Reshaping of Wall Street

Mike Santoli on the Reshaping of a newer, smaller Wall Street:

click for Video
Santoli

This is based on the article in this week’s cover story in Barron’s, Future of the Street.

Source:
Future of the Street
MICHAEL SANTOLI
BARRON’S June 30, 2008
http://online.barrons.com/article/SB121460952736112313.html

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  1. Peter commented on Jun 29

    I think he is being too optimistic.

  2. Bob commented on Jun 29

    OK, let me make sure I understand this.

    Wall Street is going through [yet another] [[self-inflicted?]] rough period. But Wall Street’s reaction to this rough period is going to be different than all the others because Wall Street is going to cut jobs and then try to become more profitable.

    Did I miss anything?

  3. Philippe commented on Jun 29

    Nice and comfortable view of an adaptable banking industry finding its measure in relation to the economic growth and environment.
    What it is about trust reputation which is the essence of the banking industry, no denting? No scares?
    Sorry I have never seen such widespread tolerated dishonesty throughout the banking world few articles to remind them.

    U_S_ securities dealers association fines HSBC Brokerage $250,000 for bond violations – International Herald Tribune.htm

    http://www.marketwatch.com/news/story/ubs-fraud-charges-latest-auction-rate/story.aspx?guid=%7B793261F2%2D7BBD%2D4018%2D8713%2DAF0DBF021D5C%7D&dist=news
    HSBC is sued over subprime bond valuation report – MarketWatch.htm

    News Release – HSBC sued over asset-backed commercial paper, subprime Household HSBC Watch.htm
    Charlotte Observer 03-14-2008 BofA, Wachovia, others accused of rigging bids.htm

    There is a confusion when referring to good franchise even when double-checking a dictionary.

  4. BG commented on Jun 29

    I couldn’t get the video piece to play on my PC; but, it really got my attention when the NYSE became a publically held company. That told me that some guys had already figured out that the party was just about over.

    Just remember, Greed rules on Wall Street. If they had thought the champagne would continue to flow (after the Baby Boomers started taking their money out for retirement), they would not have offerred the public one drop.

    In some cases, when an older, established (privately-held) company goes public and its owners choose to exchange their shares for cash, the implication is too great to ignore. For me, the NYSE going public a few years back was one of those watershed events to take notice of.

    I still think my initial reasoning is intact. The bull market we experienced from 1982 – 2000 will never be repeated in our lifetimes. It was one hellva of run; but the fundamentals now and (for years to come) can not legitimately support another multi-decade bull-market run like that.

    You will have to pick your spots going forward. Buy and Hold truly is a dead strategy now.

  5. John_Doe commented on Jun 29

    Let’s talk oil for a sec. The rise in oil is nowhere related to Asian demand BR. Oil had it $70 in the Summer of ’06, then it had fallen gradually to $48 in Jan. ’07. Then that fool of a President announced a doubling of the Strategic Oil Reserves 0n 1/23/07. The price of oil jumped $3 the next day (Wed.), and from there on it has spike parabolically. It is the artificial demad produced by the Admin. or the perception of the increased in demand that has fueled this speculation. Why would he announce this on his Union speech? Either to help his oil buddies who were peeved that the price had fallen almost 50% or because he is a fool and did not realize that such an announcement would cause oil prices to rocket (a la Greenspan Y2K Fed cuts and tech stocks).
    If the gov wanted oil prices to come down then they would shock the oil markets:
    1. The Fed increases rates 50bp (dollar strengthens)
    2. The Admin uses the SRO to flood the market with oil until its prices collapses (appx 1 month process)..
    If you think this has no precedence? Recall Fed Discount rate cut August 2007, surprise cut in Jan 23 2008, etc…

    This will correct the market quickly and be a big boom to the econ. otherwise there will be many more bankruptcies and job losses before the market “self corrects itself”.

    The Sheik with Lots of $$$$$

  6. larster commented on Jun 29

    This piece in Barrons strikes me as more shoddy journalism from Murdoch & Co. I had hoped that Barrons would be left alone but now am realizing that this was wishful thinking. The article was a collection of journalistic pablum. The industry will recover because it always has recovered, Wall Street will reinvent itself, etc. Nowhere did it lay out how this was really going to happen.

    It was also interesting that they had a good analysis of why the rout in Financials was not over in the same edition that they published this crap. Pretty soon we will see the latest topless beauty on page 7.

  7. Barry Ritholtz commented on Jun 29

    I know Santoli for a while, and he never struck me as writer who takes marching orders from anyone.

    I think there is erroneous sense that Murdoch is dictating, influencing — almost writing — all of the articles in various DJ properties. That’s not correct.

    Its pretty obvious that Fox News is a house organ of the GOP — (Why a billionaire wanted to be Karl Rove’s bitch is a conversation for another day) — but I have yet to see proof that the WSJ or Barron’s has been similarly corrupted.

  8. wunsacon commented on Jun 29

    >> The industry will recover because it always has recovered, Wall Street will reinvent itself, etc. Nowhere did it lay out how this was really going to happen.

    Because:
    – Only a fraction of people learn and then correctly apply the lessons of the prior generation.

    – Many people learn the wrong lessons from their own experiences or from current events.

    The silly phrase “time wounds all heals” comes to mind here as appropo.

    >> (Why a billionaire wanted to be Karl Rove’s bitch is a conversation for another day)

    Probably because he sincerely believes in the mission. And, speaking from personal experience, it’s very difficult to change anyone’s mind about anything. Worse, success increases self-confidence. And Murdoch has been very successful while holding his current views. He has little reason to question them.

  9. bitteroldcoot commented on Jun 29

    This struck me as somewhere between wishful thinking and self delusion.

    Wall Street has repeatedly been the source of destructive bubbles and ponzi schemes.

    We know from the great depression (and this sorry episode) that regulation of a basically dishonest endeavor eventually erodes to uselessness.

    If we end up in a depression, rather than recession, business as usual is going to be history. People are angry and are going demand a pound of flesh.

    In the end analysis I don’t thing Wall Street adds any net value to the the USA. Time to outlaw the whole thing.

  10. VennData commented on Jun 29

    Would you buy a single-stock ETF?

    That’s what you do when you use a broker rather than a diverse collection of ETFs; you’re simply giving you money to someone who cannot assure you of outperformance over an ETF basket.

    If Goldman Sachs faced commercial bank-like restrictions on their future, why not re-organize as a hedge fund? or better yet, a PE firm with their long lock ups?

    Finance is facing a disruption like the music distributors faced from P2P: 1) The simplicity, tax efficiency and cost of ETF baskets coupled with low cost exchange access has ended the old-form asset gathering. 2) The hedge fund’s complex strategies will be where the high net worth wealth migrates and 3) in the middle their I-bank businesses will be challenged by the exchanges themselves will be able to do a Google-like NetSuite-like IPO’s even governments will go that way.

    In the near term this means shrinkage much greater than the net guess of the interviewees Michael Santoli pulled together.

  11. DownSouth commented on Jun 29

    ————————–
    ☺☺”This struck me as somewhere between wishful thinking and self delusion.

    “Wall Street has repeatedly been the source of destructive bubbles and ponzi schemes…

    “In the end analysis I don’t thing Wall Street adds any net value to the the USA. Time to outlaw the whole thing.

    Posted by: bitteroldcoot | Jun 29, 2008 12:57:40 PM
    ——————————

    BP posted a chart the other day that showed the financial sector to have grown to 25% of the S&P 500. It has since fallen back to 17%.

    Just imagine what that implies. The financial sector had gotten so bloated that it was garnering a 25% cut for its role for what? For arranging financing?

    And what does this mean?

    Well it’s really quite simple. Let’s say I am a real estate developer, or an oil man, or a retailer, or a health care provider, or a transportation company who wants to embark on a new project. I take the deal to a banker or broker and he finds investors who put up the money. And for his (and an endless procession of other intermediary players’ in the financial sector) part, he receives 25% of the deal, leaving 75% for the developer and the guys with the capital.

    As the chart BP posted showed, the historic take for this service amounted to some 2 or 3%. The bubbles and ponzi schemes are tools these finance guys employ to garner 25% of the wealth, instead of the more reasonable 2 or 3%.

    I agree with you that there will be a correction, if not this crisis maybe the next. Society will not allow the financial sector to continue to garner such a huge proportion of the nation’s wealth and production for its role of merely arranging financing.

  12. johnnyvee commented on Jun 29

    The center of the financial world is no longer in New York. It is in China. Will Wall Street be relevent in 2 years is really the issue. Not very, it seems from the report

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