Trade the brokerages, writes Doug Kass, but don't invest in them. Forget the moral (and legal)...


Trade the brokerages, writes Doug Kass, but don't invest in them. Forget the moral (and legal) abuses, the business model is broken, with the companies' key profit centers under assault on both a cyclical and structural basis. Toss in the flipside of higher capital requirements - lower returns on capital - and it's hard to make an investment case. (see also)

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  • swaps
    , contributor
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    This is so basic

     

    The last ten years GS stock is up around 30 percent, compared to 300 percent gains for railroads like Norfolk Southern and CSX.

     

    Today Bloomberg reported GS employees have only 2 percent of their retirement money in their employer's stock. Why would they invest in it when 90 percent of the annual profits get ripped out each year and divvied among the employees? They get their money up front to deploy elsewhere.

     

    But last winter I made a quick upside 80 percent trading a few shares of JEF, after it got some heavy short selling. The problem right now though is that Wall Street is mostly just trading among the hedge funds, mutual funds and fiduciaries, so the experts are having to shear each other and the results are evident. I would assume the trading ranges will be tighter over the short term and for who knows how long.
    9 Jul 2012, 01:03 PM Reply Like
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