Wall Street's boom: how much longer?

By Joseph A. Giannone

NEW YORK (Reuters) - Wall Street is heading into the final weeks of 2006 riding a wave of surging takeover and trading activity with no end in sight.

Investment banks are on track for a third consecutive year of record profits with every business running at full steam. The industry is well on pace to break M&A records, demand for new debt and stock is strong and trading profits appear impervious to interest rate moves.

Skeptics have predicted the end of Wall Street's current boom almost since it began, but analysts forecast a continuing rise in earnings.

"From a fundamental standpoint, the operating environment is great and these guys were really capitalizing on it," said Sandler O'Neill & Partners analyst Jeff Harte. "The wildcard is how much better can that environment get?"

"If you put a gun to my head, I'd suggest the operating environment has the potential to get a lot better before it gets a lot worse," he added.

How much longer the good times can last will be discussed at the Reuters Investment Banking Summit in New York and London November 13-16.

Historically, Wall Street shares have soared in good times only to plunge during bear markets. Profit from trading especially followed cycles, with shares of brokerages tumbling whenever interest rates rose.

Investors bailed out of Wall Street stocks this summer, when a slowdown in the markets convinced many that business had finally peaked. Instead, most of the big banks reported surprisingly solid third-quarter results and told investors the fourth quarter is off to a very strong start.  Continued...