Re: Stanley loses $578M in 1st quarter

[Guest guest]

Ok, I admit to confusion of the logic used: if your debt is better, you'll have

a loss, but if you have lousy debt you own, you have a gain? The most logical

extrapolation is that with a lot of the other banks reporting good quarters,

perhaps the reality is they have way too much bad debt!

<sigh> More illogical, misleading accounting tricks, reminiscent of Enron

tactics

>

> http://finance.yahoo.com/news/-Stanley-loses-578M-in-apf-15000450.html

>

> Stanley loses $578M in 1st quarter

>

> Stanley loses $578M in 1st quarter, $1.6 billion in December; company

cuts dividend

>

> Ieva M. Augstums, AP Business Writer

> Wednesday April 22, 2009, 2:01 pm EDT

>

> CHARLOTTE, N.C. (AP) -- Stanley posted a bigger-than-expected quarterly

loss to common shareholders of $578 million, hurt partly by the deteriorating

commercial real estate market.

>

> The bank was also hit, counterintuitively, by an improvement in the value of

its own debt in the first quarter. This improvement essentially increased the

amount of debt on Stanley's books.

>

> The Wall Street firm also slashed its quarterly dividend 81 percent to 5 cents

per share from 27 cents.

>

> The New York-based company's report comes after several big bank rivals have

reported better-than-expected results in the last week, boosted in many cases by

strength in their investment banking businesses.

>

> Stanley posted a loss of 57 cents per share for the January to March

period, after paying more than $400 million in dividends to preferred

shareholders. The company said it lost $1.6 billion in December.

>

> Shares fell 69 cents, or 2.8 percent, to $23.96 in morning trading.

>

> Stanley reported December separately because this year the company

shifted to a traditional calendar quarter. Its fourth quarter for the previous

fiscal year included September, October and November.

>

> Stanley's first-quarter shortfall was sharper than analysts expected.

They predicted a loss of 8 cents per share.

>

> It was also worse than last year's comparable first quarter. In that period,

Stanley earned $1.3 billion, or $1.26 per share.

>

> Stanley lost $1 billion in the latest quarter from its investments in

real estate, and lost $1.5 billion because its own debt gained in value as

investors grew more confident about the bank's creditworthiness compared with

late last year, right after Lehman Brothers collapsed.

>

> So if Stanley had to buy its debt back at the end of the first quarter,

it would have had to pay more for it than it would have at the end of last year.

And accounting rules require this change to be recorded as a loss.

>

> This was the opposite of what happened to some other banks in the first

quarter -- Citigroup was able to record a $2.7 billion gain because investors

grew more worried about its creditworthiness, and in turn, reduced the debt on

Citigroup's books.

>

> " Stanley would have been profitable this quarter if not for the

dramatic improvement in our credit spreads -- which is a significant positive

development, but had a near-term negative impact on our revenues, " said Chairman

and CEO Mack.

>

> He added that the bank saw strong results in investment banking, commodities,

interest rates and credit products.

>

> Other banks -- Citigroup Inc., JP Chase & Co., Wells Fargo & Co., and

Goldman Sachs Group Inc. -- have been posting first-quarter results that have

topped analysts' estimates. These results were somewhat reassuring to investors,

but they remain concerned about upcoming loan losses this year as unemployment

rises and the housing market weakens.

>

> " Stanley's first quarter earnings show that the current environment is

still very challenging, " said Easthope, a senior analyst with consultancy

Celent. " In this climate, expect Stanley to focus on continued reduction

in the cost base and on maintaining its capital base as much as possible. "

>

> Chief Financial Officer Colm Kelleher said in an interview Wednesday with The

Associated Press that the company " remains cautious, " though he stressed

Stanley has more than enough capital and cash on hand.

>

> " I think this year is going to be a challenging year for people, but this firm

has its balance sheet, liquidity and capital into a place where we are uniquely

positioned to take advantage of markets where we see the right risk,

justification and terms, " he said.

>

> The bank would like to repay back $10 billion in U.S. government loans,

pending the results of the stress tests being administered to banks by the

administration and permission from regulators, Kelleher added.

>

[Guest guest]

My first accounting teacher in 1997 stressed that debt was an asset. She would say that debt would allow you to do certain things that you otherwise could not do in the near term, though you did have to pay it back. Another accounting teacher I had a couple of years later thought that idea was silly. However, in accounting, the cash from the debt is put on the books in both the asset and liabilities columns. The interest one has to pay is also in the liabilities column.

I can tell you from personal experience however, that debt sucks. I got into a business investment that required taking a loan. The investment was supposed to be settled out in 3 to 4 years. Turns out because of events beyond my or anyone's control that to be more like 8. Now, I could afford to float that debt without much trouble. However, I have learned harshly that debt is indeed an opportunity cost. That is to say, because my extra funds were dedicated to paying that debt, several other more attractive opportunities have gone by. I'm in the process now of clearing those investments.

Its the same with these businesses. Debt might help them in the short run, but it is hurting them now. IN the short run it might have allowed them to expand or to simply puff up the balance sheet to appease the fickle investors. Investors demand a high return on their investment now and always. If a company has a little slipup, rather than hang in there, investors tend to punish the company and take their money elsewhere. Many firms have been ruined by greedy stockholders. I always thought that this constant pursuit of ever high returns forever was a house of cards and it is turning out to be just that. Anyway, the companies are finding out now that in hard times, they have these huge payments to make on their debts and those payments take up funds they could otherwise be using to help the company. Their debt also makes them ineligible for other loans because they are a bad risk.

I'm beginning to really dislike the stock market. This is partly for reasons I have just mentioned and how easy it is to manipulate it both by greedy investors and foreign powers. Maybe going back to a system of just bonds that must be held for at least a year before being traded?

In a message dated 4/24/2009 7:09:22 A.M. Eastern Daylight Time, no_reply writes:

Ok, I admit to confusion of the logic used: if your debt is better, you'll have a loss, but if you have lousy debt you own, you have a gain? The most logical extrapolation is that with a lot of the other banks reporting good quarters, perhaps the reality is they have way too much bad debt!<sigh> More illogical, misleading accounting tricks, reminiscent of Enron tactics The Average US Credit Score is 692. See Yours in Just 2 Easy Steps!

[Guest guest]

I have seen that movie. The Stock market is basically respectably gambling for the rich people. They can afford to take losses now and then, but the average person in the market can't. The market does have historically good returns, but only so long as it remains clean. We had a build up of too much corruption and the market is resetting itself to where it should be, though I think it will overcorrect because of the actions of government.

I really don't understand why companies would go public, not the way investors are. I can see issuing bonds because they aren't as volatile as stocks. If a company's business plan is good, then it should have no problem selling bonds or getting loans to cover its plans.

In a message dated 4/24/2009 5:22:11 P.M. Eastern Daylight Time, no_reply writes:

Watch the movie "Wall Street" with and Charlie Sheen. YOu will hate the market even more. There is a lot of greed in the market, and it is hard for the small time investor to make an honest buck because of it. Administrator The Average US Credit Score is 692. See Yours in Just 2 Easy Steps!

[Guest guest]

" I'm beginning to really dislike the stock market. This is partly for reasons I

have just mentioned and how easy it is to manipulate it both by greedy investors

and foreign powers. Maybe going back to a system of just bonds that must be held

for at least a year before being traded? "

Watch the movie " Wall Street " with and Charlie Sheen. YOu will

hate the market even more. There is a lot of greed in the market, and it is hard

for the small time investor to make an honest buck because of it.

Administrator

[Guest guest]

" I really don't understand why companies would go public, not the way investors

are. I can see issuing bonds because they aren't as volatile as stocks. If a

company's business plan is good, then it should have no problem selling bonds or

getting loans to cover its plans. "

Loans put a company in the position of having to pay back the money borrowed

with interest. Bonds mean you have to buy them back at a fixed point in time.

Stocks can be put out there for an indefinite amount of time, and the dividends

issued on them are pretty much at the discretion of the company.

Administrator