
Why are big banks pulling out of investing? Is it fin tech? - mikeyanderson
Today the NYT highlighted (link below) that Goldman Sachs is one of the only banks still investing and trading heavily, and they&#x27;re seeing massive loss in profitability. What is causing this? Is fin tech automating it? Is someone else moving into the space?
 Link:http:&#x2F;&#x2F;www.nytimes.com&#x2F;2016&#x2F;04&#x2F;20&#x2F;business&#x2F;dealbook&#x2F;goldman-sachss-profit-and-revenue-tumble-in-quarter.html?smprod=nytcore-ipad&amp;smid=nytcore-ipad-share
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dbs
I don't know how is the situation in GS but in Europe many investment banks
are under serious trouble, even if we exclude the effects of periphericals
debt crisis. Turnover in primary markets has stagnated due to excess credit
capacity and a (structural) small number of companies wanting to go public. On
secondary markets, trading in equities and bonds has reached a plateau ages
ago with liquidity seeming more and more artificial and regulations decreasing
risk taking massively. Costs are also increasing due to regulation (huge in
Europe) and necessary change in outdated technology. Asset management starting
to feel the heat from indexing and ETFs... Fintech is not there yet but at
some point it will cause massive disruption because margins are going to be
way way lower. It sure looks like a death by a thousand cuts... CLSA analyst
Mike Mayo has nailed it perfectly not only for GS but for the industry as a
whole: “You danced pretty well the last three to four years without revenue
growth. But it seems like you’re getting to the end of what you can do.”

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mikeyanderson
Interesting. As a total amateur in this area, does this mean that: There is so
much cash available that betting on everything makes more sense than bets on
individual things based on analysis?

In other words, the cost to upgrade tech, follow regulations, etc. is higher
than the margin between an index and a managed fund? If that's the
case—wouldn't that mean that there are fewer people actually setting the price
for any given stock by analysis, and wouldn't that end up bloating the market
with potentially bad companies/vehicles continuing to get investment because
they are in the main indexes?

