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Ex-Lehman CFO Erin Callan Heads To Credit Suisse (CS, LEH)

Credit Suisse Group (NYSE: CS) has announced that Erin Callan will be joining the bank as a Managing Director and Head of its Global Hedge Fund Business in a newly created position based in New York. Her effective employment date is September 2, 2008.

Ms. Callan is the recently deposed CFO of Lehman Brothers (NYSE: LEH), who many feel got a bad shaft upon her termination.  She will join the Investment Bank Management Committee and the Global Client Steering Committee.

Callan will spearhead Credit Suisse's strategic advisory and coverage efforts serving the hedge fund community where she will partner and coordinate closely with the businesses that support the Bank's hedge fund clients, including Prime Services, the Financial Institutions Group and Global Markets Solutions Group.

Jon C. Ogg
July 15, 2008

Is Lehman The Next Bear Stearns? (LEH, JPM)

The financial services sector has gone from horrible to somewhat stabilizing and back to horrible and then looking even worse.  When you think of an old mantra that "Failure isn't an option" that just isn't looking to be the case in the sector.  Lehman Brothers Holdings Inc. (NYSE: LEH) is down well over 10% again today and the stock hit a new 52-week low (multi-year actually).

Part of this is the rumor mill back in full force. We don't even want to fan those flames nor do we wish to participate in that.  But part of this daily drop is from legitimate fears and some Fed-Speak that might scare you into thinking they aren't just going to bail out every institution that runs into financial trouble.  The fact that a stock keeps losing 10% or 20% of its value isn't enough to throw up the red flag for a potential filing for bankruptcy protection.  But as soon as the fears set in to the point that other parties take aggressive defensive actions to insulate themselves then it's too late.  That was the case with Bear Stearns even though many of the rumors floating around before may have helped lead to a self-fulfilling prophecy.  When key customers begin leaving and when counter-parties stop accepting a financial firm's business or their paper, then they are as good as done.

Another notion here on Lehman is the action seen in the PUT OPTIONS.  We are seeing more and more PUT buying in July contracts which expire in only a week. Below is a brief matrix of this months PUTS with strikes and the open interest.  This isn't looking that promising:

PUT/STRIKE   Volume  OpInt
JUL08 $5.00    2,517    8,422
JUL08 $7.50    2,919    19,698
JUL08 $10.00   6,815    29,377
JUL08 $12.50   5,730    23,655
JUL08 $15.00  10,716   63,370
JUL08 $17.50   2,515    63,973
JUL08 $20.00   1,158    60,566

Over the last week we have heard JPMorgan's (NYSE: JPM) Jamie Dimon talking about dismissing the notion of TBTF (too big to fail).  We have heard Treasury's Hank Paulson and other Fed officials discussing the "allowing institutions to fail" and "allowing them to seek bankruptcy protection" as part of the course of the free markets.  Dimon might want to gobble up another bank in trouble to get the deposit and banking base, but he's unlikely to want to buy another troubled brokerage firm.

Unfortunately, there are a handful of large financial companies out there where this notion of failure or bankruptcy protection or another Draconian measure is at least becoming a stronger and stronger possibility.  It seems that in today's troubled financial markets that failure is actually an option, albeit a painful one.

Jon C. Ogg
July 11, 2008

More Losses For Merrill Lynch (MER)

Oppenheimer says that Merrill Lynch (MER) lost $5.8 billion in the second quarter.

The analysis also says Merrill will cut is dividend.

According to MarketWatch, Oppenheimer analyst Meredith Whitney also slashed Merrill's full-year estimate for 2008 to a per-share loss of $5.37, significantly wider than her prior estimate of a loss of 45 cents a share.

Douglas A. McIntyre

IPO FILING: Liquidnet Holdings Inc.

Liquidnet Holdings Inc. has filed for an initial public offering to sell up to $500 million as the nominal securities amount.  This is going to be a somewhat more complicated IPO as the structure appears to have A shares and B shares, and the company has not taken any applied stock ticker and has not yet established which stock exchange it will list on.

The underwriting group is rather large.  Its lists Goldman Sachs and Credit Suisse as the lead underwriters, and other managers are listed as Liquidnet (itself), JPMorgan, Lehman Brothers, and Sandler O'Neill.

The company is an electronic marketplace for institutional investors to trade equity securities worldwide for buyers and sellers of large blocks of equity securities.  This is essentially an old ECN and now referred to as a dark pool, enabling trading clients to trade with each other directly and anonymously via the Internet on its electronic trading platform. As of May 31, 2008, its notes that its community was comprised of 514 members globally that collectively accounted for an estimated $15.9 trillion in equity assets under management, or an average of $30.9 billion per member.  In 2007, its average trade size in the U.S. was 51,580 shares.

In 2007 revenues were $346.45 million, up from $252.679 million in 2006; and the annual earnings attributed to each year were $97.51 million in 2007 and $80.5 million in 2006.  The company also noted growth in Q1 2008 over Q1 2007 with revenues and earnings of $107.07 million and $25.72 million in Q1 2008 and $77.347 million and $23.159 million in Q1 2007.

Jon C. Ogg
July 2, 2008

Wall St., Now Dead, Gets An Obit (LEH)(MER)(C)(GS)

The last round of earnings for Wall St. firms showed that the financial industry was in bad shape and getting worse. That has been followed by news that the brokerage executives who said in May that things were getting better were wrong. Lehman (LEH) could still go out of business or be sold. Merrill Lynch (MER) and Citigroup (C) have said their losses have not ended. Both may have to raise more money.

Late word is that Citigroup and Goldman Sachs (GS) will lay-off about 10% of their investment banking employees. According to the FT, "The Wall Street bank (GS) is now expected to cut up to 10 per cent of staff in the division that handles mergers and acquisition advice and corporate fundraisings."

The head of hedge fund Paulson & Co recently said global write-offs at financial firms would hit $1.3 trillion. Only about one-third of that has been taken so far. If the number is anywhere close to accurate, the lay-offs among these firms could move up by tens of thousand more.

The loss of 100,000 or 200,000 Wall St. jobs may not seem a lot compared to the millions who may be on the street by the end of the present disaster. But, because these poor souls tend to be well-paid, the hit on the tax base could be more like 500,000 to 1 million people being sacked.

The financial firms have done a great deal to hurt that national economic infrastructure. Now, they are going to do what they can to bring down the tax base.

Douglas A. McIntyre

Who Gets The CEO Job At Lehman (LEH)? A List Of Candidates

Dick Fuld, CEO of Lehman (LEH), may lose his jobs soon. Someone has to step in if the brokerage's stock keeps falling. The company board knows that. Lehman's COO and CFO has already been pushed out. The brokerage's comments on its earnings call did not encourage investors. Fuld simply took responsibility for losses, but did not offer to pay back the billions of dollars he had lost stockholders.

Where does the firm turn?

The first place is Goldman Sachs (GS), where everyone else in the financial community looks for management. The company is considered the best run on Wall St. The most logical candidate there is Jon Winkelried. He is currently president and co-chief operating officer. The key piece of his resume is that he ran Goldman's investment banking division.

The other financial firm which most investors still admire is JPMorgan (JPM). Since Jamie Dimon, the company's CEO, is only 52, no one is likely to get promoted into his job soon. That may make it more likely that the people below him could leave. Steven Black, who co-CEO of the investment banking division, is probably the strongest candidate from the bank if Lehman needs a new chief.

The most likely "dark horse" candidate is former Morgan Stanley (MS) president, Zoe Cruz. She was let go at the investment bank, but many people believe that she was simply sacrificed by CEO John Mack to save his job. She was a senior exec at MS for years, and knows Wall St. well.

In the minds of his board, Fuld may already be gone, and the they may already be looking for his replacement.

Douglas A. McIntyre

Broker Earnings To Dominate Earnings Calendar (LEH, GS, MS)

This coming week is going to be a rather important week for brokerage and investment banking firms.  We have three key firms in the sector reporting earnings: Lehman Brothers Holdings Inc. (NYSE: LEH), Goldman Sachs Group Inc. (NYSE: GS), and Morgan Stanley (NYSE: MS).  As a reminder, brokers almost never give financial guidance because so much is based upon trading and market results.   The other big commonality for the brokers this quarter is that the results aren't expected to have any huge underwriting fees and won't have the old massive advisory or investment banking fees because mergers are down in size and scope.  So most brokers are going to get their earnings from investment management fees, trading the markets, and from their brokerage operations.

Below we have created a full earnings preview with summaries and conjecture for each of the three major firms:

Lehman Cleans House (LEH)

If you thought things couldn't get weirder in the brokerage firm stocks, guess again.  Lehman Brothers Holdings Inc (NYSE: LEH) has essentially fired its CFO Erin Callan and its COO Joseph Gregory. Technically Callan is going to another department, although it doesn't take a rocket scientist to figure this out.

This report comes within 72-hours of its $2.8 billion quarterly loss expectations and after a large financing.

Ian Lowitt, the current chief administrative officer, will become CFO; and Bart McDade, global head of equities, will become the COO of Lehman.

This isn't the way to instill confidence in Wall Street.  Shares are down over 8% at $21.75 right at the open and we've already seen over 17 million shares.

Jon C. Ogg
June 12, 2008

Lehman (LEH) Raises Too Much Money

Lehman (LEH) appears to have raised $6 billion from places like The New Jersey Division of Investment and Hank Greenberg's C.V. Starr fund. It is a nice chunk of change, but it is very bad news that the brokerage had to raise that much.

According to The Wall Street Journal, Lehman's loss for the last quarter will be about $2.8 billion. Not so long ago, estimates were for that number to be $300 million.

That leaves Wall St. wondering what the next shoe to drop will be. It is hard to imagine Lehman's losses could be eight times greater than expected without results being very poor at Merrill Lynch (MER), Morgan Stanley (MS), and several other firms. Based on past results, Goldman Sachs (GS) might make it out with its skin intact.

Most of these firms put money into the same mortgage paper and corporate LBO loans to one extent or another. Lehman's shares traded at a 52-week high of $82 and now sit at just above $32. It may have further to drop.

Why does Lehman need $5 billion? The answer is almost certainly because it is still bleeding in the current quarter and may be damaged more through the rest of the year.

The $5 billion is too much, as will be the next $5 billion.

Douglas A. McIntyre

BGC Partners Prices Secondary (BGCP)

BGC Partners, Inc. (NASDAQ: BGCP) priced its public secondary offering of 820 million shares at $8.00 per share. 

According to the company, 10,000,000 of these are primary shares, 3,926,178 of which are secondary shares being sold by Cantor Fitzgerald, L.P., and 6,073,822 of which are secondary shares being sold by limited partners of Cantor Fitzgerald, L.P., and founding partners of BGC Holdings, L.P.

Joint book-running managers are listed as Deutsche Bank and Cantor Fitzgerald; co-lead managers are Wachovia Securities and BMO Capital Markets; and co-managers are Keefe Bruyette & Woods and CastleOak Securities.  The underwriters were granted an option to purchase up to 3,000,000 additional shares for 30 days after offering.

Its market cap was listed as $589 million.  This is a 1% discount to yesterday's $8.08 close and down from $9.00 just 5 days ago.  Its 52-week trading range is $7.02 to $12.97.

You can join our open email distribution list to hear about other secondary offerings, mergers, special financings, IPO's, restructurings, and other special situations.

Jon C. Ogg
June 6, 2008

S&P Knocks the Banks, Again (LEH, MER, MS, BAC, JPM, C, WB)

Standard & Poor's has come out with a report that is actually weighing down on the entire market even though it is sector specific.  The ratings agency has cut ratings on several major brokers today from to 'A/A-1' from 'A+/A-1' and has issues a "negative outlook" on the following:

• Lehman Brothers (NYSE: LEH)
• Merrill Lynch (NYSE: MER)
• Morgan Stanley (NYSE: MS)

S&P also went out on money center banks as well with the following note:

• It revised its outlooks on Bank of America Corp. (NYSE: BAC) and JPMorgan Chase & Co. (NYSE: JPM) to negative.
• It affirmed its ratings on Citigroup Inc. (NYSE: C), removed the ratings from CreditWatch negative, and assigned a negative outlook.

There is a more interesting call on this though.  It has also downgraded the COUNTERPARTY CREDIT ratings of all of those except for Citigroup, and it lowered counterparty credit ratings of Wachovia Corp. (NYSE: WB).

As a reminder, we'd note that even while this is a market moving event it is also an after-the-fact event.  If you have followed the independent ratings agency follies over the last year and longer, they haven't exactly been on top of their game.

Jon C. Ogg
June 2, 2008

Short Selling: Trouble Brewing In Online Brokers? (AMTD, ETFC, SCHW)

Short sellers TD Ameritrade Holding Corp.(NASDAQ: AMTD), E*TRADE Financial Corp. (NASDAQ: ETFC), and Charles Schwab Corporation (NASDAQ: SCHW) look like a mixed bag on the surface, but the trends in two of the three are going up as far as short selling.  Some might even call it alarming.

TD Ameritrade Holding Corp.(NASDAQ: AMTD)
Date            Short Interest   Change   Days
05/15/2008     7,524,826      -13.7%    2.80
04/30/2008     8,718,910       4.63%    2.52

TD Ameritrade was the only one of the major online brokerage firms that didn't see a rise in its short interest.

E*TRADE Financial Corp. (NASDAQ: ETFC)
Date              Short Interest    Change    Days
05/15/2008      111,402,617      6.58%     5.11
04/30/2008      104,521,843      9.63%     4.16

This is now the third gain in short selling E*TRADE shares, and the number is starting to look disturbing if you just look at the raw number of shares.  It is also disturbing if you look at the days to cover as this is the first time that it has represented more than 5-days volume over the last year, although the good news is that the daily average volume has almost steadily slid lower during 2008.

Charles Schwab Corporation (NASDAQ: SCHW)
Date            Short Interest    Change    Days
05/15/2008      32,213,885      0.33%      3.90
04/30/2008      32,108,175     27.23%     2.48

After a solid gain in short interest by 27% on the last report, this is the highest short interest in Schwab over the last year. 

Despite the increased short selling in E*Trade, this one remains our top financial pick for 2008 into 2009 in the financial sector for our weekly "10 Stocks Under $10" newsletter.

You can join our open email distribution list to hear about other issues in secondary offerings, IPO's, private equity, special financings.

Jon C. Ogg
May 28, 2008

Things Are Getting Better On Wall St.? Lehman (LEH) To Cut 5% Of People

Against a back-drop of several Wall St. analysts saying the credit crisis will damage bank earnings into 2009, Lehman Bros. (LEH) will cut 5% of its work force, according to Reuters. The brokerage has already let 5,000 people go over the last year.

The news hits as Oppenheimer made comments today that banks may produce another $170 billlion of write-downs over the next year.

Citigroup (C) dropped almost 4% today to $22.11 but still trades well above its 52-week low of $17.99. JP Morgan (JPM) was down almost 5% to $43.70, but still sits above its 52-week low of $36.01.

Those lows will be tested again.

Douglas A. McIntyre

Lehman Trims European I-Bankers (UBS, CS, DB)

In a call overseas earlier this morning, Lehman Brothers decided to cut its target prices on some select European investment banks.  Here are three of the investment bankers that are traded in the U.S.:

• UBS (NYSE: UBS) target cut 6% to 31CHF.
• Credit Suisse (NYSE: CS) target cut almost 2% to 64CHF.
• Deutsche Bank (NYSE: DB) target cut about 5% to 66EURO.

What is interesting here is that Lehman noted that the worst for these may be over as far as credit losses and writedowns from subprime loan exposure.  Lehman still believes that additional losses from from markdowns and weak trading numbers will continue to weigh on the companies this quarter.

Jon C. Ogg
May 20, 2008

Punk Ziegel Now Under Ladenburg Thalmann (LTS)

Ladenburg Thalmann Financial Services Inc. (AMEX: LTS) has announced the completion of the acquisition of Punk, Ziegel & Company, L.P as previously announced in March for an undisclosed amount, pending approval by FINRA.

Punk, Ziegel & Company is a specialty investment bank based in New York City that provides research, equity market making, corporate finance, retail brokerage, and asset management services within the industries of healthcare, technology, biotechnology, life sciences and financial services. Specifically, it will merge into Ladenburg’s principal operating subsidiaries; Ladenburg Thalmann & Co. Inc.

As previously announced, William J. Punk, Jr. will fill the Managing Director for Ladenburg Thalmann & Co. and as Chairman for the Punk Ziegel Healthcare division which will be in charge of growing the healthcare business for the investment banking and research divisions.

Ladenburg shares are down marginally, over 1%, in early morning trading to $1.87. The 52-week range is $1.49 to $2.76 and the market cap sits at about $302.45 million.

You can join our open email distribution list to keep up with other developments in the brokerage and investment banking field, plus other mergers, IPO's, spin-offs, and other specialty financings.

Jon C. Ogg
May 5, 2008

Investools Hit By Double Whammy (SWIM)

Investools Inc. (NASDAQ: SWIM) is under serious fire this morning from traders.  The company posted net income of $0.17 EPS, but First Call was at $0.21 EPS.  This is on a record revenue with a gain of 39% to $91 million. 

A miss on earnings is one thing, but this disclosure is something different entirely:

• "The Company is cooperating with a non-public, informal inquiry by the SEC relating to representations by certain presenters in certain portions of their presentations at some of the Company's seminars. The Company has been cooperating with and intends to continue to cooperate with the SEC. Because it is ongoing, the Company cannot predict the outcome of this informal inquiry at this time, and, as a result, no conclusion can be reached as to what impact, if any, this inquiry may have on the Company or its operations."

This stock rose exponentially over the last 4 and a half years and had gone more range bound over the last year-plus.  An SEC inquiry after a miss is not going to be welcomed by any stretch of the imagination.

Shares closed at $12.48 and the 52-week trading range is $9.29 to $18.23.  Unfortunately, that was the 52-week trading range.  Shares are now down almost 35% pre-market at $8.20 on very active volume of more than 500,000 with an hour to the open.

Depending on what these position claims are, this will either end up with a slap on the wrist... or a kick in the you know where.  So far traders are kicking.

Jon C. Ogg
May 2, 2008

Jefferies Saves Miserable Quarter With Financing Package (JEF, LUK)

Jefferies Group, Inc. (NYSE: JEF) has posted some ugly earnings this morning and it has announced a financing package. 

Jefferies posted a net loss of $60.5 million, or -$0.43 EPS on a 52% drop in revenues to $201.2 million.  First Call had estimates of $0.12 EPS on $313.6 million.  We thought maybe that there was a charge or something in the number, but the quote from Jefferies CEO, Richard Handler says it all: "Despite this quarter’s brutal market conditions and disappointing results...."

The company has also announced that Leucadia National Corporation (NYSE: LUK) has entered into a financing pact with the brokerage and investment banking firm.  Under the agreement, Leucadia will purchase 26,585,310 shares of Jefferies' common stock.  On a fully diluted basis, this translates to a 13.7% stake in Jefferies.

Unless the board of directors approves any sale differently, Leucadia has agreed to hold these shares for two years.  Leucadia will also agree not to take a stake larger than 30% of the broker and investment banker.

On a Pro forma basis for this share sale, Jefferies' shareholders equity at March 31, 2008
would have been $433.6 million higher with a new reading of approximately $2.16 billion.

Here is where the deal gets interesting.  Jefferies will purchase 10 million shares of common stock in Leucadia in exchange for the 26,585,310 Jefferies shares and $100,021,353 in cash. But Leucadia will register these shares promptly for discretionary resale by Jefferies from time to time.  In the release Jefferies noted that its balance sheet and liquidity are solid, but they wanted to strengthen their balance sheet in light of recent industry events and to take advantage of the many opportunities currently in the market.

You can join our open email distribution list to hear about other key financings, secondary offerings, IPO's, and other special situation previews.

Jefferies stock had already been cut in more than half, but that revenue shortfall is one of the wider ones we have seen from a broker or financial company this earnings season.  If the firm hadn't announced this financing package, let's just say this would have been far uglier of a pre-market reaction.

Shares are down over 4% at $14.30 in pre-market trading, and the 52-week trading range is $13.68 to $33.80.

Jon C. Ogg
April 21, 2008

BGC Partners Unloading Stock (BGCP)

BGC Partners (NASDAQ: BGCP), formerly eSpeed, has made a shelf filing with the SEC.  It intends to offer up to $460 million additional Class A Common Stock.  Interestingly enough, the he global inter-dealer broker currently has its market cap is listed as $602 million.

The company intends to used the proceeds for the offering for buying back Class A Common Stock from certain executive officers, as well as any other general corporate purposes.

The underwriter for the offering is Deutsche Securities.The company generated a net income of $31 million in 2007. Shares are down marginally by $0.07 to $11.91. The 52-week range is $7.02 to $12.97.

You can join our open email distribution list to hear about other secondary offerings, buybacks, IPO's, special financings, restructurings and more.

Jon C. Ogg
April 18, 2008

Jon Ogg is a producer and editor of the Special Situation newsletter and the "10 Stocks Under $10" weekly newsletter for 247Wallst.com.

E*TRADE Earnings Disappoint, But Survival No Longer Under Question (ETFC)

E*TRADE (NASDAQ: ETFC) has posted earnings of -$0.20 EPS on a net loss of $91.2 million, and its net revenues were nearly $316 million and estimates from First Call were -$0.10 EPS on $363.94 million in revenues. 

Amazingly enough, this company is still adding accounts.  It opened 305,000 gross new accounts, up 10 percent quarter over quarter and it produced 62,000 net new accounts, up from 7,000 in the prior quarter to end with 4.8 million accounts.  Total customer assets fell by -11% on a quarter over quarter basis, but it noted that it has also stabilized its client asset flows and generated a net inflow of $300 million.

E*TRADE increased excess Bank risk-based capital to approximately $695 million, up $260 million from last quarter.   It said that quarter end shows some $10.7 Billion in excess FHLB borrowing capacity.  The company's provision expense of $234 million included an additional $9 million associated with a change in the timing of foreclosure and bankruptcy-related charge-offs.  Its losses of $9 million

Next quarter estimates are -$0.03 EPS on $ 404.16 million in revenues. Estimates for fiscal Dec-2008 are -$0.12 EPS on $1.65 billion in revenues.

While CEO Don Layton noted caution at the start of 2008, he noted that E*TRADE exited the quarter "with increased stability and the beginnings of a return to growth,” He also noted that the growth in new customer relationships speaks to the continued strength and appeal of the E*TRADE brand.

Its home equity portfolio is the largest source of potential losses and Layton noted it is performing broadly in line with expectations and the company is affirming its three-year cumulative loss forecast of $1 billion to $1.5 billion.  Total allowances for loan losses rose to $566 million, as provision exceeded charge-offs by $58 million during the quarter. 

E*TRADE is changing its tune to now reflect a modest recession and taking more restructuring activities as a result.  The Company is also taking action that will reduce undrawn home equity lines by an additional $1.2 billion by the end of April.  In recognizing the slowdown and challenging environment, it is has revised expense reduction program designed to lower annual run-rate compensation-related expenses by 10% or by $50 million per year.

Shares were initially punished in after-hours trading on more disclosures of financial asbestos, but this is just more proof that Wall Street isn't factoring in the obvious.  Shares closed up some 8% today at $3.62.  At one point, shares were under $3.50 in after-hours reaction, but now shares are up an additional 2% from the close at $3.71.

E*Trade is an active stock in our weekly "10 Stocks Under $10" newsletter.

Jon C. Ogg
April 17, 2008

Jon Ogg is a producer and editor of the Special Situation newsletter and the "10 Stocks Under $10" weekly newsletter for 247Wallst.com.

TD AMERITRADE & SCHWAB Satisfy, Awaiting E*TRADE (AMTD, SCHW, ETFC)

TD AMERITRADE (NASDAQ: AMTD) came in with a solid report of $0.31 EPS on $623 million revenues.  First Call had estimates $0.31 EPS on $615.66 million in revenues.  It also reaffirmed guidance for FY2008 and sees EPS of $1.32 vs. $1.34 estimates.

The shares of Joe Moglia & Co. are trading up over 2% pre-market at $17.97, which is still in the middle of the $13.82 to $21.31 trading range of the last 52-weeks.

After today's close, we'll see earnings out of E*TRADE (NASDAQ: ETFC), and estimates from First Call are -$0.10 EPS on $ 363.94 million in revenues.  Next quarter estimates are -$0.03 EPS on $ 404.16 million in revenues. Estimates for fiscal Dec-2008 are -$0.12 EPS on $1.65 billion in revenues.

Last night we noted that the earnings report would be better on quality out of Ameritrade as it didn't have the same financial asbestos that E*Trade had.  But the one with the most leveraged opportunity will probably be E*TRADE, and now we'll have to see if the rough week we have seen in E*TRADE was justified or not.  The street acts like it is bracing for more asbestos found in the lunch room there, so we'll see.  E*TRADE shares are up almost 1% at $3.36 in pre-market trading.

Charles Schwab Corp. (NASDAQ: SCHW) already reported earnings earlier this week that met analyst estimates, and its shares have traded up while E*TRADE hasn't.  E*TRADE will have a lot to prove, but even an additional writedown or major charges should be tolerated so long as they are no death sentence.

Jon C. Ogg
April 16, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

TD AMERITRADE & E*TRADE, Brace For Earnings (ETFC, AMTD, SCHW)

On Thursday, we’ll get to see earnings out of TD AMERITRADE Holding Corporation (NASDAQ: AMTD) and E*TRADE Financial Corporation (NASDAQ: ETFC).  In fact, that will already mark the actual end of the discount brokerage firms and their earnings trifecta as Charles Schwab Corp. (NASDAQ: SCHW) already posted its earnings on Tuesday.

The estimates for the TD AMERITRADE from First Call are $0.31 EPS on $615.66 million in revenues.  Next quarter estimates are $0.32 EPS on $ 603.41 million in revenues. Estimates for fiscal Sept-2008 are $1.34 EPS on $2.45 billion in revenues.

Analysts have an average price target north of $21.00 and TD America’s 52-week trading range is $13.82 to $21.31.  Joe Moglia & Co. shares closed up over 3.5% at $17.58 Wednesday.

The estimates for the E*Trade from First Call are -$0.10 EPS on $ 363.94 million in revenues.  Next quarter estimates are -$0.03 EPS on $ 404.16 million in revenues. Estimates for fiscal Dec-2008 are -$0.12 EPS on $1.65 billion in revenues.

Analysts have an average price target north of $4.30 and E*Trade’s 52-week trading range is $2.08 to $25.79.  Anything toward that higher half or double-digits may be irrelevant for now, but we have had this under close review for our weekly "10 Stocks Under $10" letter because we think this one might not be able to stay independent forever.

As far as which earnings report will be better, it is actually an easy call.  Joe Moglia didn't have the same financial asbestos that E*Trade had, but the one with the most leveraged opportunity will probably be E*TRADE.  E*TRADE has been having a rough week as investors are probably bracing for more excuses that more financial asbestos was found in the lunch room, but that really should be expected and anything "not bad" should be met with relief.

Yesterday, Charles Schwab Corp. (NASDAQ: SCHW) reported earnings that met analyst estimates. Profit rose by 12% to $305 million for EPS of $0.22 on $1.3 billion in revenues. Shares rose after its earnings on Tuesday by $1.22 yesterday to $19.95.  Charles Schwab's 52-week range is $17.41 to $25.72.

Jon C. Ogg
April 16, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Lehman (LEH) To Liquidate Three Funds

In a sign that write-offs are still coming from unexpected quarters, Lehman (NYSE: LEH) has disclosed that it will liquidate three funds which have found themselves in deep trouble.

According to Reuters "The bank blamed the liquidation on "market disruptions that occurred in the second half of the 2007 fiscal year and further deterioration in the 2008 quarter."

In other words, we still have lots of problems.

Douglas A. McIntrye

Goldman Sachs (GS) Finally Does Badly At Something

Nothing ever goes wrong at Goldman Sachs (NYSE: GS). Their uncanny ability to do well irratates thei competitors to the point of distraction. Due to the company's performance its shares have done better so far this year than rivals Lehman (NYSE: LEH) and Morgan Stanley (NYSE: MS).

Today news came out that Goldman lost money on more trading days than either Lehman or Goldman. According to Bloomberg "In the three months through Feb. 29, Goldman lost money on 17 days, compared with eight days at Morgan Stanley and seven at Lehman Brothers."

On the days that the company was up, it was probably up well more than its peers. Goldman made over $100 million on twenty-eight of the days in question.

Douglas A. McIntyre

Fed Puts Spies At Brokerage Firms (GS)(MS)(BSC)(MER)(LEH)

The Fed does not want to see all the money it has give to brokerages in exchange for lousy paper to go down the toilet so it has stationed its own personnel in the firms to keep and eye on things.

According to The Wall Street Journal "For the first time in more than a decade, the Federal Reserve has set up shop inside brokerages to monitor their financial condition" Bernanke has been reading George Orwell's "1984"

The sleuths are stationed at Goldman Sachs (GS), Bear Stearns (BSC), Morgan Stanley (MS), Lehman (LEN), and Merrill Lynch (MER).

It is too much to hope that they will not find anything.

Douglas A. McIntyre

Broadpoint Securities Registers Shares Tied To Recent Private Placement (BPSG, FACT)

Broadpoint Securities (NASDAQ: BPSS) has filed on behalf of stockholders a securities offering whereby an aggregate of 7.058 million shares of common stock for a total maximum price of $12.352 million.

The independent boutique investment bank will not receive any proceeds  from the offering.  This securities registration is tied to a private placement that Broadpoint sold to accredited investors in early March.

We frequently discuss secondary offerings, special financings, restructurings, insider activity, activist investor trends, IPO's, back door plays into IPO's, SPAC's, spin-offs, and more on our open email distribution list.

Broadpoint has a $127 million market cap and had recently completed some private placements of securities.  For those of you who aren't familiar with Broadpoint, this is the one that used to First Albany Securities that used to trade as "FACT" on NASDAQ.

Its 52-week trading range is $0.99 to $1.96.  Back in 2005 this was north of $5.00 and back in 2003 and 2004 this traded north of $15.00 for a brief period of time.

Rachel Lopez
April 2, 2008

Another Bear Stearns Director Unloads Shares (BSC, JPM)

Another director of Bear Stearns Companies, Inc. (NYSE: BSC) has unloaded his holdings as the stock was trading north of a buyout price for some time.  Paul A. Novelly, a director, has unloaded 125,000 shares in a direct share sale with an average sale price of $10.67. 

The sale date was listed as March 28, 2008, which would have been last Friday.  His share holdings are now also listed as ZERO.  Jimmy Cayne did the same last week.  If these guys thought a much higher bid was coming shortly, would they be unloading their stock after JPMorgan Chase & Co. (NYSE: JPM) already juiced its buyout offer for a better public relations campaign?

This says that Novelly's sale did not include 3,523.244 shares held in the Non-Employee Directors' Stock Option and Stock Unit Plan.

We frequently discuss restructurings, insider activity, activist investor trends, IPO's, back door plays into IPO's, SPAC's, spin-offs, and more on our open email distribution list.

Regardless of if a higher bid will or won't materialize, shares are up 4.1% at $10.92 in late-afternoon trading before the close.

Jon C. Ogg
April 1, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Lehman Intends $3 Billion Capital Raise in Preferred Sales (LEH)

Lehman Brothers Holdings Inc. (NYSE: LEH) has just announced that it has "responded to investor interest" with the intent to offer to offer 3,000,000 shares of Non-Cumulative Perpetual Convertible Preferred Stock with a $1,000 per share offer.  That's $3 Billion.

It also expects to grant an overallotment option to purchase up to 450,000 additional shares of the Preferred Stock to the extent the underwriter sells more than 3,000,000 shares of the Preferred Stock in the offering. 

The proceeds from this offering are designated as being used to bolster its capital and increase financial flexibility.  The non-cumulative dividend rate, conversion rate and other terms have not yet been determined.

The Non-Cumulative Perpetual Convertible Preferred Stock, Series P, carries a par value of $1.00 per share and a liquidation preference of $1,000 per share.  Lehman Brothers Inc. itself will act as the sole book-running manager, and this offering will be made under Lehman Brothers Holdings' existing shelf registration statement filed with the SEC.

Lehman closed down 0.6% at $37.64, and shares are down 6% at $35.19 in after-hours trading.  Its 52-week trading range is $20.25 to $82.05.

Jon C. Ogg
March 31, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Fraud Hits Lehman (LEH)

Lehman Brothers has been the victim of fraud to the tune of $250 million. According to The Wall Street Journal "swindlers used forged documents from one of Japan's biggest trading companies."

The money taken was for loans to a Japanese medical company secured by certificates from Marubeni, a large Japanese trading company.

Douglas A. McIntyre

Bear Stearns (BSC): James Cayne Does Something Right For Once

James Cayne, chairman and, before he was asked to leave, CEO of Bear Stearns (NYSE: BSC) sold all of his holdings in the firm for $61 million, according to filings with the SEC. We noted today that Cayne sold 5.66 million shares at $10.84 apiece on March 25.

When the shares were over $170 last year, he was doing even better.

Cayne developed a reputation of being busy playing golf and had been accused publicly of smoking pot while his firm was falling apart. Cayne also plays bridge, and for once he was keeping his eyes on both his cards and the money in the center of the table.

The chairman probably reasoned that $10 was as good as it would get for Bear Stearns. There has been a lot of wild talk about a higher offer. Now Congress wants to look into the Fed's role of supporting JP Morgan (NYSE: JPM) in its buy-out of Bear. They don't understand that the central bank now has an M&A department

The whole deal still has risk in it. JP Morgan has gotten its hands on the BSC headquarters and enough of the company's shares to close a deal. But, investors are already filing suits saying that they were robbed when the big money center bank offered $2 for the broker and then upped it to $10. It did look like a bank job done under the cover of darkness, or, in this case, on the weekend.

A lot of Congressmen who still like to eat with their fingers feel the need to have hearings. It does not occur to them that so much money was withdrawn from Bear Stearns by large customers that the company could not last another day. Bernanke and his friends did not invent that story. Putting $30 billion into the deal is not likely to be their idea of a good time.

Cayne took the money and ran. He did the right thing. As captain, or captain emeritus, he left the ship early. Lifeboats were still aplenty. But, he is an old man and age has its privileges.

The ridicule will start now and last for years. Cayne should have stayed in the stock to show confidence in the JPM deal. The collapse of the firm was at his feet. Any risk going forward should be shared by him.

Why stay around when you are not wanted? He leaves now along with a huge number of Bear employees who are getting the shaft in the merger.

Will the last one to leave please turn out the lights?

Douglas A. McIntyre

Jimmy Cayne Unloads All Bear Stearns Stock (BSC, JPM)

Bear Stearns Companies Inc. (NYSE: BSC) has an SEC filing out showing that Chairman James "Jimmy" Cayne sold shares the day after JPMorgan Chase (NYSE: JPM) sweetened its bid offering to $10.00.

On March 25, Cayne sold 5,612,922 shares at $10.84 and this says that his direct beneficial ownership of Bear Stearns stock is now ZERO.  His wife also sold 45,669 shares at $10.84.

Shares of Bear Stearns closed up 0.18% at $11.23 in normal trading, but shares are down some 4.6% at $10.71 in after-hours.

Maybe some are still hoping for an even higher-yet buyout price, but it doesn't look like Cayne does.  Either that or he needed more cash to play card games.

Jon C. Ogg
March 27, 2008

Jon Ogg produces the Special Situation Investing Newsletter and can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Did Oppenheimer Bank Cuts Signal The Bottom Is Near? (C, BAC, WB, JPM)

Oppenheimer's Meredith Whitney is currently the most followed bank and financial firm analysts on Wall Street.  We don't normally like to review analyst calls that are not fresh calls from the same day, but what is interesting is that this latest spate of estimate cuts might be at least somewhat counterintuitive.

She made an influential call on Tuesday regarding several of the large money-center banks that showed some severe estimate cuts in Q1-2008 earnings.  But if you read into the data and compare what the Fiscal-2008 cuts look like compared to prior estimates you might look at this as though the bad news is getting less-bad.  At some point that becomes good news as far as Wall Street traders are concerned.

Citigroup (NYSE: C) Q1 losses are now expected to be -$1.15 EPS, down from prior targets of -$0.28.  She also now sees a slight loss for fiscal-2008 of -$0.15 EPS.   Whitney lowered her Q1 EPS forecasts on other money-center banks as follows:

• Bank of America Corp (NYSE: BAC) to $0.35 from $0.92, but fiscal 2008 to $3.25 from $3.65.
• JPMorgan Chase & Co (NYSE: JPM) to $0.70 from $0.86, but fiscal 2008 to $2.90 from $3.20.
• Wachovia Corp (NYSE: WB) to $0.55 from $0.78 cents, but fiscal-2008 to $2.70 from $3.05.

Whitney did note that despite some 30 revisions lower to estimates since the end of 2007, she is confident that this will not be the last reduction in 2008 due to mark-to-market, weaker housing, and pressure on the consumer.  She also noted that the current credit cycle would be the worst seen in generations, and she still sees billions of more on CDO write-downs.

After 30 some cuts and looking at the current data-points we already know, a longer-term visionary and contrarian would say that if the worst hasn't been seen then the at least the worst parts of the bad news have been seen.  That can't be considered good news.  But on Wall Street the bottom fishers win by investing when the bad news that comes out keeps getting less-bad and less-bad.  By the time the all-clear signal is yelled many of these banks may have rallied 25% to 35%.

We cover such issues on our open email distribution list and frequently preview issues like this for our Special Situation investing newsletter.

Jon C. Ogg
March 26, 2008

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Financial Write-Downs May Just Be Starting (C)(BSC)(JPM)

Goldman Sachs says that write-downs for subprime mortgage paper, LBOs, credit cards,and other bad paper could hit banks and brokerages for $460 billion. That is almost three times the write-offs taken by financial firms so far.

According to Bloomberg, Goldman "estimated that residential mortgage losses will account for half the total, and commercial mortgages as much as 20 percent.."

If the number is anywhere close to being true, Bernanke and Paulson, who now basically run the US, have a problem which even they cannot solve. The banks have tapped the Fed for about $200 billion. Where the next $250 billion would come from is anyone's guess.

It will not come from sovereign funds They have already lost money on almost every bank and brokerage where they have invested. Comments from the big Middle East funds indicate that they think that companies like Citigroup (C) have a long way to go in cleaning up their balance sheets.

The Fed has one chance to salvage its own savings account. It can do for the rest of the financial system what it did with Bear Stearns (BSC). It went to JP Morgan (JPM) and had the bank buy the brokerage but put up $30 billion as a back-stop. If JPM does well, the Fed will not have put all of that money into a sink hole. It will go back into the Fed's account.

The Fed could do the same thing for a number of the largest brokerages and banks. It could go to sovereign funds and say "put up $100 billion and buy a nice piece of these companies", If things fall apart, we will guarantee some of your investment. The sovereigns would have risk, but it would not be unlimited.

Or, the Fed can put up money that it does not have and knee cap the taxpayer. If the economy gets much worse that taxpayer won't have the money to pay his taxes.

Douglas A. McIntyre

Goldman Sachs SPAC IPO: Liberty Lane Acquisition Corp. (GS, MFW, LKQX, TMO)

Liberty Lane Acquisition Corp., another special purpose acquisition company, or SPAC, has filed to come public via an initial public offering of $350 million in units.  Each unit will come with one share and one-half of a warrant with a strike price of $7.50 per share.  It does note that it will list on the American Stock Exchange, but does not list a ticker.

What is interesting here besides the unit only having one-half of a warrant is that this is a Goldman Sachs & Co. (NYSE: GS) underwriting.  There had been many reports that Goldman Sachs was getting into the SPAC game, and now we have it.

This is a blank check company that was formed on March 7, 2008.  It does not list any industry nor any geographic preferences.  The company is led by Paul M. Montrone and Paul M. Meister, who have operated as a cohesive unit for more than a decade with experience acquiring and operating businesses across a broad range of industries.

We frequently cover SPAC issues and back door plays in IPO's on our open email distribution list and have many such companies under review for our Special Situation Investing Newsletter.

Mr. Meister is a director of M & F Worldwide Corp. (NYSE: MFW) and LKQ Corporation (NASDAQ: LKQX).  Both officers also have non-compete agreements in place with Fisher Scientific, part of Thermo Fisher Scientific, Inc. (NYSE: TMO).  The officers officers have a contractual obligation to present to Liberty Lane Partners any opportunities that could be taken by Liberty Lane Partners or its affiliates, and the current portfolio companies include the following:

• Prestolite Wire, a manufacturer and supplier of wiring and other products to the auto, consumer appliance and other industries.
• Mr. Gasket, a manufacturer and supplier of products to the auto, marine, consumer appliance and other markets.
• Sign Supply USA, a supplier of equipment, consumables, electronic and other supplies to the sign and electronic display markets.
• East West Plastic and Electronic Products Corp., a supplier of equipment, consumables, electronic and other supplies to the Canadian sign and electronic display market.
• Emerson Ecologics, a supplier of nutritional and herbal supplements, medical supplies, veterinary and other products to the consumer, retail and professional markets.

Jon C. Ogg
March 25, 2008

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Letter From SEC Chairman Says Bear Stearns (BSC) Could Have Weathered Storm

In what is likely to be a bit of a blockbuster, SEC charman Christopher Cox sent a letter to Swiss regulators indicating the Bear Stearns (NYSE:BSC) did not have to go the way of all flesh. According to The New York Post "the "fate of Bear Stearns was a lack of confidence, not a lack of capital," Cox, the head of the Securities and Exchange Commission, wrote in a five-page letter sent to a Swiss regulator."

That letter will lead angry Bear Stearns sharedholders, who watched the stock fall from over $30 near $2, to question why JP Morgan (NYSE:JPM) was able buy the brokerage at a deep discount with help from the Federal Reserve. The missive may encourage Congress and regulators to question whether the takeover of BSC involved foul play.

JP Morgan has come under additional scrutiny for making high pay offers to key Bear Strearns employees to keep them on board after the takeover. JPM CEO James Dimon has approached a number of important Bear Stearns bankers. The Post also reports that "He's basically bribing them for their votes," said Richard Bove, an analyst at Punk Ziegel & Co. "In this environment, there are no jobs on Wall Street, so he can bribe them by letting them keep their jobs and they'll vote for him."

Douglas A. McIntyre

How Much Higher Will Bear Stearns Ultimately Fetch? (BSC, JPM)

The last 5 to 10 trading days have been dominated by Bear Stearns (NYSE: BSC).  Whether it was over the counterparties ceasing to accept their credit, whether it was the CEO publicly calling themselves solvent, whether it was the way out of the money put options trading, whether it was a looming implosion that would have occurred, or whether or not the JP Morgan Chase (NYSE: JPM) $2.00 buyout was fair.... It still commanded most of the talk this week, even with the huge volatility the markets saw this week.

247WallSt.com keeps regular dialog with traders, brokers, analysts, executives, and even competitors.  We all agree one one thing: Bear Stearns had to be bailed out because they were going to implode.  But there is yet another issue that is common: no one believes that anyone besides JP Morgan Chase and Jamie Dimon is getting anything close to a fair deal here.  We and others still acknowledge that the fallout of an outright and instant failure would have been a widespread financial crisis.  In recent weeks we even went as far as saying that many financial firms may in fact become mandated, like it or not.  If that turns out to be the case, then this one is the first mandated merger.

With the Fed having thrown in some $30 Billion in backstops and with the new packages available to primary dealers, many of the riskier or lower-valued assets will get to be handed in for a period of 28 days (we think that will be extended greatly, if not indefinitely), this $236.2 million to acquire Bear Stearns is one that amounts to one of the greatest fleecings on Wall Street in this generation.  Before taking this too far, Jamie Dimon can't really be faulted here. He did the best thing for his shareholders in being able to be the only party and not paying more.  But Bear Stearns' management will take much blame over this.

After speaking with many contacts, the topics and opinions surrounding this are nearly endless.  More than one contact used the exact terms "STAR CHAMBER" decision.  All extremes aside, it seems that many more lawsuits will be coming in the next few weeks to overturn some of the terms here.  Those terms might not just be limited to how much is paid.  One of the greatest criticisms is that Bear Stearns had to sign away their office building win or lose.

So, here are some of the key assets Dimon & Co. are getting: underwriting and research, wealth management, clearing, prime brokerage, energy trading, M&A advisory, and more.  The capital markets side of the equation with the endless "assets" that have no set value in today's environment is the black hole, and the leverage there makes it a far larger black hole.  That's where the $30 Billion backstop comes in.  Imagine if you could just strip that off and let the vultures come screaming down.

Is a higher price assured?  In truth, absolutely not.  Did management get forced into signing a deal under duress?  If not, it is a common belief that they "were made an offer they couldn't refuse."  In fact, we have yet to find a single source out of our contacts that will say this is anywhere close to a good deal.

Frankly, it's going to be a long road ahead and it is probably far from over.  It's also hard to find too many institutions with the books that can assume the risks right now.  There are only a handful of firms that could compete against the merger because of the current malaise.

But on Friday, March 14 JPMorgan Chase shares closed at $36.54.  On Thursday, its shares closed at $45.97.  On Friday, March 14, Bear Stearns stock closed at $30.00, already down from over $70.00 the week before and down from year-ago highs north of $150.00.  Bear Stearns closed at $5.96 Thursday and it traded as high as $8.50 this week.

In any buyout and in any "creditor lines" the common shareholder is the last one to benefit and the first one to be totally hosed.  What is more than obvious anything is that those old much higher prices are merely in the history books.  And the all-stock buyout is worth more since JPMorgan Chase stock rose this week.  This bailout is a pure "takeunder" on any scale. A price of $30, $24, or even $20 would have hurt many old investors as is.  But it's also the price of doing business and shows there are no sure things and no entitlements to making money.  Either way, $2.00 pre-adjusted on stock prices will ultimately turn many  fans into insurgents.

Imagine what this business would be worth in individual units in an auction if the Fed kept the $30 billion backstop in place.  After all, business entities of this size do keep most units separated in different corporate and business entities.  Most wine buyers know about "Two-Buck Chuck."  There is a real shot with all the whining on Wall Street and Main Street that Dimon won't get to keep a new title of "Two-Buck Jamie."  This is far from over.

Barron's also ran a piece this weekend saying that Dimon will have to up the ante here, although he'll still get a steal.  We aren't positive that a significantly higher price will come and we do think Dimon & JPMorgan will be the winner.  But the current price is too low regardless of what anyone in the administration, the Fed, or at JPMorgan or Bear Stearns has to say.

Jon C. Ogg
March 22, 2008

Primary Dealers Take $29 Billion From The Fed (GS)(MS)(LEH)

Primary dealers borrowed $28.8 billion from the Fed during the first three days a new facility was open.

Reuters writes that "Primary dealers borrowed more than $13.4 billion a day from the U.S. Federal Reserve in the latest week, according to Federal Reserve."

Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), and Lehman Brothers (NYSE: LEH) all said they took advantage of the facility.

Douglas A. McIntyre

Talk of Writedowns Hit Merrill Lynch and Others (MER, BSC, MS)

This is just becoming all too familiar in the financial stocks, and the bears are still in charge since we can't hold a major up-day.  Merrill Lynch & Co. (NYSE: MER) is feeling the wrath of writedown rumors today.  It has been seen with a sharp drop in the stock today, and it has also been seen with major volume in put options.  The March options expire tomorrow, so traders are going out to April with more than 120,000 put contracts in the April 18 expirations trading hands.

The company already announced it was suing SCA over written down assets but that is on old and already written-down numbers according to contacts.  More importantly, the talk is on yet another major writedown coming soon.  The figure vary from source to source, but the figures started out as being "more than $5 Billion" today.  Then we were told it could be $10 or $12 Billion, and someone else that is close to many primary brokers noted that $15 Billion is what some are talking about internally at Merrill Lynch.

Before you go jump out the window, please keep in mind that this is all based on what traders and brokers are talking about today.  These aren't rumors as much as they are traders trying to factor in as much as they can in more write-offs.  It is also on the week of the big brokerage firms reporting earnings.  What should be expected is that more writedowns ARE COMING without question.  There is no way those writedowns will end suddenly, and the sad part is that many assets are bing written down to a "mark to theory" basis.

Bear Stearns (NYSE: BSC) was a winner yesterday on many rumors of better solutions coming, although that also now feels like it was a long time ago.  Morgan Stanley (NYSE: MS) is still positive today after its earnings beat expectations.

What is more important than any big numbers here by far is the notion of what write-offs will be paper and what write-offs will cause implosions.  If it is merely on paper and broker and bank counterparties don't cut the institutions off, then the talk may be wasted time.

Outside of that, you've probably already gotten used to seeing writedowns from major financial institutions either each day or each week.  Even if S&P was right about being past the halfway mark, that isn't going to end immediately.

Jon C. Ogg
March 19, 2008

E*Trade, Still Growing Account Base (ETFC)

E*TRADE Financial Corporation (NASDAQ: ETFC) has noted that customer cash and deposits
increased by nearly $1 billion in February, although total retail customer assets including customer cash and securities fell 1.7% month over month to $171 billion.

Total Daily Average Revenue Trades (DART's) fell 17% month over month due to weaker market trends in February.  While electronic brokers are measured by DART's as the bogey and that would be a bad number, the more impressive metric here is that E*Trade still generated 43,000 net new accounts in February to end with retail accounts totaling 4.8 million, up 0.9% month over month and 6.1 percent year over year.  If you were sitting here in November, you would have assumed that a run on the bank was a serious risk.

E*Trade has been a recent feature in our weekly "10 Stocks Under $10" newsletter, and it is an active call.

The company did also announce that R. Jarrett Lilien, President and COO will be leaving effective May 16, 2008.  Interestingly enough, E*Trade does not plan to fill the role of President and COO.

Shares of E*Trade are indicated down slightly in early pre-market trading, although we'd accept this as a win so far as it is still adding net accounts.

Jon C. Ogg
March 19, 2008

Goldman Sachs Sails Past Lowered Estimates (GS)

Goldman Sachs (NYSE: GS) has just posted earnings, and while many metrics are lower than last year the results overall were well above estimates that had been lowered in a weakening environment.  The company earned $1.51 Billion on $8.34 Billion in revenues.  On an EPS basis it posted $3.23.  First Call had earnings estimates at $2.58 EPS and $7,47 Billion in revenues.

Its annualized return on average tangible common shareholders' equity (1) was 17.0% and annualized return on average common shareholders' equity was 14.8% for the first quarter of 2008.  Individual unit numbers were as follows:

• Fixed Income, Currency and Commodities generated quarterly net revenues of $3.14 billion;
• Equities produced quarterly net revenues of $2.51 billion;
• Assets under management increased 21% from a year ago to a record $873 billion;
• Securities Services net revenues grew 38% to $722 million;
• Investment Banking revenues fell 32% to $1.17 billion;
• Financial Advisory fell 23% to $663 million.

Goldman Sachs also listed its total capital as $222.11 billion, which was $42.63 billion in total shareholders' equity and $179.48 billion in unsecured long-term borrowings. Its stated book value per common share was $92.44 and its tangible book value per common share was $80.28.  As far as its share buyback plan, it repurchased roughly 7.9 million shares of its common stock at an average cost of $198.87 per share for some $1.56 billion during the quarter.  There were some charges in the numbers.  It lost $1 Billion on non-investment grade credit origination and on residential mortgage loans and securities.

 

Goldman Sachs shares closed down $5.84 to $151.02 yesterday and shares are indicated up $7.00 to above $158.00 in pre-market trading; its 52-week trading range is $140.27 to $250.70.

Jon C. Ogg
March 18, 2008

E*Trade's (ETFC) Hidden Value