Saturday, April 4, 2009

Wall Street Profit Rebound: Where Will It Come From?

At some point, the write-down of bad assets will end and operating revenue will again be the foremost objective of management. The stock market is perhaps pricing this in as financial stocks have lead the charge in the last month. However, where do these buyers think that profits will come from?

The above graph charts mutual fund assets. Using this as a proxy for the current state of portfolios, managed money revenue will face some significant headwinds.

The two graphs above detail underwriting activity. The bulk of this segment is debt issuance. The credit collapse has obliterated this revenue stream and most experts believe that it will NEVER return to past form.

The two graphs above provide details of equity trading. Volume is up, a good sign for the trading firms. However, some commissions are based on dollar volume trading.

Still bullish?

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