Monday, October 12, 2009

Earnings To Begin in Earnest

This week marks the beginning of a deluge in earnings reports. We'll hear from banking heavy-weights like JP Morgan and Goldman Sachs (both busy allocating bonuses), as well as lightweights like Citi (getting lighter by the quarter as it expected to post yet another loss.) In the meantime, here are some highlights from this morning's financial rags:
  • Potential bidders for one of the many half-built bankrupt Las Vegas luxury casinos, Fountainebleu, are attempting to decide whether it is worth paying anything to assume the liability of spending another $2 billion to finish construction. Penn National Gaming is supposedly expressing interest.
  • Foreclosures are hitting the high-end, with about 30% of foreclosures in June involving the top third of local housing values, up from 16% three years ago, according to This is likely due to the souring economy, as well as recasts on Alt-A and option arm loans that continued to be underwritten well after the subprime market came to a screeching halt.
  • Interesting article in the WSJ about venture capitalists shutting their doors, particularly in recent outposts like Dallas. Disappointing returns and an inability to attract money for new funds is causing many less established venture firms to wind down. CenterPoint Ventures was not able to raise a new fund in 2007 after investors demanded to see returns from earlier funds. The nerve of investors actually wanting to see returns before handing over more cash! Overall venture fund-raising this year is down sharply, with just 83 new funds totaling $8 billion raised in the US through the end of September, compared to 205 new funds totaling $30.5 billion in 2006.
  • KB Home is being investigated by the SEC for its accounting. Add this to the long list of scandals in KB Home's recent past, including accusations of stock option manipulation by its chief executive and federal charges that it engaged in improper mortgage lending.
  • The trial of former Bear Stearns hedge fund managers Cioffi and Tannin will begin in Brooklyn tomorrow. This one will be interesting.
  • The US Pay Tsar is cracking down on executive pay among lower level employees at AIG. Naturally everyone will leave if they aren't paid enough, except for the new CEO, who's allowed to keep his $7 million annual salary.
  • Citigroup was hit with a $600,000 fine for helping wealthy clients evade taxes through the use of total return swaps. Apparently this is merely the first in a wide crack down against Wall Street banks, most of which apparently use this strategy. I'm sure they're all quaking in their boots at having to take that $600k hit.


Mr Wrightwood said...

By fining Citi, isn't the government really just fining itself? "Let me buy you a beer. Can I borrow $10?"

K10 said...

yes, the whole thing is hilarious, embarrassing and depressing all at the same time!