Stock Market News: Brokerages To Suffer More Writedowns
For almost a year, writedowns related to mortgage backed securities and other debt and credit market related investments has been cutting into earnings for many big time Wall Street brokerages. And, after a brief period of optimism that such large writedowns were over, things seem to be sliding back the other way again. The Wall Street Journal reports this, with regard to Goldman Sachs Group, Lehman Brothers Holdings and Morgan Stanley:
The note is taking a toll in premarket action. Shares of Lehman have been hit the hardest, losing 5.3%, while Goldman is off by 1.4% and Morgan has declined by 1.3%. Mr. Bhatia projects another round of billion-dollar write-downs for all three companies when they report earnings in September.
Of the three, he is most critical of Lehman, which has been dropping more sharply than its rivals in recent days due to liquidity concerns and chatter about asset sales. Mr. Bhatia expects a $2.9 billion write-down at Lehman, and rates the company as a speculative investment, but adds that Lehman’s price “is discounting more erosion in book value than we anticipate.” Still, the firm has the largest amount of what he calls “hard to sell” assets, at $75.6 billion.
It is also worth noting that Lehman has been trying (and failing) to get various infusions of cash. One of the most recent turn-downs was in Asia.
The speculation that more writedowns will be seen at brokerages is adding to some of the declines on the stock market. After yesterday’s stock market rally, financial sector stocks are leading the overall market lower today — with some help from rising oil prices.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
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oil prices, Lehman Brothers, writedowns
