Brokers Offer Irony Play, but No More

James J. Cramer
Brokers Offer Irony Play, but No More
By James J. Cramer
RealMoney.com Columnist

6/13/2005 8:42 AM EDT
URL: http://www.thestreet.com/p/rmoney/jamesjcramer/10227657.html

Brokerages

Expectations for Lehman, Bear and Goldman are so reduced, the brokers might beat them.
But that only makes the stocks less likely to roll over.
The long-term trend for their equities businesses is dire, so Cramer doesn't want to go long or short, just away.

Seems too pat to me. Lehman Brothers (LEH:NYSE) , Bear Stearns (BSC:NYSE) and Goldman Sachs (GS:NYSE) all expected to be not-so-hot this week. It wasn't long ago that these brokers all were expected to smash records every quarter, and yet I distinctly remember their stocks declining almost instantly after these firms reported earnings.

Now I wonder whether the brokers will be the irony play, and whether they've had expectations reduced so much that they can beat those expectations and have their stocks actually be unchanged or going higher.

Everyone is focusing on how the yield curve's lack of slope has hurt the brokers' earnings. I believe, though, that not enough attention has been paid to the absolutely relentless and brutal decline in the commissions that brokers receive. The institutional business is under siege like no other time in the last 30 years. In fact, I believe you have to go back to May Day, that historic occasion in 1975 when commissions were no longer fixed, to find a more tumultuous time in the business.

These direct-access folks are charging a penny a share. The buy side, led by Fidelity, doesn't want bundled research and trading. It's all becoming rather clear that the equity brokerage business, even with syndication, has become a total commodity even for the Goldmans and the Lehmans, which spend millions and millions of dollars on research.

So, even though I believe that the estimates and lack of enthusiasm should make these stocks less likely to roll over, the long-term secular trend for a major part of all of their businesses -- equities -- is so dire, I can't summon enthusiasm for them. As with so many other parts of this market, I don't want to go long or short them.

I just want to stay away.

Random musings: Well, it's difficult to think about how Morgan Stanley (MWD:NYSE) could do worse than with Phil Purcell, so you have to warm up to it on the news that he's been fired. But the franchise has been damaged. Best to be put up for sale. The Morgan earnings news will only heighten the negativity for the others, which makes it more likely that the disappointment, if it comes, will be muted.

What would best describe your stance heading into the coming week of trading?

	Bullish
	Bearish
	Neutral

Which of these sectors do you think is set to move up in the coming week?

Which of these sectors do you think is set to move down in the coming week?

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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here. Listen to Cramer's RealMoney Radio show on your computer; just click here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict."