As always, Andy Kessler gets it, he called the last bubble and I think with his experience in Silicon Valley and on the Street his musings are pretty accurate. Goldman is going to do something, they beat subprime for all intensive purposes. Great "future headline" stuff. Do you by some GS, or maybe C is at a low?
Cut:
Andy Kessler: WSJ: What's Next for the Banks
My view is that firms that successfully combine banking and investment banking will walk away with the prize, by being able to offer a full range of services to clients -- short-term loans against assets or receivables as well as bonds and equity for long-term projects, the kind of underwriting and trading that requires large amounts of capital. The inevitable consolidation that should have occurred after Glass-Steagall (the 1933 law that separated banks and investment banks) was repealed in 1999 had been on hold while everyone chased easy profits. But now the shakeout is here.
Goldman Sachs will own a bank, maybe even Citigroup (Goldman's $85 billion market capitalization might be able to swallow Citi's $125 billion value) and strip it down to what it needs. JP Morgan should reunite the House of Morgan by merging with Morgan Stanley, and become a full-service powerhouse. But JP Morgan could buy Merrill or Lehman or Bear Stearns instead. Bank of America will merge with who's left. But don't count out others who have done well with capital. Fortress Investment Group, despite a rocky IPO a year ago, has a powerful real estate arm that could own loan origination and servicing and enough assets to buy its way into the banking or investment banking business. Same for the Blackstone Group.
Capital flows a lot more fluidly around the globe these days. Expect consolidation to start now. The real winners on Wall Street will be the ones with huge stockpiles of capital who listen to the market, and who are fleet of foot enough to smell out and deploy their capital creating instruments that global growth companies need, rather than false profits from eating their own sausage.
The Big Five?: Goldman CitiSachs, House of Morgan, Bear of America, Fortress Lehman Lynch and Blackstone Suisse.
