Goldman, Lehman and Friends: A Breathe of Life…
March 18, 2008 7:37 am
Goldman (GS) Reports Q1 (Feb) earnings of $3.23 per share, $0.65 better than the First Call consensus of $2.58; revenues fell 22.4% year/year to $8.34 bln vs the $7.47 bln consensus
Lehman (LEH) Reports Q1 (Feb) earnings of $0.81 per share, $0.09 better than the First Call consensus of $0.72; revenues fell 30.5% year/year to $3.51 bln vs the $3.35 bln consensus.
Lehman Brothers Chief Global Fixed Income Strategist, John Malvey is looking for a 100bps cut in rates. 75bps would be fine, but 100bps would be better. Without blinking, he said, “why not go for it already.” The authorities had no alternative as went on to discuss that this was not a bailout…rather it is an intervention. (I feel better!)
Once again, it is curious as to why the Fed is waiting so long to act if it is in fact an intervention. As I had previously coined and commented on the Milli Vanilli Government, it is still worrisome that many of the actions handed down from above by the holy of holey, a.k.a. the Father of Economic Decisions (F.E.D.) have been reactive rather than proactive.
Goldman reported a not so surprising revenue result, pushing it up in pre-market. $3.23 vs $2.58 with losses on residential mortgages approaching $1 billion. Once again, many of the financial stocks have been trading similar to how the retail stocks did, just a few weeks ago. There was a feeling (fear) that removed any support from the markets on Monday. Now, a sigh of relief is going to be in the air and investors will thrust financial stocks higher. Goldman is up on the report that they have gained a good deal of assets as many institutions moved their accounts during the the past quarter.
In pre-market trading, Lehman is flying on similar earnings news, and so goes the rest of the brokers and banks. The better news is coming at an important juncture. Today could shape up to be forever known as; the day the financials were saved. Frankly, without massive relief efforts, I cannot see how they would have saved themselves. Yet they live for another day, another foreclosure and another rate cut.
Thank you to our Great Father of Economic Decision, thanks to the earning’s resuscitation team and thanks to all of the millions of dollars from U.S Taxpayers that have helped to make this all possible. We are really wonderful and selfless. Let’s all stand up and take a bow and give ourselves a round of applause.
From Briefing.com: Goldman Reports Q1 (Feb) earnings of $3.23 per share, $0.65 better than the First Call consensus of $2.58; revenues fell 22.4% year/year to $8.34 bln vs the $7.47 bln consensus. Assets under management increased 21% from a year ago to a record $873 bln, with net inflows of $29 bln during the quarter.
Net revenues in FICC were $3.14 bln, 32% lower than a strong 1Q07 as results were adversely affected by continued deterioration in the broader credit markets. Net losses on residential mortgage loans and securities were approximately $1 bln. In addition, credit products included a loss of approximately $1 bln ($1.4 bln before hedges) related to non-investment-grade credit origination activities, as well as lower results from investments compared with the first quarter of 2007. Net revenues in Trading and Principal Investments were $5.12 bln, 46% lower than the first quarter of 2007 and 26% lower than the fourth quarter of 2007. Book value per common share was $92.44 and tangible book value per common share was $80.28, each increasing 2% during the quarter. “Market conditions are clearly very difficult… But we saw strong customer activity across many of our franchise businesses in the first quarter.
I believe that Goldman is not the benchmark, but rather one of the exceptions. Only time will tell.
Disclosure: Clients of Horowitz & Company do not hold positions in securities mentioned as of the date of publish.