Wednesday, April 14, 2010

Earnings, Losses, and Excuses

First the good news:

  • Both JP Morgan and Intel reported solid earnings. Profit at JP Morgan rose by 55% from a year earlier to $3.3 billion helped by a sharp 30% reduction in provisions for credit losses. Oh, and zero percent interest rates. It's always nice when you can borrow money at zero percent from your friends at the Fed and then charge consumers 20%. Really pads the bottom line.
  • Meanwhile Intel's quarterly profit nearly quadrupled to $2.44 billion, while revenue rose 44% to $10.3 billion. The tech giant's good quarter bodes well for the rest of the tech sector.
In somewhat disappointing news:
  • Investors in Morgan Stanley's $8.8 billion MSREF VI real-estate fund were recently informed that they have likely lost two-thirds of their money. The WSJ helpfully points out that this would probably make it the largest dollar loss in the history of private far. The losses stem from a buying frenzy during the peak in the commercial real estate market using oodles of leverage. The property purchases were global, so you know, at least they were diversified. Possibly the biggest bummer about the loss is that it's really putting a damper on the firm's plans to raise the $10 billion follow-up vehicle called MSREF VII. Here's a bit of unsolicited marketing advice for the folks at MSREF that I learned in MBA school: maybe you want to rebrand? Give the fund a different name, or something? If I'd lost two-thirds of my money in your last fund, I'm definitely not investing in your new fund, because at this point I'm thinking you guys aren't very good at investing in real estate.
In hilarious, as well as infuriating news:
  • From Kerry Killinger, overseer of the multi-billion dollar fraud-infused-subprime-option-arm bubble-frenzy that was Wa Mu in its hey day before it collapsed under the weight of its stinky mortgage self: "For those that were part of the inner circle and were 'too clubby to fail,' the benefits were obvious. For those outside the club, the penalty was severe." Because underwriting over $100 billion in negative am mortgages without asking for a single W2, or verifying that the borrower actually had only $10K in annual income and $3 in his bank account before giving him a $2 million mortgage on a house that had sold for $300,000 last year had NOTHING TO DO WITH WASHINGTON MUTUAL'S COLLAPSE. No, it was the lack of a government bailout. You see, if only Washington Mutual had been bailed out by the government instead, it would've survived and would've been in tip top shape. This was all part of Mr. Killinger's business plan, and the FDIC had to go and ruin it all by seizing his bank. I mean, really, they had some nerve.

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