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Posts Tagged ‘oligopoly’

Ambulance Chasing on Wall Street

Posted by Larry Doyle on April 12th, 2010 10:58 AM |

What is driving our markets higher? A rebound in earnings along with a rebound in the economy, correct? Well, let’s take a quick look at corporate earnings.

Thanks to our Sense on Cents Hall of Famer and resident Economic All-Star David Rosenberg, we learn this morning that:

Financial sector profits have accounted for 85% of the overall increase in corporate earnings.

When I read this, I immediately think of the market akin to that gutless driver who jumps behind an ambulance as it screams down the street. Who is in that ambulance? Main Street. Who is in that car getting the ‘free ride’? Wall Street. (more…)

Price Fixing on Wall Street?

Posted by Larry Doyle on April 9th, 2010 11:16 AM |

Lessened competition in any industry will lead to wider margins and greater revenue and profit opportunities.

Wall Street circa 2010 is certainly a dramatically changed landscape with significantly lessened competition. Is Wall Street today an honest display of capitalism in which ‘to the victors go the spoils’? Or is Wall Street an oligopoly which is using its increased power and leverage to control, if not outright fix, prices for products and services?

In the midst of all the other issues Washington is facing, I think there is very little focus on this topic, but we overlook it at our peril. Why? Price fixing, or iterations thereof, is nothing more than a vehicle to transfer wealth from consumers to providers. (more…)

Financial “Family” Collusion Will Likely Increase

Posted by Larry Doyle on March 30th, 2010 9:18 AM |

What will be the next explosion in financial chicanery if not outright fraud? Collusion, that is price fixing. Why? A number of reasons, including:

1. The financial industry has become an oligopoly, (some may say cartel) thus setting the table for increased collusion to propagate.

2. Lower volumes across exchanges, which pressure revenues and incentivize market participants to collude to generate greater profits. (more…)

Wall Street Isn’t Capitalism!!

Posted by Larry Doyle on March 22nd, 2010 1:53 PM |

Is our nation trending away from the principles of capitalism which built the foundation upon which we rest? Another healthcare whine? Nope. I am talking about the once proud pillars of capitalism centered on lower Manhattan, otherwise known as Wall Street.

Let me simplify the debate. What is capitalism? Are you willing to accept the definitions provided by my Investing primer, Investopedia?

What Does Capitalism Mean?
An economic system based on a free market, open competition, profit motive and private ownership of the means of production. Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists.

What does the Financial Times have to say about our financial system this morning?   (more…)

Wall Street’s Oligopoly Flexes Its Muscle

Posted by Larry Doyle on March 15th, 2010 12:51 PM |

Pricing power is everything.

What businessman wouldn’t like greater control and influence over the pricing of his goods and services? How are prices determined? In a capitalist system, prices are a function of the competitive forces of supply and demand. What happens when competition dwindles? Pricing power for the suppliers increases. How does competition dwindle? When barriers to entry are so high, or competitors go out of business. This economic reality is also known as an oligopoly and it defines the current state of our financial industry known as Wall Street.

Is Wall Street taking advantage of the lessened competition and flexing its muscle to drive revenue? Is the Pope Catholic? (more…)

Goldman Sachs ‘Shooting Fish in a Barrel’

Posted by Larry Doyle on November 5th, 2009 9:37 AM |

Those who take risk do not always win. A variety of mathematical models dealing with risk address and negate the chance of almost uniform success by one party. While those on Wall Street would promote the overwhelming risks in the industry, I would maintain that Wall Street circa 2009 is not in the risk business. How so? Let’s review results from the firm regarded as the best at managing risk, that is Goldman Sachs.

The Financial Times provides insights into the Goldman Sachs ‘casino’ in writing this morning, Goldman Benefits From Trading Bonanza:

Traders at Goldman Sachs recorded only one daily loss in the third quarter, highlighting the trading bonanza sweeping Wall Street as central banks continue to pump billions of dollars into the financial system.

The performance – revealed on Wednesday in a regulatory filing – compares with two losing trading days in the previous quarter and confirms that the authorities’ drive to revive markets after the crisis is yielding huge windfalls for some banks.

Before the crisis, banks regularly recorded trading losses on several days in a quarter.

Goldman made more than $100m in profits on 36 of the 65 days in the three months to September and recorded more than $50m in profit on more than eight out of 10 trading days, the filing shows.

To lose money on a total of only three days over the last two quarters defies rules of logic, assuming that markets are free, fair, and balanced. Even in Vegas the house doesn’t win at that rate. The question begs then as to the nature of the supposed risks being taken by Goldman and every other Wall Street firm. Beyond the risks, we also need to question the very nature of the markets themselves. When a firm makes money 98% to 99% of the time, don’t tell me they’re taking risk. They are doing nothing more than ‘shooting fish in a barrel.’ How so? (more…)

The Wall Street Oligopoly Rails on Compensation Controls

Posted by Larry Doyle on October 22nd, 2009 3:48 PM |

Is there a hotter topic currently on Wall Street than compensation? I have to admit, I have a range of emotions on this issue.

I pride myself on being a proponent of free market capitalism. As such, while the government needs to be actively involved in regulating the marketplace, beyond that I would just as soon see Uncle Sam stay out of the way. One may think I would be vehemently against the Wall Street pay czar Ken Feinberg getting involved in compensation on Wall Street. The Wall Street Journal reports on the far-reaching net cast by Uncle Sam on this issue and writes, U.S. Unveils New Rules on Banker’s Pay. Rest assured, the crowd on Wall Street right now is seething. Let’s navigate.

As I think more and more on the compensation topic, I have come to the following conclusions: (more…)






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