Bloomberg

Goldman Sachs: Winner or loser in credit crunch?

Jim Kim — Tue, 21 Oct 2008 16:29:38 -0400

Bloomberg offers the best analysis yet of how Goldman Sachs has fared in the credit crunch. In the end, not even the gilded firm that bet so astutely on the subprime debacle was spared. It was essentially forced to recreate itself as an investment bank. The article offers some nice color on the top executives sleeping in the office as they decided the fate of the company. The big question is how will it fare in the new era? It will need to build a deposit base, obviously. It may soon be in the market to buy up a few banks, though I have trouble seeing it as a retail presence. You have to wonder about its future once it can no longer make the proprietary bets--and a trading and principle basis--that it was so known for. There are a lot of question marks, but all agree an era has ended.

For more:
- here's the Bloomberg article

Joint probe of CDS market underway

Jim Kim — Mon, 20 Oct 2008 07:51:54 -0400

In a collaboration that the New York Times calls unusual, New York state and federal prosecutors are joining forces to investigate possible manipulation in the market for credit default swaps. The focus seems to be on whether dealers artificially boosted the price of CDS on some bonds by reporting trades that never really happened. Data has been sought from Markit, the DTCC and Bloomberg. We'll see where this goes. The view seems to be that the market is so sprawling that joint action is the only way to go. Recall there's been some tension between the two camps, back when Eliot Spitzer regularly upstaged his federal counterparts. This could get interesting and just might fuel the movement to transition the market to an exchange.

For more:
- here's the article

Asset management opportunity for independents?

Jim Kim — Wed, 08 Oct 2008 12:04:39 -0400

Bloomberg offers an interesting article, suggesting that the woes of the big wirehouses may pose a once-in-a-lifetime opportunity for independent asset management firms. There's a lot of anger out there, and at least some of it is aimed at the big-name investment banks. So it would not surprise anyone if independents made a big marketing push right now, for both customers and brokers fleeing the likes of Morgan Stanley and Merrill Lynch. Charles Schwab and Fidelity--the two biggest RIA platforms--tell Bloomberg they are handling record business right now. But customers just might find out that the service offered at a small firm are not meaningfully different from a big firm. The line between a commission guy and a for-fee guy has been blurring for a while. But that's not anything that some tickets and freebies can't overcome.

For more:
- here's the Bloomberg article
- a view from the adviser trenches. Article

Merrill Lynch's loss much worse than expected, but...

Jim Kim — Fri, 18 Jul 2008 08:00:27 -0400

"Right now we believe we are in a very comfortable spot in terms of our capital." So said John Thain, CEO of Merrill Lynch. He was addressing skeptical analysts who were blindsided by Merrill's massive $4.9 billion loss. (Analysts were expecting a loss of $1.8 billion.) The company wrote off $9.4 billion, again much more than expected. Analysts at most were expecting $6 billion. The "comfortable spot" may come off sounding naive if the firm is forced into more capital raising, which may well be likely. True, Merrill raised $6 billion by selling stakes in Bloomberg and Financial Data Services, and presumably it can still sell a portion of its lucrative BlackRock stake. Recall, however, that after Merrill Lynch raised nearly $13 billion earlier this year, Thain said new capital would not be necessary. Hopefully, we won't get a repeat.

For more:
- here's the New York Times article on Merrill Lynch

Merrill Lynch's earnings in the spotlight

Jim Kim — Thu, 17 Jul 2008 07:41:20 -0400

Bank earnings for the second quarter have been surprisingly strong, so far. Of course, expectations were really, really low, which helped JPMorgan Chase handily top estimates (by 10 cents a share). That follows news of Wells Fargo's move to actually hike its dividend. But what the industry is really waiting for is Merrill Lynch's earnings, scheduled to be released today as the market closes. It likely will formally announce a sale of its 20 percent stake in Bloomberg. It's less likely to divest its lucrative stake in BlackRock, which announced strong earnings. The Bloomberg sale--and there may be other moves--will certainly offset the $5 to $6 billion in writeoffs analysts expect, due mainly to mortgage-backed and mortgage-insurance exposure. Analysts on average expect a loss of $1.91. Revenues are expected to come in at $3.3 billion from $9.5 billion a year earlier. Whew! That puts the crunch in perspective.

For more:
- here's an AP preview
- here are JPMorgan's numbers
- BlackRock's earnings beat expectations. Article

Merrill Lynch leaning toward sale of Bloomberg?

Jim Kim — Tue, 08 Jul 2008 13:54:31 -0400

We've noted that top banks and brokerages are pondering all kinds of asset sales. Few will do so in an environment as trigger-happy as the one in which Merrill Lynch now exists. Speculation is heavy that it will sell either its stake in Bloomberg or BlackRock. The conventional wisdom now seems to be that the strategic nature of its BlackRock stake limits the likelihood of such a sale. That leaves Bloomberg. With the likelihood of a $5 billion writeoff looming, Deutsche Bank star analyst Mike Mayo told clients that a sale might generate offsetting proceeds, MarketWatch notes. The danger in this is that it reduces the capital cushion against future losses. If the writedowns keep coming, the firm may be forced to sell its BlackRock stake. Hopefully, it will not get to that.

For more:
- here's a MarketWatch brief on Mayo's comments
- Wachovia's analyst expects a $5 billion writedown. Article

Related Article:
More asset sales to come

More asset sales to come

Jim Kim — Mon, 07 Jul 2008 16:07:49 -0400

With all top banks--except maybe Goldman Sachs--facing the need to raise more capital, it's a good bet we are going to see more asset sales. Morgan Stanley has announced that it will raise about $900 million by selling half of its stake in MSCI, the index and research house. Meanwhile, Merrill Lynch apparently is serious about selling part of its stakes in either Bloomberg or BlackRock, or both. Citigroup just raised $900 million by selling its stake of CitiStreet benefits administration company to ING Group. There have been various rumors that Citigroup also is pursuing sales of consumer-related business units in Europe, as well as an outsourcing outfit in India. You've got figure a lot is on the block at Citigroup.

For more:
- here's an article on Morgan Stanley from MarketWatch
- here's more on Merrill Lynch's asset sales
- here's an article on Bank of America selling its CA tech center

Next on the hot seat: Merrill Lynch?

Jim Kim — Fri, 27 Jun 2008 12:24:29 -0400

Things are getting a tad uncomfortable for Merrill Lynch and its erstwhile CEO John Thain, a man most everyone thought was perfect for the job. We're not talking Bear Stearns hot; more like Lehman Brothers hot. Merrill Lynch is expected to post a large writeoff for the second quarter. A Lehman Brothers analyst has predicted it could be as high as $5.4 billion, due mainly to larger than previously forecast losses because of CDOs and bond insurer-related issues. A large loss certainly is possible, maybe even likely. All this has revived talk of whether Merrill Lynch will be forced to sell off stakes in Bloomberg or BlackRock. CNBC notes that it cannot easily issue more common stock to due capital raising deals struck in December or January.

For more:
- here's the article

On Wall Street, Thomson Reuters vs. Bloomberg

Jim Kim — Mon, 23 Jun 2008 08:12:46 -0400

There was a day when Bloomberg wasn't the primary vendor of financial news and analytics on Wall Street. I remember back when it was a start-up, squaring off against the likes of companies like EJV (remember them?), Telerate, and a few others. But Bloomberg vanquished the field, growing way beyond its base as a bond info purveyor. When Reuters merged with Thomson, people thought a legitimate challenger to Bloomberg was born. They were right. As of right now, the New York Times reports the two are virtually tied: Thomson Reuters has 34 percent of the market, while Bloomberg 33 percent. But Thomson Reuters thinks it has an opportunity to win more market share with flexible pricing. There may be an opportunity to undercut Bloomberg a little. It will be interesting to see how Bloomberg responds. A price war? I doubt it. But let's see.

For more:
- here's the New York Times article