Depending on who you ask, Goldman Sachs Group Inc. is really good at what it does, trading almost anything that can be bought or sold on financial markets, or is the beneficiary of a giant government conspiracy designed to prop up its results.
How else to explain such massive profits - potentially topping $2-billion (U.S.) when Goldman reports quarterly numbers Tuesday - in the midst of a recession?
There's evidence that Goldman is making money the old-fashioned way: it's earning it.
And so are some of the biggest Canadian banks such as Royal Bank of Canada and National Bank of Canada, which are benefiting from some of the same forces.
Goldman is at the centre of two of the largest profit-creation trends on Wall Street right now.
It's booking big fees helping governments sell the billions in bonds they need to fund stimulus programs and companies to sell bonds to bolster bank accounts. On top of that, Goldman is raking in profits trading everything from commodities to stocks to bonds in volatile markets.
Should Goldman indeed unveil a multibillion-dollar quarterly profit, it will have done so with what many analysts said only months ago was a serious handicap - having given up at the height of the crisis the high-flying investment bank title and taken on the status of a pedestrian bank, which brings with it much more severe limits on risk.
It would be the financial equivalent of making $2-billion with one hand tied behind the company's back, and yet again drives home the firm's supremacy when it comes to profiting from markets.
The talk of Goldman's massive earnings really got going after analyst Meredith Whitney, she of the correct call on the bank plunges of last year, recommended that her clients buy the stock before the earnings were released.
Goldman will have "enormous" income from trading bonds, currencies and commodities, Ms. Whitney, who took advantage of her notoriety to start her own firm, told CNBC yesterday. "Goldman is going to surprise big on the upside."
To the investor on the Street, it may not feel like a fun time to be a trader, with markets whipsawing every which way. But for the pros, such volatility can be incredibly profitable.
Along with the swings, the biggest help for traders at every firm, not just Goldman, has been wider spreads, which is trader talk for bigger profits on each trade.
Prior to the meltdown, so many securities firms were competing for a piece of each trade or loan or deal that prices for all those services had plunged. Banks had to do more deals, taking more risk, to keep the profits rolling.
Now, with many trading houses simply gone, like Lehman Brothers Holdings Inc., and others scaling back their businesses, the remaining strong banks have been able to charge more.
That means the banks that are still standing can make just as much money, or more, while taking much less risk.
Goldman, as one of the strongest and most adept traders, has taken it to the extreme. But trading revenue has been a prime source of profit at Canadian banks such as RBC, Bank of Nova Scotia and National.
Most observers expect another strong quarter for trading, with volatility remaining high, volumes strong, and margins wide.
"I think the biggest inference we'll draw from Goldman this week will be what the trading environment looked like over the past several months," said Edward Jones analyst Craig Fehr.
Earnings at the Canadian banks' securities businesses rose 70 per cent in the last quarter, and now account for 37 per cent of "core" net income, up from a normal range of 25 to 30 per cent, according to calculations by Peter Rozenberg of UBS AG.
But Mr. Rozenberg and other analysts like Mr. Fehr are doubtful that run can continue apace. At some point, competition will come back and markets will calm down.
"We have seen well over sustainable levels - in my mind - of trading revenues out of the Canadian banks in recent quarters, because of the volatile interest-rate environment and the volatile credit and equity markets," Mr. Fehr said.