If while watching, say, CNBC, or any other financial network/news of your choice, some Wall Street bigwig says the bottom’s in and it’s time to start grabbing those big-name stocks you always wanted to own — while you look outside and see empty streets and shops, and, well, you get the picture — causing you to say “huh?” out loud to yourself, you’d be wise to wonder if Bigwig’s firm maybe already holds a few shares of those big-name stocks itself.
Here’s David Carey and John Morris essentially making my point in their telling book King of Capital; The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone:
“Investment banks trade stocks and bonds not only for their customers, but also for their own account, taking big risks in the process. Rivers of securities flow daily through the trading desks of Wall Street banks. Most of these stakes are liquid, meaning that they can be sold quickly and the cash recycled, but if the market drops and the bank can’t sell its holdings quickly enough, it can book big losses.”