Check out these results from the big houses:
The party, however, could be coming to an end. Bloomberg notes:
Merrill's Guy Moszkowski, the No. 1-ranked U.S. brokerage analyst by Institutional Investor magazine, estimates the combined profits of Goldman, Morgan Stanley (MS), Lehman and Bear Stearns will fall 5.8 percent in 2007. Revenue will decline about 2 percent, compared with a 31 percent gain this year.
Trading revenue, which accounts for about half of the firms' total, will fall 3.7 percent next year, Moszkowski said. Revenue from investment banking, which includes securities underwriting and providing mergers advice, probably will rise 7.8 percent, he forecast. Asset management will gain 11 percent.
Investment banking executives, including Goldman CEO Lloyd Blankfein, say their traders thrive on price swings. The volatility of U.S. Treasury bonds slipped this year to the lowest in five years and is the lowest in a decade for U.S. stocks, reducing the firms' opportunity to make money on hedging and trading for clients and themselves. Trading volume in stocks on the S&P 500 (SPY) fell in each of the past three months from a year earlier.
Citigroup's (C) stock has badly lagged this sector. As I've said before, I think it would be a good move to spin off both Smith Barney and Salomon Brothers.