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Thursday, December 20, 2007


first quarterly losses in seven decades

first it was morgan:

Chief Executive Officer John Mack called the fourth-quarter loss of $3.56 billion, the first in the New York-based firm's history, ``embarrassing.'' He'll forgo his bonus for the year, the company said today in a statement.

morgan was founded in 1935.

now it's bear:

Bear Stearns Cos., the No. 5 U.S. investment bank, said Thursday a bigger-than-expected writedown in its mortgage portfolio caused the first quarterly loss in the company's 84-year history.

Bear Stearns also said members of its executive committee, including Chief Executive James Cayne, will not receive bonuses for 2007.

bear was founded in 1923. that provides some really strange context for the depth of the troubles we are now seeing -- folks who never lose money (or at least never report as much) are in fact losing money. a big part of that, however, is the fact that these houses, long private, went public in the 1980s (bear in 1985, morgan in 1986) and earnings smoothing is considerably more difficult in the public arena.

morgan further raised $5bn from the china state sovereign wealth fund, following citi and ubs, and is paying a punitive 9% on the convertible preferred issues. china now owns just shy of 10% of morgan. here's more from mish.

it very probably won't be the last such investment, but i sincerely doubt the pace of sovereign wealth purchasing can keep up with writedowns.

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