Brokers' Fictitious Gains
Friday’s WSJ had this insightful column on Wall Street's earnings, Brokers’ Head-Scratcher.
“Still, some investors remained concerned about earnings quality, in part, because the firms all benefited from a tumble in the value of their own debt. Accounting rules require firms to take a gain on such declines if they are applying market values to some forms of debt or financial instruments.
At Bear Stearns, the already dismal quarter would have been even worse without about $225 million in such gains. Morgan Stanley, which also had a rocky quarter, said it booked $390 million in such debt-related gains, while Goldman said it benefited from nearly $300 million in this way. Lehman didn't specify its gains, but said they helped lower to $700 million the hit the firm took from markdowns on loans and securities.”
So much for a great quarter !
UPDATE: September 26, 2007 1:55pm
Goldman Sachs cut MER's q3 eps estimate from 1.95 to 0.15:
Analysts at Goldman Sachs (GS) to reflect "an extremely challenging operating environment" in the third quarter. "These estimates include a multi-billion dollar write-down due to weakness in mortgages, leveraged loans, and [collateralized debt obligations," they wrote in a research note. Goldman Sachs "significantly" cut its third-quarter and 2007 estimates for Merrill Lynch and "marginally" lowered its 2008 and 2009 forecasts, and reduced its price target on the stock to $94 from $108. Merrill Lynch "appears to be caught in the cross hairs of a number of headwinds in the quarter -- leveraged loan losses, mark-to-market losses on their CDO exposure, and deteriorating mortgage fundamentals," the analysts said. Merrill Lynch's shares were down 2% at $70.70 at last check in afternoon trading Wednesday.
>
Source:
Brokers' Head-Scratcher
KATE KELLY and DAVID REILLY
WSJ, September 21, 2007; Page C1
http://online.wsj.com/article/SB119033489643234610.html
Wednesday, September 26, 2007 | 11:45 AM | Permalink
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Comments
Barry, I just noticed you're now on the board of MicroIslet (MIIS).
http://biz.yahoo.com/pz/070926/127424.html
I recall you mentioned this company in the past, do you have the liberty to discuss it in more detail?
Posted by: TexasHippie | Sep 26, 2007 11:59:30 AM
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