Posts filed under “Finance”
The WSJ is reporting that Goldman Sachs, the guys who have so far managed to avoid getting banged up by the credit crunch, has run out of luck.
“Industry insiders,” whoever they may be, are suggesting losses for the Q of as much as $5 per share.
Though analysts and investors already were bracing for Goldman’s first quarterly loss since it went public in 1999, the pessimism has grown sharply. “The last two weeks have been nothing short of horrible, with asset prices coming under ever more pressure than before,” said Susan Katzke, an analyst at Credit Suisse Group, who on Monday reduced her Goldman estimate to a fiscal fourth-quarter loss of $4 a share. Previously, she projected a profit of $2.47 a share. Goldman is expected to report its financials in a few weeks.
On a day when financial stocks fell sharply, Goldman’s shares plunged $13.23, or 17%, to $65.76 in New York Stock Exchange composite trading at 4 p.m. The stock is down 69% this year.
Beyond the damage caused by day-to-day market turmoil, Goldman is struggling to find its way in the new Wall Street, where the sort of risky bets the firm mastered as it was piling up record profits just a year ago are being curtailed. As it reduces its risk and behaves more like a traditional bank in order to secure more-reliable financing, Goldman also faces one of the biggest cultural shifts in the firm’s 139-year history. Amid the financial crisis, Goldman has registered as a commercial bank.
One area that is thought to have given Goldman particular problems in the just-ended quarter is its “book” of so-called distressed investments. Over the years, Goldman has invested in everything from troubled auto loans in Thailand to the debt of a liquor maker in South Korea to struggling golf courses in Japan. This business was once a big profit center.
It isn’t known whether these specific investments contributed to the write-downs in this portfolio, and Goldman doesn’t disclose the size of its book of distressed investments, which is housed in its fixed-income department. But the business is substantial. In 2005, a blowout year for the group, Goldman bet $24 billion of its own money on this type of investing, according to people familiar with the matter.
In your best Seinfeldian voice, one needs to mutter “That’s a shame . . .”
Goldman Faces Loss of $2 Billion for Quarter
SUSANNE CRAIG, CARRICK MOLLENKAMP and SERENA NG
WSJ, DECEMBER 2, 2008
“In hindsight, it was spot on.” -Jeffrey Brown, former top official at the Office of Comptroller of the Currency, one of the first agencies to raise concerns about risky lending. > A brutally damning article about the warnings the Bush administration received and ignored was published this morning by the Associated Press. The AP summed…Read More
click for interactive graphic > Sources: Citi Faces Pressure to Slim Down U.S. Seeks Change as Part of Rescue Deal; Talks Began on Fears of Client Exodus DAVID ENRICH and DEBORAH SOLOMON WSJ, NOVEMBER 25, 2008 http://online.wsj.com/article/SB122753629931853007.html Citigroup Should Be Held Accountable, Obama Aide Podesta Says Edwin Chen Bloomberg, Nov. 28 2008 http://www.bloomberg.com/apps/news?pid=20601087&sid=akf_DTv.v8ic&
The Bailout of Citigroup moves forward (Is this book ever going to be finished?): “Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which…Read More
You MUST check out the BP Café ! Today, we had excellent posts from Jim Welsh, Marion Maneker, Jack McHugh, and author Vitaliy N. Katsenelson. Yesterday, it was Michael Panzner and Chris Whalen. The highlight of Wednesday morning was the monthly newsletter of Paul Brodsky & Lee Quaintance, which was mentioned in Alan Abelson’s column…Read More
There is a long-but-worth it article (The End) in Portfolio by Michael Lewis, who traces the arc from Liar’s Poker to the End of Wall Street. Before you turn in fear of yet another Magazine Cover Indicator, be aware of one thing: The prostrate bull on the cover of the magazine does not represent,a s…Read More