Portfolio manager Cale Smith’s riffs on investing, spoke funds, and Islamorada in the Florida Keys.

It’s official. Four big Wall Street banks pitched perfect games last quarter.

The trading departments of Bank of America, Goldman Sachs, JPMorgan Chase and Citigroup each finished the first quarter of this year having made money every single day. According to their SEC filings, their traders did not lose a single penny on a single day the whole quarter. For 61 days in a row. All four of them. Really.

Now I haven’t determined the actual probability of that occurring in a truly free market, but I’m going to guess that it’s indistinguishable from 0.0000. That is, there is zero chance these guys are really that good. (See TARP, 2008.)

But when you’re acting like some kind of emerging market oligopoly, screwing over your own clients and letting computers trade for you, apparently it is just that easy. And as I’ve said before, investors beware. These big banks are lousy businesses. They have no sustainable moats. After all, it wasn’t one bank but four of them that just threw perfect games.

There’s more in this article from the NY Times – although it inexplicably fails to raise the question, “How exactly did this occur?”

This gentleman’s quote pretty much summed it up:

“This is just, as we call it, milking the market and your captive client base.”

Exactly, dear sir. This has nothing to do with talent or being a steward of wealth.

Unbelievable, isn’t it?

Back in 1991, Wall Street firm Salomon Brothers was in serious trouble over a bond-rigging scandal. Warren Buffett took over as chairman and CEO for an annual salary of $1. This was the opening statement he gave to Congress.

Here’s a quote highlighted by Warren Buffett during this weekend’s annual meeting in response to a question about derivatives and financial reform. It was written by economist John Maynard Keynes in his influential economic textbook “The General Theory of Employment, Interest and Money.” Back in 1936, mind you. Emphasis mine.

In one of the greatest investment markets in the world, namely, New York, the influence of speculation…is enormous. Even outside the field of finance, Americans are apt to be unduly interested in discovering what average opinion believes average opinion to be; and this national weakness finds its nemesis in the stock market. It is rare, one is told, for an American to invest, as many Englishmen still do, “for income”; and he will not readily purchase an investment except in the hope of capital appreciation. This is only another way of saying that, when he purchases an investment, the American is attaching his hopes, not so much to its prospective yield, as to a favourable change in the conventional basis of valuation, i.e. that he is, in the above sense, a speculator.

Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. The measure of success attained by Wall Street, regarded as an institution of which the proper social purpose is to direct new investment into the most profitable channels in terms of future yield, cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism — which is not surprising, if I am right in thinking that the best brains of Wall Street have been in fact directed towards a different object.