banker by day and DJ by night (tweet this). As the previous CEO’s been there so long, a change-up could well spark a new direction for the bank – like a turn to consumer-facing business (e.g. personal bank accounts and credit cards). This isn’t in Goldman’s current box of tricks, so it could be an expensive endeavor with a long wait for it to bring home the bacon.

Originally posted as part of the Finimize daily email.

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