Ackman on Goldman - Risk CONTROL

During a recent television appearance, IMMENSELY successful shortseller Bill Ackman, manager of the $1.6 Billion Pershing Square Capital hedge fund, acknowledged why he believes Goldman Sachs (GS) has been able to outperform its financial peers (Merrill Lynch -MER, Lehman Brothers - LEH, Citigroup - C, Bank of America - BAC, the artist formerly known as Bear Sterns, etc.) during the current credit crisis.

According to Ackman, Goldman Sachs has been able to outperform because of its Proprietary method of RISK CONTROL.

As he put it, Goldman Sachs CEO Lloyd Blankfein requires that company traders uniquely mark-to-market their assets on a nearly DAILY basis. If a manager is unable to price one of his illiquid assets then he is instructed to "sell 10% of the position" and use that price.

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Perhaps more significant than the subject of Ackman's actual acknowledgement (I had already believed Goldman was the best 'Risk Controller' in town as evidenced by their relative lack of subprime-related asset writedowns), is the SOURCE himself - BILL ACKMAN.

*As noted above, Bill Ackman has been one of the most successful shortselling traders on Wall Street the past couple of years - chiefly benefiting from the IMMENSE amount of financial institution (banking, insurance, etc.) failures exposed by subprime + the Popping of the U.S. housing bubble. Nobody knows and studies financial institutions + their risk control practices better and more THOROUGHLY than Ackman. Don't believe me? Check out the below January 31st, 2008 article from Bloomberg titled "Ackman devoured 140,000 pages Challenging MBIA Rating" (MBI is down 86% year over year):

http://www.bloomberg.com/apps/news?pid=20601109&sid=a7.NpGwa19TY&refer=home

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Random
Thought
Of
Brilliance

With Ackman's $IGNIFICANT blessing, looks like GS's risk control practices should be viewed as the NEW STANDARD and until its peers catch up....GS remains the SAFEST, CHEAPEST and BEST way to play U.S. financials.

Data Courtesy: CNBC.
Full Disclosure: I own shares of GS.