Wednesday, September 26, 2007

Earnings Quality Part XXIII........

Another example why you should read the earnings news especially from financial with great scepticism......Add this to the list of "creative accounting" like Negative Amortisation, Level 3 " Mark-To-Make-Believe Gains", Level 2 "Mark-To-Model", "Preferred Measurements Of Income", loan loss "politics" Part 1 & Part 2 etc.......
Einmal mehr Beleg dafür das man besonders die Ergebnisse der Finanzinstitute mit einer gewissen Portion "Skepsis" betrachten sollte......Hier ein paar weitere Beispiele die belegen das nicht wirklich "konservativ" bilanziert wird Negative Amortisation, Level 3 " Mark-To-Make-Believe Gains", Level 2 "Mark-To-Model", "Preferred Measurements Of Income", Risikovorsorge Teil 1 & Teil 2 etc.......
Brokers' Head-Scratcher / WSJ
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.
Hat tip to Barry Ritholtz
Keep this in mind when Wall Street is pointing to low pe´s......They also often forget to mention that financials are the biggest sector of almost every major US index....
Behaltet all das im Hinterkopf wenn der nächste Analyst mal wieder auf die niedrigen KGV´s verweist....... Zudem wird nur zu gerne unterschlagen das Finanzwerte der mit Abstand wichtigste Sektor aller US Indizes sind....
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Blogger jmf said...

Merrill Lynch May Write Down Assets by $4 Billion

Tanona cut his third-quarter earnings estimate to 15 cents a share from $1.95. For the full year, he expects earnings of $6.75 a share, or 25 percent less than his previous prediction

10:01 PM  
Blogger jmf said...

From Barry´s comment section

"The Fed would not have signed 6 23A exemption letters, opened the discount window to accept MBS & other impaired securities at an 85 price, and cut the discount rate 100bps if some major players were not technically insolvent. Either a few players go down or we are in the process of "turning Japanese" to borrow a phrase, experiencing a long-drawn process of recognizing all of the mortgage & CP losses that are flowing through to the securities these banks own. Like the old Fram commercial said, "you can pay me know or you can pay me later". If the dung shoe fits, wear it."


10:27 PM  
Anonymous Anonymous said...

Ja, aber...

I just did a quick calculation, and since the Aug 17 close, the Hang Seng index, right now trading over 27000, has risen almost 33% in little more than a month. And on Aug 17, it actually traded 1000 pts lower, intraday, than its close.

Unglaublich, oder?

To perhaps get a clue to the psychology at work, note this interesting quote:

The newspaper report "sparked a notion that the subprime issue may not have been that serious," said Horoshi Chano, who helps manage $7.3 billion at Yasuda Asset Management Co. in Tokyo.

Personally, to me it seems like panic buying -- people afraid they will miss the next leg up.

But if it is true that on the NYSE a HUGE % of trading is done by institutions, aka the 'smart money', could the same be true in some Asian markets, zB Hong Kong?


11:45 PM  
Blogger jmf said...

Moin Eh,

unglaublich, in der Tat.

While I think China/Hong Kong is an extreme it feels the entire EM is acting like a safe haven and a bet on a currency appreciation .

Amazing, isn´t it.....

Schwellenbörsen trotzen der Finanzkrise

Including a nice chart

Here is a interesting post from iTulip

Today I Shorted China

I think the latest central bank action has lead to what Russ Winter calls "Flucht in die Sachwerte".

We in Germany know what he means..... :-)

It is fascinating to watch how this will play out.

12:04 AM  
Blogger jmf said...

The Short View: Emerging markets bubbles — we’re not (quite) there yet

China and India, however, dominate the flows of foreign money. Here the picture is different.

MSCI shows India trading at a multiple of 22.9 and China at 48.8. This does look like a bubble. In both cases, their growth to date owes much to multiple expansion: India’s doubling in three years; China’s trebling in two years. For both, the growth story is compelling, but authorities are tightening monetary policy, not normally a good time for multiples to expand.
So there is not – yet – a generalised emerging markets bubble. There is growth in emerging markets, for those who do the necessary homework and take the necessary risks.
But there is no great bargain opportunity, either. And the way funds are piling in to the most popular markets suggests bubbles could easily form there.

12:15 AM  
Anonymous Anonymous said...

From your FAZ link:

Zwar fielen die Kurse an den Börsen in China, Indien und Brasilien unmittelbar nach dem Ausbruch der Hypothekenkrise in Amerika Mitte Juli stärker als an den etablierten Aktienmärkten.

This is why I am still looking for a good entry point for DXESX.

But I agree: nicht jetzt.


12:53 AM  
Blogger jmf said...

Moin Eh,

interesting product.

A few more days or weeks of this mania and i´m in danger of getting "weak".

So far i´m very proud that i have never touched a short in this region.

In large part because the shorts in the US looked so much better :-)

1:08 AM  
Blogger jmf said...

ECB Loans Emergency 3.9 Billion Euros, Most Since '04

The European Central Bank loaned the most money at its penalty interest rate in almost three years as policy makers struggle to push down market borrowing costs.

The ECB loaned 3.9 billion euros ($5.5 billion) at its marginal lending rate of 5 percent yesterday, the most since October 2004, the Frankfurt-based central bank said today. It didn't provide details on who asked for the money.

1:58 AM  
Blogger jmf said...

Profit Growth in U.S. May Hit Five-Year Low on Housing Slump

Profit in the U.S. may grow at the slowest rate in more than five years this quarter as the housing slump hurts results at companies from IndyMac Bancorp Inc. to Target Corp.

Earnings of Standard & Poor's 500 Index members may rise an average of 3.2 percent from a year earlier, breaking a 20- quarter streak of gains exceeding 10 percent, according to data compiled by Bloomberg.

So-called short sellers increased their bets against homebuilders, home improvement retailers and mortgage real estate investment trusts in each of the past four months. The number of borrowed shares traded with the expectation of paying for them at a lower price in the future grew by 21 percent, 34 percent and 17 percent, respectively.

Short interest for the broader group of consumer discretionary companies listed on the New York Stock Exchange increased 2.7 percent in the last month.

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