Questioning Goldman

By: PAUL JACKSON
April 14, 2009 10:22 AM CST

We all know by now that Goldman’s Q12009 was, well, golden. But the NY Times’ Floyd Norris has some very pertinent questions, like: where’d December go?

6:50 a.m.| Where’s December?: Goldman Sachs reported a profit of $1.8 billion in the first quarter, and plans to sell $5 billion in stock and get out of the government’s clutches, if it can.

How did it do that? One way was to hide a lot of losses in not-so-plain sight.

Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s earnings statement, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ended in February.

The orphan month featured — surprise — lots of write-offs. The pretax loss was $1.3 billion, and the after-tax loss was $780 million.

Would the firm have had a profit if it had stuck to its old calendar, and had to include December and exclude March?

Very interesting, indeed. Two major financials have reported earnings now (WFC being the other), and both should have some questions over the gymnastics used to arrive at such seemingly sacchrine earnings numbers.