Ready for 'write-ups' in the second quarter?

Thu, 15 May 2008 06:59:56 -0400

Breakingviews notes another reason to think that the worst of the credit crisis may have passed. Credit default swaps on collateralized debt obligations and leveraged loans have staged impressive rebounds. Prices have really rebounded. That raises the prospect of "write-ups" for the second quarter, which would certainly help offset expected weakness in other areas. Who'd have thought that just a few quarters ago. Still, there's no point getting too excited now. The article notes that the rebound has affected all securities; there are plenty of stinkers in plenty of portfolios. As well, the rebound may have been a bit of a dead-cat bounce, if you know what I mean. Still, there seem to plenty of distressed securities buyers out there. We'll see where this mini-rally leads.

For more:
- here's the Breakingviews article

Second-quarter earnings still a question mark

Thu, 15 May 2008 06:59:55 -0400

Goldman Sachs analyst William Tanona has reduced his second-quarter earnings estimates at Bear Stearns, Lehman Brothers and Morgan Stanley, notes the AP. For the second-quarter, the sources of reduced earnings growth likely will shift. The key contributors this time will not be writedowns from troubled securities, CDOs and leveraged loans. Rather, it will come from weakness in core business lines, such as investment banking and principal and proprietary trading. As noted previously, losses from credit spreads on their own debt (a fair value issue) will lead to losses, even though there might be write-ups from other securities (see previous item). All in all, he also believes that on a valuation basis, top banks are now a good buy.

For more:
- here's the AP article