Good News and Bad on Wall Street

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The New York Times reports both good news and bad today:

The activities at the heart of what Wall Street does — selling and trading stocks and bonds, and advising on mergers — are running at levels well below where they were at this point last year, said Meredith Whitney, a bank analyst who was among the first to warn of the subprime mortgage disaster and its impact on big banks.

Worldwide, the number of stock offerings is down 15 percent from this time last year, while bond issuance is off 25 percent, according to Capital IQ, a research firm. Based on these trends, Ms. Whitney predicts that annual revenue from Wall Street’s main businesses will drop 25 percent, to around $42 billion in 2010, from $56 billion last year.

….As a result, executives, portfolio managers and analysts say that even the mighty Goldman Sachs, which posted a profit every day for the first three months of the year, is unlikely to deliver the kind of profit growth that investors have come to expect.

Keith Horowitz, a bank analyst at Citigroup, said he expected Goldman Sachs to earn $7.8 billion in 2010, a 35 percent decline from the $12.1 billion it made last year. The drop in trading translates into lower commissions for brokerage firms, as well as a weaker environment for underwriting initial public offerings and other stock issues, traditionally a highly lucrative niche.

Banks are also scaling back on making bets with their own money — known as proprietary trading — another huge profit source in recent years that will soon be forbidden under terms of the financial reform legislation passed by Congress this summer.

Wall Street should be earning less. Ideally, though, it should be earning less because margins have become thinner and the market for lucrative but idiotic rocket science finance has declined. So the good news here (maybe) is that prop trading activity is down and margins are getting squeezed. The bad news is that core businesses like issuing bonds and managing IPOs are also down. That’s just a sign of a sluggish economy.

And speaking of a sluggish economy….

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WE'LL BE BLUNT

We need to start raising significantly more in donations from our online community of readers, especially from those who read Mother Jones regularly but have never decided to pitch in because you figured others always will. We also need long-time and new donors, everyone, to keep showing up for us.

In "It's Not a Crisis. This Is the New Normal," we explain, as matter-of-factly as we can, what exactly our finances look like, how brutal it is to sustain quality journalism right now, what makes Mother Jones different than most of the news out there, and why support from readers is the only thing that keeps us going. Despite the challenges, we're optimistic we can increase the share of online readers who decide to donate—starting with hitting an ambitious $300,000 goal in just three weeks to make sure we can finish our fiscal year break-even in the coming months.

Please learn more about how Mother Jones works and our 47-year history of doing nonprofit journalism that you don't elsewhere—and help us do it with a donation if you can. We've already cut expenses and hitting our online goal is critical right now.

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