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It is striking– but not unexpected– that Goldman Sachs reported only its 2nd quarterly loss since it went public several years ago. Nor that its common stock is selling at a 20% discount to book value of $120 a share– rather than its formerly exalted premium over book value.
Just as t he protesting residents of the square they temporarily reside until the cold weather drives them inside, the profits of ALL Wall Street were $12.6 billion in the first 6 months of 2011– as the public flees the markets, volume of trading is volatile but depressed, Goldman has to give up a great deal of its risky–but highly profitable business trading (fixed income trading was off a troubling 36%).
Even if Wall Street can make another $12 billion the next 6 months– which I doubt– it will still be a year of $24 billion– down 60% from the $54 billion profits racked up in 2010. No wonder bonuses will be off 30-40%. It’s about time that the unlimited gravy train goes in reverse.
Who ever thought Morgan Stanley would be trading at $15 a share, that Bank of America would be 50% of book(if indeed it is really book, or just some figment of it due to mortgages impossible to evaluate with any certainty.
And the occupiers of Wall Street had nothing to do with this comedown. Nor did they cause wholesale prices to rise 6.9% the past 12 months despite the economy’s stagnation. Can’t blame the 9.1% unemployment or the 45 million on food stamps or the 45 million below the poverty line.
While the seekers after utopia, nirvana in civil society are still getting free grub and marching and most of all getting exposure on national television we will be fascinated by this welcome diversion from the Republican debates, from the European contagion. I’d bet Goldman and Bank of America and Morgan Stanley and their ilk (Keefe Bruyette & Woods believes JPM is a $50 stock; its $32 a share today.) could sell below book value some months to come, maybe longer.
And no great achievement will be notched by the demonstrators, who, according to pollster Douglas Schoen; comprise a segment of the electorate”that believes in radical redistribution of wealth, civil disobedience and in some instances, violence.” There’s more chance of the last two items taking place than the first. The bonuses on Wall Street may be reduced greatly for the time being, but they are still bound to be big money.
source: forbes.com
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