Tuesday, April 15, 2008
State Street Boasts Higher Profits, Ignores Losses
State Street beat earnings estimates handily this morning by posting profits of $530 million. The stock rallied nicely until the conference call when the company mentioned that its investment portfolio had $3.16 billion in unrealized losses. The company's claims that the losses were most likely temporary ("See? They're unrealized losses! They don't actually count!") failed to impress investors when it dawned on them that State Street may actually fail to realize it has losses. How many of those losses will turn into impairments is anybody's guess, but something tells me the answer in definitely not close to zero.
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When I go to the bank for a loan and they ask for my earnings for the last two years, can I say I had some "unrealized" losses on all the stocks I bought that went down but I am not including that number in my earnings number? All the losses are unrealized and temporary so please allow me to borrow based on my GAAP earnings?. American accounting standards, the land of transparency and the envy of the world. Funny how we make fun of 3rd world accounting standards.
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