Stocks are off to a rough start after the long Thanksgiving weekend, with the Dow Jones Industrial Average (DJINDICES:^DJI) and the broader S&P 500 (SNPINDEX:^GSPC) losing 0.5% and 0.46%, respectively, as of 10:10 a.m. EST.
The macro view
You can read as many reports as you like from Goldman Sachs (NYSE:GS) concerning the eurozone crisis, but the "tells" of the firm's unvarnished assessment of the risks are in the way it manages its own balance sheet in the region. In an article published this morning, Bloomberg reports that Goldman -- the top equity underwriter in Europe -- has walked away from multiple stock offerings on behalf of Southern European lenders this year because it felt the fees and margin of safety in the deal valuations did not justify the risks. In fact, the last equity offering on behalf of a lender in the European periphery that Goldman undertook dates back to July 2011. Because an underwriter buys the shares from the issuer before selling them on to investors, the underwriter takes principal risk and is exposed to declines in the share price.
The micro view
And speaking of investment banking, some of Barclays' (NYSE:BCS) top shareholders have told the bank's new CEO, Antony Jenkins, that he should consider following the lead of UBS, according to the Financial Times. Last month, the Swiss bank announced it is effectively withdrawing from the fixed-income business and began culling 10,000 employees. The suggestions from Barclays' shareholders include hiving off its investment bank. While such moves may make sense for individual institutions, when a bank exits or retreats from an activity, the activity becomes more attractive for the remaining participants, particularly those who already hold the strongest positions. As such, this trend -- and I do think these moves are part of a broader trend in which marginal players reduce their footprint -- favors banks like Goldman or JPMorgan Chase (NYSE:JPM).
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