Goldman v. Deutsche

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Goldman v. Deutsche

Postby dtcochrane » Wed Mar 24, 2010 4:50 pm

Howdy CasPers!

I've just written a review of Capital as Power and for the review I wanted a demonstrative graph to illustrate the usefulness and importance of a differential perspective. I decided to examine Goldman Sachs over the course of the so-called 'crisis.' Although almost all observers of capitalist political economy know how GS has fared positively, despite this supposedly being a crisis of finance, I make the claim that such analysis from political economists is without meaning if not informed by a coherent theory of value. In the process of examining Goldman Sachs, I compared it to the German financial giant Deutsche Bank AG. The result is below:

GS-DB.JPG
GS-DB.JPG (83.65 KiB) Viewed 1342 times


The figure shows two things: Goldman and Deutsche relative to the S&P 500 Index. That's the top of the graph. The adjusted share price [1] for both firms was divided by the S&P 500 and then indexed (May 1999 = 100). The bottom of the graph is a comparison of the two firm's market capitalization (equity only). It's the bottom graph that I find particularly stunning as it shows that the two financial Leviathans were basically the same size (ratio of one) from 1999 until August of 2006, with some fluctuation. Then, after a great deal of volatility, Goldman has emerged at roughly twice as large.

I'm hardly prepared to tell the qualitative tale to align with this quantitative picture, but I wanted to share.


[1] Adjusted for dividends and splits.
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Re: Goldman v. Deutsche

Postby joefrancis » Sun Mar 28, 2010 4:03 am

Hey Troy,

A few thoughts:

(1) What are you going to say when they ask: "But so what? This is all just price movements and fictitious capital and doesn't has anything to do with the real nature of capitalist power, which is all about what happens in the workplace."

(2) That's a very neat way of calculating market capitalisation. One question: What does 'adjusted for dividends and splits' mean? Does this take into account new share issues? That would be the only major problem I can think of with the methodology.

(3) Regarding the graph, I like the lower line a lot. It would be even better if you could find some other series that you could correlate it with: the ratio between the fiscal stimulus given by the US and German governments?

(4) I'm not so sure about the upper lines. I had to think about them quite a lot and then they made my head hurt. You're asking the reader to make a lot of comparisons simultaneously: between Goldman Sachs and the S&P500; between Deutsche Bank and the S&P500 hundred; then finally between Goldman Sachs and the S&P500 and Deutsche Bank and the S&P500 hundred. It all gets very confusing! You basically want to compare (I think) the performance of Goldman Sachs and Deutsche Bank, so why bring the S&P500 into it at all? Again, I think the lower part does a much better job, although it would be good if you could correlate it with something.

Anyhow, those were my thoughts. Hope you're well, J
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