Brokers' Fictitious Gains

Wednesday, September 26, 2007 | 11:45 AM

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.



Brokers' Head-Scratcher
WSJ, September 21, 2007; Page C1

Wednesday, September 26, 2007 | 11:45 AM | Permalink | Comments (31) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



TrackBack URL for this entry:

Listed below are links to weblogs that reference Brokers' Fictitious Gains:


Barry, I just noticed you're now on the board of MicroIslet (MIIS).

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

The comments to this entry are closed.

Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      


Complete Archives List



Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:

Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo



Odds & Ends

Site by Moxie Design Studios™