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Wall Street's Big Three Still Rule

Stocks in this article: GS JPM MS

Sometimes cynicism will serve you well as a trader. Right now, the big investment banks look still like great opportunities based on a cynic's view.

Very few stocks during the run from the March lows offered better return opportunities than the major investment banks.

Goldman Sachs (GS), for example, after bottoming below $50 a share before the start of the year, closed on Tuesday at $176.51.

Morgan Stanley (MS), at one point thought to be in real trouble of 'Lehman-like' dissolution and priced at under $7 closed on Tuesday at $33.70.

Much of the recovery that these shares have seen is merely because these institutions didn't see the end that some predicted for them. It now appears certain that these two, along with the other consolidated powerhouse JPMorgan Chase (JPM) will be the three strongest investment banks survivors of last year's carnage.

And here's where the cynicism starts to figure in. With all the anger, bailout money, congressional hearings and proposed legislation, it seems also clear that all the mechanisms that allowed these banks to make outsized profits from easy leveraged capital and monopolized derivative markets are still firmly in place and unlikely to change.

Profits for the biggest banks are poised to break all records in this recession year. Between Goldman, Morgan Stanley and JPMorgan, Bloomberg News estimates a $30 billion bonus pool this year, up 60% from last year and the highest since 2007.

Now, we can all be outraged at this, and we should be. But, better yet, we should try to make some money from it instead.

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