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June 14, 2007

PPI up slightly!

The core PPI number (excluding food and energy) saw a rise in 0.2%.  This is an okay number.  Equity markets will behave fine with this news.  Only when there is a major surprise to the upside should we become concerned.

BTW, CPI comes out tomorrow.

Goldman Beats (but barely)!!!

Well Goldman did it again.  The firm reported net revenues of $10.18 billion and net earnings of $2.33 billion for its second quarter ended May 25, 2007. Diluted earnings per common share were $4.93 compared with $4.78 for the second quarter of 2006 and $6.67 for the first quarter of 2007. Annualized return on average tangible common shareholders' equity was 31.2% for the second quarter of 2007 and 37.8% for the first half of 2007. Annualized return on average common shareholders' equity was 26.7% for the second quarter of 2007 and 32.3% for the first half of 2007.

Other highlights included:

-- The firm continued its leadership in investment banking, ranking first in worldwide announced mergers and acquisitions and public common stock offerings for the calendar year-to-date.

-- Equities generated its second highest quarterly net revenues of $2.50 billion, reflecting strength across all major businesses.

-- Asset Management generated record management and other fees of $1.04 billion. Assets under management increased 28% from a year ago to a record $758 billion, with net asset inflows of $18 billion during the quarter.

-- Securities Services achieved record net revenues of $757 million, 15% higher than its previous record.

My take:  not a bad quarter but there appears to be a deceleration in revenue from a year-to-year basis.  This should be expected and I as have mentioned in the past:  GS's increases in earnings every quarter were not sustainable.  But its still a good stock and very good firm!

Two Interesting "Buried" Points to take away from the initial Press Release:

(1) "Net revenues in Fixed Income, Currency and Commodities (FICC) were $3.37 billion, 24% lower than the second quarter of 2006, primarily reflecting lower net revenues in commodities and weak results in mortgages, principally attributable to continued weakness in the subprime sector."

My take: Maybe we havent seen the end of the subprime woes!  In fact, this may be a clear indicator as to why you need to stay away from interest rate sensitive Bear Stearns!

(2) "Operating expenses were $6.75 billion, essentially unchanged from the second quarter of 2006 and 14% lower than the first quarter of 2007."

My take: GS will do just about anything to hit theirs numbers and "right" the ship!  If earnings see declines then I would expect operating and compensation expenses (layoffs and/or tempered hiring policies) aggressively slashed over the next 3 to 4 quarters (regardless of what they might say). 

More after the conference call!

June 11, 2007

On tap for this week (Jun 11 - Jun 15)...

This week will see much action on both the macroeconomic side and coporate earnings front.

Tuesday  June 12

  • Lehman Brothers Earnings Report

Wednesday June 13

  • Retail Sales for May (forecast = +0.6%)
  • Import Price Index (forecast = 1.5%)
  • Fed's Beige Book

Thursday June 14

  • Producer Price Index PPI (forecast = +0.5%)
  • Initial Jobless Claims (forecast = 309,000)
  • Goldman Sachs Earnings Report
  • Freddie Mac Earnings Report
  • Adobe Earnings Report
  • Bear Stearns Earnings Report

Friday June 15

  • Consumer Price Index CPI (forecast = +0.6%)
  • CPI ex-energy (forecast = +0.2%)
  • Industrial Production (forecast = +0.1%)
  • Capacity Utilization (forecast = 81.5%)
  • UMich Sentiment Index (forecast = 88.3)
  • Carnival Coporate Earnings

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