This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Stock Rally Is Cold Comfort for Wall Street

NEW YORK ( TheStreet) -- It almost feels like they could take away the police guard from the charging bull sculpture located on Broadway just below Wall Street.

The S&P 500 just hit a four year high. Shares of Goldman Sachs (GS) and Morgan Stanley (MS) are up 12.19% and 16.46%, respectively, over the past month. Bank lending is on the rise.

Heck, buyout tycoon Mitt Romney is even starting to climb in the polls.

But there are other, more powerful signs, suggesting a return to anything resembling pre-crisis Wall Street is hard to fathom.

Investor pessimism about Wall Street hasn't changed even slightly since the stock market bottomed in March 2009.

Both Morgan Stanley and Goldman trade at price-to-tangible book valuations that, according to a report this week from Bernstein Research analyst Brad Hintz, "were last seen during the depths of the financial crisis when both firms were at risk of failure."

Equity trading volumes are another sign investor confidence is in the toilet. August volumes are headed toward the lowest monthly average since Sept. 2007, according to a report Wednesday from Sandler O'Neill analyst Richard Repetto. While this is partly a reflection of lower volatility, Repetto also makes a strong case that investor confidence is to blame. He points to the State Street Investor Confidence Index, which is at its lowest since Dec. 2008, and $16 billion in flows out of equity mutual funds so far in the quarter.

"We suspect the lack of investor confidence is one of the key drivers of soft equity volumes," Repetto writes.

Meanwhile, attacks on the banking industry are unrelenting, as Rochdale Securities analyst Dick Bove lamented in a research noted published Wednesday.

"The drumbeat continues with banks and bankers being put under greater scrutiny than any other business possibly in the history of this country," Bove writes.

And yet all the scrutiny seems to accomplished little, other than further gumming up the gears of the U.S. economy.

I asked Colorado Governor John Hickenlooper what Coloradans are thinking about Wall Street and the banking industry these days. He said, "most people are pretty frustrated with the amount of regulation that seems to inhibit the ability of small banks to give loans and yet doesn't really -- what I hear from out here they feel that it hasn't sufficiently addressed issues surrounding Too Big to Fail and the excesses in some of the largest banks in this country."

It's hard to believe things won't improve for the U.S. economy -- indeed, as I mentioned, there are many signs things are improving already. But it appears it won't be Wall Street that pulls us out of the mud. And maybe that's for the best.

-- Written by Dan Freed in New York.

Follow this writer on Twitter.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs