Earnings and Economic Numbers 4/29/2008

Deutsche Bank reported a net loss of 131 million euros after taking 2.7 billion in write-downs. In other, equally shocking banking earnings news, Countrywide lost another bundle of money, attempting to prove to the world that WaMu and Wachovia had nothing on them when it came to lack of underwriting standards. Countrywide lost $893 million, or $1.60 a share. Although the Bank of America takeover appears to be on track, Countrywide's losses could easily blow through the $4 billion that Bank of America paid for it in about three more quarters. Furthermore, GMAC posted a $589 million loss due to $859 million in losses in its ResCap mortgage lending unit. Another fine example of great timing by Cerebrus Capital, who took a large stake in GMAC at the peak of the market. Need another? Chrysler's losses led to a 32% decline in Daimler's net income. Cerebrus paid $7.4 billion for its 80% stake in Chrysler just a year ago. That investment has been a real performer.

If you are confused about the horrendous numbers posted by the financial firms, a peek at a couple of economic reports should help explain the situation. The S&P Case-Shiller Home-Price Index fell 12.7% from a year earlier. Nineteen of the twenty cities in the index showed declines, Las Vegas leading the pack with a 23% price slump. Charlotte, the lone holdout posted a meager increase of 1.5%. Then again, I don't ever remember reading about frantic condo-flipping in Charlotte. Also, US foreclosure filings doubled in the first quarter, led by Nevada. Interestingly, Las Vegas is in Nevada, which leads me to suspect that there is a very interesting correlation between foreclosures and slumping housing prices. Maybe everyone will use their $600 rebate checks from the government to buy a house out of foreclosure. If that happens, I'd consider being bullish again on financials. In the meantime, I'm buying more bags of rice on the downtick.