Solomon,Smith,Barney

[Henry C.K. Liu]

Precisely.  The word is that porfits are in the intemerdiary functions of
institutions.  That is why all the institutions are shutting or cutting down their
trading side, SSB, Swiss Bank, Goldamn, Merrill, etc.  The trick is to earn risk
free fees from holding the money, but only on behalf of others who are taking the
risk.
The rationale goes something like this:
Arbitrage has shown that the increasing efficiency of the markets makes
inefficency spreads very minuscule.  So large volume is required to achieve a
target level of reward.
While the techical tools, mostly mathematical, have increase the frequencies of
wins, the error from even low probablility losses carries very heavy penalty, as
LTCM has shown.
So in the new matrix of relative risk and probability, banking is superior to
trading as a profit center.
In banking, volume is all. Its the zero risk model of finance.

Henry

Doug Henwood wrote:


> Henry C.K. Liu wrote:
>
> >A SSB trader told me that the instruction from Weil was to keep as much funds
> >in the firm for as long as possible before having to return it to clients or
> >the market.  According the Weil, that is the sercret of financail success
> >for a
> >financial institution.  Doug, want to build a new economic theory around a
> >street smart notion?
>
> But that's theoretically impossible! Everyone knows they're just
> intermediaries!!
>
> Doug