Bloomberg Businessweek: Stocks: Wall Street Loses Ground As the Market Booms

The following is an excellent article from the December 29, 2014-January 11, 2015 issue of Bloomberg Businessweek on page 40 written by Jing Cao titled “Stocks: Wall Street Loses Ground As the Market Booms” and I quote:

“Stocks”

“Wall Street Loses Ground as the Market Booms”

December 23, 2014

Wall Street banks have failed to keep up with the stock market during its more than five-year boom, falling behind industries such as technology and health care. There were just 32 U.S. financial firms among the world’s largest 500 companies by market value when trading closed on Dec. 18 in New York. That compares with 41 at the end of 2006, the last full year before the credit crisis. Some companies that remain on the list, such as Citigroup (C) and American International Group (AIG), have shrunk to a fraction of the size of tech giants like Apple (AAPL) and Google (GOOG).

Illustration by 731

Goldman Sachs (GS) has a lower market value than it had at its peak in 2007. While Google and Apple have been adding products and customers since then, Wall Street has lost trading revenue and spent much of that time repaying bailouts, settling government probes, or divesting assets under pressure from federal watchdogs. “The culture in the large banks needed to be corrected,” says Charles Peabody, a banking analyst at Portales Partners. “That is a good thing. The extent of this adjustment process has been a lot more drawn out than any of us anticipated, and that’s not been a good thing.”

Goldman Sachs went public in 1999, the same year that President Bill Clinton signed the law that repealed barriers between commercial and investment banking. The bank’s market capitalization as of Dec. 18 had dropped about 21 percent from the peak in October 2007 of more than $105 billion. U.S. financial companies now make up about 8.1 percent of the market value of the world’s largest 500 companies, compared with 9.7 percent at the end of 2006. Companies that disappeared from the top-500 list include Lehman Brothers, which filed for bankruptcy protection in 2008, and Merrill Lynch, which struck a deal the same year to sell itself to Bank of America (BAC).

U.S. health care’s share in the top 500 climbed to 7.6 percent as Johnson & Johnson (JNJ) and Amgen (AMGN) expanded. Technology advanced to 7.5 percent from 5.3 percent. Apple is the world’s largest company, up from No. 98 at the end of 2006. Goldman Sachs dropped to 94th from 63rd in that span. David Wells, a spokesman for the bank, declined to comment. Citigroup, which was the first U.S. lender to adopt the universal banking model combining commercial and investment banking, has plunged to No. 35 from fourth.

Wells Fargo (WFC), which gets most of its revenue from consumer, corporate, and real estate lending, is now the most valuable bank in the world. “Revenue growth has been lacking as a generality in the banking industry,” says Peabody. “Wells has been doing a better job, in part because it’s not as exposed to the capital markets.”

The bottom line: Wall Street accounts for 8.1 percent of the value of the top 500 global companies, down from 9.7 percent in 2006.

Cao is a reporter for Bloomberg News in New York.”
(IF PRESIDENT CLINTON WOULDN’T HAVE SIGNED A BILL THAT REPEALED THE BARRIERS BETWEEN COMMERCIAL AND  INVESTMENT BANKING (KNOWN AS THE GLASS-STEAGALL ACT), WHICH CAUSED A CHAIN REACTION WHICH CAUSED LOWER PROFITS WHICH LED TO THE 2008 CRASH.   SINCE WE’RE STILL USING HEDGE FUNDS, PRIVATE EQUITY AND UNREGULATED, TOXIC DERIVATIVES, THINGS HAVE GOTTEN EVEN WORSE BECAUSE OF THE FACT WE STILL HAVE NO REAL REGULATIONS ON THE INVESTMENT BANKERS BECAUSE JAMIE DIMON OF JPMORGAN LOBBIED SUCCESSFULLY TO PROTECT THE GROWING, UNREGULATED, TOXIC DERIVATIVE MARKET IN THE RECENTLY PASSED $1.1 TRILLION SPENDING BILL THAT SENATOR ELIZABETH WARREN TALKED AGAINST ON THE SENATE FLOOR AND WHILE SHE LOST, SHE IS GAINING SUPPORT BECAUSE THE COMPANIES VALUATIONS ARE GOING DOWN WHICH IS CREATING MORE RISK.  IT’S JUST KICKING THE CAN DOWN THE ROAD FOR OUR KIDS TO BAIL OUT.  IS THIS WHAT DAVID STOCKMAN, PRESIDENT REAGAN’S BUDGET DIRECTOR, CALLS “CRONY CAPITALISM?”
LaVern Isely, Overtaxed Independent Middle Class Taxpayer and Public Citizen and AARP Members
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About tim074

I'm a retired dairy farmer that was a member of the National Farmer's Organization (NFO). Before going farming, I spent 4 years in the United States Air Force where I saved up enough money to get my down payment to go farming. I also enjoy writing and reading biographies and I write about myself as well as articles and excerpts I find interesting. I'm specifically interested in finances, particularly in the banking industry because if it wasn't for help from my local Community Bank, I never could have started farming which I was successful at. So, I'm real interested in the Small Business Administration and I know they are the ones creating jobs. I have been a member of Common Cause and am now a member of Public Citizen as well as AARP. I have, in the past, written over 150 articles on the Obama Blog (my.barackobama.com) and I'd like to tie these two sites together. I'm also on Twitter, MySpace and Facebook and find these outlets terrifically interesting particularly what many of these people did concerning the uprising in the Arab world. I believe this is a smaller world than we think it is and my goal is to try to bring people together to live in peace because management needs labor like labor needs management. Up to now, that hasn't been so easy to find.
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