Thursday, July 17, 2008

MEMO FROM OZ--MERRILL LYNCH AND GOOGLE

Merrill Reports $4.9 Billion Loss on Write-Downs



Merrill lost $4.9 billion in the quarter, or $4.95 a share, results far worse than the $1.8 billion loss expected by financial analysts. Just a year ago, Merrill recorded a profit of $2.067 billion for the second-quarter.
The bank said its mortgage assets and other investments are now worth $9.4 billion less than it once thought they were, bringing its total write-downs to close to $40 billion. It is a striking backtrack, more than wiping out the $25 billion in profit the company earned in the four and a half years before the credit crunch began.

Google Earnings Are Below Forecasts, and Shares Fall



SAN FRANCISCO —Google, the search giant, gave an uncharacteristic disappointment to investors on Thursday, failing to meet at least some of Wall Street’s expectations for its second-quarter performance.
The company, based in Mountain View, Calif., said its profits, excluding the costs of stock options, were $4.63 a share, missing Wall Street’s forecasts of $4.74 a share.
Google’s net income grew 35 percent, to $1.25 billion, or $3.92 a share, compared with $925 million, or $2.93 a share, in the second quarter of 2007. Revenue climbed 39 percent, to $5.37 billion, from $3.87 billion a year earlier.
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If, in microcosm, we needed a primer on why Wall Street is in such deep shit these days, I guess the combination of these two articles in the NYTimes is evidence enough. Company A loses $40 billion, $15 billion more than it earned in the past four boom years--and is still in business. Company B earns 35% more than it earned a quarter ago, cumulatively coining so much money it is awash in capital and--does it go up in value? No, it declines.
In the topsy-turvy world of economic OZ, such things are the norm.
The mortgage banks (and indeed all banks) are failing or on the brink of failure, the nation's two biggest loan guarantors plunge like olympic divers, the dollar is worth half what it was before this madman became president and . . .
. . . because oil prices per barrel have dropped by an infinitesimal amount, the stock market is surging.
Go figure. Or, perhaps more usefully, just hold your head in your hands and wait for various axes to drop.

* For more in-depth articles by Jim on Business and Economy, check out Opinion-Columns.com