In the news:
“Goldman Sachs, the most profitable Wall Street firm before it converted to a bank last year and posted its first quarterly loss since going public in 1999, said yesterday it earned $3.39 a share, in the first quarter. A surge in trading revenue outweighed asset writedowns, and the result beat the $1.64 estimate of 16 analysts surveyed by Bloomberg.”
More here at Bloomberg.
My Comment
“Beating expectations” has turned into a short-sighted game of bluff. Companies deliberately underestimate earnings so they can beat analyst estimates. That gives them a temporary boost for the quarter that’s entirely misleading.
The point of all this tarting up on the part of the firm was to boost it enough to raise capital to repay some ($10 billion) of its TARP debt. Why? Because GS doesn’t want to abide by TARP limits on compensation.
But even so, debt with FDIC backing is more “attractive,” according to CFO David Viniar. You see, the FDIC backing won’t require caps on compensation.
In other words, TARP or no, as far as the public recouping anything for taking the risk, it’s heads we win, tails you lose.
Meanwhile the share price on the new capital fell by 12% on anxiety that the first quarter results weren’t sustainable.
What’s also interesting is that Goldman also changed its financial calendar to include December in the results of the previous quarter….
Hmm. Can YOU do that with the IRS?