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Monday, October 16, 2006

Investment Banks And Banks Hit 52-Week Highs, Foundation Crumbles

Stocks: (C)(JPM)(GS)(MS)(MER)

Almost every investment bank and commercial bank hit a 52-week high last week.

Citigroup. Goldman Sachs. JPMorganChase, Merrill, Morgan Stanley.

But, what's wrong with this picture.

Private equity is drying up. The Nasdaq is struggling. IPOs are slowing. The real estate market is at death's door.

There is also the threat that some of the private equity deals may default. Some of them have taken on extraordinary amounts of debt.

Due to all of these factors, there is a vocal minority on Wall St. emerging that says banking earning could fall next year, with one forecast saying profits could fall 23%. With IPOs already slowing, a lot of the money coming into investment houses won't be there next quarter.

The 52-week highs may not last too long.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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