Three factors will keep the cash register ringing for investment banks: 1. Demographics of baby-boomers saving for retirement. 2. The cheaper dollar, meaning that foreign firms will be on a shopping spree for U.S. companies, which will help M&A advisory. 3. Mortgage portfolios that have been marked to market. When liquidity retuns to this market, portfolios of mortgages will start to show profits.
It would seem that Wall Street also hasn't forgotten that it is the second most regulated industry in the U.S. (after nucular energy) and that it needs to keep track of where its bread is buttered. Banks are betting that the butter will be spread by a Democrat in 2009.
On the next pullback, which I think is coming once all the shorts are done covering, I'll be looking to buy the investment banks cheap again. Look out for U.S. firms like Goldman Sachs (GS - $179.63), Lehman (LEH - $48.65), Morgan Stanley (MS - $49.67) and Merill Lynch (MER - $46.71) to continue to do well. I own the investment banks directly, but rather than pick individuals, the Exchange traded fund (IAI - $39.43) works well as a proxy.
Is the Sky Falling? (Continued) Written By: Mark Bershatsky 2008-03-27 11:14:40 In a previous post, I had mentioned how our current financial crisis has rippled across other sectors of the U.S. economy and overseas, sending noticeable shock waves across global financial markets. The critics and "doom and gloomers" are all lined up and waiting to unleash a heavy dose of "I told you so" to investors that will supposedly get burned if they don't allocate their money properly, however I think much of this pessimism is overhyped.
Lehman Brothers Appoints Council on Climate Change Written By: David Neubert 2007-02-28 18:02:30 Lehman Brothers (LEH) said on Wednesday that it has named Theodore Roosevelt IV, a great-grandson of U.S. President Theodore Roosevelt, as chairman of its global council on climate change (source Reuters).
Lehman Creates Council of Climate Change Written By: David Neubert 2007-02-28 18:08:46 My former employer created a council on climate change. This is good business and I'm glad to see them continue to innovate.
Level 3 Assets at Big Brokers - Not as Scary as People Say Written By: David Neubert 2007-12-14 12:08:58 Felix Salmon at Portfolio.com dug up the ratios for level 3 assets at each major Wall Street broker. This ratio is seen by some to be "scary." I don't find it as scary as some. The assets in Level 3 are mark-to-model. Some of these could include complex derivatives for which there is no market that exactly hedges assets, hence the high risk in panic liquidation but not so much in cash flow. Their markets are worried about some of those with the highest ratios of Level 3 assets to capital. Personally, I trust the risk managers at firms like Goldman Sachs (GS - $212.89), Morgan Stanley (MS - $50.88) and Lehman Brother (LEH - $63.03) to be able to correctly value these situations. I do believe the market will continue to focus on this ratio, which will encourage firms to try to move more assets out of this category.
