Goldman Sachs: look past the ping pong Forget Tuesday's beating of muddle-headed analyst estimates. Try to ignore, too, the recent history of giant squids and South African ping-pong ninjas. How well, exactly, is Goldman Sachs performing half a decade on from the financial crisis? To be sure graduates still fall over themselves to work there; pay for the first half of 2012 averaged nearly $250,000 per employee. But is it a good time for outside investors to own Goldman stock? The bank's share price is back in double digits, having been above $150 in early 2011. In fact, in spite of rising a bit this year, Goldman's shares have behaved exactly how many might have expected given an industry under attack from all sides, falling 25 per cent, 30 per cent and 50 per cent respectively over one, three and five years. That is much worse than more diversified peers such as JPMorgan and much, much worse than the broader index. That sounds excessive until remembering that back in 2007 Goldman made $11.5bn in net income. In the first six months of this year, by contrast, it earned an annualised net income of just $6bn. Quite a difference. Yet overall staff numbers are roughly the same, even though pay and benefits have fallen by about a quarter. So compared with the good old days there must be lots of people running around the corridors of Goldman trying to look busy while looking forward to smaller bonuses. It is hard to imagine management allowing this situation to last long. Indeed Goldman said on Tuesday there would be further cost cutting. Such tinkering is not to be sniffed at. Cut a further $1bn off annual pay (less than 10 per cent worth) and the bank's return on equity jumps from 8.8 per cent to about 12 per cent. Who knows? One day it may be better to own Goldman than to work for it.