Big Banks Profit By Selling and Trading Commodities

Big Banks such as Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley, UBS, and others are making a lot of money for themselves on commodities trading and selling commodities related products. Specifically, “commodities-related revenue at the 12 biggest investment banks climbed 45 percent last year despite weak oil trading, boosted by power, gas and base metals markets” according to a recent industry article.  What this means is that these big banks collectively made $3.6 billion last year from such things as trading oil and gas and metals as well as selling products such as derivatives relating to oil and gas and metals to its own clients and other investors.

The point of highlighting this and the take away for investors should be that while these big banks are selling you commodities-related investments, they are simultaneously buying and selling commodities-related investments for their own accounts. We believe this activity further highlights the conflicts of interests that remain embedded in the financial industry. It also highlights how, unlike traditional retail investors, Big Banks can make a lot of money through selling and trading regardless of volatility or weakness in the investment itself.

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