Custom Search

Tuesday, January 20, 2009

State Street, Barclays Suck Markets Lower

In yesteday’s post, Royal Bank of Scotland: Kills Oversold Bounce I wrote:

“Do not buy bank common shares for anything but a quick scalp or trade. The overnight gap or event risk is far too great. The banking system is insolvent. Discovering which individual banks are not is a very dangerous game to play.”

Yup. Today pretty much illustrates the dangers.

Pre-market the bid on State Street (STT) is $24.00, down over 30%. The previous panic low in October 2008 was $27.87.

Barlays (BCS) is down over 40% pre-market, bid at about $4.20.

Bank of America (BAC) is down 15% pre-market, bid at about $6.00.

Because of the debacle with Royal Bank of Scotland (RBS) on Monday, financials will get taken out to the woodshed today and shot…

State Street Net Falls 71% on Costs to Support Funds (Update1): “State Street Corp., the world’s largest money manager for institutions, said fourth-quarter earnings fell 71 percent on costs of more than $800 million to prop up funds and cut its work force.

Net income fell to $65 million, or 15 cents a share, from $223 million, or 57 cents, a year earlier, the Boston-based company said in a statement today. Excluding certain items, profit was $1.18, beating the $1.13-a-share estimate of 13 analysts surveyed by Bloomberg.

State Street said Jan. 16 that fourth-quarter results would include expenses to offset losses in its stable value funds, cut jobs and write down the value of investment securities. Last month, the company said it would eliminate 1,700 jobs, or 6 percent of its workforce, as declines in financial markets reduced client assets on which it charges fees. Global stock markets fell 47 percent in 2008.

“What drives their revenue is the value of their assets under custody and assets under management, and those have declined precipitously,” Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine, said in an interview before the earnings were released. Cassidy, who doesn’t own State Street shares, rates the company “sector perform.” He had estimated the company would earn $1.04 a share.”


Anonymous said...

"Because of the debacle with Royal Bank of Scotland (RBS) on Monday, financials will get taken out to the woodshed today and shot…"
What worries me is that after our trading accounts have become fat from shorting just about everything from regional malls to my grandmother's pet pig......there could come a time when the trading account itself seizes up. At the moment the best investment of all could be cash under the mattress. It's not safe anywhere else.