Zach, The brokerages will be cheap when the market is undervalued.
I used to have the same idea that the brokers make commissions selling as well as buying, but it just ain't so. First of all, some of the sales will be at losses, so that cuts down on the reservoir of assets from which to gather commissions. Second, some of the losers will kiss the broker goodbye, whether it is their fault or not, and it usually is. Third, losses make those who stay think about moving from full service to discounters or some low fee index product. Fourth, a huge amount of profits come from investment banking, and if you've looked at the new deals during this little downturn, there has been none. Fifth, trading profits disappear. Sixth, a lot of profits are managing assets, and they have declined. Since the fee is a set %, the lower assets take directly from the bottom line. Seventh, overhead remains fairly fixed while revenues decline, and this is a highly leveraged business.
Many of these factors were true of Merrill at the top, much less during the decline. The eps were only growing at a 6% rate at the top, making Mer one of the most overpriced stocks in the world. It is still overpriced, but may be due for a dead cat bounce. Morgan Stuckup is in even worse shape, as its open end funds are woefully underperforming, including those managed by the subsidiary where I once reigned as manager supremo. <G> It becomes easy for a broker to talk a customer out of crappy performing funds and sucker them into the better performers at other fund companies.
The Monkey Emerging Markets Fund is o.k., but I can't understand why you would want to own it at net asset value when you can own better managed closed end funds such as Templeton Emerging Markets (EMF) and Morgan Stanley Emerging Markets (MSF) at discounts to NAV of 12% and 26%, respectively. I highly recommend you look at the cefs as a better way to get more bang for your buck in this area.
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