It is interesting to watch the financials here, as Goldman (GS)(the "man" on the Street) comes out and says writedowns will be far worse than expected, the market seems to be in general shrugging it off. People are saying it is 'priced into the stocks,' but I just think its investor fatigue with hearing the same news every few weeks. Much like a drug (or credit injections) it takes more and more to keep the user going. At some point all this news of billions upon billions of writedowns starts rolling off of investors' backs.
What? Another $6 billion? Been there, done that!
Unless its something much more large in scale ("Maybe I'll get scared when you write off $40 billion!"), or using some new lingo or a new problem ("Writedowns not due to subprime mortgages but due to commerical property loans"), the market has apparently checked out and moved on. Again, Americans have the attention span of a gnat so away we go to worry about Britney Spears' little sister's pregnancy - we cannot be bothered with such things as another $20 billion+ of writedowns. Whats $20 billion when we already have heard this news before? It's all fake money anyhow - I mean what's a writedown after all? And no matter what the Fed has our back as do our friends in the Middle East and Far East.
So I suppose when these banks are going back with hats in hands asking for yet another round of capital infusion from our foreign friends, maybe that will get the attention of investors. Because right now even a nearly $20 billion write off by Citibank means very little. At this point they are fast approaching the point where they are just writing off every thing they have in terms of CDO exposure and saying 'ok we fess up, it's all a joke.' And investors seem content with that because at least it's contained and measured. Until it's not. Which could be a few weeks or months from now. When the next shoes fall. And maybe we have something attention grabbing enough to get the short attention span investor to realize these are real dollars and real destruction of bank's balance sheets. Gosh, back in the day when people actually paid attention when a Goldman analyst spoke.
On Thursday, a Goldman Sachs analyst joined a long line of his peers to predict that fourth-quarter writedowns to be taken by several large banks are likely to be even greater than investors expect. William Tanona now estimates Citigroup's (C) writedowns to come in at $18.7 billion in the quarter, up $7.7 billion from his original expectation. He expects Merrill Lynch (MER) to write down $11.5 billion of CDOs and subprime exposure, up $5.5 billion. Tanona doubled JPMorgan Chase's (JPM) writedown estimates to $3.4 billion, according to an industry note in which he cut his earnings estimates on the three firms. Following the writedowns, Citi would still be exposed to about $25 billion worth of collateralized debt obligations, or CDOs, Tanona estimates. Merrill will still be exposed to $8 billion of CDOs and $5 billion for JPMorgan Chase, he writes. (And we can write that off next quarter, and like magic, all of our problems are fixed.) Still, as a result of the larger-than-expected writedowns this quarter, Citi is likely to cut its dividend by 40% to preserve capital, Tanona wrote in a note on Thursday. Separately on Thursday, Brad Hintz, an analyst at Sanford Bernstein, estimated that Merrill's combined subprime and CDO exposure currently totals $27 billion. The New York brokerage will likely write down $10 billion of its exposure this quarter. (At this pace, that's just two more quarters of writedowns and the problem's solved.) Hintz estimates that Merrill will report a net loss of $5.10 a share, "marking the weakest quarterly result in the firm's history," he wrote in a note. (Who cares? It's only money, and there is always more around the corner to squander. We are too big to fail.) Shares of all three firms have fallen between 1% and 2%.
Folks, we need something a lot more interesting to bother us nowadays. Writeoffs? We're Immune! A write off here, a write off there, here a write off, there a write off... Old Mcdonald...
