Party may be over for investment banks

[Judi Lynn]

Party may be over for investment banks
Analysts are slashing estimates for brokerage firms. The best days for the industry may be over, for now.
By Shaheen Pasha, CNNMoney.com staff writer
September 6 2006: 6:17 AM EDT

NEW YORK (CNNMoney.com) -- Sluggish stock trading and a slowdown in merger activity are expected to take a bite out of third-quarter earnings at some of the nation's top investment banks.

Earnings season is just around the corner for major players like Goldman Sachs (Charts), Lehman Brothers (Charts) and Bear Stearns (Charts), which are all slated to report their fiscal third-quarter results next week. But Wall Street is already bracing itself for some disappointments with analysts slashing estimates for some of the banks.

And some on Wall Street expect that whatever positive sentiment investors had for the sector could fizzle, sending the firm's stocks sharply lower.

While there's little surprise that the industry is experiencing some slowdown in the summer months (they're not called the summer doldrums for nothing), analysts fear that the latest quarter could start a prolonged downturn in earnings for the banks after an unusually strong period of equity underwriting and growth in the capital markets.
(snip/...)

http://money.cnn.com/2006/09/06/news/companies/brokerage_stocks/index.htm?cnn=yes

[Virginia Dare]

1. What a shame...

that will really put a hurting on the champagne and caviar business :nopity:

[Bake]

2. Boo frickin' hoo!

Bunch of overpaid prima donnas anyway. They don't actually PRODUCE anything (I think that may be a quote from the 80s flick "Wall Street"). They need to come down a notch or five. "Masters of the Universe" my ass!

Bake

[sui generis]

4. color me prima donna

it's childish to paint with such a broad brush.

Many companies have one or two great producing profit centers and huge drag cost centers and would ordinarily go under without an infusion of money. Money goes into those kinds of companies on the prediction that they can be combined with similar lines of business to build a "turnaround" that cuts off the dead weight, and in turn stimulates new ideas in the market as mid-level competitors evolve or die.

Some times even some of that "dead weight" simply isn't getting enough money to diversify or subsidize its own growth, so other companies pick up their intellectual property and scientists before they get buried.

It's not all about greedy sucking stereotypes. If a taco stand is going under because it can't pay for marketing, and twenty people get together to buy half the taco stand's profits in exchange for marketing money and paying of the taco stand's creditors, and that taco stand makes 10 or 15 times as much money after the cash infusion, instead of going belly up, IT'S NOT GREED.

What should they "produce" anyway? Are you implying that unless you're screwing together bicycles on a factory line or raising hogs for slaughter you're a useless human?

That's the way the world works. Plus, some of the wealthiest people in the world are some of the most liberal and generous with their money and foundations.

[Bake]

5. I've got an MBA in finance, so skip the lecture

Yes, I well realize that investment banking serves a useful purpose and that while the investment banker may not produce anything, he/she often makes it possible for others to produce. My lack of sympathy for the Goldman Sachs and Lehmans of the world stems from the abuses which they have foisted on the rest of us, such as IPOs where the "good stuff" goes to the insiders' cronies, or the financing of acquisitions where the sole intent is to rape the company's pension fund and divest assets ("dead weight" as you call it). They may as well be the poster children for everything that's wrong with corporate America: myopic focus on this quarter's earnings and to hell with the long term. I'm not lumping you in with that bunch, but I would suggest that if you cannot clean your own house, the market will do it for you eventually.

And calling me "childish" doesn't inspire any greater sympathy on my part for the "industry."

Bake

[sui generis]

6. childish, meet prima donna

please ta meetcha. Sorry for the lecture, your MBA in Finance wasn't in your profile and is reasonably uncommon, and even less common to find someone so degreed making your original statement. Said in humor :P I was however using "childish" in the general sense, rather than specifically, to clarify.

I haven't told you what I think of MBA's in general either, and as a prima donna it is well within my purview to do so at great length, sparing no effort at lecture, and I am unanimous in this, but I wouldn't want to lump you in with "that bunch" either. There are exceptions to every generalization though, and most people with that level of education do tend to be on the opportunistic side, I'll agree.

Yes, ultimately, we rely on the market to clean house. Or Darwin, whichever happens first.

There is no doubt that there are crooks and phenomenally self-centered people and organizations out there who do nothing but try to think of novel ways to separate people from their money, and a crook is a crook with or without a degree to justify it.

But you also know the market is complex then, and not just producer oriented, else the fed would be controlling manufacturing orders instead of interest rates.

[Bake]

7. I'm a lawyer now, so I don't have much room to talk ...

As we have more than our own share of monstrous egos, etc. I've always respected your posts and would never call you a "prima donna." But you've got to admit, there are some p.d.'s in your business as well as in mine. That whole "masters of the universe" thing really set me off.

Peace,

Bake

[sui generis]

8. hah

There certainly are - I'm probably a little more than half p.d. myself, but at this point it's just an adopted work-related survival mechanism more than an inborn character defect. I do have to leave the p.d. at work though or else I'll be accused of something far far worse at home: being "high maintenance". By another prima donna. So we can't take ourselves too seriously.

Leave it to family (and sometimes DU) to bring us back to earth.

Yes, there are some incredibly insensitive people in this business, and while it is not necessarily full of sociopaths, it is full of people who are disconnected from the street and from the lives of real people, and even more so full of people to whom image is absolutely everything; who think substance should rarely intrude in a conversation when name dropping will suffice, and un-earned pedigree makes one person superior over another, all other qualifications being equal. They extend that false sense of superiority to insulate any fleeting guilt they may have about slash & burn headcout tactics, or about overtly playing market games in the dark gray area of business ethics.

The few who are very highly principled profit only marginally less actually, but there is a class of human that thinks that being in this industry requires unfettered ruthlessness and aggression and serial unpleasantness. They're addicted to adrenaline, and will make a grand production of everything, even taking a piss break.

I guess there have always been shits in every industry, and we both know just about any shit will float if it has a Harvard MBA or a family pedigree with which to dazzle the easily bedazzled. That's not to say that there aren't really good people out there too, but we both know it's more often bad news that makes the news.

Peace

Michael

[Double T]

3. There is NOT much left to merge, thanks to the greedy bastards...........

pigs get fat and hogs get slaughtered. Time to call in the butcher.

[zonkers]

9. So if the market ancx real estate dip, is precious metals where all the

big investor money going to go? Finance stuff mystifies me.