I’m looking for Wall Street to do well no matter who wins the election this year.
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.
Photo:ebby, Creative Commons, Flickr
Disclosure: I do not own IAI or MER. I do own LEH, GS and MS. I have traded MER, GS, LEH and MS in the past year. My last trade in LEH was a sell. My last trade in GS was a buy. My last trade in MER was a sell. My last trade in MS was a sell. I also own the preferred shares and debt of Lehman.
I am a former Managing Director at Morgan Stanley and Lehman. I am still a participant in their executive compensation, deferred compensation and pension plans.