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) -- Even as Wall Street tentatively emerges from its near-death experience, one thing certainly hasn't changed: trading remains an outsized and unpredictable component of bank earnings.

"On the outlook slide, you've got the investment bank. Again, we don't know what the future holds. The uncertain environment obviously continues. There are still risks out there and trading can be volatile, so no real guidance for you there. Make your own assumptions," said

JPMorgan Chase

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CFO Michael Cavanagh, during the bank's second-quarter earnings call.

Trading, to a great extent, is betting, hopefully educated betting, when practiced by large, powerful institutions like JPMorgan,

Goldman Sachs

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Morgan Stanley

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. Check out a preview of this week's big reports, complete with re-caps of second-quarter numbers:

Most of the trading that banks do is in the fixed-income markets, which are larger than equity markets, and far less transparent.

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A degree of predictability entered the fixed-income trading business last quarter, as the fates of Bear Stearns, Lehman Brothers and Merrill Lynch allowed even severely weakened banks like


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Bank of America

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to benefit, while stronger ones like Goldman, JPMorgan and

Credit Suisse

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made a killing, despite apparently taking less risk than usual. The profits came from charging higher-than-usual margins for acting as a go-between on relatively safe trades -- a brief return to an era on Wall Street that hadn't been seen for more than a decade.

That scenario -- the return of predictability -- came as a big surprise, however, and it is likely to be gone as suddenly as it came, as smaller dealers such as

Jefferies Group

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and foreign banks that did not have a strong U.S. presence, such as


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, BNP Paribas and



, beef up their operations here, according to Tim Sangston, managing director at consulting firm Greenwich Associates.

Sangston says proprietary trading -- where banks invest for their own portfolio, is making a comeback.

"I am starting to hear that word again. It was a dirty word six months ago," Sangston says.

Sangston works on an extensive, annual survey of U.S. institutional fixed-income investors that Greenwich publishes each April. This year's survey said trading volumes were 20% higher than last year, and Sangston says conversations he has had since then with market participants suggest volumes have continued to increase.

A rise in volumes is consistent with the view of Brad Hintz, analyst at Sanford Bernstein, that institutions are getting more comfortable holding trading positions on their books overnight.

"My guess is what you will see this quarter is larger balance sheets, somewhat higher leverage and larger inventory positions," Hintz says.

Such an environment will force institutions to take greater risks in order to continue to drive profits. Sound familiar?

Quarterly reports due this week from JPMorgan (Wednesday); Citigroup and Goldman Sachs (Thursday) and Bank of America (Friday) will go a long ways toward telling the tale.


Written by Dan Freed in New York