Economist Nouriel Roubini argues that Goldman Sachs (GS) and Morgan Stanley (MS) are screwed, too, and should be using every available hour to find banks to merge with. But they’re too busy: They’re preparing to release their earnings for the now-irrelevant third quarter.
WSJ: With Goldman due to report fiscal third-quarter results Tuesday and Morgan Stanley Wednesday, Wall Street is jittery about how much financial damage those two firms will suffer from the same problems that pounded Lehman, especially losing bets on real-estate-related assets.
The numbers won’t be pretty, with analysts expecting write-downs of $1 billion to $2 billion each at Goldman and Morgan Stanley. Luckily for both, enough businesses are posting at least decent results to keep the two firms in the black for the latest fiscal quarter.
…Goldman could be hit especially hard. Analysts surveyed by Thomson Reuters estimated last week that Goldman would make about $1.73 a share in the fiscal third quarter, down 72% from a year earlier — one of the firm’s weakest showings since the crunch began. Morgan Stanley is expected to post earnings of 77 cents a share, down 44%.
Until recently, Goldman has had a magic touch, betting correctly that subprime mortgages would crater and nimbly avoiding other messes. Morgan Stanley embarrassed itself with some of its mortgage bets last year, but has since soothed investors and scaled back on risky exposures.
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