First it was JPM [12], then it was, surprisingly, none other than NY Fed chief Bill Dudley [13] - the head of the trading desk that proudly boasts trader extraordinaire Kevin Henry, then it was Citi yesterday [14], and now joining the chorus of banks and Fed presidents blaming all that is wrong in the banking system on near record low volatility resulting in a collapse in trading is none other than Goldman Sachs, whose president Gary Cohn spoke at a Sanford Bernstein conference earlier today, said that fixed income volumes - the bread and butter of Goldman's juggernaut FICC division - are under significant pressure, and blamed low interest rates and, drumroll, the Fed's QE on the drop in volatility, summarizing the current trading environment as "Abnormal." It appears increasingly more are voicing their displeasure with the New Centrally-Planned Abnormal... but only after their balance sheets are full to the brim with some $2.8 trillion in fungible reserves.
Some other soundbites from Cohn:
- Cohn says economic factors are biggest driver of slow trading; economic fundamentals bigger driver than regulation
Translated: the bond market has realized what is happening to the economy, which means stocks not so much.
- Cohn says market is perhaps overly influenced by ‘recency’
Translated: the last crash was caused by the Fed; therefore everyone knows who will be the reason for the next crash.
- Cohn: We believe strongly trading volume will return to normal
Translated: at some point QE will end and all hell will break loose (yes, the Lehman deflationary collapse "recenecy" is still there, and everyone remembers who the biggest winners were from the Lehman and AIG collapse). We will be sure to profit again.
- Cohn says Goldman Sachs is taking market share in trading; says market share gains may not translate to revenue yet
Translated: it worked for Amazon for 5 years, why shouldn't it work for us too?
- Cohn: ‘environment for all of the firms is quite difficult’
Translated: It's not just who are getting tired of the Fed's endless manipulation of every asset class.
- Cohn says M&A pickup may be followed by trading pickup
Translated: he may be right, he may be wrong. One thing is certain: M&A pickup with be followed by a pinkslip, pardon synergy, pickup.
And the main slides from Cohn's presentation. Note the absolute collapse in FX volumes as regulators have finally clamped down on foreign exchange market manipulators and all that's left are the robots.
[15]
[16]
Source: Goldman [17]