Are Wall Street’s Best Days Over?
In the wake of last year’s bank failures, a giant chunk of the Wall Street pie was left for grabs. But with so many banks scrambling for a piece of it, will most shareholders end up with crumbs?
That’s the growing concern among investors as banks around the world do anything and everything in an attempt to grab market share surrendered by Lehman, Bear Stearns and other now defunct financial firms.
The big worry is that margins are being squeezed – and as a result profits will never be what they were.
On the surface that may seem alarmist, but we have to concede that the landscape is changing rapidly.
Banks are facing cut throat rivals that weren’t really competition a few short years ago. We’re talking boutique firms like Guy Adami favorite Jefferies as well as discount brokers such as TD Ameritrade.
Also trading volumes have dried up lately; if they don’t return it’s a problem for the bottom line.
And the threat of sweeping new regulation continues to loom; that really put a damper on profits – depending upon what’s passed.
According to the Wall Street Journal, investment-banking margins have already fallen a long way since the first half of 2009, when central banks gifted huge profits via steep yield curves and quantitative easing.
Of course we realize there’s another side to the story. Firms such as Goldman Sachs and Morgan Stanley didn't become Street icons because the don't know how to make money - clearly they do.
As Guy Adami often says, there’s probably a group of very smart guys somewhere on Wall Street right now, dreaming up new ways to profit.
Anthony Scaramucci of Skybridge Capital isn’t ready to write-off the Street either.
”The fact that we’re talking about the days being over means there’s probably a renaissance coming,” he says. “I don’t think Wall Street is dead. It will reinvent itself and come back bigger and better.”
Speaking of reinvent, they say necessity is the mother of invention. It’s just a question of whether that’s where you want to put your money.
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Trader disclosure: On March 18th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Stutland Equities Is A Market Maker in (VIX); Stutland Equities Is A Market Maker in (SPX) Futures; Stutland Owns (GS) Call Spread; Stutland Owns (GE); Kelly Is Short (EURUSD); Kelly Is Short (GBPUSD); Kelly Is Short (EZU); Finerman's Firm Is Short (SPY), (IWM), (MDY), (IJR), (SPY), (USO); Finerman's Firm Owns (IYR) Puts; Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm And Finerman Own (GOOG); Finerman's Firm And Finerman Own (JPM); Finerman's Firm And Finerman Own (WFC) Preferre ; Grasso Owns (TSO); Grasso Owns (AAPL)
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