Lending money to Goldman Sachs?

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LovingLife
Posts: 35
Joined: Mon Apr 23, 2018 10:31 pm

Lending money to Goldman Sachs?

Post by LovingLife » Sat Aug 18, 2018 12:48 am

Anyone participate in their online broker-offered callable rate offerings by various big banks? I’ve gotten several recently, including a callable step-up one from GS that pays 3% for a couple of years and then 4% for another couple. I realize that there’s risks to ponder (illiquidity, ability to get called, etc) and diligence will need to be done on where in the debt stack these notes will reside before any investment can be seriously considered. However, I’m curious if anyone on here has participated in such offerings before and what your experience was like. Also, did your online broker attempt to charge a commission to place the investment?

Valuethinker
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Joined: Fri May 11, 2007 11:07 am

Re: Lending money to Goldman Sachs?

Post by Valuethinker » Sat Aug 18, 2018 5:25 am

Callable

In rising interest rate environment why would you do this?

Why don't you just buy a bond issued by Goldman Sachs?

b42
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Joined: Thu Apr 11, 2013 7:00 pm

Re: Lending money to Goldman Sachs?

Post by b42 » Sat Aug 18, 2018 8:12 am

If the rate of return you receive is only 3% for a few years, there are some 3 year CDs approaching 3% that would be almost as much income without all of the hassles of a broker-offered callable security.

LovingLife
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Joined: Mon Apr 23, 2018 10:31 pm

Re: Lending money to Goldman Sachs?

Post by LovingLife » Sun Aug 19, 2018 4:04 pm

Valuethinker wrote:
Sat Aug 18, 2018 5:25 am
Callable

In rising interest rate environment why would you do this?

Why don't you just buy a bond issued by Goldman Sachs?
It might depend on the seniority of this paper vs a regular GS bond, for example. If this is more senior, one might be willing to accept a lower yield than on a traditional bond that is already junior to revolver and other bank debt, for example. So, has anyone bought broker-offered debt issues recently from big banks? Curious what you were charged and other features of the paper.

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Rob5TCP
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Re: Lending money to Goldman Sachs?

Post by Rob5TCP » Sun Aug 19, 2018 4:42 pm

A review of this (from a few years ago)
You shoulder all the risks. Should, for any reason rates should start to decline;
yours will be recalled. If they stay the same or continue to rise; this will act
as any other CD (except there is no redemption option, I believe these have
to be sold on the secondary market).

https://www.bestcashcow.com/goldman-sac ... up-cd.html

"A depositor needs to understand that Goldman Sachs Bank will call the CD in two years in interest rates remain low. However, it is very possible that CD rates could return over the next 6 to 24 months to levels where a 5 year CD is paying 5 to 6%. Were that to happen, you would be earning a rate that is substantially below market and have your money tied up for a significant length of time. Basically, the CD produces a “heads I will, tails you lose” type of outcome."

jminv
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Re: Lending money to Goldman Sachs?

Post by jminv » Sun Aug 19, 2018 4:55 pm

You can get a 3 year cd for 3.1%. Interests rates are on the uptrend. A callable rate offering with these features isn’t all that interesting in light of that. The callable feature is asymmetric too - if rates drop and they want to refinance that’s fine and your note is called but if you’d like to move your money into something that yields more you can’t.

LovingLife
Posts: 35
Joined: Mon Apr 23, 2018 10:31 pm

Re: Lending money to Goldman Sachs?

Post by LovingLife » Sun Aug 19, 2018 5:12 pm

Rob5TCP wrote:
Sun Aug 19, 2018 4:42 pm
A review of this (from a few years ago)
You shoulder all the risks. Should, for any reason rates should start to decline;
yours will be recalled. If they stay the same or continue to rise; this will act
as any other CD (except there is no redemption option, I believe these have
to be sold on the secondary market).

https://www.bestcashcow.com/goldman-sac ... up-cd.html

"A depositor needs to understand that Goldman Sachs Bank will call the CD in two years in interest rates remain low. However, it is very possible that CD rates could return over the next 6 to 24 months to levels where a 5 year CD is paying 5 to 6%. Were that to happen, you would be earning a rate that is substantially below market and have your money tied up for a significant length of time. Basically, the CD produces a “heads I will, tails you lose” type of outcome."
Thanks - the deal I’m referring to is somewhat different than the one in the link - and I am aware of the “heads I win, tails you lose” aspect of it - but since the current deal is much shorter than 7 years (or whatever term was in that CD in the link), the risk is somewhat lower. To be clear, I’m not saying I’m planning to do this or am even interested in doing it. I’m mostly interested in what fees get paid to your broker or the issuer so I can do a market analysis (even if anecdotal) of possible net returns.

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