Ken Griffin: The SellSide Is Toast

Everything keeps coming up roses for Ken Griffin. His new futures exchange continues to take shape while his established foe weeble wobbles, shares of the CME Group (CME-NYSE) had better make a stand or they will fall down

Griffin's Citadel Investment Group is on a roll, however. The firm could turn out to be a blueprint of sorts, for what works on Wall Street. And Ken has figured out what does not work on Wall Street:

"It is the Great Depression on Wall Street. It sure isn't on Main Street," Ken Griffin, chief executive of hedge fund Citadel Investment Group LLC, said during a panel at the Milken Institute Global Conference in Beverly Hills, California.

According to Griffin and other top U.S. investors at the conference, the credit and housing crises that led to hundreds of billions of dollars in losses for Wall Street firms will take those investment banks years to claw back from. Reuters

Ken Moelis, who bailed out of UBS to start his own boutique when he saw the writing on the wall, seemed eager to endorse Griffin's stance:

"Until you see Wall Street put on their party hats again and get on the tables and start dancing is going to be years," said Ken Moelis, a former UBS (UBSN.VX) banker who now runs his own investment firm, Moelis & Company. "It will be a long time for Wall Street to come back to where it was."

No doubt the Bear Stearns staffers who are getting pink slips this week would agree with Griffin; it’s tough out there. While I am glad to see the bank and brokerage stocks do their best to frustrate the short sellers, Griffin’s view might mean that the Finacials ETF (XLF) is best suited to renters, as opposed to owners. And the brokerage stocks might have many more months of sideways price action as investors get a bead on their longer term earinings power. Several legs to the stool have been sawed off, and even bulls of mighty Goldman Sachs might start focusing on the asset management part of their model while de-emphasizing their traditional sales and trading and Investment banking arms. Or at least recognize their value; a large portion of their market cap is attributable to asset management but it is rarely emphasized.

Griffin is sitting pretty at the moment, and will likely find a way to strengthen his firm while his SellSide counterparts try to figure out what hit them.

He might be hen-pecked, but it is good to be Ken.

Would taking Citadel public strengthen his hand? Not the way I see it, but the rumors never seem to die.

Brokerage Proxy: Still Rangebound?

Investors see recession, Wall Street depression
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Citadel’s Ken Griffin Drops IPO Hints At Milken Conference
Dow Jones

Bear Stearns sending redundancy letters, say staff
Reuters
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. NP

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