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Monday, July 13, 2009 1:48 PM

Goldman Sachs: The Canada connection

David Berman

When Goldman Sachs Group Inc. reports its second quarter financial results on Tuesday, will investors apply the results to Canadian banks? Mark McQueen , president and chief executive of Wellington Financial, will.

Analysts estimate that Goldman Sachs – the recipient of government financial aid in 2008, now since repaid – will report an amazing $2-billion (U.S.) in earnings during the quarter, due partly to trading revenues.

“It is difficult to ascertain whether or nor Goldman has dramatically increased the risk tolerance on their trading desk, but one thing is for sure – the universe is a happy place for anyone who trades commodities, currency or fixed income products,” Mr. McQueen said on his blog.

That’s because there is a lot of volatility in these products, and the bigger the volatility the wider the trading “spreads” between the asking price and the bidding price – where so-called market makers like Goldman Sachs earn a lot of money.

What’s interesting here is that the areas where Goldman Sachs specializes is also the areas where Canadian banks also specialize. So if Goldman Sachs producers stunning earnings on Tuesday, chances are Canadian banks will do okay as well.

“The Goldman quarter may well serve as a harbinger of what’s to come for the Canadian Chartered banks this October,” he said.

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Markets Blog Contributors

David Berman

David Berman

David Berman has been writing about business and investing since 1995. He began his career at Canadian Business magazine, where he wrote full-length features on a range of topics, from goose slaughterers to broadcasters. Later, he moved to MoneySense magazine, where his emphasis turned to investing. More recently, he worked at the Financial Post as an investing writer and daily columnist. He has a bachelor of arts degree from the University of Toronto and studied journalism at Ryerson University.

 

David Parkinson

David Parkinson has been covering business and financial markets since 1990, and has been with The Globe and Mail since 2000. A Calgary native, he received a Southam Fellowship from the University of Toronto in 1999-2000, studying international political economics.

 
Globe and Mail Reporter Simon Avery.

Simon Avery

Simon Avery has covered telecom and technology for the Globe since 2004. Previously, he was a staff reporter for The Associated Press in Los Angeles and for The Wall Street Journal in San Francisco. He covered the boom and bust in Silicon Valley for the Financial Post between 1998 and 2001. Mr. Avery holds a Master's degree in journalism from Columbia University and a Bachelor of Arts in English and political science from the University of Western Ontario.