"Goldman Sachs further shrinks commodities trading"

We have so many posts on Goldman in the commodities biz that it is almost hard to pick one or two as representative. Former chairman and CEO Lloyd Blankfein came up on the commodities side and it was during his tenure as president and chief operating officer, before becoming CEO, that the big banks started selling "commodities as an asset class" which didn't work out so well for CalPERS and the other institutional investors who bought into the pitch but was hugely profitable for Goldman and made Blankfein a billionaire.

As they used to say, the firm made money Lloyd made money and two out of three ain't bad.

From Reuters, March 7:

Goldman Sachs Group Inc , once one of the most active banks in commodities trading, has cut 10 roles to further downsize its global commodities trading division amid rising costs and shrinking profits.

Three sources familiar with the matter said on Thursday the cuts were announced this week following an annual review of headcount across all divisions and regions. Goldman Sachs declined to comment.

The commodities trading business was once one of Goldman’s largest, most active units and a significant driver of profits earned by the Wall Street bank until tighter regulation curbed the risks it could take on proprietary bets. 

Cuts were accelerated as competition with trading houses and oil majors increased and as profits shrank...

...MORE

Goldman really got going in commodities with the purchase of J. Aron where Blankfein started as a precious metals salesman. From October 2012:
"The J. Aron Takeover of Goldman Sachs" (GS)

"When Blankfein asked about his title, a boss at J. Aron said,

 'You can call yourself contessa if you want.'"
-Fortune, January, 2006

—One of my favorite Goldman quotes.

From DealBook:

When Goldman Sachs bought the commodities broker J. Aron & Company in 1981, the cultures clashed.

For years, Goldman bankers treated their new colleagues with little respect, and J. Aron staff members were even forced to ride in a separate elevator bank.

Now, J. Aron alumni control the elevator to the executive suite. In the latest sign, Goldman Sachs announced last month that one of them, Harvey M. Schwartz, will be succeeding David A. Viniar as chief financial officer....

Among Goldman's innovations was allowing their institutional clients to evade exchange position limits and CFTC reporting requirements as large speculators by entering into swaps with the bank and using its designation as a commercial hedger.

Of course, since the whole commodities-as-an-asset-class was presented in the form of private long-only index funds—"You need exposure to the entire class"—Goldman Sachs was taking the opposite side of the "exposure".

Combined with another innovation, the Goldman Sachs Commodities Index, heavily weighted toward oil and we had this series of headlines as oil made its spring-of-2008 run to $147.27, July 11 "on the way to $200" before collapsing to $33.87, Dec. 21, 2008

June 16, 2008: Goldman, Morgan Stanley Profits Conceal Reliance on Commodities
June 25, 2008: Which Former Goldman Sachs Chairman Should We Listen to on Oil Market Speculators?
August 19, 2008: Goldman’s Oil Thesis: Timing is Everything

 October 2, 2008: Commodities: $50 bln in 'long-only funds' flees commods markets. And: Calpers says staying the course on commodities

October 7, 2008: Goldman: We Got Our Shorts On, Oil not Going to $200.00
October 27, 2008: The Goldman Commodities U-turn, again
November 20, 2008: It’s official, Goldman capitulates on oil
December 2, 2008: Oil speculation: It's back
December 12, 2008: Goldman Cuts Oil Forecast to $45 (vs original $200) Sees Bottom
June 5, 2009: Are Goldman's Oil Swaps Clients Piling Back Into Oil?

Good times.

As an outro, here's DealBreaker with a snippet of a 2009 Der Spiegel interview with Mr. B:
"Only The Salt Of The Earth Work For Goldman Sachs":

...Blankfein: I think we all know that greed can drive behavior, but it tends to be short term and ultimately destructive. Our leadership team stands out because most of our people have built their whole career at the firm and stayed through many years and many changes in the market. When our people leave they tend to go on to other positions -- whether in government or other forms of public service -- that no one would do if their were motives were financial. Those characteristics don't make me think of "greed."

SPIEGEL: So only modest, good people work for Goldman Sachs? We hardly believe that....MORE